Bus Models Finance Strategy

Bus Models Finance Strategy - Business Valuation: Business...

Info iconThis preview shows pages 1–11. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Business Valuation: Business Models, Strategy, & Finance Spring, 2010 Instructor: John M. Longo, PhD, CFA Key Topics Common Strategic and Business Models Detailed Business and Sector Models Linking Business and Strategic Models to Valuation. What is a Business Model? A business model is the framework a company uses to make money. At a big picture level, there are 3 types of business models: High profit margin, low turnover (Gucci) Low profit margin, high turnover (Wal-Mart) High profit margin, high turnover (Google) These three categories can be divided further into dozens of more granular business models. What is a Business Model? Another broad categorization of business models classifies them according to 2 segments: Low cost Different Warren Buffett and others sometimes call a business model a franchise . Well Known Business Model Examples Hewlett Packard sells its printers at close to cost, but earns large profits on cartridge (inkjet, laser) refills. Gillette sells its razor close to cost, but earns large profits on the blade replacements. Google offers free search, but earns money from advertising. The movie theater example. Financial Statements Are Backward Looking To help your firm and portfolio prosper, you need to look forward . Business models and corporate strategy are crucial for all firms. Most industries also have other factors that need to be carefully analyzed. Ex: Research & Development (R&D) or Pipeline in Pharmaceutical Firms. Numbers Are Not Enough! Corporate strategy, industry structure, political, technological and macroeconomic forces are key. Popular Strategic / Industry Models: Porters 5 Forces SWOT Analysis PEST (or STEP) Analysis Boston Consulting Group Matrix McKinsey 7S - Framework Porters 5 Forces (5F) Attempt to explain industry structure and performance. Force 1: Bargaining Power Of Buyers Force 2: Bargaing Power Of Suppliers Force 3: Rivalry Among Existing Competitors Force 4: Barriers To Entry Force 5: Threat From Substitute Products And Services Porters 5 Forces (5F) A quick and dirty check is that a firm with a strong strategic position should have several of the following characteristics, relative to their industry peers. (Warren Buffett and moat) High profit margins Large and / or increasing market share Higher valuation metrics (e.g. P/E) Large (or rapidly growing) market cap Lets look at a brief 5F analysis for the Healthcare sector / Pharmaceutical industry . Bargaining Power Of Buyers: Moderate Some drugs have no substitute, so bargaining power may be low at times....
View Full Document

Page1 / 37

Bus Models Finance Strategy - Business Valuation: Business...

This preview shows document pages 1 - 11. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online