Week 1 Flashcards
What is a corporation?
A tool of value creation
Economic Value Added
Economic value added (EVA) is a measure of a company’s financial performance based on the residual wealth calculated by deducting its cost of capital from its operating profit, adjusted for taxes on a cash basis. EVA can also be referred to as economic profit, and it attempts to capture the true economic profit of a company.
Value has a ____ nature
relative — water and desert example
Human capital definition
a measure of the economic value of an employee’s skill set. This measure builds on the basic production input of labor measure where all labor is thought to be equal. The concept of human capital recognizes that not all labor is equal and that the quality of employees can be improved by investing in them; the education, experience and abilities of employees have economic value for employers and for the economy as a whole.
Natural capital definition
A reference to the stock of natural resources, such as water and oil. Unlike other forms of equity (such as machines and buildings), which can be created on a regular basis, many natural resources are nonrenewable. Natural capital includes many resources that humans and other animals depend on to live and function, which leads to a dilemma between depleting and preserving those resources.
Produced capital
Nations infrastrucuture, transportation networks, factories, homes and other manufactured assets.
Social capital definition
an economic idea that refers to the connections between individuals and entities that can be economically valuable. Social networks that include people who trust and assist each other can be a powerful asset. These relationships between individuals and companies can lead to a state in which each thinks of the other when something needs to be done.
Conditions for perfect competition to occur
- Homogeneous products
- Perfect information
- Important supply and demand
- Free flow of resources
Sources of competitive advantage
- Scale
- Lower transaction cost
- Access to unique resources
- Higher quality
- More services
- Trade and technology secret
- Strong brand awareness
- Etc.
THE THREE FUNDAMENTAL PILLARS OF CORPORATE STRATEGY (VRP)
What’s strategic managment?
the ability of managers to make strategic choices, capable of engaging organizational resources within a specific perimeter to create and sustain over time the creation of value for the company’s stakeholders.
Strategic management emphasizes the role of managers and their capacity to explore the future, formulate strategies and implement them through conducting strategic initiatives
Strategic management is a 4 phases temporal pattern
- Make sense of environmental opportunities and threats, as well as organizational strengths and weaknesses
- Seize these opportunities and threats within an action plan
- Transform and/or adapt the company’s resources base and its perimeter to build a sustainable system of value creation
- Exploit the system of value creation
Strategic management is not about ensuring organizational efficiency
- It is about navigating the complexity of world (ambiguous and uncertain)
- It is about thinking your organization in its globality and in its time
- It is about developing, exploiting and sustaining a series of temporary competitive advantage
Establish and/or validate the company’s strategic statement
- Mission is the company’s « raison d’être »
- Vision is what the company aspires to be (long-term objective)
- Strategic objectives are the qualitative and quantitative objectives that must be reached
- Corporate values are the principles and assumptions underlying the formulation and implementation of the company’s strategy
THE STRATEGIC MANAGEMENT LEVELS
