Textron Case
Textron Case
1) How does Textron make money?
Textron is able to make money as a result of 4 defining aspects of its business model: a. Textron is a conglomerate: by purchasing a variety of companies, Textron is able to share technology between its business units thus increasing its competitive advantage in these respective units. For instance, lessons learned in aerodynamics at Bell Helicopters can be used in the construction of aircraft at Cessna. Additionally, because of Textron 's size, it increases its buyer power and can take advantage of economies of scale when purchasing from the common suppliers across business units. b. Diversification: Textron has purchased a variety of companies that complement one another such as different target markets (regular consumers vs. government consumers) and both high and low priced products (ex: hardware tools vs. private jets). Thus, like a well diversified stock portfolio, Textron is able to hedge its exposure to risk between its various business units (if one industry performs poorly one year, another industry may fair better). c. Vertically integrated: in Textron 's history it "developed a vertically integrated company that controlled every operational aspect of the business from raw goods to processing to distribution". Thus, it has been able to control the costs of many aspects of its business d. Finance business unit: Additional revenue is generated through the earned interest from customers who purchase credit from Textron in order to purchase Textron products. This revenue stream keeps customers in the Textron environment instead of losing customers to other credit-granting financial institutions. This Textron environment also: * Creates a "one-stop-shop" that can increases Textron 's stickiness to its customers (also increase customer retention), which may lead to longer and stronger customer relationships. * Creates flexibility since Textron can offer more
1) How does Textron make money?
Textron is able to make money as a result of 4 defining aspects of its business model: a. Textron is a conglomerate: by purchasing a variety of companies, Textron is able to share technology between its business units thus increasing its competitive advantage in these respective units. For instance, lessons learned in aerodynamics at Bell Helicopters can be used in the construction of aircraft at Cessna. Additionally, because of Textron 's size, it increases its buyer power and can take advantage of economies of scale when purchasing from the common suppliers across business units. b. Diversification: Textron has purchased a variety of companies that complement one another such as different target markets (regular consumers vs. government consumers) and both high and low priced products (ex: hardware tools vs. private jets). Thus, like a well diversified stock portfolio, Textron is able to hedge its exposure to risk between its various business units (if one industry performs poorly one year, another industry may fair better). c. Vertically integrated: in Textron 's history it "developed a vertically integrated company that controlled every operational aspect of the business from raw goods to processing to distribution". Thus, it has been able to control the costs of many aspects of its business d. Finance business unit: Additional revenue is generated through the earned interest from customers who purchase credit from Textron in order to purchase Textron products. This revenue stream keeps customers in the Textron environment instead of losing customers to other credit-granting financial institutions. This Textron environment also: * Creates a "one-stop-shop" that can increases Textron 's stickiness to its customers (also increase customer retention), which may lead to longer and stronger customer relationships. * Creates flexibility since Textron can offer more