...always miss the opportunities to create values for their companies and their shareholders. In this article, the author, noted professor emeritus Alfred Rappaport, set out ten basic governance principles for companies to realize the potential of creating shareholder value. In the real world, there is only Berkshire Hathaway that is likely to implement all these principles. It is obvious that more and more CFOs and other top executives followed Berkshire Hathaway's legendary CEO, Warren Buffet, management skills by following his footsteps to enhance shareholder value. Based on many research and several decades of consulting experience, the author suggests to executives ten maximizing shareholder value principles. For example: Do not provide earnings guidance or manage earnings Try to make shareholder value-maximizing strategic decisions Grasp any opportunities to create shareholder value Focus on high value-added activities (e.g., marketing, design, research) in order to reduce capital expenditures Return cash to the shareholders when there are no opportunities to create value Reward employees in order to motivate them to maximize the potential for high returns Management ignoring long-term considerations because the average time for holding stocks at professionally managed funds is only one year. Investors are usually engaged in pursuit of optimal short-term earnings. However, their actions seem to be the culprit behind value-destroying, for instance, stock option...
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...and Gas Corporation (NYSEG) Project Share is both altruistic and good business with supporting claims from Edward Freeman and opposing views from Milton Freidman and John Boatright. Edward Freeman, having a Kant view, sees Project Share as contributing value to the various groups that are connected to NYSEG including shareholders. Project Share is consistent with its fiduciary responsibility to its shareholders. Project Share utilizes non-maleficence, beneficence, justice, and autonomy by ensuring that customers who cannot pay their bills on time have financial aid. This also creates value for NYSEG by becoming a positive image in the public eye, retaining customers, and creates more jobs. The money that would have been lost any how from outstanding bills is used to create beneficence. Conversely, Milton Freidman, who also has a Kant view, sees Project Share as not fulfilling your duty to your shareholders, which is to maximize profit. Spending shareholder’s money on the less fortunate consumers who cannot pay their bills is breaking non-maleficence and beneficence. I think he would remind NYSEG of the invisible hand, which states that society is much better off if we can rely on the self-interest of the company to do its duty to provide us with energy rather than relying on beneficence or social responsibility. Lastly, John Boatright, who has a Utilitarian view, may argue that a successful corporation should be creating value for all stakeholders but it is not the...
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...considered part of corporate level strategy. TYPES OF CORPORATE STRATEGY • Value-Creating Strategy • Value-Neutral Strategy • Value-Reducing Strategy VALUE-CREATING STRATEGY • One in which the business seeks to edge out its competitors by gaining more market share. • These strategies seek to add real and perceived value to the business' products and services by exploiting economies of scope -- the resources and capabilities of the business that can be shared across the entire organization to reduce costs and increase efficiency. • A key idea behind value-creating strategy is diversification: offering more products to more consumers within the market in an attempt to dominate all of part of the overall market share. TYPES OF CORPORATE STRATEGY • Value-Neutral Strategy A business can employ a value-neutral strategy when the organization isn't so much concerned with allocating resources and manpower as it is with securing its current place within the market. Creating synergy between departments, working to reduce risk and securing a steady cash flow are valueneutral approaches. TYPES OF CORPORATE STRATEGY • Value-Reducing Strategy This happens on an organization-wide level when the stakeholders or customers perceive that the business is getting too big for its britches or that only the toplevel executives are benefiting from diversification. In this case, value-reducing strategy refocuses the business' market, helps it define a target demographic ...
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...achieve success and to grow exponentially in their relevant industries. This article has focused on two strategies, Red Ocean and Blue Ocean particularly. These strategies are used to define the environment a firm is operating in and to figure out whether they are creating value for the firm or not. Blue Ocean Strategy is basically to create new uncontested markets solely through innovation and creativity where demand is created and derived from the market. Whereas Red Ocean refers to competing in the existing share of market with your rivalry firms within set boundaries to gain a bigger portion of the pie. Researches done on various firms following the Blue Ocean strategy have shown that firms which have invested and focused on areas which customers value the most have achieved huge profits mainly through cost leadership. Red Ocean strategy offers high value at a higher cost or can offer low value at a lower cost, this is a tradeoff where the Blue Ocean strategy has an advantage as its purpose is to create value and offer newer products/services which have not been previously introduced in the market or to a specific untapped market segment. Blue Ocean strategy not only requires technological advancements but also creating value for the buyers to achieve differentiation and cost leadership in the industry. In the case study, Cirque Du Soleil is working on the Blue Ocean Strategy as he had successfully managed to attract a great crowd of clients and earned great profits. Basically...
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...shareholders – example: sell of value –creating assets; Conversely, a firm with too little debt may pass up the opportunity to reduce its tax payments and increase its value through tax savings. The firm’s optimal capital structure is the debt ratio that maximizes the market value of the firm’s assets. We have to analyze how a change in firm’s debt ratio affects: 1 – Profitability, measured with earnings per share (EPS); 2 – Market value of its assets; 3 – Share price; 4 – Cost of capital. Example: 100% equity finance Example: Borrow $100M @ 10% and repurchase of 1M shares EPS increases, but firm’s value remains the same. MM Theorem – capital structure does not increase firm’s value (in a world without taxes and costs of financial distress). This is explained by risk, any gain in EPS is offset by higher risks company faces by taking debt. In the example above, shareholders would be better off with leverage, though company’s management might think it is riskier to do it. So shareholder can replicate leverage on his personal account, by borrowing and buying new shares. * Annual tax shield: Tc x Kd x D * Vl = Vu + PV ITS * Pl = Pu + (PV ITS/Nu) A) Pl = share price leveredge B) Pu = share price unleveredge C) Nu = number of shares before recapitalization * WACC = Ke (E/E+D) + Kd (1-Tc) (D/E+D) Following MM, when taxes are taking into account, firm’s financing decisions affects the value of its assets, its share price, and its cost of capital...
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...reasons. First, activists have the wrong time-horizon, focusing on the short-term rather than the long –term. Capitalism desperately needs managers to focus their attention on creating value for their customers and the economy through sustained effort over the medium-term. Activists pursue the maximization of shareholder value as reflected in the current stock price, which leads to negative results, such as destroying real shareholder value. According to Marc Benioff, Chairman and CEO of Salesforce [CRM], this theory of business is “wrong. The business of business isn’t just about creating profits for shareholders – it’s also about improving the state of the world and driving stakeholder value.” He has been joined by others in criticizing the goal of maximizing shareholder value, including former chairman and CEO of General Electric Jack Welch, Vinci Group chairman and CEO Xavier Huillard, CEO of Unilever Paul Polman, and co-CEO of Whole Foods John Mackey. Second, the goal of activists, to extract value from companies for shareholders, is wrong. Rather, the goal of companies should be to create value for their customers and the economy. The Economist writes that shareholder capitalism should focus on growth and creation, not just divvying up profits. Activists turn capitalism into extracting value from companies and dividing it...
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...operations, marketing policies, financial flows, and logistical systems. In these organizations, the global operating units report directly to top management, not to the head of an international division. Evaluating and Controlling the Marketing Process To deal with the many surprises that occur during the implementation of marketing plans, the marketing department has to monitor and control marketing activities continuously. Table 1.1 lists four types of marketing control needed by companies: annualplan control, profitability control, efficiency control, and strategic control. The Fourteenth Edition of Principles of Marketing! Still Creating More Value for You! The goal of every marketer is to create more value for customers. So it makes sense that our goal for the fourteenth edition is to continue creating more value for you—our customer. Our goal is to introduce new marketing students to the fascinating world of modern marketing in an innovative and comprehensive yet practical and enjoyable way. We’ve poured over every page, table, figure, fact, and example in an effort to make this the best text from which to learn about and teach marketing. Enhanced by mymarketinglab, our online homework and personalized study tool, the fourteenth edition creates...
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...business. It is a decision making tool in order to balance the activities of a company among those which make profits, those who ensure growth, those which constitute the future of the firm or those who are its heritage. With this tool one is able to define the development policy of the company. The matrix will position the products/services in two axis: * the rate of growth of the market ; * the market share of a product/service offered facing the competitors | Golden Rules | * Positioning = the company has to place each of its products/services on the matrix. Thus it is able to obtain information on the market share of the product or service and the market growth. * Creating long-term value = the company should have a product portfolio that includes products with high growth where it is necessary to inject cash and products where growth is weaker but which generate a lot of cash. | Structure of the BCG Matrix | * Question marks They do not generate profits unless the company decides to invest resources to maintain and even increase the market share (become potential stars). They have a high demand for liquidity and the company must ask the question: Invest or give up the product? * StarsThese are promising products for the company, they even can be considered as leaders of the industry. The strategy is to boost these products by appropriate investments to monitor the growth and maintain a position of strength. These products require a large amount of cash...
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...Marketing and the Marketing Process Marketing deals with customers more than any other business functions. Marketing is managing profitable customer relationships. Marketing has a twofold goal. They are to attract new customers by promising superior value, and keep and grow current customers by delivering satisfaction. The American Marketing Association defines marketing as “The Process of planning and executing the conception, pricing, promotion, and distribution of ideas, good, and services to create exchanges that satisfy individual and organizational objective”. The Marketing process is the method of evaluating openings, choosing the proposed customer, addressing the consumer needs and wants, describing the price, product, place and promotion and addressing the marketing campaign. The marketing process takes major responsibility to control overall marketing strategy. The marketing process has 5 steps that lead to a successful advertising campaign. In the first four steps, companies work to understand consumers, create customer value, and build strong customer relationships. In the final step, companies reap the reward of having superior customer value. Now, we will explore the steps of the marketing process. Step 1 is marketers need to understand the market place and the needs and wants of customers. There are five core customer and market place concepts. Needs, wants, and demands is one. Human needs are states of felt deprivation. Human wants are the form human needs...
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...Toothpaste Market in India to 2014 (Oral Hygiene) is a comprehensive resource for market and segment level data including value and volume from 2004 to 2014, and market/company shares for 2008-09.This report also provides data on expenditure and consumption as well as key distribution channels, and reveals the leading companies in the Indian toothpaste market. Features and Benefits - Identify key market segments by analyzing market size data (value & volume) for categories - Design business strategies by gaining insight into quantitative market trends over 2004-09 and expectations for 2010-14 - Identify key companies in the toothpaste market in India and design M&A strategies by analyzing market share data - Predict how consumer preferences will change in the future by analysis of expenditure and consumption information from 2004 to 2014 Highlights -The toothpaste market in India increased at a compound annual growth rate of 6.6% between 2004 and 2009. - The standard category led the toothpaste market in India in 2009, with a share of 91.5%. -Leading player in toothpaste market in India is Colgate-Palmolive Company. Key questions answered - Which will be the fastest growing segment within the toothpaste market in India? - How will the forecast growth differ from the historic growth exhibited by the toothpaste market in India? - Which company accounted for the largest share of the Indian toothpaste market in 2009? - How will consumption and expenditure patterns change from 2004 to 2014...
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...Research In Motion Table of Contents 1. Executive summary 3 2. Value Based Marketing Strategy 4 3. Marketing mix strategy 4 a) Product 5 b) Place 6 c) Price 6 d) Promotion 6 4. Driving forces of change in the mobile industry 7 5. Changes in Competitive Landscape 8 6. Understanding customer behavior 9 7. SWOT analysis 10 8. Recommended Marketing mix strategies for RIM 13 9. Target Market for Blackberry 14 10. References 15 Executive Summary Research In Motion (RIM) is one of the world’s leading manufacturer of wireless devices and also known for their smartphone and tablet range, Blackberry. It was found in 1984 by Mike Lazaidis in Canada. Initially RIM was in to wireless equipments until 1999 when they started creating Blackberry series. Blackberry is now widely used as a smartphone which is used mainly by corporate and business people. But it also attracts a broad range of users from teenagers to other professionals. It is widely available in many countries with offices operating around the world. Recent falling of stock has forced RIM to construct an all new market strategy in order to be in a highly competitive market. It has been analyzed that it is high time RIM should constitute a better marketing plan, which will focus mainly on Value based marketing along with marketing mix strategies. This report also defines...
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...fully diversified firms are classified into related and unrelated categories. A firm is related through its diversification when there are several links between its business units; for example, units may share products or services, technologies, or distribution channels. The more links among businesses, the more constrained is the relatedness of diversification. Unrelateness refers to the absence of direct links between businesses. 참고 : http://wenku.baidu.com/view/6a080e260722192e4536f624 2. A.Describe how Haier uses activity sharing and the transfer of core competencies to create value. (related diversification strategy) Haier uses both related and unrelated diversification strategies. Haier catapulted in the last two decades producing consumer products that are sold in similar fashion. They all shared distribution channels, outbound logistics, and sales forces. Haier was able to develop core competencies through effective activity sharing of primary activities resulting in a superb competitive advantage, ultimately creating value. CEO Zhang Ruimin realized that using both strategies’ can work in Haier’s favor with the ultimate goal of getting name recognition globally. His related diversification strategy used both operational and corporate relatedness to create value. It is evident in the case study that Haier took advantage of this strategy to help in these areas: •Inbound logistics: delivery, warehouse, quality assurance. •Operations: quality control, assembly facilities...
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...unable to tolerate their mother milk (Nestle.com). His product became a success, and it created a demand throughout Europe. As Nestlé’s popularity grew more businesses wanted to merge and become partners with Henri Nestlé's business. From 1866 to 1947 the Nestlé Company had gone through several name changes. In 1905, Anglo-Swiss Condensed Milk Co. and Farine Lactee Henri Nestlé merged, and the company’s name became Nestlé & Anglo-Swiss Condensed Milk Co. Then in 1929, Peter-Cailler-Kohler Chocolats Suisses S.A. merged with the company. The name was then changed to Nestlé & Anglo-Swiss Holding Co. Ltd, on November 27, 1936. In December 1947, Co. acquired all the shares capital of the Alimentana S.A. company in exchange for fifteen Nestlé shares and fifteen Unilac shares for each of Alimentana S.A. share, so this point the name was at Nestlé Alimentana S.A. And then finally, the last name change that the company would endure was in 1977, where it adopted the name Nestlé SA (Mergent Online). In 1981 the World Health Assembly adopted the International Code for the Marketing of Breast-milk Substitutes (“WHO Code”) and recommended that its Member States implement it. Nestlé was the first company to develop policies based on the WHO Code and apply them across our entire operations in...
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...Marketing 1 Marketing – an organizational function and a set of processes for creating, capturing, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders • Creating value o Production-Oriented Era – manufacturers were more concerned with product innovation, not with satisfying the needs of individual consumers and retail stores were considered places to hold the merchandise until a consumer wanted it o Sale-Oriented Era – overproduction led to heavy doses of personal selling and advertising o Market-Oriented Era – manufacturers began to focus on consumer wants and needs before they designed, made, or attempted to sell their products and services o Value-Based Marketing Era – give customers greater value than competitors, beyond just meeting the needs and wants of consumers • Value – reflects the relationship of benefits to cost or what you get for what you give • Value Co-creation – method of providing additional value to customers by allowing them the opportunity to act as collaborators in creating the product or service • About satisfying customer needs and wants o Marketplace needs to be segmented or divided into groups so that the organization can target specific groups • Entails an exchange o Exchange – the trade of things of value between the buyer and the seller so that each is better off as a result o Sellers provide products or services then communicate and facilitate...
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...How Costa Coffee would benefit and create additional value for their coffee store clients by using elements of Starbucks marketing strategy? Contents Introduction 3 Coffee Market in the UK 3 Market Leading Coffee Shops in the UK 4 Costa Coffee 4 Identifying competition 6 Starbucks 6 Conclusions 8 Recommendations 9 References 11 Appendix 1 13 Appendix 2 14 Appendix 3 15 Introduction Competitive marketing strategy is described by Kotler and Armstrong (2012) as a strategy which positions company against competition giving it the strongest possible strategic advantage. I have chosen Costa Coffee as it currently is the market leader in terms of most coffee retail outlets in the United Kingdom as demonstrated on appendix 1. Kotler and Armstrong (2012) point out that competitor analysis includes assessing competitions objectives, strategies, strengths and weaknesses, reaction patterns and selecting which competitors to attack or avoid. For he purposes of this assignment, I have identified competition based on the market share and customer view. Competitive marketing strategy is selected on the basis of it creating further value for the customer. Blythe (2009) concludes that competitive advantage is the outcome of effective...
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