Last answered:

31 Oct 2023

Posted on:

30 Oct 2023


Resolved: Comparable demand sources


At the end of the lecture you mention "... we should also make sure peer firms have comparable demand sources. It would be meaningless to juxtapose companies that are, say, exposed to different business cycle stages.". How do I go about making sure this is the case? Could you please elaborate a bit more?


1 answers ( 1 marked as helpful)
Posted on:

31 Oct 2023


Hello Jacobo!

Thanks for reaching out!

When we talk about ensuring that peer firms have comparable demand sources, we are essentially focusing on aligning companies that operate under similar market conditions and face analogous customer demand patterns. This is vital to ensure that the comparisons and analyses we draw are accurate and relevant.

Here are some steps and considerations that might help you in this process:

1. Industry Classification:
Ensure that the firms are operating within the same industry or sector. This is the most basic step but an essential one, as it lays the groundwork for further analysis.
2. Business Cycle Stage:
Assess the stage of the business cycle that the industry is currently in. Industries can be cyclical or non-cyclical, and understanding this will help in choosing firms that are exposed to similar economic conditions.
3. Geographical Presence:
Consider the geographical markets that the firms operate in. Firms operating in the same regions are more likely to be exposed to similar demand patterns.
4. Customer Base:
Evaluate the customer base of the firms. Companies catering to the same customer segments are likely to have comparable demand sources.
5. Revenue Streams:
Examine the diversification of revenue streams of the firms. Firms with similar revenue diversification are more likely to have aligned demand sources.
6. External Factors:
Take into account any external factors that might influence demand, such as regulatory changes, technological advancements, or social trends.

Hope this helps!


The 365 Company

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