1.2 PORTER’S FIVE FORCES APPLIED TO THE AIR COURIER INDUSTRY.

Apply Porter’s five

forces to the air courier industry. Industry participants include such firms as FedEx, UPS, and DHL. (Hint:
Access Gale’s Business & Company Resource Center, Global Business Browser, or Standard & Poor’s Industry
Surveys to obtain the needed information.)

Industry and Strategy Analysis

A Porter has suggested five forces influencing the level of firms in an industry. Applying these five forces to the
specialty coffee competition industry:
1.Rival amount Existing Firms: This is moderate in the specialty coffee retail industry.
There are many firms in retail operations who sell a cup of coffee. But not many offer the kind of experience
that specialty coffee shops like Starbucks offer. Even the ones who do offer experience with coffee many
among have a reach with such a large network of shops like Starbucks.
2.Threat of New Entrants: This is low in the specialty coffee retail industry
For any new entrant to grow a network of stores like Starbucks is difficult. Also, Starbucks has positioned itself
as a global brand that is widely recognized.
3.Threat of Substitutes: This is high in the specialty coffee retail industry.
Many fast-food chains with a reach as wide as Starbucks are offering coffee and other beverages along with
their food products. The beverages sold by them would be cheaper as they do not offer the specialty coffee
experience. Tea and other caffeinated beverages sold in stores are also substitutes for coffee. lt all depends on
how easily are they accessible, how price conscious are the coffee drinkers of these specialty coffee retail
stores.
4.Buyer Power: This is low to moderate in the specialty coffee retail industry.
Most of the buyers would come to specialty coffee for that experience. They might not be price conscious. But
how much of a higher price they would be ready to pay? or are they brand-loyal enough to stay with their
preferred coffee brand.
5.Supplier Power: This is low in the sociality coffee retail industry.
This industry has a large number of suppliers but small number of buyers of a size as huge as Starbucks so this
industry has a low threat of suppliers.

1.8 EFFECT OF INDUSTRY ECONOMICS ON BALANCE SHEET. Access the investor relations or
corporate information section of the websites of American Airlines (http://www.aa.com), Intel
(http://www.intel.com), and Disney (http://disney.go.com). Study the business strategies of each firm. Examine
the financial ratios below and indicate which firm is likely to be American Airlines, Intel, and Disney. Explain
your reasoning.
FIRM A FIRM B FIRM C
Property, Plant, and Equipment/Assets 27.9% 34.6% 62.5%
Long-Term Debt/Assets 18.2% 3.7% 35.7%

Firm A is Disney
Firm B is Intel
Firm C is American airlines
American airline acquire much more asset than design company, and this suggest that firm C {62.5%} is
American airline. Disney need to borrow money to financial the acquisition of their property, plant and
equipment than it shows higher LIP/TA higher than Intel. Labor, intensive firm this suggest that firm A
(18.24%) represent Disney, while (3.7%) represent Intel.

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1.9 EFFECT OF BUSINESS STRATEGY ON COMMON-SIZE INCOME STATEMENT. Access the
investor relations or corporate information section of the websites of Apple Computer (http://www.apple.com)
and Dell (http://www.dell.com). Study the strategies of each firm. Examine the following common-size income
statements and indicate which firm is likely to be Apple Computer and which is likely to be Dell. Explain your
reasoning. Indicate any percentages that seem inconsistent with their strategies
FIRM A FIRM B
Sales 100.0% 100.0%
Cost of goods sold (82.1) (59.9)
Selling and Administrative (11.6) (9.7)
Research and Development (1.1) (3.1)
Income Taxes (1.4) (8.9)
All Other Items 0.2 0.8
Net Income 4.1% 19.2%

Firm A is Dell and firm B is Apple.

Research and development expense to sale % Apple computer is more of a technology innovator that Dell there
give apple computer a higher R&D expense to sale %
Net are consistent of these firm compared to Dell, Apple computer has a much higher profit margin
Dell have a higher cost of goods sold to sale % because it adds less value, essentially following an assembly
strategy and computer based on low price.

1.10 EFFECT OF BUSINESS STRATEGY ON COMMON-SIZE INCOME STATEMENT. Access the investor relations or
corporate information section of the websites of Dollar General (http://www.dollargeneral.com) and Macy’s Inc.
(http://www .macysinc.com). Study the strategies of each firm. Examine the following common-size income statements
and indicate which firm is likely to be Dollar General and which is likely to be Macy’s. Explain your reasoning. Indicate
any percentages that seem inconsistent with their strategies.

FIRM A FIRM B
Sales 100.0% 100.0%
Cost of goods sold (70.7) (60.3)
Selling and Administrative (23.4) (34.1)
Income Taxes (0.8) (0.5)
All Other Items (4.0) (0.1)
Net Income 1.0% 5.2%

Company A is Dollar General

Company B is Macy
For discount company normally they sell at low prices to increase sale volume, therefore cost of goods sold for
many should be low.
Department stores normally make advertising expenses to promote, their product to increase demand, so
General Dollar have graters selling expenses.
Department store have higher profit margin.

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