Thursday, June 4, 2009

Competition eating Margins

Most people reading this blog would have seen a lot of posts discussing competition in business. Let me discuss an example of Finolex Cables. Following table shows revenues and profits of the company over last 13 years:
















YearRevenueProfitsMargin
1996514.155.110.71%
1997480.648.410.07%
1998460.948.610.54%
1999465.66213.31%
2000576.170.112.17%
2001627.972.511.55%
2002675669.78%
2003518.924.74.76%
2004568.929.65.2%
2005670.130.84.6%
2006889.950.45.67%
2007114081.187.12%
20081417.988.916.27%
TTM1463.41-28.23-1.93%


It is clearly seen that during the last business cycle of 1996-1997 the margins were in double digits but the margins started collapsing in 2003, both due to competition and increase in raw material prices. Even at the peak of business cycle in 2007, margins never went up to the last business cycle. This is due to newer players like KEI, Diamond Cables, Delton Cables and Paramount Communications etc. eating into Finolex brand.
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