Power of Suppliers – Low There is low supplier concentration relative to the industry they sell to and a single supplier does not account for a large part of a retailer’s business. This weakens the overall power of the supplier because there are more supply options available for discount retailers. The emergence of private labels has also reduced supplier leverage. Supplier power is further weakened by low switching costs and non-differentiated products. As the retailers incur virtually no costs by changing suppliers it is easy for them to play them against each other to get better terms.
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.
The strategy involved receiving orders directly from customers and avoiding distribution channels. It was an efficient and less expensive way of distribution and production. That enabled Dell to attain cost leadership and competitive advantage in PC market. 2. Sources of Dell’s competitive advantage In general, Dell’s competitive advantage came from 4 sources: - Just in time purchasing of components (avoiding falling prices) - Customers linked directly to manufacturer - Lower inventory costs (avoiding carrying and inventory costs based on cost of capital) - Distribution channel related costs and markups (which increases prices to the customer) Each one of these measures enabled costs cuts, quicker deliver time and a more reliable finished product.
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
1. The strategy of DFA company was taking advantages of size effect (small companies outperform the market) and value effect (high book-to-market ratio companies outperform the market). So that they chose small-capital companies and high book value companies to create their portfolio. They primarily believed in efficient market as well as the sound academic researches and ability of skilled trader. They worked with the RIAs (registered investment advisors) to lower the cost.
Ebay could build regional distribution centers where these third-party retailers would be able to store their products in the interim period for a fee. This presents a dual advantage as brick-and-mortar retailers do not have the distribution network that Ebay has and so being able to store their products at Ebay facilities will minimize shipping costs and save money for the end customer. And by connecting end customers with smaller retailers Ebay will benefit by opening up these retailers to greater exposure while earning a profit from lead generation rather than commission. Ebay must also modernize its operations to ensure its survival in the e-commerce space. An effective way Ebay could improve operations is through using environmentally friendly packaging to ship products of its retail website Half.com and other retailers creating a
Cloning the industry price If the virgin mobile clone the industry price they have various advantage to lure the customer, they have the differentiated applications and superior customer service. Also they are offering fewer hidden charges and better off-peak hours. Also our calculation (exhibit 1 & 2) shows that break even for the virgin mobile is less compare to industrial average but there are numerous drawbacks which outweigh this price strategy. • Virgin will loose the advantage of transparent pricing structure for customer by not eliminating all hidden charges. • Virgin may have to abandon its preferred target market of teenagers, due to contract implementation and billing system.
Computed by deducting the cost of capital from the after-tax profit, it is said to be the best measure of the true profitability of an enterprise because it is tied to cash flow and not earnings per share. Many analysts would agree that EVA is more positively associated with a company’s stock price than ROE or EPS. Keith confirmed his findings with an industry analyst, which posed him with the decision of whether of not to implement this calculation into OSI accounting practices. Furthermore, would it be a beneficial tool to be used for evaluating the new manager’s incentive compensation plans? The EVA trend seems to be almost mandatory for the larger companies, but there is no reason that it shouldn’t work just as well for their smaller firm.
Monopoly and Price Discrimination What we called monopoly is the sole seller if the product and that product do not have close substitutes. Monopoly can control the prices of their goods, but their profit is not limited because high prices reduce the amount that their consumers buy. The most important cause of monopoly is barriers to entry. The three main sources are owned by a single firm, the government gives a single firm the exclusive right to produce some good or services, and the cost of production makes a single producer more efficient than a large number of producers like the distribution of water. Monopoly is the sole producer in the market; its demand curve is the market demand.
The primary cost advantage is Wal-Mart’s superior distribution capability (location of stores, inside-out growth patterns, cross-docking, superior information management). Wal-Mart’s prices are low by the industry standard, which, combined with its lower costs, indicates a strategy that aims at growth in volume through grabbing increased market share. Low prices, advanced data management and extremely motivated employees (“10 ft rule”, “sundown rule”) means a better customer experience than at other discount retailers, even though Wal-Mart remains a self-service retailer. In addition, the large size of the traditional Wal-Mart stores adds convenience by offering a one-stop solution by offering a wide range of products. It’s worth mentioning that Wal-Mart acquired volume through a careful consideration of locations, away from competition.