Forward Integration [ Definition, Examples, Advantages & Disadvantages ]

Before we begin to understand forward integration, we need first to understand vertical integration because forward integration is essentially a type of vertical integration. Put simply, vertical integration is a business strategy wherein a company expands its operation within its supply chain, primarily through acquisitions. The direction in which the company grows through vertical integration can either be forward or backward. Forwards Integration, a type of vertical integration, happens when a company moves forward in the supply chain by acquiring or merging with a company on the distribution or retail end. To better understand how Forward Integration exactly works, let's check...

Year-Over-Year [ Definition, Example, Pros & Cons ]

Let's suppose that Company A reported revenue of $50000 in 2020 and $25000 in 2019.  To calculate year-on-year growth, one would have to use the following formula: In the case of 'Company A' example, we would substitute the following values in the formula: As per the calculation, Company A had a year-on-year growth of 100%. As you must have figured out by now, year-over-year analysis entails comparing the performance of one period with the same period. The period comparison made during the Year-over-Year analysis could be annual, quarterly, or monthly. In most cases, year-on-year analysis is used to assess the financial performance of...

Interest Coverage Ratio

The interest coverage ratio is a quantity that is used to evaluate the financial health of a company. It is calculated by dividing the earnings of a company (before interest and taxes) by the amount of interest the company is required to pay over a fixed time period. It can be calculated using the formula, text{Interest Coverage Ratio}= frac{text{Earnings before interest and taxes(EBIT)}}{text{Amount of interest to be paid by the company}} We can calculate the EBIT of a company by subtracting the expenditure of the company from the total revenue. The interest coverage ratio is also known as the Times Interest Earned ratio...

What are Barriers to Exit & Types of Barriers to Exit

Let's suppose that an airline has been incurring recurring losses and wants to shut shop to avoid further losses. However, the airline owes a considerable amount of debt to its investors, using whose money the airline purchased airplanes in the first place.  Scraping the airplanes would not give enough return on their original value. Another airline looking to amp up its fleet numbers would be ideal to buy the planes. But finding such a buyer when the struggling airline is looking to exit the business would be an uphill task. If the airline doesn't find a buyer, it would have...

What are Barriers to Entry & Types of Barriers to Entry

Let's suppose someone wants to start a lemonade stand. Getting one up and running would be relatively easy and within the financial reach of the majority of the population. In this case, one could say that the barriers to entry to starting a lemonade stand business are low. On the other hand, if you wanted to start a new airline, getting one up and running would be relatively more difficult than starting a lemonade stand and outside the financial reach of the majority of the population. And say even if you had the financial resources needed to create an airline,...

Amazon Unbound Book Summary

In 2014, Brad stone published 'The Everything Store: Jeff Bezos and the Age of Amazon,' chronicling Amazon's journey from its inception until the year of publishing. In 2021, Brad Stone released another book, Amazon Unbound: Jeff Bezos and the Invention of a Global Empire, chronicling Amazon's growth from 2014 to 2021. Both books are essential reading for those who want to make sense of Amazon's all-encompassing and, at times, perplexing business. I read 'The Everything Store,' Stone's first book on Amazon, and made a book summary in Dec 2020. So, when Stone released 'Amazon Unbound' in May 2021, I decided to read...

Instagram Business Model Case Study

In April 2012, Facebook acquired Instagram for a then-unprecedented $1billion. At the time of the acquisition, Instagram was growing fast, but it had only 25 million registered users — minuscule compared to Facebook's hundreds of million users. To top it off, Instagram was not bringing in any revenue; it was being run by 13 employees and only two years old. Before Facebook closed the deal, even Twitter had tried its hand at courting Instagram. But Instagram's founders, Kevin Systrom and Mike Krieger decided to go ahead with Facebook because other than the massive sum of money, Zukurberg dangled the carrot of independence. If Instagram...

Indiegogo Business Model Case Study

Until the first decade of the 21st century, the traditional model of raising money to start a business included either borrowing money from a bank in exchange for collateral or convincing venture capitalists your idea was worthy of investment in exchange for equity. Even though these models had their own set of pros and cons, both rested on the assumption that the business will most likely succeed, moving customer validation, if not entirely, then for the most part, to a post-launch date. However, Indiegogo's entrepreneurial crowdfunding model flips the traditional fundraising model on its head. Under the Indiegogo Model, aspiring...

GoFundMe Business Model Case Study

The first noteworthy instance of crowdfunding on the internet occurred in 1997 when fans of the British rock band Marillion raised US$60,000 to fund an entire U.S. tour. Crowdfunding, as a concept, had existed before, but the advent and the subsequent popularization of the internet helped it reach an unprecedented number of people.  It would still take more than a decade since 1997's Marillion crowdfunding campaign for the birth of crowdfunding companies like GoFundMe & Kickstarter, both of which are now giants of the crowdfunding space. With time, the causes for which people began raising money using the internet also diversified. Today, we see crowdfunding...

Ketto Business Model Case Study

In 1885, the Statue of Liberty was shipped from France to the US. Designed by a French sculptor named Frederic Auguste Bartholdi and paid for by the French government, the Statue was to be a diplomatic gift to the US.  But when the Statue arrived in New York, it was in pieces, awaiting assembly. The Statue's granite plinth, the base upon which it was to stand, required $250,000, a large sum at the time. The American Committee of the Statue of Liberty, a group tasked with raising the amount necessary, fell short by more than a third. Grover Cleveland, then New...