The strategic profit model, also known as the DuPont model provides a visual view of a companys finance activities

and, therefore, it can be used as a springboard to understand and analyse performance with a view to increase profit. Thus, for the sake of analysis, we are going to pit 50 year-old business conglomerate Wal-Mart against 82 year-old employee owned Publix chain of supermarkets. The strategic profit model or DuPont model was established in 1919 by a finance executive at E.I du Pont de Nemours and Co., of Willington, Delaware. The model recognises the importance of three factors: (1) The net profit margin (the after-tax profit a business generates for each dollar revenue) There are two ways to measure the net profit margin: (i) Net Income/ Revenue or (ii) (Net Income + Minority Interest + Tax-adjusted Interest)/ Revenue According to the statistics, Wal-Marts net profit margin for 2007 was 3.4 %. It is inferior to Publixs as the latter has a net profit margin of 5.14 %. This is a business setback for Wal-Mart since its net profit margin for the year is lower than its competitor. It must be highlighted that Wal-Mart is not a retailer per se and therefore cannot afford to have a lower net profit margin than Publix. The numbers speak for themselves and there are reasons that justify Publixs higher net profit margin. This is because Publix provides appealing packages for key-market segments as a strategy to win more customers. Publix has catered for a very opportunistic model of business as it sets out to provide culturally adapted products for Hispanic and Caribbean populations in Florida. This diversity plays a role in its endeavour to increase profits and also its adaptation to cultural variants in the American setting. This exclusivity in products reduces the price competition. This enterprise harmoniously matches the image of Publix as one of the defining characteristic of Publix is that it is an employee-owned business. In this sense, the level of commitment to the work is obviously higher since higher profits directly benefit the employee. This incentive will trigger a higher net profit margin and alongside this positive scheme, customer satisfaction is highly valued as employees

pack the goods and offer to carry items to customers car. The image of the company is well-established and well-structured and this contributes to high productivity rate and profit simultaneously.

(2) Assets turnover Asset turnover measures a companys efficiency in using its assets. In the case of Wal-Mart, a ratio of 2.53 indicates that turnover is 2.53 times bigger than total assets. The situation is still under control but Publix asset turnover proves to be more lucrative. Despite the long store hours of Wal-Mart, we can readily confirm that Publixs strategy is much better. Since employees are themselves shareholders, therefore, the level of commitment to the work is higher and this impacts positively and lucratively on sale. We can surmise that employees would rather skip lunch, cover shifts and manage time effectively and subsequently boost sales. The commitment of the employees manifests itself in many ways; employees are sensitive to profit issues and therefore adopt the required attitude to use time effectively to boost sales of products. In the formula for asset turnover, a net sale is very important. This is hypothetically why Publixs turnover is 2.86 times bigger than total assets. (3) Financial leverage It is an indicator of the dependency of a business upon debt in order to operate. Whether these debts are short-term or long term, nevertheless, Publixs management of debts is preferable and therefore its margin of profits is higher. Publix has a financial leverage of 1.42. It is a remarkable performance since a ratio of 1 means no debts. Therefore Publix has minimal debt compared to Wal-Mart with a ratio of 2.53. The prospect for further investment is more suitable for Publix since the capital will come from its profits and thus less chance for debts. Comparatively, Wal-Mart should revise this dependency on debts for operation. One of the set-back of Wal-Mart is that it operates at international level and therefore debts can increase or decrease according to change in foreign currency rate. These are factors that can cause fluctuations in the financial leverage of a company.

These three financial indicators allow businesses to calculate the return on net worth (RONW). RONW is often referred to as return on equity and measures the companys profitability by multiplying the three financial indicators previously mentioned. At the same time it reveals the profit a company generates with the money that the equity shareholders have invested. Therefore, shareholders will find it more suitable to invest in Publix since RONW shows clearly the yield in terms of profit. Shareholders will find it beneficial to use RONW to calculate the companys profit and subsequently their own.

Question 2: Explain how employee ownership can contribute to increased productivity? Employee ownership stipulates the idea that alongside with the owner(s), they also have a share in the business cake. There are many ways by which such a business model can increase productivity. Such a business structure promotes a sense of belonging. It creates a sense of ownership and this positively impacts on creativity. Employees do not feel detached and understand that the companys profit is their own profit. Therefore the service quality is better vis--vis customers. This mind-set will nurture the necessary drive for them to involve responsibly and accordingly for the success of the whole business. This mind-set represents a source of motivation and team-spirit that will trigger productivity. Being themselves partly owners of the trade, employees would ensure that profit is maintained. This can be achieved by willingness to work odd-hours for the benefit of the company. It also means that employees will develop an awareness of the set-backs in business. In a sense, they would be unwilling to absent themselves and if the case arises, they will find ways to remedy the situation by finding someone to cover their absence or shifts. Understanding that the companys profit is their own will drive them to adopt such attitude such as skipping lunch. This bespeaks of time management, and an awareness of time and its impact on profit is a reliable asset to boost productivity.

Employee ownership can increase productivity due to personal involvement. IT is worth noted that the employees are closer to the customers that those at management level. Therefore, they get direct feedback. They can use those feedbacks positively; employee-ownership somehow means that they have a say in decision-making and their feed-backs are genuine. Decision-making becomes more valid and stronger because of the employees on-the-floor experience. Proper decision-taking in business leads to accruing productivity.