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A strategy implementation tool that harnesses multiple internal and external performance metrics to balance financial and strategic goals.
The balanced scorecard framework enables managers to
implement feedback and organizational learning
translate the strategic vision into operational goals
communicate and link the strategic vision
The difference between the value a consumer attaches to a good or service and what he or she paid for it.
Value-Price Paid
The difference between value (V) and cost (C), or (V – C), also known as the sum of consumer and producer surplus.
Public companies are required by law to release detailed accounting data, which enables economic value creation comparative analysis of firms
The total dollar market value of a company’s outstanding shares at any given time, calculated as the
(# of shares outstanding * by the share price)
The worth of the most favorable sacrificed alternative due to the resources utilized.
Another term for profit, the difference between price charged (P) and the cost to produce (C), or (P – C). also called profit
The difference between price charged (P) and the cost to produce (C), also known as producer surplus. (P-C)
Superior performance relative to other competitors in the same industry or against the industry average
Consumers’ Willingness to Pay−Cost to Produce
Framework proposing that strategic leaders maintain a dual focus on shareholder value creation and value creation for society(social and economic).
Says that: Stock prices are influenced by the psychological mood of investors.
Overall macroeconomic factors have a direct bearing on stock prices.
Stock prices can be highly volatile.
These are the key questions for understanding the balanced scorecard?
How do we create value?
How do customers view us?
What core competencies do we need?
The public stock company has four characteristics that make it an attractive corporate form
Limited liability for investors
means that the shareholders who provide the risk capital are liable only for the capital specifically invested, and not for other investments they may have made or for their personal wealth. While they can earn money on their investment, they cannot lose an amount that is larger than that investment. encourages investments by the wider public and entrepreneurial risk-taking.
Transferability of investor ownership through the trading of shares of stock on exchanges such as the New York Stock Exchange (NYSE), Each share represents only a minute fraction of ownership in a company, thus easing transferability.
Legal personality. The law regards a non-living entity such as a for-profit firm as similar to a person, with legal rights and obligations. Legal personality allows a firm’s continuation beyond its founders’ lifetime or involvement in the company.
Separation of legal ownership and management control.13 In publicly traded companies, the stockholders (the principals, represented by the board of directors) are the legal owners of the company, and they delegate decision-making authority to professional managers (the agents).
Legal owner
Own at least one share
a multidimensional perspective
mance dimensions:37
Accounting metrics
Shareholder value
Economic value
a firm’s strategic leaders must be able to accomplish two critical tasks:
Assess their firm’s performance accurately.
Compare and benchmark their firm’s performance to other competitors in the same industry or against the industry average
three defining problems faced by capitalism today according to strategy scholar Rebecca Henderson
are climate change, economic inequality, and the short-term focus of corporate governance(beleaguered institutions).
firm's purpose has shifted over time. The are the views of the firm's purpose in historical order, with the most recent view at the top.
creating shared value
pursuing corporate social responsibility
maximizing profits
examples of the competition metrics most commonly used in strategic management to conduct direct performance comparisons between different companies
Return on invested capital, return on assets, and return on revenue
e information used for comparing the performance of public companies based on accounting profitability
10K
The relative performance is evaluated using standardized financial metrics.
The information is derived from such data as income statements and balance sheets.
accounting profitability perspective
Accounting data are historical and therefore backward-looking. Accounting data focus primarily on tangible assets.
most commonly used metrics for comparing the performance of different companies
return on revenue
return on equity
return on assets
These statements about stock market valuations are true
Viewed over the long term, stock market valuation is a useful metric for assessing competitive advantage.
Stock market valuation is equal to the number of outstanding shares multiplied by the share price.
Because external factors create volatility in stock prices, a better measure of a firm's performance over the long term is
the total return to shareholders
a successful product differentiation strategy
, its product will have a higher perceived value and the firm will have a competitive advantage over a competitor that creates a product at equal cost but with a lower reservation price.
