The effect of cost reduction on profitability in Shoprite Holding LTD South Africa

Abstract

This research examined the effect of cost reduction on profitability in Shoprite Holdings Ltd South Africa Ltd South Africa. The objectives of the research were: To analyse the effect of cost of goods reduction on net profit in Shoprite Holdings Ltd South Africa South Africa. To evaluate the effect of operating cost reduction on net profit in Shoprite Holdings Ltd South Africa South Africa. To accomplish these objectives, the study pursued a positivism paradigm since it sought to measure quantitative variables which are cost of goods sold, operational costs and net profit. Data was collected from secondary means of published financial statements for Shoprite Holdings Ltd South Africa and analysed using linear regression models. The results of the study found that there is a positive correlation between cost of goods sold and net profit and that cost of goods sold could account for 80,4% of net profit. The regression for this objective equation was estimated: Y = 256.190 + 0.037X1 + e. Similarly, there was a positive correlation between operating cost and net profit and that operational cost accounted for 79% of the net profit. The derived estimated regression equation was: Y = 356,593 + 0,132X2 + e. The study recommended that the retail industry could benefit from the understanding that cutting back on OPC and COGS can increase net profit. For academics, the study recommended that the limitation of the period considered in the study could be used by others in the academy to learn about shortcomings of limited data in correlational regression. It is expected that future research could address the same study when there is more data generated.