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1 Discussion Notes

2 Index Introduction to DSM Workshop Multinational Corporations
Overview Corporate Organisation Markets and Businesses Business Objectives Financial Policy Revenue Maximization Financial Value Maximization Shareholder Value Maximization Annual Reports Corporate Governance, Risk Management and Internal Control Strategic Risk Management Strategy Growth Investing Foreign Direct Investing (FDI) Economies of Scale - Integration Acquisitions and Mergers Valuation (finance) Workshop Case Analysis Debate Case Questions How to Use Your Workshop Resources Disclaimer Learning Objectives Click on Logo Source: Wikipedia

3 Index Introduction to DSM Overview Corporate Organisation
Markets and Businesses Business Objectives Financial Policy Revenue Maximization Financial Value Maximization Shareholder Value Maximization Annual Reports Corporate Governance, Risk Management and Internal Control Strategic Risk Management Click on Image Source: DSM

4 Index Business Drivers Click on Image Source: DSM Business Analysis
Quantitative Methods Strategic Business Analysis Financial Statements - The System Financial Statements - Analysis Financial Ratios Corporate Strategy Business Strategy Overview Value Based Management Value Drivers Business Economics Economic Value Added Market Capitalisation Shareholder Value Shareholder Value Analysis Value Creation Value Management Models Centralization, Decentralization and Delegation Why Delegate? Click on Image Source: DSM

5 Index Performance Assessment: Balanced Scorecard
Performance Management Framework Econometrics Balanced Scorecard Vision and Strategy Corporate Culture Financial Customer Internal Business Learning and Growth Measurement of Intellectual Capital Business Value as a System Systems Thinking Organisational Effectiveness Value Chain Chapter Annotated Lecture Outline Lecture Chapter 18 - Annotated Lecture Outline Chapter 21 - Annotated Lecture Outline Click on Image Source: DSM

6 Workshop This workshop series is designed to compliment Teaching and Learning Strategies for undergraduate, postgraduate and executive level Strategic Management and related programmes and courses using the case studies featured in the ‘Strategy Analysis and Practice’ text. The overall aim is to support the learning contents offered in the relevant chapters of the book whilst expanding participants’ knowledge and skills base required to understand, review and analyse the decisions taken during the strategy development and implementation processes of DSM’s Vision 2005: Focus and Value agenda from

7 Workshop Strategy Analysis and Practice
John McGee, Warwick Business School Howard Thomas, Warwick Business School David Wilson, Warwick Business School

8 Case Analysis A case study is a particular method of qualitative research. Rather than using large samples and following a rigid protocol to examine a limited number of variables, case study methods involve an in-depth, longitudinal examination of a single instance or event: a case. They provide a systematic way of looking at events, collecting data, analyzing information, and reporting the results. As a result the researcher may gain a sharpened understanding of why the instance happened as it did, and what might become important to look at more extensively in future research. Click on Image Source: DSM

9 Case Analysis Case studies lend themselves especially to generating (rather than testing) hypotheses. The scope and relevance of case studies Types of case study Illustrative case studies Exploratory case studies Critical instance case studies Program implementation case studies Program effects case studies Cumulative case studies Business school case studies Medical case studies History of the case study Conclusions Notable case studies References See also External links Click on Image Source: DSM

10 Workshop Debate Workshop discussion topics have been divided into five parts according to the relevant chapters of the book: Introduction Business Analysis Corporate Strategy Performance Assessment: Balanced Scorecard Business Value as a System You should ensure that you have understood the contents of chapters 9, 18 and 21 prior to attending any of the above debates. Also see: How to Use Your Workshop Resources Learning Objectives Learning from Case Studies: A Short Guide for Students

11 Case Questions Please Note:
At your instructor’s discretion the indicative questions below and elsewhere in this resource may be varied or deemed unnecessary for teaching and learning purposes for some courses or modules. Identify DSM’s key performance indicators and evaluate their the corporate strategic performance. What should DSM do if a business group did not meet its contract, given DSM’s historical culture of tolerance for mediocre performance? Finally, there were some more fundamental questions. Implementing the new financial metrics had led to greater emphasis on short-term performance. DSM felt that this short-term focus could be hazardous for a specialty company that heavily depended on innovation and R&D.

12 Case Questions For example, in 2000 one of DSM’s most successful and profitable product was Stanyl, a product which had been 10 years in development, with negative EPs throughout all those years. How would these kinds of investment project be handled under the new approach? Also see Learning Using Case Studies for further information Also see A Model for Case Analysis and Problem Solving

13 How to Use Your Workshop Resources
Viewing You will need either MS PowerPoint program or PowerPoint Viewer installed on your computer. The latter may be downloaded free from Microsoft website here. Navigation The Learning Contents (Literature Reviews) are linked to a relevant public domain on the Internet. Most, if not all pictures/images are ‘clickable’, i.e. linked to its source which provides further information on the topic or the copyright holder.

14 How to Use Your Workshop Resources
If your version of PowerPoint does not show navigation buttons on the slide, right click on the screen and select your destination from the dialogue box. Alternatively use the small arrowheads, indicating ‘previous’ and ‘next’.

15 Disclaimer This information is provided with the understanding that the authors and publishers do not assume any legal responsibility for the completeness or accuracy of the contents or any opinions or views expressed on these pages or linked destination sources. It is the nature of the media (Internet) that some of the pages may not always be available due to broken or dead links, withdrawals, etc. Whilst the publishers will be pleased to take any appropriate corrective action, for example, by replacing or removing the sources when possible, they unable to assume any legal responsibility for unavailability of any third party material for whatever reason beyond their direct control.

16 Learning Objectives The main objective of the workshop is to evaluate DSM’s corporate strategic planning process and outcomes and their impact on the company’s business level operations. Participants will have an opportunity of developing and enhancing their strategic thinking and internet research skills analytical and critical thinking skills by reviewing the factors that influenced corporate centre's decisions on the businesses in their portfolios understanding of distinction between scale and scope and implications that these concepts have for adding value in multi-business firms

17 Learning Objectives awareness of the links between strategy and organizational structure and the way organizational structures have changed over time skills to analyse and critically evaluate the different factors that can add value in multi-business firms knowledge and understanding of the empirical research findings of work which has examined the links between strategy and performance in multi-business corporations knowledge and understanding of a range of performance measures and the concepts of “shareholder value” and “economic value-added” and their linkage to the strategy process

18 Learning Objectives understanding of the notion of a “balanced scorecard” and the ways in which this framework can be used to manage value understanding of the importance of the performance feedback loop for assessing and making strategic choices understand of the strategic systems perspective and the way in which this can be used to build an holistic picture of strategy context, content and process understanding of stakeholder theory and be able to apply this framework to gain insight into strategic issues in a range of organizations ability to identify a range of challenges facing organizations in the future and explain the ways in which a strategic systems approach can help managers to think and act strategically

19 Introduction to DSM Overview Multinational Corporations
Corporate Organisation Business Objectives Strategy Corporate Governance, Risk Management and Internal Control Source: DSM

20 Overview Company Name History Products Data Click on Image Source: DSM

21 Overview DSM (in full Koninklijke DSM N.V., or Royal DSM N.V.) is a multinational chemicals company. Its headquarters are in Heerlen, the Netherlands. Originally a state-owned coal mining company (Dutch State Mines/De Staats Mijnen). Click on Image Source: Wikipedia

22 Overview Name The name DSM is actually derived from the English language, it is the acronym of the translation of the Dutch name; De Nederlandse Staatmijnen translated into Dutch State Mines (DSM). This company was regularly in the news in the late 1960's, because of the dutch government's decision to close all the (state)mines. In 1973, after the last mine was closed, the company decided to carry the acronym as its name. Click on Image Source: Wikipedia

23 Overview History DSM was established in 1902 as a coal mining company. Through the years the company focused not only on mining, but also on the chemical sector. Due to the closure of all the mines and the unemployment that followed, the dutch government stimulated the chemical plants, to provide jobs for the miners. In 1989 DSM was privatized, and started its first sale of the company's common shares to public investors. In 2002 the company sold their petrochemical division (the naphtha crackers) to Sabic of Saudi Arabia. Click on Image Source: Collection D.Visser

24 Overview Products Industrial chemicals (e.g. feedstocks for plastics producers) Performance materials (e.g. automotive plastics, resins, elastomers) Life science products (e.g. antibiotics, food specialties) Nutritional products (e.g. vitamins) Click on Image Source: Wikipedia

25 Overview Data DSM has about 24 thousand employees, in a.o. the Netherlands, Sweden, the United States, Switzerland, Austria, Belgium, the United Kingdom, Canada, Brazil, Germany, Italy, Spain and Australia. DSM has a total of 270 production locations and offices worldwide and achieved a turnover of 7.7 billion Euros in 2004, with a net profit of 262 million Euros.

26 Multinational Corporations
A multinational corporation (MNC) or multinational enterprise (MNE) or transnational corporation (TNC) is a corporation/enterprise that manages production establishments or delivers services in at least two countries. Annual Report on the Guidelines for Multinational Enterprises The 2005 edition includes a special focus on corporate responsibility in the developing world Critiques Examples In fiction See also Fostering Growth and Promoting a Responsible Market Economy - A G8 Declaration

27 Multinational Corporations
Multinational corporations (MNC) are often divided into three broad groups: Horizontally integrated multinational corporations manage production establishments located in different countries to produce same or similar products. Vertically integrated multinational corporations manage production establishment in certain country/countries to produce products that serve as input to its production establishments in other country/countries. Diversified multinational corporations manage production establishments located in different countries that are neither horizontally or vertically integrated.

28 Multinational Corporations
Multinationals have played an important role in globalization. Given their international reach and mobility, prospective countries, and sometimes regions within countries, must compete with each other to have MNCs locate their facilities (and subsequent tax revenue, employment, and economic activity) within. To compete, countries and regional political districts offer incentives to MNCs such as tax breaks, pledges of governmental assistance or improved infrastructure, or lax environmental and labour standards. This process of becoming more attractive to foreign investment can be characterized as a race to the bottom.

29 Corporate Organisation
Overview of activities The activities of DSM are grouped into four clusters: Nutrition, Pharma, Performance Materials and Industrial Chemicals. DSM is active worldwide. The company creates innovative products and services that help improve the quality of life. More ... Corporate movie DSM has created a unique movie which introduces you to a few examples of our key products and explains the benefits that they bring to people around the world. 2005 2000 Source: DSM

30 Corporate Organisation
DSM had a decentralized organizational structure bult around 15 business groups (consisting of various business units) that were empowered to execute all business functions. Larger Image Source:

31 Markets and Businesses
Business Groups Agriculture Automotive Building & construction Dietary supplements Electrical & electronics Feed / animal nutrition Fibers, textiles & clothing Food & beverages Furniture Marine Medical materials Packaging Personal care / cosmetics Pharmaceuticals Sports, leisure & consumer goods Transportation & mechanical engineering Source: DSM

32 Business Objectives Shareholder Value Growth
Sales 60% > €10 billion by 2005 Specialty Products 80% Industrial 20% Financial Targets Financial Value Market Capitalisation Larger Map Click on Image Image by BizEd

33 Revenue Maximization Revenue Profit maximization Revenue Maximisation
Larger Picture Source: Georgetown University Click on Image

34 Financial Policy Objectives Key Financial Data
Given the dynamic nature of DSM’s markets, it has always been important for the company to have a strong financial position. This gives DSM the financial resilience to continue pursuing its strategic goals even during economic downturns. DSM aims for a net debt which is less than 40% of group equity plus net debt and an operating profit before amortization and depreciation (EBITDA) which is at least 8.5 times the balance of financial income and expense. This underlines the company's aim of maintaining its ’A’ long-term credit rating. DSM aims to achieve a cash flow return on investment (CFROI) which is higher than the weighted average cost of capital (WACC). Key Financial Data Click on Image Source: DSM

35 Shareholder Value Maximization
Creating and managing shareholder value Shareholder value Definition Shareholder Value Maximization Criticism Alternative Definition based upon Criticism: Stakeholder Analysis Also see Value Based Management Source:

36 Financial Value Maximization
Larger Image Click on Image Source: Return Driven Strategy

37 Financial Value Maximization
Stock (Share) Valuation Fundamental criteria (fair value) Market criteria (potential price) See also External links Return on Investment Calculations Arithmetic return Logarithmic return Examples of high yielding investments See also External links Click on Image

38 Financial Value Maximization
Discounted Cash Flow DCF Analysis: Introduction DCF Analysis: The Forecast Period & Forecasting Revenue Growth DCF Analysis: Forecasting Free Cash Flows DCF Analysis: Calculating The Discount Rate DCF Analysis: Coming Up With A Fair Value DCF Analysis: Pros & Cons Of DCF DCF Analysis: Conclusion

39 Financial Value Maximization
Cash Value Added - CVA The difference between the operating cash flow that a company demands and the operating cash flow it generates. Operating cash flow demanded is the cash the company requires to meet its business costs within a given period. Operating cash flow generated is all of the cash that a business generates through sales and investments without any reductions for non-cash expenses such as depreciation, amortization, deferred interest expenses and so on.  Larger Image Source: Metapraxis

40 Internal Rate of Return
The internal rate of return (IRR) is defined as the discount rate that gives a net present value (NPV) of zero. The NPV is calculated from an annualized cash flow by discounting all future amounts to the present. Source: Wikipedia Larger Image Click on Image Source: Baarns Consulting Group

41 Divestment In finance and economics, divestment or divestiture is the reduction of some kind of asset, for either financial or social goals. A divestment is the opposite of an investment. Divestment for financial goals Divestment for social goals Criticisms of divestment for social goals External links See also Larger Image Click on Image Source: Accenture

42 Annual Reports Key Financial Data 2005 2000 Financial Statement
Report by the Managing Board Review of business Report by the Supervisory Board to the shareholders Information about the DSM Share Click on Image Source: DSM Source: DSM

43 Corporate Governance, Risk Management and Internal Control
The Dutch Corporate Governance Code prescribes that quite a number of documents relating to Corporate Governance should be published on the company's website. We gladly adhere to this practice in order to inform our stakeholders and other interested parties of the way our company has embedded its Corporate Governance policies. Here you can find that DSM is applying all 113 Best Practices of this code with one exception. Also see DSM managed in a controlled, consistent and balanced way, World Economic Forum Also see Value Maximization, Stakeholder Theory, and the Corporate Objective Function 2005 Click on Image Source: DSM

44 Strategic Risk Management
“Despite growing sensitivity to shareholder value, most VBM initiatives fail. They simply fail to be integrated into day-to-day decision-making. This is not a new insight.  Several advisors, including our former colleagues, recommend compelling behavioral change through incentives.  Others, including ourselves, weave the concepts of free cash flow and Economic Value Added into corporate strategy, by making EVA ®-based targets a vital part of long-term planning.  Both initiatives add value. Yet they sometimes just scratch the surface.” Click on Image Source:

45 Financial Risk What is Financial Risk? Measuring Market Risk
Interest-Rate Risk Liquidity Risk Credit Risk Value at Risk Details of the definition Example Common VaR calculation models Caveats Further reading External links Larger Image Click on Image Source: Danmarks Nationalbank

46 Strategy Vision 2005: Focus and Value Growth Market Capitalisation
Diversification Divestment Growth Acquisitions and Mergers 50% Foreign Direct Investment Organic Growth 6% p.a. International Trade Market Capitalisation Click on Image Source:

47 Growth Investing Organic Growth Organic Growth
Growth investing is a style of investment strategy. Those who follow this style, known as growth investors, invest in companies that exhibit signs of above-average growth, even if the share price appears expensive in terms of metrics such as price-to-earning or price-to-book ratios. In typical usage, the term "growth investing" contrasts with the strategy known as value investing. However, some notable investors such as Warren Buffett have stated that there is no theoretical difference between the concepts of value and growth when considering ("Growth and Value Investing are joined at the hip"). Indeed, when just investing in one style of stocks, diversification could be negatively impacted. Organic Growth Organic growth is the rate of business expansion through increasing output and sales as opposed to mergers, acquisitions and take-overs. Organic Growth

48 International Trade International trade is the exchange of goods and services across international boundaries or territories. In most countries, it represents a significant share of GDP. While international trade has been present throughout much of history (see Silk Road, Amber Road), its economic, social, and political importance has been on the rise in recent centuries. Industrialization, advanced transportation, globalization, multinational corporations, and outsourcing are all having a major impact. Increasing international trade is the usually primary meaning of "globalization".

49 International Trade International trade theory
Ricardian model Heckscher-Ohlin model Specific Factors Gravity model Regulation of international trade Risks in international trade Economic risks Political risks See also External links Data Click on Image Source: HSBC Bank plc

50 Growth Investing Foreign Direct Investment
Foreign direct investment (FDI) is the movement of capital across national frontiers in a manner that grants the investor control over the acquired asset. Thus it is distinct from portfolio investment which may cross borders, but does not offer such control. Firms which source FDI are known as ‘multinational enterprises’ (MNEs). In this case control is defined as owning 10% or greater of the ordinary shares of an incorporated firm, having 10% or more of the voting power for an unincorporated firm or development of a greenfield branch plant that is a permanent establishment of the originating firm. Click on Image Source: The Globalist

51 Foreign Direct Investment
Policies to Attract Foreign Direct Investment Doing Business Direct Investment is Primary Strategy to Access Foreign Markets China and India Jockey for the Top Most Attractive Foreign Direct Investment Destination Globally World Economic Forum Business Strategy Competitiveness Click on Image Source: University of Michigan Library

52 Economies of Scale - Integration
This occurs when two firms join together to form one new company. Integration can be voluntary (a merger) or forced (a takeover). The figure below shows the three main types of integration. Click on Image Source: BizEd, University of Bristol

53 Acquisitions and Mergers
Financing M&A Merger Acquisition High-yield Examples Motives behind M&A M&A and Investment Banking M&A Marketplace Difficulties Levels and flows Classifications of mergers Issues World Economic Forum Click on Image Source: George & Co Also see Value Drivers

54 Valuation (finance) Valuation
Valuation of companies (business valuation) Valuation using discounted cash flows Valuation using multiples Usage Asset pricing models Related Material Click on Image Source: George & Co

55 Business Drivers Also see Business Prophet - C.K. Prahalad
Insights and Opportunities: Transforming Procurement Capabilities in Asia Economic Value Added Larger Image Source: Metapraxis

56 Business Analysis Benefits of Business Analysis
Roles of Business Analysts Business Process Improvement Goal of Business Analysts External Links Also see Quantitative Methods Strategic Business Analysis Financial Statements Quantitative Method From Wikipedia, the free encyclopedia Larger Image Click on Image Source: BizEd

57 Quantitative Methods Quants Handbook
Lecture 1: Functions & Economic Relationships Lecture 2: Economic Models/Linear Models Lecture 3: Basic Differential Calculus Lecture 4: Optimisation Lecture 5: Functions of Several Variables Lecture 6: Unconstrained Optimisation Lecture 7: Constrained Optimisation Lecture 8: Growth & Dynamics Lecture 9: Introduction to Difference Equations Source: Bob Beachill Leeds Metropolitan University Click on Image Source: Brian C. McCarthy Ohio University

58 Strategic Business Analysis
SWOT Analysis PEST market analysis tool Porter's Five Forces Model Value Chain Managing Your Value Chain Resources and Capabilities Organisational Capabilities Financial Analysis Larger Image Click on Image Source: Wikipedia

59 Financial Statements: The System
Larger Image Larger Image Click on Images Source:

60 Financial Statements: Analysis
Financial Statements: Introduction Financial Statements: Who's In Charge? Financial Statements: The System Financial Statements: Cash Flow Financial Statements: Earnings Financial Statements: Revenue Financial Statements: Working Capital Financial Statements: Long-Lived Assets Financial Statements: Long-Term Liabilities Financial Statements: Pension Plans Financial Statements: Conclusion Printer friendly version (PDF format) Source:

61 Financial Ratios A financial ratio is a ratio of two numbers of reported levels or flows of a company. It may be two financial flows categories divided by each other (profit margin, profit/revenue). It may be a level divided by a financial flow (price/earnings). It may be a flow divided by a level (return on equity or earnings/equity). The numerator or denominator may itself be a ratio (PEG ratio). Ratios Flow-to-flow Level-to-level Ratio-to-ratio To cash flow To earnings To market cap See also External links Larger Image Download Financial Ratio Analysis (177K) for Microsoft Excel. Source: Baarns Consulting Group

62 Click on Image for further information
Corporate Strategy Synergy Literature Reviews Strategic Management Business Strategy Value Based Management Value Creation Value Management Models Centralization and Decentralization and Delegation Corporate Social Responsibility Financial Highlights Image by The Knowledge Management Advantage Click on Image for further information Also see Annotated Lecture Outline

63 Performance Assessment
Literature Reviews Performance Management Framework Econometrics Balanced Scorecard Vision and Strategy Corporate Culture Financial Customer Internal Business Learning and Growth Feedback Measurement of Intellectual Capital Image by TPG Click on Image for further information Also see Annotated Lecture Outline

64 Business Value as a System
Literature Reviews Systems Thinking Organisational Effectiveness Value Chain Stakeholder Theory Theory of Constraints Click on Image by Andersen Consulting Also see Annotated Lecture Outline

65 Business Strategy Overview
Larger Map Source: BizEd, University of Bristol Click on image for further information

66 Value Based Management
 Managing for Value Source: Dresden International University Click on Image for further information Source: FDC

67 Value Drivers Your Customer Base
Recurring Revenue Product Integration Gross Margin Intellectual Property Human Capital Management Experience and Expertise General Administrative Leverage Distribution Leverage History/Reputation and Operating Tenure Sales and Marketing Effectiveness Barriers to Competitive Entry/Differentiation Twelve Value Drivers FOCUS has developed a unique tool that is proven to help ensure the success of your transaction. For buyers and sellers alike, the key to achieving successful M&A transactions is to identify the value components or Value Drivers of the transaction and then to make certain a plan is in place to integrate these components at the least cost. 12 VALUE DRIVERS: Self Assessment Scorecard

68 Value Drivers Crucial organisational capabilities, giving the firm competitive advantage. Different from Rappaport value drivers. Life Style Extra sales growth rate, operating profit margin income tax rate, incremental investment in working capital, incremental investment in fixed capital, replacement of fixed capital, cost of financing (cost of capital) forecast duration (the planning period). Larger Image Click on Image Source: The Segal Group, Inc Turner, R. (1998). Projects for Shareholder Value: The Influence of Project Performance Parameters at different Financial Ratios. Project Management, 4(1),

69 Value Drivers Measuring and Ranking Value Drivers Larger Image
Value drivers intangible assets and intellectual capital The new New Economy Analyst Report – March 16, 2003 Juergen Daum’s new New Economy Best Practice service ©2003 Juergen Daum. All rights reserved.

70 Business Economics Larger Map Source: BizEd, University of Bristol

71 Business Economics Economics, which focuses on measurable variables, is broadly divided into two main branches: microeconomics, which deals with individual agents, such as households and businesses, and macroeconomics, which considers the economy as a whole, in which case it considers aggregate supply and demand for money, capital and commodities. Aspects receiving particular attention in economics are resource allocation, production, distribution, trade, and competition. Economic logic is increasingly applied to any problem that involves choice under scarcity or determining economic value. Click on Images for further information. Economics Source: Wikipedia

72 Economic Value Added What Does Economic Value Added Really Mean?
Click on Images for further information Source: David Harper, (Contributing Editor - Investopedia Advisor) Larger Image

73 Value Creation Operational Effectiveness
Michael Goold, Andrew Campbell and Marcus Alexander, Corporate Strategy and Parenting Theory, Long Range Planning, Vol.31, No.2, pp , 1998. Parenting Advantage (Goold & Campbell) Parenting Styles (Goold & Campbell) Core Competence (Hamel & Prahalad) Distinctive Capabilities (Kay) Cash Value Added Operational Effectiveness Copyright © 2000, Community Intelligence Labs. Click on Image

74 Value Management Models
Larger Image Source: performgroup Click on image for further information Larger Image Click on Image Source: Realisation

75 Value Management Models - Six Sigma
Six Sigma was pioneered by Bill Smith at Motorola in 1986[1]. Originally, it was defined[2] as a metric for measuring defects and improving quality; and a methodology to reduce defect levels below 3.4 Defects Per (one) Million Opportunities (DPMO). Six Sigma is a registered service mark and trademark of Motorola, Inc[3]. Motorola has reported over US$17 billion savings[4] from Six Sigma to date. AlliedSignal and GE became early adopters of Six Sigma and reported benefits of over US$300 million during its first year of application[5]. Their CEO's, Larry Bossidy and Jack Welch, played a vital role in popularizing Six Sigma. Other major organizations who claim to have benefited from Six Sigma implementation are Ford, Caterpillar, Microsoft, Raytheon, Quest Diagnostics, Seagate Technology, Siemens, Merrill Lynch, Lear, 3M and many more. Click on Image Source:

76 Value Management Models - Six Sigma
Definition Application & Success Healthcare Banking Insurance Construction Military Methodology DMAIC DMADV Roles Required for Implementation Examples of Some Key Tools Used Criticisms of Six Sigma Of its origin Of the term: Six Sigma Of statistics Of methods Of effects References See also External links Click on Image Source: QCI International. All rights reserved.

77 Value Management Models - Value Chain
Source: Click on images for further information

78 Shareholder Value What is Shareholder Value?
What Drives Shareholder Value? Shareholder Value Analysis Larger Image Source: Accenture

79 Shareholder Value Analysis
Larger Image Source: Rediscovering Shareholder Value: A Proven Approach How to Build Value into a Merger Shareholder Value Tool

80 Market Capitalisation
Valuation "Float" Categorization of companies by market cap Examples Levels See also Lists External links Data Click on Image Source:

81 Centralization, Decentralization and Delegation
Advantages of Centralization Close control of operations Uniformity of policies, practices, and procedures Better use of centralized experts Advantages of Decentralization Faster decision-making Decision better adapted to local condition Better management experience for managers that are considered for promotion to higher level management Click on Image Copyright: Cornell University

82 Why Delegate? At a certain point, there are just too many facets to running a successful business to continue doing it alone. In an increasingly complex business environment, with all the trends affecting business today, such as globalization, the information technology explosion, strategic alliances, increased mergers and acquisitions, heightened competition, and higher expectations of nearly every customer, it just isn't possible to still be that one person in control of everything. Bringing in others to manage is an absolute necessity for survival now. Source:

83 Performance Management Framework
History What is BPM? Metrics / Key Performance Indicators Application software types Designing and implementing a business performance management programme Vendors See also Performance Management: Making it Work: Achieving the Right Value Balance Advocating Productivity Larger Image Click on Image Source: SourceMedia and DM Review

84 Econometrics Econometrics literally means 'economic measurement'. It is a combination of mathematical economics, statistics, economic statistics and economic theory. Undergraduate Econometrics Graduate Econometrics Online Resources for Econometric Students Click on Image Source:

85 Balanced Scorecard Literature Reviews Balanced Scorecard
A comprehensive view of business performance Public sector Balanced Scorecard Purpose of the Balanced Scorecard Evolution of the Balanced Scorecard See also References Balanced Scorecard Click on Image by PA Consulting Group

86 Vision and Strategy Organization's Vision Mission Statement
People sometimes say that it is pointless to develop a sense of purpose for a company. There already is a purpose: "To maximize return on investment to shareholders." Obviously, making money is important. But to confuse the essential requirement for advancing in the game with the deeper rationale, is a profound confusion. Focusing on the purpose of making money at the expense of other purposes, will naturally distract an organization's competitive advantage." (P. Senge) Click on Image Source: Psylon

87 Corporate Culture Influences on organizational culture
Strong/Weak cultures Classifying organizational culture Hofstede Deal and Kennedy Charles Handy Edgar Schein Elements of culture Critical Views on Organizational Culture Figures in Organizational Culture See also Sources Image by Matsushita Electric Industrial Co. Ltd.

88 Financial Finance Examples of some basic financial concepts
Business finance Finance of states Financial economics Financial mathematics Financial analysis See also External links Click on Image Source: PPARC

89 Customer Types of Customers Needs and Expectations The Loyalty Effect
Larger Image Click on Image Source: Forward Analytics

90 Internal Business Stakeholder Stakeholder view Common usage
Examples of common stakeholders Shareholder Concept - Maximising Shareholder Wealth Stakeholder Concept - A Wider Range of Objectives See also External links Larger Image Click on Image for further information

91 Learning and Growth Learning Organization What was intended! Feedback
Taxonomy Roles and flows Challenging assumptions Accounting Larger Image Click on Image for further information

92 Training and Development
Systematic strategies Measuring the return on investment of your training programs, beyond the classroom and the bottom line, creates a learning environment that can make any company stronger Return on Investment Source:

93 Feedback In cybernetics and control theory, feedback is a process whereby some proportion or in general, function, of the output signal of a system is passed (fed back) to the input. Often this is done intentionally, in order to control the dynamic behaviour of the system. Feedback is observed or used in various areas dealing with complex systems, such as engineering, architecture, economics, and biology. Click on Image Source: Vensim

94 Feedback Types of feedback In electronic engineering
In mechanical engineering In economics and finance In nature In organizations In gaming Sources See also Climate Feedback Loop Source:

95 Measurement of Intellectual Capital
The Structure of Intellectual Capital Why Care about IC Tracking IC Measurement of IC Related Articles Intellectual Property Gaining Protection in the Muslim World Intellectual Property Rights in Islam Resources Source: QuantAA

96 Systems Thinking Systems thinking involves the use of various techniques to study systems of many kinds. It includes studying things in a holistic way, rather than through purely reductionist techniques. It aims to gain insights into the whole by understanding the linkages and interactions between the elements that comprise the whole "system". Systems thinking can help avoid the silo effect, where a lack of organizational communication can cause a change in one area of a system to adversely affect another area of the system. Why use systems thinking techniques? What is a system? Examples Methodologies Applications See also Bibliography External links Click on Image Source:

97 Organisational Effectiveness
The external environment and shareholder value expectations Business Strategy Building leadership and management capability Achieving strategic readiness of intangible assets Strategic success measures Culture Larger Image Click on Image Source: Perform Group

98 Value Chain The Hidden Costs of a Forgotten Business System
Larger Image Click on Image Source: Expert Views, Inc.

99 Stakeholder Theory As originally detailed by R. E. Freeman (1984), stakeholder theory attempts to ascertain which groups are stakeholders in a corporation and thus deserve management attention. In short, it attempts to address the "Principle of Who or What Really Counts." Click on Image Source: San Diego University

100 Theory of Constraints Theory of Constraints (TOC) is a body of knowledge on the effective management of (mainly business) organizations, as systems. The author is Eliyahu M. Goldratt, with many others contributing to the body of knowledge. Theory of Constraints Summary Larger Image Click on Image Source:

101 Theory of Constraints The thinking process (TP) Throughput Accounting
Application-specific TOC solutions Operations Supply Chain / Logistics Finance and Accounting Project Management Marketing and Sales The Six Necessary and Sufficient Questions relating to Technology Development and practice Also See References Larger Image Click on Image Source: Osaka Gakuin University

102 Corporate Strategy Lecture Outline 1/4
Introduction The move from a focus on competitive strategy to a focus on corporate strategy. A discussion of the growth in multi-business firms with illustrative examples Slide: Definition of corporate strategy. Click on Image for further information

103 Corporate Strategy Lecture Outline 2/4
Changes in Organisational Structures over Time An explanation of the ways in which organizational structures have evolved and developed over time and a discussion of the advantages and disadvantages of U versus M forms of organization. Slide: Figure 9.2 plus bullet points outlining strengths and weaknesses of this form of organization Slide: Figure 9.3 bullet points outlining strengths and weaknesses of this form of organization Click on Image for further information

104 Corporate Strategy Lecture Outline 3/4
Strategy and Structure A discussion of the two-way relationship between strategy and structure and Alfred Chandler’s work. A consideration of the questions raised by the rise of M forms of organization Slide: Bullet points of issues (page 343) Managing the Multi-business Firm 1: The Corporate-Business Interface An introduction to issues of business unit boundaries, groupings of businesses and headquarter/business unit relationships. An exposition of common corporate-business interface styles. Slide: Bullet points relating to three different styles (p.347) Managing the Multi-business Firm 2: The Role of the Corporate Headquarters An explanation of the different ways in which the centre can add value and a description of Gold and Campbell’s work on parenting styles Slide: Figure 9.7 Slide: Figure 9.8

105 Corporate Strategy Lecture Outline 4/4
Managing the Multi-business Firm 3: Managing the Portfolio A brief review of portfolio models such as the familiar BCG matrix plus an explanation of the limitations of these models and the reasons why they are no longer popular. Slide: Figure 9.9 Evidence and Experience A brief review of the finding of some of the empirical work in the area, emphasizing the difficult of measuring relatedness Slide: bullet points on concept of ‘relatedness’ Concluding Comments Link back to the resource-based view highlighting the connection between core competences and relatedness. A summary of the key tensions in managing portfolio businesses including centralization v decentralization, vertical v horizontal focus and co-operation v competition.

106 Performance Assessment 1/5
Lecture Introduction - placing this set of lectures in context by explaining the links between value creation and capture and strategic management. An explanation of the central importance of performance assessment and feedback in the strategy process. Slide: Figure 1.6 The Domain of Business Performance - a brief review of some of the different domain’s business performance emphasizing the distinction between operational, financial and effectiveness measures. Slide: Figure 18.1

107 Performance Assessment 2/5
Concepts of Value - an exposition of some alternative concepts of value and related performance measures including accounting, economic value-added and shareholder based approaches. Students may have covered some of these concepts in greater depth on other modules so it may be necessary for the lecturer to refer to work undertaken in other modules. Slide: Concepts of Value and performance management: bullet point list of sub-headings from pages The link between shareholder value and business models - an explanation of Yip's characterisation of business models and the way this links with 'value-based' management techniques. Undergraduate lecturers may select to omit this section. Slide: Figure 18.2

108 Performance Assessment 3/5
The Balanced Scorecard - an introduction to the balanced scorecard framework and a discussion of its economic value-added (EVA) and shareholder value added (SVA) roots. A discussion of the basic building blocks of the models and the way measures are derived. Slide: Figure 18.3 The Balanced Scorecard as a Strategic Management System - linking the balanced scorecard to the strategy concepts, including key success factors, to provide an overall map. Slide: Figure 18.4 Larger Image Click on Image for further information

109 Performance Assessment 4/5
The Strategic Management System in Practice - a discussion of the roles and responsibilities of the senior management team in the light of the links between the balanced scorecard and the strategic management system. This could include a discussion of the advantages and disadvantages of linking the top team's performance to balanced scorecard outcomes. Slide: Figure 18.5 Click on Image for further information

110 Performance Assessment 5/5
Concluding Comments - a recap on how the building blocks that have been constructed in previous lectures can be brought together through the use of value-based management techniques such as the balanced scorecard. The lecture could conclude with a return to the emergent versus planned strategy debate, a theme throughout the module, by discussing the role of performance feedback in the strategy process. Larger Image Click on Image for further information

111 Business Value as a System 1/5
Lecture Introduction - the aim of this lecture is to pull together a number of themes that have emerged throughout the course. Emphasis is placed on an integrated, systems view of strategy. Lecturers may choose to introduce some systems theory concepts such as but this is optional. The main point is to show how prior lectures have acted as a series of building blocks to build a view of the organization as part of an integrated web of relationships. Slide: Figure 21.1 Click on Image for further information

112 Business Value as a System 2/5
Stakeholder Theory - The concept of the organization at the heart of an intricate web of relationships leads naturally to a discussion about stakeholders. The main elements of stakeholder theory need to be explained but again the emphasis in this final lecture should be on the firm as a locus of contacts and contracts. Lecturers may choose to allude to learning theories at this point, showing how learning allows the firm to adapt to change within its network. Slide: Table 21.2 p783 Larger Image Click on Image for further information

113 Business Value as a System 3/5
Creating Value for Whom? - Once the firm is viewed from a stakeholder perspective, the next question becomes whose interests do the firm serve? Much of the traditional strategy literature takes for granted that shareholders have primacy and the main goal of business organizations is to maximize shareholder value. Once the existence of multiple stakeholders is recognized then it makes sense to look to a wider set of objectives, including corporate social responsibility i.e. themes that have been developed in earlier sessions. Slide: Bullet points in two columns list main principles of shareholder and CSR perspectives (taken from page 786) Larger Image Click on Image for further information

114 Business Value as a System 4/5
Creating and Capturing Value - the authors argue that the integration of a strategic systems approach with the goal of maximizing shareholder value offers the best practical insight into managing a business. Lecturers may agree or disagree but, whatever viewpoints are adopted, the main purpose of this session is to draw together key themes from prior lectures and to show how the pieces fit together. The key messages of the text are that strategy is highly context specific and that competitive advantage most commonly lies in the space where strategy and practice meet. Intangible assets are of vital importance to the attainment of competitive success and reputation and image and identity are particularly important elements within the resource portfolio. Slide: Pulling it Together: The Example of HP - bullet points drawn from top of page 788

115 Business Value as a System 5/5
Concluding Comments - lecturers will want to give this last session their own flavour but may care to use Sundaram and Inkpen (2004) quote 'All of us seek a path to a promised land in which accountable firms managed by ethical decision-makers create the greatest value for the greatest number of stakeholders' and weave their own critical argument around this theme.

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