=+20-29 KKK Evaluating managers, ROI, DuPont method, value chain analysis of cost structure OBJECTIVE 3 Almond Phones Ltd is the largest mobile phone company in the world. The CEO of Almond Phones Ltd is retiring and the board of directors is considering external candidates to fill the position. The board’s top two choices are Shelley McKay (current CEO of Connect) and Jayson Dren (current CEO of Mobton). As a board member on the search committee, you collect the following information (in millions):

$76.5

$371.5

$8.6

$250.4 55.5 121.5 115.2 55.2 347.4 1

2 3

4 5

6 7

8 9

10 11 A B C D E 2014 2015 2014 2015 Revenues $668 $356 $585 Costs D&R 60.3 93.2 92.5 Production 145.6 170.3 150.1 Marketing and distribution 185.4 211.3 176.4 Customer service 80.4 63.8 88.8 Total costs 503.9 505.7 508.5 Operating profit $162.3 Total assets $601.5 Connect

$251.1

$685.2

$755 Mobton In early 2015, a leading electronics magazine gave Mobton’s main product five stars, its highest rating. Connect’s main product received three stars, down from five stars a year earlier. In the same article, Mobton’s new products received praise; Connect’s new products were judged as ‘mediocre’.

Required 1 Use the DuPont method to calculate Connect’s and Mobton’s ROIs in 2014 and 2015. Comment on the results. What can you tell from the DuPont analysis that you might have missed from calculating ROI itself?