Bethany Powell
Profit Maximization
Profit maximization refers to a process that a company undertakes to determine the best
productivity and price levels so that the company’s return is maximized. Profit maximization
creates the advantage of establishing a cash flow and creates a cost-efficient environment.
Naturally, GM wants to maximize their profits because they are a business and rely on profit
being made. GM is already taking the necessary steps to increase profit because they have 100
production facilities that are in 26 countries. Additionally, they sale in over 150 countries. To
maximize profits, there are a few decisions that GM would have to make regarding pricing and
production. When the company made the decision to expand their base to other countries, they
had profit maximization in mind. GM would need to look at production costs, sales pricing, and
their output levels in correlation to reaching their profit goals. To maximize their profits, GM
would need to make decisions on reducing production costs, marketing to the target audience,
and when is the best time to provide sales and discounts.
Profit maximization also has risks that are associated with the process. For example, if GM sees
that it is selling one model the most, they may sink the most money into further pushing that
model. This would create an unbalanced inventory and if that model ends up losing attention,
they would be stuck with all the inventory and have to lower prices (O’Farrell, n.d.).
Lastly, something that GM should take into consideration is ensuring that they are increasing
output in order to bring in more revenues than it costs to produce. This strategy can be completed
if it is done in a mindful manner. A data analysis of production costs could be conducted to
ensure that they are receiving the biggest profit. For example, the products used should not
skimp on quality because the good name behind GM may be tarnished (Samuelson & Marks,
2015).