Verum Insights...

“no forces interfere with the process of entry by competitors, profitability will be driven to levels at which efficient firms earn no more than a “normal” return on their invested capital. It is barriers to entry, not differentiation by itself, that creates strategic opportunities.”

“Operational effectiveness can be the single most important factor in the success, or indeed in the survival, of any business.”

“We put all the assets required at about 15 percent of sales. Spontaneous liabilities (meaning accounts payable, accrued wages and taxes, and other non-interest-bearing obligations) finance a third of the assets.* That leaves capital requirements at around 10 percent of sales. With operating margins at 12–13 percent, the pretax return on capital amounts to 120–130 percent. Even if the investments requirements were twice our estimate, the pretax return on capital would be 60 percent or more. Given the steadiness of the revenues, the networks could easily finance their operations with half debt, half equity. The debt would provide a tax shield to keep the after-tax return on equity capital in the stratosphere. TABLE 10.2

Estimated balance”

“As any family with children knows, it is far easier to buy kittens and puppies than to drown them later. In”

“If no forces interfere with the process of entry by competitors, profitability will be driven to levels at which efficient firms earn no more than a “normal” return on their invested capital. It is barriers to entry, not differentiation by itself, that creates strategic opportunities.”

“keep in mind Einstein’s admonition that “Everything should be made as simple as possible, but not simpler.”