Answer To: HOLMES INSTITUTE FACULTY OF HIGHER EDUCATION Assessment Details and Submission Guidelines Trimester...
Tanaya answered on May 22 2021
Question 3.2. For each industry identified in question 3.1, determine the following: (a) the number and size distribution of companies; (b) the nature of barriers to entry; (c) the height of barriers to entry; and (d) the extent of product differentiation. What do these factors tell you about the nature of competition in each industry? What are the implications for the company in terms of opportunities and threats?
Value added by the retail industry is in between $1.14 trillion. The domestic product amounts to 5.9%. The general merchandise amount in the U.S. amount to $161 billion. For Amazon the number of centres located in Seattle, New Castle, Delaware and Washington. The size of the fulfilment centres of Amazon ranges in between 400,000 square feet to 1,000,000 square feet. For Nordstrom, there are nine distribution centres. The Seattle store is one of the largest stores for Nordstrom. Some of the areas which can pose a challenge for entry in the retail industry include governmental regulation, start-up cost, distribution channels, the scale of economy, competitive responses, technological challenge and accessibility for suppliers. The product differentiation in the retail industry has been identified in terms of a niche market, designers, availability of suppliers and advertising initiative taken up by the businesses.
The product differentiation in this industry has been carried out in terms of quality and cost with effective customer support. The competition in the retail industry is based on the different categories of the products they cater and the size of the products. Companies like Walmart and Amazon also have been competing on the market positioning based on their evolution of business in terms of profitability and product differentiation (Gregory 2015). The threats that are faced by the retail industry include inadequate ability to adapt to the technology, lack of skilled workforce, lack of efficiency in the supply chain, diversity in culture, complex tax structure and inadequate logistics and infrastructure. The opportunities are the development in terms of the web-based retail portal. As a result, more number of customer are able to access products rather than visiting the stores. The growth trends are higher, with more customer engagement and support.
Question 4.3. Why is it important to understand the drivers of profitability, as measured by the return on invested capital?
For finding the drivers of profitability in any company, it is crucial to explore the weakness and strengths of the company. This will also allow the company to measure their strengths compared to its competitors. This aspect ensures the company can maintain its financial position. In addition, it also allows the company to determine if they will be able to make enough profits or whether they will be deteriorating among the competitors. The success or failure of the company plays a crucial role in providing satisfactory returns to the stakeholder’s investments. This allows the organization in gaining benefits which are only possible if the companies can maintain their consumers and reap adequate profits.
Further, this also allows them to gain value. The driver of profitability also ensures whether the company can develop strategies which will help them in deriving profits in business. It can be either through the cost-structure, or it can be in terms of the industry standards and ROIC also known as the return on investment increased the profitability. Further, it also helps in measuring the effectiveness at which the company can invest its capital funds in future. The ROIC assist in the measurement of the effectiveness of the company on the basis of its allocated funds. With the help of the ROIC ratio, the company will also be able to ensure that the company is generating adequate profits. Further, in case the company has an ROIC of 2% or more, the profit is higher while in case the ROIC is less than 2%, the company is making...