1.I syllabus or class directly on the Discussion

Topics: BusinessAccountability

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Last updated: September 24, 2019

1.

ITimothy (Shao-Yu) Chang have thoroughly read and fully understand the policieson the syllabus. I have asked any questions about the syllabus or classdirectly on the Discussion Board and take full accountability for myself, myknowledge and my work 2.Inone concise paragraph, discuss how this company describes its industry in its10-K’s discussion of “Competition.” Concisely link this to the work of MichaelPorter.The Company is functioning under a relatively competitivemarket due to the following reasons associated with Porter’s 5 forces. First ofall, the competitive rivalry is high due to competitors’ price-cuttingstrategy. Since it’s a competitive market with similar product being produced andthe quality of the product is assured, the lower the price of the product wouldattract more customers to buy.

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The pricing game can maintain a company’s marketshare, but it also suggests that customers are price sensitive with highbargaining power. The frequent product evolution and introduction demonstratesthat beside the pricing game, competitors are also trying to gain market shareby establishing brand recognition. Threat of the new entrants should also beconsidered since the market share looks depleted already with the pricing gameamong competitors, which suggests the barrier to entry is relatively easy inthis case.

Lastly, the threat of substitute products also exists since theconsumer’s switching cost is low. Not only the customers are price elastic, butalso the new technological inventions by the competitors can easily drive thecustomers away from consuming Company’s products and services.  3.Inone concise paragraph, discuss whether the discussion of its “Supply ofComponents” corroborates or alters your assessment of this Company’s descriptionin Question 1 and provide the reason(s) for your choiceInQuestion 1 we defined that the market that the Company in is a competitivemarket. Besides the 4 forces listed in Question 1, the bargaining power ofsupplier can also prove that the market is competitive. First of all, certainkey components are only supported by limited suppliers. For that being said,suppliers possess the bargaining power when selling their product to theCompany since the Company has no other alternative suppliers to buy from.Second of all, even if the Company has entered an agreement with the suppliersto purchase supplies at a favorable and fixed price, we may not guarantee thatthe contract can be renewed or extended.

Lastly, the Company also possess therisk of late shipment of the components that a delay in shipment will damageits finance and operations. To conclude, the Company has no bargaining powertowards its suppliers in a competitive market.  4.Accordingto this company’s description, choose your best guess for this company relativeto its industry.

In a few concise sentences, discuss the motivation for yourchoiceI would guess C, an average-sized and growing firm, for thefollowing reasons. It’s an average size firm because in the Company’sdiscussion of “Competition”, the competitors are collaborating to competeagainst Company’s advanced products, or, moreover, imitates the products’ features.Not only collaborations, some well-funded competitors are also willing to runtheir company at 0 or negative profit margin to bring the price down and gainthe pricing advantage over the Company. The Company is a growing firm becausethey are constantly developing new products that put them in a competitiveposition, or, otherwise, its competitors wouldn’t worry too much about theirmarket share being eaten by the Company.    5.Accordingto this company’s description, which of the following ranges would you expectfor its current (the most recent year’s) Gross Margin and Operating Margin? Ina few concise sentences, discuss the motivation for your choice for both ofthese MarginsGross MarginI would guess F, 25-30%, due to the following comparisonswith Whole Foods and Starbucks.

Both Whole Foods and Starbucks have establishedtheir brand throughout decades by showing their customers that their productsare safe and enjoyable to consume. Whole Foods typically set their price higheron groceries compare to other stores such as Walmart or Target. However, noone’s ever seen a customer complaining about the price because they believethat Whole Foods price their vegetables higher because they are organic andmore expensive to product. Same idea with Starbucks.

Even though we see a lotof coffee shops around the world that set their coffee per cup at a much lowerprice than Starbucks, there’s always a line in front of the Starbucks storewaiting to purchase their product because the brand assures its quality.However, in this case, the Company has no brand established that the customersare indifferent in buying the same product from either the Company or itscompetitors. If Company can’t attract its customer through brand recognition/reputation,then they will have to lower the product price to gain advantage over thecompetitors. This will result in reducing its revenue while COGS remain thesame, so the Gross Margin would be lower than either the Whole Foods orStarbucks.  Operating MarginIn this situation, I would guess B, 2.5-5%, as my answer tothe Company’s operating Margin. In its 10K, we can clearly point out that theturnover rate of a customer sticking with a specific model of a product isextremely high because many new products and services are introduced everyyear.

In order to put the company in a competitive position, the Company wouldhave to have substantial amount of capital invested into their R&Ddepartment for new inventions and developments. In calculating the OperatingMargin, a high R&D expense would lower the margin and that’s why I believethe Company’s Operating Margin won’t be as high as Starbucks or Whole Foods. 6.Accordingto this company’s disclosures and the general idea framework from Porter’sForces (see the article on Canvas if needed), note who holds more of the powerwith respect to its dealings with its suppliers In a few concise sentences,discuss the motivation for your choiceB, thesuppliers would have more power dealing with the supplies sold to the companydue to similar reasons listed in Question 3: there are only few suppliers thatcan provide certain key components that the Company must purchase; thefavorable pricing set in the contract isn’t permanent and the Company isuncertain of its renewability; and the Company’s financial condition is heavilydepended on the price of the component and its shipment time. The supplierspossess the bargaining power. 

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