The company selected for this project is Ingram Micro. It is one of the largest distributors of Information Technology products not only in America but in the whole world as well. Basically, the main modus operandi of the company is to generate income through selling IT products in bulk to large distributors or resellers or in retail to its dedicated special group of resellers.
The main distinguishing operation of Ingram Micro in terms of profit generation is that it generates revenues by adjusting in real-time all the products it distributes from the manufacturer to the distributors. Ingram Micro is like a channel so it is crucial that price adjustments will not compromise its ability to earn profits. Technically, the mode of distributing products can be considered elastic in demand curves.
This means that any changes or adjustments in the prices of the products won’t have true effect on the demands of the resellers. This is mainly due to the fact that the consumers’ market of IT products can readily adjust to price fluctuations as technology commodities always do. However, if a reseller wishes to order in bulk, Ingram Micro can immediately adjust its profit to save the deal and create more future opportunities with a specific reseller. So in this case demand really drives the profit of the company.
On the other hand if one manufacturer is not able to meet the demands of the reseller, Ingram Micro can increase prices for profit maximization without even hurting its reputation among the resellers as the latter always understand the situation that Ingram Micro is simply dependent on how much commodities they can acquire at any given time. On the aspect of company operations, we can say that Ingram Micro has fixed costs of operations on its employees’ salaries, arrangement with delivery companies like FedEx and UPS and the maintenance of network systems and warehouse tax payments.
Variable costs may include the cost of technology products for system upgrade, repairs and some unwanted delivery errors charged to the company’s accounts. To illustrate Ingram Micro’s profit maximization, a study on revenue and cost balances can be used. Profit maximization is attained when the marginal revenue starts to equal with marginal cost and projects upward (Wolfram, 2008). Below is a hypothetical data where Ingram Micro is set to reach its profit maximization status.