For a long time the markets in America have been characterized by inconsistencies in pricing powers, and now it seems there is a steady rise in management costs for many companies. The option to remain in business is to increase prices. This is a decision that may affect sales in many ways.
While companies that have been compelled to increase prices rely on the patronage of their loyal customers, there will be limitations in business growth because of the low number of new customers. Many of the companies have retained their old prices for fear of losing customers to the competition. These companies now have to make an extra effort to avoid shutting down. The compromise on the part of the businesses is identified as the reason behind the low rate of inflation we have been experiencing.
From another perspective, businesses that have raised their prices cite reasons such as higher costs of labor and the need to reduce wage inflation as their reasons for the price increase. The business analysts, however, have a different opinion. They believe that an investment focused on improving productivity should be the major option considered by businesses rather than increasing prices.
The impact of the inflation is already being felt in the entertainment scene where cinemas have increased the prices of their tickets by as much as 3.7%. When reached for comments about this development, the managers identify the growing inflation as the reason behind the price increase. There are indications that the prices may be lowered to normal rates if the economic situation changes.
Studying past reports, it can be observed that the prices of movie tickets have been increasing over the past years. The business managers have stated that they are passing on the high costs due to inflation to the customers. It is believed that every film house is experiencing the impact of inflation at the moment. These businesses still have to strive to achieve their growth plans even when the management costs rise.
Interestingly, a change is expected in 2019, which will lower the costs of managing businesses. Till that happens, we interacted with some businesses to find out how they have managed to cope with the inflation.
Bubble wrap is one of the popular packaging manufacturing companies that have been hit by the inflation. The impact has caused an increase in shipping and importation of resources for the business. The company manages these costs by passing some of the financial burden to the customers.
Steel Production Costs
BTD the metal fabrication unit of Otter Tail Corp has identified its high pricing power as its leverage to survive the high management costs due to inflation. A bulk of the costs of steel is passed to the customers, and the company can retain its high-profit margin to remain in business.
We also found companies in the diode manufacturing sector that claimed their products are being affected by the high tariffs caused by inflation. However to remain competitive in the market the companies in this sector try to pass off a minimal part of these costs to the customers.
The Real Estate Scene
The situation is the same in the real estate sector. The businesses here have to make quick decisions to maintain a margin that is profitable enough to sustain the business.
The business owners have also indicated the high-interest rates as one of the factors that have made it difficult to make the expected profits. Now, to handle the impact of inflation, businesses offer multiple products with different features and prices to give the customers options rather than increasing the prices of all products.
While some companies have been able to cope with the high inflation rates by passing the costs along, not all businesses can do this. For example businesses in the health services sector that offer medical assistance cannot put the burden on their patients. The profits from such businesses have been hit by these economic changes. Even when some unavoidable increments happen, the businesses suffer a loss of customers who cannot afford the new prices.
Owners of restaurants have also been caught up in the inflation ‘whirlwind.’ To retain their customers, many restaurants have employed professional analysts to review their financial and expenditure profile to find ways that the company can remain profitable.
What are the options for businesses? While it is important to make changes that can help companies stay in business, it is fair that the additional costs can be split with the customers. This means the increase in prices will not be too much and customers can continue buying.
It is however important that the government address issues related to inflation to help the affected companies. Efforts should also be made to boost the financial economy to improve the state of commercial affairs.
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