Big Bend, Inc. and Longbow, Ltd. have both been in the chemical business for several decades. Each has developed a strong reputation in the industry and both are known for strong management. Big Bend tends to sell specialty products in small batches that are custom made.
Longbow operates more in large-scale sales of commodity-type products that become raw material for a wide variety of plastics and polymers. Selected information is presented below for two recent fiscal periods.

Required
A. Considering only the brief written descriptions of the two firms, would you expect one or the other to use a product differentiation strategy? Or cost leadership strategy? Explain.
B. Compute the profit margin, asset turnover, and return on assets for 2005 for both firms. Are your expectations from part A borne out by the data for 2005?
C. What changes in profit margin, asset turnover, and return on assets have occurred between 2004 and 2005?
D. Compute the return on equity for both firms for both years.
E. Which is a more successful strategy, product differentiation or cost leadership?Explain.

Big Bend (In millions) 2005 $34.2 40.3 2004 2005 2004 Total assets Total stockholders' equity Sales revenue Net income 38.2 17.3 206.5 6.4 30.2 36.1 16.3 193.3 5.8 9.96 8.82 35.9 3.68 3.13