Quality solves the trade-off between margins and sales

Once upon a time, a businessman was thinking how to
solve the problem of the trade-off, between margins and
sales.

He thought if the margins are increased, profitability
increases but sales may decrease. With decreased sales, the
increase in profitability is balanced out and is thus,
ineffective. If the margins are decreased, sales may increase
but profitability decreases. With decreased profitability, the
increase in sales is balanced out and is thus, ineffective. He
faced the challenge of increasing the margins, so that the
profitability also increases correspondingly, while ensuring
that the sales should not decrease at all.

While thinking, he glanced around and saw sunlight
entering through his glass-covered window. He thought that
long ago, a similar problem was faced by people who wanted
both light and heat to come in their homes. They made holes
in the walls and thereby created windows, which would let
both light and heat come in the rooms. Through the
windows, sunlight came in, but during rainy and winter
months, rains and cold also came in. If they closed the
windows, then rain and cold were blocked, but sunlight was
also blocked and the room became dark. Thereafter, glass
was invented. With this invention, people started to have
windows made of glass. The glass blocked the rain and cold,
while allowing sunlight, thereby keeping the room bright and
warm.

Thus, in deep thought, he concluded that the trade-off
between light and heat, was solved with the invention of
glass. Similarly, the trade-off between margins and sales, can
be solved by innovations in quality. Thereafter, he improved
the quality of his products. With improved quality, his
margins increased, profitability increased and his sales did
not decrease, rather it also increased.

~0~
Excerpt from the book “Once Upon A Time: 100 Management Stories” by Rajen Jani

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