Question

If the company is successful in achieving challenging targets for these performance measures, will it also necessarily achieve high profitability? Explain your answer (400 words)

Answer 1

Achieving challenging targets in a company leads to better performance of the company. But it does not mean that the same company will necessarily achieve high profitability.

If a company is achieving its challenging targets, it may mean any of the following things:

1. The goals of the company are clear and easily understood by all the employees and management of the company.

2. The company is making optimum utilization of its resources.

3. The decision making of the higher management of the company is clear and effective.

4. The management and employees of the company are dedicated and giving their maximum contribution to the company.

If we sum up all the points mentioned above, then that will definately lead to success of the organization. Also, for a company to be highly profitable, achieving the targets is not the one and only factor. There are many more factors which will lead to high profitability of the company.

Factors leading to High Profitability of the company-

1. Degree of competition the company has to face is low.

2. The demand of the products of the company is high.

3. The economic and political environment is stable.

4. Advertising and Promotion of the products of the company is done extensively.

5. Management of the company is capable and motivated.

6. The company develop strategies to grow their key profit drivers.

7. The company develops new product lines.

8. The company finds new markets and customers for their products.

9. The company has excellent after sales customer service.

10. The company makes efforts to decrease their Overheads and Direct and Indirect costs.

11. The company focuses on its profitable products.

Achieving Targets not only leads to High Profitability, but also following:

1. Growth of the company in terms of productivity or size.

2. Decrease in competition of the company.

3. Clarity in focus of the management.

4. Increase in morale, teamwork of the management.

Therefore, if the company is successful in achieving challenging targets, it does not mean that it will also result in high profitability. Achievement of challenging targets leads to many more goals and objectives, not necessarily high profitability of the company.

Also, high profitability of the company is not only dependent on achievement of challenging targets. There are many more factors because of which, there can be high profitability of the company.