Tiles Competitor Analysis - 955 Words

Competitor’s Analysis The following materials are widely and commonly used as flooring and furnishing supplies. These products are considered as direct competitors of Bamboo Tiles. Wood – Solid wood or engineered planks. Advantages | Disadvantages | * Beautiful, warm and soft on the feet * Fairly durable * Long lasting of properly sealed and maintained * many wood types and hues to choose from | * Susceptible to water damage * darkens with age * price range: expensive to very expensive | Pros – Beautiful, warm, soft on the feet, fairly durable, long-lasting if properly sealed and maintained, can be refinished, many wood types and hues to choose from, can be painted or stained for more color options, helps†¦show more content†¦Cons – Cannot be refinished if damaged. Some can be expensive – as much as wood. Tip - Material must acclimate for 48 hours before installation. Vinyl Flooring Advantages | Disadvantages | * Inexpensive * durable, * easy on the feet * water and stain resistant * low maintenance | * Prone to dents and tears. * Moisture can get into seams leading to mildew and lifting. * Glossy finishes are slippery when wetcan dull easily unless waxed regularly. | Pros – Inexpensive, durable, easy on the feet, quiet, water and stain resistant, and low maintenance. Its easy to install – especially tiles. 12 foot wide sheets means seamless floors in small rooms. You can create patterns with tiles. Cons – Prone to dents and tears. Moisture can get into seams leading to mildew and lifting. and can dull easily unless waxed regularly. Carpet Advantages | Disadvantages | * Warm * easy on the feet * lots of colors and styles to choose from * slip-resistant * Price range: Affordable | * Appropriate only more dry climates * Collects dirt and moisture – which can turn into mildew * not a good choice for people with dust allergies * Its hard to clean | Pros – Warm, easy on the feet, quiet, lots of colors and styles to choose from,Show MoreRelatedClassic Ceramic - Swot Analysis Essay example931 Words   |  4 PagesQuestion: Carry out a SWOT analysis on behalf of the company. Consider the current situation in terms of the strengths and weaknesses of Classic Ceramics, together with the major threats to the business and the opportunities that exist to develop their current product lines or exploit new business opportunities. You should summarize the conclusions arising out of the SWOT analysis in no more than 250 words to ensure that you focus upon the key issues. 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Economic Value Added Free Essays

EVA is a way of measuring a firm’s profitability. EVA is NOPAT minus a charge for all capital invested in the business (Byrne 1). A more intuitive way to think of EVA is as the difference between a firms NOPAT and its total cost of capital (Kramer Pushner 40). We will write a custom essay sample on Economic Value Added or any similar topic only for you Order Now Stern Staurt’s numerical definition of EVA is calculated for any year by multiplying a firm’s economic book value of capital  © at the beginning of the year by the spread between its return on capital  ® and its cost of capital (K): EVA=(Rt-Kt)*Ct-1 (Kramer Pushner 41). EVA is a notion of residual income (Ehrbar Xi). Investors demand a rate of return proportional to the amount of risk incurred. Operating profits determine residual income by plotting them against the required rate of return, a product of both debt and equity. EVA takes into account all capital invested. Peter Druker says in his Harvard Business Review article, â€Å"EVA is based on something we have known for a long time: What we call profits, the money left to service equity, is not profit at all. Until a business returns a profit that is greater than its cost of capital, it operates at a loss. Never mind that it pays taxes if it had a genuine profit. The enterprise still returns less to the economy than it devours in resources†¦. Until then it does not create wealth but destroys it† (Ehrbar 2). EVA is a measure of wealth creation or destruction after all costs are capitalized. Companies use EVA as a measure of corporate performance, as an incentive system and as a link between shareholder and management/employee goals. Stock price indicates investor’s certainty concerning current and future earnings potential. EVA is a static measure of corporate performance; MVA is a dynamic, forward looking market performance measure. MVA is a market generated number calculated by subtracting the Capital invested in a firm  © from the sum (V) of the total market value of the firm’s equity and book value of debt: MVA=Vt-Ct† (Kramer Pushner 42). Al Ehrbar describes MVA as exactly equivalent to the stock market’s estimate of the NPV of a company. In 1998 CSX Corperation introduced EVA criteria to the fast growing but low margin CSX Intermodal business, where trains deliver freight to waiting trucks or cargo ships. Large amounts of capital are required to power a mammoth fleet of locomotive, containers and railcars. Figuring in capital costs, CSX Intermodal lost $70 million in 1988. â€Å"The CEO issued an ultimatum, et EVA up or be sold† (Fortune, 39). CSX Intermodal freight volume increased by 25%, yet they dramatically reduced their capital cost by reducing the number of container and trailers by 22%, reducing their locomotive fleet by 33%, and reducing fuel costs. EVA in 1992 was $10 million dollars, and was expected to triple the following year. Wall Street responded: CSX stock price rose from $28 before EVA to a 1993 price of $75. CSX concluded that investors care more about their net cash return on capital than accounting figures such as EPS, ROE and ROA. Companies that adopt EVA as a performance measure found tie-in compensation plans very useful in aligning management behavior and shareholder needs. Typical plans consist of two familiar parts, a bonus and stock incentives, applied in new ways (Fortune 50). Bonus targets are established by a percent increase in EVA and recalculated each year by averaging the prior year’s goal and the prior year’s result. Bonus have no limits, but the manager incurs operating risk because some of the bonus is put in a â€Å"bank,† say, for five years. If over the next five years management performs poorly, and EVA drops, the â€Å"bank† account is depleted. Management incurs the risks and benefits just as owners do. Joel Stern notes that in cases without an EVA incentive plan, employees suffer from a common problem. On average their fixed pay, salaries and pension, are too high, and their variable pay, profit sharing and share options, are to low (Ehbar XIX). Stern adds that size, not value, drives employees in typical incentive programs because size is positively correlated with increases in fixed pay and closely thereafter, variable pay, even if it destroys shareholder wealth. EVA protects shareholder interests by depositing variable pay into a deferred account that can be lost if value is eroded. EVA, as a corporate measure and a predictive tool, generates mixed reviews in the business and academic worlds. ATT’s Jim Meen says, â€Å"The correlation between MVA and EVA is very high. So when your driving your business toward EVA, your really driving the correlation with market value† (Kramer Pushner, 43). Stern Stewart finds an R squared value of 60% based on 20 groupings of firms (Kramer Pushner, 41). Contenders site statistical evidence to the contrary. BCG-Holt calculates an R square, after removing 21 outliers, of 27%. Dodd and Chen report that EVA accounts for only 20. 2% of the variation in stock returns for a sample of 500 companies, while ROA explains 24. 5% of market returns (Kramer Pushner, 43). In their paper â€Å"An Empirical Analysis of Economic Value Added as a Proxy for Market Value Added,† Kramer and Pushner test the hypothesis that EVA is highly correlated with MVA. Simple regression analysis is used to test this hypothesis and other market determinants of market value such as NOPAT. First Kramer and Pushner test the relationship between the level of MVA and the level of EVA using the SS1000. In all cases the level of MVA positively relates to both NOPAT and EVA in the same and prior periods. However, in all cases, NOPAT explains more of the total variation in MVA than EVA† (O’Byrne Stewart 44). This suggests that the level of NOPAT is not only a better proxy but also a better predictor of corporate performance than the level of EVA. Results for weighted least squares, change in MVA and variations are described graphically in appendix 1. Kramer and Pushner conclude that there is no clear evidence that EVA is the best measure of corporate success in adding value to shareholder investments (Kramer and Pushner, 47). Stephen F. O’Byrne and Stern Stewart and Co. tested a similar hypothesis. Their objective is to show that EVA provides a theoretical and practical measure of operating performance. O’Byrne and Stewart substantiate the explanatory power of EVA relative to earnings because, unlike previous studies, they recognize two important characteristics: Multiples of positive EVA are significantly higher than multiples of negative EVA, which implies that companies with negative EVAs have values that are higher than what would be expected if the market valued EVA at the same multiple. Multiples of capital tend to decline with company size, which suggest that the market assigns higher multiples to a given level of EVA for smaller companies. Stewart, 117). O’Byrne and Stewart suggest at first glance that earnings and EVA have about the same level of success in explaining market value. The variance explained ranges around 32%. Taking into account the two characteristics listed above, the explanatory power of their model increases to 42%. Five-year changes in EVA explain 55% of the variation in market value, and ten-year changes in EVA explain 74% of the variation in ten-year changes. The NOPAT model has 15%-20% less explanatory power. The results of O’Byrne and Stewart research appear in appendix 2. They conclude that because EVA is systematically linked to market value, it proves to be a better predictor of market value than other performance measures. Proponents of EVA also argue that GAAP standards distort true economic reality, produce unreliable corporate standards and serve as an unproductive compensation system. Harvard business school professor Baruch Lev states that; â€Å"Overall, the fragile association between accounting data and capital market’s values suggest that usefulness of financial reports is rather limited† (Ehrbar, 161). Some differences in GAAP and economic reality stem from a bias toward conservative estimates, compounded by SEC requirements driving conservative financial policies. The principal divergence is GAAP’s treatment of equity. The cost of equity should be capitalized. The cost of borrowed capital shows up in a companies interest expense. â€Å"But the cost of equity capital, which the shareholders have contributed, typically appears nowhere in any financial statement-and equity is extraordinarily expensive† (Fortune, 38). Ehrbar contends that GAAP distorts economic reality in areas such as RD, strategic management, expense recognition, depreciation, restructuring charges, taxes and balance sheet adjustments (64). RD under GAAP standards require Corporations to immediately expense RD in the period in which they occur, where as managers and investors see RD as an investment. GAAP’s treatment of RD reduces book value by writing down the asset to $0; EVA would capitalize RD and amortize it over a period of time. Lastly, GAAP incentives can be ineffective motivators. For example, a retiring officer’s pension plan is linked to earnings. During their last year they might skimp on RD to boost earnings because their pension plan is tied to performance. Operating earnings often serve as the benchmark for management compensation. Management has the incentive to negotiate a target that is easy to beat. Managers aim low, insuring their bonus. Trade loading is a second example of how GAAP can affect management decisions concerning bonuses and owner interests. EVA as a measure of financial performance is positively related MVA, but depending on the methodology, the result vary. Kramer and Pushner used simple univariate regressions to compare EVA with other measures explaining EVA. Their results were mixed, NOPAT’s explanatory power in Ordinary Least Squares Regressions outperformed EVA by 9%, however when weighted, EVA’s explanatory power was higher overall and surpassed NOPAT by 6%. Kramer and Pushner note that the market focuses on profits rather than EVA. Investors rely on earnings estimates that are consistently calculated within the industry. This is not the case for FCF or EVA. Lastly, Kramer and Pushner observe, â€Å"investors certainly need to be aware of capital structure, they should already by familiar with the opportunity cost of their investment and may not need to incorporate this into the measure of performance† (Kramer and Pushner 47). Investors may be familiar with the opportunity cost of their investments, although EVA analysis can illuminate problems, such as those created by GAAP accounting, that may not be recognized otherwise. Stephen O’Byrne and Stern Stewarts calculation required the recognition of two important characteristics that drastically changed the explanatory power of EVA. They note that simple a simple regression model, similar to the one used by Kramer and Pushner, depresses the predictive power of EVA and inflates the predictive power of earnings (Stewart 120). EVA with industry coefficients explains and impressive â€Å"56% of the variation in actual market/capital ratios† (Stewart 121). It also produces notable results for changes in EVA and market value over time. Far better results than NOPAT. My results using a simple linear regression model parallels Kramer and Pushner’s results. EVA in 1997 has the highest R square factor, at 33%, but is far from the results calculated by Stewart. EVA’s R squared increased dramatically since 1992. This is consistent with the economic trend of the 90’s, so the increase may not necessarily reflect an increase in EVA due to internal factors, but an external factor, such as the greatest economic expansion in recorded history. All four factors consistently increase from 1992 to 1997. EVA could be a valuable tool if it is tailored to the company and industry. This requires an understanding and adjustment for different EVA multiples for positive and negative EVA and different capital multiples for different size companies. This requires complex calculations, a regularly cited problem. However, in this context EVA lives up to its reputation as a great measure of corporate performance. Other functions, such as aligning employee and shareholder goals, the basis for an incentive system and a more realistic picture of economic reality, makes EVA more attractive. I would recommend using Stern Stewart model to calculate EVA. How to cite Economic Value Added, Essay examples

Equal Exchange Trading Fairly and Making A Profit †Free Sample Assig

Questions: 1. Explain the competitive pressures facing the fair trade food and beverage products industry. What does a five-forces analysis reveal about the nature and strength of the competitive pressures facing Equal Exchange? Which of the five forces is the strongest? Why? Which of the five forces is weakest? Why? 2. What is your ASSESSMENT of Equal Exchanges financial performance and condition? Is the company in good financial shape? Why or why not? 3. What specific actions would you recommend to Equal Exchanges executive directors, workerowners, and board of directors concerning the companys future direction? Answers: 1. In case of fair trade food and beverage product industry, the companies provide wide range of green, organic and wholesome food products. Though there exist free trade policies, the small firms face a huge competition from the large suppliers of food and beverage product industries. The five forces are- a. Rivalry among the competing sellers: - There are great rivalries among the competing sellers and there are bigger numbers of companies, which are involved in the industry. b. New entrants:- There is strong brand recognition and the customer loyalty, which is build by the industry incumbents. The existence of the little restrictive government policies and effective distribution channel encourage the new entrants the market. c. Substitutes: - The large number of available substitutes that are available in the U.S. market at reasonable prices, which create the new preferences for the customers. d. Buyers:- There is rising awareness for the free trade policies among the buyers and the buyers have the bargaining policy. e. Suppliers: - As, the fair trade companies are the best customers of farmers, the bargaining power of small suppliers is not strong. Therefore, they face high level of competition. Among them the competition and the exploitation of the farmers is the most strongest among the progress, as in U.S. market despite of free trade policy, there is exploitation of the small farmers by the large farmers. However, among them the weakest is the buyers i.e. the lack of awareness among the buyers about the products ('Envirogen Moves Into North American Food And Beverage Processor Market' 2015). 2. In this case, the equal exchange has done a good job to nullify the external threats and has prepared well for capturing the opportunities with fair trade and workers co-operative model. As in seen in the table- 4.1, according to the equal exchanges income statement 2006-2010, it can be seen that the total cost has declined from 2006 to 2008, whereas the total revenue has increased from 2006-2008(Lovett, Eckes and Brinkman 2015). 3. The following actions may be recommended:- The industry should offer attractive opportunity for growth. To aware the customers more about the fair trade policies the company should take initiatives. The current franchising policy in dispersed locations should be improved. Strategic alliances with fellow competitors should be formed. Marketing communication channel should be strengthen. References 'Envirogen Moves Into North American Food And Beverage Processor Market'. 2015.Filtration Industry Analyst2015 (6): 3-4. doi:10.1016/s1365-6937(15)30171-4. Lovett, William A, Jr Eckes, and Richard L Brinkman. 2015.U.S. Trade Policy. Hoboken: Taylor and Francis.