Risk and uncertainty - Essay Example

Risk and Uncertainty Major Differences Risk and uncertainty are two distinct concepts, and hence these terms are not interchangeable. As Knight describes, the major difference between risk and uncertainty is that the former can be quantified and measured whereas the latter cannot be measured (233). Risks can be eliminated to some extent by adopting effective policies while avoiding uncertainty. In other words, uncertainty is beyond human control when risk is manageable to some extent. Although individuals do not know the outcome in case of risk, they clearly know the possible distribution of the outcome.

In contrast, there is an uncertainty when individuals are not informed of the outcome or of its distribution. Some authors suggest that risk is about the outcome of events whereas the uncertainty is specifically related to its probability. Use of inventoryAn effective inventory management is essential to ensure the better use of inventory. If the prevailing economic and market conditions are favourable, the organisation may use the inventory at its best level to generate more profits. Likewise, the firm should not choose to use inventory on a large scale when the existing business conditions are not promising.

Use of excess capacityBusinesses should use their excess capacity once they identify an emerging opportunity to expand their market territory or to increase sales volume. For instance, firms may use their excess capacity in peak seasons to take advantages of the favourable market situation. A cake manufacturing company must use its excess capacity in festival seasons like Christmas, New Year, and Easter because there will be an increase in the market demand of cake during these seasons. By using the excess capacity, the company can improve its production capacity to meet the increased supply needs.

In addition, a company can use its excess capacity when demand conditions are favourable. To illustrate, a company would experience increased demand for its products/services following a positive review by reputed agencies and therefore the company must increase its capacity to benefit from this particular business situation. Minimising risk/uncertainty exposureA number of strategies can be used to minimise risk/uncertainty exposure during the product launch (Harley Davidson low-to-the-ground hover bikes).

It is clear that the organisation would not be informed of many risks and uncertainties when it launches the product into the market. A prior market survey can really assist the organisation to minimise its risk/uncertainty exposure to a great extent. The business can make use of the wide popularity of the social networking websites like Facebook and Twitter to obtain customer views and opinions concerning this Harley Davidson design prior to the product launch at cheap costs. Such a practice would assist the company to identify the weaknesses with the product (if any), and make proper changes (if necessary) before the product launch.

Similarly, the firm can use modern advertising tools to limit its risk/uncertainty exposure considerably. Evidences suggest that online based advertising techniques can benefit companies to obtain an initial boost in sales and thereby make the product recognizable in the market. In addition, hiring celebrities like soccer players or film actors to appear in the Ads of the product is also a better strategy today. Works CitedKnight, Frank H. Risk, Uncertainty and Profit. Courier Dover Publications, 2012. Print.