Moreover, its supply chain initiatives are expected to deliver around $2.00 billion of net savings on annual run rate basis. Its supply chain initiatives such as rate reductions, greater equipment standardization, project re-scoping, and timing optimization are enabling the company to better negotiate cost reductions from suppliers. More importantly, the company is reducing its operating costs. CVX has reduced its operating as well as G&A costs by over 12% in the third-quarter to $6.6 billion from $7.5 billion last year. Also, it lowered its exploration expenses to $315 million, a reduction of 14% as compared to $366 million last year.
The companies involved in the price war can take steps to curtail their Selling, General and Administrative (S, G & A) expenses to improve their performance. If the company’s pricing strategy succeeds, the company will earn good operating profits. However, if it fails, the curtailed and well planned S, G & A expenses will help the company mitigate the competition risks. The lower S, G & A expenses as a percentage of revenue indicates a better performance. Sainsbury’s already had much lower S, G & A expenses as a percentage of its revenue than that of Morrisons.
However, the furniture store took in only $50 in cash, for an item they bought for $100 cash. In every sale, the firm will register a profit, yet its cash reserves will decline by $50. Therefore when a sale is increased rapidly most portion of the sale is made on the account then cash flow will be poor but we will see good amount of sales and higher profits because in financial statements revenues is recognized when goods is sold on account too. Hence cash flow may be poor in case of higher sales & higher profits too. The firm can improve such poor condition of cash flow with the help of following recommendations.
With regards to the private label, Freshgel, all that can be deduced from their pricing strategy is that the prices they set were not at a low enough level to entice consumers who would otherwise choose the two dominant brands in the industry. Their unit sales are considerably lower than that of their competitors and in order to achieve success their most likely strategy is to reduce prices even further. However, even if they witness an increase in unit sales, it is likely that their revenue will not increase substantially. In contrast, Store Two’s results are indicative of a slightly different relationship, as the correlation of the price and amount for sales is positive for Colgate. It is negative, but very close to zero in Prodent’s case.
Whereas other discounter and supermarkets markup 20 to 50 percent. Low pricing strategy kept customers coming to shop. As a result to the low markups, Costco’s net revenues barely covered operating expenses and contributing only a fractional percentage to profits. Wall Street analysis criticized Costco’s management for going above and beyond to please customer at the expense of profits for shareholders. Costco products cover a broad range from fresh meats, seafood, produce, paper products, and dairy to electronics, apparel, housewares, and washer and dryers.
Transformational Change: Starbucks became the first company (private) to introduce stock options for its employee. Schultz also introduced free insurance for the employees. Success and complexities: Increased job satisfaction of employees and hence lower retention rate. This did not work initially as Starbucks faced huge losses at that time. Also, at the time of introduction of subsidies, shareholders did not favor Schultz, as they fear the dilution of their share price.
Explain the difference between implicit and explicit costs. Give two examples of when an explicit cost is different from an implicit cost. The easier one to explain by far is explicit cost. Costs that a company will pay, whether it be for wages, rent, items that need to be purchased to run the company, etc. are out-of-pocket expenses.
During the same excat year it loaned $25,000 to a bank. Beta Corporation has in their first year an ordinary loss of $60,000 and in their second year had an ordinary loss of $20,000. Moreover, when June 30th of Year 2 came around, Juan and his wife divorced. Juan made a transfer of 50% to Martha, his former spouse, in accordance with the divorce settlement. In Year 3, Beta Corporation improved its performance incurring $40,000 of ordinary income.
This approach allows business organizations to measure the real profit of each product. It can understand the performance of each product and improve its performance. The costs involved in making a product, and the sales revenues generated, are likely to be different at different stages in the life of a product. For example, during the initial development of the product the costs are likely to be high and the revenue minimal – i.e. the product is likely to be loss-making.