bmgt364.9.27.2010

bmgt364.9.27.2010 - 2005 Robert H. Smith School of Business...

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Unformatted text preview: 2005 Robert H. Smith School of Business University of Maryland Strategic Management Does Strategy Matter? 2005 Robert H. Smith School of Business University of Maryland Differences in Industry Profitability The average return on invested capital varies markedly from industry to industry. Between 1992 and 2006, for example, average return on invested capital in U.S. industries ranged as low as zero or even negative to more than 50%. At the high end are industries like soft drinks and prepackaged software, which have been almost six times more profitable than the airline industry over the period. Return on Invested Capital is the appropriate measure of profitability for strategy formulation. Return on sales or the growth rate of profits fail to account for the capital required to compete in the industry. 2005 Robert H. Smith School of Business University of Maryland Differences in Industry Profitability TOP 10 Security Brokers and Dealers Soft Drinks Prepackaged Software Pharmaceuticals Perfume, Cosmetics Advertising Agencies Distilled Spirits Semiconductors Medical Instruments Mens and Boys Clothing BOTTOM 10 Bakery Products Engines and Turbines Book Publishing Laboratory Equipment Oil and Gas Machinery Soft Drink Bottling Knitting Mills Hotels Catalog, Mail-Order Houses Airlines 2005 Robert H. Smith School of Business University of Maryland Profitability of US Industries (selected industries only) Profitability of US Industries (selected industries only) Household & Personal Products 22.7 Gas & Electric Utilities 10.4 Pharmaceuticals 22.3 Food and Drug Stores 10.0 Tobacco 21.6 Motor Vehicles & Parts 9.8 Food Consumer Products 19.6 Hotels, Casinos, Resorts 9.7 Securities 18.9 Railroads 9.0 Diversified financials 18.3 Insurance: Life and Health 8.6 Beverages 18.8 Packaging & Containers 8.6 Mining & crude oil 17.8 Insurance: Property & Casualty 8.3 Petroleum Refining 17.3 Building Materials, Glass 8.3 Medical Products & Equipment 17.2 Metals 8.0 Commercial Banks 15.5 Food Production 7.2 Scientific & Photographic Equipt. 15.0 Forest and Paper Products 6.6 Apparel 14.4 Semiconductors & Computer Software 13.9 Electronic Components 5.9 Publishing, Printing 13.5 Telecommunications 4.6 Health Care 13.1 Communications Equipment 1.2 Electronics, Electrical Equipment 13.0 Entertainment 0.2 Specialty Retailers 13.0 Airlines (22.0) Computers, Office Equipment 11.7 Median return on equity (%), 1999-2005 2005 Robert H. Smith School of Business University of Maryland 1 8 .4 1 5 .2 1 5 1 4 .7 1 2 .8 1 1 .9 1 1 .3 1 1 1 0 .3 1 0 .3 9 .9 9 .9 9 .6 9 .5 9 9 8 .4 7 .7 6 .9 6 .5 6 .2 0 5 1 0 1 5 2 0 P h a rm a c e u tic a ls H o u s e h o ld a n d p e rs o n a l p ro d u c ts C o m p u te r s o ftw a re a n d s e rvic e s M e d ia C o m m e rc ia l s e rvic e s S e m ic o n d u c to rs H e a lth c a re e q u ip m e rn t a n d s e rvic e s F o o d , b e ve ra g e s , to b a c c o...
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bmgt364.9.27.2010 - 2005 Robert H. Smith School of Business...

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