Profit margins, lower

As the new product lines came on-stream, Lilly s top management decided to sell off its non-healthcare business. Not only were the profit margins lower, but, as one senior executive stressed, they demanded a disproportionate amount of management time. In 1988 Lilly sold its Elizabeth Arden Cosmetics to Faberge for 700 million. The following year its agricultural chemical business was turned over to a joint venture, DowBlcano, in which Lilly held 40 percent of the equity and Dow Chemical the rest (see Chapter 3). By 1991 Eli Lilly had 78 percent of its sales in pharmaceuticals (9... 

The more that can be done on the prevention side of the formula in managing any pollution problem, not just air pollution, the lower are our operating and hidden costs, and hence, the higher our profit margin. These cost saving categories can represent an enormous motivation for doing pollution prevention. 

A common assumption is that reduced environmental impact must be paid for by higher prices or lower profit margins. This is a dangerous assumption because it reinforces the idea that environmental issues are a problem and cost. With good design you can achieve reduced impact and higher value at the same time. 

Part D was implemented, he has experienced lower profit margins. At the same time, his patients and the community have expressed their gratitude for his assistance during Medicare enrollment periods and for helping them better understand the issues related to the many Medicare Part D prescription drug plans. 

Third-party issues are wide-ranging. One of the most prominent issues from this arena focuses on the reimbursement rates for prescription medications that are received by independent community pharmacies from third parties. It is a constant struggle between third parties, who want to lower costs by lowering reimbursement rates to pharmacies, and independent practitioners, who must monitor the rates constantly to ensure that the pharmacy will be able to cover costs and have some profit margin. 

Catalyst performance must continually improve to keep a product technically superior. Successful catalyst research programs coupled with production cost minimization may allow a plant to be run at capacity while its competitor shuts down or operates at a lower capacity and reduced profit margin. In many instances, finding the competitive advantage is essential to business survival. Finding or making the most cost-effective catalyst is a strong incentive for catalysis research. 

The ethical problems touch upon the interests not of the marketer but of the supplier industry. The economic basis of this industry rests upon profit margins sufficient to recover, within a reasonable time period, the expenses incurred in the development of fragrances. The practice of looking for lower-priced replacements from other suppliers denies such margins to the original supplier. 

The practical problems arise from the fact that briefings of this type are of questionable value to the alternative supplier. They demand a great deal of effort while offering, by their very nature, slim profit margins. Moreover the business gained by winning such a brief is usually short-lived because there is no natural limit to the customer s desire for lower costs. 

Nonetheless, some U.S. refiners make excellent profits from their ability to process cheaper, lower quality crude. They enjoy fat profit margins from these plants because their raw feedstock of heavy crude costs less. Additional refiners may be encouraged to refit for handling heavy crude, despite the fact that refitting can cost from 250 million to 800 million. These refits may make plants more flexible, but they won t boost total refining capacity in the U.S. 

Subsequently, indigo was successfully produced via fermentation on the 300000 L scale at a cost that was comparable with the price of chemical indigo [109]. Commercialization proved elusive, however, presumably because chemical indigo is marketed with a substantial profit margin. We note that it is common experience that the total costs of a new process, to compete, must be equal to (or lower than) the production cost of the existing process. In this particular case, it would seem that the STY of the fermentative process is too low to compete with a chemical procedure that encompasses only three steps from the basic chemicals aniline and acetic acid. 

Building infrastructure in anticipation of market development has rarely happened, and when it has, the investors have usually been disappointed, especially with high cost refueling stations, such as for natural gas or electricity. Fuels with lower infrastructure investment costs, such as ethanol, would appear to have lower barriers to introduction. However, the target markets for these fuels are general consumer vehicles which refuel at branded and independent stations. Branded stations have been reluctant to offer fuels not supported by the parent companies both types of stations have thin profit margins that increase the opportunity costs of replacing a conventional pump with an alternative fuel. 

The pretax profit margin declined about from 9.9% in 1997 to 5.9% in 1998 (see Table 7.15), reflecting a decrease in revenue from sales and services of about 12 billion, in part because of lower average worldwide prices for crude oil, natural gas, and petroleum product as well as currency translation effects (Table 7.16). The returns on assets and equity were about half the values in 1997. Compared with the median values for 20 petroleum refiners in 1998, Mobil exceeded the returns but did considerably less well than Exxon (see Tables 7.23 and 7.24). 

To manufacture commodity chemicals requires very large plants with large capital outlays, while the capital requirements for specialties and fine chemicals are lower. The profit margin for the latter products is higher than that for commodity chemicals. 

There has already been a trend towards lower profit margins because of increased costs. These potentially lower profits will put more pressure on marketing research staffs to help forecast and predict when markets and products will become unprofitable or below profit standards set by the company. 

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