Whenever we hear the word inflation, the first thought it reaches our mind is that how will it be affecting the consumers. However, it is not only individuals but also business enterprises that get affected by inflation majorly. Both the business and the consumers together get affected by the inflation badly. Below mentioned are few ways the inflation creates an impact on the business organization.
- Increasing the price gradually– The business organizations are bound to increase the price. They increase the price gradually so that the chance to incur the revenue loss will be reduced. The increasing of price gradually will prevent the sudden hike in prices. Another way the business enterprises deal with the inflation is reducing the packaging size while maintaining the same price level. This small quantity change won’t be noticed by the customers as they are mainly focused on price.
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- Cost of inventory– The inflation not only increase the price of the goods which consumers wish to buy but also those goods which the business uses as inventory and materials. When the cost of inventory costs goes high, you are bound to sell the goods at exorbitant rates. And if your competitors have not raised the price of their goods, the consumers will definitely opt for the alternatives. If the price of inventory goes down in future, you will be holding the materials which have been bought at much higher cost. Hence if you feel the inventory price will drop, it is best to buy the right quantity of goods and not to stock up for future.
- Price fluctuation– Whenever the product or service prices fluctuate, the business will end up spending more money changing the price tags and printing new menus to list out the correct prices. This costs incurred are known as menu costs. Imagine the labor charge you need to spend on if daily the price tag has to be changed. More money will be wasted on reprinting the products price. Over time, the cost of all these will add up to a bigger amount. Hence at the time of price fluctuation, the price is not printed individually on the product, rather it would be put up on the rack. Or else, you need to ask the helper to help you out the final price of the product you wish to purchase.
The business organizations have to do a great deal of planning while facing the inflation period in order not to incur a loss during the period.