Upgrade to remove ads
Strategic Management Ch 5: Competitive Advantage, Firm Performance, and Business Models
Terms in this set (24)
This measure of relative firm performance uses accounting and financial data to compare and benchmark the focal firm's performance to other competitors in the same industry or the industry average
ROIC, ROE, ROA, and ROR are these types of measures that are typically broken down into:
Working capital turnover
This measures how efficiently a company is producing a good. The lower this measure, compared to a benchmark, the more efficiently the company is at production
This measures how much of each dollar that the firm earns in sales is invested to conduct research and development. The lower this measure, compared to a benchmark, the more efficiently the company is at production
This measures how much of each dollar that the firm earns in sales is spent on advertising and sales support. The lower this measure, compared to a benchmark, the more efficiently the company is at production
Working Capital Turnover
This is a measure of how much a firm earns for each dollar it invests in production. The higher this value, the better the performance. Broken down into fixed asset turnover, inventory turnover, receivables turnover, and payables turnover
Fixed asset turnover
This measure (Revenue/Fixed Assets) conveys how well a company leverages its fixed assets. The higher, the better.
this measure (COGS/Inventory) indicates how much of a firm's capital is tied up in its inventory. Since the first component is the cost of what has been sold and the denominator is what is waiting to be sold, the higher the value of this ratio, the better performance of the company.
this measure (Revenue/Accounts Receivable) measures how efficiently the firm is collecting money from its customers.
this measure (Revenue/Accounts payable) measure how efficiently the firm is paying its debts
Problems with accounting profitability
1.) Accounting data is historical, not forward-looking
2.) Accounting data does not consider off-balance sheet items for which the company must still pay attention. Example: pension payments
3.) Accounting data focuses on tangible assets; it ignores intangible value
individuals or organizations that own one or more shares of stock in a public company. They are the legal owners of public companies.
the money provided by shareholders in exchange for an equity share in a company; it cannot be recovered if the firm goes bankrupt
total return to shareholders
return on risk capital that includes stock price appreciation plus dividends received over a specific period
a firm performance metric that captures the total dollar market value of all of a company's outstanding shares at any given point in time. It is equal to #outstanding shares X Share price
problems with shareholder performance
1.) Stock prices can be highly volatile, difficult to assess performance in short run
2.) Stock prices are also influenced by non-firm/non-industry effects in the general economy
3.) Stock prices reflect the psychological mood of investors; often irrational
economic value created
this is the difference between value (V) and cost (C) or (V-C); sometimes also called economic contribution
the dollar amount a consumer would attach to a good or service; the consumer's maximum willingness to pay; sometimes also called reservation price
Also known as the producer surplus, this is the difference between price charged and the cost to produce
the difference between the value a consumer attaches to a good or service and what he or she paid for it
the value of the best forgone alternative us of the resources employed
This is a strategy implementation tool that harnesses multiple internal and external performance metrics in order to balance financial and strategic goals. The metrics on this should answer the following questions:
1.) How do our customers view us?
2.) How do we create value?
3.) What core competencies do we need?
4.) how do our shareholders view us?
triple bottom line
this is the combination of economic, social, and ecological concerns that can lead to a sustainable strategy
organizational plan that details the firm's competitive tactics and initiatives; in short, how the firm intends to make money
THIS SET IS OFTEN IN FOLDERS WITH...
Strategic Management Ch. 2: Managing the Strategy…
Strategic Management Ch 3: External Analysis
Strategic Management Ch 4: Internal Analysis
Strategic management Ch. 6
YOU MIGHT ALSO LIKE...
Chapter 5- Competitive Advantage and Firm Performa…
MGMG ch 5
Chapter 5: Competitive Advantage and Firm Performa…
OTHER SETS BY THIS CREATOR
Strategic Management Ch 12
Strategic Management Ch 11
Strategic Management Ch 9
Strategic Management Ch 8
OTHER QUIZLET SETS
Corporate Finance Chapter 2
Financial Management - Ch. 2: Financial Statement…
Section A2: Financial Ratios