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Strategies For Value Creation: Costin Ciora - Business Strategy & Analysis

The document discusses strategies for creating value. It presents several methods and tools for calculating and maximizing value in the long term, including value-based management, value creation, and value contribution. Specific indicators are presented for measuring value creation, such as economic profit, economic value added (EVA), market value added, total shareholders return, and cash value added. EVA is defined as invested capital multiplied by the difference between return on investment and cost of capital. The document provides examples of how to calculate EVA and its components.

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Natalia Matu
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45 views

Strategies For Value Creation: Costin Ciora - Business Strategy & Analysis

The document discusses strategies for creating value. It presents several methods and tools for calculating and maximizing value in the long term, including value-based management, value creation, and value contribution. Specific indicators are presented for measuring value creation, such as economic profit, economic value added (EVA), market value added, total shareholders return, and cash value added. EVA is defined as invested capital multiplied by the difference between return on investment and cost of capital. The document provides examples of how to calculate EVA and its components.

Uploaded by

Natalia Matu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Lecture 11

Strategies for value creation

Costin Ciora - Business Strategy & Analysis 1


Value creation

Costin Ciora - Business Strategy & Analysis 2


• Maximizing value on the long
Value creation
term

Value based
management
Calculating
created
• Governance value
• Change management
• Leadership
• Specific methods and tools

Costin Ciora - Business Strategy & Analysis 3


Applying Value-Based Management

Value – based Value Value


management creation contribution

Costin Ciora - Business Strategy & Analysis 4


Questions ?

5
Indicators for value creation
measurement
Economic Profit - Alfred Marshall (1890)

EVA –Economic Value Added– Bennet Stewart ( Trademark of Stern


Stewart)

MVA –Market value added- Stern Stewart

TSR –Total Shareholders Return- Boston Consulting Group

CVA –Cash Value Added - Boston Consulting Group

CFROI – Cash-Flow Return on Investment–Holt Value

EVA Momentum - Bennet Stewart (Trademark of EVA Dimensions)

WAOK –Wealth Added on Capital model developed by Costin Ciora

Costin Ciora - Business Strategy & Analysis 6


EVA – Economic Value Added
EVA = Invested capital x (Return on Investment – Cost of capital)

EVA-
Economic
Value Added

Operating
profit after
tax
Cost of
capital

7
EVA – Economic Value Added
EVA = Invested capital x (Return on Investment – Cost of capital)

Invested capital = Shareholders’ EQUITY + Financial DEBT

Return on Investment (%) = Operating profit after tax/Invested capital x 100

Cost of Capital - a weighted average of the cost of equity and cost of debt

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10
Source: Harvard Business School, Institute for Strategy & Competitiveness,
http://www.isc.hbs.edu/creating-shared-value
Source: Harvard Business School, Institute for Strategy & Competitiveness,
http://www.isc.hbs.edu/creating-shared-value
How to create Shared Value Opportunities

1. By reconceiving needs, products, & customers


– Meeting societal needs through products
– Serving unserved or underserved customers

2. By redefining productivity in the value chain


– Utilizing resources, energy, suppliers, logistics, and employees
differently

3. By improving the local and regional business environment


– Improving skills, the supplier base, the regulatory environment,
and the supporting institutions that affect the business
– Strengthening the cluster on which the company depends

Source: Harvard Business School, Institute for Strategy & Competitiveness,


http://www.isc.hbs.edu/creating-shared-value
References
• ACCA P3 – Business Analysis, Kaplan Publishing, 2012

• Vaughan Evans – Key strategy tools, Pearson Publishing, 2013

• Martin Reeves, Knut Haanaes, Janmejaya Sinha - Your strategy


needs a strategy. How to Choose and Execute the Right
Approach. Harvard Business Review Press, 2015

Costin Ciora - Business Strategy & Analysis 14


Thank you for your attention!

15

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