Monday, November 30, 2009

How Companies Make Money??

Hi Readers, this week posting is contributed by my dear friend Sana Khan

To understand how companies make money, let me take few classic examples from different sectors of our industry.

one of the most popular application on Internet and highly used freeware software in computer history, so how do they buy time and money for their research and development projects?? Firefox actually earns approximately $ 40,000,000 per year!! Google pays all this amount on making Google as default search engine toolbar on Firefox main page. The deal with Google helps Firefox to earn there 85% of total earnings. People also donate to Firefox for there development work, donation also plays an important role in earning money. And rest of money comes from T-shirts and other accessories with high price tag at Firefox stores, people like to have brand on what they wear and use.


To explain how media makes money, let me take an much localized example of our Telugu Television Channels and Newspapers. Media earns a large amount of share from advertisement. Ads are of two categories Commercial and Entertainment. The market rate for 10 seconds advertisement on Television varies from Rs 7000 to Rs 30,000 on non-news channels like Gemini TV, ETV and Maa TV. These are going rates for commercial products such as real estate, cosmetics, Mobile phone, insurance and all other ads you see on TV. Usually Commercial ads are buyed on annual basis. The Rate of Entertainment ads would be fraction of the commercial ads, with varies from Rs 1900 to 2500. This concession is mainly because movie trailer also have 'entertainment value' for the channels and of interesting to audience too.

Pepsi and Coca Cola
Its really amazing to know how much these beverage companies make out of each sale. As they manufacture these products in bulk so that would not cost them much. Lets take a small exam of Aqua water bottle sold at various bus stops, railway station and shopping malls would cost around Rs 14/- Liter. Almost with the same quality localized home deliver suppliers are selling 20 Liters of water Can for Rs 25-40 approx with fair enough profits. This clear shows how much these beverages companies make out of each product. Lets take another small exam of cool drinks
For instance price of coke = Rs 12
The total cost of production filtered = Rs 2.50
For whole sale dealer's profit margin = Rs 1.00
And for retailer = Rs 0.50

Remaining Rs 8/- goes directly into the pockets of Companies. Out of these ample profit they spend little amount on advertising and branding. As these companies are usually MNC's major amount of profit is shipped across the sea's sadly... People may have to think of some alternative Indian products which would help our nation at least to circulate our money with in the county.