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Industry, firm, year, and country effects on profitability: Evidence from a large sample of EU food processing firms
Abstract
This paper analyzes the variance in accounting profitability within the European food industry. Based on a large panel data set, the variance in return on assets (ROA) is decomposed into year, country, industry, and firm effects. Further on, we include all possible interactions between year, country, and industry and discuss the theoretical foundations for these effects. After singling out the significant effect classes in a nested ANOVA with a thoroughly designed rotation regarding the order of effect introduction, we determine effect magnitude using components of variance (COV). Our results show that firm characteristics seem to be far more important than industry structure in determining the level of economic return within the food industry. Year and country effects, as well as their interactions were weak or insignificant, indicating that macroeconomics and trade theory offer little potential to serve as a basis for the explanation of performance differentials. While neither national nor industry-specific cycles were significant, EU-wide fluctuations significantly contributed to explaining differences in performance, suggesting that economic cycles in the EU are by and large synchronized.
... From the industrial organizational theorists' viewpoint, industry characteristics explain performance deferential performance among firms and not firm-specific characteristics (Schiefer and Hartmann 2013). McWilliams and Smart (1993) postulated that the firm's ability to formulate a competitive strategy to boost its performance is a function of the industry's characteristics. ...
... This resulted from the large firms' ability to diversify and innovate. Supporting the firm-specific effect relative to industrial effect, which accounts for less than 5% of FP variation is Schiefer and Hartmann (2013). They argued that the lesser effect of industry among the food industry in Europe is due to industry heterogeneity differences as some studies focus on specific sectors and others on the entire economy. ...
... On the other hand, it has been suggested that industrial factors have lesser or no impact on firm profit (Mauri and Michaels 1998;Claver, Molina, and Tari 2002;Schiefer and Hartmann 2013). Galbreath and Galvin (2008) asserted that there is a change in the current business environment and this necessitates that for businesses to be competitive and profitable, there is the need to move away from the status quo and leverage their resources than to rely on control and manipulation of structural forces or to position in attractive industries. ...
Financial performance (FP) is important to every firm, especially SMEs, but FP determinants are debatable. This paper investigates determinants of FP among Ghanaian SMEs. Employing a survey data set of 238 SMEs, multiple regression analysis was performed to determine the extent to which each firm-specific characteristic and industry impact FP. The findings show that a significant relationship exists between company ownership type and FP. There is also a positive link between firm age, firm size, and FP. The industry effect is significant in the services sector. The results also show that the impact of firm-specific characteristics and industry differs across the sub-components of FP and manufacturing and service industries. The results demonstrate the relevance of the tenets of resource base view and structure- conduct-performance in explaining the SMEs' FP variations in a developing country context. The managerial and policy implications of the findings for both sectors have been discussed.
... Second, evidence for the food sector is as yet sparse since past research has focused on other manufacturing sectors or entire economies. Few exceptions are Schumacher and Boland (2005), Chaddad and Mondelli (2013), Schiefer and Hartmann (2013), and Hirsch and Geschwandtner (2013). However, the former two studies focus on the U.S. sector, while the latter study analysis the magnitude of profit persistence rather than profits at a specific point in time. ...
... However, the former two studies focus on the U.S. sector, while the latter study analysis the magnitude of profit persistence rather than profits at a specific point in time. To the best of our knowledge, Schiefer and Hartmann (2013) is the only study so far which decompose the variance in profitability of EU food industry firms. However, their study is based on the conventional approaches of ANOVA and COV. ...
... Regarding firm performance in the agribusiness sector, Schumacher and Boland (2005) analyzing the U.S. food economy and Schiefer and Hartmann (2013) focusing on the EU food sector also find evidence for the superiority of firm effects in explaining the variance in profitability. However, in the study of Schumacher and Boland within their COV framework, industry effects, which contribute 20%, also have a crucial impact. ...
This paper decomposes the variance in EU food industry return-on-assets into year, country, industry and firm effects using a hierarchical linear model (HLM). The HLM approach accounts for some of the methodological drawbacks of conventional approaches of variance decomposition such as anova and components of variance and additionally allows the estimation of the impact of covariates within each effect level. The results for selected EU countries show that firm effects are far more important than industry structure in determining food industry profitability. In particular, firm size and industry concentration are drivers of profitability while firm risk and age as well as industry growth have a negative influence.
... The authors analyse the SMEs in the food industry. Schiefer and Hartmann (2013) relate to all types of companies and conclude that firm characteristics are essential in explaining the return-on-assets of the same industry. ...
Our paper builds on the importance of high-tech manufacturing and knowledge-intensive services as significant competitiveness and economic growth drivers in the European Union and offers a fresh approach of the study on the competitiveness of secondary and tertiary high-tech industries across EU member states. Our analysis covers the 2008–2015 period and includes twelve old and new EU members. We opt for a balanced panel data approach in OLS and ARIMA frameworks to investigate the competitiveness of high-technology industries in the EU with the aim of uncovering the nature of the main explanatory factors behind their performance. Our results show that the number of persons employed and the investment rate are both determinants of labour productivity and business profitability, while turnover and personnel costs have a specific influence on productivity and profitability, respectively. The GDP level and the percentage of population with tertiary education are the most significant location-related drivers for high-tech industries’ competitiveness. Overall, industry-related factors are more important for explaining the competitiveness of high-tech sectors compared to location-related factors, while external factors have a marginal impact on high-tech industries’ performance.
... Nanda and Panda [23] confirmed firm-specific determinants as dominant players in the generation of corporate profitability and positively identified the size of a firm and its liquidity as crucial factors, while leverage was considered as a variable with a negative influence (except for during a crisis period). Schiefer and Hartmann [24], and Inci and Lee [25] observed industry-related factors. Raza et al. [26] conducted similar research between Pakistani companies, claiming that both internal and industry related factors have a similar influence on profitability. ...
The main aim of this paper is to provide empirical evidence about profit-shifting to selected tax havens by Slovak companies. This contribution focused on the very rare evidence of use of tax havens by Slovak companies not only in the field of corporate income tax, but also in selected areas of profitability. Two sources of data were used. Lists of Slovak companies with tax haven links were provided by the company, Bisnode, and financial statements of investigated companies were gained from the Finstat database. Based on the available data, the investigated period was between 2008 and 2016. We statistically tested selected indicators (ETR, taxes per assets, ROE, ROA, and ROS) of Slovak companies with direct ownership links to tax havens compared to their counterparts. Our findings suggest that Slovak companies with an ownership link to tax havens pay significantly lower taxes compared to companies without ownership links to tax havens during the period monitored. The aggressive tax planning was not only confirmed by the significantly lower reported values of ETR and taxes per assets, but also by the lower values of ROA. On the one side, Slovak companies with ownership links to midshore tax havens had the highest values of ROE, ROA, and ROS, but on the other side, these Slovak companies reported the highest ETR among the appointed categories (onshore, midshore, and offshore). The lowest taxes paid per unit of total assets were found in Slovak companies with ownership links to onshore tax havens. The analysis was supplemented by the changes of the selected indicators before and after obtaining an ownership link to a tax haven.
... The results show that firm effects dominate in explaining performance variation ranging between45% and 50%, followed by industry effects between 10% and 17%, and country effects between 5% and 8% of performance variance. Schiefer et al. (2013) argue that firm characteristics are more important to firm profitability than industry structure. In particular, firm size is the driver of performance whilefirm risk, age and, market share have a negative influence. ...
The objective of this study is to demonstrate the relative importance of both firm-level and country-level on financial performance. In addition, to explore the influence of firm-level variables (Accounting standards, firm age, firm size, liquidity) together with country-level variables (GDP per capita, inflation rate, development status, human development index, country openness to trade) onfinancial performance. Financial performance is measured in this study by Return on Assets. Hierarchical Linear Modeling is employed to identify the components of firm performance variability. Thisstudy employs a sample of 4095 publicly listed industrialfirms from 54 countries listed on stock exchange covering the period from 2014 to 2016.The results show that both firmand country-level performance variations are significant. However, financial performance is explained better by firm-level performance variationthatcontributes up to 92.8% to variance in financial performance.Moreover, in terms of country-level variables, the results show that country openness to trade and human development indexare significantly affecting firm performance. Moreover, in term of firm-level variables, the results show that firm age is negatively related to firm financial performance and firms adopting IFRS are more likely to have higher financial performance than firms adopting local GAAP.This study contributes to the literature by employing Hierarchical Linear Modeling to integrate both firm-level and country-levelvariables into one cross-sectional analysis. It provides an insight to analysts and stakeholders to consider multi-level characteristics when examining financial performance.
... Their results show that during the recession (In 1982, Texas began to be affected by the worldwide recession) in the Texas banking industry, firm effects are large and significant, market share effect and market concentration are also significant but very small. Schiefer and Hartmann (2009) use the panel data to analyze the variation in the profitability within European food industry. They decompose the variation in Return on Asset (ROA) into year, industry country and firm effects, while also including an interaction between country and industry term. ...
This study examines large Canadian and US firms to decompose the variation of firm profitability into year, industry, year-industry and firm components. Return on Assets (ROA), Return on Equity (ROE) and Return on Sales (ROS) provide three measures of firm profitability. For all three measures and both countries, firm effects provide the biggest contribution to the variability in firm profits with year-industry effects second, year effects third, and industry effects last. These results match those of previous studies. Comparing Canadian and US firms, firm effects explain more of the variation in the profitability of Canadian firms. Finally, the combination of industry, year and firm factors explain more the overall variation in profitability of our sample of Canadian firms than our sample of US firms.
... The second group focuses on the internal factors of profitability such as the size of enterprises, indebtedness, growth, age, lagged profitability and other factors at the level of enterprises (Burja, 2011;Chandrapala and Knapkova, 2013;Margaretha andSupartika 2016, Ke andHiong, 2016). The third group includes research papers which investigate the influence of both internal and external factors on profitability ( Schiefer and Hartman, 2013;Nuševa, Mijić, Jakšić, 2017). ...
The aim of this paper is to identify the factors that influence the profitability of selected companies within the fruit processing industry in Serbia. Profitability was measured through the accounting indicator of the rate of return on assets (ROA). Profitability of fruit and vegetable processing companies is positive but at relatively low level. In the capacity of independent variables were used the size of the enterprise, debt ratio, quick ratio, inventory, sales growth and capital turnover ratio. The analysis covers the period from 2007 to 2015 (9 years) and includes 198 observation of the companies from the fruit and vegetable processing industry in Serbia. Panel regression model was built. The results of the conducted panel analysis showed that the sales growth and capital turnover ratio showed a statistically significant impact on profitability as a measure of the success of companies in the field of fruit and vegetable processing industry. The size of the company showed a statistically significant impact on the profitability at a level of significance of 10%.
... Schumache ve Boland (2005) gıda endüstrisindeki firmaların karlılığını incelemişlerdir ve firma özelindeki faktörlerin endüstrinin kendisinden daha önemli bir etken olduğunu bulmuşlardır. Sektörün Avrupa'daki performansını inceleyen benzer bir çalışma Schiefer ve Hartmann(2009) tarafından yapılmış ve firma özelliklerinin, endüstri karakteristiğine göre firma karı üstünde daha önemli etkisi olduğunu bulmuşlardır. Zouaghi, Hirsch ve Garcia (2016) ise firmaya özgü nedenlerin karlılıktaki büyük etkisini İspanya için ortaya koymuşlardır. ...
Bu çalışmanın amacı, sürekli gıda fiyatlarının arttığı bir ekonomik konjonktürde Borsa İstanbul'da işlem gören gıda firmalarının finansal performansını değerlendirmektir. Artan gıda fiyatlarının en çok etki etmesi gereken sektör gıda sektörüdür. Bu etki olumlu ya da olumsuz olabilmektedir. Artan gıda fiyatlarının artan girdi maliyetine dönüşüp olumsuz etki yaratması mümkündür. Fakat artan gıda fiyatları karşısında tüketicinin paketlenmiş hazır gıdalara yönelip, sektörün satışlarına olumlu etki yapması da olasıdır. Bu amaçla, öncelikle gıda fiyatlarında 2012-2017 yılları arasında trend incelenmiştir. Daha sonra, gıda sektöründe faaliyet gösteren Tukaş, Ülker, Penguen, Tat, Kerevitaş, Avod, Pınar Et ve Un ve Pınar Süt firmalarının dönem karı(zararı), toplam varlıklar, toplam özsermaye, toplam satışlar kalemlerinin ortalaması alınarak sektörü temsil eden bir veri yaratılmıştır. Sonuç olarak, artan gıda fiyatları karşısında, sektör büyümekte ve finansal performansı da iyileşmektedir. Bundan sonraki çalışmalarda amaç, gıda fiyatlarının gıda firmalarının finansal performansına olan olumu etkisini ekonometrik modellerle ispat etmek olacaktır
... Schmalensee, 1985;Rumelt, 1991;McGahan and Porter, 1997;Mauri and Michaels, 1998;Hawawini et al., 2003;Brito and Vasconcelos, 2006). Furthermore, several studies observed that the impact of industry-level factors can be explained in relation to less than 5 percent variation in profitability ( Rumelt, 1991;Claver et al., 2002;Hawawini et al., 2004;Brito and Vasconcelos, 2006; Schiefer and Hartmann, 2009). Therefore, in this study, we examined the effect of crucial firm-level factors on profitability of the firm at the time of crisis. ...
Purpose
The present study examines the firm-specific and macroeconomic determinants of profitability of Indian manufacturing firms. It assesses the main determinants of firm's profitability in the pre-crisis and post-crisis period from 2000 to 2015.
Design/methodology/approach
This methodology splits the factors that influence firm profitability in two groups: firm-specific (internal) factors and macro-economic indicators. It further aims to look at the consistency of the factors in the pre-crisis and post-crisis period. The return on assets (ROA) and the Net Profit Margin (NPM) are considered as proxy for corporate profits. The panel Generalized Least Square (GLS) and Panel Vector Auto Regression (VAR) model have been employed, and it is observed that the exchange rate seems to have played a major role in the crisis period by explaining the earning quotient for Indian firms.
Findings
This paper concludes that the firm specific variables and exchange rate channels are quite relevant in explaining the profitability of Indian manufacturing firms. It accepts the hypotheses that size and liquidity enhances whereas leverage discourages the profitability. Few exceptions have been observed during the crisis period. The study also concludes that in the short run, the changes in exchange rate is not increasing profitability, but in the long run, it increases profitability as the volatility of nominal exchange rate is positively impacting profitability. Moreover, the study finds that the nominal exchange rate index is more informative and explains that profitability is better than real exchange rate index in the case of Indian manufacturing firms over the study period.
Research limitations/implications
The managers and the policy makers should give utmost importance to the firm-specific determinants, especially after the crisis period and consider the appropriate exchange rate to evaluate firm performance for making any change in the policy to make any business profitable.
Originality/value
This study has been conducted over a longer time by using advanced panel data analysis techniques on the recent data. The study period properly captures the crisis time and the research includes different selection of profitability that highlights corporate earnings pattern. Moreover, validation of the exchange rate sensitivity of profitability over nominal and real exchange rate increases the robustness of the study. Moreover, on Indian manufacturing firms, the study is very significant and unique.
... A first contribution related to the ideal proxies for sustainable competitive advantage. Though several studies succeeded in proposing another alternative as proxies of long term performance (Damodaran, 2009;Tangen, 2004), our result give strong emphasis to Hegel et al., (2013); Schiefer et al., (2013); Dehning & Stratopoulos (2003); and Davis et al., (2002). For most subsidiaries which operated in a foreign country, performance measurement relied on asset utilization. ...
This study tried to identify factors which drive international sustainable competitive advantage using Indonesian listed-multinational companies. The study began with identifying the terminology for emerging market using a single index model. We then deployed the three measurements for competitive advantage which are return on sales, return on asset and return on equity.
Our results showed that all three measurements have the power to explain each competitive factor for Indonesian multinational firm, but statistically, ROA showed as the best proxies. Moreover,
eight out of ten hypotheses tested were strongly supported by the data. The study strongly emphasized the importance of knowledge management, local leadership and a factor of location
as vital drivers for global competitive advantage. Lastly, the study also stressed the importance of globalizing subsidiaries in order to gain sustainable competitive advantage for the host country.
... Brudney et al., 2005;Rosenbaltt and Shirom, 2006), however, they have utilization also in the economic field (e.g. Schiefer et al., 2013). The usage of HLM in the Czech Republic is not widely used yet, as pointed out by Soukup (2006). ...
The paper deals with the factors of profitability, which can be seen as the most important in the Czech food processing industry. The relationship between profitability and particular firm characteristics (on the Level 1) and industry characteristics (on the Level 2) is estimated with the use of hierarchical linear modelling (HLM), which accounts for the shared variance in hierarchically structured data and simultaneously investigates relationships within and between hierarchical levels of grouped data. The suitability of the multilevel model is confirmed by Intra-Class Correlation Coefficient. The models are estimated in the statistical software HLM, the data are prepared in the software IBM SPSS Statistics. The empirical analysis is conducted using data at the firm level. The pre-tax and pre-interest return on assets (ROA) is employed to express the profitability of firms. The dataset covers the period from 2005 to 2012 and is made of 4,976 observations across 8 years and 10 food processing sectors in the Czech Republic – the sample of firms involved in the analysis consists of 622 firms with full data in 2005-2012. The results show that the market concentration measured by the concentration ratio CR4 is a strong predictor of the Level 2, the effect of sector market concentration on the firm profitability is significant and positive. This finding is consistent with generally accepted assumption that companies in industries characterized by high market concentration may have the ability to prevent entry into the industry, leading to higher profit levels. Moreover, in more concentrated sectors of the food industry it can be expected better bargaining position of large firms in relation to the highly concentrated subsequent stage of the commodity vertical, i.e. retail. Another important predictor of profitability on the Level 2 is the growth of imports measured as the growth rate of imports for particular food sectors. The value of its regression coefficient in the model is negative and statistically significant. An increase in imports causes a negative impact on the profitability of domestic food enterprises because it leads to increased market competition and downward pressure on prices. The effect of firm market share on profitability is estimated on the Level 1. Market share is generally used to evaluate the competitive position of the company, because it is assumed that the growth of the firm market share leads to the growth of firm profitability. These assumptions are confirmed – the value of the regression coefficient in the model is statistically significant and positive. The food industry structure in the Czech Republic has changed recently, the market concentration has grown, which has an impact on firms in the food industry. Firms that are successful on the market and have higher market shares reach higher profitability as shown in the research. Moreover, higher market concentration in a sector means higher profitability of the firms in this sector.
... McGahan and Porter 1997or Goddard et al. 2009). As regards the food sector, Schiefer and Hartmann (2009), using ANOVA and COV, quantify firm, ...
... These findings are important for investors considering adding agribusinesses to their investment portfolios particularly during the recent economic recession. Schiefer, Hirsch, Hartmann, and Gschwandtner (2013) focused on the EU food sector and also found evidence of weak economic fluctuations which explained the difference in firm performance when compared to firm-specification characteristics. In line with this, we put forward following hypotheses: ...
The globalization and expansion of financial markets and the current economic crisis are changing the rules. Innovation has ceased to be part of the business strategy in many companies. However, in other companies innovation still plays a fundamental role in the improvement of performance and in maintaining competitive advantages in today’s global markets. This is particularly the case in the agri-food industry; we will see here how innovations have become an important instrument for companies in this sector.
... In a first attempt, similar to many previous studies (e.g. Schiefer & Hartmann, 2013), firms operating in the miscellaneous industry NACE-1589 were deleted from the sample, as this industry is classified as 'Manufacture of other food products not elsewhere classified' and likely contains a variety of heterogeneous firms. The presence of many heterogeneous firms in an industry might lead to less distinct industry effects. ...
Since the 1980s economic researchers have applied variance decomposition methods such as ANOVA or components-of-variance (COV) in order to determine the importance of different effects for firm profitability variation. Nevertheless, these studies either focus on entire manufacturing sectors or on the U.S. food sector. This article, therefore, aims to determine the sources of firm profitability variation for EU food processors using the classical approaches of hierarchical ANOVA and COV. The paper also highlights a lack of the hierarchical ANOVA effect introduction pattern that occurs throughout previous literature. The results suggest that firm-related effects are the main profit driver while industry, year, and country effects are negligible. [EconLit citations: L10, L25, C33].
... Competitive pressure has also lead to the strengthening of business development services among key agribusiness players and stakeholders as argued by Schiefer and Hartmann (2013). This has been witnessed through capacity building in technical issues (e.g. ...
Agribusiness is projected to be a 1.08billion) annually. The opportunity for application of nanotechnology in agricul¬ture is prodigious. Nanotechnology, focusing on special properties of materials emerging from nanometric size has the potential to revolutionize the agricultural and food sectors, biomedicine, environmental engineering, safety and security, water resources, energy conversion, and numerous other areas. It is well recognized that adoption of new technology is crucial in accu-mulation of global wealth and market value which now stand at US0.9 trillion). This review set out to address the implications of nanotechnology for the agri-food industry by examining the potential benefits, risks and opportunities. © Universidad Alberto Hurtado, Facultad de Economía y Negocios.
... More specifically, empirical findings rather indicate the dominance of firm effects compared to relatively small contributions of year, country, and industry effects (e.g., Schmalensee, 1985, Rumelt, 1991, McGahan and Porter, 1997, Mauri and Michaels, 1998, Hawawini et al. 2004, Brito and Vasconcelos 2006. Moreover, a number of studies found that less than 5% in profitability variations can be explained by the industrylevel factors (Rumelt, 1991, Claver et al., 2002, Hawawini et al. 2004, Brito and Vasconcelos 2006, Szymański et al. 2007, Schiefer and Hartmann, 2009. Having in mind this argument, this study examines the impact of the major firm level factors on firm profitability during a crisis. ...
This paper investigates how large and medium-sized companies listed on the regulated market segments of the Belgrade Stock Exchange manage their pro-fitability during periods of recession, over the four-year period (2008-2011). The study shows that bigger and more liquid companies demonstrate higher profit-ability. As to growth opportunities, asset efficiency and institutional ownership, these profitability determinants are statistically significant only in the case of return on asset as a profitability measure. The analysis reveals evidence of the transitional character of the Serbian corporate environment and indicates the need for additional ways to gain profitability and improve companies’ perfor-mance during crisis periods.
... Finally, model (1) includes country-and sector-specific year effects. Yearcountry and year-industry interactions are interpreted as national and industryspecific business cycles and are considered as indicators for the relevance of macroeconomic environment in explaining profitability variation Schiefer and Hartmann (2013). Indeed, these interaction terms aim at capturing year-to-year variations in industry-specific and country-specific returns. ...
This paper investigates the impact of the interaction between product, labor and financial market imperfections on firms’ investment by using a panel data of European firms over the period 1994-2008. It studies the impact of product and labor market regulations on firm investment and how it changes with the degree of financial market imperfections. Findings show that product and labor market regulations negatively affect firm investment by lowering firm profitability. The presence of more efficient financial markets increases firm investment and lowers the negative effects of market regulations.
... From an empirical point of view, extensive literature has emerged initially analyzing profit differentials only at a specific point in time (e.g., Schmalensee 1985;Rumelt 1991;Porter 1997 andSchiefer and Hartmann 2013;Hirsch et al. 2014). ...
Based on autoregressive (AR) models and Arellano-Bond dynamic panel estimation, this article analyses profit persistence in the European dairy processing industry. The sample comprises 590 dairy processors from the following five countries: Belgium, France, Italy, Spain, and the United Kingdom. The AR models indicate that cooperatives which account for around 20% of all firms in the dairy processing sector are not primarily profit oriented. In addition, the results point toward a high level of competition as profit persistence is rather low even if cooperatives are excluded. The panel model reveals that short- as well as long-run profit persistence is influenced by firm and industry characteristics.
... McGahan and Porter 1997or Goddard et al. 2009). As regards the food sector, Schiefer and Hartmann (2009), using ANOVA and COV, quantify firm, ...
The present article is the first that analyses profit persistence in the European food industry. Based on the Arellano and Bond GMM estimator, the degree of profit persistence and the drivers of persistence are quantified for a large sample of food processing firms. The analysis reveals that the degree of profit persistence in the food industry is lower compared with other manufacturing sectors due to strong competition among food processors and high retailer concentration. Furthermore, firm size is an important driver of persistence, while firm age, risk and R and D intensity have a negative influence.© Oxford University Press and Foundation for the European Review of Agricultural Economics 2013.
Food and Allied enterprise supply the basic needs of human being in Bangladesh. This industry is considered as one of the most important manufacturing sectors. Like other business enterprises, such enterprises need to incur selling & distribution cost for marketing their products. By examining the impact of such selling & distribution cost on revenue and profit with reference to eight sample firms,this study finds that selling & distribution cost is highly correlated with revenue and net profit and the coefficients of correlation are 0.990 and 0.989 respectively. For further analysis marketing cost or selling & distribution cost again classified into two groups namely promotional cost and non-promotional cost. Correlation of promotional cost with revenue and net profit is reflected by coefficients, which are 0.986 and 0.982respectivelywhereas coefficients of correlation of non-promotional cost with revenue and net profit are 0.991 and 0.993 respectively. This study finally get the result that revenue and net profit is more depended on promotional cost as compared to overall selling and distribution cost and non-promotional cost. To sustain in the industry and to generate more revenue and profit, the company should be aware about their sales volume, net profit, promotional and non-promotional and overall selling and distribution cost of self as well as competitors. So proper understanding of relationship between revenue & cost helps a company to avoid unnecessary costs and attempt to cost reduction approach significantly.
The aim of the study is to assess the impact of the EU ETS on the profitability and the excess rate of return (ERR), which is the difference between profitability and the cost of capital. The study was conducted between 2008 and 2016 on a sample of 91 very large companies covered by the EU ETS. Models for panel data were used for the analysis. No statistically significant relationship between emission allowances and return on equity was found. However, a statistically significant relationship between emission allowances and ERR was detected. This could mean that companies were able to pass on the cost of emission allowances to their counterparties. However, greenhouse gas emissions entail greater exposure to the price risk of emission allowances, which the companies were unable to diversify, resulting in an increase in the cost of equity. Moreover, the study shows that the effect of emission allowances on the value of companies may not be symmetrical, as the variable under study was only statistically significant when it took on positive values (GHG emissions were higher than the allocation). As proven, an analysis of the excess returns can help to explain some of the inconsistencies and contribute to a better understanding of the impact of the EU ETS on the value of companies. The research carried out helps to answer the question of who bears the costs of reducing greenhouse gases and is it true that there are no costs for companies and therefore the introduction of the EU ETS has not affected their value. The conclusions of this study may be of interest to policymakers, investors but also to the public. JEL Classification: G320; G380; H220; H230.
The market structure of the sugar industry in Iran, due to the production of high share of products by a few firms, has moved away from competitive market conditions, which is expected to result in market failure due to the inefficiency of monopoly. So the main questions addressed in this paper are; How we can increase the share of low-income firms and what is the relationship between the efficiency of firms and the market structure of this industry. In order to answer these questions, using the cross-efficiency ranking method, the maximum relative distance from the anti-ideal virtual decision-making unit based on the data envelopment analysis method and the efficiency of these companies was evaluated. Then, using parametric models, the relationships among behavior, profitability, efficiency and market structure of these firms were examined. Statistics and information of sugar factories in Iran in 2014 were analyzed using GAMS and SHAZAM softwares. Based on the results, there is an interaction relationship between structure and performance in the industries in sugar supply chain. Increasing the profitability of small-scale units compared to large units by implementing supportive policies and reducing the cost of providing inputs, increasing the efficiency and quality of sugar production through investment in R&D, branding, developing new markets by implementing export incentive policies and productivity management cycle are ways to modify the structure of the sugar supply chain.
The objective of this paper is to analyse the effect that operating leverage exerts on the profitability of SMEs, both in isolation and indirectly through its other determinants. We use panel data from a total of 9652 European agri-food SMEs from 2009 to 2016. The work’s principal contribution is the study of the SMEs of a key sector of the European economy in terms of the cost structure, since this is an issue that directly affects the competitiveness of firms, but which has not garnered sufficient attention in the literature. It also considers the importance of the institutional and legal environment on the risk assumed by companies. The results obtained confirm that operating leverage or cost structure, in addition to affecting profitability, also affects the relationship between that profitability and other sources of risk that depend on the country in which the company operates. More specifically, indebtedness, size, innovation specificity and reputation all affect profitability to a greater or lesser extent, depending on the level of operating leverage of the company.
This chapter provides with evidence to the large-scale impact of nanotechnology on the food industry in the USA. The existing reservations on the implementation side along with the extent of productivity improvements and the possible proliferation of the new products and processes are discussed. A prescription to this dilemma, i.e., the safety concerns that might affect the population health versus the economic gains from the application of nanotechnology, is offered. Unlike the development of the Internet and its recently recognized impacts on a nation’s security and the recent regulation efforts, this multifaceted industry and its implications are argued to be best regulated on a piecemeal basis where the technology implementation and regulation are developed simultaneously.
Previous studies have explored the predictors of business unit performance in multiple-business firms and investigated the extent of the effect of industry, corporate, and business unit on the performance of a business unit. These studies have focused almost exclusively on examining performance differences within a single country, thus treating country effects as external to business unit performance. In contrast, this study focuses on multinational corporations and examines the extent to which country effects explain the variation in the performance of foreign affiliates. Our findings show that country effects are as strong as industry effects, following affiliate effects and corporate effects. Our results also suggest that corporate and affiliate effects tend to be more critical in explaining the variation in foreign affiliate performance in developed countries, whereas country and industry effects are more salient in developing countries. Copyright © 2004 John Wiley & Sons, Ltd.
Understanding sources of sustained competitive advantage has become a major area of research in strategic management. Building on the assumptions that strategic resources are heterogeneously distributed across firms and that these differences are stable over time, this article examines the link between firm resources and sustained competitive advantage. Four empirical indicators of the potential of firm resources to generate sustained competitive advantage-value, rareness, imitability, and substitutability are discussed. The model is applied by analyzing the potential of several firm resources for generating sustained competitive advantages. The article concludes by examining implications of this firm resource model of sustained competitive advantage for other business disciplines.
A new theory of competition is evolving in the strategy literature. The authors explicate the foundations of this new theory, the ''comparative advantage theory of competition,'' and contrast them with the neoclassical theory of perfect competition. They argue that the new theory of competition explains key macro and micro phenomena better than neoclassical perfect competition theory. Finally, they further explicate the theory of comparative advantage by evaluating a market orientation as a potential resource for comparative advantage.
In this paper, we examine the importance of year, industry, corporate-parent, and business- specific effects on the profitability of U.S. public corporations within specific 4-digit SIC categories. Our results indicate that year, industry, corporate-parent, and business-specific effects account for 2 percent, 19 percent, 4 percent, and 32 percent, respectively, of the aggregate variance in profitability. We also find that the importance of the effects differs substantially across broad economic sectors. Industry effects account for a smaller portion of profit variance in manufacturing but a larger portion in lodging/entertainment, services, wholesale/retail trade, and transportation. Across all sectors we find a negative covariance between corporate-parent and industry effects. A detailed analysis suggests that industry, corporate-parent, and business-specific effects are related in complex ways. © 1997 by John Wiley & Sons, Ltd.
Now nearing its 60th printing in English and translated into nineteen languages, Michael E. Porter's Competitive Strategy has transformed the theory, practice, and teaching of business strategy throughout the world. Electrifying in its simplicity -- like all great breakthroughs -- Porter's analysis of industries captures the complexity of industry competition in five underlying forces. Porter introduces one of the most powerful competitive tools yet developed: his three generic strategies -- lowest cost, differentiation, and focus -- which bring structure to the task of strategic positioning. He shows how competitive advantage can be defined in terms of relative cost and relative prices, thus linking it directly to profitability, and presents a whole new perspective on how profit is created and divided. In the almost two decades since publication, Porter's framework for predicting competitor behavior has transformed the way in which companies look at their rivals and has given rise to the new discipline of competitor assessment.
More than a million managers in both large and small companies, investment analysts, consultants, students, and scholars throughout the world have internalized Porter's ideas and applied them to assess industries, understand competitors,, and choose competitive positions. The ideas in the book address the underlying fundamentals of competition in a way that is independent of the specifics of the ways companies go about competing.
Competitive Strategy has filled a void in management thinking. It provides an enduring foundation and grounding point on which all subsequent work can be built. By bringing a disciplined structure to the question of how firms achieve superior profitability, Porter's rich frameworks and deep insights comprise a sophisticated view of competition unsurpassed in the last quarter-century.
Book Description
Publication Date: June 1, 1998 | ISBN-10: 0684841487 | ISBN-13: 978-0684841489 | Edition: 1
Clique Aqui
Strategy is about seeking new edges in a market while slowing the erosion of present advantages. Effective strategy moves are grounded in valid and insightful monitoring of the current competitive position coupled with evidence that reveals the skills and resources affording the most leverage on future cost and differentiation advantages. Too often the available measures and methods do not satisfy these requirements. Only a limited set of measures may be used, depending on whether the business starts with the market and uses a customer-focused approach or alternatively adopts a competitor-centered perspective. To overcome possible myopia, the evidence of advantage should illuminate the sources of advantage as well as the manifestations of superior customer value and cost superiority, and should be based on a balance of customer and competitor perspectives.
This study addresses the issue of the relative degree of variance in ROA accounted for by industry, corporate, and SBU effects while controlling for the business cycle and the interaction between the business cycle and industry. Two key articles, Schmalensee (1985) and Rumelt (1991), are discussed in detail. Research results on a recent data base (COMPUSTAT), using variance components analysis (VARCOMP) are presented that not only confirm most of the Rumelt (1991) findings, but also suggest the existence of a corporate effect, heretofore undetected.
We document that business cycles of U.S. Census regions are substantially more synchronized than those of European countries. Data from regions within European countries confirm a European border effect — within-country correlations are substantially larger than cross-country correlations. These results continue to hold after controlling for exogenous factors such as distance and size. We consider the role of four factors that have received attention in the debate about EMU: sectoral specialization, the level of trade, monetary policy and fiscal policy. We find that the lower level of trade between European countries explains most of the observed border effect.
The globalization process has created considerable speculation on the impact of the home country environment to a firm’s competitive advantage in international markets. Using a random effects model that is partly induced from the concept of comparative advantage and partly following the descriptive modeling of performance determinants, this paper explores the quantitative impact of home country environment on the performance for firms across 6 countries. The paper uses two value-based, i.e., risk adjusted and cash-flow based, measures of firm performance. The results indicate that the importance of country factors is low and firm-specific factors dominate performance across and within countries. The results also show that global industry effects are increasingly more important than country effects.
The source of the variance in profitability among firms is an important issue in the field of food and agribusiness economics. The objective of this study is to analyze firm profitability in the food economy and determine the source of variance of firm profitability. The results indicate that firm effects account for the largest variance in business-segment performance within the food economy. Firm specific factors are less important for the vast majority of firms that are not the industry high or low performers. These results provide support that industry structure matters more for firms that are not high or low performers, which is characteristic of the majority of firms in an industry. [EconLit citations: Q130, L100.] © 2005 Wiley Periodicals, Inc. Agribusiness 21: 97-108, 2005.
A comparative assessment of the performance of enterprises belonging to three strategic ownership groups (state, foreign and indigenous private) is undertaken for the Polish food industry. This analysis draws on two competing theories of enterprise performance (industrial organisation and the resource-based view), which heavily influenced post-socialist policy makers and theorists. Indigenous private companies recorded the best average return on total assets (ROTA) for the period analysed. The determinants of profitability are found to differ significantly among the three strategic groups. For indigenous Polish private and foreign-owned enterprises, firm effects are the primary determinants of variations in ROTA. While regional location is a significant determining factor of performance for indigenous private firms, its influence is negligible in the case of state and foreign-owned companies. To uncover the specific firm resources that are responsible for the superior performance of indigenous private enterprises, in-depth interviews were conducted.
This paper deals with the existence and identification of are used for individual countries in order to detect changes in the mean growth rate of industrial production. A Markov switching vector autoregression model is then used to identify a common cycle in Europe. Three important results are obtained: we find a common unobserved component governing European business cycle dynamics, suggesting the existence of a common business cycle; we propose a dating of the business cycle, both for an index of industrial protection and GDP, and both chronologies appear to be consistent; and finally we retrieve an important set of stylized facts and relate these with those reported for the US. Finally two further issues are investigated: first, the contribution of the European business cycle to the individual country cycles; and second, we undertake an impulse response analysis to investigate the response of each individual country to European expansions and recessions.
Using data for European countries from 1976 to 1998, this paper shows that the relative importance of country-specific shocks versus (common) sectoral shocks has reduced considerably during the most recent years, probably as a result of more intense policy co-ordination.
Caves and Porter [1977] developed a theory of strategic groups to explain why national and regional producers behave differently in most consumer-goods industries. One implication of this theory is that the structure of demand and cost conditions differ between groups. This article tests for the presence of demand asymmetries between national and regional strategic groups by estimating a firm demand function for U.S. beer producers. The results suggest that these demand differences do exist. The impact of firm advertising differs between national and regional producers, and there is greater rivalry among competitors inside than outside strategic groups.
Economic Policy in EMU
- M Buti
- A Sapir
Buti, M., and A. Sapir. 1998. Economic Policy in EMU. Oxford: Oxford University
Press.