Chapter 1.1, Problem I.11E

Competitive companies are often measured by how they compete in their industry. Therefore, analyzing gross profits helps substantiate (or refute) managers' claims of good financial performance.  Gross profit signals the health of a company and its closest competitors.  A company that creates a superior brand and charges higher prices than its competitors generates higher gross profit.  In this discussion question, you will apply theory from your past courses in management and finance:  Describe two competitive companies with similar gross profit figures that ended up with dramatically different net operating income.  Provide details of the two companies and include both qualitative and quantitative results to support your response.  Provide three factors that financial analysts need to evaluate when determining one of your chosen company's (from the previous question) ability to repay short-term versus long-term debt.  Describe in details to support your response.

1 – According to the I/O model, what should a firm do to earn above-average returns?     2 - What does the resource-based model suggest a firm should do to earn above-average returns?     3 - Why is it important for a firm to study and understand the external environment?     4 - What are the differences between the general environment and the industry environment? Why are these differences important?     5 - How do the five forces of competition in an industry affect its profitability potential? Explain.     6 - Why is it important for a firm to study and understand its internal organization?     7 - What is a business model and how do business models differ from business-level strategies?     8 - How do awareness, motivation, and ability affect the firm’s competitive behavior?     9 - What is corporate-level strategy and why is it important?     10 - What motives might encourage managers to over diversify their firm?

1) After you estimate an industry earnings multiplier , how do you determine if the industry's multiplier is relatively high or low ? 2) What are the five basic competitive forces that determine the intensity of competition in an industry and thus , its rate of return on capital?