The determination of fuel costs as variable or fixed depends upon the type of variable computed. For instance, if one is searching the passenger break-even point per week, he can threat fuel costs as fixed, because they will not change on a per flight basis. However, if one is determining the total profit figure per month, such cost should be treated as variable, because it is influence according to the number of flights made. Meal and refreshment costs of $5. Case 2-50. Shopping Humanized.
In September 1990, management decided to diminish costs by 3% to 12%. The cost control exercise also resulted in the laying off some personnel. Such action may have conflicted with the value proposition noted above, because the job security of Nordstrom’s employees was shaken. As a result their motivation and commitment to the company could have diminished thus not attaining the ‘shopping humanized’ that the company focuses upon.
The expansion of the corporation incurred substantial fixed costs associated with new stores being built. Furthermore a large variety of inventory was held, which also leads to more fixed costs, like for example inventory insurance costs. With the aid of such growth program, however the company managed to increase sales drastically and thus attain long-term benefits. For instance, in 1980 sales reached $407 million. Better reputation in the market place was another long-term benefit that was partly derived from greater availability of inventory.
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Their efforts relation to cost-volume-profit analyses because each expansion strategy was conducted by meticulously analyzing that the costs involved would be covered by the sales generated leading to profit. Such measures ensure the long-term survival of the firm.
The Nordstrom’s Reinvent Yourself Campaign was created by Minneapolis ad agency with the aim of enabling clients that shop at Nordstrom to feel unique, creative people. Under such an approach Nordstrom’s merchandise is directed towards a younger and hipper customer base.
Even though this was a very expensive marketing move, the company managed to reach more clients than competitors. This resulted in increased sales and attainment of their value proposition. There is a number of opportunity costs arising from the $40 million spent in this campaign. The company could for example have spent the money in other capital projects like new stores, in replacing its present tangible fixed assets or in investing the money and gaining a financial return.
- Answers. com, 2009. Company History: Nordstrom Inc. (on line). Available from: http://www. answers. com/topic/nordstrom-inc (Accessed 18th February 2009).
- Huizenga Business School, n. d. Defining and Refining the Value Proposition (on line). Available from: http://www. huizenga. nova. edu/5017/presentations/CVch7slides_2e. ppt (Accessed 18th February 2009).
- Levine, S. , 2000. Reinvest This, thestranger. com (on line). Available from: http://www. thestranger. com/seattle/Content? oid=4640 (Accessed 18th February 2009).
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