SlideShare ist ein Scribd-Unternehmen logo
1 von 22
Downloaden Sie, um offline zu lesen
By: Mohamed Azmi Taufik
o

o

2

A business company main objective is to maximise
shareholder wealth (value).
Value is created only when the rate of return is higher
than the cost of capital.
o

o

VBM metric, measures & value creation

o

3

Understand the meaning of VBM

Challenges in implementing VBM
o
o
o
o
o

o
o
o

4

Definition
Framework
Value Drivers
Value Creation
Measures and Metrics
Implementing VBM
Track record
Conclusion



VBM is a management approach which put shareholder
value creation as the core philosophy of the company
(KPMG Consulting, 1999).



5

VBM is a managerial process which effectively links
strategy, measurement and operational processes to
the end of creating shareholder value (CIMA, 2004)

VBM is a philosophical concept rather than technique
intended to show the financial managers where and when
value is created or destroyed within the organisation
(Kaushal and Bhargav, 2011)
Generic VBM framework (Morin and Jarrell, 2005)








6

Valuation – defines the corporate value and explains the key drivers
of value.

Strategy – establishes a clear link between corporate value and
specific business strategies.
Finance – describes value enhancing financial policies available to the
company.
Corporate Governance – explains the actions and policies of senior
management such as performance measurement, compensation
systems and investor communication that foster value creation.
Value drivers are variables that affect the company’s bottom
line or profit (Koller,1994)

Determinants of value of a firm (Morin and Jarrell, 2005)

7


Rate of return must be greater than cost of capital – must
make profit





Sustain and leverage on employees intellectual capital






Motivation towards company interest and value
Build trust

Build trust with external environment and other
stakeholders




8

Increasing stock price
Investors confidence

Customers
Government & regulatory bodies
Community
The relationship between the company, shareholders &
stakeholders

To create the maximum possible value for shareholders the company management
must be committed to creating value in relation with customers, suppliers,
employees and communities (Niculescu, 1999).
9


Firm performance measure should meet the following
(Peterson, 2000),



Measure should incorporate risk factor





Measure must be future oriented
Uncontrollable factors to be excluded in the measure

The following factors need to be addressed (Peterson,
2000),



Measure should be in a flow manner (long process)



10

Measure must be translated to divisional level
Measure should promote shareholder value


Discounted Cash Flow (DCF)



Returns to Shareholders (RTS) - annual capital gains plus
dividend yields



Cash Flow Return on Investment (CFROI) - expresses an

estimate of a company’s single-period cash flow as a percentage of
total investment.


Return on Invested Capital (ROIC) - the ratio of net operating
profits less adjusted taxes (NOPLAT) to invested capital



Economic Value Added (EVA) - measures the excess of earnings
over the minimum return that shareholders could get by investing
capital in companies of similar risk

11








Value-creation mindset needs to be adopted (Copeland et al., 1994)
Mindset should tie-up with the necessary management process and systems
(Copeland et al., 1994)

Employee compensation to tie-up with performance (Martin and Petty, 2000)
Top management of the firm must fully support the program (Martin and Petty,
2000)





12

Strategic planning approach – analyse long-term trend
Other stakeholders need to be considered


Successful implementation by,


Coca Cola, GE, Abbott Labs, Merck – has shown increased in
performance & firm’s value (Morrin and Jarrell, 2005).





Higher return and value creation



13

Perform better than peers

Executives were highly rewarded
14

The outcome of adopting VBM: Higher value strategies/ decision which lead to
improved shareholder return.
Source: Copyright © The LEK/Alcar Consulting Group, Inc. via Morrin and Jarrell (2005)
o

Behavioural -such as getting managers to understand the new
measures and avoiding complexity

o

Technical - getting the right data, volatility in WACC, the
reliability of assumptions

o

Organisational - overcoming internal resistance, the
significant effort and time required for implementation

o

15

Managerial – support from Top Management








16

Implementation of VBM by various Fortune 100 companies has
proven the effectiveness of VBM in creating and increasing firm’s
value.
Companies need to adopt VBM with performance measures that is
relevant and suitable to their organisations’
Top management support and commitment will ensure ‘smooth’
implementation of VBM

To maintain the competitive edge and continue to create value
performance metrics adopted need to be constantly monitored
and assessed
Value-based Management


Introduced Smart Orange under the GLC Transformation program in 2004



Process includes,



18

Introducing Core Values – Kristal





Restructuring into 2 separate SBUs - Wholesale and Retail





Realign Vision, Mission and Business Strategy

Develop competency model – Functional & Behavioural

Full Top management support and commitment
To continue to create value - Teaming With Passion Program were
carried out – compulsory for all staff and Leadership team to attend
19
20
21
22

Más contenido relacionado

Was ist angesagt?

Debt securitisation
Debt securitisationDebt securitisation
Debt securitisationBibin Pv
 
Foreign exchange exposure PPT
Foreign exchange exposure PPTForeign exchange exposure PPT
Foreign exchange exposure PPTVijay Mehta
 
Management control system in service and multinational organization
Management control system in service and multinational organizationManagement control system in service and multinational organization
Management control system in service and multinational organizationjakiun johora mustafa
 
Behavioural implimentations
Behavioural implimentationsBehavioural implimentations
Behavioural implimentationsNITISH SADOTRA
 
CORPORATE GOVERNANCE IN INDIA
CORPORATE GOVERNANCE IN INDIACORPORATE GOVERNANCE IN INDIA
CORPORATE GOVERNANCE IN INDIASahil Nagpal
 
Strategic Management- Strategic Audit- MBA
Strategic Management- Strategic Audit- MBAStrategic Management- Strategic Audit- MBA
Strategic Management- Strategic Audit- MBAChandra Shekar Immani
 
Unit v new business model and strategy for internet economy
Unit v new business model and strategy for internet economyUnit v new business model and strategy for internet economy
Unit v new business model and strategy for internet economyDeborah Sharon
 
Models of strategy implementation by : Rajeh Altharah
Models of strategy implementation by : Rajeh AltharahModels of strategy implementation by : Rajeh Altharah
Models of strategy implementation by : Rajeh AltharahRAJEH AL-THARRAH
 
Indian ethos, need, purpose
Indian ethos, need, purposeIndian ethos, need, purpose
Indian ethos, need, purposeChhavi Verma
 
Corporate governance in india
Corporate governance in indiaCorporate governance in india
Corporate governance in indiaRamGeerYadav1
 
Strategic evaluation & control
Strategic evaluation & controlStrategic evaluation & control
Strategic evaluation & controlBandri Nikhil
 
International financial market & instruments module 3
International financial market & instruments   module 3International financial market & instruments   module 3
International financial market & instruments module 3Vishnu Vijay
 
Dividend Decisions
Dividend DecisionsDividend Decisions
Dividend DecisionsKaushik Deb
 
Strategic management
Strategic managementStrategic management
Strategic managementHarsh Arora
 

Was ist angesagt? (20)

Debt securitisation
Debt securitisationDebt securitisation
Debt securitisation
 
Foreign exchange exposure PPT
Foreign exchange exposure PPTForeign exchange exposure PPT
Foreign exchange exposure PPT
 
Management control system in service and multinational organization
Management control system in service and multinational organizationManagement control system in service and multinational organization
Management control system in service and multinational organization
 
strategic control
strategic controlstrategic control
strategic control
 
Corporate Governance
Corporate GovernanceCorporate Governance
Corporate Governance
 
Behavioural implimentations
Behavioural implimentationsBehavioural implimentations
Behavioural implimentations
 
CORPORATE GOVERNANCE IN INDIA
CORPORATE GOVERNANCE IN INDIACORPORATE GOVERNANCE IN INDIA
CORPORATE GOVERNANCE IN INDIA
 
Turnaround Strategy
Turnaround Strategy Turnaround Strategy
Turnaround Strategy
 
Strategic Capability
Strategic CapabilityStrategic Capability
Strategic Capability
 
Strategic Management- Strategic Audit- MBA
Strategic Management- Strategic Audit- MBAStrategic Management- Strategic Audit- MBA
Strategic Management- Strategic Audit- MBA
 
Unit v new business model and strategy for internet economy
Unit v new business model and strategy for internet economyUnit v new business model and strategy for internet economy
Unit v new business model and strategy for internet economy
 
Swaps
SwapsSwaps
Swaps
 
Models of strategy implementation by : Rajeh Altharah
Models of strategy implementation by : Rajeh AltharahModels of strategy implementation by : Rajeh Altharah
Models of strategy implementation by : Rajeh Altharah
 
Indian ethos, need, purpose
Indian ethos, need, purposeIndian ethos, need, purpose
Indian ethos, need, purpose
 
Corporate governance in india
Corporate governance in indiaCorporate governance in india
Corporate governance in india
 
Dividend policy
Dividend policyDividend policy
Dividend policy
 
Strategic evaluation & control
Strategic evaluation & controlStrategic evaluation & control
Strategic evaluation & control
 
International financial market & instruments module 3
International financial market & instruments   module 3International financial market & instruments   module 3
International financial market & instruments module 3
 
Dividend Decisions
Dividend DecisionsDividend Decisions
Dividend Decisions
 
Strategic management
Strategic managementStrategic management
Strategic management
 

Ähnlich wie Value-based Management

CFO Summit XXI-A.Elli M&A
CFO Summit XXI-A.Elli M&ACFO Summit XXI-A.Elli M&A
CFO Summit XXI-A.Elli M&AAlberto Elli
 
27.04.2012 Role of the board in determining dividend financing and investment...
27.04.2012 Role of the board in determining dividend financing and investment...27.04.2012 Role of the board in determining dividend financing and investment...
27.04.2012 Role of the board in determining dividend financing and investment...The Business Council of Mongolia
 
The Golden Triangle of Value Creation - Paul Lim
The Golden Triangle of Value Creation - Paul LimThe Golden Triangle of Value Creation - Paul Lim
The Golden Triangle of Value Creation - Paul LimPaul Lim
 
Creating the Performance Driven Organisation - Paul Lim
Creating the Performance Driven Organisation - Paul LimCreating the Performance Driven Organisation - Paul Lim
Creating the Performance Driven Organisation - Paul LimPaul Lim
 
Finance Presentation 2008
Finance Presentation  2008Finance Presentation  2008
Finance Presentation 2008stevepollard
 
Making Conduct Risk [Good] Business As Usual
Making Conduct Risk [Good] Business As UsualMaking Conduct Risk [Good] Business As Usual
Making Conduct Risk [Good] Business As UsualAndrew Smart
 
Fueling Strategic Transformation at Emirates National Oil Company
Fueling Strategic Transformation at Emirates National Oil CompanyFueling Strategic Transformation at Emirates National Oil Company
Fueling Strategic Transformation at Emirates National Oil CompanyRafael Lemaitre
 
Analytics that Work - Tools for Creating Value and Focusing Performance
Analytics that Work - Tools for Creating Value and Focusing PerformanceAnalytics that Work - Tools for Creating Value and Focusing Performance
Analytics that Work - Tools for Creating Value and Focusing PerformanceNational Pork Board
 
Foundations of Strategic Competitiveness
Foundations of Strategic CompetitivenessFoundations of Strategic Competitiveness
Foundations of Strategic Competitivenessdrnurhizam
 
Management Techniques to Increase the Bottom-line
Management Techniques to Increase the Bottom-lineManagement Techniques to Increase the Bottom-line
Management Techniques to Increase the Bottom-lineCavendish
 
Sfm module-1
Sfm module-1Sfm module-1
Sfm module-1devrai16
 
The role of finance in the strategic planning and decision-making process
The role of finance in the strategic planning and decision-making processThe role of finance in the strategic planning and decision-making process
The role of finance in the strategic planning and decision-making processyashikagupta48
 
Can technology support better brand valuation
Can technology support better brand valuationCan technology support better brand valuation
Can technology support better brand valuationMarketnet
 
Evaluation andControlChapter 11Learning ObjectivesUn.docx
Evaluation andControlChapter 11Learning ObjectivesUn.docxEvaluation andControlChapter 11Learning ObjectivesUn.docx
Evaluation andControlChapter 11Learning ObjectivesUn.docxelbanglis
 
FINANCIAL CONTROLLERSHIP CHAPTER 2 PPT
FINANCIAL CONTROLLERSHIP CHAPTER 2 PPTFINANCIAL CONTROLLERSHIP CHAPTER 2 PPT
FINANCIAL CONTROLLERSHIP CHAPTER 2 PPTMary Rose Habagat
 
Performance Management Measuring Performance
Performance Management Measuring PerformancePerformance Management Measuring Performance
Performance Management Measuring PerformanceOsama Yousaf
 

Ähnlich wie Value-based Management (20)

The cost boomerang
The cost boomerangThe cost boomerang
The cost boomerang
 
CFO Summit XXI-A.Elli M&A
CFO Summit XXI-A.Elli M&ACFO Summit XXI-A.Elli M&A
CFO Summit XXI-A.Elli M&A
 
27.04.2012 Role of the board in determining dividend financing and investment...
27.04.2012 Role of the board in determining dividend financing and investment...27.04.2012 Role of the board in determining dividend financing and investment...
27.04.2012 Role of the board in determining dividend financing and investment...
 
The Golden Triangle of Value Creation - Paul Lim
The Golden Triangle of Value Creation - Paul LimThe Golden Triangle of Value Creation - Paul Lim
The Golden Triangle of Value Creation - Paul Lim
 
Chase Corp
Chase CorpChase Corp
Chase Corp
 
Creating the Performance Driven Organisation - Paul Lim
Creating the Performance Driven Organisation - Paul LimCreating the Performance Driven Organisation - Paul Lim
Creating the Performance Driven Organisation - Paul Lim
 
Building Business Value
Building Business ValueBuilding Business Value
Building Business Value
 
Finance Presentation 2008
Finance Presentation  2008Finance Presentation  2008
Finance Presentation 2008
 
Making Conduct Risk [Good] Business As Usual
Making Conduct Risk [Good] Business As UsualMaking Conduct Risk [Good] Business As Usual
Making Conduct Risk [Good] Business As Usual
 
Fueling Strategic Transformation at Emirates National Oil Company
Fueling Strategic Transformation at Emirates National Oil CompanyFueling Strategic Transformation at Emirates National Oil Company
Fueling Strategic Transformation at Emirates National Oil Company
 
Analytics that Work - Tools for Creating Value and Focusing Performance
Analytics that Work - Tools for Creating Value and Focusing PerformanceAnalytics that Work - Tools for Creating Value and Focusing Performance
Analytics that Work - Tools for Creating Value and Focusing Performance
 
Foundations of Strategic Competitiveness
Foundations of Strategic CompetitivenessFoundations of Strategic Competitiveness
Foundations of Strategic Competitiveness
 
Influence of Merger and Acquisition as Survival Strategy and Return on Asset ...
Influence of Merger and Acquisition as Survival Strategy and Return on Asset ...Influence of Merger and Acquisition as Survival Strategy and Return on Asset ...
Influence of Merger and Acquisition as Survival Strategy and Return on Asset ...
 
Management Techniques to Increase the Bottom-line
Management Techniques to Increase the Bottom-lineManagement Techniques to Increase the Bottom-line
Management Techniques to Increase the Bottom-line
 
Sfm module-1
Sfm module-1Sfm module-1
Sfm module-1
 
The role of finance in the strategic planning and decision-making process
The role of finance in the strategic planning and decision-making processThe role of finance in the strategic planning and decision-making process
The role of finance in the strategic planning and decision-making process
 
Can technology support better brand valuation
Can technology support better brand valuationCan technology support better brand valuation
Can technology support better brand valuation
 
Evaluation andControlChapter 11Learning ObjectivesUn.docx
Evaluation andControlChapter 11Learning ObjectivesUn.docxEvaluation andControlChapter 11Learning ObjectivesUn.docx
Evaluation andControlChapter 11Learning ObjectivesUn.docx
 
FINANCIAL CONTROLLERSHIP CHAPTER 2 PPT
FINANCIAL CONTROLLERSHIP CHAPTER 2 PPTFINANCIAL CONTROLLERSHIP CHAPTER 2 PPT
FINANCIAL CONTROLLERSHIP CHAPTER 2 PPT
 
Performance Management Measuring Performance
Performance Management Measuring PerformancePerformance Management Measuring Performance
Performance Management Measuring Performance
 

Mehr von Azmi Taufik

The Flywheel and The Doom Loop
The Flywheel and The Doom LoopThe Flywheel and The Doom Loop
The Flywheel and The Doom LoopAzmi Taufik
 
Organisational Development: The Process, Models, Factors & Implementation
Organisational Development:  The Process, Models, Factors & ImplementationOrganisational Development:  The Process, Models, Factors & Implementation
Organisational Development: The Process, Models, Factors & ImplementationAzmi Taufik
 
The Minimum Wage
The Minimum WageThe Minimum Wage
The Minimum WageAzmi Taufik
 
Knowledge management book review
Knowledge management book reviewKnowledge management book review
Knowledge management book reviewAzmi Taufik
 
I moved your cheese and Who moved my cheese book review
I moved your cheese and Who moved my cheese book reviewI moved your cheese and Who moved my cheese book review
I moved your cheese and Who moved my cheese book reviewAzmi Taufik
 
Knowledge management and business intelligence
Knowledge management and business intelligenceKnowledge management and business intelligence
Knowledge management and business intelligenceAzmi Taufik
 

Mehr von Azmi Taufik (6)

The Flywheel and The Doom Loop
The Flywheel and The Doom LoopThe Flywheel and The Doom Loop
The Flywheel and The Doom Loop
 
Organisational Development: The Process, Models, Factors & Implementation
Organisational Development:  The Process, Models, Factors & ImplementationOrganisational Development:  The Process, Models, Factors & Implementation
Organisational Development: The Process, Models, Factors & Implementation
 
The Minimum Wage
The Minimum WageThe Minimum Wage
The Minimum Wage
 
Knowledge management book review
Knowledge management book reviewKnowledge management book review
Knowledge management book review
 
I moved your cheese and Who moved my cheese book review
I moved your cheese and Who moved my cheese book reviewI moved your cheese and Who moved my cheese book review
I moved your cheese and Who moved my cheese book review
 
Knowledge management and business intelligence
Knowledge management and business intelligenceKnowledge management and business intelligence
Knowledge management and business intelligence
 

Último

14 march 2024-capital-markets-update eni.pdf
14 march 2024-capital-markets-update eni.pdf14 march 2024-capital-markets-update eni.pdf
14 march 2024-capital-markets-update eni.pdfEni
 
L-1 VISA Business (Plan Sample) - Plan Writers
L-1 VISA Business (Plan Sample) - Plan WritersL-1 VISA Business (Plan Sample) - Plan Writers
L-1 VISA Business (Plan Sample) - Plan WritersPlan Writers
 
Bus Eth ch3 ppt.ppt business ethics and corporate social responsibilities ppt
Bus Eth ch3 ppt.ppt business ethics and corporate social responsibilities pptBus Eth ch3 ppt.ppt business ethics and corporate social responsibilities ppt
Bus Eth ch3 ppt.ppt business ethics and corporate social responsibilities pptendeworku
 
Reframing Requirements: A Strategic Approach to Requirement Definition, with ...
Reframing Requirements: A Strategic Approach to Requirement Definition, with ...Reframing Requirements: A Strategic Approach to Requirement Definition, with ...
Reframing Requirements: A Strategic Approach to Requirement Definition, with ...Jake Truemper
 
Record of Module Forensic photography in
Record of Module Forensic photography inRecord of Module Forensic photography in
Record of Module Forensic photography inalexademileighpacal
 
Streamlining Your Accounting A Guide to QuickBooks Migration Tools.pptx
Streamlining Your Accounting A Guide to QuickBooks Migration Tools.pptxStreamlining Your Accounting A Guide to QuickBooks Migration Tools.pptx
Streamlining Your Accounting A Guide to QuickBooks Migration Tools.pptxPaulBryant58
 
Mist Cooling & Fogging System Company in Saudi Arabia
Mist Cooling & Fogging System Company in Saudi ArabiaMist Cooling & Fogging System Company in Saudi Arabia
Mist Cooling & Fogging System Company in Saudi Arabiaopstechsanjanasingh
 
"InShorts: A Game-Changer in the Digital News Age"
"InShorts: A Game-Changer in the Digital News Age""InShorts: A Game-Changer in the Digital News Age"
"InShorts: A Game-Changer in the Digital News Age"Adharsh45
 
Shravan Kumaran and sanjay kumaran.pdf..
Shravan Kumaran and sanjay kumaran.pdf..Shravan Kumaran and sanjay kumaran.pdf..
Shravan Kumaran and sanjay kumaran.pdf..ranjithapriya2
 
Optimize Your CRM Customization and Beyond
Optimize Your CRM Customization and BeyondOptimize Your CRM Customization and Beyond
Optimize Your CRM Customization and BeyondBoundify
 
The 10 Most Influential Women Making Difference In 2024.pdf
The 10 Most Influential Women Making Difference In 2024.pdfThe 10 Most Influential Women Making Difference In 2024.pdf
The 10 Most Influential Women Making Difference In 2024.pdfInsightsSuccess4
 
Benihana of Tokyo case study11111111.pdf
Benihana of Tokyo case study11111111.pdfBenihana of Tokyo case study11111111.pdf
Benihana of Tokyo case study11111111.pdfjavenxxx01
 
CXO 2.0 Conference (Event Information Deck | Dec'24-Mar'25)
CXO 2.0 Conference (Event Information Deck | Dec'24-Mar'25)CXO 2.0 Conference (Event Information Deck | Dec'24-Mar'25)
CXO 2.0 Conference (Event Information Deck | Dec'24-Mar'25)CXO 2.0 Conference
 
We are inviting you on board, to move forward together in the Right Direction
We are inviting you on board, to move forward together in the Right DirectionWe are inviting you on board, to move forward together in the Right Direction
We are inviting you on board, to move forward together in the Right DirectionRight Direction Aero
 
ICv2 Hobby Games White Paper 2024 - State of the Industry
ICv2 Hobby Games White Paper 2024 - State of the IndustryICv2 Hobby Games White Paper 2024 - State of the Industry
ICv2 Hobby Games White Paper 2024 - State of the IndustryDennisViau
 
Dashboards y paneles - CP Home - Area de Operaciones
Dashboards y paneles - CP Home - Area de OperacionesDashboards y paneles - CP Home - Area de Operaciones
Dashboards y paneles - CP Home - Area de OperacionesLPI ONG
 
NewBase 14 March 2024 Energy News issue - 1707 by Khaled Al Awadi_compress...
NewBase  14 March  2024  Energy News issue - 1707 by Khaled Al Awadi_compress...NewBase  14 March  2024  Energy News issue - 1707 by Khaled Al Awadi_compress...
NewBase 14 March 2024 Energy News issue - 1707 by Khaled Al Awadi_compress...Khaled Al Awadi
 
The Vietnam Believer_Newsletter_Vol.001_Mar12 2024
The Vietnam Believer_Newsletter_Vol.001_Mar12 2024The Vietnam Believer_Newsletter_Vol.001_Mar12 2024
The Vietnam Believer_Newsletter_Vol.001_Mar12 2024believeminhh
 

Último (20)

14 march 2024-capital-markets-update eni.pdf
14 march 2024-capital-markets-update eni.pdf14 march 2024-capital-markets-update eni.pdf
14 march 2024-capital-markets-update eni.pdf
 
L-1 VISA Business (Plan Sample) - Plan Writers
L-1 VISA Business (Plan Sample) - Plan WritersL-1 VISA Business (Plan Sample) - Plan Writers
L-1 VISA Business (Plan Sample) - Plan Writers
 
Bus Eth ch3 ppt.ppt business ethics and corporate social responsibilities ppt
Bus Eth ch3 ppt.ppt business ethics and corporate social responsibilities pptBus Eth ch3 ppt.ppt business ethics and corporate social responsibilities ppt
Bus Eth ch3 ppt.ppt business ethics and corporate social responsibilities ppt
 
Reframing Requirements: A Strategic Approach to Requirement Definition, with ...
Reframing Requirements: A Strategic Approach to Requirement Definition, with ...Reframing Requirements: A Strategic Approach to Requirement Definition, with ...
Reframing Requirements: A Strategic Approach to Requirement Definition, with ...
 
WAM Corporate Presentation Mar 12 2024_Video.pdf
WAM Corporate Presentation Mar 12 2024_Video.pdfWAM Corporate Presentation Mar 12 2024_Video.pdf
WAM Corporate Presentation Mar 12 2024_Video.pdf
 
Record of Module Forensic photography in
Record of Module Forensic photography inRecord of Module Forensic photography in
Record of Module Forensic photography in
 
Streamlining Your Accounting A Guide to QuickBooks Migration Tools.pptx
Streamlining Your Accounting A Guide to QuickBooks Migration Tools.pptxStreamlining Your Accounting A Guide to QuickBooks Migration Tools.pptx
Streamlining Your Accounting A Guide to QuickBooks Migration Tools.pptx
 
Mist Cooling & Fogging System Company in Saudi Arabia
Mist Cooling & Fogging System Company in Saudi ArabiaMist Cooling & Fogging System Company in Saudi Arabia
Mist Cooling & Fogging System Company in Saudi Arabia
 
"InShorts: A Game-Changer in the Digital News Age"
"InShorts: A Game-Changer in the Digital News Age""InShorts: A Game-Changer in the Digital News Age"
"InShorts: A Game-Changer in the Digital News Age"
 
Shravan Kumaran and sanjay kumaran.pdf..
Shravan Kumaran and sanjay kumaran.pdf..Shravan Kumaran and sanjay kumaran.pdf..
Shravan Kumaran and sanjay kumaran.pdf..
 
Optimize Your CRM Customization and Beyond
Optimize Your CRM Customization and BeyondOptimize Your CRM Customization and Beyond
Optimize Your CRM Customization and Beyond
 
The 10 Most Influential Women Making Difference In 2024.pdf
The 10 Most Influential Women Making Difference In 2024.pdfThe 10 Most Influential Women Making Difference In 2024.pdf
The 10 Most Influential Women Making Difference In 2024.pdf
 
Benihana of Tokyo case study11111111.pdf
Benihana of Tokyo case study11111111.pdfBenihana of Tokyo case study11111111.pdf
Benihana of Tokyo case study11111111.pdf
 
CXO 2.0 Conference (Event Information Deck | Dec'24-Mar'25)
CXO 2.0 Conference (Event Information Deck | Dec'24-Mar'25)CXO 2.0 Conference (Event Information Deck | Dec'24-Mar'25)
CXO 2.0 Conference (Event Information Deck | Dec'24-Mar'25)
 
We are inviting you on board, to move forward together in the Right Direction
We are inviting you on board, to move forward together in the Right DirectionWe are inviting you on board, to move forward together in the Right Direction
We are inviting you on board, to move forward together in the Right Direction
 
WAM Corporate Presentation Mar 12 2024.pdf
WAM Corporate Presentation Mar 12 2024.pdfWAM Corporate Presentation Mar 12 2024.pdf
WAM Corporate Presentation Mar 12 2024.pdf
 
ICv2 Hobby Games White Paper 2024 - State of the Industry
ICv2 Hobby Games White Paper 2024 - State of the IndustryICv2 Hobby Games White Paper 2024 - State of the Industry
ICv2 Hobby Games White Paper 2024 - State of the Industry
 
Dashboards y paneles - CP Home - Area de Operaciones
Dashboards y paneles - CP Home - Area de OperacionesDashboards y paneles - CP Home - Area de Operaciones
Dashboards y paneles - CP Home - Area de Operaciones
 
NewBase 14 March 2024 Energy News issue - 1707 by Khaled Al Awadi_compress...
NewBase  14 March  2024  Energy News issue - 1707 by Khaled Al Awadi_compress...NewBase  14 March  2024  Energy News issue - 1707 by Khaled Al Awadi_compress...
NewBase 14 March 2024 Energy News issue - 1707 by Khaled Al Awadi_compress...
 
The Vietnam Believer_Newsletter_Vol.001_Mar12 2024
The Vietnam Believer_Newsletter_Vol.001_Mar12 2024The Vietnam Believer_Newsletter_Vol.001_Mar12 2024
The Vietnam Believer_Newsletter_Vol.001_Mar12 2024
 

Value-based Management

  • 2. o o 2 A business company main objective is to maximise shareholder wealth (value). Value is created only when the rate of return is higher than the cost of capital.
  • 3. o o VBM metric, measures & value creation o 3 Understand the meaning of VBM Challenges in implementing VBM
  • 4. o o o o o o o o 4 Definition Framework Value Drivers Value Creation Measures and Metrics Implementing VBM Track record Conclusion
  • 5.   VBM is a management approach which put shareholder value creation as the core philosophy of the company (KPMG Consulting, 1999).  5 VBM is a managerial process which effectively links strategy, measurement and operational processes to the end of creating shareholder value (CIMA, 2004) VBM is a philosophical concept rather than technique intended to show the financial managers where and when value is created or destroyed within the organisation (Kaushal and Bhargav, 2011)
  • 6. Generic VBM framework (Morin and Jarrell, 2005)     6 Valuation – defines the corporate value and explains the key drivers of value. Strategy – establishes a clear link between corporate value and specific business strategies. Finance – describes value enhancing financial policies available to the company. Corporate Governance – explains the actions and policies of senior management such as performance measurement, compensation systems and investor communication that foster value creation.
  • 7. Value drivers are variables that affect the company’s bottom line or profit (Koller,1994) Determinants of value of a firm (Morin and Jarrell, 2005) 7
  • 8.  Rate of return must be greater than cost of capital – must make profit    Sustain and leverage on employees intellectual capital    Motivation towards company interest and value Build trust Build trust with external environment and other stakeholders    8 Increasing stock price Investors confidence Customers Government & regulatory bodies Community
  • 9. The relationship between the company, shareholders & stakeholders To create the maximum possible value for shareholders the company management must be committed to creating value in relation with customers, suppliers, employees and communities (Niculescu, 1999). 9
  • 10.  Firm performance measure should meet the following (Peterson, 2000),   Measure should incorporate risk factor   Measure must be future oriented Uncontrollable factors to be excluded in the measure The following factors need to be addressed (Peterson, 2000),   Measure should be in a flow manner (long process)  10 Measure must be translated to divisional level Measure should promote shareholder value
  • 11.  Discounted Cash Flow (DCF)  Returns to Shareholders (RTS) - annual capital gains plus dividend yields  Cash Flow Return on Investment (CFROI) - expresses an estimate of a company’s single-period cash flow as a percentage of total investment.  Return on Invested Capital (ROIC) - the ratio of net operating profits less adjusted taxes (NOPLAT) to invested capital  Economic Value Added (EVA) - measures the excess of earnings over the minimum return that shareholders could get by investing capital in companies of similar risk 11
  • 12.     Value-creation mindset needs to be adopted (Copeland et al., 1994) Mindset should tie-up with the necessary management process and systems (Copeland et al., 1994) Employee compensation to tie-up with performance (Martin and Petty, 2000) Top management of the firm must fully support the program (Martin and Petty, 2000)   12 Strategic planning approach – analyse long-term trend Other stakeholders need to be considered
  • 13.  Successful implementation by,  Coca Cola, GE, Abbott Labs, Merck – has shown increased in performance & firm’s value (Morrin and Jarrell, 2005).   Higher return and value creation  13 Perform better than peers Executives were highly rewarded
  • 14. 14 The outcome of adopting VBM: Higher value strategies/ decision which lead to improved shareholder return. Source: Copyright © The LEK/Alcar Consulting Group, Inc. via Morrin and Jarrell (2005)
  • 15. o Behavioural -such as getting managers to understand the new measures and avoiding complexity o Technical - getting the right data, volatility in WACC, the reliability of assumptions o Organisational - overcoming internal resistance, the significant effort and time required for implementation o 15 Managerial – support from Top Management
  • 16.     16 Implementation of VBM by various Fortune 100 companies has proven the effectiveness of VBM in creating and increasing firm’s value. Companies need to adopt VBM with performance measures that is relevant and suitable to their organisations’ Top management support and commitment will ensure ‘smooth’ implementation of VBM To maintain the competitive edge and continue to create value performance metrics adopted need to be constantly monitored and assessed
  • 18.  Introduced Smart Orange under the GLC Transformation program in 2004  Process includes,   18 Introducing Core Values – Kristal   Restructuring into 2 separate SBUs - Wholesale and Retail   Realign Vision, Mission and Business Strategy Develop competency model – Functional & Behavioural Full Top management support and commitment To continue to create value - Teaming With Passion Program were carried out – compulsory for all staff and Leadership team to attend
  • 19. 19
  • 20. 20
  • 21. 21
  • 22. 22