Question

Many of you shop at various retail chain store operations like Walmart or The Bay. Based on your understanding of how these retail chain stores are managed, would you agree or disagree that one location of a large retail store chain should be treated as an investment center? What about the maintenance department at that one location? What about a single department (i.e. automotive or children’s clothing) within the store?

Answer 1

There are various classifications of business units within an enterprise. Some of these are profit center, cost center and investment center.

Under Cost center method of reporting, cost is the main criteria. The main focus is on minimizing costs.

Under Profit center method of reporting, profit is the main criteria. The main motive is to enhance the profits of the business unit by increasing sales and reducing expenses.

Under Investment center method of reporting, return ion investment is the main criteria. The main motive is to increasing the return, in both the total amount of revenue and percentage of sales. It can be achieved by increasing sales, reducing expenses and monitoring the investments in assets. Thus, the main focus is on assets, revenue and expenses. Also, an investment center has its own financial statements, income statement and balance sheet.

As retail chain stores, such as Walmart or The Bay, have huge investments in fixed assets and working capital. The main focus is on the cost of capital. Also, they have there own financial statements, income statements and balance sheets. So, these stores can be treated as Investment Center.

Maintenance department of that particular retail store at that specific location has various roles and responsibilities. Some of these are:-

1) Maintenance

Maintenance department makes sure that each machine and equipment in the retail store is regularly tended to. The oils, lubricants are timely applied in the machines. Also, the servicing of the machines is timely done so as to prevent the breakdown of the machines before there life span.

2) Inspection

Maintenance department ensures that that all the facilities such as security, air conditioning, air vents, etc are up to the standard of the policies of the retail store. There are no requirements for the repairs. Each and every equipment in the retail store is checked for any faults. The frequency of inspection depends upon the intensity of usage of the equipments.

3) Repair

It is the responsibility of the maintenance department to repair all the machines with the unsatisfactory conditions which are found during an inspection.

4) Upkeep

The maintenance department focuses on the overall upkeep of the retail store.

The single department within the retail store such as automotive , children's clothing line basically focuses on maintaining the logistics and inventory in the department. They find out the best sellers and find out the ways to boost the sales and increase the profit margins. Also, these single department finds out the low demand products and consider various promotional offers and schemes to enhance their sales and avoid dead stock.

They monitor the latest trends and demands on the target customers and try to provide such products and services to the customers before their competitors.