Break Even Analysis

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Break Even Analysis

Nicola Lamprecht

20th Jan 09

D.Shahrezaey

0703123

Q 1:  The first way in which HMV generates sales revenue is through the sale of good in store like CDs, books and DVDs. This is the main front runner in sales, creating large profits in the millions especially when new CDs and DVDs are released.

Secondly HMV makes sales revenue is through online music, movie and game downloads. But they are not a very big competitor in this market as of yet as their downloads cannot be put onto apple MP3 players which are the main MP3 players and they only started this store in 2005 compared to iTunes which was released for customers to use on the 9th of January 2001 making a 4year difference over the competitor.

Thirdly they sell all their products, books, CDs and DVDs and more  in their new offshore Internet fulfilment facility in Guernsey, as it is a recognized tax-haven. Under European law, retailers that operate outside the European Union can sell products valued at less than £18 to customers in member states without charging VAT which is why they moved them selves to the channel island and with the money they save on VAT, and being close enough to the UK they offer free postage being a perk of the online store.

Finally, HMW group own the Waterstones book store which generate sales revenue for them through selling all genres of books and audio CDs. HMV group confirmed record sales of £564.3m in the year to 26th April, representing year-on-year growth of 5% and like-for-like growth of 3.3%. Last year it reported a drop in full-year like-for-like sales of 4.1%. But due to them building a new distribution hub/warehouse costing 1.6m their profits are still at, but down to 16.3m.

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Q2:

a)  Start-up Costs

b) Five types of cost incurred when opening a new store, especially a big retail chain would include, Cost of premises (either bought or rented),

shop-fitting (which can go into the million very easily), staff training, purchasing the initial stock which required deep pockets and finally premises insurance which for a big store with thousands of people coming in and out all day would be very expensive as England seems to be catching up with the USA when it comes to ...

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