Question

why would a company take orders that would not produce an immediate profit?

Answer 1

Scenario 1 : If a Company is new in the market.

Newly Start up company takes the order from customer even if that will not result in immediate profit because following reasons :

a. Company wants to make foot prints or to occupy its presence in to the market.

b. Company wants to build customer base.

c. Company wants to utilise the production capacity.

d. There could be scenario that orders at least result in Break even point so that its overheads are absorbed.

Scenario 2 : If a Company is existing in the market since long time.

Existing company takes the order from customer even if that will not result in immediate profit because following reasons :

a. To eliminate competitor from that on going deal.

b. To take orders in newly un touched areas where company has started its operations just recently , even though orders do not produce an immediate profit.

c. To strengthen customer base.

d. To stay competitive market.

e. If company does not have enough orders then company make take orders not to be resulted in immediate profit just because to reduce the loss of the over all by absorbing the fixed overheads.