Strategy as a quest for value The purpose of business is first to create value

Strategy as a quest for value the purpose of business

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Strategy as a quest for value The purpose of business is, first, to create value for customers and, second, to extract some of the customer value in the form of the profit, thereby creating value for the firm. Value can be created in two ways: by PRODUCTION and by COMMERCE. The difference between the value of a firm’s output and the cost of its materials inputs is its value added. Value proposition: What the company is offering to you that makes you chose this company instead of all the other. Value for whom? Stakeholder: a person with an interest or concern in something, specially a business. The stakeholder approach: The firm is a coalition of interest groups - it seeks to balance their different objectives. Shareholder: an owner of shares in a company. The shareholder approach: The firm exists to maximise the wealth of its owners (= max. present value of profits over the life of the firm)
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There’s only one approach Assumption: The primary goal of strategy is to maximise the value of the enterprise through seeking to maximise profits over the long term. COMPETITION erodes profitability The MARKET for corporate control Convergence oF STAKEHOLDERS INTERESTS Empirical evidence shows that firms which take account of a broader set of interests achieve superior financial performance. Specific objectives - The MISSION of a company is permanent. Is an statement where we describe the activity of the company. We translate the mission into different objectives: - STRATEGIC OBJECTIVES which is longterm - TACTICAL OBJECTIVES OR GOALS which is medium-term - OPERATIONAL OBJECTIVES OR STANDARDS which is short-term, means the scope of this objectives might be 3/months, and we can change them. Business goals
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Mission - Corporate mission The MISSION constitutes a firm’s IDENTITY and PERSONALITY. It can be understood as the answer to the following question: ‘What’s the essence of our business and what do we want it to be?’ It has 3 basic characteristics: Always positive Stable in the long term Stresses the effort and commitment of the firm —> Through the mission you are developing all the different things. When we analyse the language normally the mission is telling us about the SCOPE of the firm* + It identifies the CORE CAPABILITIES* + Something about the VALUES, BELIEFS and ATTITUDES of the firm = They tell about HOW the firms does everything * Scope of the firm : The different business in which a firm operates or may operate in the future (products or services provided and geographic sphere covered) *Core capabilities: The way that the firm compete on the markets. Based on them, a firm achieves its sustainable competitive advantage. Example: Ryanair Its objective is: ‘To become Europe’s most profitable low cost airline by rolling-out proven low fare, no-frills service in all markets in which we operate to the benefit of passengers, people and stake- holders’ Scope (WHAT) Core capabilities (HOW) Corporate culture (FOR WHOM) Vision It refers to the desired future state of the organisation, ‘What do we want to achieve? Where do we want to be in the future? It can be changed with years, maybe if we have been too positive or
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