business / Current Affairs / life

Why Big Companies Don’t Make a Profit

So perhaps a light-hearted tale shall be the best way to begin.

My flatmates and I decided last weekend to sit down together and share a meal; A meal of pizza. Not just any pizza; Delivery pizza. Being slightly too eager at the thought of not having to cook/having nothing better to do with our time, we proceeded to order at around 5pm even though we didn’t want dinner until 7.30. Now we decided to order out from an established place…I won’t name any names, but it’s one of the big pizza household names…you can’t guess too wrong. Placing an order via telephone, 50% voucher code in-hand, I simply ordered three pizzas…not too complex…three pizzas.

My total came to a glorious £23.73. Split that between five people and hey presto you’re only looking at £4-something each for atleast 5 slices each! (Not that we can eat that much…well some of us can, but that’s a whole other story for another time).

7.30pm came along and on the dot, the doorbell rings. A nice man holding three boxes hands over our food and after taking the cash goes on his way. We ran up the stairs to unload the pizzas into the kitchen-everyone stood in attention waiting to grab their first slice. We began to open the boxes. Some jumped immediately for their slices. As I open the last box I realise-this isn’t right.

Being a vegetarian, there is always one veggie pizza-standard. Well there wasn’t one on my table. No there was not. After a quick call to the pizza place they apologised and offered to send it out as soon as and free of charge of course. My flatmates approvingly smiled at the thought that they had a whole large pizza free of charge. As students, anything free is a true gift.

But then one of them stopped and looked puzzlingly at her pizza, “Wasn’t there meant to be Steak on this pizza?”

This is chicken though…and bacon?”, another chimed in looking equally confused.

Wait a minute, this order is entirely wrong! This isn’t at all what we ordered”, said the third incredulously before bursting into laughter.

I couldn’t believe it! I was going to have to make another call, wasn’t I? They all looked at me expectantly.

“Yes, I’m calling!” I said picking up the phone again. After an awkward conversation with the manager, he offered to send out another pizza-with the correct toppings free of charge again.

I have never seen my flatmates so ecstatic in the whole time I have known them. Not only had they gotten one extra pizza, but now they were getting two!

They had already devoured one pizza between the four of them and now deciding to ‘save’ the other ‘wrong’ pizza, waited for the next two. Within fifteen minutes they had arrived and finally I could eat! The others now looked strategically upon their ‘steak’ pizza, weighing up how full they already were with their desire to eat the steak pizza.

“Marginal Utility guys”, I added perhaps unhelpfully to them…they then looked even more upset at the thought of wasting hot pizza.

So eating my pizza, I watched them debate how much more pizza they could eat, which slice was bigger, which had more meat to base ratio etc Fascinating stuff.

All in all, 25 slices out of the 48 slices that had sat in our kitchen had been consumed in that night. The rest left for breakfast the next day. Or indeed lunch or dinner. Leftovers know no bounds.

What, as decent mathematicians was the best part about it? We had been given five pizzas for the price of three. £4-something now paid for 9 slices, not 5. That was on top of the 50% voucher we used initially as well!

So question is: how much money did the pizza place lose? We may have gotten those pizzas for free but they certainly must have cost something. The people whose order we had received, had they been given free replacements too? In this chain of events, if a company as big as this has loss-making orders like this on its books all the time, doesn’t it add up?

Recently there’s been a lot in the news about corporation tax and how big companies are avoiding it.

Now I think given the choice anyone in the UK would love to save a bit of money from the ‘Tax-man’. Don’t try to deny it, you would.

So if companies are engaging in a (currently) ‘legal’ form of tax avoidance, who are we to stop them?

They are just being resourceful and trying to get the most out of their revenues. Isn’t it morally wrong though? Have we all become so greedy?

On the flip side, big companies like Amazon, Starbucks, Google and Apple provide numerous jobs in the UK economy. Would a complete clampdown on their finances or even just a boycott affect there willingness to operate in the UK and consequently eradicate a large proportion of that employment? I don’t think the economy could bear that.

That is perhaps a bit extreme though. The UK is a huge market for these companies and they know this. So maybe they should just suck it up and take a couple of hits and pay up. Smaller businesses do.

One of the biggest claims to be heard is that the representative from Starbucks said that they didn’t even make a profit in the UK! Apparently that’s only happened once in 15 years.

Even as ridiculous as that may sound and as ridiculous as this may sound, if they’re making mistakes like the pizza place, I may not find it so hard to believe.

Companies like Starbucks who have hundreds of branches (I mean there must be one of almost every corner in London) completely saturate their market. Their costs must be phenomenal; Coffee being a non-reusable sort of good, rents of their premises and there’s corporate responsibility meaning fair-trade pay for suppliers etc I can kind of see how they might be more like ‘getting by’. Saying that though, the prices are steep! (Luckily for me I’m not completely hooked on coffee…yet. Otherwise Starbucks would be an expensive habit).

 So what do you think? Do big companies get away with too much when it comes to tax avoidance? Do you think there’s any truth in the small profits they say they get from the UK? How do you think we can convince them to contribute more?


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