Superprofit is a profit that is well above the average.
For example, for five years the enterprise had a net income of 5 million dollares per year, and for the last reporting period it amounted to 15 million. In this case, we can say about excess profits.>
How superprofit can turn out? All components can be divided into two types of factors:
1. Internal factors that are divided into extensive and intensive. The first one include a change in the schedule of the enterprise, a change in the level of trade allowances, a change in the average number of employees and so on. Intensive factors include optimization of the production process, optimization of customer service and so on.
2. External factors. The company cannot influence external factors or can affect slightly. They include inflation, price changes, violation of contracts with suppliers and so on.
What can be done to get superprofits? What operations need to be performed? The main tool in this case are prices. For example, significantly reduce the price of goods, almost to cost. As a result, a huge number of customers will flow to the company and, due to a large turnover of funds, it will be possible to reach superprofits. An example is the company Xiaomi. While competitors sell flagship smartphones for $ 1000 +, Xiaomi makes a simplified version and sells for $ 200. If the consumer is not tied to the brand, then he will certainly choose a smartphone that is several times cheaper with approximately similar characteristics. Xiaomi generates a large profit due to the huge number of smartphones sold. This Chinese brand sells for 20+ millions of their product while competitors sell 1-2 million.
You can go the other way and vice versa set high prices, but you need to provide something valuable in return. This is Apple’s strategy. Its products are much more expensive than competitors, but at the same time, the company offers high quality and a brand that people are willing to pay for. As a result, it can make super profits by selling a small number of pieces of equipment.>
There are more strategies:
Superprofit plays an important role both for the enterprise itself, since it allows it to direct more resources to reinvest, develop, strengthen reserve funds and so on, and for the state, which receives more profit in the form of taxes.
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