Fortune’s Top 10 US Firms

1. Fortune’s Top 10 US Firms This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, 2004.

2. Persistently Superior Profitability • What accounts for success? • Do all well-managed firms earn superior profit? • What can managers do to get superior profit? • Can managers enhance profitability by diversification? • Do all firms eventually drop back to the pack? This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, 2004.

3. The Economics of Strategy: Creating & Capturing Value • Wall Mart • Most profitable retailer in the world • 1962: First store opens • 1993 q2 – 1997: stock value dropped • 1999: $165 billion in sales • Responses to problems in mid 1990’s • New international super-centers • E-commerce sites • Experimented with traditional sized grocery stores in Arkansas • By 1998 the stock was performing well again This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, 2004.

4. Strategy • Strategy: • Management definition • Economics definition • Profitability • Create Value • Capture Value This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, 2004.

5. Creating Value: Transactions Costs Price in $ Supply P* Demand Quantity Q* This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, 2004.

6. Other Ways to Create Value • Product Quality • Pricing Complements • Pricing Substitutes This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, 2004.

7. Capturing Value • Long Run Profitability in Competitive Markets • Economic Profit • Accounting Profit • Firms with Market power • With barriers to entry • Without barriers to entry This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, 2004.

8. Capturing Value • Barriers to entry • Degree of rivalry • Threat of substitutes • Buyer and Supplier Power This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, 2004.

9. Capturing Value: What works? • Superior Factors of Production • Some advantages are hard to copy This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, 2004.

10. All good things come to an end This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, 2004.

11. Diversification • What is it? • Costs of Diversification • Benefits of Diversification • Stuff that won’t maximize profits This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, 2004.

12. Discussion Question • 8-4: The Watts Brewing Company owns a valuable water rights that allow it to produce better beer than competitors. The company sells its beer at a premium and reports a large profit each year. Is this firm necessarily making economic profit? This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, 2004.

13. Discussion Question • 8-5: Sun Resorts has a hotel on a Caribbean Island. It recently spent money to lobby the government to build a better airport and expand air service. Why did they do this? Do you think Sun Resorts cares about how many airlines serve the island? This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, 2004.

14. Discussion Question • 8-6: Evaluate the following statement: “Business is war, never consort with the enemy.” This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, 2004.

15. Discussion Question • 8-8: One CEO justified the merger of his soft-drink company with a machine tool company in the following manner: “This is a great merger. First the products are unrelated. Thus our company’s earnings volatility is likely to decrease. Second, our management team has proven that we are better managers than the former management of the tool company.” Evaluate this rationale. This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, 2004.

16. Discussion Question • 8-9: Pepsi produces Fritos and Lays potato chips in addition to it basic soft-drink products. Discuss potential ways this business combination might increase value. This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, 2004.

17. Discussion Question • Sun Resorts has a hotel on a Caribbean Island. It recently spent money to lobby the government to build a better airport and expand air service. Why did they do this? Do you think that Sun Resorts cares about how many airlines serve the island? This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, 2004.