Wal-Mart created a competitive advantage with its inventory system to reduce the ratio of cost of goods sold to sales expecting:
A)to enjoy huge economic profits forever.
B)its rivals will never imitate their strategy and it will continue to enjoy positive economic profits.
C)its rivals will immediately do the same thing and it will end earning zero profits.
D)to enjoy economic profits for a few years before its rivals caught up.
E)it will at least be able to cover its fixed costs.

Question

Quizplus · Accepted Answer

Wal-Mart's inventory system created a competitive advantage that allowed it to reduce the ratio of cost of goods sold to sales, which means it could sell products at lower prices and/or maintain higher profit margins. However, it was expected that its rivals would eventually imitate the strategy and reduce the competitive advantage, leading to lower economic profits. Therefore, Wal-Mart could expect to enjoy economic profits for a few years before its rivals caught up.

Wal-Mart Created a Competitive Advantage with Its Inventory System to Reduce