Dr Adah-Kole Onjewu discusses the process of assessing failure and success with Neill Ricketts, CEO of Versarien.
In the video, Dr Adah-Kole Onjewu discusses the process of assessing failure and success with Neill Ricketts, CEO of Versarien – building on the tasks you’ve undertaken in the previous steps.
An improvement in performance may appear impressive until managers realise that competitors are improving at double the rate.
Also, a catastrophic decline in profits could be the result of an unavoidable environmental circumstance (like war, volcanic eruptions, Brexit etc.), and not because of strategic drift. However, cost leaders and companies with differentiation advantage will have deep pockets to survive such problems better than their competitors.
As already discussed, it is not always possible to directly compare organisations because they do not operate in the same way, nor do they offer the same range of products to the same markets. However, managers must try to access industry average figures and use these as a general basis for comparison.
Every industry comprises leaders and followers and the former provides benchmarks for the latter. In the auto industry, most car makers look at Toyota as the standard against which to measure their efficiency. The same can be said of Apple in the mobile phone market and Ryanair in the low-cost travel business.
To conclude, the purpose of analysing the financial statement of Versarien or any other organisation is to draw conclusions about its performance.
In Versarien’s case, you have the benefit of qualitative and quantitative data to contextualise the company’s low or delayed profitability. Managers live and die by their ability to process and present this context to stakeholders in a persuasive way.
Your analysis of Versarien’s performance will differ from the opinion of other students because there are no right or wrong answers to strategic questions. In assessing failure and success, everything is relative but your contextualised arguments must stand up to stakeholders’ scrutiny.
The key to interpreting financial statements is to find patterns and articulate them in simple language. Has there been an increase, decrease, rise, fall, flattening or drop in revenues?
What are your final thoughts about Versarien’s performance? Discuss in the comments area.