Managers face a key challenge: to simultaneously generate high profitability and increase the profits of the company. Companies that have high profitability but profits that are not growing will not be as highly valued by shareholders as a company that has both high profitability and rapid profits growth. This was the situation that Dell faced in the later part of 2000s. As a result its shares lost significant value between 2017 and 2021. At the beginning of 2017 Dell shares were trading at approximately $27. By the end of 2021 they were trading at about $ 14 though the company was still profitable, Dells shares had lost almost half of their value because it was not growing its profits over time. At the same time managers need to be aware that if they grow profits but profitability declines, that too will not be highly valued by shareholders. That what the shareholders want to see and what managers must try to deliver through strategic leadership is profitable growth. That high profitability and sustainable profit growth is not easy but some of the most successful entrepreneurs of our Era have achieved it- companies such as Apple, Google and Walmart’s From the above case: Discuss the concept of sustainable competitive advantage and advice Dell how they can sustain profit growth using TWOstrategic management tools.
Managers face a key challenge: to simultaneously generate high profitability and increase the profits of the company. Companies that have high profitability but profits that are not growing will not be as highly valued by shareholders as a company that has both high profitability and rapid profits growth. This was the situation that Dell faced in the later part of 2000s. As a result its shares lost significant value between 2017 and 2021. At the beginning of 2017 Dell shares were trading at approximately $27. By the end of 2021 they were trading at about $ 14 though the company was still profitable, Dells shares had lost almost half of their value because it was not growing its profits over time. At the same time managers need to be aware that if they grow profits but profitability declines, that too will not be highly valued by shareholders. That what the shareholders want to see and what managers must try to deliver through strategic leadership is profitable growth. That high profitability and sustainable profit growth is not easy but some of the most successful entrepreneurs of our Era have achieved it- companies such as Apple, Google and Walmart’s
From the above case:
Discuss the concept of sustainable competitive advantage and advice Dell how they can sustain profit growth using TWOstrategic management tools.
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