Tim Thompson operates a highly regarded hardware store. Tim’s store is the place to go if you need to get detailed advice on what kind of tools to get for the project at hand, as well as help in tracking down hard-to-find spare parts. Tim enjoys interacting with his customers and often remembers past projects that he has helped his customers complete. Thus, Tim has a loyal clientele even though his prices are usually 10% higher than those found at MegaLo Mart.
Tim’s staff is also very interested in home building and maintenance. To retain them, Tim pays them an average of $15 per hour. He reckons that each of four sales persons generates an average of $20,000 in sales per month. In contrast, the average salesperson in MegaLo Mart, the discount hardware store down the street, generates only $12,000 in sales. However, the average salesperson in MegaLo Mart has less than two years experience in the retail industry and considerably less in hardware. Consequently, these salespersons earn only $8 per hour.
MegaLo Mart earns a Contribution Margin Ratio of 28% on its sales. The margin is lower even though its variable costs are only 90% of the variable costs incurred by stores such as those by Tim. (MegaLo Mart uses its volume to bargain aggressively with its suppliers.)

Required:
a. Describe Tim’s strategy and value proposition. Contrast with the same items for MegaLo Mart.
b. Are Tim’s expenditures on resources consistent with his strategy and value proposition?
c. How would the management control systems for store employees differ between Tim’s shop and MegaLo Mart? Would you attribute the differences primarily to size or to differences in strategic thrust?