Corporate Sales Research Articles

Monsanto, ICI agree on glyphosate patents

Monsanto and ICI have reached a settlement that protects Monsanto's patents on glyphosate, the active ingredient in its premier herbicide, Roundup, but gives a license to ICI to sell its own version of a glyphosate herbicide in the U.S. beginning in the 1990s. The settlement stems from a patent infringement suit filed by Monsanto in 1983 against Stauffer Chemical, which had begun marketing an herbicide called Touchdown. Stauffer's agricultural chemicals unit and its Touchdown business were acquired by ICI last year. The case was important to Monsanto because its crop chemicals unit, although supplying just 15% of corporate sales in 1987, contributed almost 49% of operating income. Roundup sales and income are major factors in these numbers. As part of the settlement agreement, the Federal District Court in St. Louis has entered a final judgment decreeing that Monsanto patents involved in the suit are valid, enforceable, and were infringed on by Stauffer's Touchdown herbicide. However, ...

SECURITY PRICE REACTIONS AROUND PRODUCT RECALL ANNOUNCEMENTS

AbstractThis study presents an empirical, event‐time analysis of the financial impact of product recall announcements on the equity holders of affected firms. Product recalls convey relevant information to the market at the time the announcement is reported in The Wall Street Journal. Further, security prices continue to react significantly to product recall announcements for approximately two months following the initial news release. No relation between the firm's equity decline and the direct costs of the recall is found, indicating the importance of indirect costs such as litigation or a reduction in future corporate sales due to reputation damage.

SECURITY PRICE REACTIONS AROUND PRODUCT RECALL ANNOUNCEMENTS

This study presents an empirical, event-time analysis of the financial impact of product recall announcements on the equity holders of affected firms. Product recalls convey relevant information to the market at the time the announcement is reported in The Wall Street Journal. Further, security prices continue to react significantly to product recall announcements for approximately two months following the initial news release. No relation between the firm's equity decline and the direct costs of the recall is found, indicating the importance of indirect costs such as litigation or a reduction in future corporate sales due to reputation damage.

A Note on Relevant Comparisons of Corporations and Countries

Abstract. Attempts to compare the magnitude of corporations and countries are frequently biased by the use of inconsistent measures. While Gross National Product reflects the output obtained from a nation's land, labor and capital resources, corporate sales reflect not only the firm's output but also that of its suppliers. A more realistic picture can be obtained by comparing corporate value added to national output. While available information permits only an approximation of the former, it appears that the average company is responsible for less than 50 percent of the value of the product it sells. The basic conclusion that some firms are in this sense comparable to Nation‐States remains valid. However, the rank of the largest companies relative to countries is reduced substantially.

Regulatory and Life Cycle Influences on Managerial Incentives

An important controversy persists in economics concerning the appropriateness of profit maximization as opposed to various competing nontraditional theories of the firm [13]. Of particular interest has been the comparative relevance of the sales maximization hypothesis suggested by Baumol [4] and others. A typical methodology employed to empirically analyze the profit versus sales maximization issue has been to question whether the financial rewards of top executives are more strongly influenced by corporate profit or sales performance. It is implicitly assumed that the firm has a well-defined set of organizational goals and that the structure of executive compensation is designed to provide executives with a consistent set of incentives. Therefore, should profit performance constitute a significant determinant of executive compensation, support for the profit maximization hypothesis would be gained. On the other hand, if executive compensation is closely related to firm sales, then the nontraditional sales maximization hypothesis would be supported. In an early empirical analysis of the issue McGuire, Chiu and Elbing [14] found that sales and compensation were more highly correlated than were profits and compensation and, therefore, that the Baumol hypothesis seemed most relevant. Lewellen and Huntsman [12] pointed out, however, that McGuire, et al., had neglected to consider the deferred and contingent (stock options, etc.) elements of executive compensation and in so doing had perhaps biased their analysis against the profit maximization hypothesis. By correctly considering the impact of corporate performance on the total compensation of top corporate executives, Lewellen and Huntsman found strong support for the profit maximization hypothesis, and no support for sales maximization. In fact, so convincing were the Lewellen and Huntsman results that they seemed to resolve the managerial motivation issue in favor of the traditional profit maximization model. More recent empirical analyses, however, have tended to suggest that the issue is far from resolved. Baker [3], Boyes and Schlagenhauf [5], and Ciscel and Carroll [6] have all

SELECTING A FORECASTING TECHNIQUE WITH THE AID OF SIMULATION

During recent years a number of techniques have been developed to aid in the forecasting of corporate sales, individual product demand, economic indicators, and other related series. These techniques have included classical time series analysis, multiple regression and adaptive forecasting procedures. As a result of these developments, the individual company and decision maker is faced with the task of selecting the forecasting technique that is most appropriate for his situation. This article reports research conducted at INSEAD on how simulation can be used to compare and evaluate alternative forecasting techniques for a specific application.

Vertical Integration by Corporations, 1929-1965

W HEN the surface of the economist is 14/1 7 scratched we generally find a belief that vertical integration in the corporate sector has increased during the past few decades, if not longer. This proposition, however, has not been put to a rigorous empirical test for the entire corporate sector. According to Professor Bain, We must, in the present state of knowledge, confine ourselves to a few remarks based on miscellaneous scraps of evidence. I In this note a measure of vertical integration in the corporate sector is developed. The measure is calculated for the year 1929 and for the period 1948 through 1965. The conclusion reached on the basis of this empirical evidence is that there has not been any discernible increase in the degree of vertical integration in the corporate sector. If anything, there might have been a slight decline. The index we use is the ratio of corporate sales to gross corporate product standardized to abstract from the changes in output mix. A rise in this index implies a decline in corporate vertical integration and vice versa.2 Because industry sales data are on a consolidated basis by corporation and most of the gross corporate product is on an establishment basis, this series reflects a preponderance of any general movements on the part of corporations to merge with suppliers or customers. If, for example, firm A has a gross corporate product of 500 and sales to firm B of 1000 (firm A's purchased material inputs are 500) and firm B has a gross corporate product of 500 and sales of 1500, then total corporate sales for both firms equal 2500 and total gross corporate product equals 1000. In this instance the ratio of sales to gross corporate product equals 2.5. If these two firms merge, total corporate sales will then be 1500 and gross corporate product will still be 1000. The new ratio of corporate sales to gross corporate product will be 1.5. Vertical integration has caused a decline in our ratio. As is readily aDDarent. neither pure horizontal integration nor a pure conglomerate movement will affect our ratio.3 There are natural differences among industries which preclude the meaningfulness of comparing the degree of vertical integration in one industry with that of any other industry. Thus a corporation in the service or mining industry will naturally have a much lower sales to gross corporate product ratio than a corporation in the retail or wholesale trade industry. If the proportional mix of total gross product is changing, we could very easily find a change in the aggregate sales to gross product ratio without any changes in this ratio for any specific industry. Any conclusions about changes in the ratio which are due to such changes in the proportional mix implies interindustry comparisons. In order to avoid the mix problem we calculate the aggregate ratio using the proportional mix of one base period. More explicitly our methodology is as follows: For any year t, total corporate sales, St, is equal to the sum of total corporate sales for each industry i. Thus,

A model for corporate growth by new product research productivity

A highly simplified model for growth of corporate sales resulting from new product research shows that investment of a fixed annual fraction of profits in new product research and development leads to a feedback effect on growth. When the parameter β(k + S γ ) exceeds unity, annual sales grow exponentially. For values less than unity, sales reach a steady annual value. The factors in this critical parameter are: β = (total sales of new products)/(dollar of total sales) γ = (sales per old product item)/(sales per new product item) k = years life as a new product S = additional years life as an old product. The qualitative principles involved are of general validity. Although too crude for quantitative prediction of individual product return, the model may have rough quantitative value for whole businesses or large product classes.

Sensitivity of Corporate Sales to Income Changes

The sensitivity of corporate sales to changes in income levels is a useful and basic concept. This article develops—for a broad range of industries—the historical, long-range pattern of fluctuations in corporate sales associated with fluctuations in disposable personal income. If also suggests further use of such income sensitivity of demand coefficients for various inter-industry comparisons.

Sensitivity of Corporate Sales to Income Changes

Sensitivity of Corporate Sales to Income Changes