Instituto Tecnologico de Parral Ingenieria Industrial

Chavez Barron Tania Guadalupe Chavez Villegas Luis Andres Delgado Yanez Victor Manuel Lujan Rivera Ariana Rocio Ribota Mayra Lizeth Torres Cortez Dinora Arlette

THE FINANCIAL DETECTIVE Financial characteristics of companies vary for many reasons. The two most prominent drivers are industry economics and firm strategy. Each industry has a financial normal round, which companies within the industry tend to operate. An airline, for example would naturally be expected to have a high proportion of fixed assets (airlines) while a consulting firm would not. A steel manufacturer would be a expected to have a lower gross margin than pharmaceutical manufacturer, because commodity products like steel are subject to strong price competition, while highly differenced products like patented drugs enjoy much more pricing freedom. Because of unique economic features of each industry, average financial statements will vary from one industry to next. Similarly, companies within industries have different financial characteristics, in part because of varied strategies. Executives choose strategies that will position their company favorably in the competitive jockey within an industry. Strategies typically entail making important choices in how a product is made. How its marketed, and how the company is financed. Strategies among companies in the same industry can differ dramatically. Different strategies can produce arresting differences in financial results for firms in the same industry. The following paragraphs describe two participants in a number of different industries. Their strategies and market niche provide clues to the financial condition and performance one would expect of them. The companies commonsized financial statements and operating data as of early 1996 have been presented in standardized format in Exhibit 1. It is up to you to match the financial data with the company descriptions. Also, try to explain the differences in financial result across industries. HEALTH PRODUCTS Companies A and B manufacture and market health care products. One firm develops, manufactures, and distributes ethical drugs (pharmaceuticals) to doctors and hospitals through a direct sales force. This firm holds a substantial number of patents on original research. Also it owns shares in joint ventures and small biotech firms as part of a strategy of tapping new research breakthroughs. HOUSEHOLD APPLIANCES The two home-appliance manufactures are companies C and D. One focuses on manufacturing and marketing high-quality washer, dryers, dishwashers, and refrigerators under its own brand name. The strategy of the first company is to be the quality leader in the industry, and to charge commensurate prices. The other company attempts to segment the market for the same products by selling under its own three private label brand names. In particular, this second firm is a captive supplier of private-label appliances on a large multiyear contract with one of the leading retailers in the United States.

COMPUTERS Companies E and F sell computers and related equipment. One company is a mail-order seller of personal computers primarily to the consumer market. This firm is located in modest facilities in rural region, and it outsources important elements of it manufacturing. The key strategy of this firm is to keep costs low charge low prices, and achieve high until sales volumes. The other company sells it computers thought dealers and a sales force. Many of this companys sales are to the business market. This film has a leading brand name. More of this firms manufacturing is internal. The key strategy of this firm is to be the quality and service leader in the industry, and to offer a broad product line in its segment. RETAILING Companies G and H are two retailers with different marketing emphases. One company is a large, nation chain of department stores. This company sells, largely on credit, everything from automotive equipment and services to clothing and household items. Its properties are primarily leased. The other firm is a rapidly growing chain of consumer home-improvement stores offering a large selection of home improvement items at low prices. The firm has been called a category killer by virtue of its strategy to underprice the competition, advertise heavily, and enjoy large market share and unit sales volumes. These firm stores are in a warehouse format and are all leased. HOTELS Companies I and J are both operators of large\motel chains. One of these two companies owns are one of the largest food-service contractors in the country. This firm finances its hotel via off-balance-sheet limited partnerships. This company ha significant assets in the form for food service and hotel management contracts. The key strategy of this firm is to manage, not own, its hotel. The other firm operates a worldwide chain of high-quality hotels and hotels in addition to a smaller line of casinos the key strategy of this firms to concentrate in the lodging and entertainments business and to own it properties. NEWSPAPERS Companies K and L own newspapers. One has a large flagship newspapes that is sold around the country and around the world. Because the company is centered largely around one product, it has a strong central control. Competition for subscribes and advertising revenues in this firms chocen segment is fierce. The other firm owns a number of newspapers in relatively smaller communities throughout thw Midwest. Some analysit view this film as holding a portafolio of small local monopolies in newspaper publishing. This company has a significant amount of goodwill in its balance sheet stemming from acquisitions. Key to this firm operating success is a strategy of decentralized decision making and administration.

BEER Of the beer companies. M and N one is national brewer of mass-market consumer beers under a variety of brand names. This company also owns several theme parks. The other company is one of a group of microbrewers with sampler production volume and higher prices. This company outsources much of its brewing activity and has recently completed a successful initial public offering (IPO) of its stock. STEEL Companies O and P manufacture and sell steel. One of steel companies is a minimal. This company serves a specific segment is the steel market that is not as vulnerable to foreign competition. Being smaller, the firm can fill smaller production orders profitably. Not being us unionized as the rest of the industry the firm enjoys lower labor costs. The key strategic emphases of this firm are low cost, low prices, an nibble service. The other company is a large integrated steel producer able to provide a full range of products. While is has higher cost its aims to offset this with long production runs in the fulfillment of large contracts.