Assignment
Differences between Value and ReturnsEvaluating the benefit an opportunity can provide is complex. When measuring an economic benefit, you must look at the real return, the nominal return, and the overall value. In many cases, a project might generate a negative return in the short term but may be of value in the long term. You may take on a project for its business, knowing that the project is a losing proposition but will compensate for this loss by bringing in a new project later that will generate a positive return, or future value. This assignment will illustrate this concept. Firms need to distinguish between value creation and the returns they obtain from their investments.
Tasks:
Locate an article from the Internet or the Argosy University online library resources that deals with firms distinguishing between value creation and the returns they obtain from their investments. You can consult sources such as the Wall Street Journal, Financial Times, Bloomberg Markets, the Economist, US News and World Report, and other publications for conducting this research.On the basis of the selected article, address the following questions:
• What are some of the strategies that firms engage in to create value?
• What is the difference between adding value in the value chain and creating returns for shareholders?
• Why does adding value to the firm and creating returns for shareholders in the short run and long run matter?
STUDENT RESPONSE:
What are some of the strategies that firms engage in to create value?
• Harness innovation for the public good
• Put people at the center
• Spread economic opportunity
• Engage in new alliances
• Be performance-driven in everything
• Practice superior governance
• Pursue purpose beyond profit
o (Values-Driven Performance: Seven Strategies for Delivering Profits With Principles, 2004)
What is the difference between adding value in the value chain and creating returns for shareholders?
Adding Value: Adding value is expected in the course of regular business, and it takes many forms like customer incentives, no-cost options, loyalty programs and giveaways. It involves taking something with a value and adding it on for the buyer. (Value, Value Added and Value Creation, 2013).
Creating Value: Creating value goes further. It requires identifying what would be of value to an individual buyer and then finding or making a way for that unique value to be realized. Unlike added value, created value is original and unique to the one buyer it suits. (Value, Value Added and Value Creation, 2013).
Why does adding value to the firm and creating returns for shareholders in the short run and long run matter?
Focusing on short term could cause or make things harder to change in the future tense. Often times there is a need for change such as demographic change, new targeted community, or becoming global. If a company has focused mostly on one particular area they may not be equipped to service others. Taking these sort of risk could hurt the company, while affects shareholders.
Reference
Values-Driven Performance: Seven Strategies for Delivering Profits With Principles. (2004). Retrieved from Ivey Business Journal.
Value, Value Added and Value Creation. (2013). Retrieved from Managing Americans.