By minimizing handling of goods through the use of direct shipments form the manufacturer to the store, as well as the use of cross-docking techniques where items are shipped to a cross-dock and then distributed to stores, Costco is able to minimize handling time. This minimized handling enables Costco to cut costs due to less labor involved. Costco also buys items from retailers on the grey market at deeply discounted prices that it can pass onto its customers. Often times, because Costco has such a rapid inventory turnover, Costco is able to buy products and sell them before the invoice is due, often taking advantage of early payment discounts, and in essence, the vendor finances purchase, and Costco is able to pass those savings onto its customers. I think that Cosco’s biggest weakness is that they are not overly forward-looking.
Yes, the company’s business model is appealing because the company’s increased inventory turnover and low operating costs allowed it to maintain a profit, despite their significantly lower gross margins compared to the industry (traditional wholesalers, mass merchandisers, supermarkets and supercenters). What are the chief elements of Costco’s strategy? How good is the strategy? The chief elements are pricing, product selection, maintaining low operating costs and expansion. Pricing/Product Selection-The company philosophy was to provide high end quality product and/or services to club members but maintain low prices.
There was not one dominant player within the industry; they were more equally balanced thus increasing rivalry. The High fixed cost for running a discount store resulted in an economies of scale effect, this can be seen when Wal-Mart decided to gain economies of scale by building their own distribution centres to add value. Going public in order to finance the extra storage was important for Wal-Mart to utilise capacity as efficiently as possible, they did this by creating distribution hub around 15-20 stores. The increased rivalry continues, this was due to the low levels of product differentiation and little in the way of own branding, products were standard in nature through all discount stores. Also the low switching cost and consumer awareness of shopping around to find the best bargains increased competition around stores to capture customers.
Blue Nile’s supply chain efficiency allows them to have lower operating costs. Blue Nile bypasses the wholesalers and brokers, which gives them a great opportunity to obtain a more cost-efficient product. Blue Nile and their suppliers also have multiyear agreements whereby Blue Nile only purchases diamonds and gems when a customer places an order. The low operating cost allows Blue Nile to offer their customers discounted prices at about 20% to 35% less than the traditionally established stores. 2.
Vertical integration helped reduce the bullwhip effect. Zara was able to originate the design and have finished goods in stores much faster than average retailers. The short cycle time and
On the opposite end of the continuum, a full-line discount store such as Wal-Mart has a moderate to low level of customer service. Their business model is built around high volume sales with a low profit margin. They have made their fortune on buying large quantities of items at a low cost in order to pass on the savings. Another way for them to
Ceres is a service company and they carry fewer amounts of inventory compared to a typical manufacturing company. This is an explanation for the lower percentage increase between revenue and inventory. The percentage difference between account receivable and sale revenue is about 20%, this shows that Ceres Company has been very effective in collecting funds from debtors. Additionally, it can also be explained that debts from prior periods have also been collected. What have been the key factors in the company’s growth?
Niche markets can allow for higher margins; however new entrants effectively position their product to a low volume high price model limiting their sales volume. Consequently, J&J should not overlook the low end segment of the consumer market,
The benefits of accrual basis accounting include equal distribution of expenses paid in advance and in arrears. Cash basis accounting is beneficial to smaller businesses especially when the company does not have to maintain an inventory, there are no customer accounts of returns, and when most of the sales are cash sales. This method of accounting is typically easier and cheaper to maintain. Although there are numerous benefits to both options the business must determine which method is best for them and that is usually based off the
Mechanically how is your strategy different than your best strategies in 4a Strategy 6 : Inventory Management in Price Cutoffs = 10 could be improved with a small tweak on the preloaded strategy. The cutoff could be reduced from 10 to say 5-6. Why does the change in 5a work better? With the tweaked strategy 6, the reduced cut-off will ensure that the inventory be cut down quickly when the overnight volatility and order processing costs are relatively high. The bid-ask spread is also a cost to the dealer.