Marginal Analysis – Increasing Delivery Area To Increase Profitability

Introduction

The important issue in adding another delivery area is to look at how profitable the increment will to the business. The owner will thus have to examine the marginal cost and the marginal benefit of the increase in the business. The extended marginal should provide the owner with enough information, which will determine whether it is more than the marginal cost or the contrary (Tucker, 2010). If the marginal benefit is greater than the value or it is equal to the marginal cost of the unit then the company should add the unit, which, in this case, is the delivery. If the marginal cost supersedes the marginal benefit when the radius is increased them, there is no need of making the improvement. Since the pizzeria is determined to increase its range after doing a marginal analysis, it should focus on bringing more customers on board.

Promoting the products in search an area and carrying out a market research to understand the customers is important. To increase the profitability will mean that the business works on its relationship with the clients and targets them. The company should engage options that will help retain customers in the new market and ensure that the customers are served well. The marginal cost in the end will thus be dealt with when there is more benefit than the cost associated with the addition of various products. The business will, therefore, determine how many additional deliveries are needed to ensure that the company still operates at a profit. The owner should make sure that he or she has enough money to cover the marginal cost and determine whether there is any competition in the added market (McGuigan, 2005).

The most important considerations are therefore the marginal cost and benefit and to some extent the availability of capital for units to the additional area.

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