Title: Why Is Opportunity Cost So Important in Business? | SB
Headings: Why Is Opportunity Cost So Important In Business?
Why Is Opportunity Cost So Important In Business?
The Importance of Opportunity Cost
The Implications for Small Businesses
Measuring the Most Effective Way to Spend
Widening Your Knowledge and Making Better Decisions
Enabling Better Management and Ownership
Enabling Better Leadership
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Content: Take the example of fidget spinners, for instance: you may remember that they were something of a popular fad a few years ago. What if you – as many real-life companies did – decide to get on the bandwagon and manufacture them as part of your toy business? This seems like a sound choice; many people would argue this is a textbook case of identifying a lucrative trend and simply attempting to meet consumer demand. But in the case of fidget spinners, the fad died out as quickly as it arose, which would leave you - as it did in real-life for many companies - with a ton of unsold stock. If you had more in-depth information about fads and consumer preferences, maybe this problem could have been avoided. Rather than blindly following the dollar signs, you may have been a lot more cautious and not ordered too many spinners, instead allocating the remaining resources to a "safer" long-term seller, such as Lego or Barbie dolls. Considering the opportunity costs involved in each decision encourages you to learn more about the myriad factors involved. It will undoubtedly improve your long-term planning and organising skills – and it ensures that you don't end up with a stock room full of cheap plastic toys that nobody wants.