Analysis of growth, price-recovery, and productivity components. Tilson Ltd. sells men’s @

clothing. Corporate strategy is to offer a wide selection of clothes and excellent customer 2, 2010 total costs, service, and to charge a premium price. Tilson presents the following data for the years 2009 $3,872,400 and 2010. For simplicity, assume that each customer purchases one piece of clothing.

Total selling and customer-service costs depend on the number of customers that Tilson has created capacity to support, not the actual number of customers served. ‘Total purchasing and administrative costs depend on purchasing and administrative capacity that the company has created (defined in terms of the number of distinct clothing designs that Tilson can purchase and administer). Purchasing and administration costs do not depend on the actual number of clothing pieces purchased.
Actual results for 2009 showed that Tilson purchased 920 distinct designs. This Strategy, Balanced Segre ‘ : Scorecard, and Strategic number dropped to 800 distinct designs in 2010. Marketwide prices for clothes and the market size were unchanged in 2009 and 2010.
At the start of 2010, the company had targeted a 10% increase in operating income over the previous year.
REQUIRED 1. Is Tilson’s strategy one of product differentiation or cost leadership?
2. Calculate the company’s operating income in 2009 and 2010.
3. Calculate the growth, price-recovery, and productivity components of changes in operating income between 2009 and 2010.
4. Does the strategic analysis of operating income indicate the company was successful in implementing its strategy in 2010? Explain.LO1

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1. Number of items of clothing purchased and sold 2. Average selling price 3. Average cost per item of clothing 4. Selling and customer-service capacity 5. Selling and customer-service costs 6. Purchasing and administrative capacity 7. Purchasing and administrative costs 2009 60,000 $ 75.00 $ 51.00 72,000 customers $594,000 950 designs $308,750 2010 60,000 $ 73.80 $ 52.00 61,000 customers $494,100 820 designs $258,300