Costco Wholesale Corporation was founded on September 15th, 1983 by James Sinegal and Jeffrey Brotman. The two founded Costco to allow small businesses and families to purchase a variety of high quality, brand name items for a better value, and significantly lower price. The idea is, that businesses can purchase items in bulk, and then resell them for an individual price per item, thus bringing in a quantitatively larger profit. According to Jim Sinegal, the Company's Co-Founder and Director, "Costco is able to offer lower prices and better values by eliminating virtually all the frills and costs historically associated with conventional wholesalers and retailers, including salespeople, fancy buildings, delivery,
To begin, they have added volume to their business which was not available locally. According to Gupta, Govindarajan, & Wang (2008), they have exploited economies of global scale. The only way to increase their business volume was to go global, and increase profitability. Localized plants can help reduce the time it takes to deliver cement to a customer, which will help increase their customer satisfaction, and gain them additional business. In addition, when CEMEX began expanding abroad, they used PMI teams to streamline a new firm, identify and retain talent, and adopt the key standards of CEMEX's business model.
These strategies if used by Company G are the best mix to achieve their objectives because they allow Company G to maximize its profit while supporting the mission statement. The remote control features of the product combined with the variety of colors available and the convenience of not having to place the product near an outlet provide unique high-quality features that will best allow Company G to achieve its goal of increasing its revenue by 25% over the next three years. Using the previously stated price strategies will help Company G sell higher amounts of the product to big retailers at a competitive price, best equipping the company to reach a breakeven point by the second year. By using the place strategies stated earlier Company G will have a fast delivery cycle and get its new product out to more stores enabling them to have the product available in most major retail stores within a few months, and by using these promotion strategies of advertising on television as well as the internet they are best able to increase product awareness among the target audience by at least 30 percent in one
Even though the U.S. economy has been suffering greatly since mid 2000, Sara Lee has maintained market share in the core products that included foodservice, beverages, bakery items, body care, and household items. A current split of the company has been noticed and that may indicate a possible sale of its international business, leaving open rivals to finance an acquisition. The brand mix of similar products – unique brands – gives Sara Lee a strong competitive advantage over the competition with product effectiveness that reduces over all costs and drives up margins. Using a cross-mix strategy would remove the potential selling of one division or other, which would reassure investors that the company has a long-term strategy to maintain both the North America and International operations. The company is in a great cash position to develop long term strategies by using innovation, private labeling and marketing to generate new growth among other retail locations – reducing the overall dependency on Wal-Mart.
This is because they can find out exactly how many hampers are needed to be sold to make the business economically viable. There is no point in them continuing if the breakeven point is unrealistically high as they will never be able to reach it and inevitably make a loss. When Amelia and Julia estimated there sales at 400 hampers a year this left them with a margin of safety, the predicted sales takeaway the break even sales, at 200 hampers. For a small company having a margin of safety at 50% of their predicted sales is very positive as even if they only sell half of what is expected then they are still not going to make a loss. Breakeven analysis is very useful as well as it is easy to change the graph in accordance to different factors.
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.
A) Profit = (12.50 – 10) X 1000 = $2500. As there exists positive economic profit in this perfectly competitive industry in the short run ( as the price exceeds the average total cost), new firms will be attracted to enter the industry. As new firms enter the industry, the total market production increases, this will bring down the market price and thus, result in a fall in profits. This entry of new firms will continue till the economic profits in the long run becomes equal to zero, after which there will be no incentive for any new firm to enter. 2.
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.
Using the single allocation rate would lead Coffee Bean Inc. to believe that Moana Loa costs them more but also is more profitable with a $1.80 gross profit versus Malaysian which has a gross profit of $1.50. Using the single allocation rate will most likely lead management to make incorrect decisions regarding their different product lines. After recalculating costs and gross profit using the activity based costing method Moana Loa has a gross profit of just $1.45 and Malaysian has a gross profit of $2.26 making it more costly to produce but at the same time more profitable. Coffee bean Inc. in the future should use the Activity Based Costing method rather than their single allocation rate. Activity Based Costing leads to more accurate cost assignment, and will keep management better aware of which products cost the most and which products are the most profitable.
Ebusiness Individual Assignment Chong Lok Yee 53082125 T12 Method 1 only Porter’s Five Forces Model for Amazon The threat of new entrants: The threat of new entrants to Amazon is moderate. 1. Many firms, like Amazon, Ebay, and Argos are currently enjoying the economies of scale as they have expanded a large scale production, having limitless quantity and parameters of goods online and acquiring large customer base due to network effect. So, they can sell products at a lower price than the new entrants without influencing the profit margin. 2.