Jan 5, 2009

Profit or Sales??

A question that has been bogging me has been whether companies that go after supply chains are looking at their profits or at their sales margins in order to get the most out of their bottom line. I looked at Nokia and it seems they favor Profit over the sales figures. I do not know what kind of an impact this would have on a slowing economy. I found an ITWEB article about this. The following part of the article struck me as particularly interesting.

"When times are tougher, people who have stronger positions fare relatively better than the competition... So, overall, I believe many of our competitors will have limitations here in terms of their ability to do things."

Nokia has said it aims to increase its cellphone market share in 2009, helped by consumers' appetite for cheaper mktgpic8models.

"The fact that we are commercial in all price points will give us the possibility, if the trade-down happens, to sell another device, which is not always the case with competitors who have a more limited portfolio.”

Interesting and true. However, another company that is well known for managing its supply chain particularly well – Dell, had a different view. This extract was from a “Motley Foolarticle.

"Dell's focus remains on growing units faster than the industry," says the press release, which then goes on to list secondary goals like "increasing revenue, profitability and cash flow, and making decisions that deliver the best long-term result."

Listing Dell’s focus on profitability as a secondary goal gives me the sense that companies that have strong supply chains need the volume to justify the investment in improving the supply chain. Going after profits or “profitability” in the broader sense of the word will impact the volume. However,  in a down market economy where you are a big player (like Nokia), the case might be different.

Jan 5, 2009

Profit or Sales??

A question that has been bogging me has been whether companies that go after supply chains are looking at their profits or at their sales margins in order to get the most out of their bottom line. I looked at Nokia and it seems they favor Profit over the sales figures. I do not know what kind of an impact this would have on a slowing economy. I found an ITWEB article about this. The following part of the article struck me as particularly interesting.

"When times are tougher, people who have stronger positions fare relatively better than the competition... So, overall, I believe many of our competitors will have limitations here in terms of their ability to do things."

Nokia has said it aims to increase its cellphone market share in 2009, helped by consumers' appetite for cheaper mktgpic8models.

"The fact that we are commercial in all price points will give us the possibility, if the trade-down happens, to sell another device, which is not always the case with competitors who have a more limited portfolio.”

Interesting and true. However, another company that is well known for managing its supply chain particularly well – Dell, had a different view. This extract was from a “Motley Foolarticle.

"Dell's focus remains on growing units faster than the industry," says the press release, which then goes on to list secondary goals like "increasing revenue, profitability and cash flow, and making decisions that deliver the best long-term result."

Listing Dell’s focus on profitability as a secondary goal gives me the sense that companies that have strong supply chains need the volume to justify the investment in improving the supply chain. Going after profits or “profitability” in the broader sense of the word will impact the volume. However,  in a down market economy where you are a big player (like Nokia), the case might be different.