This exercise will demonstrate how the concepts we learned about gross margin (also called gross profit) in Chapter 6 and how it and a business’ volume is related to overall profitability.

Consider the merchandising income statement formula, which is defined as:



Gross Margin (or Gross Profit)

-Operating Expenses

Net Income

Read this article on the disparity on the gross margin for Walmart vs. Apple:

NOTE: The author of the article has an opinion regarding how “progressives” view the two companies. This view is not the point of this exercise! Please garner from this article just the information regarding the differing gross margins yet both companies are extraordinarily successful.

Post a paragraph (at least 5 sentences) on the discussion board and comment on two of your classmates’ postings with substantive comments. Note that only responding with merely a “yes” or “no” or “I agree/disagree” is insufficient unless you explain thoroughly WHY you feel that way.

Your original post should contain unique thoughts or address one or more of the following questions:

  • How is Walmart able to be so successful given the fact it has a thin gross margin?
  • Do you think Walmart has made a risky decision to deliberately lower prices which creates this thin margin?
  • Do you believe Walmart should be reviled for being so profitable, or do you think they bring something beneficial to the marketplace? (NOTE: Your professor grew up in a time before there were successful national mass marketers like Walmart, so consider what market forces were in place before Walmart and its large volume presence came into being.)
  • What is the difference in the two companies’ operations that would account for such a huge disparity in margins?
  • Even though Apple has a huge margin, what inherent risks to they have with their business model that could derail their success?

Please note the due date on the link and turn in your response with plenty of time to spare, as system issues and other last-minute distractions are a way of life. No additional time will be granted if you miss the deadline.

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