Economic Assessment Of The Warehouse Group

Introduction

The Warehouse was founded by Stephen Tindall in 1982 with the aim of providing a wide range of products to New Zealanders at a bargain price. The Warehouse, Warehouse stationery, Torpedo 7 and Noel Leeming are the members of Warehouse group. The Warehouse group is a big retailer where which is introducing where everyone gets a bargain and it’s employing more than 12,000 people around New Zealand.

The theory of the firm

The theory of the firm is a microeconomic concept which indicates that firm is existing to maximize the profit.

This theory of the firm reveals that what are the inputs of Warehouse such as labor, finance, land to maximize their profit, what are the production and operational techniques that are used to maximize the profit in short run and what are the prices that are charged for the goods that sell in the Warehouse stores. Moreover, this theory of the firm discusses how the relation of employment in the Warehouse is and what are the limitations or boundaries between Warehouse and market and how decision making is done well by The Warehouse on situations.

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For example, although Warehouse is a big retailer in New Zealand it sells some similar products at a bargain price as its competitors in the market such as Kmart sells. Therefore, the Warehouse focuses on decision making such as pricing adjustments of goods in time to time and focuses on the volume of the goods they sell. The organizational structure of Warehouse defines rules and responsibilities of each person to work on goals.

Theories of profit Hawley’s risk theory of profit relates to The Warehouse group. There are many risks that can happen in any kind of company such as introducing a better substitute by the main competitor Kmart, risks which are occurred by fire and water, risks that are occurred by natural disasters, sudden fall of price of goods. The Warehouse is predetermining those risks and its helps to the Warehouse to earn a large profit. Furthermore, Clark’s dynamic theory also relates to The Warehouse group. This theory says that the profit rise in a dynamic economy not in a statistic economy. The change and increase in customer demand of Warehouse, increase in population, changes in the organizational forms are some features of dynamic economy. The Warehouse group is taking advantages from these changes and they expand their sales by reducing cost and reducing prices of goods. Therefore, The Warehouse can earn more profit.

Market structure

The Warehouse group is under the Monopolistic market structure. There are many retailers like the Warehouse such as Kmart and etc. So, there are few barriers to enter and exit from this market. There isn’t much difference in the price between competitors. As there are many businesses like Warehouse and there are many consumers, Warehouse can’t increase or decrease the price of goods than the competitor as it may cause to lose the profit. But still Warehouse sells products differentiated by brand and quality from products sell by other competitors.

The growth and performance of The Warehouse group

Achieved an adjusted net profit after tax $59.0 million for the financial year 2018. Net profit after tax in 2017 was $59.2 million for the full year. When compared to the 2017 there is no much different in adjusted net profits in both years. Furthermore, The Warehouse relocated some stores in to larger sites. Opened a Clearance site in Balmoral, Auckland. Introducing self-service counters in stores. Apparel continued to perform strongly with sales and margin both increasing. Customers have behaved confidently to Warehouse’s mixture of clothes and their pricing. Seasonal categories have achieved well with Water Sports and pools. Furniture also have a good demand. Can identify a unit growth in groceries with the confectionery, health and beauty categories. Clothing, home ware, entertainment and consumer electronics are the most attractive product categories.

Needs for improving

Every company needs to be improved to keep their position in the competitive market. Therefore, The Warehouse group should focus on improving. They should open self-counters in every Warehouse store as it is convenience for customers. They can open more stores of Warehouse stationery as it causes directly to the profit of the company as a group. The Warehouse group can add more products like food items in stores therefore, customers can buy everything that they need under one roof at the Warehouse bargain price.

Recommended economic strategies

Nowadays, people look beyond the balance sheet. They mostly focus and love to purchase and deal with the companies which are focusing on sustainability. Although The Warehouse group is working on sustainability still they are in a big problem of recycling plastic and hard polystyrene. For that, they can introduce reusable bags like other companies do which are made from plant materials. Customers in New Zealand will buy as they all know plastic is not good for their health. They can invest on opening more stores in various locations and they can spread their business in to some other countries. The Warehouse group should use more technology in stores like some Warehouse stores do not have price readers and customers need to bring it to the cashier or ask sales person. Some customers do not like this. Therefore, they can use more technology in stores as technology effects to the productivity of the company.