Practical issues: helping you in preparing for

your essay & group project assignment

Lecture 8
GROUP PROJECT PRESENTATION & INDIVIDUAL REPORT

The question
Select a company from the list below. Answer all parts of the question.
Drawing on relevant academic strategy concepts and performance data:
a) to what extent and how can the strategy followed by the company be explained by
theories of positioning, resources or other approaches to strategy; and
b) to what extent and why do you consider that the current strategy is likely to succeed?
You will need to decide and justify the time period over which you will analyse strategy
and performance.
70% of the marks are for part (a) and 30% for part (b).
 
Select one company from the following list:
Vodafone, Amazon, Sony, Samsung, International Business Machines (IBM), Microsoft,
Ford
OR select one public company headquartered in Pakistan of your choice.
Information for group presentation:
• Make a group of 5 students.
• Presentations should last 20 mins.
• Group presentations will be followed by 10 mins Q&A by the panel
(assessors/markers) and audience (students).
• Presentations will be held in weeks 22nd Nov. – 10th Dec.

Information for individual assignment:

• Each student will be required to submit an individual report on the
companies mentioned in the list (slide 17) OR any Pakistani company
of your choice – must be publicly listed and headquartered in
Pakistan.
• WORD LIMIT FOR INDIVIDUAL REPORT: 3500 WORDS
• Assignment submission date: 22nd Nov.
Important information for group presentation:
• You may chose your own group.
• Groups must be of 5 students (based on the total strength of class).
There can only be 6 students in a group in case students are left
unassigned to a group.
• All group members must present and must not exceed the time limit of
presentation. If you exceed the time limit of presentation a penalty
may be imposed.
• Each student must present (so if there are 5 students in a group, then
each student must present for 4 mins ….)
Important information for individual assignment:
• The word limit excludes references, tables, graphs and diagrams. If you exceed
the word limit a penalty may be imposed.
• It is essential that you follow normal academic conventions on citation and
referencing of sources. Failure to appropriately cite and reference sources,
including failing to acknowledge sources, overly-close paraphrasing etc can be
deemed plagiarism and is a serious academic issue. Where plagiarism is found
penalties can be applied, including a mark of zero.
• This work should be completed on an individual basis. You should not discuss
your work with others; nor should you share plans or drafts. Please bear in mind
that collusion is a serious academic matter that can lead to penalties being
imposed.
• Use the Harvard system to cite and reference your sources.
• Make sure you number the pages in your work.
How to work on your essay/group project?

1. Reading the financial press & other media

2. Presentation of company financial information
3. Analyst reports (what’s in them and how to find them)
4. What to look for when assessing financial performance
1. Reading the financial press & other media
• What is the financial press?
• Newspapers and their associated websites e.g.
 Financial Times
 Wall Street Journal
 Business Week
 Other ‘quality’ media e.g., free sites like the New York Times, The Guardian, Bloomberg, Reuters, Forbes
• Coverage:
 General political & economic news (domestic & international)
 Company news – short pieces about recent announcements by companies, reports from industry associations
 Analysis of performance – around major reporting or other events
 Analysis of issues that affect the business environment (regulation, currencies, commodity prices, technology,
trade)
Reading the financial press cont’d...

• Other media sources

• Industry journals, trade publications
• Consultancy reports
• Data monitor, Keynote etc
• Web-based publications
• What to look for?
Data e.g., on industry level
Key events to follow up
Comment (but with caution)
Example: industry level information

• Eg PWC telecomms page:

• http://www.pwc.co.uk/communications/publications/ind
ex.jhtml

• http://www.pwc.com/gx/en/automotive/index.jhtml
• May contain useful data but don’t simply accept the
arguments made
Presentation of company financial information
• How to find company level financial information?
• Investor relations website: will include annual reports,
quarterly earnings announcements, news archive,
presentations & webcasts
• Here or elsewhere: updates on strategy, some descriptive info
on vision etc
• E.g., ‘About Samsung’
http://www.samsung.com/us/aboutsamsung/index.html
• But, the narrative is the message the company wants to give,
so needs to be analysed and interrogated, not simply repeated
What to look for when assessing financial performance
• Telling a story with numbers
• Not reporting on all the ratios but identifying key indicators and
discussing the nature, likely causes and significance of changes in these
• Choice of measures – relative as well as absolutes (e.g., profit margins,
not simply $$s of profit)
• Relating performance to the business – key products and markets;
major decisions; external events
• Benchmarks: against the past, targets, competitors
• Presenting data in an effective and efficient way e.g., graphs and tables,
not spreadsheets
Key areas (i): sales
• Growth: growth rates, patterns, major shifts. Calculate as
% changes to detect turning points etc
• Ford – cyclicality?
• Vodafone – slowdown?
• Apple – recovery then....?
 APPLE SALES DATA

Annual Sales ($m) Sales Growth (%)

2001 5363
2002 5742 7.1
2003 6207 8.1
2004 8279 33.4
2005 13931 68.3
2006 19315 38.6
2007 24006 24.3
2008 32479 35.3
2009 36537 12.5
2010 65225 78.5
2011 108249 66.0
2012 156508 44.6
 APPLE ANNUAL SALES GROWTH:
WHAT’S THE PATTERN?
90.0

80.0

70.0

60.0

50.0

40.0

30.0

20.0

10.0

0.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
sales growth %
 SALES DATA CONT’D

• Key issues
• Identify significant years
• What happened to explain the shift?
• Sustainability, new patterns and trends?
• Implications and possible risks
• More info? E.g., break down total sales into geographical markets,
product categories etc. for more nuanced story (look at Apple)
 INTERROGATING APPLE’S SALES (1)

Apple: breakdown of sales revenues

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Americas Europe Japan Retail Asia Pacific

 INTERROGATING APPLE’S SALES (2)

Apple sales: breakdown by product

100.0

80.0

60.0

40.0

20.0

0.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Desktops Portables iPod iTunes

iPhone iPad Peripherals Software and other
 KEY AREAS (II): OPERATIONS AND
PROFITS

• % changes; patterns; degree of stability; robustness vs fragility

• Profit margins (%s)
• Understanding relationship between revenue, costs and profits: gross
profit, operating profit
• What are the key costs (e.g., marketing); how are they managed as the
business grows (or changes)
• Sustainability of profits: built on sales growth, cost control....
• Internal vs external factors explaining profits
• Rate of return measures e.g., ROCE, ROA etc.
 APPLE: PROFITS DATA

Gross margin % Pre-tax margin % Selling and admin

costs as % of sales
2001 23.0 -1.0 21.2
2002 27.9 1.5 19.3
2003 27.5 0.4 19.5
2004 27.3 4.6 17.2
2005 29.0 13.0 13.3
2006 29.0 14.6 12.6
2007 34.0 20.9 12.3
2008 34.3 21.2 11.6
2009 36.0 21.9 11.4
2010 39.3 28.4 8.5
2011 40.5 31.6 7.0
2012 43.9 35.6 6.4
 UNDERSTANDING OPERATIONS AND PROFIT

• Understanding contributions to profits: where are the profitable

products and markets
• What are the competitive conditions in such markets
• Identifying key non-financial indicators and how these help to explain
profitability/ performance more generally
• Efficiency measures – how well does the company use its assets or
capital to earn profits
 HOW ARE THE PROFITS MADE?

• Does the company disclose margins/ profitability on individual

products/ product areas?
• Less common than by region but analysts may comment
• Question: what is the gross profit margin on an iPhone (2011 sale price
= US$630 incl downloads)?
 MAJOR COSTS

• For any organisation: understanding operating performance

requires analysis of costs (scale and trends) as well as sales
revenues
• Major elements of costs; how are they controlled?; significant
risks or improvements
• Controllable vs uncontrollable
 OTHER ISSUES E.G., BALANCE SHEET AND FUNDING

• How is the business funded: importance of debt vs equity? (Apple = very low
gearing)
• Debt: particular problems and risk posed by levels of debt, interest payments. If
debt has risen, why? (to fund acquisitions or growth, distress.....)
• Returns to shareholders – dividends and share price (Apple 1st dividends 2012)

• Assets: what are the major assets; changes?; ownership v leasing; investment
• Building resources (eg R&D spend?; Apple = 2% of sales rev)
• Cash flow: ability to cover current liabilities (Apple has large cash pile)
 IN GENERAL

• Linking the numbers to an argument

• Developing your argument, not relying on what others say (won’t work – different purpose)
• Evidence-based (decide on key evidence)
• How does performance change with scale, or across different parts of the company?
• Thinking about competitive advantage and how this might be seen or analysed through
numbers
• Comparisons with other companies (direct competitors; those with overlapping products,
similar trajectories etc)
• Don’t worry if you don’t understand everything. If you find puzzles, why not mention them? (or
even research them)
 WHAT IS YOUR TASK?

• Choose a company
• Choose time period (why this period)
• Explore company strategy in relation to two major
schools of strategy
• Explore past performance
• How can the company improve future performance