textbookCrafting and Executing Strategy THE QUEST FOR COMPETITIVE AD VANTAGE Concepts and Cases 20th edition

LEARNINGEXERCISES 1. Using the financial ratios provided in Table 4.1 and the financial statement information presented on pp. 110112 for Costco Wholesale Corporation, calculate the following ratios for Costco for both 2012 and 2013: a. Gross profit margin b. Operating profit margin c. Net profit margin d. Times-interest-earned (or coverage) ratio LO 1 110 e. Return on stockholders equity f. Return on assets g. Debt-to-equity ratio h. Days of inventory i. Inventory turnover ratio j. Average collection period Based on these ratios, did Costcos financial performance improve, weaken, or remain about the same from 2012 to 2013? Consolidated Statements of Income for Costco Wholesale Corporation, 20122013 (in millions, except per share data) 2013 2012 Revenue Net sales .............................................................................. $102,870 $97,062 Membership fees ................................................................. 2,286 2,075 Total revenue ....................................................................... 105,156 99,137 Operating Expenses Merchandise costs ............................................................... $ 91,948 $86,823 Selling, general, and administrative ..................................... 10,104 9,518 Preopening expenses .......................................................... 51 37 Operating income ................................................................ 3,053 2,759 Other income (expense) Interest expense ............................................................... (99) (95) Interest income and other, net ......................................... 97 103 Income before income taxes ................................................ 3,051 2,767 Provision for income taxes ................................................... 990 1,000 Net income including noncontrolling interests ..................... 2,061 1,767 Net income attributable to noncontrolling interests ............... (22) (58) Net income attributable to Costco ........................................ $ 2,039 $ 1,709 Net income per common share attributable to Costco: Basic ................................................................................ $ 4.68 $ 3.94 Diluted .............................................................................. $ 4.63 $ 3.89 Shares used in calculation (000s) Basic ................................................................................ 435,741 433,620 Diluted .............................................................................. 440,512 439,373 111 (continued) Consolidated Balance Sheets for Costco Wholesale Corporation, 20122013 (in millions, except per share data) September 1, 2013 September 2, 2012 Assets Current Assets Cash and cash equivalents ......................................... $ 4,644 $ 3,528 Short-term investments .............................................. 1,480 1,326 Receivables, net ......................................................... 1,201 1,026 Merchandise inventories ............................................. 7,894 7,096 Deferred income taxes and other current assets ........ 621 550 Total current assets .................................................... $15,840 $13,526 Property and Equipment Land ............................................................................ $ 4,409 $ 4,032 Buildings and improvements ....................................... 11,556 10,879 Equipment and fi xtures ............................................... 4,472 4,261 Construction in progress ............................................. 585 374 21,022 19,546 Less accumulated depreciation and amortization ....... (7,141) (6,585) Net property and equipment ....................................... 13,881 12,961 Other assets ............................................................... 562 653 Total assets ................................................................. $30,283 $ 27,140 Liabilities and Equity Current Liabilities Accounts payable ....................................................... $ 7,872 $ 7,303 Accrued salaries and benefi ts .................................... 2,037 1,832 Accrued member rewards ........................................... 710 661 Accrued sales and other taxes ................................... 382 397 Deferred membership fees ......................................... 1,167 1,101 Other current liabilities ................................................ 1,089 966 Total current liabilities ................................................. 13,257 12,260 Long-term debt, excluding current portion .................. 4,998 1,381 Deferred income taxes and other liabilities ................. 1,016 981 112 Total liabilities .......................................................... $19,271 $14,622 Commitments and Contingencies Equity Preferred stock $.005 par value; 100,000,000 shares authorized; no shares issued and outstanding 0 0 Common stock $.005 par value; 900,000,000 shares authorized; 436,839,000 and 432,350,000 shares issued and outstanding 2 2 Additional paid-in capital .......................................... $ 4,670 $ 4,369 Accumulated other comprehensive (loss) income ... (122) 156 Retained earnings ................................................... 6,283 7,834 Total Costco stockholders equity ............................. 10,833 12,361 Noncontrolling interests ........................................... 179 157 Total equity .............................................................. 11,012 12,518 Total Liabilities and Equity ................................... $30,283 $27,140 Source: Costco Wholesale Corporation 2013 10-K. 2. Panera Bread operates more than 1,600 bakery-cafs in more than 44 states and Canada. How many of the four tests of the competitive power of a resource does the store network pass? Using your general knowledge of this industry, perform a SWOT analysis. Explain your answers. 3. Review the information in Illustration Capsule 4.1 concerning American Giants average costs of producing and selling a hoodie sweatshirt, and compare this with the representative value chain depicted in Figure 4.3 . Then answer the following questions: a. Which of the companys costs correspond to the primary value chain activities depicted in Figure 4.3 ? b. Which of the companys costs correspond to the support activities described in Figure 4.3 ? c. How would its various costs and activities differ if the company chose to produce its hoodies in Asia? d. What value chain activities might be important in securing or maintaining American Giants competitive advantage? Explain your answer. 4. Using the methodology illustrated in Table 4.3 and your knowledge as an automobile owner, prepare a competitive strength assessment for General Motors and its rivals Ford, Chrysler, Toyota, and Honda. Each of the five automobile manufacturers should be evaluated on the key success factors and strength measures of cost competitiveness, product-line breadth, product quality and reliability, financial resources and profitability, and customer service. What does your competitive strength assessment disclose about the overall competitiveness of each automobile manufacturer? What factors account most for Toyotas competitive success? Does Toyota have competitive weaknesses that were disclosed by your analysis? Explain.