Profit squeeze definition
/What is a Profit Squeeze?
A profit squeeze is a decline in earnings over a period of time. A profit squeeze can damage a firm severely, so management needs to anticipate its underlying causes and shift the business into a different market segment or geographic area, or adopt some other innovation that allows the firm to continue earning its accustomed profit . Otherwise, the organization will eventually fail or be acquired by some other party.
Causes of a Profit Squeeze
There are many reasons for a profit squeeze. Here are several possibilities for why it might be occurring:
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Increased costs . A business could suffer from increased operating costs, increased financing costs, or increased taxes.
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Increased competition . A business might be suffering from increased competition, leading to a decline in the prices at which it sells goods and services to customers.
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Altered regulation . A business might be suffering from more burdensome regulatory oversight that requires more staff time.
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Changes in consumer preferences . Customers may find that the company’s products are no longer appealing, and so begin to make purchases elsewhere, causing a decline in sales.
