Analyse the importance of the break even analysis in supporting the achievement of strategic aims and objectives.

The company that I have chosen for this task is M & S and they have an aim of:

• To make profit
• To expand
• To increase market share
• To attract more customers

So now we are going to see how these aims are achieved through break even:

Firstly break even helps to generate profit because as discussed above, break even helps to work out the price per item that would be suitable for the consumers and that would help the business to break even. So if the items are sold soon the business will also break even but the business should make sure that they give good customer service so that they consumers can go and tell their family and friends about the product which would help M & S to get more customers meaning that they would make profit. Then if the business is making a profit other financial investors will find out that the company is doing good and will buy shares in M & S; achieving another aim. This will lead the business to expand their business (achieving an other aim) because they will be making enough money and also getting financial investors to invest, helping the business to reinvest the profits they made into opening new store around other areas. Break even can also help achieve the aim of expanding by looking at the break even graph and identifying the margin of safety area (the area that is above the breakeven point) meaning that the business is making a profit and to see weather they can use those profits into investing them into opening new stores or making the existing store more wider.

As management plays a vital role in the business they need to make sure that they carry out the right and correct decisions for the business because if they don’t then the business will be affected in many ways like if the manager at M & S says that they are going to higher their selling price this will affect the business in a bad way because many customers will not be attracted as they would be able to get cheaper process from other places plus a good quality product, so why shop from M & S if their prices are too high. This will mean that the business will not break even or may break even but has to wait for a long time. They can lower the costs of the item and then it will help to break even earlier but they many items will need to be sold. Also if the manager plans to produce less items then this is not a correct decision because may be the business can sell more than expected and then customers will not be happy with the services as M & S will always be running out of stock and wouldn’t have enough stock in their store. This will mean that the business will loss its customers meaning that the business will also not be capable of breaking even leading the business to liquidation. If the managers at M & S decide to sell their products at reasonable prices where the business can break even and also keep their customers happy will also help to achieve break even quicker because the business will get many customers and the business will be able to make profit.

If the managers decide to train their staff it will be an excellent decision as the staff will know which kind of customers service to give to the customers so that they are kept satisfied which will help to sell more items meaning that the business will break even and also will be able to stay competitive as customers prefer good customer service and if they find that the staff are very helpful and friendly they will also advertise the business meaning that the customers will gain even more customers again meaning that the business will break even quicker and make a profit and will also stay competitive amongst other competitors.

Profit maximisation can be achieved by trying to sell more items but then they need to make sure that those items are of good quality so that it can allow the business to sell more and more meaning that the business is making a profit. If the quality is good more customers will be attracted and the business will gain a place in the market. To maximise profit also the business should know how many items they need to sell meaning going back to the break even and checking how many units to sell to break even. A business can also maximise profit by cutting down on unnecessary raw materials so that they can keep the costs low. If the costs are kept low then the business will be able to breakeven and also be able to make a profit.