RISK FACTORS STUDENT ORGANIZER:

  1. Profitability: Is the company making a profit?

  2. Product: Does the company have a successful product?

  3. Market: Does the company have a large share of the market?

  4. Competition: Are other companies creating similar or better products?

  5. Management: Does the company have strong leaders?

Company A: Company B:
Company A makes low-cost PCs. It was one of the first companies to make a low-cost PC, and it was very popular 10 years ago. However, it is starting to struggle because it is not keeping up with current technological advancements. Company B makes cell phones that also play music and movies. The company has developed a design that means the phone can come in many different shapes and sizes, and is very inexpensive to produce.
After 10 years of high profits, this company is starting to make less money. It's still profitable, but the profits aren't increasing each year as they had previously. With its new design and lower prices, Company B is starting to see its profits soar. The company is selling its new phones as fast as they can make them.
Company A's low-cost PC is falling in popularity because it does not have compatible software for downloading music or making digital movies, it only has "office" software like word processing and spreadsheets. Company B's phones are extremely popular because of the new design. In fact, it has become a fad in most high schools to own this type of phone, and some people are buying two or three of them at a time.
Company A's share of the low-cost PC market is falling because consumers are choosing to buy computers that have the capability to download music. Because customers buy Company B's phones, they are not buying other phones, so Company B's share of the cell phone market is increasing.
The other low-cost PC makers have been able to sell their computers with compatible software for downloading music and making digital movies. No other cell phone company has been able to come up with a similar innovative design, or low-cost means of production. For this reason, no other company is competing very well with Company B.
Company A just hired a new CEO to help improve the company. The CEO previously was the head of a chain of restaurants, and knows nothing about the computer industry. Company B has a strong management in place, with managers who have worked in the cell phone industry and are also innovative thinkers. The company plans to keep the same management it place.