Apple with only 7% of Sales account today for 35% of Industry Profits

According to a Business Insider article, the banking giant has aggregated numbers from the top ten PC makers in the world and determined that, while Apple only commands 7 percent of overall revenues in the PC market, its products account for 35 percent of the operating profits. See Full Article.

Richard Branson’s Fundamental Objective

The Financial Times posed twenty questions to Richard Branson. Here are the two important ones that touch upon the idea of a fundamental objective.

How important is money?
My priority is learning and trying to improve the world – not being rich.

How do you want to be remembered?
That I have made a difference.

Read full interview.

Duplicity

Rarely is a Hollywood movie such a great teaching instrument. Duplicity gives a wonderful picture of how far large companies go in figuring out what their competition is up to. What’s more, the principles of game theory are very well illustrated by Julia Roberts and Clive Owen, who make a wonderful pair. I recommend that every Strategic Management student watch this film.

Lessons for Entrepreneurs

Ryan Trainor

1. Articulate and sell your vision and build strong teams with skilled people who offset your weaknesses and excel at implementation.
2. Foster good relationships with your bank, clients, staff and other stakeholders.
3. Create processes and systems to get the best out of employees. People want to be part of a company where they can have input and be recognised for it.

Mario Salva

1. Know your market. Research who your target customers are, what they can afford and how you can deliver your product at a more competitive price than your opposition.

From BRW, Feb 12-18, 2008

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Rolls-Royce: Transforming its Jet-Engine Business Model

The Economist reports how Rolls-Royse figured out a different way to make money in the jet engine business:
The big pay-off from getting engines under more wings comes from selling spares and servicing them. This is because selling aircraft engines is like selling razors. The razor and engine make little if any profit; that comes later, from blades or spare parts and servicing (see chart 3). Gross margins from rebuilding engines are thought to be about 35%; analysts at Credit Suisse, an investment bank, estimate that some makers of jet engines get about seven times as much revenue from servicing and selling spare parts as they do from selling engines. Many analysts suspect that Rolls-Royce (and others) sell engines at a loss. Judging this is hard, though, because of the way Rolls-Royce accounts for long-term contracts, often by booking a profit on the sale for income that will be received only over many years. Rolls-Royce says that, on average, engines are sold at a profit. The trouble with selling razors at a loss is that someone else may make the blades to fit them. And the juicy margins in engine maintenance have indeed attracted a swarm of independent servicing firms (and engine-makers after each other’s business).

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Adrian Finlayson on the Difference of Being a Consultant and Being a CEO

“It’s much harder doing than telling. Things take a lot longer than you initially think, and along the way you have to manage a broad stakeholder base, including your team, investors and the board. A chief executive is a management consultant who has to implement his own recommendations.”

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Dell Needs to Change its Business Model

In SMI we are doing a case study of how Dell developed a market positioning and orgnanizational strategy that allowed it to outcompete all other firms in the PC industry. Dell seemed unstoppable and.  The Economist reports on the current troubles of Dell and how the returned founder of the firm tries to turn the firm around and restore it to glory, i.e. growth and profitability.  Read Story
September 5, 2008 update: Dell plans to sell all its factories

LaudaMotion’s New Business Model for Car Rentals: 1 Euro a day if drive at least 30 kilometers

Laudamotion is gambling that it can charge advertisers rather than rental customers for the cost of renting out small car in a city. If you drive more than 30 kilometers a day in a metropolitan area, you only pay 1 euro. The service is presently available in some major German and Austrian cities. Will LaudaMotion’s novel rental car business model work?

Danger Looming in Different Market Segment: The iPhone Challenge for Blackberry

Blackberry’s dominate the business PDA email market. But Apple’s iPhone initially designed for consumers may invade the business market as well.

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Henry Kravis On Creating Value

Henry Kravis: The thing that is really important as you think about the private equity industry is that it has changed dramatically. In the late nineties we made a lot of mistakes at KKR. I’m not saying it’s good that we made the mistakes, but we did learn from our mistakes, because we changed the way we do business. The first thing we did was to make sure we acted and thought like industrialists. The days of just financial engineering are over. You have to really operate the business. Our whole approach at KKR since 1999 is that our job begins the day we buy a company. I like to say any fool can buy a company. There’s plenty of financing around. But what do you do with a business to create value? We’ve had an in-house consulting firm since the early eighties, but today we have a very large one. These operating consultants put metrics into every business that we’re involved with, they improve productivity, they shorten the supply chain, they improve sales. We expect everyone at KKR to understand their industry from the bottom up, and talk to purchasing managers, marketing people, salespeople, customers, suppliers, and understand the metrics, understand the best practices, the economic drivers, what drives an industry.

Read Full Interview at Columbia Business School .

Has the Macquarie Group found a way to achieve higher returns without increasing risk?

Read the story on Economist.com

CEO of GE Discusses Earnings Miss on TV

Part 1
Part 2

Falling margins in Flat Panel TVs force Philips out of North American Producer Market

As prices decline, profits have been increasingly difficult to achieve. According to iSuppli, the average selling price for a 42-inch L.C.D. television has fallen from $2,082 one year ago to $1,544 today, a 26 percent drop. Depending on the manufacturer, the profit margin for that size set is between 9 and 16 percent.

Full Story at NY Times

Coming Soon Superfast Internet

by Jonathan Leake, Science Editor, Times of London
THE internet could soon be made obsolete. The scientists who pioneered it have now built a lightning-fast replacement capable of downloading entire feature films within seconds. At speeds about 10,000 times faster than a typical broadband connection, “the grid” will be able to send the entire Rolling Stones back catalogue from Britain to Japan in less than two seconds. The latest spin-off from Cern, the particle physics centre that created the web, the grid could also provide the kind of power needed to transmit holographic images; allow instant online gaming with hundreds of thousands of players; and offer high-definition video telephony for the price of a local call. David Britton, professor of physics at Glasgow University and a leading figure in the grid project, believes grid technologies could “revolutionise” society. “With this kind of computing power, future generations will have the ability to collaborate and communicate in ways older people like me cannot even imagine,” he said.

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Book Review Instructions

During the SMY, each student will present a review of a book or an article that has extended their thinking about Strategic Management. The article or book should not be a core management text that most students would be already familiar with. New insights often come from another domain. For this reason we encourage you to look far afield for texts that provide you with some insight into the problems of the general manager or entrepreneur. For example, “It’s Only a Game” by John O’Neill (former CEO of the Australian Rugby Union and Football Federation of Australia) is a good insight into managing a complex organisation. We have posted an example of such a book review on the eLearning website along with some background information on the value of this assignment.

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Conglomerate Watch: Immelt find it tough to follow Jack Welsh’s act

GE’s CEO Jeffrey Immelt finds it difficult to convince markets that his new strategy will deliver value as his predecessor did.
Two articles in the Financial Times highlight how important it is for CEO to communicate effectively to financial analysts whose recommendation drive the stock price of a firm. Here are excerpts from the informative articles.

GE redoubles efforts to woo investors.

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Understanding the Strategies of Airbus and Boeing

Boeing and Airbus are pursuing different strategies with their next generations planes (the superlarge A380 and the supereffecient Boeing 787 Dreamliner). A recent article in the New York Times nicely demonstrates that the differences on the two companies’ strategic bet are driven by two different views how passenger travel will develop in the future. In essence, the firms tried to create strategies that fit with the perceived future environments of airplane travel.

Course Outline

SM1_course-outline_July23_2008.pdf

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