Discussion: What Strategies Do You See as an Investigator?
Choose any one of the following companies and review the respective websites: Wal-Mart, Home Depot, IBM, or Cardinal Health. Examine their strategies to check if they are emergent, intended, or both emergent and intended. Discuss why you selected a particular company and how its strategies compare with their competition. In your responses to your classmates, relate how these strategies can translate to a business’s success and assess any differences in opinions you may have on a chosen company.
Discussion: The External Environment
Subaru America is a mainstream automaker offering middle-line priced automobiles. It offers great value for consumers. The company experienced phenomenal success in the 1980s but had to redesign itself slightly with the introduction of the Subaru Outback to compete in the trendy sport utility vehicle (SUV) market.
Tasks:
http://media.pearsoncmg.com/ph/streaming/bp/2013/MGMT/Strat/Strat2012_Subaru_External.html
Subaru America: The External Environment. Based on the video, discuss the following questions:
- How does Subaru’s sustainable business practices help make it more competitive?
- Compare and contrast Subaru’s practices to two other auto manufacturers.
- Discuss how the internal and external environments of Subaru and the two other manufacturers compare. Are they alike or are they different?
Discussion: Cost Strategy
This week, you explored the aspect of cost in an overall business strategy and approach. The text talks about Ryanair and its cost strategy. In the U.S., there are other companies in many industries that use the same approach. Identify two companies that use the same cost strategy as Ryanair. Detail their actions and how the strategy equates to their success or failure. Find the market share they have in their industry and explain how the companies can neutralize threats in their industry.
Discussion: Vertical Integration
For this discussion, identify and research a company that has vertically integrated. Describe the value chain and determine if the company is forward or backward vertically integrated. Why is this integration beneficial to the company and why is it an important strategy?
Discussion: Exploring International Strategy
Select and describe a company that has an international strategy.
- Do you think international strategies are always just a case of diversification strategies that a firm might pursue or are there any other reasons?
- In which countries is it riskiest to begin international operations?
Discussion: Using Strategic Alliances
For years, companies have used strategic alliances to help mutually benefit partner organizations. Consider a joint venture between GM and Toyota. GM has been interested in learning how to profitably manufacture high-quality small cars from its alliance with Toyota. At the same time, Toyota has been interested in gaining access to GM’s U.S. distribution network.
- Which of these firms do you think is more likely to accomplish its objectives and why?
- What other companies have used a strategic alliance successfully?
Project Description
| Managerial Accounting Project DescriptionThe final project will provide an opportunity to utilize the accounting skills you learned during the course by preparing a schedule of cost of goods manufactured, computing the contribution margin ratio and breakeven point, and completing a contribution format segmented income statement.
Project Introduction: The project will be introduced in Week 1. The project is due for submission in Week 6. It is suggested that you follow the schedule below for timely completion of the project. Alternatively, you may complete the project at your pace. Following the schedule given below will help you balance the load across the weeks.
Course Objectives Tested:
Project Submission Plan: |
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Project Part |
Description/Requirements of Project Part |
| Project Part 1 | Tasks: Click here to download the information to calculate the following:
Deliverables and Format: Click here to download the template for Project Part 1. Assigned and Due Date: Grading Weight: 6% |
| Project Part 2 | Tasks: Computing Solutions sells a laptop battery, but they have been having some slow sales periods. The company’s contribution format income statement for January, 2012 is shown below: |
Using the above information, calculate the following:
- Contribution margin ratio
- Breakeven point
Deliverables and Format:
Submit your answer in Project Part 2 template.
Click here to download the template for Project Part 2.
Assigned and Due Date:
Assigned: Week 1
Due: Week 4
Grading Weight: 7%
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Schedule of Cost of Goods Manufactured:
| Computing Solutions Company Schedule of Cost of Goods Manufactured For the Month Ended August 31 |
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Income Statement:
| Computing Solutions Company Income Statement For the Month Ended August 31 |
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- The CM ratio is _____%.
| Total | Per Unit | Percent of Sales | |
The break-even point is:
Incremental contribution margin:
- Explain your answer.
- Segments defined as product lines:
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Product Line |
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Software Division |
Business Software |
Gaming Software |
- Computation for choosing product line:
| Business Software | Gaming Software | |
1.
2.
- Segments defined as product lines:
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|
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Product Line |
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Software Division |
Business Software |
Gaming Software |
| Sales | 600,000 | 200,000 | 300,000 |
| Variable expenses | 300,000 | 130,000 | 120,000 |
| Contribution Margin | 300,000 | 70,000 | 180,000 |
| Traceable Fixed Expenses: | |||
| Advertising | 120,000 | 30,000 | 42,000 |
| Depreciation | 48,000 | 10,000 | 24,000 |
| Administration | 10,2000 | 14,000 | 21,000 |
| 270,000 | 54,000 | 87,000 | |
| Net Profit | 30,000 | 16,000 | 93,000 |
- Computation for choosing product line:
| Business Software | Gaming Software | |
| Sales | 200,000 | 300,000 |
| |Contribution Margin | 70,000 | 180,000 |
| Contribution Margin Ratio | 35% | 60% |
Thus, it can be seen from the above calculations that Gaming Software division has better contribution margin ratio. Therefore, the company should focus on this division to increase profit.
1.
| Current Cost | 40,000 | |
| Cost of Supercomputer: | ||
| Annual Depreciation | 7,500 | |
| Technician cost | 14,000 | |
| Electricity cost | 1,800 | |
| Insurance and Maintenance | 3,200 | 26,500 |
| Savings | 13,500 |
2.
| Annual Savings | 13,500 |
| Net Investment | 90,000 |
| Expected Return | 15% |
The supercomputer will not be purchased as expected return from this super computer is 15% which is less than required rate of return of the company.
3. Computation of payback period
Initial Investment 94,500
Annual Savings 13,500
Payback period 7 Years
4. Computation of Internal Rate of Return
|
Year |
Cash Flow |
|
0 |
-94,500 |
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1 |
13,500 |
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2 |
13,500 |
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3 |
13,500 |
|
4 |
13,500 |
|
5 |
13,500 |
|
6 |
13,500 |
|
7 |
13,500 |
|
8 |
13,500 |
|
9 |
13,500 |
|
10 |
13,500 |
|
11 |
13,500 |
|
12 |
18,000 |
| IRR |
9.77% |
It can be seen from the above computations that internal rate of return is very less as compared to average return computed above. Thus, simple rate of return is not accurate for accurate decision making.
- The CM ratio is 30%.
| Total | Per Unit | Percent of Sales | |
| Sales | 585,000 | 30 | 100% |
| Variable Expenses | 409,500 | 21 | 70% |
| Contribution Margin | 175,500 | 9 | 30% |
The break-even point is:
| 180,000 | Fixed Expenses |
| 30% | Contribution Margin Ratio |
| 600,000 | Breakeven Point |
Incremental contribution margin:
| Incremental Sales | 15,000 |
| Incremental contribution margin ratio | 30% |
| Incremental contribution margin | 4500 |
- Explain your answer.
It can be seen from the above working that the current sales level of the company is less than breakeven level. Therefore, the company is incurring loss. The company must increase sales to breakeven.
Schedule of Cost of Goods Manufactured:
| Computing Solutions Company Schedule of Cost of Goods Manufactured For the Month Ended August 31 |
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| Cost of Material Consumed: | ||
| Opening Inventory | 8,000 | |
| Purchase | 165,000 | |
| Closing Inventory | 13,000 | 160,000 |
| Direct Labor Cost | 70,000 | |
| Manufacturing Overhead | 85,000 | |
| Total Cost | 315,000 | |
| Changes in Inventory of Work in Process: | ||
| Opening Inventory | 16,000 | |
| Closing Inventory | 21,000 | (5,000) |
| Cost of Goods Manufactured | 310,000 | |
Income Statement:
| Computing Solutions Company Income Statement For the Month Ended August 31 |
||
| Sales | 450,000 | |
| Less: Cost of Goods Sold | ||
| Opening Finished Inventory | 40,000 | |
| Cost of Goods Manufactured | 310,000 | |
| Closing Finished Inventory | 60,000 | 290,000 |
| Gross Profit | 160,000 | |
| Selling and Administrative expenses | 142,000 | |
| Net Profit | 18,000 | |
Business Policy of Wal-Mart
Name of the Student
Name of the Organization
Author’s Note
Table of Contents
I. Strategy of Wal-Mart 2
II. External Environment 2
III. Cost Strategy of Wal-Mart 3
IV. Vertical Integration in Wal-Mart 4
V. International strategy of Wal-Mart 5
VI. Strategic Alliance. 6
I. Strategy of Wal-Mart
After examining strategies of Wal-Mart, it is clear that the company uses both intended and emergent strategies. At their initial stages, Sam Walton, the founder of Wal-Mart decided to establish its other stores close to the first store of Wal-Mart, as it was easier for him to manage all the stores at the same time. The reason for adopting emergent strategy was the unknown future of the store as it was in its beginning days. On the other hand, Wal-Mart also uses intended strategy. They keep the prices of the products very low; sometimes lower than other stores to attract more customers. This intended strategy helps them to acquire a competitive advantage over rival stores.
Costco Wholesale is the primary competitor who is outperforming Wal-Mart using their intended strategy. Wal-Mart sells their products at a low cost. On the other hand, Costco makes most of its profits from membership fees, not margins on product sales. Therefore, they can sell their product at a very low cost, lower than Wal-Mart.
Emergent strategy is a big help for the companies who are entering into the new market. Playing safe allows them to gain profitability with a chance to evaluate the market at the same time. The intended strategy can help a business to gain more customers; however, there is a risk also.
II. External Environment
External analysis of Wal-Mart is discussed below with the help of PESTLE analysis,
Politics: Recently, Wal-Mart had to face political action lawsuit for gender discrimination. Otherwise, they are good at adapting and changing their priorities and strategies according to the political factors like economic conditions, political instability, currency regulation, legal and regulation constraints, intellectual property rights and tax systems.
Economic: The Economic Condition of the host countries is creating a negative impact on Wal-Mart. For example in the US, higher interest rates, higher fuel and energy cost, a higher level of unemployment, higher tax rates, economic slowdown and other economic factors are changing the consumer demand for Wal-Mart products services.
Social factors: While operating in International markets, Wal-Mart strictly follows the local culture of the host country. They follow the local population, distribution of age, attitude toward career and other social factors to implement their marketing strategy in that country.
Technological Factors: Wal-Mart uses the modern tools and technologies for their marketing and advertising purposes. It heavily relies on the internet and social media to promote their band and to sell its products. CEO of Wal-Mart once stated that technology is the primary concern on the agenda of marketing in Wal-Mart.
III. Cost Strategy of Wal-Mart
Wal-Mart strongly follows “Everyday Low Price” cost strategy which allows the customers to buy different products at a low price throughout the year without waiting for a sale. Besides, low price strategy gives them a competitive advantage over their rivals. Because of this strategy, it is almost impossible for new companies to join the industry. Therefore, the risk of new entrants is also not there. However, there are some factors that helped Wal-Mart to carry out this strategy since their beginning days till today.
Huge customer base: The customer base and operational spread of Wal-Mart is huge. Therefore, keeping low price does not affect their sales volume.
Supply chain management: Wal-Mart uses a smart supply chain management that is efficient and reduces the outlays.
Overhead and Operational cost: Wal-Mart keeps its overhead and operational costs as low as possible. The management instructed their employees to keep the cooling and heating cost of the building as low as possible. Besides, their low benefits health care plans, company policy to share rooms with the colleagues has also helped to keep the costs at a minimum level.
Transportation cost: Transportation cost of Wal-Mart for supplying goods is very low in compare with other companies. They have 160 distribution centers build on almost 120 million square feet and are located within 130 miles of the stores from where they supply.
IV. Vertical Integration in Wal-Mart
Wal-Mart never missed a chance to expand their business and profitability. Therefore, they are a strong practitioner of vertical integration. In its initial stages, Wal-Mart was only a retailer but from 1991, it started to sell well under its private label brand. For example, their private soft drinks brand Sam’s choice is now the third most popular brand in the United States. The company is also offering home entertainment by providing Vudu, which is an online stream service that allows consumers to purchase movies which can be viewed on almost any Internet-capable device. Wal-Mart introduced Vudu as their private brand in the year of 2010. Besides, the company is also interested in entering sued car market which is an example of the horizontal integration system. However, selling its own products in its stores has provided Wal-Mart a bunch of opportunities and advantages over their competitors.
V. International strategy of Wal-Mart
Going global is not an easy task for any company. However, Wal-Mart not only succeeded to spread their business globally but also acquired huge market shares from those markets in a very short amount of time. Their systematic and accurate international strategy helped them to achieve this enormous success. International strategies of Wal-Mart are,
Market selection: In 1991, Wal-Mart planned to spread their business in Asian countries. But soon they understood that cultures, languages and lifestyle of Asian people are totally different from the US. Besides, the geographical distance was another problem as it had to supply its good from the US to Asia. Therefore, they made the perfect plan to open their first international stores in Mexico, Brazil and Argentina. These countries had the largest population in Latin America which helped Wal-Mart to prepare themselves for the challenges in Asia. In the year 1996, they decided to open their store in China which had a population of 1.2 billion in 640 cities. However, they still felt that geographical distance is creating a barrier to their expansion plans. Therefore, they decided to shake hands with two Japanese retailers who are Ito-Yokado and Yaohan. Those retailers helped Wal-Mart to sell their products in Japan, Singapore, Hong Kong, Malaysia and Singapore. In 1996, Wal-Mart entered Hong Kong with the help of C.P. Pokphand Company to open three value club membership discount stores in Hong Kong.
Market entry strategy: The authority of Wal-Mart felt the cultural differences between the United States and Mexico. Therefore, they joined hands with Cifra which was Mexico’s largest retailer. While entering Brazil, they shared hands with Lojas Americana, a local retailer. In this way, they entered each market with the help of a local retailer to understand the local culture and daily needs with the help of those retailers.
Workforce and stores: After finalizing their purchases in Canada Wal-Mart send a professional team there to educate Woolco’s 15,000 employees with the objectives and goals of Wal-Mart. Besides, they bought every outlet from Woolco and renovated them within three or four months up to its own standards.
VI. Strategic Alliance
One of the most strategic alliances of Wal-Mart was joining hands with Stanley Works. In the year of 2001, Wal-Mart started selling Stanley hand tools, mechanic tools and Stanley toolboxes in their all U.S stores. Other companies with whom Wal-Mart formed strategic alliances are Humana and Li Feng. The Medicare patients of Humana can now buy the prescribed medicines from Wal-Mart because of their alliance with each other.
