Showing papers on "Profitability index published in 1970"

Education in Production

Abstract: There have been several studies of the demand for education as an investment good1 which generally take input and product prices as given and concentrate on computing (internal) rates of return to investment in schooling. Although these estimates usually indicate returns that are high by most standards, there is considerable variation, both through time and space, which points to the need for a clearer understanding of the underlying factors affecting profitability of investment in people. For such an analysis, education must be viewed not only as an investment but also as a factor of production. In this paper, I consider the question: Why has the incentive been maintained for a relative expansion in the supply of skilled labor in the United States? Three alternative explanations are considered, and one is pursued with an empirical analysis of factors determining relative wages among skill classes in agriculture. As we would expect for any factor of production, the evidence suggests that the return to education is affected by factor ratios, but ratios do not tell the whole story. In agriculture, much of the "leverage" distinguishing college graduates from less schooled persons has its roots in technical change as reflected in the level of research activity. Thus the incentive for acquiring a college education is based on dynamical considerations of changing technology; and if technology becomes stagnant, this incentive is reduced and may disappear. Convincing evidence of the maintained incentive for acquiring schooling is found in Gary Becker's (1964) estimates of private rates of return which are reproduced in table 1. When these rates of return are compared to the

Survey of capital budgeting: theory and practice

Abstract: THERE EXISTS A WIDE DISPARITY between the theory and practice of capital budgeting. During the past fifteen years, the theory of capital budgeting has been characterized by the increased application of such analytical techniques as utility analysis, mathematical programming, probability and statistical theory. The practice of capital budgeting has no doubt changed at the same time, but business executives do not appear to have adopted many of the new techniques. The purpose of this paper is to compare current theory with practice: (1) to discuss the nature of the gap and the reason for its existence, and (2) to try to lessen this disparity by suggesting ways of modifying theory to make it more operationally meaningful. To aid discussion, this paper is divided into four sections: objective of financial management, risk analysis in investment decisions, profitability criteria for investment selection, and conclusions. It is difficult, if not impossible, to characterize the current theory of capital budgeting in a few words. By current theory, I shall mean the type of work on capital budgeting that appears in journals such as Management Science, Journal of Finance, Journal of Financial and Quantitative Analysis, and Engineering Economist. These theories generally make use of modern quantitative tools. By current practice, I shall present the findings of case studies I conducted during the summer of 1969. In all, I interviewed eight medium and large companies in the following industries: electronics, aerospace, petroleum, household equipment, and office equipment.' I held full-day discussions in each company interviewed. Because of the small sample I do not wish to put forward any statistical generalizations about current practice. However, since the companies studied were chosen for the efficiency of their management, they do give a preliminary view of current capital budgeting practices in firms with progressive management.

Random walks and technical theories: some additional evidence

Abstract: THE RANDOM WALK and martingale efficient market theories of security price behavior imply that stock market trading rules based solely on the past price series cannot earn profits greater than those generated by a simple buy-and-hold policy1. A vast amount of statistical testing of the behavior of security prices indicates very little evidence of any important dependencies in security price changes through time.2 Technical analysts or chartists, however, have insisted that this evidence does not imply their methods are invalid and have argued that the dependencies upon which their rules are based are much too subtle to be captured by simple statistical tests. In an effort to meet these criticisms Alexander (1961, 1964) and later Fama and Blume (1966) have examined the profitability of various "filter" trading rules based only on the past price series which purportedly capture the essential characteristics of many technical theories. These studies indicate the "filter" rules do not yield profits net of transactions costs which are higher than those earned by a simple buy-andhold strategy. Similarly, James (1968) and Van Horne and Parker (1967) have found that various trading rules based upon moving averages of past prices do not yield profits greater than those of a buy-and-hold policy.

The Joint Venture Process in International Business: India and Pakistan

Abstract: Trade between developed countries has so accelerated in recent decades that it tends to obscure the less obvious returns but considerable potential of business opportunities in the developing nations. To the businessman thinking of investing in an underdeveloped market the whole issue is fraught with uncertainties, of which the structuring of investment and choice of partners are perhaps the most important and perplexing.With this book, J. W. C. Tomlinson, Senior Lecturer in International Business at the Manchester Business School, Manchester, England, paves the first steps in the path of such businessmen, especially those interested in investment in India or Pakistan. He sets up a framework for a model of the decisions and dimensions involved in establishing and operating joint ventures in international business.The author bases his study on evidence collected from top executives of 50 British firms with investments in India and Pakistan. Some of his conclusions may be surprising. He finds, for instance, that the profitability of joint ventures seems to be inversely related to the size of the foreign parent company and to the latter's predilection for control over a joint operation. He also finds that the apparently attractive compromise of 50-50 joint ventures usually turns out to be a snare and a delusion. In general, given more effective search procedures, there are more potential local associates for joint ventures in less-developed countries than the literature suggests. Most significantly, host government partners are rarely a hindrance and often the most compatible associates for a foreign investor.It appears that the decision to go into a joint venture, the selection of partners and the manner in which it is set up are only partially determined, if at all, by considerations of bilateral monopolistic advantage. Initiation, promotion and development of new ventures tends to be the responsibility of individuals or special interest groups.Hitherto, the area of joint operations in international business has only been examined descriptively. Here is a study which analyzes the subject rigorously and in depth, providing detailed information of the results of a type of operation which is likely to become increasingly significant.

The value of information and stochastic programming

Abstract: The problem of planning under uncertainty has many aspects; in this paper we consider the aspect that has to do with evaluating the state of information. We address ourselves to the question of how much better (i.e., how much more profitable) we could expect our plans to be if somehow we could know at planning time what the outcomes of the uncertain events will turn out to be. This expected increase in profitability is the “expected value of perfect information” and represents an upper bound to the amount of money that it would be worthwhile to spend in any survey or other investigation designed to provide that information beforehand. In many cases, the amount of calculation to compute an exact value is prohibitive. However, we derive bounds (estimates) for the value. Moreover, in the case of operations planning by linear or convex programming, we show how to evaluate these bounds as part of a post-optimal analysis.

The Profitability of Corporate Mergers

Abstract: Notwithstanding the widespread interest in the profitability of mergers, very little evidence on the success of corporate mergers has been offered.' Furthermore, what evidence has been presented has generally been conflicting. For example, of two recent studies, one concluded that actively merging firms were noticeably unprofitable2 and the other suggested that active acquirers were neither more nor less profitable than other other comparable firms in their industry.3 These conflicting findings have historical precedent. At least three authors studied the profitability of firms which were actively involved in the merger movement occurring at the turn of the century. Of these three, one found that such firms were singularly unprofitable after consolidation,4 another concluded that approximately one half of the combinations formed eventually achieved success,5 and the third found that the common stock of some consolidations yielded a return no better than that obtained from ordinary preferred stocks and bonds.6 This study attempts to pinpoint some of the sources of these conflicting findings by comparing the investment performance7 and earnings per share growth of active acquirers to that of their respective industries.

Managing for Value: Developing a Performance Measurement System Integrating Economic Value Added and the Balanced Scorecard in Strategic Planning

Abstract: Economic value added (EVA) systems and the balanced scorecard (BSC) have generated a tremendous interest in corporate America recently as approaches to performance management. Implementation of these methodologies has not proven to be easy. This paper introduces the analytical hierarchy process and shows how this methodology addresses the limitations ore VA and BSC by integrating them into one comprehensive system. A case study is used to illustrate this methodology. Introduction Managing for value has become the mantra of today's executives as the reality of today's competitive environments force businesses to focus on improving profitability. Firms, both large and small, are implementing value-based measures using measures such as Economic Value Added (EVA). All too often, however, these initiatives are interpreted merely as an advance in metrics and measurement and not a tool for strategy development. This narrow interpretation and use suggests little fundamental change in the behavior of the many people responsible for the decisions and actions that create long-term value and has brought only mediocre results to some firms. To improve the implementation of value based management (VBM), firms need to move beyond narrow metrics to the utilization of EVA as a strategic decision tool. It must be linked to broad process reforms including the identification of value drivers, the integration of budgeting with strategic planning, and development of a comprehensive performance measurement system. This is the objective of our paper. We focus on the development of a complementary system of managerial metrics linking the EVA system to the Balanced Scorecard (BSC) using analytical hierarchy processing (AHP). The importance of managing for value is discussed and potential limitations identified. The Balanced Scorecard as a vehicle for identifying value drivers and drilling down into the operations of the firm is presented. Then, these two complementary frameworks are combined, using the AHP methodology, to develop a comprehensive measurement system for assessing the overall performance of the organization. A case study is used to illustrate this methodology. Economic Value Added A paramount objective of management should be the creation of value for the firm. Thus, it is essential in strategic planning to manage the firm's resources with an objective of increasing the firm's market value (Hawawini and Viallet 2002: Eccles and Pyburn 1992). From an EVA perspective, the ultimate success of a firm is not measured only by its capacity to grow its sales, produce profits, or generate cash from its operations, but whether the firm's activities are creating value for its owners (Ehrbar 1998). According to economic theory, a firm is creating value if the net present value of all its investments is positive. Quite simply, EVA is a measure that enables managers to see whether they are earning an appropriate return on the capital under their control. It is a measure of profit less the cost of capital employed (EVA calculations are provided in Exhibit 1) and is the one measure that properly accounts for all the complex trade-offs, often between the income statement and balance sheet, in creating value (Pettit 2000). The EVA metric is not only a measure of financial performance but should serve as the centerpiece of a strategy development and implementation process. Putting value based management into practice, however, has been found to be more complicated than some of its proponents suggest. Haspeslagh, Nada and Boulos (2001) found a number of characteristics associated with the successful implementation of value based management (VBM). Successful VBM companies keep the technical accounting aspects of EVA simple, making very few changes to their accounting practices. They invest time and effort in identifying and assessing the operational factors, or value drivers, that have the greatest influence on the creation of economic profit. …

Alternative Measures of Performance For E-Companies: A Comparison of Approaches

Abstract: Understanding firm performance is as important in the new economy as it was in the old one It seems difficult, however, to make a judgment about which measures of performance are good predictors of future success for e-companies This paper contrasts indicators of asset productivity, shareholder value, growth, survival, and cyberspace usage, exploring how these different indicators reflect performance for a sample of e-companies, and compares them with a sample of brick-and-mortars competing in the same industries Results suggest that multiple indicators are more necessary than ever to capture the variability of outcomes in the Internet economy Introduction One of strategic management's main challenges as a field has been the conceptualization and measurement of firm performance (Barney 1997; Venkatraman & Ramanujam 1986) Several authors have highlighted the importance of firm performance for the field of strategy (Day, Farley & Wind 1990; Prahalad & Hamel 1994; Rumelt, Schendel & Teece 1994) and have also pointed out the inadequacy of most indicators to capture its complexities (Jacobson 1987; March & Sutton 1998; Venkatraman & Grant 1986) Now, the transformation of business models accompanying the new economy seems to be making it even more challenging to find indicators that can help managers and researchers predict a firm's future success based on its current operations The e-commerce environment seems to complicate the measurement of firm performance and, at the same time, seems to offer new opportunities for developing new performance indicators On one hand, the emphasis on information-based operations and on the use and exploitation of intangible assets that characterize the new economy suggests that e-companies performance cannot be measured with traditional accounting or assets productivity indicators such as ROA and ROE Also, the condition of "newness" of these firms precludes the use of profitability ratios to assess their future potential of success On the other hand, this same emphasis on interactive information and the access it provides to direct customer data has created opportunities for the development of new performance indicators, such as accessibility, web presence, and usefulness Understanding, explaining and predicting firm performance is, nevertheless, as important in the new economy as it was in the old one Why do firms perform differently? What are valid and useful measures of firm performance? What indicators allow us to predict when an operation is on the right track, and when it is not? How can we distinguish a strong industry performer from a weak one? Questions such as these are still fundamental, especially if we want to develop theories that are useful and that offer effective recommendations for managers When discussing performance of e-commerce firms, some of the prevailing arguments do not seem to offer very useful answers to these questions We frequently find a position of skepticism about the future of Internet-based firms, more now that the optimism and enthusiasm characteristic of the e-commerce initial boom (Fox 1999) have turned into widespread pessimism (Chen & Linsday 2000; Kedrosky 2000) as many companies have been unable to survive the inevitable shakeout (Choi & Whinston 1998; LeDuff 2000; Useem 2000) If we take this position, the answer to the question will be not to bother studying and analyzing these companies since most of the "no-profit" companies are going to die anyway Another stance regarding e-companies performance is to argue that not enough time has passed yet in order to be able to understand and predict what is going on; that it is better to wait before attempting to value the performance of firms in the e-commerce world (Warren Buffett, as cited by de Figueiredo 2000) This position seems to assume that, with time, it will be possible to develop performance measures for e-companies and to value their results …

Overhead Allocation via Mathematical Programming Models

Abstract: : In the paper the authors have devised methods for allocating overhead charges on the basis of mathematical programming models of the firm's production and sales possibilities. The basic scheme was to charge products on the basis of their utilization of the scarce resources of the firm. The prices for use of these resources were obtained from the dual variables associated with the constraints of profit-maximizing programming models. Special attention was given to traceable and avoidable overhead and overhead subsidies that arise because of sales and production interdependencies or managerial constraints. The objective, in all of these procedures, has been to devise a method for allocating overhead that does not distort the relative profitability of products so that managers would make identical product related decisions both before and after the overhead allocation. As such, the method captures a principal benefit of direct costing analysis while significantly extending this benefit to recognize scarce resource utilization and interaction with other products in reporting profitability. At the same time, the method avoids a difficulty of direct costing systems in that it is a full costing system with all overhead being allocated to products. Also the availability of the original programming model (before any overhead allocations) facilitates marginal analysis for short term product related decisions and expansion of scarce resources. (Author)

A model of the Soviet firm

Abstract: The Liberman reforms of 1962 modify the above model somewhat, though they do not change it in any fundamental way. The problem of systematic misinformation is attacked by opting for a bonus based not on profit achieved but rather, on an average of the profit achieved and the planned profit. Thus there is an incentive to divulge more information, but the awareness (on the part of managers) that higher performance will affect bonus norms is not removed. Also, because it is profits that determine bonuses, a firm now has an incentive to reduce costs — if it keeps its output constant (and thus the output norm constant) it can still get a higher bonus by reducing costs and hence increasing profits. But, clearly, this too fails; we have merely added another dimension to the conflict. Managers will soon recognize that not only output norms but also profitability norms are sensitive to achieved output and profit. Thus the Liberman reforms, though implicitly recognizing the problems involved, do not introduce the structural changes needed to remove the conflict.

A Simulation Approach to Risk Assessment in Investment Analysis

Abstract: A simulation technique is advanced as a means of determining the probability of achieving various possible financial outcomes when assessing alternative investments. To this end a model is constructed and applied to a proposed investment in pasture improvement. Results are contrasted with a deterministic budget approach. The model uses triangular distributions to derive probabilistic estimates for the stochastic events considered. Possible fields of application of interest to agricultural economists are discussed.

A Capability-Driven Turnaround Strategy For The Current Economic Environment

Abstract: Many Businesses were prompted to reevaluate their products and services as a result of the recent economic downturn. Changes were made to their business models to realign capabilities and performance in some cases. Businesses need to provide better products and faster services while faced with more discerning customers, emerging markets, and dynamic regulatory environments. In a turnaround situation, businesses need to reinvent strategies and position themselves to meet short-term goals, while functioning in a competitive landscape for the long-term. The capability-driven model leverages core business and operating capabilities to optimize the entire value chain; innovation and Corporate Social Responsibilities are integrated carefully for long-term sustainability. The proposed framework is based on careful studies of companies that returned to profitability from a failing situation. Introduction Businesses evolve all the time. However, the recent economic downturn (Survey of Current Business, 2009, 2010; IMF Sees Major Slowdown for Global Economy, Calls for Strong and Coordinated Policies to Support a Turnaround. October, 2008) accelerated this market dynamic and many businesses found themselves floundering for survival. Changes in customer behavior (Annual Retail Trade Report, 2008, 2009, 2010) and competitive pressures, along with blind spots that companies develop over time (dwindling profitability) stagnates revenue growth and loss of market capitalization (Consumer Trend Data, 2009-1010; Annual Retail Trade Report, 2008, 2009, 2010; and All Times Bankruptcy, P1995-2010). Companies once regarded highly in terms of shareholder value and market share fail to recognize changing market conditions; these firms need a strategy for turnaround. Several studies suggest numerous factors influencing turnaround including managerial changes, improvement in financial instruments, and tactical changes such as operational efficiency and competitive improvement (Barker & Duhaime, 1997; Moulton, Thomas & Pruett, 1996). These studies examine declining firms in the context of decline sources and organizations' responses to the decline (Barker & Duhaime, 1997; Moulton, Thomas & Pruett, 1996; Castrogiovanni & Burton, 2000). It is argued that turnaround strategies are not applicable to all firms because most retrenchment activities are a consequence of decline and not a necessity to achieve turnaround (Barker & Mone, 1994). Typical retrenchment activities are cost reduction and fixed asset reduction. The influence of typical retrenchment strategies in turnaround is understood poorly. Cost cutting measures are important, but an important question still remains unanswered, how to influence a declining firm toward turnaround other than adoption of a mere balance sheet approach?" This study examines the turnaround approaches of companies that did not file bankruptcy and took measures to address declining profitability. Several companies, from various industries, fallen victim to market blindness were studied. These companies emerged stronger and with long-term viability, by implementing a holistic turnaround strategy. This study contributes to the emerging trend that suggests against the simplistic and standard approach to turnaround situations for companies in need of changing from non-profitability to profitability. This study reveals pertinent and repeating adaptable capabilities that every business in most industries can execute for long-term growth and profitability-at the heart of which is returning to core. To formulate an adaptable strategic framework for successful turnaround in the wake of recent changes in economics and customer behaviors and preferences, a study to test the following research questions was conducted: (1) Does sustainable tumaround require a holistic approach with a strong focus on core business capabilities? (2) Is an effective operational strategy, with a coordinated approach, spanning the entire value chain of a business, more critical for a successful turnaround, rather than a finance focused approach? …

The analysis of net farm income: an examination of farm management survey data

Abstract: The practical significance of the conventional “net farm income” is elusive It would be useful to have an accepted method of dividing “management and investment income” into its recognised Components—managerial salary and return on tenant's capital One is a residual if the other can be calculated, and both alternatives are considered An empirical formula is suggested for estimating the managerial salary which may be imputed to the farmer, taking account of his total turnover, his labour bill and his net farm income This formula is then applied to Farm Management Survey data, for individual farms and for groups of average, high and low performance (output per £ input) The method may permit closer analysis of relative profitability

Pendapatan Premi, Rasio Hasil Investasi, Laba, Klaim dan Risk Based Capital Perusahaan Asuransi Kerugian di Indonesia

Abstract: Research in the insurance industry has not been widely studied. This study aims to premium income, investment claims ratio and stock-based risk to risk-based capital of insurance companies. This study uses empirical data derived from financial statements with a sample of 14 companies for the period 2011-2015, using purposive sampling. The method of analysis used is multiple regression. Based on the test results, the ratio of Risk and Capital Risk Risk (RBC). However, profitability and premium income do not affect Risk Based Capital (RBC) variable. Future research using a sample of insurance companies can test other financial aspects in order to obtain empirical evidence related to determinants of financial performance for the insurance services industry. ABSTRAK Riset di bidang industri asuransi belum banyak dikaji. Penelitian ini bertujuan untuk pendapatan premi, rasio klaim investasi dan risiko berbasis saham terhadap risk based capital perusahaan asuransi. Penelitian ini menggunakan data empiris yang berasal dari laporan keuangan dengan sampel 14 perusahaan untuk periode 2011-2015, dengan menggunakan purposive sampling. Metode analisis yang digunakan adalah regresi berganda. Berdasarkan hasil pengujian, rasio Risk and Capital Risk Risk (RBC). Namun, profitabilitas dan pendapatan premi tidak mempengaruhi variabel Risk Based Capital (RBC). Penelitian mendatang dengan menggunakan sampel perusahaan asuransi dapat menguji aspek-aspek keuangan lain agar dapat diperoleh bukti empiris terkait faktor-faktor penentu kinerja keuangan untuk industri jasa asuransi. JEL Classification: G32, G22

Measures of Merit for Ship Design

Abstract: This paper explains the role of engineering economy in ship design and discusses the relative virtues and shortcomings of the several measures of merit in current use. In particular, comparison is made of the two criteria most popular with U.S. business managers today: net present value and discounted cash flow rate of return or yield. Under some conditions, the required freight rate criterion may be preferable to either of those two. Valid criteria have characteristics of flat laxity. Therefore, finding an exactly optimal design is not as important as establishing the range of designs that promises close to the maximum level of profitability. Applying the different criteria to a typical speed-optimization study demonstrates that, when properly used, each valid criterion will indicate a design that is within the reasonable range indicated by the others. The effects of taxes as well as bank loans are covered in some detail, with illustrative examples from a feasibility study. These demonstrate that taxes have great influence in weighing the economic merit of new technologies but that bank loans do not. A brief discussion of inflation concludes that technical decisions need be little affected by expected changes in the value of the dollar.

Kicking Up Dust: Growth as an Irrational Market Response

Abstract: This paper introduces the concept of irrational growth, defined as a growth strategy that cannot (or will not) succeed in generating economic profits. Growth is a frequently utilized performance indicator, yet examining strategy research, the relationship between growth and economic profits is complex. A theoretical foundation based on institutional theory suggests that growth is adopted regardless of likelihood of positive economic outcomes. Propositions for testing an institutional bias towards growth are developed and research directions are suggested. Introduction Researchers recognize that firm performance is a complex multidimensional measure (Baum & Wally, 2003). In the process of understanding performance, researchers often use recognized performance indicators (Combs, Crook, & Shook, 2005; Farjoun, 2002; A. D. Meyer, 1991; Venkatraman & Ramanujam, 1986). Two frequently examined performance indicators include economic profitability and firm growth. While the pursuit of growth and profitability differ, an assumption of business literature states that growth ultimately, or perhaps eventually, creates profitability. For instance, in a prescriptive study examining competition in the new millennium, business practitioners are advised to grow to succeed in globally competitive markets (Ireland & Hitt, 2005). Without challenging the prescription of 'grow to succeed,' we know that growth sometimes leads to excess. We need look no further than recent activity in the housing and financial sectors to observe growth fueled exuberance leading to ruin. Such episodes appear rather predictably in our markets--the most recent bubble will not be the last just as it was not the first. Given this, why do we unequivocally treat growth as a positive measure of performance? Why do our sophisticated markets and talented business leaders create and recreate growth fueled bubbles which inevitably burst? The question posed examines a potential paradox within extant business literature (Poole & Van de Ven, 1989). Knowing that some firms grow to excess, why do we explore growth as a positive performance indicator? Should we not rather ask which conditions enable growth to lead to success and under which might growth lead to excess? While some exploration of a growth/performance paradox occurs in diversification and agency studies (Jo & Kim, 2008; O'Brien & David, 2010; Sun & Cahan, 2009); in general business research treats growth as a desirable, positive performance outcome. Indeed, sales growth or some other growth measure often appears side by side with economic profitability in examination of firm performance (Combs et al., 2005). We know that growth itself is multi-dimensional and that, within one dimension of growth (e.g. sales growth), different and contradictory relationships between growth and other organizational measures manifest depending on how (and for how long) growth is measured (Weinzimmer, Nystrom, & Freeman, 1998). Accepting that growth, profitability, market performance, and survival are all routinely deployed performance measures (Combs et al., 2005), one would expect a significant positive relationship to exist between growth and profit indicators. As shall be demonstrated in the following section though, the relationship between growth and profitability is, at best, complicated. If the relationship between growth and profitability is not clear cut, research could generate a substantial contribution by embracing the complexity and variety of firm performance indicators (Venkatraman & Ramanujam, 1986). Rather than simultaneously using growth and profitability as separate but desirable goals, research should examine the conditions through which growth leads to profitability (Combs et al., 2005; Weinzimmer et al., 1998). It is incorrect to suggest that growth is an inappropriate performance measure. Indeed, a sound theoretical foundation in resource dependency (Pfeffer & Salancik, 2003) and industry impact (Dess, Ireland, & Hitt, 1990) each demonstrate distinct paths between growth and profitability. …

Discount Retail Profitability: A Harbinger For E-Commerce?

Abstract: Expansion of electronic commerce has the potential to increase retail productivity. However, these gains may not translate into enhanced retailer profitability. This study examines profitability of the discount retail industry from 1981-1998, a period during which the industry realized significant productivity gains. Although productivity measures like inventory turnover and sales per employee increased during this period, industry profitability did not increase. Instead, consumers benefited from the increased efficiency through paying lower markups. The experience of the discount retail industry may indicate that retailers face a product price treadmill: gains in efficiency result in lower prices rather than higher profits. The projected efficiencies of the Internet and the expansion of electronic commerce may portend lower retail profitability but greater savings for consumers. Introduction At the end of the twentieth century, the potential of electronic commerce fueled investor optimism and helped propel U.S. equity valuation to historic heights. Investors believed that productivity gains of network technology would generate increased corporate profitability for companies involved in electronic commerce. Although the bubble has burst on Internet valuations, the question remains about whether innovations that lower production costs will result in increased profitability. In a competitive market, lower costs produce lower prices. Innovative firms may be able to capture abnormal profits before other firms in the industry adopt the new technology or business mode but once the innovation is widely diffused, sustained profitability is possible only if significant barriers to entry exist. This paper examines discount retailers, a category that includes firms like Wal-Mart and Kmart, to determine whether increased efficiency attributable to improvements in distribution and inventory management have resulted in abnormal profits for retailers or lower prices for consumers. The fortunes of discount retailers during a period of technological innovation may be a harbinger of the financial impact that electronic commerce will have upon retailers. The Internet, Retailers and the Treadmill This work is motivated by the uncertainty regarding valuations of Internet-based retailers. In 1998 and 1999, financial analysts were discarding traditional price-earnings (P/E) valuation models for other methods in order to justify the high valuations of etailers (Laderman & Smith, 1998). Although many Internet companies lost the majority of their market valuation when the NASDAQ corrected sharply in 2000, analysts continue to disagree about the proper valuation of companies utilizing a new technology (Trueman, Wong & Zhang, 2000; Schwartz & Moon, 2000). One of the arguments advanced for high market valuations of Internet retailers is the increased efficiency and the reduced costs that the Internet brings to businesses (Johnson, 1999; Tully, 2000). However, the benefits of cost saving technology may not accrue to the firm. Instead, consumers may enjoy lower prices or a factor of production, like labor or landowners, may realize increased compensation. The agricultural economics and resource economics literature documents the equivocal results that technological innovation can have on producers. Cochrane (1958) introduced the concept that farmers are on a product price treadmill. Profits that result from the adoption of new technologies evaporate as increased competition drives price down. Farmers constantly strive to improve their incomes by adopting new technologies. Lower costs ensure that early adopters of the technology enjoy above average profits for at least a brief period of time. However, as more farmers adopt the technology, production increases and prices decrease. The product price treadmill benefits consumers through lower food prices, but farm profitability remains relatively low. …

Profit by Design

Abstract: TODAY’S RESTAURANT basically offers four benefits in the market place: convenience, food, service, and atmosphere. These factors are present in varying degrees whether the food service unit is a fast food franchise, a deli place, a family-style operation, or a luxury dining establishment. Convenience is a matter of market location and/or parking facilities. Competition is keen in heavily trafficked areas. Here, for the most part, are located the fast food franchise, the deli place, and the many family restaurants which depend upon volume sales and rapid customer turnover in

Manpower ratios and productivity

Abstract: The success of the business enterprise under competitive conditions depends upon the efficiency with which resources are used—in other words, its level of productivity—in relation to that of its competitors. This article is concerned with the use of productivity measurement as a management tool, its relationship with profitability and the factors which affect it. Particular attention is devoted to the relationship which is shown to exist in many industries between productivity and the composition of the labour force and its implications for management.

Poplar Growing and Farm Adjustment on the North Coast of New South Wales

Abstract: The poplar species, Populus deltoides provides types which are ecologically well suited to the rich alluvial soils of the north coast. This study uses a simple simulation model and linear programming to explore the economics of introducing poplars into farm plans on this soil type. If the price of poplar timber does not fall by more than 60 per cent relative to other agricultural prices, and if plantations can be financed at discount rates less than 10 per cent, then poplar growing has considerable scope for integration with other farm activities. Poplars should be included under all the farm conditions tested, namely farm sizes between 100 and 150 acres, labour forces between one and three men per farm and a doubling of dairy profitability over the present level.

Factors affecting beef breed profitability in central Queensland.

Abstract: A survey -of a random sample of beef cattle properties in Central Queensland was undertaken to determine relative financial performance of British and Zebu cross breed herds. Major productivity differences were in age of marketing and mortality rate. On an “average” property, this represented a difference in net income of about $2,300 per year in favour of Zebus. Alternative management policies to increase profit are suggested.