Transcript DSM - Performance Management

Discussion Notes
Teaching Notes: Finntrack
Strategy: Analysis and Practice ©2005 McGraw-Hill Education Europe
Index
• Workshop
– Case Analysis
– Debate
– Case Questions
– How to Use Your Workshop
Resources
– Disclaimer
– Learning Objectives
Click on Logo
Source: Wikipedia
• 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)
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 Image
Source: 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 Image
Source: 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 Image
Source: DSM
Workshop
This 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.
Workshop
Strategy Analysis and Practice
John McGee, Warwick Business School
Howard Thomas, Warwick Business School
David Wilson, Warwick Business School
Case Analysis
A 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 Image
Source: DSM
Case Analysis
Case 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
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History of the case study
Conclusions
Notable case studies
References
See also
External links
Click on Image
Source: DSM
Workshop Debate
Workshop discussion topics have been divided into five parts according to the relevant
chapters of the book:
1.
2.
3.
4.
5.
Introduction
Business Analysis
Corporate Strategy
Performance Assessment: Balanced Scorecard
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 Objectives
Learning from Case Studies: A Short Guide for Students
Case Questions
Please 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 information
Also 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 Objectives
The 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
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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 Image
Source: DSM
Overview
DSM (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 Image
Source: Wikipedia
Overview
Name
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 Image
Source: Wikipedia
Overview
History
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 Image
Source: Collection D.Visser
Overview
Products
• 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 Image
Source: Wikipedia
Overview
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.
Multinational Corporations
A 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.
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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 Corporations
Multinational 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
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
2005
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.
2000
Source: DSM
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 Image
Source: healthallianze.co.nz
Markets and Businesses
• Business Groups
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Agriculture
Automotive
Building & construction
Dietary supplements
Electrical & electronics
Feed / animal nutrition
Fibers, textiles & clothing
Food & beverages
Furniture
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Marine
Medical materials
Packaging
Personal care / cosmetics
Pharmaceuticals
Sports, leisure &
consumer goods
• Transportation &
mechanical engineering
Source: DSM
Business Objectives
• Shareholder Value
• Growth
• Sales 60% > €10 billion by
2005
•Specialty Products 80%
•Industrial 20%
• Financial Targets
• Financial Value
• Market Capitalisation
Larger Map
Click on Image
Image by BizEd
Revenue Maximization
• Revenue
• Profit maximization
• Revenue Maximisation
Click on Image
Larger Picture
Source: Georgetown University
Financial Policy
Objectives
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 Maximization
Creating and managing shareholder value
Shareholder value
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Definition
Shareholder Value Maximization
Criticism
Alternative Definition based upon
Criticism: Stakeholder Analysis
Also see Value Based Management
Source: Shareholdervalue.com
Financial Value Maximization
Larger Image
Click on Image
Source: Return Driven Strategy
Financial Value Maximization
Stock (Share) Valuation
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Fundamental criteria (fair value)
Market criteria (potential price)
See also
External links
Return on Investment
• Calculations
• Arithmetic return
• Logarithmic return
• Examples of high yielding
investments
• See also
• External links
Click on Image
Source:UserStrategy.com
Financial Value Maximization
Discounted Cash Flow
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
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 Image
Source: Metapraxis
Internal Rate of Return
The 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 Image
Click on Image
Source: Baarns Consulting Group
Divestment
In 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 Image
Click on Image
Source: Accenture
Annual Reports
Key Financial Data
2005
2000
Report by the Managing
Board
Review of business
Report by the Supervisory
Board to the shareholders
Financial Statement
2005
Information about the DSM
Share
2000
Source: DSM
Click on Image
Source: DSM
Corporate Governance, Risk Management
and Internal Control
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
Also see Value Maximization,
Stakeholder Theory, and the Corporate
Objective Function
Forum
Source: DSM
2005
Click on Image
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 Image
Source: Shareholdervalue.com
Financial Risk
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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 Image
Source: 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 Image
Source: netg.com
Growth Investing
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-tobook 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
Organic growth is the rate of business expansion through increasing
output and sales as opposed to mergers, acquisitions and take-overs.
• 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
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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 Image
Source: HSBC Bank plc 2002 - 2006
Growth Investing
Foreign Direct Investment
Foreign 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 Image
Source: The Globalist
Foreign Direct Investment
• Policies to Attract Foreign Direct
Investment
• 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 - Integration
Integration
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 Image
Source: BizEd,
University of Bristol
Acquisitions and Mergers
• 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
Click on Image
Source: George & Co
Also see Value Drivers
Valuation (finance)
• Valuation
• Valuation of companies (business
valuation)
• Valuation using discounted cash
flows
• Valuation using multiples
• Usage
• Asset pricing models
• Related Material
Click on Image
Source: George & Co
Business Drivers
Also see
• Business Prophet - C.K.
Prahalad
• Insights and Opportunities:
Transforming Procurement
Capabilities in Asia
• Economic Value Added
Larger Image
Source: Metapraxis
Business Analysis
1. Benefits of Business Analysis
2. Roles of Business Analysts
3. Business Process
Improvement
4. Goal of Business Analysts
5. External Links
Also see
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Quantitative Methods
Strategic Business Analysis
Financial Statements
Quantitative Method
From Wikipedia, the free
encyclopedia
Larger Image
Click on Image
Source: BizEd
Quantitative Methods
Quants Handbook
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
Click on Image
Source: Brian C. McCarthy
Ohio University
Source: Bob Beachill
Leeds Metropolitan University
[email protected]
Strategic Business Analysis
SWOT Analysis
• PEST market analysis tool
• Porter's Five Forces Model
• Value Chain
• Managing Your Value Chain
• Resources and Capabilities
• Organisational Capabilities
• Financial Analysis
Larger Image
Click on Image
Source: Wikipedia
Financial Statements: The System
Larger Image
Click on Images
Source: Investopedia.com
Larger Image
Financial Statements: Analysis
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9)
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11)
Financial Statements: Introduction
Financial Statements: Who's In Charge?
Financial Statements: The System
Financial Statements: Cash Flow
Financial Statements: Earnings
Financial Statements: Revenue
Financial Statements: Working Capital
Financial Statements: Long-Lived Assets
Financial Statements: Long-Term Liabilities
Financial Statements: Pension Plans
Financial Statements: Conclusion
Printer friendly version (PDF format)
Source: Investopedia.com
Financial Ratios
A 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
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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
Synergy
• Strategic Management
• Business Strategy
• Value Based Management
• Value Creation
• Value Management Models
• Centralization and
Decentralization and Delegation
Image by The Knowledge Management
Advantage
• Corporate Social Responsibility
Click on Image for further information
• Financial Highlights
Also see Annotated Lecture Outline
Performance Assessment
Literature Reviews
• Performance Management Framework
• Econometrics
• Balanced Scorecard
• Vision and Strategy
• Corporate Culture
• Financial
• Customer
Image by TPG
• Internal Business
Click on Image for further
information
• Learning and Growth
• Feedback
• Measurement of Intellectual Capital
Also see Annotated Lecture
Outline
Business Value as a System
Literature Reviews
• Systems Thinking
• Organisational Effectiveness
• Value Chain
• Stakeholder Theory
• Theory of Constraints
Also see Annotated Lecture Outline
Click on Image by
Andersen Consulting
Business Strategy Overview
Larger Map
Source: BizEd, University
of Bristol
Click on image for further
information
Value Based Management
• Managing for Value
Source: Dresden International University
Click on Image for
further information
Source: FDC
Value Drivers
Twelve 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.
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12 VALUE DRIVERS: Self
Assessment Scorecard
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Your Customer Base
Recurring Revenue
Product Integration
Gross Margin
Intellectual Property
Human Capital
Management Experience and
Expertise
General Administrative Leverage
Distribution Leverage
History/Reputation and Operating
Tenure
Sales and Marketing Effectiveness
Barriers to Competitive
Entry/Differentiation
Value Drivers
Crucial organisational capabilities, giving the
firm competitive advantage. Different from
Rappaport value drivers. Life Style Extra
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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 Image
Click on Image
Source: 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, 2003
Juergen Daum’s new New
Economy Best Practice service
©2003 Juergen Daum. All rights
reserved.
Business Economics
Larger Map
Source: BizEd,
University of Bristol
Business Economics
Economics, 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.
Economics
Source: Wikipedia
Economic Value Added
What Does Economic Value
Added Really Mean?
Click on Images for further
information
Source: David Harper, (Contributing
Editor - Investopedia Advisor)
Larger Image
Value Creation
• 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
Copyright © 2000, Community
Intelligence Labs. Click on Image
Value Management Models
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Source: performgroup
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further information
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Source: Realisation
Value Management Models - Six Sigma
Six 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.
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Source: KETCH.ca
Value Management Models - Six Sigma
• Definition
• Application & Success
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Healthcare
Banking
Insurance
Construction
Military
• Methodology
• DMAIC
• DMADV
• Roles Required for Implementation
• Examples of Some Key Tools Used
• Criticisms of Six Sigma
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Of its origin
Of the term: Six Sigma
Of statistics
Of methods
Of effects
• References
• See also
• External links
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Source: QCI International. All rights reserved.
Value Management Models - Value Chain
Source: Themanager.org
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further information
Shareholder Value
• What is Shareholder Value?
• What Drives Shareholder
Value?
• Shareholder Value Analysis
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Source: Accenture
Shareholder Value Analysis
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Source: agility.com.au
• Rediscovering Shareholder Value: A Proven Approach
• How to Build Value into a Merger
• Shareholder Value Tool
Market Capitalisation
• Valuation
• "Float"
• Categorization of companies by
market cap
• Examples
• Levels
• See also
•Lists
• External links
•Data
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Source:
Centralization, Decentralization and Delegation
Advantages of Centralization
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Close control of operations
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Uniformity of policies, practices, and procedures
•
Better use of centralized experts
Advantages of Decentralization
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Copyright:
Cornell University
•
Faster decision-making
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Decision better adapted to local condition
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Better management experience for managers that are considered for promotion to
higher level management
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
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Source: SourceMedia and DM Review
Econometrics
Econometrics literally means 'economic measurement'. It is a combination of
mathematical economics, statistics, economic statistics and economic theory.
• Undergraduate Econometrics
• Graduate Econometrics
• Online Resources for
Econometric Students
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Source: econ101.com
Balanced Scorecard
Literature Reviews
• Balanced Scorecard
• 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
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Vision and Strategy
• Organization's Vision
• Mission Statement
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)
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Source: Psylon
Corporate Culture
• Influences on organizational culture
• Strong/Weak cultures
• Classifying organizational culture
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Hofstede
Deal and Kennedy
Charles Handy
Edgar Schein
• Elements of culture
• Critical Views on Organizational
Culture
• Figures in Organizational Culture
• See also
• Sources
Image by Matsushita Electric Industrial Co. Ltd.
Financial
Finance
• Examples of some basic
financial concepts
• Business finance
• Finance of states
• Financial economics
• Financial mathematics
• Financial analysis
• See also
• External links
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Source: PPARC
Customer
• Types of Customers
• Needs and Expectations
• The Loyalty Effect
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Source: Forward Analytics
Internal Business
Stakeholder
• Stakeholder view
• Common usage
• Examples of common stakeholders
• Shareholder Concept - Maximising
Shareholder Wealth
• Stakeholder Concept - A Wider
Range of Objectives
• See also
• External links
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Learning and Growth
Learning Organization
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What was intended!
Feedback
Taxonomy
Roles and flows
Challenging assumptions
Accounting
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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
• Return on Investment
Source:
Managementmag.com
Feedback
In 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.
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Source: 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 Loop
Source: geocomplexity.net
Measurement of Intellectual Capital
• 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
Source: QuantAA
Systems Thinking
Systems 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
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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
• Culture
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Source: Perform Group
Value Chain
The Hidden Costs of
a Forgotten Business
System
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Source: Expert Views, Inc.
Stakeholder Theory
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."
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Source: San Diego University
Theory of Constraints
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
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Source: de.lge.com
Theory of Constraints
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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
Questions relating to Technology
• Development and practice
• Also See
• References
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Source: Osaka Gakuin University
Corporate Strategy Lecture Outline 1/4
Lecture
Introduction
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 examples
Slide: Definition of corporate strategy.
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Corporate Strategy Lecture Outline 2/4
Changes 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 organization
Slide: 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 organization
Slide: 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 styles
Slide: Figure 9.7
Slide: 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 relatedness
Slide: 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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Performance Assessment 5/5
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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Business Value as a System 1/5
Lecture
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 2/5
Stakeholder 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 3/5
Creating 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.