Syco_ case study answers by taranzat2

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									Case Scenario: Syco.

Copyright: Taranjeet Gill MBA

Syco is a diversified company that has six primary lines of business. Fifty percent of its
revenues and 18 percent of its profits come from retailing. Most of its retail outlets are
discount department stores that serve as anchor tenants for large suburban shopping malls.
The remaining businesses are broken out as follows: Insurance accounts for 30 percent of
revenues and 50 percent of profits; consumer credit card operations are 6 percent of sales and
17 percent of profits; 5 percent of revenues and 6 percent of profits come from its stock
brokerage business; commercial and residential real estate operations generate 4 percent of
sales and 8 percent of profits; finally, 5 percent of revenues and 1 percent of profits come
from its online portal business. The company’s management states that all these businesses
are essential to its competitive future.

[a] Why might there be so much variability among the proportion of sales versus
profitability contributed by each of the businesses? Does this mean that Syco is more
successful in its insurance business than in its retail business?

Syco operates 6 different businesses with variability in proportions of revenues and profits.
Even though retailing is the core business with highest revenue, it has lower profit margin
compared to other diverse businesses that Syco has because of the nature of the business. The
variability in profit margin is attributed to operating cost. Some are services (insurance, stock
brokerage, credit cards and online portal) with low fixed cost and some are product based
(retailing and real estate) with high fixed cost. For re
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