1. Avoid/Minimise the Accumulation of Inventory
Rate of Sales should be greater than the Rate of Production in order to avoid / minimise the Accumulation of Inventory otherwise high carrying costs will reduce the Profitability.
2. Avoid/Minimise the situation of Shortage of Funds
Rate of CASH INFLOW should be greater than the Rate of CASH OUTFLOW so as to avoid / minimise the Costs associated with the Shortage of Funds like borrowing costs (which will reduce the Profitability), the risk of financial insolvency (which will adversely affect the reputation and may be a threat to going concern).
3. Avoid/Minimise the Investments in Receivables
Credit Period allowed to Customers should be less than the Credit Period received from the Suppliers so as to avoid / minimise the Investments in Receivables and to make use of money of Suppliers otherwise high carrying costs of Receivables (like Interest cost,
Bad Debts, Collection Costs) will reduce the Profitability.
4. Economical Purchases
Always make Economical Purchases by taking advantage of New Suppliers,Quantity Discount, Cash Discount etc. This may be competitive advantage.
5. Explore Innovation on continuous basis
Always explore Innovative Products, Innovative Production Process Technology,Innovative Raw-Material, Innovative Markets, Innovative Sales Promotion Techniques so as to have competitive advantage.
6. Pricing Policy
Follow Skimming (High) Pricing Policy for Innovative Products in order to earn Super normal Profits and then Follow Penetration (Low) Pricing Policy so as to avoid the entry of the Competitors in the market.
7. Borrowing Policy
BORROW only IF ROI is greater than the COST OF BORROWING otherwise no benefits of trading on equity will accrue to Equity shareholders and also there is risk that earnings of Equity shareholders may be wiped out to the extent of excess of COST OF BORROWING over ROI.
8. Where to Produce & Sell
Produce where the Cost is minimum and Sell where the Revenue is Maximum (e.g.Produce in China & sell in India)
9. FAIR TO ALL
BE FAIR TO ALL like Consumers, Suppliers, Employees, Shareholders, Govt. Agencies,Distributors, Wholesalers, Retailers etc.
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