E upply schedules control invoicing salesanalysis

Info icon This preview shows pages 22–24. Sign up to view the full content.

View Full Document Right Arrow Icon
.E '~upply schedules control; invoicing ,salesanalysis; upqrades Technology/a: malntenanee 'market research product ,- -,~ - - "'~ development Procurement The results of these activities manifest themselves in a company's financial statements and the supporting documents. A company's primary and support activities are not carried out in isolation but are, instead, influenced by five important forces that confront the company and determine its competitive intensity: (A) industry competition, (B) buyer power, (C) supplier power, (D) product substitutes, and (E) threat of entry (for further discussion, see Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors, 1980 and 1998).
Image of page 22

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

View Full Document Right Arrow Icon
Module 1 I Framework for Analysis and Valuation Competitive Forces within the Broader Business Environment EXHIBIT 1.7 ~JI [email protected] iI\:i~2.(.(~ ft it ~t [email protected] ~-~~~-- Investors These five forces are depicted graphically in Exhibit 1.7 and are key determinants of profitability. @ Industry competition Competition and rivalry raise the cost of doing business as companies must hire and train competitive workers, advertise products, research and develop products, and engage in other related activities. ® Bargaining power of buyers Buyers with strong bargaining power can extract price conces- sions and demand a higher level of service and delayed payment terms; this force reduces both profits from sales and the operating cash flows to sellers. © Bargaining power of suppliers Suppliers with strong bargaining power can demand higher prices and earlier payments, yielding adverse effects on profits and cash flows to buyers. @ Threat of substitution As the number of product substitutes increases, sellers have less power to raise prices and/or pass on costs to buyers; accordingly, threat of substitution places downward pressure on profits of sellers. ® Threat of entry New market entrants increase competition; to mitigate that threat, compa- nies expend monies on activities such as new technologies, promotion, and human develop- ment to erect barriers to entry and to create economies of scale. The broader business environment affects the level of profitability that a company can expect to achieve. Global economic forces and the quality and cost of labor affect the macroeconomy in 'hich the company operates. Government regulation, borrowing agreements exacted by credi- ors, and internal governance procedures also affect the range of operating activities in which a company can engage. In addition, strategic plans are influenced by the oversight of equity markets, and investors are loathe to allow companies the freedom to manage for the longer erm. Each of these external forces affects a company's strategic planning and expected level of profitability. The relative strength of companies within their industries, and vis-a-vis suppliers and custom- ers, is an important determinant of both their profitability and the structure of their balance sheets.
Image of page 23
Image of page 24
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern