Chapter 5 Minicase - Mini case PDF

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Competing on Business Models: Google vs. Microsoft · What are Google and Microsoft’s business models? Google & Microsoft: Below is a graphic that describes the flow of products that Google and Microsoft offer their customers. Microsoft could be considered bundling, as you pay for all of the Microsoft apps if you buy the Microsoft Suite package. Instead of paying a premium for each product, you are purchasing them all for a discounted price. Microsoft is also trying to change this by getting into the advertising market with Bing. Google, on the other hand, has a business model very similar to a freemium model. You can search Google for free anytime you want or use google sheets, slides, and documents. However, these products, as well as some of their search options, entice you to buy some of their other new, tech products. Google also charges advertisers to place advertising on their website.

· How is strategy different from a business model? Strategy is a set of goals on which a company will set measurable performance standards, while a business model is the process in which a business will generate profits. · How is strategy similar to a business model? They are similar in the sense that both will be obtained by a set of relatively similar goals, and both will be constantly changing and developing.

· Create a balanced scorecard for the Beacom School of Business School focusing on the below aspects: Customer, innovation/learning, internal business, financial • Questions to ask within your group: – How do customers view us? – How do we create value? – What core competencies do we need? – How do shareholders view us?

Assessing Competitive Advantage: Apple vs. Blackberry · Calculate some of the following ratios with the information provided in the case for 2012:   ROIC ROA ROE (be sure to subtract total liabilities from shareholders’ equity) Payable Turnover CurrentBook Value per Share Apple

Blackberry

ROIC

35.0%

14.1%

ROA

23.7%

8.47%

ROE

35.3%

11.5%

Payable Turnover

7.4

24.8

Current

1.50

2.09

Book Value per Share

125.89

4.13

**Be sure to explain the importance of each ratio (for example, gross margin helps us understand how profitable a firm is by measuring the relationship between a firm’s sales and the costs associated with those sales such as advertising). ROIC - Measures how effectively the company is using capital invested in its operations. This helps us to understand the return on the capital we will invest or that the company will borrow. Generally, the higher the better. ROA-Measures the firm's efficiency in using assets to generate earnings. It is also an indicator of how profitable a firm is relative to the total assets that they have. ROE-Measures earnings to owners as measured by net assets. ROE is important to measure, as you want to make sure the firm is using equity efficiently to generate earnings. Generally, the higher the ROE, the better the company is performing. Payable Turnover - Measures the rate at which the firm is paying its suppliers. This is important because we want to make sure our company is paying suppliers quickly when generating revenue.

Current - This measures short term liquidity. This is important because we want to make sure the firm is able to pay short term liabilities and debts which having to sell hard assets. Book Value Per Share - This number is the minimum value of a company’s equity. The formula is the common stock divided by the number of outstanding shares. This is important to a company because they want to make sure the stock is selling for more than its book value. (A value greater than 1)

· Can you find signs of performance differentials between these two firms that may have indicated problems at BlackBerry? The first glaring difference between these firms are the return ratios. In 2012 Apple had a Net Income that was much better than Blackberry $41,733 to $1,164 respectively. Apple was just flat out more profitable, which really gave Apple the leg up on Blackberry for these ratios. Blackberry was able to have a superior Payable Turnover Ratio, but this is likely because they weren’t able to have much for Accounts Payable mainly because nobody wanted to help finance them. If a firm like Blackberry is looking like it is failing, people will steer away from doing business with them in fears that Blackberry will go out of business and not be able to pay their debt. Since Blackberry had such low liabilities, some of these ratios make them look pretty good. That’s why so many measurements are necessary to properly analyze a firm....