Ch 2: Transaction Analysis

http://www.allmediascotland.com/media_releases/5726/uk%92s_first_eco-friendly_luxury_hand_car_wash_opens_in_glasgow

Summary:

This article explains how the UK introduces a new eco-friendly luxury car hand wash in Glasglow. This new car washing system was designed to attract customers by boasting about its new technology compared to the old car washing method where an automated brush is used. The new method is also better because it says it recycles and retains the traffic film, and helps better protect the surface from acid rain. Since its environmental friendly, the new system includes a filter system to cleanse the used water left over from the car wash, which removes contaminants from the water. The filtered out and unwanted waste is removed safely. It also reuses 75% of its water.

Connection:

The article is connected to transaction analysis because when the company makes money by washing a customers car it’s an operating activity. Since this company focuses on doing car washes by hand, it must pay wages to the multiple employees that works there, which is also considered an operating acitivity. Some of the financial activities for this company could be to pay the water bill, electricity used for the filter system that’s used to clean the water and possibly loaning money from the bank for new investments. The cash that the company earns is recorded into the cash flow statements.

Response:

I think that this new method could turn out to be a great success to the company if they could lower the costs of their services. Sure the new system may be eco-friendly, but a lot of people care more about saving money than the environment. So if management gets around the idea of lowering costs, they could most likely earn more proft and increase environmental awareness. If I were to give suggestions to a company using this car wash method, I would recommend them to charge less, but still earn some profit. By doing this, it would be more appealing to consumers which would increase the demand for the company’s services.

Ch1: Overview of Corporate Financial Reporting

http://www.nytimes.com/2005/07/17/business/yourmoney/17costco.html

Summary: This article is talking about how Costco, being one of the nations fifth largest retailer, is too overly generous towards their customers and employees, possibly more than their shareholders. By doing this it keep Costco's customers loyal and lowers the chances of employees stealing products from the warehouses. The owner, Mr. Sinegal, works very different than how Wall Street businesses these days operate. He doesn't think about earning as much money possible from today until next week, he wants to keep his business going for another 50-60 years. At Costco, they only mark up merchandise by 10-15%, but in supermarkets they mark up by around 25%, and in department stores they mark up by 50%. In the previous 12 months, Costco's stock prices have risen 10%, while Wal-Mart has decreased 5%.

Connection: This article relates to chapter one because it shows how this particle business has differed from other companies and how it has succeeded. Although Costco could earn a lot more profit if it marked up higher on its merchandise, it refuses to do so, which makes the customers happy. By having this low price and good quality merchandise strategy, Costco is a top contender in the retail industry. The business can also check on how other companies are doing so it could adjust its own selling strategy accordingly. The financial documents mentioned in this chapter like the balance sheet, income statement, and etc. can greatly aid Costco in knowing their position in the industry.

Reflections: I think that if in the future I think about buying shares, I would definitely consider Costco. Customers like it when they charge low prices on merchandise which makes their customers happy and loyal, so as long as Costco doesn't change this about their business, customers will keep coming back. Compared to other supermarkets and department stores in the industry, Costco doesn't have any trouble competing with them. For example in this article it revealed that Costco shareholders gained a 10% increase in value in their stocks while Wal-Mart stocks plummeted 5%. Although I think if Costco got rid of their members only policy, they would definitely see more satisfied customers.