Teaching Notes: FinntrackFinntrackStrategy: Analysis and Practice Strategy: Analysis and Practice ©2005 McGraw-Hill Education EuropeMcGraw-Hill Education.

Teaching Notes: Finntrack Strategy: Analysis and Practice ©2005 McGraw-Hill Education Europe

Discussion Notes

Index• Introduction to DSM

– Multinational Corporations– Overview– Corporate Organisation– Markets and Businesses – Business Objectives

•Financial Policy•Revenue Maximization •Financial Value Maximization •Shareholder Value Maximization

– Annual Reports – Corporate Governance, Risk Management

and Internal Control

•Strategic Risk Management– Strategy

•Growth Investing •Foreign Direct Investing (FDI)•Economies of Scale - Integration•Acquisitions and Mergers •Valuation (finance)

• Workshop – Case Analysis– Debate – Case Questions – How to Use Your Workshop Resou

rces

– Disclaimer – Learning Objectives

Click on LogoSource: Wikipedia

Index• Introduction to DSM

– Overview– Corporate Organisation– Markets and Businesses – Business Objectives

•Financial Policy•Revenue Maximization •Financial Value Maximization •Shareholder Value Maximization

– Annual Reports – Corporate Governance, Risk Management

and Internal Control

•Strategic Risk Management

Click on ImageSource: DSM

Index• Business Drivers• Business Analysis

– Quantitative Methods – Strategic Business Analysis

•Financial Statements - The System •Financial Statements - Analysis

– Financial Ratios• Corporate Strategy

– Business Strategy Overview– Value Based Management – Value Drivers– Business Economics – Economic Value Added – Market Capitalisation– Shareholder Value – Shareholder Value Analysis – Value Creation – Value Management Models – Centralization, Decentralization and Delegation

•Why Delegate?

Click on ImageSource: DSM

Index• Performance Assessment: Balanced Scorecard

• Performance Management Framework• Econometrics• Balanced Scorecard

• Vision and Strategy • Corporate Culture

• Financial • Customer • Internal Business• Learning and Growth

• Measurement of Intellectual Capital• Business Value as a System

• Systems Thinking • Organisational Effectiveness • Value Chain

• Chapter 9 - Annotated Lecture Outline • Lecture

• Chapter 18 - Annotated Lecture Outline • Lecture

• Chapter 21 - Annotated Lecture Outline• Lecture

Click on ImageSource: DSM

WorkshopThis workshop series is designed to compliment Teaching and Learning Strategies for undergraduate, postgraduate and executive level Strategic Management and related programmes and courses using the case studies featured in the ‘Strategy Analysis and Practice’ text.

The overall aim is to support the learning contents offered in the relevant chapters of the book whilst expanding participants’ knowledge and skills base required to understand, review and analyse the decisions taken during the strategy development and implementation processes of DSM’s Vision 2005: Focus and Value agenda from 2000 - 2005.

WorkshopStrategy Analysis and Practice

John McGee, Warwick Business SchoolHoward Thomas, Warwick Business SchoolDavid Wilson, Warwick Business School

Case AnalysisA case study is a particular method of qualitative research.

Rather than using large samples and following a rigid protocol to examine a limited number of variables, case study methods involve an in-depth, longitudinal examination of a single instance or event: a case.

They provide a systematic way of looking at events, collecting data, analyzing information, and reporting the results.

As a result the researcher may gain a sharpened understanding of why the instance happened as it did, and what might become important to look at more extensively in future research.

Click on ImageSource: DSM

Case AnalysisCase studies lend themselves especially to generating (rather than testing) hypotheses.

• The scope and relevance of case studies

• Types of case study • Illustrative case studies • Exploratory case studies • Critical instance case studies • Program implementation case

studies • Program effects case studies • Cumulative case studies • Business school case studies • Medical case studies

• History of the case study • Conclusions • Notable case studies • References • See also • External links

Click on ImageSource: DSM

Workshop DebateWorkshop discussion topics have been divided into five parts according to the relevant chapters of the book:

1. Introduction 2. Business Analysis3. Corporate Strategy4. Performance Assessment: Balanced Scorecard 5. Business Value as a System

You should ensure that you have understood the contents of chapters 9, 18 and 21 prior to attending any of the above debates.

Also see:

How to Use Your Workshop Resources Learning ObjectivesLearning from Case Studies: A Short Guide for Students

Case QuestionsPlease Note:

At your instructor’s discretion the indicative questions below and elsewhere in this resource may be varied or deemed unnecessary for teaching and learning purposes for some courses or modules.

Identify DSM’s key performance indicators and evaluate their the corporate strategic performance.

What should DSM do if a business group did not meet its contract, given DSM’s historical culture of tolerance for mediocre performance?

Finally, there were some more fundamental questions. Implementing the new financial metrics had led to greater emphasis on short-term performance. DSM felt that this short-term focus could be hazardous for a specialty company that heavily depended on innovation and R&D.

Case Questions

For example, in 2000 one of DSM’s most successful and profitable product was Stanyl, a product which had been 10 years in development, with negative EPs throughout all those years.

How would these kinds of investment project be handled under the new approach?

Also see Learning Using Case Studies for further informationAlso see A Model for Case Analysis and Problem Solving

How to Use Your Workshop Resources

Viewing

You will need either MS PowerPoint program or PowerPoint Viewer installed on your computer. The latter may be downloaded free from Microsoft website here.

Navigation

The Learning Contents (Literature Reviews) are linked to a relevant public domain on the Internet.

Most, if not all pictures/images are ‘clickable’, i.e. linked to its source which provides further information on the topic or the copyright holder.

How to Use Your Workshop Resources

If your version of PowerPoint does not show navigation buttons on the slide, right click on the screen and select your destination from the dialogue box. Alternatively use the small arrowheads, indicating ‘previous’ and ‘next’.

Disclaimer

This information is provided with the understanding that the authors and publishers do not assume any legal responsibility for the completeness or accuracy of the contents or any opinions or views expressed on these pages or linked destination sources.

It is the nature of the media (Internet) that some of the pages may not always be available due to broken or dead links, withdrawals, etc. Whilst the publishers will be pleased to take any appropriate corrective action, for example, by replacing or removing the sources when possible, they unable to assume any legal responsibility for unavailability of any third party material for whatever reason beyond their direct control.

Learning ObjectivesThe main objective of the workshop is to evaluate DSM’s corporate strategic planning process and outcomes and their impact on the company’s business level operations.

Participants will have an opportunity of developing and enhancing their

• strategic thinking and internet research skills

• analytical and critical thinking skills by reviewing the factors that influenced corporate centre's decisions on the businesses in their portfolios

• understanding of distinction between scale and scope and implications that these concepts have for adding value in multi-business firms

Learning Objectives• awareness of the links between strategy and organizational structure and the

way organizational structures have changed over time

• skills to analyse and critically evaluate the different factors that can add value in multi-business firms

• knowledge and understanding of the empirical research findings of work which has examined the links between strategy and performance in multi-business corporations

• knowledge and understanding of a range of performance measures and the concepts of “shareholder value” and “economic value-added” and their linkage to the strategy process

Learning Objectives• understanding of the notion of a “balanced scorecard” and the ways in which

this framework can be used to manage value

• understanding of the importance of the performance feedback loop for assessing and making strategic choices

• understand of the strategic systems perspective and the way in which this can be used to build an holistic picture of strategy context, content and process

• understanding of stakeholder theory and be able to apply this framework to gain insight into strategic issues in a range of organizations

• ability to identify a range of challenges facing organizations in the future and explain the ways in which a strategic systems approach can help managers to think and act strategically

Introduction to DSM

• Overview

• Multinational Corporations

• Corporate Organisation

• Business Objectives

• Strategy • Corporate Governance, Risk Management and Internal Control

Source: DSM

Overview• Company

• Name

• History

• Products

• Data

Click on ImageSource: DSM

OverviewDSM (in full Koninklijke DSM N.V., or Royal DSM N.V.) is a multinational chemicals company. Its headquarters are in Heerlen, the Netherlands. Originally a state-owned coal mining company (Dutch State Mines/De Staats Mijnen).

Click on ImageSource: Wikipedia

OverviewName

The name DSM is actually derived from the English language, it is the acronym of the translation of the Dutch name; De Nederlandse Staatmijnen translated into Dutch State Mines (DSM). This company was regularly in the news in the late 1960's, because of the dutch government's decision to close all the (state)mines. In 1973, after the last mine was closed, the company decided to carry the acronym as its name.

Click on ImageSource: Wikipedia

OverviewHistory

DSM was established in 1902 as a coal mining company. Through the years the company focused not only on mining, but also on the chemical sector. Due to the closure of all the mines and the unemployment that followed, the dutch government stimulated the chemical plants, to provide jobs for the miners.

In 1989 DSM was privatized, and started its first sale of the company's common shares to public investors. In 2002 the company sold their petrochemical division (the naphtha crackers) to Sabic of Saudi Arabia.

Click on ImageSource: Collection D.Visser

Overview

• Industrial chemicals (e.g. feedstocks for plastics producers)

• Performance materials (e.g. automotive plastics, resins, elastomers)

• Life science products (e.g. antibiotics, food specialties)

• Nutritional products (e.g. vitamins) Click on ImageSource: Wikipedia

Products

Data

DSM has about 24 thousand employees, in a.o. the Netherlands, Sweden, the United States, Switzerland, Austria, Belgium, the United Kingdom, Canada, Brazil, Germany, Italy, Spain and Australia. DSM has a total of 270 production locations and offices worldwide and achieved a turnover of 7.7 billion Euros in 2004, with a net profit of 262 million Euros.

Overview

Multinational CorporationsA multinational corporation (MNC) or multinational enterprise (MNE) or transnational corporation (TNC) is a corporation/enterprise that manages production establishments or delivers services in at least two countries.

• Critiques • Examples • In fiction • See also

• Fostering Growth and Promoting a Responsible Market Economy - A G8 Declaration

Annual Report on the Guidelines for Multinational Enterprises The 2005 edition includes a special focus on corporate responsibility in the developing world

Multinational CorporationsMultinational corporations (MNC) are often divided into three broad groups:

• Horizontally integrated multinational corporations manage production establishments located in different countries to produce same or similar products.

• Vertically integrated multinational corporations manage production establishment in certain country/countries to produce products that serve as input to its production establishments in other country/countries.

• Diversified multinational corporations manage production establishments located in different countries that are neither horizontally or vertically integrated.

Multinational Corporations

Multinationals have played an important role in globalization. Given their international reach and mobility, prospective countries, and sometimes regions within countries, must compete with each other to have MNCs locate their facilities (and subsequent tax revenue, employment, and economic activity) within.

To compete, countries and regional political districts offer incentives to MNCs such as tax breaks, pledges of governmental assistance or improved infrastructure, or lax environmental and labour standards. This process of becoming more attractive to foreign investment can be characterized as a race to the bottom.

Corporate Organisation

2005

2000

Source: DSM

Overview of activities

The activities of DSM are grouped into four clusters: Nutrition, Pharma, Performance Materials and Industrial Chemicals. DSM is active worldwide. The company creates innovative products and services that help improve the quality of life. More ...

Corporate movie

DSM has created a unique movie which introduces you to a few examples of our key products and explains the benefits that they bring to people around the world.

Corporate Organisation

DSM had a decentralized organizational structure bult around 15 business groups (consisting of various business units) that were empowered to execute all business functions.

Larger ImageSource: healthallianze.co.nz

Markets and Businesses

• Agriculture • Automotive • Building & construction • Dietary supplements • Electrical & electronics • Feed / animal nutrition • Fibers, textiles & clothing

• Food & beverages • Furniture

• Marine• Medical materials • Packaging • Personal care / cosmetics • Pharmaceuticals • Sports, leisure & consumer goods • Transportation & mechanical engineering

• Business Groups

Source: DSM

Business Objectives

Larger MapClick on ImageImage by BizEd

• Shareholder Value

• Growth

• Sales 60% > €10 billion by 2005

•Specialty Products 80%•Industrial 20%

• Financial Targets

• Financial Value

• Market Capitalisation

Revenue Maximization

Larger PictureSource: Georgetown University

• Revenue • Profit maximization • Revenue Maximisation

Click on Image

Financial PolicyObjectives

Given the dynamic nature of DSM’s markets, it has always been important for the company to have a strong financial position. This gives DSM the financial resilience to continue pursuing its strategic goals even during economic downturns.

DSM aims for a net debt which is less than 40% of group equity plus net debt and an operating profit before amortization and depreciation (EBITDA) which is at least 8.5 times the balance of financial income and expense. This underlines the company's aim of maintaining its ’A’ long-term credit rating. DSM aims to achieve a cash flow return on investment (CFROI) which is higher than the weighted average cost of capital (WACC).

Key Financial Data

Source: DSM

Click on Image

Shareholder Value MaximizationCreating and managing shareholder value

Shareholder value

• Definition • Shareholder Value Maximization • Criticism • Alternative Definition based upon Criti

cism: Stakeholder Analysis

Also see Value Based ManagementSource: Shareholdervalue.com

Financial Value Maximization

Larger ImageClick on ImageSource: Return Driven Strategy

Financial Value MaximizationStock (Share) Valuation

• Fundamental criteria (fair value) • Market criteria (potential price) • See also • External links

Return on Investment• Calculations

• Arithmetic return• Logarithmic return• Examples of high yielding inv

estments• See also • External links

Click on ImageSource:UserStrategy.com

Financial Value Maximization

1) DCF Analysis: Introduction

2) DCF Analysis: The Forecast Period & Forecasting Revenue Growth

3) DCF Analysis: Forecasting Free Cash Flows

4) DCF Analysis: Calculating The Discount Rate

5) DCF Analysis: Coming Up With A Fair Value

6) DCF Analysis: Pros & Cons Of DCF

7) DCF Analysis: Conclusion

Discounted Cash Flow

Financial Value Maximization

Cash Value Added - CVA

The difference between the operating cash flow that a company demands and the operating cash flow it generates. Operating cash flow demanded is the cash the company requires to meet its business costs within a given period. Operating cash flow generated is all of the cash that a business generates through sales and investments without any reductions for non-cash expenses such as depreciation, amortization, deferred interest expenses and so on. 

Larger ImageSource: Metapraxis

Internal Rate of ReturnThe internal rate of return (IRR) is defined as the discount rate that gives a net present value (NPV) of zero. The NPV is calculated from an annualized cash flow by discounting all future amounts to the present.

Source: Wikipedia

Larger ImageClick on ImageSource: Baarns Consulting Group

DivestmentIn finance and economics, divestment or divestiture is the reduction of some kind of asset, for either financial or social goals. A divestment is the opposite of an investment.

• Divestment for financial goals • Divestment for social goals

• Criticisms of divestment for social goals

• External links • See also

Larger ImageClick on ImageSource: Accenture

Annual Reports

Key Financial Data

2005

2000

Financial Statement

2005

2000

Source: DSMClick on ImageSource: DSM

Report by the Managing Board

Review of business

Report by the Supervisory Board to the shareholders

Information about the DSM Share

Corporate Governance, Risk Management and Internal Control

2005Click on Image

Source: DSM

The Dutch Corporate Governance Code prescribes that quite a number of documents relating to Corporate Governance should be published on the company's website. We gladly adhere to this practice in order to inform our stakeholders and other interested parties of the way our company has embedded its Corporate Governance policies. Here you can find that DSM is applying all 113 Best Practices of this code with one exception. Also see DSM managed in a controlled, consistent and balanced way, World Economic Forum

Also see Value Maximization, Stakeholder Theory, and the Corporate Objective Function

Strategic Risk Management“Despite growing sensitivity to shareholder value, most VBM initiatives fail. They simply fail to be integrated into day-to-day decision-making.This is not a new insight.  Several advisors, including our former colleagues, recommend compelling behavioral change through incentives.  Others, including ourselves, weave the concepts of free cash flow and Economic Value Added into corporate strategy, by making EVA ®-based targets a vital part of long-term planning.  Both initiatives add value. Yet they sometimes just scratch the surface.”

Shareholdervalue.com

Click on ImageSource: Shareholdervalue.com

Financial Risk

• What is Financial Risk?• Measuring Market Risk • Interest-Rate Risk • Liquidity Risk • Credit Risk • Value at Risk

• Details of the definition• Example

• Common VaR calculation models • Caveats • Further reading • External links Larger Image

Click on ImageSource: Danmarks Nationalbank

Strategy• Vision 2005: Focus and Value

• Diversification

• Divestment

• Growth

• Acquisitions and Mergers 50%

• Foreign Direct Investment

• Organic Growth 6% p.a.

• International Trade

• Market Capitalisation

Click on ImageSource: netg.com

Growth Investing

Organic Growth

Organic growth is the rate of business expansion through increasing output and sales as opposed to mergers, acquisitions and take-overs.

Growth investing is a style of investment strategy. Those who follow this style, known as growth investors, invest in companies that exhibit signs of above-average growth, even if the share price appears expensive in terms of metrics such as price-to-earning or price-to-book ratios. In typical usage, the term "growth investing" contrasts with the strategy known as value investing. However, some notable investors such as Warren Buffett have stated that there is no theoretical difference between the concepts of value and growth when considering ("Growth and Value Investing are joined at the hip"). Indeed, when just investing in one style of stocks, diversification could be negatively impacted.

• Organic Growth

International Trade

International trade is the exchange of goods and services across international boundaries or territories. In most countries, it represents a significant share of GDP. While international trade has been present throughout much of history (see Silk Road, Amber Road), its economic, social, and political importance has been on the rise in recent centuries. Industrialization, advanced transportation, globalization, multinational corporations, and outsourcing are all having a major impact. Increasing international trade is the usually primary meaning of "globalization".

International Trade

• International trade theory • Ricardian model • Heckscher-Ohlin model • Specific Factors • Gravity model

• Regulation of international trade • Risks in international trade

• Economic risks • Political risks

• See also • External links

• Data

Click on ImageSource: HSBC Bank plc 2002 - 2006

Growth InvestingForeign Direct InvestmentForeign direct investment (FDI) is the movement of capital across national frontiers in a manner that grants the investor control over the acquired asset. Thus it is distinct from portfolio investment which may cross borders, but does not offer such control. Firms which source FDI are known as ‘multinational enterprises’ (MNEs). In this case control is defined as owning 10% or greater of the ordinary shares of an incorporated firm, having 10% or more of the voting power for an unincorporated firm or development of a greenfield branch plant that is a permanent establishment of the originating firm.

Click on ImageSource: The Globalist

Foreign Direct Investment• Policies to Attract Foreign Direct Investmen

t

• Doing Business

• Direct Investment is Primary Strategy to Access Foreign Markets

• China and India Jockey for the Top Most Attractive Foreign Direct Investment Destination Globally

• World Economic Forum

• Business Strategy

• Competitiveness

Click on Image

Source: University of Michigan Library

Economies of Scale - IntegrationIntegration

This occurs when two firms join together to form one new company. Integration can be voluntary (a merger) or forced (a takeover). The figure below shows the three main types of integration.

Click on ImageSource: BizEd, University of Bristol

Acquisitions and Mergers

Click on ImageSource: George & Co

• Financing M&A • Merger• Acquisition• High-yield

• Examples• Motives behind M&A • M&A and Investment Banking • M&A Marketplace Difficulties • Levels and flows • Merger • Classifications of mergers • Issues

• World Economic Forum Also see Value Drivers

Valuation (finance) • Valuation• Valuation of companies (business val

uation) • Valuation using discounted cash flow

s• Valuation using multiples

• Usage • Asset pricing models • Related Material

Click on ImageSource: George & Co

Business Drivers

Larger ImageSource: Metapraxis

Also see

• Business Prophet - C.K. Prahalad

• Insights and Opportunities: Transforming Procurement Capabilities in Asia

• Economic Value Added

Business Analysis

1. Benefits of Business Analysis

2. Roles of Business Analysts 3. Business Process Improveme

nt 4. Goal of Business Analysts 5. External Links

Also see

• Quantitative Methods • Strategic Business Analysis • Financial Statements• Quantitative Method• From Wikipedia, the free en

cyclopedia

Larger ImageClick on ImageSource: BizEd

Quantitative Methods

Lecture 1: Functions & Economic Relationships Lecture 2: Economic Models/Linear Models Lecture 3: Basic Differential Calculus Lecture 4: Optimisation Lecture 5: Functions of Several Variables Lecture 6: Unconstrained Optimisation Lecture 7: Constrained Optimisation Lecture 8: Growth & Dynamics Lecture 9: Introduction to Difference Equations

Source: Bob BeachillLeeds Metropolitan University [email protected]

Quants Handbook

Click on ImageSource: Brian C. McCarthy Ohio University

Strategic Business Analysis

Larger ImageClick on ImageSource: Wikipedia

SWOT Analysis

• PEST market analysis tool

• Porter's Five Forces Model

• Value Chain

• Managing Your Value Chain

• Resources and Capabilities

• Organisational Capabilities

• Financial Analysis

Financial Statements: The System

Larger ImageLarger ImageClick on ImagesSource: Investopedia.com

Financial Statements: Analysis1) Financial Statements: Introduction2) Financial Statements: Who's In Charge?3) Financial Statements: The System4) Financial Statements: Cash Flow5) Financial Statements: Earnings6) Financial Statements: Revenue7) Financial Statements: Working Capital8) Financial Statements: Long-Lived Assets9) Financial Statements: Long-Term Liabilities10) Financial Statements: Pension Plans11) Financial Statements: Conclusion

Printer friendly version (PDF format)

Source: Investopedia.com

Financial RatiosA financial ratio is a ratio of two numbers of reported levels or flows of a company. It may be two financial flows categories divided by each other (profit margin, profit/revenue). It may be a level divided by a financial flow (price/earnings). It may be a flow divided by a level (return on equity or earnings/equity). The numerator or denominator may itself be a ratio (PEG ratio).

• Ratios • Flow-to-flow• Level-to-level• Ratio-to-ratio• To cash flow• To earnings• To market cap

• See also • External links

Larger Image

Download Financial Ratio Analysis (177K)

for Microsoft Excel.

Source: Baarns Consulting Group

Corporate Strategy

Literature Reviews• Strategic Management

• Business Strategy

• Value Based Management

• Value Creation

• Value Management Models

• Centralization and Decentralization and Delegation

• Corporate Social Responsibility

• Financial Highlights Also see Annotated Lecture Outline

Image by The Knowledge Management Advantage

Click on Image for further information

Synergy

Performance Assessment

• Performance Management Framework

• Econometrics

• Balanced Scorecard

• Vision and Strategy

• Corporate Culture

• Financial

• Customer

• Internal Business

• Learning and Growth

• Feedback

• Measurement of Intellectual Capital

Image by TPG

Click on Image for further information

Literature Reviews

Also see Annotated Lecture Outline

Business Value as a System

• Systems Thinking

• Organisational Effectiveness

• Value Chain

• Stakeholder Theory

• Theory of Constraints

Literature Reviews

Click on Image byAndersen ConsultingAlso see Annotated Lecture Outline

Business Strategy OverviewLarger Map

Source: BizEd, University of Bristol

Click on image for further information

Value Based Management

Click on Image for further informationSource: FDC

Source: Dresden International University

• Managing for Value

Value DriversTwelve Value Drivers FOCUS has

developed a unique tool that is proven to help ensure the success of your transaction. For buyers and sellers alike, the key to achieving successful M&A transactions is to identify the value components or Value Drivers of the transaction and then to make certain a plan is in place to integrate these components at the least cost.

• Your Customer Base • Recurring Revenue • Product Integration • Gross Margin • Intellectual Property • Human Capital • Management Experience and Exper

tise

• General Administrative Leverage • Distribution Leverage • History/Reputation and Operating T

enure

• Sales and Marketing Effectiveness • Barriers to Competitive Entry/Differe

ntiation

12 VALUE DRIVERS: Self Assessment Scorecard

Value Drivers

Crucial organisational capabilities, giving the firm competitive advantage. Different from Rappaport value drivers. Life Style Extra

• sales growth rate,• operating profit margin • income tax rate,• incremental investment in working capital,• incremental investment in fixed capital,• replacement of fixed capital,• cost of financing (cost of capital)• forecast duration (the planning period).

Turner, R. (1998). Projects for Shareholder Value: The Influence of Project Performance Parameters at different Financial Ratios. Project Management, 4(1), 70-73.

Larger ImageClick on ImageSource: The Segal Group, Inc

Value Drivers• Measuring and Ranking

Value Drivers

Larger Image

Value drivers intangible assets and intellectual capital

The new New Economy Analyst Report – March 16, 2003Juergen Daum’s new New Economy Best Practice service©2003 Juergen Daum. All rights reserved.

Business Economics

Larger Map

Source: BizEd, University of Bristol

Business EconomicsEconomics, which focuses on measurable variables, is broadly divided into two main branches: microeconomics, which deals with individual agents, such as households and businesses, and macroeconomics, which considers the economy as a whole, in which case it considers aggregate supply and demand for money, capital and commodities. Aspects receiving particular attention in economics are resource allocation, production, distribution, trade, and competition. Economic logic is increasingly applied to any problem that involves choice under scarcity or determining economic value. Click on Images for further information.

EconomicsSource: Wikipedia

Economic Value Added

Larger ImageWhat Does Economic Value Added Really Mean?

Click on Images for further information

Source: David Harper, (Contributing Editor - Investopedia Advisor)

Value Creation

Copyright © 2000, Community Intelligence Labs. Click on Image

• Michael Goold, Andrew Campbell and Marcus Alexander, Corporate Strategy and Parenting Theory, Long Range Planning, Vol.31, No.2, pp.308-314, 1998.

• Parenting Advantage (Goold & Campbell)

• Parenting Styles (Goold & Campbell)

• Core Competence (Hamel & Prahalad)

• Distinctive Capabilities (Kay)

• Cash Value Added

• Operational Effectiveness

Value Management ModelsLarger ImageSource: performgroupClick on image for further information

Larger Image Click on ImageSource: Realisation

Value Management Models - Six SigmaSix Sigma was pioneered by Bill Smith at Motorola in 1986[1]. Originally, it was defined[2] as a metric for measuring defects and improving quality; and a methodology to reduce defect levels below 3.4 Defects Per (one) Million Opportunities (DPMO). Six Sigma is a registered service mark and trademark of Motorola, Inc[3]. Motorola has reported over US$17 billion savings[4] from Six Sigma to date.

AlliedSignal and GE became early adopters of Six Sigma and reported benefits of over US$300 million during its first year of application[5]. Their CEO's, Larry Bossidy and Jack Welch, played a vital role in popularizing Six Sigma. Other major organizations who claim to have benefited from Six Sigma implementation are Ford, Caterpillar, Microsoft, Raytheon, Quest Diagnostics, Seagate Technology, Siemens, Merrill Lynch, Lear, 3M and many more.

Click on ImageSource: KETCH.ca

Value Management Models - Six Sigma• Definition • Application & Success

• Healthcare • Banking • Insurance • Construction • Military

• Methodology • DMAIC • DMADV

• Roles Required for Implementation • Examples of Some Key Tools Used • Criticisms of Six Sigma

• Of its origin • Of the term: Six Sigma • Of statistics • Of methods • Of effects

• References • See also • External links

Click on Image

Source: QCI International. All rights reserved.

Value Management Models - Value Chain

Source: Themanager.org

Click on images for further information

Shareholder Value• What is Shareholder Value?

• What Drives Shareholder Value?

• Shareholder Value Analysis

Larger ImageSource: Accenture

Shareholder Value Analysis

Larger Image

Source: agility.com.au

• Rediscovering Shareholder Value: A Proven Approach

• How to Build Value into a Merger

• Shareholder Value Tool

Market Capitalisation

Click on ImageSource:

• Valuation • "Float" • Categorization of companies by mark

et cap • Examples • Levels • See also

•Lists • External links

•Data

Centralization, Decentralization and Delegation

Advantages of Centralization

• Close control of operations

• Uniformity of policies, practices, and procedures

• Better use of centralized experts

Advantages of Decentralization

• Faster decision-making

• Decision better adapted to local condition

• Better management experience for managers that are considered for promotion to higher level management

Click on ImageCopyright: Cornell University

Why Delegate?

At a certain point, there are just too many facets to running a successful business to continue doing it alone.

In an increasingly complex business environment, with all the trends affecting business today, such as globalization, the information technology explosion, strategic alliances, increased mergers and acquisitions, heightened competition, and higher expectations of nearly every customer, it just isn't possible to still be that one person in control of everything. Bringing in others to manage is an absolute necessity for survival now.

Source:

Performance Management Framework• Performance Management

• History

• What is BPM?

• Metrics / Key Performance Indicators

• Application software types

• Designing and implementing a business performance management programme

• Vendors

• See also

• Performance Management: Making it Work: Achieving the Right Value Balance

• Advocating Productivity

Larger ImageClick on ImageSource: SourceMedia and DM Review

EconometricsEconometrics literally means 'economic measurement'. It is a combination of mathematical economics, statistics, economic statistics and economic theory.

Click on ImageSource: econ101.com

• Undergraduate Econometrics

• Graduate Econometrics

• Online Resources forEconometric Students

Balanced ScorecardLiterature Reviews

• Balanced Scorecard

Click on Image by PA Consulting Group

• A comprehensive view of business performance

• Public sector Balanced Scorecard • Purpose of the Balanced Scorecard • Evolution of the Balanced Scorecard

• See also • References

• Balanced Scorecard

Vision and Strategy

People sometimes say that it is pointless to develop a sense of purpose for a company. There already is a purpose: "To maximize return on investment to shareholders." Obviously, making money is important. But to confuse the essential requirement for advancing in the game with the deeper rationale, is a profound confusion. Focusing on the purpose of making money at the expense of other purposes, will naturally distract an organization's competitive advantage." (P. Senge)

• Organization's Vision

• Mission Statement

Click on ImageSource: Psylon

Corporate Culture

Image by Matsushita Electric Industrial Co. Ltd.

• Influences on organizational culture • Strong/Weak cultures • Classifying organizational culture

• Hofstede • Deal and Kennedy • Charles Handy • Edgar Schein

• Elements of culture • Critical Views on Organizational Cult

ure • Figures in Organizational Culture • See also • Sources

FinancialFinance• Examples of some basic fin

ancial concepts • Business finance • Finance of states • Financial economics • Financial mathematics • Financial analysis• See also • External links

Click on ImageSource: PPARC

Customer• Types of Customers

• Needs and Expectations

• The Loyalty Effect

Larger ImageClick on ImageSource: Forward Analytics

Internal Business

• Stakeholder view • Common usage

• Examples of common stakeholders• Shareholder Concept - Maximising S

hareholder Wealth

• Stakeholder Concept - A Wider Range of Objectives

• See also • External links

Stakeholder

Larger ImageClick on Image for further information

Learning and Growth

Learning Organization

• What was intended! • Feedback • Taxonomy • Roles and flows • Challenging assumptions • Accounting

Larger ImageClick on Image for further information

Training and Development

Systematic strategies

Measuring the return on investment of your training programs, beyond the classroom and the bottom line, creates a learning environment that can make any company stronger

Source: Managementmag.com

• Return on Investment

FeedbackIn cybernetics and control theory, feedback is a process whereby some proportion or in general, function, of the output signal of a system is passed (fed back) to the input. Often this is done intentionally, in order to control the dynamic behaviour of the system. Feedback is observed or used in various areas dealing with complex systems, such as engineering, architecture, economics, and biology.

Click on ImageSource: Vensim

Feedback• Types of feedback

• In electronic engineering

• In mechanical engineering

• In economics and finance

• In nature

• In organizations

• In gaming

• Sources

• See also Climate Feedback LoopSource: geocomplexity.net

Measurement of Intellectual Capital

Source: QuantAA

• The Structure of Intellectual Capital

• Why Care about IC

• Tracking IC

• Measurement of IC

Related Articles

• Intellectual Property Gaining Protection in the Muslim World

• Intellectual Property Rights in Islam

• Resources

Systems ThinkingSystems thinking involves the use of various techniques to study systems of many kinds. It includes studying things in a holistic way, rather than through purely reductionist techniques. It aims to gain insights into the whole by understanding the linkages and interactions between the elements that comprise the whole "system". Systems thinking can help avoid the silo effect, where a lack of organizational communication can cause a change in one area of a system to adversely affect another area of the system.

• Why use systems thinking techniques?

• What is a system? • Examples

• Methodologies • Applications • See also • Bibliography • External links Click on Image

Source: systems-thinking.org

Organisational Effectiveness

• The external environment and shareholder value expectations

• Business Strategy

• Building leadership and management capability

• Achieving strategic readiness of intangible assets

• Strategic success measures

• CultureLarger ImageClick on ImageSource: Perform Group

Value ChainThe Hidden Costs of a Forgotten Business System

Larger ImageClick on ImageSource: Expert Views, Inc.

Stakeholder Theory

Click on ImageSource: San Diego University

As originally detailed by R. E. Freeman (1984), stakeholder theory attempts to ascertain which groups are stakeholders in a corporation and thus deserve management attention. In short, it attempts to address the "Principle of Who or What Really Counts."

Theory of Constraints

Larger ImageClick on ImageSource: de.lge.com

Theory of Constraints (TOC) is a body of knowledge on the effective management of (mainly business) organizations, as systems. The author is Eliyahu M. Goldratt, with many others contributing to the body of knowledge.

• Theory of Constraints Summary

Theory of Constraints• The thinking process (TP) • Throughput Accounting • Application-specific TOC solutions • Operations • Supply Chain / Logistics • Finance and Accounting • Project Management • Marketing and Sales • The Six Necessary and Sufficient Qu

estions relating to Technology • Development and practice• Also See• References

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Source: Osaka Gakuin University

Corporate Strategy Lecture Outline 1/4LectureIntroduction The move from a focus on competitive strategy to a focus on corporate strategy. A discussion of the growth in multi-business firms with illustrative examplesSlide: Definition of corporate strategy.

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Corporate Strategy Lecture Outline 2/4Changes in Organisational Structures over Time An explanation of the ways in which organizational structures have evolved and developed over time and a discussion of the advantages and disadvantages of U versus M forms of organization.

Slide: Figure 9.2 plus bullet points outlining strengths and weaknesses of this form of organizationSlide: Figure 9.3 bullet points outlining strengths and weaknesses of this form of organization

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Corporate Strategy Lecture Outline 3/4

Strategy and Structure A discussion of the two-way relationship between strategy and structure and Alfred Chandler’s work. A consideration of the questions raised by the rise of M forms of organizationSlide: Bullet points of issues (page 343)

Managing the Multi-business Firm 1: The Corporate-Business Interface An introduction to issues of business unit boundaries, groupings of businesses and headquarter/business unit relationships. An exposition of common corporate-business interface styles.Slide: Bullet points relating to three different styles (p.347)

Managing the Multi-business Firm 2: The Role of the Corporate Headquarters An explanation of the different ways in which the centre can add value and a description of Gold and Campbell’s work on parenting stylesSlide: Figure 9.7Slide: Figure 9.8

Corporate Strategy Lecture Outline 4/4

Managing the Multi-business Firm 3: Managing the Portfolio A brief review of portfolio models such as the familiar BCG matrix plus an explanation of the limitations of these models and the reasons why they are no longer popular.Slide: Figure 9.9

Evidence and Experience A brief review of the finding of some of the empirical work in the area, emphasizing the difficult of measuring relatednessSlide: bullet points on concept of ‘relatedness’

Concluding Comments Link back to the resource-based view highlighting the connection between core competences and relatedness. A summary of the key tensions in managing portfolio businesses including centralization v decentralization, vertical v horizontal focus and co-operation v competition.

Performance Assessment 1/5

Lecture Introduction - placing this set of lectures in context by explaining the links between value creation and capture and strategic management. An explanation of the central importance of performance assessment and feedback in the strategy process.Slide: Figure 1.6

The Domain of Business Performance - a brief review of some of the different domain’s business performance emphasizing the distinction between operational, financial and effectiveness measures.Slide: Figure 18.1

Performance Assessment 2/5

Concepts of Value - an exposition of some alternative concepts of value and related performance measures including accounting, economic value-added and shareholder based approaches. Students may have covered some of these concepts in greater depth on other modules so it may be necessary for the lecturer to refer to work undertaken in other modules.Slide: Concepts of Value and performance management: bullet point list of sub-headings from pages 674-677

The link between shareholder value and business models - an explanation of Yip's characterisation of business models and the way this links with 'value-based' management techniques. Undergraduate lecturers may select to omit this section.Slide: Figure 18.2

Performance Assessment 3/5

The Balanced Scorecard - an introduction to the balanced scorecard framework and a discussion of its economic value-added (EVA) and shareholder value added (SVA) roots. A discussion of the basic building blocks of the models and the way measures are derived.Slide: Figure 18.3

The Balanced Scorecard as a Strategic Management System - linking the balanced scorecard to the strategy concepts, including key success factors, to provide an overall map.Slide: Figure 18.4

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Performance Assessment 4/5

The Strategic Management System in Practice - a discussion of the roles and responsibilities of the senior management team in the light of the links between the balanced scorecard and the strategic management system.

This could include a discussion of the advantages and disadvantages of linking the top team's performance to balanced scorecard outcomes.Slide: Figure 18.5

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Concluding Comments - a recap on how the building blocks that have been constructed in previous lectures can be brought together through the use of value-based management techniques such as the balanced scorecard.

The lecture could conclude with a return to the emergent versus planned strategy debate, a theme throughout the module, by discussing the role of performance feedback in the strategy process.

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Performance Assessment 5/5

Business Value as a System 1/5Lecture Introduction - the aim of this lecture is to pull together a number of themes that have emerged throughout the course. Emphasis is placed on an integrated, systems view of strategy. Lecturers may choose to introduce some systems theory concepts such as but this is optional.

The main point is to show how prior lectures have acted as a series of building blocks to build a view of the organization as part of an integrated web of relationships.Slide: Figure 21.1

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Business Value as a System 2/5Stakeholder Theory - The concept of the organization at the heart of an intricate web of relationships leads naturally to a discussion about stakeholders.

The main elements of stakeholder theory need to be explained but again the emphasis in this final lecture should be on the firm as a locus of contacts and contracts. Lecturers may choose to allude to learning theories at this point, showing how learning allows the firm to adapt to change within its network.Slide: Table 21.2 p783

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Business Value as a System 3/5Creating Value for Whom? - Once the firm is viewed from a stakeholder perspective, the next question becomes whose interests do the firm serve? Much of the traditional strategy literature takes for granted that shareholders have primacy and the main goal of business organizations is to maximize shareholder value.

Once the existence of multiple stakeholders is recognized then it makes sense to look to a wider set of objectives, including corporate social responsibility i.e. themes that have been developed in earlier sessions.Slide: Bullet points in two columns list main principles of shareholder and CSR perspectives (taken from page 786)

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Business Value as a System 4/5

Creating and Capturing Value - the authors argue that the integration of a strategic systems approach with the goal of maximizing shareholder value offers the best practical insight into managing a business.

Lecturers may agree or disagree but, whatever viewpoints are adopted, the main purpose of this session is to draw together key themes from prior lectures and to show how the pieces fit together.

The key messages of the text are that strategy is highly context specific and that competitive advantage most commonly lies in the space where strategy and practice meet. Intangible assets are of vital importance to the attainment of competitive success and reputation and image and identity are particularly important elements within the resource portfolio. Slide: Pulling it Together: The Example of HP - bullet points drawn from top of page 788

Business Value as a System 5/5

Concluding Comments - lecturers will want to give this last session their own flavour but may care to use Sundaram and Inkpen (2004) quote 'All of us seek a path to a promised land in which accountable firms managed by ethical decision-makers create the greatest value for the greatest number of stakeholders' and weave their own critical argument around this theme.