23 August 2010

High supply, High Demand and Not Profitable Business Ideas

It is quite common for us to hear about high demand and high profitable business. If there are demands in the market, then I can make a profit from them by fulfilling these demands. Therefore, many entrepreneurs are looking for them. However, do you think about "what is high demand but not profitable business"? Is such business exists in this world? This is the topic today.

First of all, let's see the relationship between price and demand. Since high price might cause low demand and vice versa, the price and the demand are negative relationship to each other. From this statement, we know that the demand of a business can be boosted via lower its goods and services price. For example, if you are selling a meal which is 50% cheaper than the similar meal on the market, people who are used to eating this kind of meal will go to your shop. As a result, you have managed a high demand but not very profitable business.

However, this kind of idea is not very wisely and has been called "Red Sea Strategy". This is because this kind of strategy will try to share existing market instead of create a new market. Therefore, if we really care about the profitable of our business, we need to consider one more factor, supply. Its relationship to price is pretty simple, "the high the supply, the lower the price".

As a result, profitable equals to demand minus supply.

Therefore, entrepreneurs should always looking a business which is both high demand and low supply. Profit is just a matter of time. Feel free to give me a comment about this topic. It will be a great support to Xaivier Blog.

Written by: Xaivier Chia

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