MNGT 4800 Chapter 5 Notes
MNGT 4800 Chapter 5 Notes MNGT 4800
Popular in Strategic Management (Section 009)
Popular in Business, management
This 2 page Class Notes was uploaded by Peyton Oglesby on Sunday February 7, 2016. The Class Notes belongs to MNGT 4800 at Auburn University taught by Dr. Peter Stanwick in Spring 2016. Since its upload, it has received 22 views. For similar materials see Strategic Management (Section 009) in Business, management at Auburn University.
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Date Created: 02/07/16
Chapter 5-Competitive Advantage and Firm Performance How to measure the success of a Corporation: Net income and revenues for the past five years and two critical competitors to compare to Return on Assets= Net Income/Total Assets Measuring: Competitive Advantage • Competitive performance variances should be measured by using an assortment of evaluation tools. • Measured comparative to other organizations • Three standards: o How much economic value does the company produce? o What is the companies’ accounting profitability? o How much shareholder value does the company generate? (VPC) Value: a dollar amount a consumer is willing to pay for a service or good Price: the cost a good or service is for sale Cost: the price to make the service or good Economic Value as Competitive Advantage If the economic value generated is: o Equal to its rivals competitive parity o Lesser than its rivalscompetitive disadvantage o Bigger than its rivals competitive advantage Drawbacks: o Value may be broadly diverse o Determining value can be difficult o “firm level competitive advantage” the organization must have economic value for all its services and goods ACCT Profitability Regulated by: o (GAAP) Accounting principles o Sarbanes-Oxley Act o US Securities and Exchange Commission Authorizes direct organization performance comparisons o Supplies the most positive profitability metrics o Using typical ratios Uses ordinary, public metrics Permits direct organization performance comparisons Competitive advantage is relative to opponents Drawbacks for ACCT Measures Looking backwards at data while moving forward in the future Doesn’t consider “off balance sheet” objects Focuses on tangibles that may not be relevant anymore Shareholder Value Creation Positives Complete return to shareholders Outside performance metric Efficient-market hypothesis Shareholder Value Creation Drawbacks Highly volatile stock prices Macroeconomic elements have a direct effect on the stock prices Irrational stock prices frequently reflect mood of investors A Balanced Scorecard Includes many metrics that are both internal and external Uses precise performance metrics and questions o Includes both strategic and financial: Consumer viewpoint Inside core capabilities Shareholder viewpoint Future developments to create worth o Advantages Design business procedures Interprets visions into measureable goals Communicates vision thru the company Apply organizational learning o Disadvantages Limited direction on choosing metrics Restricted awareness on how to get back on track to reach goals No tools for strategy formulation Implications for the Strategist Qualitative and quantitative performance measurements matter like the Balanced Scorecard and Triple Bottom Line The only better strategy is the goal Competitive advantage is best by criteria, replicating overall corporation performance
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