About 75% of the personal computers in the world are based on Intel-architecture microprocessors. The company's phenomenally successful "Intel inside" advertising program has made the Intel name synonymous with leading edge technology.

Intel can charge a premium price for its products, since they represent the leading edge of a popular consumer movement...personal computing. However, to maintain its position as the industry leader, Intel must constantly invest large sums of money into new product research and development. The company also invests heavily in building new "state of the art" factories in order to increase operating efficiencies and keep costs down.

Intel is an example of a company with high net margins. The margin between the premium price Intel is able to charge and the fully absorbed costs (direct, indirect and overhead) amounted to 31% of sales in 1995.

Emerson Electric Co. started in the electric motor business in 1890. Over the years, Emerson has expanded through internal growth and acquisitions. Today, the company designs and manufactures electrical, electromechanical and electronic systems.

Emerson Electric Co. has been able to create a distinct market for its traditional electric motors by expanding vertically. Emerson motors are packaged with drive transmissions, control devices and measuring systems. Emerson products are known for their quality, and thus demand a premium price in the marketplace.

Emerson Electric Co. is an example of a company which has been able to achieve medium net margins over a long period of time. The margin between the price Emerson is able to charge and the fully absorbed costs (direct, indirect and overhead) amounted to 17% of sales in 1995.

Chrysler Corporation is an example of a traditional company in a very competitive market.

In the late 1980's, it seemed likely that Chrysler would go out of business. Increased competition from Japanese automakers, and aging plants drove Chrysler to the brink of bankruptcy. However, during the 1990's the company has been able to turn itself around.

Led by its strength in mini vans and light trucks, Chrysler has been able to create an exciting line of new vehicles. Management has tightened product development time, and implemented a lean production system. Retained earnings from increased sales during the 1990's have reduced interest costs. Management's goal is for Chrysler to be the largest domestic automobile producer in North America by the year 2000.

Chrysler Corp.'s struggle to re-build is an example of a company which has low net margins. Revenue of $52 billion in 1995 makes the company the 8th largest U.S. corporation in terms of revenue. However the company's margin between the price it is able to charge and the fully absorbed costs (direct, indirect and overhead) amounts to only 7% of sales.