Even when vendor payments were made in time to take advantage of early payment discounts. Costco was able to finance inventory by vendors, rather than by having to maintain sizable working capital. Also, generating cash flow fast helped Costco payoff for almost 80 percent of its own buildings and land. 2. Describe Costco’s Strategy Costco’s strategy elements are low prices, limited selection, and a treasure-hunt shopping environment.
In 1996 Coke did not have strong working capital. In 2010 Coke has developed a positive working capital and will not require short-term loans for daily business support. 2. Analysis of Common-size statements. The total assets of Coke have risen over the years but the percent of current assets has reduced.
This is due to the relatively large amount of sellers, differentiated products, and easy entry and exit from the industry. The large number of sellers constitutes small market shares, the absence of collusion, and independent action between firms. Product differentiation tends to focus on product features, service, location, brand names and packaging, and
With limited product selection and low prices, Costco Wholesale Corporation is able to use quick inventory turnover and high sales volume as a business model. This business model is appealing, because Costco Wholesale is able to pay their suppliers for their products at a very quick rate, since they have such a high inventory turnover rate. This causes Costco to be capable of receiving payment discounts for paying invoices so quickly. Due to these circumstances, Costco is able to provide low prices for its customers and use the extra money saved from discounts for investing in new inventory or products. 2.
However this is primarily due to the reinvestment of profits into the purchasing of Property, Plant and Equipment and paying down long term debt. Dawson has a solid track record of increasing revenue, profitability and improving return on assets while at the same time improving control of operating expenses. Small companies like Dawson can compete against larger retail chains by providing specialty products and superior service. Dawson is also very efficient at collecting its receivables within the first 30 days (92%), resulting in strong cash generation. Analysis Assumptions: The case indicates that Dawson is a small retail chain that sells hard and soft goods.
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
1. What are the core competencies and end products of IKEA? How are they linked with each other? The core competencies of IKEA are the “assemble-it-yourself” furniture and the flat packaging that reduces the cost of transport and storage. Having such “space-friendly” package allows the warehouses to contain sizeable amounts of furniture and trucks to transport significantly much bigger quantity.
This assumption has most likely reduced our estimated valuation by neglecting some years with potential growth rates of more than 5%. However, in the long run we felt that the amount would have an immaterial affect on our findings. Arguably the most important assumption in this calculation is the sales growth rate associated with the terminal value. Since this number is the present value of perpetuity it represents the largest piece of our free cash flow. As mentioned earlier, we feel that Home Depot’s expansion will be at an end or close to it by 2011, and any continued growth beyond that date will most likely be fueled by existing store sales.