The purpose of this note is to consider the decisions that firms’ leaders make about the scope of their business. It examines three companies–Domino’s Pizza, General Mills, and General Electric–who define their businesses in different ways and asks students to evaluate them from the perspective of a potential investor. They should consider the following: What does the company do? What does it sell, and how does it make money? Does the company operate in more than one line of business, and why? Which of its products or businesses make money? What are its prospects for the future? Why does each company exist in its form (i.e. Why are their lines of businesses under the control of one firm)? This short note gives students an introduction to thinking about firms from a managerial/strategic level.
Note on Setting the Scope of Your Business
by: Scott Moore
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After reading and discussing the material, students should:
- Understand how different firms can make vastly different decisions related to the scope of their business.
- Describe how scope-related decisions made by the executives at Domino's, General Mills, and General Electric have affected their past profitability and future opportunities.
- Understand how financial ratios can be used to gain insight into a firm's operations.