...determining the cost of serving customers and as a basis for evaluating the profitabilty of a specific customer or group of customers. Why is this important? Most managers agree that 80% of their profits come from the top 20% of their customers and most important, the bottom 20% of their customers are unprofitable. For example, to compete with Walmart,Best Buy works hard to attract profitable customers and equally hard to discourage the unprofitable customers which those that are price shopping and looking for discounts and promotions and comparing prices to Walmart. Best Buy studies demographic and sales data for each store location to identify profitable and unprofitable customers. Customer profitabilty analysis idetifies customer service activities and cost drivers and determines the profitability of each customer or customer group. Here, customer service include all activities to complete the sale and satisfy the customer including advertising, sales calls, delivery, billing, collection, service calls, inquiries and other forms of customer service. Customer profitability analysis allow managers to: * Identify most profitable customers * Manage each customer’s cost-to-serve * Introduce profitable new products and services * Discontinue unprofitable products, services or customers * Shift a costomer’s purchase mix toward higher-margin products and service lines * Offer discounts to gain more volume with low costs-to-serve customers * Choose types of after-sale...
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...A proposal On An analysis on how customer loyalty affects the growth and profitability of the FMCG organization: a case study of Unilever Table of Contents 1. Introduction 1 2. Rationale for the Chosen Topic 1 3. Aim of the research 2 4. Research objectives 2 5. Research questions 3 6. Literature Review 3 7. Research Paradigm 5 8. Research Methodology 5 8.1 Research Philosophy 5 8.2 Research Approach 6 8.3 Research Strategy 6 8.4 Data collection Techniques 7 8.5 Sampling 7 Figure: Sampling Technique Classification 7 Source: Parasuraman, 2001 7 8.6 Data analysis tools and techniques: 8 8.7 Limitations of the study 8 9. Ethical Considerations 8 10. Time framework 8 11. List of references 9 1. 2. Introduction Customer loyalty and brand equity are the issues of high concentration by the twenty first century marketers for ensuring sustainable growth and profitability of business. The real asset of business in recent times is its customers. The cornerstone of assuring growth and profitability of business is the smooth operation of business (Hallowell, 2008). Strategies driven for obtaining customer loyalty are being adopted today by many successful organizations. For achieving high customer loyalty, no stone has been remained unturned in today’s highly competitive business world by business organizations (Zeithaml et al., 2011). The effect of profitability and growth on the basis of customer loyalty of the FMCG firms...
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...MANAGEMENT S T R AT E G Y MEASUREMENT M A N AG E M E N T AC C O U N T I N G G U I D E L I N E Customer Profitability Analysis By Marc J. Epstein Published by The Society of Management Accountants of Canada, the American Institute of Certified Public Accountants and The Chartered Institute of Management Accountants. N OT I C E TO R E A D E R S The material contained in the Management Accounting Guideline Customer Profitability Analysis is designed to provide illustrative information with respect to the subject matter covered. It does not establish standards or preferred practices.This material has not been considered or acted upon by any senior or technical committees or the board of directors of either the AICPA, CIMA or The Society of Management Accountants of Canada and does not represent an official opinion or position of either the AICPA, CIMA or The Society of Management Accountants of Canada. Copyright © 2000 by The Society of Management Accountants of Canada (CMA Canada), the American Institute of Certified Public Accountants, Inc. (AICPA) and The Chartered Institute of Management Accountants (CIMA). All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, without the prior written consent of the publisher or a licence from The Canadian Copyright Licensing Agency (Access Copyright). For an Access Copyright Licence, visit www.accesscopyright.ca or call toll free...
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...has been operating since 1962 (45 years from 2008). Its largest customer group is the automotive industry with revenue of over 10 billion worldwide. Jamestown’s automotive segment produces 55% of the firm’s gross sales. Jamestown continues to invest mostly in research and development of automotive technology as it is known for supplying its customers with the best and latest technology and has to keep up with the quick advancing of technology in the automotive industry in order to succeed. Some of its products include wiring harnesses, headlight systems etc. In order to compete with competitors Jamestown has services that include overnight delivery of electronic products, JIT inventory deliveries to client plants and warehousing of client parts until they are needed. These services are very attractive to customers and have caused sales to increase, but management has observed that the profits are not moving at the same pace as the sales growth. Thus management decided to prepare a customer profitability analysis chart for a few customers in order to see if they can know which customers are the most profitable and which are the least. An evaluation of production, marketing, distribution and customer support was prepared by the executive team in order to know the reason for shrinking profits. In n annual Board of Directors meeting, the board members decided to evaluate the efficiency of the initial profitability system and what is actually causing the shrinking profits. The...
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...Profitability Analysis Using Activity-Based Costing by Priscilla Wisner Executive Summary • • Traditional cost allocation methodologies in firms can provide misleading information about the profitability of products, product lines, customers, and markets. Activity-based costing (ABC) provides more meaningful information about the drivers of costs, the activities performed in a firm, and the relationship between costs and products, customers, markets, and segments. In addition to supplying more detailed and better cost and profitability information, an ABC analysis enables managers to evaluate processes from an activity viewpoint, leading to identification of non value-adding activities and process inefficiencies. ABC does not change overall profitability in a firm; it better aligns cost assignment to the causes of those costs. With better information, better decisions can be made in a firm to improve profitability—this is the power of ABC. • • • Introduction Cost allocation in firms can provide misleading information about the profitability of products, product lines, customers, and markets. Traditional cost allocation practices allocate all manufacturing overhead costs using a single driver such as direct labor hours, direct labor dollars, or machine hours. Sales-related costs are typically ignored. While technically accurate, in most complex organizations a single overhead cost driver is not sufficient to accurately assign the pool of overhead costs to the products...
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...Dakota Office Products Case Analysis Concern over a first year loss prompted a case study of the business operations of Dakota Office Products. Harvard Business School professor Robert S. Kaplan authored the case study as an illustration of use of activity based cost allocation and profitability (Kaplan, 2005). In the case presentation, John Malone, the General Manager of Dakota Office Products (DOP) commissioned analysis of the company’s operations and cost allocation practices; it focused on the company’s distribution center. Activities that emerged as cost drivers included: commercial freight shipping, personal delivery of orders under the Desktop Delivery program, warehouse handling and space, and several product ordering and entry activities. In this paper, the cost drivers were utilized to establish activity-based costing for DOP. Profitability for two current DOP customers was also analyzed for behavior patterns that might lead to or suggest improved pricing. Specific assignment questions were detailed and answered on the topic of relative profitability of the two customers. The objective of the analysis was to utilize learnings from the profitability calculations in order to make recommendations which would return DOP to profitable operation following the year of the unexpected loss. If the methods in this paper were utilized, it is felt to be a useful tool to assist DOP management in turning the company around. Method The assignment is summarized in this...
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...3 Industry Analysis: The Fundamentals When a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact. —Warren Buffett, Chairman, Berkshire Hathaway The reinsurance business has the defect of being too attractive-looking to new entrants for its own good and will therefore always tend to be the opposite of, say, the old business of gathering and rendering dead horses that always tended to contain few and prosperous participants. —Charles T. Munger, Chairman, Wesco Financial Corp. OUTLINE n n n n n INTRODUCTION AND OBJECTIVES FROM ENVIRONMENTAL ANALYSIS TO INDUSTRY ANALYSIS THE DETERMINANTS OF INDUSTRY PROFIT: DEMAND AND COMPETITION ANALYZING INDUSTRY ATTRACTIVENESS Porter’s Five Forces of Competition Framework Competition from Substitutes Threat of Entry Rivalry Between Established Competitors Bargaining Power of Buyers Bargaining Power of Suppliers APPLYING INDUSTRY ANALYSIS Describing Industry Structure Forecasting Industry Profitability Strategies to Alter Industry Structure 66 INTRODUCTION AND OBJECTIVES 67 n n n n DEFINING INDUSTRIES: WHERE TO DRAW THE BOUNDARIES Industries and Markets Defining Markets: Substitution in Demand and Supply FROM INDUSTRY ATTRACTIVENESS TO COMPETITIVE ADVANTAGE: IDENTIFYING KEY SUCCESS FACTORS SUMMARY NOTES INTRODUCTION AND OBJECTIVES In this chapter and the next we explore the external environment of...
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...Linking Customer and Employee Satisfaction to the Bottom Line Also Available from ASQ Quality Press: Analysis of Customer Satisfaction Data Derek R. Allen and Tanniru R. Rao Customer Centered Six Sigma: Linking Customers, Process Improvement, and Financial Results Earl Naumann and Steven H. Hoisington Customer Satisfaction Measurement Simplified: A Step-by-Step Guide for ISO 9001:2000 Certification Terry G. Vavra Improving Your Measurement of Customer Satisfaction: A Guide to Creating, Conducting, Analyzing, and Reporting Customer Satisfaction Measurement Programs Terry G. Vavra Measuring Customer Satisfaction: Survey Design, Use, and Statistical Analysis Methods, Second Edition Bob E. Hayes The Trust Imperative: Performance Improvement through Productive Relationships Stephen Hacker and Marsha Willard Customer Satisfaction Measurement and Management Earl Naumann and Kathleen Giel Performance Measurement Explained: Designing and Implementing Your State-of-the-Art System Bjørn Andersen and Tom Fagerhaug Value Leadership: Winning Competitive Advantage in the Information Age Michael C. Harris To request a complimentary catalog of ASQ Quality Press publications, call 800-248-1946, or visit our Web site at http://qualitypress.asq.org . Linking Customer and Employee Satisfaction to the Bottom Line A Comprehensive Guide to Establishing the Impact of Customer and Employee Satisfaction on Critical Business Outcomes Derek R. Allen and Morris...
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...3 Industry Analysis: The Fundamentals When a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact. —Warren Buffett, Chairman, Berkshire Hathaway The reinsurance business has the defect of being too attractive-looking to new entrants for its own good and will therefore always tend to be the opposite of, say, the old business of gathering and rendering dead horses that always tended to contain few and prosperous participants. —Charles T. Munger, Chairman, Wesco Financial Corp. OUTLINE n n n n n INTRODUCTION AND OBJECTIVES FROM ENVIRONMENTAL ANALYSIS TO INDUSTRY ANALYSIS THE DETERMINANTS OF INDUSTRY PROFIT: DEMAND AND COMPETITION ANALYZING INDUSTRY ATTRACTIVENESS Porter’s Five Forces of Competition Framework Competition from Substitutes Threat of Entry Rivalry Between Established Competitors Bargaining Power of Buyers Bargaining Power of Suppliers APPLYING INDUSTRY ANALYSIS Describing Industry Structure Forecasting Industry Profitability Strategies to Alter Industry Structure 66 INTRODUCTION AND OBJECTIVES 67 n n n n DEFINING INDUSTRIES: WHERE TO DRAW THE BOUNDARIES Industries and Markets Defining Markets: Substitution in Demand and Supply FROM INDUSTRY ATTRACTIVENESS TO COMPETITIVE ADVANTAGE: IDENTIFYING KEY SUCCESS FACTORS SUMMARY NOTES INTRODUCTION AND OBJECTIVES In this chapter and the next we explore the external environment of...
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...Summary of “The Effect of Labor on Profitability: The Role of Quality” Zeynep Ton Harvard Business School, Boston, MA 02163, zton@hbs.edu Abstract Store labor is a large expense in retail operations. Although there is overwhelming evidence that CQ(conformance quality—how well employees execute prescribed processes) and SQ(service quality—the extent to which customers have a positive service experience at the stores) improve sales, there is limited evidence indicating their effect on profitability. When the costs of increasing labor are obvious and benefits are indirect, managers may not employ more staff. And this paper studies the effect of labor on profitability through its impact on quality, both conformance quality and service quality. Key words: labor; quality; retail corporation 1. Literature review and hypothesis of this paper 1.1 Service quality(SQ) SQ is measured by customers’ assessment of their service experience. the writer present some studies that show profitability is stimulated by loyal customers. But the evidence is limited. Some other studies show that the relationship between profitability and customer loyalty is not strong. In a study of Swedish firms, Anderson et al.(1997) find that the relationship between customer satisfaction and return on investment varies across industries.The mixed evidence about the effect of SQ on profitability suggests that the effect depends on the operating context. 1.2 Conformance quality(CQ) ...
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...------------------------------------------------- A Report On Comparative Performance Study of Conventional and Islamic Banking in Bangladesh Course Title: THEORY AND PRACTICES OF BANKING IN BANGLADESH Course Code: FBK 312 Submitted To: Md. Nur Nabi Assistant Professor Department of Finance and Banking Faculty of Business Administration and Management Patuakhali Science and Technology University Dumki, Patuakhali- 8602 Submitted by: Group: C (Level: 3, Semester: I) Session: 2012-2013 Faculty of Business Administration and Management Patuakhali Science and Technology University Dumki, Patuakhali- 8602 Date of Submission: 09th May 2015 ------------------------------------------------- Roll No | Registration No | Name of the Students | Signature | 1203051 | 03596 | Nusrat Jahan Rupa | | 1203053 | 03598 | Nusrat Yesmin | | 1203054 | 03599 | Nisath Salsabil Urmi | | 1203056 | 03601 | Mehedi Hasan | | 1203057 | 03602 | Hasan Shahria Nayeem | | 1203060 | 03605 | Khondokar Tanveer Ahsan | | 1203061 | 03606 | Sume Akter | | 1203062 | 03607 | Rased Amer Sohag | | 1203065 | 03610 | Nusrat Jahan Pinki | | 1203067 | 03612 | Rasel Miah | | ------------------------------------------------- Group Member Details ------------------------------------------------- ------------------------------------------------- ATTENDANCE REPORT 1) Level : 3 2) Semester : I 3) Course Code : FBK-312 4) Course Title : THEORY AND PRACTICES...
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...Reduce Order Driven Costs & Improve Customer Profitability - Immediate • Standardize RC2 packaging to reduce costs • Incent customers to place larger orders less frequently by instituting minimum order limits • Impose a premium fee for rush orders • Coordinate with customers to improve forecasting and further integrate supply chains for more accurate and timely ordering Update Product Marketing Concept & Refine Corporate Strategy - Long Term • Perform a market/competitive analysis of the US market to inform future decisions • Improve accuracy of forecasting • Consider changing product mix based on market/customer demand • Contract with additional customers to purchase the RC1 unit • Expand RC2 wholesale distribution to online channels • Invest profits into additional R&D COMPANY OVERVIEW Breeden Security USA, herein referred to as “The Company,” first entered the US market as a subsidiary of German manufacturer, Breeden Security GmbH, in 2007 with two products; RC1 and RC2. • The RC1 unit is a miniature signaling device component manufactured for use by one end-customer used primarily to produce remote controls for garage door openers. • The RC2 is a similar device used by a householder to turn on interior lights when arriving after dark. Distributed exclusively through mail-order catalogues, RC2 is sold to numerous customers with unique packaging requirements...
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...S12 Final Exam Topics From Exam 1 1. Explain in detail the strategy making process including why an implementation plan is essential (1), why the sixth step is important (Monitoring performance that the text authors leave out) (2), what a mission statement is and why it is necessarily the first step (3), how to evaluate a mission statement using Abel’s framework (4), and why values should be part of the mission statement. The strategy making process include five steps: (1) Select the corporate mission and major corporate goals. Mission statement provides the framework within which strategies are formulated. It is important because the company mission statement describe what the company does. A goal is a precise and measureable desired future state that a company attempts to realize. (2) Analyze the organization’s external competitive environment to identify opportunities and threats. The essential purpose of this is to identify strategic opportunities and threats in the organization operating environment that will affect how it follows its mission. …In addition, step (3) Analyze the organization’s internal operating environment to identify the organization’s strengths and weaknesses. It focuses on reviewing the resources, capabilities, and competences of a company. (4) Select strategies that build on the organization’s strengths and correct its weaknesses in order to take advantage of external opportunities and counter external threats. Its purpose is to create a company-specific...
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...industry. The worldwide market for semiconductors in the automotive electronics industry exceeds $10 billion. In addition, wireless data delivery – currently is estimated to be a $20 billion industry, and experts predict that soon 50 percent of all new cars and 90 percent of higherend models will possess telematic-capable devices. Further, many experts estimate that 30 to 40 percent of the production value of all automobiles consist of electrical products. R & D Electronics historically has invested heavily in researching and developing auto-motive electronic technology in order to provide customers with state-of-the-art functionality, safety, and performance. R&D Electronics continues its heavy investment in this research and development arena because the resulting product features quickly devolve from being “cutting edge” features that create a competitive advantage to commodities that customers regard as standard features on all automobiles. R&D Electronics has continued to upgrade its research and development and manufacturing abilities to keep pace with changing technologies. For instance, R&D Electronics designs, produces, and installs a direct measurement tire pressure sensor and monitoring system for many of its automotive clients. Demand for this system has grown tremendously, as R&D Electronics has gone from producing 3,000 tire pressure sensor devices per week to 250,000 per week. R&D Electronics has found such growth challenging to manage from both cost control and cost...
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...full analysis of the situation, as well as a solid recommendation on how you should proceed. I’ll be in contact with you next week to discuss this report, but should you have any questions for me before that time please feel free to contact me. Sincerely, Sample Student Executive Summary Agro Storage has recently purchased a cold-storage warehouse that stores packages for three customers. Although the warehouse runs at 85% capacity, the previous owner was unsatisfied with profitability. Pressure on prices downward and the non-homogeneity of customer packages complicates matters. I have developed three criteria for choosing a solution – profitability, risk and perceived image our customers. Of all these, I’ve determined profitability to be the most important criteria upon which to base a recommendation. In order to begin my analysis, I determined what an average package would look like for each customer. I then calculated the costs associated with each characteristic of a package, including weight, volume and area. In order to make a recommendation, I focused on four main alternatives: • Maintaining Status Quo • Contracting the whole warehouse to one customer • Maintaining all three customers, but renting additional space to the most profitable customer • Renting the entire warehouse equally to the two most profitable customers I recommend contracting the whole warehouse to Hansen. This is the most profitable of the customers, based...
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