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Problem for Strategic Profit Model Assignment
Week 5
Dog-Ann is a pet supplies company serving in Midwest. It sells pet supplies and provides pet grooming and training services. Table 1 shows the income statement of Dog-Ann for the previous year.
Sales
$250,000
Cost of Goods
$150,000
Fixed Assets
$105,000
Variable Expenses
$25,000
Fixed Expenses
$35,000
Inventory
$10,000
Accounts Receivable
$5,000
Other Current Assets
$5,000
a) Develop the strategic profit model of this organization and draw the diagram.
b) What is the firm’s profit margin?
c) What is the firm’s ROA
Suppose the firm undertakes a supply chain improvement project. It improves its service level to customers by opening more warehouses which means it will be able to deliver more quickly to customers. The result is a 10% increase in sales. Assume cost of goods sold increases by 6%. The new warehouse requires additional new asset investment of $40,000. Fixed expenses increase by $1,000 because of the expense of operating the warehouses. Assume other variables do not change. Answer the following three questions based on this information.
c) Show the new strategic profit model.
d) What is the new asset turnover?
e) What is the firm’s new return on assets?
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Sales
$250,000
Cost of Goods
$150,000
Fixed Assets
$105,000
Variable Expenses
$25,000
Fixed Expenses
$35,000
Inventory
$10,000
Accounts Receivable
$5,000
Other Current Assets
$5,000
Explanation / Answer
The external environment factors affecting they healthcare industry are as follows:
Market
Technology
Government
Competitor
Customers
Market forces including the customers are the important factors in determining the success of health care industry. There has been an increase in the size of population. Now patients are becoming more aware of their rights and are better informed. They are more demanding now days. This means health care industry should focus on catering to such needs of the customers which would ultimately help in financing the hospitals.
There are increasingly professional and skilled competitors in the industry. The system of physicians needs to be updated with the required knowledge and continuous training. The hospitals can find high qualified trained professionals outside the major centres of large cities.
Focus is shifted from product a device to the client. Hospitals are not only involved in doing their Jon with the best of their ability but also achieving patient’s satisfaction.
Government should be involved in free market mechanism. They should regulate the drug, insurance and medical industry advertising which would bring down cost.
Technology is becoming more and more advanced with introduction on new tools and procedures to make each and every treatment possible .the industry needs to keep pace with such fast changing technology.
To cater to all these there is a need of strategic planning. Competition is directly related to patient satisfaction. As the competition increases the quality of service provided also increases. As quality increases, patient satisfaction automatically increases. This also result in decrease in health care cost
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