Efficiency of Operations: Case Study of UnitedTechnologies Corporation

In this paper, efficiency of operations was examined for United Technologies which is a leading U.S.-based multinational corporation. Using both Johansen's cointegration and Granger's causality tests it is evident that efficient management of cost of goods sold is more important and if these expenses are managed well it could provide greater flexibility to United Technologies to bring about superior operating performance. For instance, if United Technologies deliberately increase SGA and RD expenses it would lead to higher future operating profitability.

Keywords

Operating and financial efficiency; Cointegration; Granger's causality

References

i. M. Anderson, R. Banker, R. Huang, and S. Jankiraman (2007). “Cost Behavior and Fundamental Analysis of SG&A Costs.” Journal of Accounting, Auditing and Finance, 22(1), 1–28.
ii. M. Anderson, R. Banker, R. Huang, and S. Jankiraman (2003). “Are Selling, General and Administrative Costs ‘Sticky’?” Journal of Accounting Research, 41(1), 47–63.
iii. Hirotugu Akaike (1973). “Information Theory and the Extension of the Maximum Likelihood Principle.” In B. N. Petrov and F. Csaki (Eds.), 2nd International Symposium on Information Theory. Budapest.
iv. R. Banker, R. Huang, and R. Natarajan (2006). “Does SG&A Expenditure Create a Long-Lived Asset?” Working Paper.
v. R. Banker, R. Huang, and R. Natarajan (2011). “Equity Incentives and Long-Term Value Created by SG&A Expenditure.” Contemporary Accounting Research, 28(3), 794–830.
vi. P. Bharadwaj (2015). “The Success of Global Supply Chains: An Exploratory Analysis.” Competition Forum.
vii. R. J. Brenner and K. E. Kroner (1995). “Arbitrage, Cointegration, and Testing the Unbiasedness Hypothesis in Financial Markets.” Journal of Financial and Quantitative Analysis, 30(1), 23–42.
viii. R. Cuthbertson and W. Piotrowicz (2011). “Performance Measurement Systems in Supply Chains.” International Journal of Productivity and Performance Management, 60(6), 583–602.
ix. J. Doukas and A. Rahman (1987). “Unit Roots Tests: Evidence from the Foreign Exchange Futures Market.” Journal of Financial and Quantitative Analysis, 22(1), 101–108.
x. A. Ellinger, H. Shin, W. Magnus Northington, E. Adams, D. Hofman, and K. O’Marah (2012). “The Influence of Supply Chain Management Competency on Customer Satisfaction and Shareholder Value.” Supply Chain Management, 17(3), 249–262.
xi. Robert F. Engle and Clive W. J. Granger (1987). “Co-integration and Error Correction: Representation, Estimation, and Testing.” Econometrica, 55, 251–276.
xii. O. Friis, J. Holmgren, and J. Eskildsen (2016). “A Strategy Model—Better Performance Through Improved Strategy Work.” Journal of Modelling in Management, 11(3), 742–762.
xiii. J. Hussein and M. Davis (2018). “Improving Operational and Financial Efficiency with Product ID Rationalization—Cisco’s Experience.” Journal of Business Forecasting, 37(1), 4–10.
xiv. Søren Johansen and Katarina Juselius (1992). “Testing Structural Hypotheses in a Multivariate Cointegration Analysis of the PPP and the UIP for UK.” Journal of Econometrics, 53(1–3), 211–244.
xv. Robert S. Kaplan and David P. Norton (1996). The Balanced Scorecard. Boston, MA: Harvard Business School Press.
xvi. Robert S. Kaplan and David P. Norton (2001). The Strategy-Focused Organization. Boston, MA: Harvard Business School Press.
xvii. MarketLine (2019). United Technologies Corporation: SWOT Analysis. Retrieved September 23, 2019, from MarketLine
xviii. W. McPhee and D. Wheeler (2006). “Making the Case for the Added Value Chain.” Strategy & Leadership, 34(4), 39–46.
xix. Pierre Perron (1988). “Testing for a Unit Root in Time Series Regression.” Biometrika, 75, 335–346.
xx. Michael Porter (1985). “Technology and Competitive Advantage.” Journal of Business Strategy, 5(3).
xxi. C. Sakuramoto, L. Di Serio, and A. Bittar (2019). “Impact of Supply Chain on the Competitiveness of the Automotive Industry.” RAUSP Management Journal, 54(2), 205–225.
xxii. APICS (2020). Supply Chain Operations Reference Model (SCOR). Retrieved March 21, 2020, from APICS SCOR Framework
xxiii. J. D. Wisner, K. Tan, and G. K. Leong (2019). Principles of Supply Chain Management: A Balanced Approach (5th ed.). Independence, KY: Cengage.

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Prof. Prashanth N. Bhardwaj , Prof. Mukesh Chaudhry, Prof. Suneel Maheshwari . (2021). Efficiency of Operations: Case Study of UnitedTechnologies Corporation. DIAS Technology Review, 17(2), 32-36.

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[1] i. M. Anderson, R. Banker, R. Huang, and S. Jankiraman (2007). “Cost Behavior and Fundamental Analysis of SG&A Costs.” Journal of Accounting, Auditing and Finance, 22(1), 1–28.

[2] ii. M. Anderson, R. Banker, R. Huang, and S. Jankiraman (2003). “Are Selling, General and Administrative Costs ‘Sticky’?” Journal of Accounting Research, 41(1), 47–63.

[3] iii. Hirotugu Akaike (1973). “Information Theory and the Extension of the Maximum Likelihood Principle.” In B. N. Petrov and F. Csaki (Eds.), 2nd International Symposium on Information Theory. Budapest.

[4] iv. R. Banker, R. Huang, and R. Natarajan (2006). “Does SG&A Expenditure Create a Long-Lived Asset?” Working Paper.

[5] v. R. Banker, R. Huang, and R. Natarajan (2011). “Equity Incentives and Long-Term Value Created by SG&A Expenditure.” Contemporary Accounting Research, 28(3), 794–830.

[6] vi. P. Bharadwaj (2015). “The Success of Global Supply Chains: An Exploratory Analysis.” Competition Forum.

[7] vii. R. J. Brenner and K. E. Kroner (1995). “Arbitrage, Cointegration, and Testing the Unbiasedness Hypothesis in Financial Markets.” Journal of Financial and Quantitative Analysis, 30(1), 23–42.

[8] viii. R. Cuthbertson and W. Piotrowicz (2011). “Performance Measurement Systems in Supply Chains.” International Journal of Productivity and Performance Management, 60(6), 583–602.

[9] ix. J. Doukas and A. Rahman (1987). “Unit Roots Tests: Evidence from the Foreign Exchange Futures Market.” Journal of Financial and Quantitative Analysis, 22(1), 101–108.

[10] x. A. Ellinger, H. Shin, W. Magnus Northington, E. Adams, D. Hofman, and K. O’Marah (2012). “The Influence of Supply Chain Management Competency on Customer Satisfaction and Shareholder Value.” Supply Chain Management, 17(3), 249–262.

[11] xi. Robert F. Engle and Clive W. J. Granger (1987). “Co-integration and Error Correction: Representation, Estimation, and Testing.” Econometrica, 55, 251–276.

[12] xii. O. Friis, J. Holmgren, and J. Eskildsen (2016). “A Strategy Model—Better Performance Through Improved Strategy Work.” Journal of Modelling in Management, 11(3), 742–762.

[13] xiii. J. Hussein and M. Davis (2018). “Improving Operational and Financial Efficiency with Product ID Rationalization—Cisco’s Experience.” Journal of Business Forecasting, 37(1), 4–10.

[14] xiv. Søren Johansen and Katarina Juselius (1992). “Testing Structural Hypotheses in a Multivariate Cointegration Analysis of the PPP and the UIP for UK.” Journal of Econometrics, 53(1–3), 211–244.

[15] xv. Robert S. Kaplan and David P. Norton (1996). The Balanced Scorecard. Boston, MA: Harvard Business School Press.

[16] xvi. Robert S. Kaplan and David P. Norton (2001). The Strategy-Focused Organization. Boston, MA: Harvard Business School Press.

[17] xvii. MarketLine (2019). United Technologies Corporation: SWOT Analysis. Retrieved September 23, 2019, from MarketLine

[18] xviii. W. McPhee and D. Wheeler (2006). “Making the Case for the Added Value Chain.” Strategy & Leadership, 34(4), 39–46.

[19] xix. Pierre Perron (1988). “Testing for a Unit Root in Time Series Regression.” Biometrika, 75, 335–346.

[20] xx. Michael Porter (1985). “Technology and Competitive Advantage.” Journal of Business Strategy, 5(3).

[21] xxi. C. Sakuramoto, L. Di Serio, and A. Bittar (2019). “Impact of Supply Chain on the Competitiveness of the Automotive Industry.” RAUSP Management Journal, 54(2), 205–225.

[22] xxii. APICS (2020). Supply Chain Operations Reference Model (SCOR). Retrieved March 21, 2020, from APICS SCOR Framework

[23] xxiii. J. D. Wisner, K. Tan, and G. K. Leong (2019). Principles of Supply Chain Management: A Balanced Approach (5th ed.). Independence, KY: Cengage.