I am eager to start my health care business in Eye care sector. Where I will be
ID: 359686 • Letter: I
Question
I am eager to start my health care business in Eye care sector. Where I will be serving the community for affordable eye care treatments. My team will be comprising of best doctors which will assist, guide and take care of the society in eye care sector in all the possible ways. My team will be giving world class affordable service in the region. My goal is to serve the community. Once a year basic eye care education and treatment will be free for the people who can afford it. This will help in marketing my eye care clinic too. I will be using digital and traditional marketing tools to market my eye care center. I would like to locate the business wherein people can reach easily and can have sufficient parking space. My team will be having HR, Financial and Marketing team to help me making wise decisions for future and to manage the organization in the defined goal. Identify the type of organization it is or will be (sole proprietorship, partnership, or corporation) and why this structure is appropriate for your business. Be sure to give your health care business a name. I will be start my health care business initially as sole proprietor as I will be focusing on limited market initially. Once it is being proved that the model is working, then during the time of expansion, I may consider other models like partnership or forming a corporation. I would like to be the sole decision maker my company and the target market is also small; hence I will be using sole proprietorship mode.
I will be naming it as Barnaby Eye Care. Explain whether it is a for-profit or not-for-profit business and why you chose that type of organization structure. It will be a for profit business only although pricing and services will be competitive. Sooner or later expansion mode will be picture wherein I can go for franchise model even, hence from day one it will be a for profit organization certainly by using social responsibilities means too. While starting my goal is to serve the community in better way and I would be growing my business to the state and then to country, hence as a sole proprietor I would like to develop my own culture when comes to health care practices. Discuss the mission of the business, i.e., the purpose the business serves. To cater the importance of Eye care for the community and helping the society by giving affordable and reachable treatments Describe the target market the organization will serve. All age group and gender as eye care is needed to everyone. Middle class and above in geographical territory will be targeted initially to give services. Social activities and free basic checkups for Lower middle class once a year which will further help in marketing too. Explain your role as the financial manager and identify how the finance department fits into the organizational structure. To use the money with proper investments, maintain accounts of the organization, Taxation compliance, to make proper investments of the profit to increase the same, Loans and fund raising, Accounting
Identify any challenges (trends, laws, regulations, industry standards, etc.) facing your business today that may impact its financial viability. Although there are not many challenges in the health care system and if certain are there they can be solved. Apart from this the major challenge is rising land costs and initial investments for machinery costs, high machinery costs, purchasing or leasing land.
Your health care business is beginning to take shape. You’ve chosen products or services to offer, come up with a business model, and looked at your fixed and variable costs. Now you have to decide how to set your prices. For this assignment, determine your prices and when you will make a profit.
1.In your own words, discuss both the full-cost pricing strategy and the marginal-cost pricing strategy and explain how each would apply to your health care business. How would target costing affect your business?
2. Based on your analysis, which pricing method would be the best for you to use in your health care business and why?
3.Return to the break-even analysis tool that you used for the Break-Even Analysis Assignment. Increase the sales or service units by 25% from the number that you indicated in the Break-Even Analysis Assignment. Write a summary of how this affected your health care business. What departments did you have to make changes in? What did this do to your fixed or variable costs? Be specific. Upload your revised PDF break-even analysis tool to show that you have increased the sales or services units by 25%.
Explanation / Answer
The Break even analysis model is not given by you. As the question refers to the Break even done in an earlier assignment, I will avoid answering that part. I will answer the first two questions.
Full cost pricing is a price-setting method under which we add together the direct material cost, direct labor cost, selling and administrative costs, and overhead costs for a product, and add to it a markup percentage (to create a profit margin) in order to derive the price of the product. The overhead costs are generally calculated assuming less than full capacity operation of a plant in order to allow for fluctuating levels of production and costs. The pricing formula is:
(Total production costs + Selling and administration costs + Markup) ÷ Number of units expected to sell
Marginal-cost pricing, is the practice of setting the price of a product to equal the extra cost of producing an extra unit of output. By this policy, a producer charges, for each product unit sold, only the addition to total cost resulting from materials and direct labour.
Businesses often set prices close to marginal cost during periods of poor sales. If, for example, an item has a marginal cost of $1.00 and a full cost selling price is $2.00, the firm selling the item might wish to lower the price to $1.10 if demand has waned. The business would choose this approach because the incremental profit of 10 cents from the transaction is better than no sale at all.
Full cost pricing is often used by firms as it is very difficult to calculate the precise demand for a product and establish a market price. This method is most commonly used in situations where products and services are provided based on the specific requirements of the customer; thus, there is reduced competitive pressure and no standardized product being provided. The method may also be used to set long-term prices that are sufficiently high to ensure a profit after all costs have been incurred.
In our case, it is best to adopt the full price strategy, as we have various products and services and it is customized to the customer and thereby there will be no comparison with the competition. It also enables us to make a decent profit. If however, sales are diminishing at any point in time, we can shift to marginal cost pricing temporarily to boost sales and also to cover our fixed costs and some of our overheads in the short term.
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