The Impact Of Advertising On Firm Performance

China's economic growth rate tends to decline in recent years.From 2003 to 2007,China's economy grew at an average annual rate of 11.60%,while the average annual growth rate from 2008 to 2012 is only 9.27%.China's economic growth even reduced to 6.9% in 2015,0.5% lower than 2014.With economic growth receding,the overall market demand tends to dull,profit margins continue to shrink and performance declines year by year.Under the circumstance,the production and operation of companies face enormous challenges,shareholders and management take various measures to reduce the cost,such as cutting redundant institutions,reducing employee benefits,downsizing production and selling assets.However,even in this case,companies' advertising costs still increase year by year.Advertising costs is only a detailed expenditure under selling expenses,and it's only a small proportion of companies' general costs.Therefore the impact of advertising costs on performance has not ever been considered accordingly in academic field.Most corporations otherwise unanimously choose to show more discretion regarding potential decrease on advertising costs.Moreover,advertising costs still remain increasing with relatively a high velocity.Deriving from proven actuality,this thesis intends to clarify the mutual relationship between advertising costs and performance,explore the prudence of continually increased advertising costs.In case of coming into a rational conclusion on advertising costs' effect,the author initially went over existing exploration published domestically and internationally.After thoroughly analyzing relative theories,the author raised reasonable hypothesis.With further exploring data reports from food and beverage industry among 2011 to 2014,it is correspondently verified various magnitude impact on performance,which brought by advertising costs invoked by variable scaled companies.It is as follows:1.Budgeted advertising costs have positive ratio impact on performance.2.Normally,expected positive influence on performance brought by advertising costs will not endure more than 2 years.Ultimately,it declines with time fleeting.3.Enormous enterprise scale is not a necessary role when considered into the beneficial relationship between advertising costs and performance.This thesis ends up with suggestions for enterprises' advertising decision.For food and beverage industry,investment on advertising should be considered prudently in order to multiple profits with balancing advertising costs.Some large food and beverage companies shouldn't take prodigal expenses on advertising as a crucial element in expending performance.On the contrary,they should reduce expenditure on advertising and arrange consumption of resources rationally.Small food and beverage companies should take advantage of advertising marginal utility and enlarge costs on advertising.Medium-sized corporations are strongly advised to make decision on advertising expenses more carefully.Taking the flexibility on budget and the capability counterattack potential debt crisis into very serious consideration.Maximizing the positive advertising costs' effect on performance.