What makes some companies more profitable than others?


Quick Answer

Some of the factors that determine profitability include advertising, economies of scale, monopoly, patents and government regulations. The primary goal of all businesses is to make profit, notes Iowa State University.

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Full Answer

One of the things that make some companies more profitable than others is marketing strategy. Companies that are more aggressive in advertising tend to win the larger share of the market. Those that package their messages in an appealing and realistic manner create an edge over their competitors.

Monopolizing a market can make a company more profitable because it will have no competitors. Electricity and telephone network providers usually monopolize the market, which is why they tend to make larger profits when compared to other companies.

Government regulations may sometimes prohibit foreign companies from selling their products or services. This shields local investors from competition. Even if foreign companies are allowed to operate in a market, the government may set more requirements for them as a way of favoring local companies.

If a company is well organized it is likely to make more profits than one that lacks organization. Those run by highly qualified managers and employees are likely to implement strategies that will make them more profitable. Economic profit not only serves as a sustenance but an incentive to companies, notes Econoclass, a website dedicated to providing resources for economics teachers.

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