...September 22, 2013: Profile: Illinois Tool Works manufactures a diversified range of industrial products and equipment. ITW produces everything from plastic beverage rings to commercial dishwashers to automotive seat heaters. It operates a decentralized model, with the number of divisions dropping to 100 (from 800) after its business structure simplification initiative is complete. The revenue split in 2012 was 50% North America, 30% Europe, 20% Asia Pacific/other. Firm/Industry Comparisons | | ITW | Industry | Market Data | | | Beta | 1.24 | 1 | P/E | 14.4 | 18.9 | Price/CF | 15.6 | 15.3 | Dividend Yield | 2 | 2 | Revenue Growth | | | 3 Yr. Revenue Growth | 8.9 | 3.6 | Debt Ratios | | | Debt/Equity | .50 | 1.03 | Debt/Assets | .26 | .42 | Total Liab./Total Assets* | .45 | | LT Liab./Total Assets* | .30 | | *ITW only | | | | NPM | TAT | EM | Dupont ROE | Direct ROE | ITW | 13.4% | .91 | 1.92 | 23.41 | 22.9 | Industry | 8.7% | .47 | 2.45 | 10.02 | 15.5 | Analysis Market Data Beta: The beta for Illinois Tool Works (ITW) is currently at 1.24. The beta reflects a slightly higher systematic risk for ITW than the market average. As a result of higher risk, ITW returns and losses will be greater than the market average. Favorability is determined by investment strategy. P/E Ratio: The price per earnings ratio of ITW is currently at 14.4%, which is unfavorable. As compared to the industry average P/E ratio of 18.9%, investors are...
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...Internal Analysis of Firms Analysis of the Firm Role of a firm: * Marketing approach: Firm should give customers what they want Nonsense * Exchange is about comprise from both the firm and the consumer * If not -> no exchange * If not -> changement of partner However, the firm can also have technical limits and not being able to reach consumer expectation. That’s why exchanges will be based on the nature of the firm. (short term) The Marketing concept vision is that the firm to deliver a product has only to understand the consumer. Firms are flexible and can adapt them to customers’ requirements. It is true when speaking about pricing and promotion modification needed, less when it touches the product channel. However, it leads to marketing strategy decisions. The relationship between firms and the environment: 3 operating modes: * Firms cannot adapt to the environment – Environmental Strategy * Strong inertial forces constraining change: cultural, technological… * The firm will perish * Firms adapt to the environment – Learning Model * The firm has no barriers to change and is infinitely flexible * The firm will survive * Firms can change their environment - Proactive model * Interaction between firms and their environment impact it… * … however, this approach is going beyond such interaction to create major and explicit change * The firm will survive In practice, the...
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...and UPS Airfreight Industry Analysis 1. During the 1980s, the air express industry was a medium to attractive industry to already be a major player in, but not a very attractive industry to try and break into. The industry can be characterized by high rivalry from competitors who compete on the same services with very little differentiation, medium power from suppliers who supply the resources necessary to run the business, high buyer power because customers can basically find an equal service from any firm in the industry, low substitution threat from other means of shipping transportation, and low threat of new entrants due to the high initial capital outlay and need of management experience. In this analysis, we will delve deeper into each of the dynamics within Porter’s 5 Forces to form an opinion of why the industry is attractive to be in and then discuss how competition greatly increased during 1988-1989. In the air express industry, where customers can ship their packages over long distances via airplane, there is high rivalry because the firms competing in the industry all do the same service. Since there is little differentiation between firms, each firm must battle for customers by either providing better or new services, integrating new competencies into their business processes, or doing business at a low price to create bigger economies to scale which will then cut down operating costs. Firms who want to compete provide...
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... Malaysia based manufacturer and distributor of fruit based cordials. It began operations in 1983 under the leadership of Rosli bin Khaled. Prior to entering the cordial manufacturing business, Rosli was an employee of a firm the manufactured automotive safety belts. He left the firm to search of new challenge, in the course of which he founded BBSB. The firm sells its cordials in three sizes, namely 720ml, 2 liters, and 4.55 liters. The firm largely relies on government tenders with government owned or linked corporations such as FELDA, MARA, PERNAS and RISDA, and geographically serve the states of Pahang, Kelantan, Perak, Terengganu, Selangor and the Klang Valley region. Problem Statement The case study presents us with a situation where the firm has reached maximum production capacity, in the presence of ample market opportunities. At the present BBSB is forced to let these opportunities go as it cannot cater to the market demand. BBSB, and its owner Rosli bin Khaled are now faced with the choice of incurring costs and investing in moving to a new facility to take advantage of the opportunities or not. Additionally, the firm has also to decide where it will relocate its operations, in the Klang Valley or in its home state of Kelantan. SWOT Analysis Strengths 1. Strong growth in sales. BBSB has recorded double to triple digit growth well into five years in its operations. 2. Low costs and high profit margin. According to prices table provided, BBSB has a good...
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...Puma is one of the key sportswear firms globally that is involved in segments like sports clothing, footwear, and lifestyle products, where its core capabilities are in the field of manufacturing, designing, marketing and distribution of its products. The company has evolved over number of years to become € 2,738.8 million turnover firm in 2008 (FAME, 2009), however its roots can be traced back to the modest beginnings in the firm Gebruder Dassler Schuhfabrik by Rudi and Adi Dassler created in 1924, which later split into Puma and Adidas in 1948 (Keynote, 2009). Porter’s Five Forces: Porter’s five forces have been identified as the key competitive forces that define industry structure that is relevant to the business of the firm and therefore is highlighted as micro business environment analysis of the firm (Lynch, 2003). The implementation of the tool has been undertaken for Puma as follows: • Bargaining Power of Suppliers is low as Puma is one of the vertically integrated firms therefore making its own departments suppliers and distributors of its products, while raw material producers offer low differentiation therefore also have very low bargaining power. • Bargaining Power of Buyers is medium to high as there are low switching costs between different brands therefore allowing opportunity to customers to try different firms for their wardrobe. However, the strong product portfolio and the price mix of Puma means that it enjoys a degree of customer loyalty which...
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...be successfully established in the global market. The central theory introduced in this article is developed based on a comprehensive framework of the entry modes choices. These modes of choices would determine the success factor of the international business strategy, and to choose these choices there are several important factors to be considered. These factors include situational firm factors, foreign environment review, and moderating factors that would directly influence the firm’s desired mode of choice. Referring to Appendix A is the mode choice of framework by Driscoll that depicts the whole concept discussed. To briefly illustrate, the firm would need to evaluate the two situational factors that would directly affect its desired level of different modes of characteristics. Subsequent from the selected desired modes, the firm would also need to determine the potential moderating influences, which would affect the desired mode. Thus, reassessment based on the moderators would take place to determine the most effective modes of entry. By selecting the right mode of entry, the firm would incorporate an effective business strategy for its international business plans. The article written by Driscoll is set to present an argument for the development of a comprehensive framework for understanding the mode of entry choices. In the article, she illustrated about the different modes of entry to international markets, analyzed on the different characteristics of the entry...
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...when considering a merger. c. Managers who purchase other firms often assert that the new combined firm will enjoy benefits from diversification, including more stable earnings. However, since shareholders are free to diversify their own holdings, and at what's probably a lower cost, diversification benefits is generally not a valid motive for a publicly held firm. d. Operating economies are never a motive for mergers. e. Tax considerations often play a part in mergers. If one firm has excess cash, purchasing another firm exposes the purchasing firm to additional taxes. Thus, firms with excess cash rarely undertake mergers. 2. Which of the following statements is most CORRECT? a. Financial theory says that the choice of how to pay for a merger is really irrelevant because, although it may affect the firm's capital structure, it will not affect its overall required rate of return. b. The basic rationale for any financial merger is synergy and, thus, the estimation of pro forma cash flows is the single most important part of the analysis. c. In most mergers, the benefits of synergy and the premium the acquirer pays over the market price are summed and then divided equally between the shareholders of the acquiring and target firms. d. The primary rationale for most operating mergers is synergy. e. The acquiring firm's required rate of return in most horizontal mergers will not be affected, because the 2 firms will have...
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...and successful strategy for the company. The case presented by Claire Mackey one of the division managers will be of great contribution to the strategy that the firm will use to rebuild its sales and profit margins. Mackey’s report focuses on the problems that Brannigan is facing currently and specifically the declining sales volume and lower profits that the company has been recording for the past three years. Mackey is confident that by handling the current customer desires for healthier and more convenient products, the company will be in a position to increase its sales volume. His report also focuses on how the company can manage to penetrate other markets, which it has not managed to do for the past three years as well as improve the performance of the low performing markets like Southeast Asia and China. Since the report focused on the actual challenges the firm is experiencing now, it will not only be a good consideration before making the final decision on the implementation but will also assist in making well thought and research decisions for the benefit of the firm. Mackey’s report focused on borrowing the ideas of successful firms in the industry to be able to improve the performance of Brannigan. Mackey provides a list of competitor firms whose their ideas will be of great benefit to firm. Since firms such as...
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...innovations by global competitors (e.g., Toyota and Honda) has challenged GM & Ford to reinvent themselves continuously. The challenge of continuous and dynamic change is affecting firms across multiple industries. These include even the IT Services Industry such as Accenture / IBM / Infosys & TCS and their business models & Service models are changing the nature of competition. The winners and losers resulting from changes in this particular industry remain unknown. Consider a situation where Complete Customer relationship management service for any organization ( which will have been implemented, supported & serviced ) by any of the traditional players being replaced by a cloud offering from an organization Salesforce.com for which payment can happen on pay-per–use model & supported by niche player whose entire business model is predicated on this. Being able to create a more attractive value proposition for customers is making it quite difficult for some of the more traditional players like IBM or Accenture since that means cannibalization of their existing revenue stream, changing the Business model of service & delivery and altering the Relationship matrix with customers in complete linear model. Challenging nature of competing in a global environment creates several tension-filled questions for firms: - In what markets should we compete? Should we offer standardized products across all markets or should we modify our products for local preferences? - How much risk...
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...The study of international business is fine if you are going to work in a large multinational enterprise, but it has no relevance for individuals who are going to work in a small firm. Evaluate the statement in 3000 word. INTRODUCTION Studying business international is good because it gives us an opportunity to know about other’s nation laws in order to import or to export products between two countries that have achieved their consensus to do business between them. International business includes all commercial transactions, either private or government sector, investments, sales, transport, and logistics that happen between two or more countries that are beyond their political boundaries. Generally, private company makes a deal with businesses from other countries to achieve target profits. And for government, the main reason they do this is because of their diplomatic relationship and also to gain profits. International business also can mean that it refers to all of the business transactions such as services, natural resources of the country, and goods or products. As for students, they will learn and practice on how to serve people in international markets. When they are entering working environment, they will find out that most of people that they need to serve is people that come from several races and countries. Students also studying about the culture of another country, their lifestyle, what they do in their daily business routines. The strategies on how to take...
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...Knowledge of the Firm, Combinative Capabilities, and the Replication of Technology Author(s): Bruce Kogut and Udo Zander Source: Organization Science, Vol. 3, No. 3, Focused Issue: Management of Technology (Aug., 1992), pp. 383-397 Summary: Carlos Ip Introduction: Why firms exist? A prevailing view is that firms serve to keep in check transaction costs from self-interested motivations of individuals. Authors said that firms do better than markets in sharing and trasnfer of knowledge of individuals and groups within an organization. Knowledge is held by individuals, but is also expressed in regularities by which members cooperate in a social community (i.e. group, organization, network). • Suggesting that firms learn new skills by recombining their current capabilties. • Growth occurs by building on social relationship existed in a firm. • Cumulative knowledge of the firm provides options to expand in new but uncertain markets in the future. Paradox identified: firm growth efforts by replication of its technology enhances potential for imitation. Authors view the central competitive dimension of what firms know how to do is to create and transfer knowledge efficiently within an organization content, • Suggest that organizations are social communities in which individual and social expertise is transformed into economically useful products and services by the application of a set of higher-order organizing princples. • Firms exist because they provide a social...
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...ABSTRACT Growing liberalization and internationalization has led the firms to a race for expansion. Firms are more enthusiastic to trap new market segments than ever before. Expansion is an unpredictable, high-stacks game. The paper puts forth a Corporate Expansion Strategy to deal with such a scenario . Case studies have also been used to understand the expansion phenomenon. Efforts have been made to take a generic view of expansion which is independent of line of business, market segment, or type of expansion. Expansion and investment are compared to have a clear understanding of how expansion for a firm and investment for a individual are similar to each other and how they differ with each other. INTRODUCTION Firms are attracted to capture the new liberalized market segments to pronounce their global existence and enhance their customer base. The literature emphasizes the points that should be discussed and resolved ,before making any decision regarding expansion. It is a design process for building a new set-up. Expansion involves various critical factors to be considered e.g risk of market, return from a new set-up, risk estimation, opportunity cost, expansion revision analysis , resource availability, dominant market study etc. Expansion decision is a strategic decision which is related to firm's objectives and mission. To quantify the expansion benefits is a very complex process as analysis involves various intangible variables like brand-value, employment generation...
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...What Consulting Firms are Looking For October, 2015 What is a consultant? * ASK the audience what they think….is not a test, just want to understand what you think * Acknowledge their thoughts….reinforce/add with…a consultant is many things: * An advisor * A thought partner * A counselor…personal and professional * An analyst * A strategist * A change agent * ….all focused on helping others succeed…must get your satisfaction, and feel successful in your career, by helping others succeed, rather than running something * All this starts Day One when you join a firm * But mix is very much skewed to being an analyst in the early days The roles in a team…and the career progression is typically: * Associates: working with more junior client team members – often peers or a few years older, often with MBAs and other advanced degrees from schools as good as this one – to gather the data, do the analysis, develop first drafts of recommendations, write a lot of powerpoint slides * Managers (each firm uses a different term…Engagement Managers, Project Managers, Team Leaders): working with a more senior client executive appointed by top management to lead the project – often someone in their 40s or 50s with a track record of success in the company - still get to do all the stuff Associates do, but also to provide the overall guidance to the team and client to get the work done * Managers also work with the...
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...Diversification patterns and performance of large established Japanese firms Tatsuo Ushijima* Aoyama Gakuin University Graduate School of International Management Shibuya 4-4-25, Shibuya-ku Tokyo 150-8366 JAPAN Yoshitaka Fukui Aoyama Gakuin University Graduate School of International Management Shibuya 4-4-25, Shibuya-ku Tokyo 150-8366 JAPAN * Corresponding author Tel: +81-3-3409-8544; Fax: +81-3-3409-4167 E-mail: ushijima@gsim.aoyama.ac.jp This version: December 11, 2004 Acknowledgement: We would like to thank seminar participants at the University of Tokyo and the 22nd Nikkei conference on firm behavior for their helpful comments. Remaining errors are ours. Financial supports from the Graduate School of International Management at Aoyama Gakuin University are greatly appreciated. ABSTRACT This article examines the industry diversification of the largest Japanese manufacturers in 1973-98. Results show that 118 sample firms steadily increased diversification, a trend continued from earlier periods. Nevertheless, the relatedness of their constituent businesses gauged based on the Input-Output table remained high and stable throughout the study period. Econometric analysis reveals that firms pursuing the “constrained diversification” exploiting inter-business links centered on the core industry segment tend to achieve a higher profitability than firms engaged in the “linked diversification” exploiting links distant from the core. JEL classification: L23; L25; L29 Keywords:...
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...with two separate law firms on unrelated matters. The client was dissatisfied with the representation they received from one firm, and filed a malpractice suit. Later those two firms merged into one firm. This opinion looks to address three questions: 1. Can the successor firm can continue to represent the same client using any member, including the sued lawyer? 2. Can the successor firm represent the client in the pending matters through members excluding the sued lawyer? 3. Can the successor firm represent the client with respect to one or more matters pending at the time of filing of malpractice suit against the individual lawyer and predecessor firm using lawyers who were not members of the predecessor firm? The lawyer must examine the situation impartially and carefully in a thought out manner, and arrive at a conclusion that the interest of the client in the ongoing matter as well as the future representation of the client will not be adversely affect. The test should consider how the confidentiality of the information protected by the lawyer-client privilege, as well as other secrets of the client will be handled in the future. The lawyer must believe the clients interest will not be adversely affected. If the lawyer disputes the malpractice claim, it’s not likely he should represent the client. If there’s no question to the malpractice and the lawyer is settling, it’s okay to represent. MRPC 1.10(a) indicates that when a lawyer associated with a firm is disqualified from...
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