Business Report - Research Paper Example

Harvey Norman barely survived with impending lawsuits and losses experienced from giving out very high discounts to attract customers. The Reject Shop on the other hand posted a good increase in profits and sales in that year. The company opened 18 new stores in that year and was able to repay much of its debts (Roth, 2013). The Reject Shop can sustain a downturn in the economy because its average unit price is A$9.00 (in 2011). As of today, the unit price is A$10.04. Even if the domestic market failed, The Reject Shop would probably survive (Greenblat, 2011).

In an attempt to avoid losses and survive in the industry, the Harvey Norman Holdings Limited misled their customers by false advertisements. The federal court hit the company with a $1.25 million fine. The judge ruled in favor of the Australian Competition and Consumer commission saying that the company deliberately and blatantly disregarded the truth while conducting a calculated and misleading campaign (Appliance Retailer, 2012, p.4). The Reject Shop has not been involved in such bad publicity.

When the industry domestic market was low in 2012, The Reject Shop suffered some loss like all the other retail companies but did not do illegal stuff to make more money. Metrics is the first thing looked at with any investment. The Reject Shop has a return on equity of more than 40 per cent for every year in its corporate life (Greenblat, 2011). Its debt is little or none existent and it is maintaining its return on equity despite its equity growing. This means that The Reject Shop is a good investment.

The return on equity combined with little or no debt signals that the company has a strong competitive advantage. Moreover, a poll showed that 90 per cent of consumers knew about The Reject Shop. This means that the market’s place strong position and the brand awareness support the return in equity. In the recent years, its equity has risen threefold while its profits have