Homework 8

1. Analyze the income statement for a company in your industry.
Find a public company and look at its annual report.
If you can’t find a public company look for news information that talks about revenue, cost and profitability.
If you can’t find any data then estimate revenue and costs based on comparable businesses (ask instructor for help)
Summarize one year’s data in a table on your wiki (revenue, cost, % of total)
Do a first attempt at a “five forces” analysis of your industry.
List examples of each type of participant.
Put it on your wiki.
Assess the likely profitability of the industry.
Do a revenue and cost driver analysis.
What is the size of your industry (i.e. total revenue)?
What are the three biggest companies in your industry by revenue?

Continental Airlines Statement through December 2007

Revenue is 14,232 million

Cost of goods sold was $11,068 million

Gross profit $3,164 million

Gross profit margin was 22.2%

SG&A expenses were $2064 million (SG&A stands for Selling, General and Administrative Expenses. This includes Income statement item which combines salaries, commissions, and travel expenses for executives and salespeople, advertising costs, and payroll expenses.)

Depreciation & Amortization was $413 million

Operating income was $687 million

Operating Margin was 4.8%

Revenue was $14,232 million

Total Expenses were (cost of goods) $11,068 millions + (SG&A expenses) $2,064 million + (Depreciation & Amortization) $413 millions = $13,545 million

(Total Revenue) $14,232 - (Total Expenses) $13,545 = (Operating Income) $687 million

Percentage of total (operating margin) was 4.8%

2. Do a first attempt at a “five forces” analysis of your industry
List examples of each type of participant
Put it on your wiki
Assess the likely profitability of the industry.

Potential Entrants-aggregators—There are no aggregators in competition but companies in our field can compete to be the number one result in a search engine like google or yahoo.

Buyers- Individual travelers, Business travelers, Advertisers

Suppliers- Steel manufactures, Oil companies, Energy suppliers, Airports, Safety line contractors, Pilot schooling, Tower training

Competitors- Expedia, Travelocity, ORBITZ, Kayak, Fodors, Navigant, travelnow, cheaptickets.

Substitutes- Cars, Buses (Greyhound), Trains (Amtrak)

3. Do a revenue and cost driver analysis

4. What is the size of your industry (i.e. total revenue)?
World Travel; International Tourism Revenue $735 billion US. US Travel Revenue $699.9 billion US.
http://www.plunkettresearch.com/Industries/TravelAirlineHotelTourism/TravelAirlineHotelTourismStatistics/tabid/253/Default.aspx

5. What are the three biggest companies in your industry by revenue?

ORBITZ, Travelocity and Expedia are the biggest companies in the industry.

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