Industry Flashcards
(138 cards)
1
Q
What are oil and gas customer segments?
A
- Petroleum refiners
- Domestic and commercial users
- Electricity generators
- Governments
2
Q
What is OPEC?
A
Organization of the Petroleum Exporting Countries
Controls oil prices
3
Q
What is PV-10?
A
Estimated future earnings based on reserves with 10% discount rate
4
Q
What are upstream, midstream, and downstream?
A
- Upstream: Drilling and extracting raw oil (usually contracted out)
- Midstream: Transporting the raw oil
- Downstream: Refining and selling the finished petroleum products
5
Q
What is fracking?
A
Injecting liquids into rocks to extract oil and gas
6
Q
What are renewables?
A
Solar, wind, hydropower, biomass, geothermal
7
Q
What are oil and gas revenue streams?
A
- Upstream: Crude oil price
- Midstream: Transportation fees
- Downstream: Sale of gasoline, oils, fuel, refining products like lubricant, gas stations (and associated sales)
8
Q
What are oil and gas cost drivers?
A
Upstream
• Exploration (e.g., land leases)
• Rig rates (usually daily) & rig utilization
• Drilling and extraction equipment & labor
Midstream • Crude oil • Storage • Transportation • Pipeline construction
Downstream
• Crude oil
• Refinery equipment & labor
Overall
• High investment costs
• Sales and marketing
9
Q
What are oil and gas risks?
A
- Access to reserves
- Energy policies
- OPEC decisions
- Political pressures
- Substitutions/ renewables
- Spills
10
Q
What are oil and gas channels?
A
- Retail
- Wholesale
- Commercial
11
Q
What are key economic drivers of oil and gas?
A
Government regulation
International oil product demand
12
Q
What are key energy cost drivers?
A
- Transportation / Distribution costs
- Storage Costs
- Production Costs: Labor + Materials
- Plant Development Costs
- Depreciation & Taxes
- Overhead
13
Q
What are key trends in oil and gas?
A
- Price volatility
- Technological innovation to unlock shale gas
- New market entry
- New sources of supply
- Heightened focus on sustainability
14
Q
What is consolidation in airline industry?
A
Bringing the weaker airline’s assets and infrastructure into the stronger airline then consolidates and enhances the stronger airline’s market position
15
Q
What are key ideas in the airline industry?
A
• Consolidation in industry
• Low cost carriers and fare competition on
competitive routes
• Online booking and check-in
• Expansion of domestic and international routes
• Capacity optimization (Load Factor)
16
Q
What is capacity optimization and load factor in the airline industry?
A
An airline’s capacity utilization measures how efficiently an airline fills seats on its planes. We use airline’s load factor (passenger-miles as a proportion of available seat-miles) to proxy for capacity utilization.
17
Q
What are revenue streams in the airline industry?
A
• Ticket sales to economy and business
passengers
• Charges for baggage and on-board services (upselling)
• Cargo transportation and fees
• Credit cards
• Value-added services (food & drinks, WiFi, extra legroom, etc.)
• In flight purchases (e.g., food and beverages,
entertainment)
• Tiered amenities (e.g., extra leg room seats)
• Ancillary revenue (e.g., reservation changes)
18
Q
What are key cost drivers in the airline industry?
A
• Gate leases • Fuel • Aircraft leases • Insurance & Legal fees • Maintenance / equipment • Crew & ground staff salaries • In flight consumables (e.g., food and beverages, entertainment) • Marketing • Technology (e.g., booking system)
19
Q
What are customer segments in the airline industry?
A
- Leisure travelers – (generally price sensitive)
- Business travelers – (very important to airlines due to margins and services purchased)
- Freight/Cargo transportation
20
Q
What are channels in the airline industry?
A
Mobile apps
Airline websites
3rd party travel sites
Airline sales team: call centers, online, or kiosk
Travel management companies (TMCs) serving corporate clients, travel agents
21
Q
What are risks in the airline industry?
A
- Changes in fuel prices
- Macroeconomic conditions impact leisure travelers
- Competition, particularly from highly government-• subsidized foreign airlines
- Government regulation and equipment failure
- Labor unrest/strikes
22
Q
What are key economic drivers in the airline industry?
A
- World price of crude oil
- Trips by US residents
- Optimization of capacity
- Per capita disposable income
- COVID- 19
23
Q
What are key trends in the airline industry?
A
- Major consolidation within industry due to high fixed costs
- Rise in third party booking websites (e.g., Booking.com, Expedia)
- Airlines use rewards programs (miles) and partnerships with hotels, car rentals, and credit card companies to increase loyalty/differentiate
- Low-cost carriers ( e.g , Southwest, Spirit) creating price wars
- Reduce costs by fuel efficiency opportunities and route optimization
24
Q
What are key ideas in the automative industry?
A
- Automakers, Original Equipment Manufacturers (OEMs), Replacement Parts Production, Rubber Fabrication
- Highly capital and labor intensive
- Competition due to foreign automakers
- Unions
- Technology innovations such as electric vehicle and autonomous driving
25
Who are key players in oil and gas?
* BP
* ExxonMobil
* Marathon Petroleum
* Royal Dutch Shell
* Schlumberger
26
Who are the major players in the airline industry?
1. American Airlines
2. Delta Air Lines
3. United Airlines
4. Emirates
5. Southwest Airlines
6. China Southern Airlines
7. Ryanair
27
What are the revenue streams in the automotive industry?
* New car sales
* Auto part sales
* Services offered with vehicle purchase
* Financing
* Extended warranties
* Leasing
* Servicing
28
What are the cost drivers in the auto industry?
- Labor
- Materials
- Advertising
- Financing costs
- Recall costs
- Infrastructure costs
29
Who are the customer segments in the auto industry?
* Cars, vans, pickup trucks, and SUVs
* Personal car buyers
* Rental car companies
* Commercial purchasers
* Government purchasers
* Preferred employers
30
What are the channels in the auto industry?
- Automobile dealers
- Secondary automobile market
- Automotive parts/services outlets
- Direct to consumer
31
What are the risks in the auto industry?
- Globalization of the industry enables more ease of foreign competition
- Extensive competition impact on already low margins
- Changes in consumer trends and tastes
- Everchanging mobility industry
32
What are key economic drivers in the auto industry?
- GDP growth
- Disposable income growth
- Price of crude oil
- Steel prices
- Consumer confidence index
- Yield on Treasury note
- Shift towards electrification
33
What are key ideas in customer products and retail?
- Same store sales
- Sales per square foot
- Inventory management and turn-over
- Seasonality/recessions
- Digital marketing
- Private label vs. wholesale
- Direct-to-consumer vs. in-store/retail
34
What are key metrics in the retail industry?
• Sales per square foot
• Inventory turnover ratio: divide the cost of goods by average inventory for the same period
• Total revenue = traffic * conversion rate * basket
size * avg. price per item
35
What are revenue drivers for retail?
* Product sales (brick & mortar, online)
* Slotting fee
* Advertising
* Affiliate marketing / brand partnerships
* Cross-selling additional products and services
* Loyalty and rewards programs
* Conversion rate (visits vs purchases)
* Basket size (driven by consumer spending)
* Avg. price per item
* Margin retailer makes vs. distributor vs. manufacturer
* Other revenue (e.g., after sales services)
* Macro-economic health and disposable income
* New customers; existing customers
* Average spend per customer
* New channels
* Pricing power
36
What is a slotting fee?
A cost that manufacturers pay to place their products on retail shelves
37
What are cost drivers for retail?
* Cost of goods sold
* Returns
* Inventory management (warehouse, storage, and stock)
* Distribution
* Delivery and Transportation
* Labor (workforce, in-store employees)
* Real estate
* Online retail – technology cost
* Rent and utilities
* Marketing
* Influencers / Brand Ambassadors
38
What is basket size?
Number of items getting sold in a single purchase
39
What are customer segments in customer products and retail?
* Dependent on the type of product sold
* Income
* Socio-economic status
* Age
* Normal vs. inferior good
40
Who are the major players in CPG and retail?
* Amazon
* Coca-Cola
* Nike
* P&G
* Unilever
* Walmart
41
What are CPG and retail channels?
* Department Stores/Big box retailers
* Direct to Consumer
* Discount retailers
* Demographic retailers
* Brand websites
* 3rd party sellers (Amazon)
* E-commerce resellers
42
What are risks in the CPG and retail industry?
* Changes in disposable income
* Demand and supply issues
* Overstock
* Easy entry invites competition
* Change in consumer demand
* Increases in input costs
43
What are key economic drivers in CPG and retail?
* Consumer Confidence index
* Per capita disposable income
* International Export/Import
* Gross Domestic product/inflation
* Commodity prices (e.g. gold price for jewelry)
44
What are important trends and considerations in the retail industry?
* Seasonality is a big factor in retail sales – large portion of sales occur in holiday season / end of year
* Industry is very impacted by economic conditions
* Social media presence has a large impact on brand strength and perceptions, especially with growth of influencers
* Omnichannel retail is growing through e-commerce development or acquisition
* More private label products (i.e. Walmart brand instead of manufacturer brand)
* Use of big data to tailor the shopping experience – added focus on customer experience
45
What are key ideas in financial services industry?
* Consolidation/acquisitions
* Increased mobile banking and digitization
* Physical and digital channel innovation
* Customer attrition rate
* Offshoring of call centers and back-office functions
* Cross selling financial services
46
What are cost drivers for CPG?
* Cost of goods sold (raw materials)
* Manufacturing facilities (owned or leased)
* Packaging
* Distribution & inventory management
* Marketing
* R&D – new product innovation
* Environmental and regulatory costs
* Durables – spoilage
47
What are revenue drivers for CPG?
* Sales direct to consumer (higher margins)
* Sales to retailers (lower margins)
* Shelf placement in stores
* Packaging and price tiering
* Product mix (cannibalization vs. complementary products)
* Acquisitions
* Product sales (brick & mortar, online)
48
What are important trends and considerations in CPG?
* Discounts and price promotions have lowered margins
* Cannibalization can be a concern when introducing new products, so firms regularly rationalize brands
* Tariffs and regulations play a role in imports / exports and where the firm is manufacturing or sourcing
* Small firms compete via specialization or local targeting
* High buyer power for retailers (e.g., Walmart)
* Demand has recently increased for organic / socially minded companies
* In-store experiences are one way to increase direct to consumer sales
49
What are revenue drivers in financial services?
• Fixed or Variable Fees (trading commissions, M&A fees,
asset management fees, transaction fees, currency
exchange)
• Premiums – credit card APRs
• Locker rent
• Loan interest (Loan types: Real estate, Auto, Personal, Education)• Spread between interest rate charged and Fed rates
• Credit cards
50
What are cost drivers in financial services?
* Interest rates on deposits
* Branch and compliance costs
* Overhead costs: paper fee, error rate costs for manual processing
* IT (back-end processing, security, apps & websites)
* Real estate costs (physical branches)
* Labor (customer service commonly off-shored)
* Marketing
* Research (e.g., on securities)
* Losses on investments (e.g., loan defaults)
51
Who are major players in financial services?
* Bank of America
* BlackRock
* Citi
* Fidelity
* Goldman Sachs
* J.P. Morgan
* Wells Fargo
52
What are customer segments in financial services?
* Wealth: deposit balances, income
* By lifestyle: buying behavior
* Size: small businesses and consumers
* Age: under 35 adapt to technology better
53
What are channels for financial services?
* Savings and loan
* Credit union
* Traditional checking
* Online banking
* Microfinance
54
What are risks for financial services?
* Change in savings behavior
* Loan default
* Interest rate and federal funds rate changes
55
What are key economic drivers in the financial services industry?
* Consumer confidence
* Household debt
* Employment statistics
* Urbanization
* Home and car buys
* Disposable income
* Interest rate
* Government Regulation
56
What are key trends and considerations in the financial services industry?
* Use of AI / Blockchain to verify transactions
* Growth of mobile banking; disruption in the industry from Fintech and online banks
* Changing customer acquisition model increased emphasis on relationship building with customers
* Regulations within the industry e.g. Dodd Frank increased capital requirements for banks
* Changes in customer demographics creating a larger market for retirement products
57
What are key ideas in healthcare?
* Affordable Care Act
* Highly fragmented: Top 50 organizations account for 15% revenues
* Employers pushing health care costs onto employees
* Aging Baby Boomer population driving increased revenues
58
What are revenue drivers in healthcare?
```
• Hospital care
• Physician and clinical services
• Prescription drugs
• Dental services
• Risk stratification (insurance)
• Research, Technology, Equipment
• Collections from third-party payers (i.e. insurance
companies)
• Co-payments
• Government reimbursement (~50% of spend)
• Inpatient & outpatient treatment costs (without insurance)
• Insurance premiums
• Government subsidies
```
59
What are cost drivers in healthcare?
• Clinical care (impatient and outpatient services)
• Dependent on segment
• Significant costs related to new technology implementation
• Often inefficient organizational structures
• High upfront investment in hospital facilities and
equipment
• R&D costs
• Physicians (i.e. doctors & nurses)
• Medical suppliers
• Insurance (malpractice liability)
• SG&A
• Payouts to healthcare providers – insurance companies
often negotiate directly with healthcare providers on
reimbursement rates; billed price is typically paid at a
discount
• Re-insurance
• Other labor
60
What are customer segments in healthcare?
* Patients/consumers
* All generations and segments of the population require different products/services (age groups, geographic location, underlying health conditions)
61
What are healthcare channels?
* Hospitals
* Doctors offices
* Nursing homes
* Outpatient surgery centers
* Pharmacies
* Medical equipment
* Payer vs. Provider
62
What are key metrics of the healthcare industry?
Providers
• Bed capacity utilization
• # of deaths in surgery
• # of patients seen
```
Insurance
• # of doctor visits
• # of people employed
• Population age
• Total health expenditures
```
63
What are healthcare risks?
* Affordable Care Act (ACA) – changes in payment models (from fee for service to value-based care)
* Funding availability
* Integrated health systems – consolidation horizontally and vertically
64
What are key economic drivers in the healthcare space?
* Regulation for health medical insurance
* Federal funding for Medicare and Medicaid
* Aging population
* Advances in medical care and technology
65
What are key trends and considerations in the healthcare space?
• Market is slowly consolidating (the top 4 payers are 35%), with the rest fairly fragmented.
• Industry has been affected by healthcare reform increases in bottom-line due to pressure to eliminate / lower coverage caps,
reduce denials based on pre-existing conditions, and increase in the insured population
• Firms differentiate based on broader network coverage, lower administration fees, steeper discounts on provider charges, and add ons (e.g., case management)
• Price comparisons occur on exchanges / online marketplaces
• Aging population
• Payer consolidation
• Influence of technology on personalized medicine and prevention
• New R&D technologies driving specialization
66
Who are key players in the healthcare industry?
* Aetna/CVS
* CIGNA/ Express Scripts
* Blue Cross Blue Shield
* Kaiser Permanente
* Johnson & Johnson
* Pfizer
67
What are key ideas in the manufacturing and production industry?
* Direct-to-consumer
* Data driven analytics
* Sustainability
* Just-in-time (JIT) inventory
* Commodities
* Bottleneck
* Outsource
68
What are revenue drivers in manufacturing and production?
* Economies of scale
* Ingredient sourcing (location, quality)
* Contract production (loaning underutilized equipment)
69
What are cost drivers in manufacturing and production?
* Raw materials
* Labor & wages
* Capacity constraints
* Overhead
* Depreciation
70
Who are customer segments in manufacturing and production?
* Distributors
* Retailers
* Ancillary organizations in need of excess production capacity
71
What are risks of manufacturing and production?
• Savings dependent upon economies of scale and vendor relationships
• Changes in disposable income and consumer tastes
• Accurately forecasting demand and supply
Globalization creates cheaper overseas production
72
What are key economic drivers in manufacturing and production?
* Trade-war & tariffs
* GDP
* Changes in the supply of domestic natural resources
* COVID-19
73
What are key ideas in media and entertainment?
* Create, license and / or distribute content (TV shows, movies, music, news, video games, books, magazines, radio shows, advertising, etc.)
* Developing/acquiring multiple brands and multiple distribution channels
* Digitalization
* Corporate consolidation
74
What are revenue drivers in media and entertainment?
* Advertising (largest revenue category, especially for media, offered free to customers)
* Content sale/subscription
* Subscription fees
* Content licensing/distribution
* Merchandising
* IRL events/experiences (e.g., theme parks, concerts, etc.)
* One-time purchases
75
What are cost drivers in media and entertainment?
• Media production (e.g., studios, equipment, printing
presses)
• Marketing & distribution
• Investment in digital technologies
• IP/content acquisition/licensing
• Talent (e.g., actors, editors, writers)
• Other labor (e.g., sales staff)
76
What are customer segments in media and entertainment
```
Individual customers segmented by:
• Demographic
• Age
• Genre preferences
• Geography
• Traditional target TV demo: 18-49 year-olds
```
77
What channels do media and entertainment use?
* Cinema
* Traditional TV (broadcast & cable) and home video
* Internet advertising
* Video games and e-sports
* Book/magazine publishing
* Music, radio, podcasts
* Over-The-Top (OTT)
78
What risks are present in the media and entertainment industry?
* Tech companies pose competition for advertising
* Competition for best content/artists/IP
* Distribution of traditional distribution models
* Evolving consumer habits/preferences
79
What are key economic drivers in media and entertainment?
* The growth of streaming and mobile video
* Control/ownership of IP and artistic talent
* Piracy and copyright enforcement
* Platform-exclusive content
* Multi-channel franchises
* Royalties and monetization
80
What are key industry trends and considerations in media and entertainment?
* Most media has shifted to omnichannel presence
* Digital media has low barriers to entry, creates downward pressure on ad prices, and increases piracy risks
* Consumer and advertising spending is highly influenced by macroeconomic conditions
* Augmented reality / virtual reality technology
81
What are key ideas in the non-profit/social sector?
* Central mission/purpose (impact metrics) is more important than traditional business metrics (i.e., revenue, EBITDA)
* Target high-impact issues
* Can focus on micro, local issues or global problems
* Funding / scalability / sustainability
82
What are revenue drivers in the social sector?
* Grants
* Private donations
* Endowments
* Corporate sponsorships
* Services provided by organization to be reinvested in organization
* Ticket sales (for charity events)
* Memberships (for museums or other similar organizations)
* Tuition (for educational institutions)
* Government subsidies
83
What are cost drivers in the social sector?
* Labor (workforce, employees)
* Real estate
* Technology cost (website/app maintenance)
* Materials
* Administrative functions
84
What are important trends and considerations in the social sector?
* Growing emphasis on companies to incorporate more corporate social responsibility initiatives and non-profit arms into their organizations
* Growing emphasis on environmentally-conscious initiatives and sustainability
85
What are the key ideas for the pharma industry?
* Affordable Care Act
* Aging population
* Patents and generics
* Research & Development
* Insurance
* FDA
* Contract vs in-house salesforce
86
What are the revenue drivers for the pharma industry?
• Insurance payments
• Due to significant R&D lead times revenue is highly volatile
• Seasonality is high on certain products (vaccines and cold medicine) and low on other products (pain medicines)
• Drug sales – difference in price comes from OTC /
prescription drugs
• 3rd party payer reimbursement
• Government subsidies
87
What are cost drivers for pharma?
* Research & Development
* Marketing costs
* Wages
* Liability insurance and legal fees
* Regulatory and legal costs (e.g., patents, FDA)
* Manufacturing and production costs
* Distribution and sales
88
Who are customer segments for pharma?
* Medical patients
* Prescribing doctors
* Government insurance programs
* Health insurance companies
89
What are channels for pharma?
* Over the counter (OTC)
* Prescription drugs: Hospitals, pharmacies
* Mail order pharmacy: Express Scripts, Walgreens
* Provider offices/clinics
90
What are the risks for pharma?
* Generic manufacturers pose a major competitive threat following patent expiration
* Tariff barriers are no longer a relevant form of protection
* Unfavorable government healthcare regulations
91
What are the key economic drivers for pharma?
* Median age of population
* Research and development expenditure
* Insurance and regulatory landscape•
* Patent protection
* Innovation
92
What are pharma metrics?
• # of patented drugs
• Market sizing: total population à % with illness à
% diagnosed à market share of drug à price of
one dose * # of doses per year
93
What are key trends and considerations for pharma?
* High growth in emerging markets
* Patents protect drugs for up to 20 years
* First mover advantage is real
* FDA approvals last 5 years with a high failure rate of drugs – many drugs fail during three phases
* Increasing demand for pricing transparency
94
What are key ideas for PE and M&A?
* Exit: strategic or IPO
* Synergies
* Stability of cash flows (IRR, NPV)
* Strong management team
* Targeted returns ~ 40%+
* Un-invested capital vs. invested
94
What are key ideas for PE and M&A?
* Exit: strategic or IPO
* Synergies
* Stability of cash flows (IRR, NPV)
* Strong management team
* Targeted returns ~ 40%+
* Un-invested capital vs. invested
95
What are revenue drivers for PE and M&A?
```
• Components of the revenue charge
- Invested capital
- Transaction and advisory fees
- Carried interest
• Value creation: selling underperforming assets, pricing optimization, diversifying customer base, operations efficiency
• Revenue from the acquired firm
• Other consulting/advisory services
```
96
What are cost drivers for PE and M&A?
* Wages and profit-sharing
* Administrative costs (regulatory filings, record keeping, accounting and travel)
* Outsourcing of capital-intensive IT functions for algorithmic trading
* Deal Fees
* Overhead costs
97
Who are investors?
* Pension funds (largest share)
* Private investors (e.g. High net worth individuals)
* Banks, sovereign funds and life insurance companies
98
What are averages in the PE and M&A industry?
• Large firms focus on deals ~$1B; middle market firms cover deals between $15M - $1B
• Average holding period before sale has increased from 3 years to 6 years in the past 15 years
• Borrowing can typically range from 65% to 85% of the purchase price of the firm
• Fees on committed capital (0-3%, average 2%) – usually
needs to beat the hurdle rate* of 6-12% per year
• 20% gross profit upon sale of company
99
What are risks in the PE and M&A industry?
* New regulation 🡪 compliance costs, Rising competition 🡪 decreasing industry fees
* Competition also exists with sovereign wealth funds and corporate buyers
* Changes in tax structure
100
What are key economic drivers in the PE and M&A industry?
* Investor uncertainty/Pension demand
* Access to credit/interest rates
* Regulations
* Exit opportunities
* GDP/Investment returns
101
What are important considerations and trends in PE and M&A industry?
• Two main types of PE firms: active (give operational support to management and increase synergies) and passive (depend on management to grow company)
• Exit opportunities include selling its position to a competing firm or M&A with another company, putting its private companies
up for IPO, or shutting down and selling off assets
• PE firms create value through deal origination and execution, and through portfolio oversight and management
• Typical target companies for PE firms include:
• High potential companies (like a venture capital firm)
• Company with value tangible or intangible assets
102
What are key ideas in the restaurant industry?
* Newer “ fast-casual” restaurants threaten to steal market share from both QSR and full-service restaurants
* Implementation of technology to increase profitability
103
What are revenue drivers in the restaurant industry?
* Food and beverages (usually the higher-margin products)
* Merchandise
* Catering
* Franchising fees
* Licensing
104
What are the cost drivers in the restaurant industry?
* Labor
* Raw Material
* Real Estate
* Marketing
105
What are the customer segments in the restaurant industry?
* Preferred/loyal customer
* By location or neighborhood
* Purchase decision
106
What are channels in the restaurant industry?
* Dine-in
* In-house Delivery
* Outsource Delivery
* Pick up
107
What are risks in the restaurant industry?
* Maintaining a safe environment for employees, contractors, and other visitors
* Wage and hour lawsuits
* Liquor liability
* Food allergies
* Food-borne illness/contamination
108
What are key economic drivers in the restaurant industry?
* GDP growth
* Consumer Confidence index
* Per capita disposable income
109
What are the key ideas in the tech industry?
* SaaS
* Software
* Hardware
* Digital
* AI, Could, IoT, Blockchain
110
What are the revenue drivers in the tech industry?
* Advertising and data collection (services offered free)
* Subscription
* Direct sales
* Service fees
* Licensing fees
111
What are cost drivers in the tech industry?
* Product development
* R&D for innovation
* IT infrastructure
* Customer acquisition
* Traditional costs (physical stores, inventory, labor are very low)
* Wages and human capital
112
What are the customer segments in the tech industry?
* Individual user
* Corporations
* Professional service providers
113
What are the channels in the tech industry?
* Online / e-commerce
| * Retail
114
What are risks in the tech industry?
* Competition
* Innovation
* Piracy
* Privacy
* Patent expiration / generics
115
What are key economic drivers in the tech industry?
* Overseas production efficiencies
| * Trade-wars and tariffs
116
What are important trends and considerations in the tech industry?
* Innovation in the industry has reduced product life spans and increased obsolescence
* Firms are trying to create ecosystems (e.x. Google Home, Amazon Echo)
* Businesses want dynamic software with low implementation costs
* Software sales are highly dependent on network effects
* Key Terms: Internet of Things, cloud computing, Blockchain, AI / Machine Learning, GDPR, SaaS, Intellectual Property (IP), Freemium
117
What are key ideas in telecomm?
* Deregulation led to spur of new companies
* Bottlenecks: High capital, scarce operating skills and management experience
* Shift from telephones to internet-based services for mobile
* Bundling of services
118
What are revenue drivers in telecomm?
* Voice calls
* Additional lines/family plans
* Text and image communication
* Data subscriptions
* Bundling with video, music & games content
* Value Added Services
119
What are cost drivers in telecomm?
* Infrastructure
* Frequency licenses
* Wages
* Marketing and advertising
120
Who are customer segments in telecomm?
* Retail/individual customers
* Residential and Small Business (Price sensitive)
* Large multinationals (Price insensitive)
121
What are channels in telecomm?
* Retail stores - carriers and mass retailers
* Direct sales force
* Online
122
What are risks in telecomm?
* Rapid development of technology
* High exit barriers
* Systems not reusable across industries
* Commoditized services
123
What are key economic drivers in telecomm?
* Investment in rising technology services
* Number of subscriptions to additional services
* Number of broadband and mobile internet connections
124
Who are the major TMT players?
* Apple
* AT&T
* Comcast
* Disney
* Facebook
* Google
* IBM
* Microsoft
* Netflix
125
What are the key ideas in the utilities industry?
* Increase in energy consumption
* High investment costs and regulations
* Industry structure is disintegrating into smaller supplier segments
* Seasonality
* Gov. incentives for sustainable initiatives
* Bundling services with renewable
126
What are the revenue drivers in the utilities industry?
* Transmitted electricity: baseload and intermittent electricity
* Baseload (95% of industry)
* Coal, natural gas, nuclear, other
* Intermittent: renewable energy
127
What are cost drivers for the utilities industry?
```
• Purchased power accounts (nearly half of total cost)
Infrastructure
• Wages
• Marketing
• Maintenance contracts
```
128
What are the customer segments for utilities?
* Commercial and Industrial
| * Residential
129
What are the channels for the utilities industry?
* Transmission lines/pipelines
| * Upstream electricity generators
130
What are the risks for the utilities industry?
* Clean energy threatens the future of traditional power generation methods
* Seasonal demand leads to uncertain estimates
* Energy efficient appliances decrease consumption
131
What are the key economic drivers for the utilities industry?
* Economies of scale
* Industrial production index
* Climate/seasonality
132
What are industrials?
Provides products and services primarily used to produce other goods. Main sectors include electrical equipment / components, heavy machinery, construction, and aerospace and defense. Main customers include the government, OEMs, and B2B. Market is very
consolidated, functioning as an oligopoly
133
What are revenue drivers for industrials?
• Volume (driven by product type and demand)
• Contract length
• Bundling of product and services (e.g. maintenance
package)
• Customization (made to order vs. large batch)
• New technologies and products (automation)
134
What are key cost drivers for industrials?
* Manufacturing – capital intensive (can be leased / owned)
* Raw materials
* Labor – often unionized
* R&D
* Marketing & trade shows
* Distribution & inventory management
135
What are key revenue drivers for industrials?
• Volume (driven by product type and demand)
• Contract length
• Bundling of product and services (e.g. maintenance
package)
• Customization (made to order vs. large batch)
• New technologies and products (automation)
136
What are key metrics for industrials?
* Capacity utilization
* Inventory turnover
* Book-to-bill ratio
137
What are important considerations and trends for industrials?
* Tied to gross domestic product (GDP) growth, production and capacity utilization, and economic indicators
* Greatly impacted by recession, as drop in overall capital and construction spend decreases
* Local assembly is cheaper because it’s easier to ship
* Push to just-in-time inventory
* Often commoditized, with high switch costs
