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Letter report on the decline in sales/profit

Letter report on the decline in sales/profit.

Zenith Corporation

Abdullah Haroon Road,

Karachi.

May 7, 20___

Mr. Shakil Ahmed Barry

Managing Director

Marigold Cosmetics Limited

Urooj Chambers,Jinnah Road

Karachi

Dear Sir:

 

Here is my analysis determining the causes of the problem of decline ii1 sales and profit and the solution to counter it. In the preparation of the report, I have allowed your instructions and covered all those points you wanted answered. The details are as follows.

REASONS FOR DECLINE

 

High Prices anti Competition

Since the market is highly competitive and the company does not enjoy any monopolistic characteristics and features in its products, high prices have caused decline in sales. The market is dumped with local and smuggled goods selling at much low prices.

Substandard Quality and Designs

Due to increase in the cost of raw materials and labor the company has lowered the quality to maintain the previous level of cost. But this approach has resulted in the lost market. On one hand, the fierce competition and on the other, high prices and poor quality have damaged the profitability of the company very badly. The designs of the products are outdated and have not been changed since long. The current marketing principle calls for continuous research and testing for the improvement of the product to give maximum consumer satisfactions.

Inadequate Advertising

Advertising competition also exists in the industry, but the company does not respond to this dire need. InPakistanadvertising, especially TV advertising is very effective means to promote goods and services. Not only advertising but also other promotional means have also been completely ignored. If this policy continues, the sales volume and profit of the company are likely to encounter further fall.

High Amount of Bad Debts

 

Although liberal credit policy has increased sales to some extent and neutralized the impact of high prices, competition, and substandard quality to a limited amount, it has increased the level of bad debts offsetting all the gains, in other words this policy has failed to increase the salary significantly and has resulted in the hike of bad debts causing the net profit to fall. If the company docs not whip up to take countering action, further increase in bad debts may be around the corner.

EFFORTS

 

The following efforts are proposed.

Effective Pricing Policy

 

The company needs review its pricing policy to keep pace with the current marketing inevitability. Prices should be competitive in order to meet the challenge of severe competition. Discount policy for dealers should also be redevised. This policy should envisage competitive discount rates.

Quality Control

 

Quality control should be applied over production. It is imperative that the company should take immediate measures to raise the quality of materials being used in the products. By market research and testing the designs and styles of the company products should be updated and brought to the market standard. The new price level should justify the quality and the quality should justify the price.

Effective Advertising Policy

 

The bewilderment caused by non advertising can be defeated by effective promotional policy. New promotion policy should make provision for advertising, publicity, incentives, and bonus schemes for customers and dealers. TV and newspaper advertising should have preference because they have tremendous impact on sales and profit.

I am sure my findings will help you get over the problem and the company will soon be able to soar its sales volume and profit.

If you have any questions about the contents for the report, please don’t hesitate to call, And if any of your business friends have need of management and marketing consultant, 1 certainly would appreciate your recommending my company to them.

Sincerely,

-sd-

Mohammad Rizwan

Management Consultant

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