Finance Manager’s Review one - a Financial Thinking I Paper

Finance Manager’s Review One

A Financial Thinking I Paper

Jia Song

Eastern University

Author Note

This paper was prepared for Financial Thinking I, taught by Jerry Scarpati.

        Wal-Mart Stores Inc. is busy trying to win over online shoppers in the Chinese e-commerce company’s backyard.  Its online arm in China—called Yihaodian, meaning No.1 Store—has recently built up its supply chain and streamlined its mobile site in a push to boost sales.  And Wal-Mart owns a 54% stake in Yihaodian (Banjo & Burkitt, 2014).

        In order to gain more shares in the whole market, Yihaodian will have to wrestle China’s largest e-commerce company, Alibaba, which commanded more than half of China’s $46 billion online business-to-consumer market in the second quarter.  

        Therefore, Yihaodian carved out its niche by specializing in online grocery before any of its bigger rivals got into that business to get more competitive advantages.  Mr. Yu, the founder of YHD said the company’s biggest strength is that it has figured out how to deliver fragile goods like bananas and mangoes to customers’ homes within hours by using a network of about 20 fulfillment centers and hundreds of delivery stations across the country.  Besides, YHD now turns over its entire inventory in 18 days, down from 50 days when the company first started (Banjo & Burkitt, 2014).

        Moreover, in the online grocery delivery business, speed is everything.  Mr. Yu said, “In the U.S., people accept delivery in five to seven days; however, in China customers are spoiled, same-day or next-day delivery is a must.”

        What’s more, the market is getting tougher, though, as rivals start to horn in on the online-grocery business, Yihaodian faces serious competitive challenges as all the other players go into grocery and it becomes a price-cutting, discounting world.  Under the circumstance, the biggest financial management issue is how to maximize the profit as well as remain competitive during the battle of price-cutting.  In this case, some managerial accounting tools are available.  If I were the manager of Yihaodian, I would first identify, measure, analyze, interpret and communicate information in pursuit of the organization’s goals.  For instance, before launching any promotion or discount activity, I would estimate the net income and potential risks and then compare it with the rivals’ system.  Next, I would plan the details of the promotion like the duration of the promotion and the specific discount during the promotion.  At the meantime, I would analyze rivals’ delivery system and then improve the productivity of my organization.  Also, I would think about the most effective way of advertising and value its cost performance.  After making a decision, how to direct and control the whole activity will become my biggest concern.  How much labor should I add to the delivery team? How much inventory should I prepare in advance?  Many more relevant questions would occur.