The document introduces the ADDING value scorecard as a tool for assessing international business strategy. The scorecard breaks down value creation into six components: Adding volume, Decreasing costs, Differentiating, Improving industry attractiveness, Normalizing risks, and Generating knowledge. For each component, guidelines are provided for analysis, such as unbundling costs, assessing the effects of volume, and accounting for cross-country differences. The scorecard is intended to facilitate robust evaluation of global strategies and avoid errors like focusing too narrowly on size-based metrics.
Mcdonald's IMC and its marketing strategy from the history. ...mayurmittal0001
You will find all the details of McDonald's, from its logo to its marketing strategy, Ansoff matrix, PLC, Facts, Competitors. ... Please download the ppt. There are videos in the presentation so won't get the full matter because many things that I've covered in this ppt are behind the videos.
Mcdonald's IMC and its marketing strategy from the history. ...mayurmittal0001
You will find all the details of McDonald's, from its logo to its marketing strategy, Ansoff matrix, PLC, Facts, Competitors. ... Please download the ppt. There are videos in the presentation so won't get the full matter because many things that I've covered in this ppt are behind the videos.
In response to a huge crisis in 2000, the new CEO of Procter & Gamble has to decide whether to continue with an unusual organizational design or to revert to the old matrix organization. Describes all the organizational designs used by Procter & Gamble from the 1920s onward, including geographic, product, and matrix architectures. Market development organizations, global business units, and global business services unit, each of which is heavily interdependent with the others and none of which has a clear decision-making advantage, comprise the unusual organizational design. Examination of the different organizational designs, trade-offs associated with each organizational architecture as well as the accompanying implementation problems
Cola Wars - Coke Vs Pepsi Harvard Business School Case StudyMohan Kanni
A brief presentation on case study Cola Wars where we try to analyse the past history and predict the future of their business and growth opportunities from a Marketing Management Perspective.
Managing Finance (MNGFIN)
Week 5: Strategic management accounting
The nature and role of strategic management accounting
Textbook reading (Atrill & McLaney: Ch. 9)
Last week’s objectives helped you develop an understanding of the role of budgets
in the strategic planning process. Budgets are useful tools for setting financial
standards of performance and act as motivators for effective management. However,
budget preparation, management, monitoring, and analysis represent only a small
portion of the role that management accounting can take within the strategic
planning process. Of course, strategic planning requires an organisation to fully
examine and analyse itself both internally and externally.
Management accounting is a unique field that is excellently positioned to assist with
both the internal evaluation as well as external analysis that organisations must
conduct to remain competitive. It may seem that management accounting is strongly
focused on the measuring of internal performance of the organisation. This was the
common belief for many years; however, in the contemporary business landscape,
companies are finding that they can also practice such analysis on their competitors
as well as their customers. Consequently, this forces them to be more outward
looking, to develop competitive strategies, and to monitor these strategies using the
appropriate range of performance measurements. The role of management
accounting is expanding from supportive to participative as new methods are being
used to help meet corporate strategic objectives.
Competitor and customer profitability analysis
Textbook reading (Atrill & McLaney: Ch. 9)
To better understand the expanding strategic role that management accounting is
acquiring within the organisation, it is important to examine two key areas from this
field: competitor analysis and customer profitability analysis. The methods and
techniques that you have examined and explored to this point have all been focused
on measuring and analysing the performance of the organisation itself. This
information is of great importance, as it provides detail with regards to profitability,
sustainability, etc. However, if the concentration remains solely on the individual
organisation, true analysis has fallen short, as companies do not operate in vacuums.
Managers must do their best to understand the competitive stance of other
organisations with regards to costs, strategies, resources, capabilities, and
objectives. In other words, an organisation must do its best to understand what its
competition might do if it were to reduce prices, launch a new product, or attempt to
enter a new market. While obtaining such precious information proves to be difficult
at times, there are numerous sources that can be utilised, such as public financial
reports, industry reports, government statistics, and simple observations of
behaviours and a ...
In response to a huge crisis in 2000, the new CEO of Procter & Gamble has to decide whether to continue with an unusual organizational design or to revert to the old matrix organization. Describes all the organizational designs used by Procter & Gamble from the 1920s onward, including geographic, product, and matrix architectures. Market development organizations, global business units, and global business services unit, each of which is heavily interdependent with the others and none of which has a clear decision-making advantage, comprise the unusual organizational design. Examination of the different organizational designs, trade-offs associated with each organizational architecture as well as the accompanying implementation problems
Cola Wars - Coke Vs Pepsi Harvard Business School Case StudyMohan Kanni
A brief presentation on case study Cola Wars where we try to analyse the past history and predict the future of their business and growth opportunities from a Marketing Management Perspective.
Managing Finance (MNGFIN)
Week 5: Strategic management accounting
The nature and role of strategic management accounting
Textbook reading (Atrill & McLaney: Ch. 9)
Last week’s objectives helped you develop an understanding of the role of budgets
in the strategic planning process. Budgets are useful tools for setting financial
standards of performance and act as motivators for effective management. However,
budget preparation, management, monitoring, and analysis represent only a small
portion of the role that management accounting can take within the strategic
planning process. Of course, strategic planning requires an organisation to fully
examine and analyse itself both internally and externally.
Management accounting is a unique field that is excellently positioned to assist with
both the internal evaluation as well as external analysis that organisations must
conduct to remain competitive. It may seem that management accounting is strongly
focused on the measuring of internal performance of the organisation. This was the
common belief for many years; however, in the contemporary business landscape,
companies are finding that they can also practice such analysis on their competitors
as well as their customers. Consequently, this forces them to be more outward
looking, to develop competitive strategies, and to monitor these strategies using the
appropriate range of performance measurements. The role of management
accounting is expanding from supportive to participative as new methods are being
used to help meet corporate strategic objectives.
Competitor and customer profitability analysis
Textbook reading (Atrill & McLaney: Ch. 9)
To better understand the expanding strategic role that management accounting is
acquiring within the organisation, it is important to examine two key areas from this
field: competitor analysis and customer profitability analysis. The methods and
techniques that you have examined and explored to this point have all been focused
on measuring and analysing the performance of the organisation itself. This
information is of great importance, as it provides detail with regards to profitability,
sustainability, etc. However, if the concentration remains solely on the individual
organisation, true analysis has fallen short, as companies do not operate in vacuums.
Managers must do their best to understand the competitive stance of other
organisations with regards to costs, strategies, resources, capabilities, and
objectives. In other words, an organisation must do its best to understand what its
competition might do if it were to reduce prices, launch a new product, or attempt to
enter a new market. While obtaining such precious information proves to be difficult
at times, there are numerous sources that can be utilised, such as public financial
reports, industry reports, government statistics, and simple observations of
behaviours and a ...
WE BELIEVE that our Eighth Core Portfolio investment strategy provides the answers to the previously mentioned issues and offers a truly balanced approach to investing.
Equities, bonds, real estate and commodities are four asset classes that cover the core of any asset allocation process. The Eighth Core Portfolio is based on the idea that, during any given stage of a global investment cycle, money will flow across these assets, thereby affecting their performance. Rather than time the entry into the outperformer and the exit from the underperformer the Eighth Core Portfolio invests globally across all four in equal measure thereby ensuring that it participates in the best asset class in any environment. Over the investment period a constant exposure is maintained in order to avoid any outperforming asset class becoming a drag when the market turns.
This balanced approach is designed to produce medium to long term returns which exceed those of nominal cash returns. Historical evidence shows that this strategy has had proven outperformance in various timeframes and in all environments (see Tables 1 to 3) More importantly it minimizes volatility by taking advantage of the low correlations between the individual asset classes (see Table 4).
Cost Analysis ModelsUnit 3 Written AssignmentBUS .docxbobbywlane695641
Cost Analysis Models
Unit 3: Written Assignment
BUS 5110
Managerial Accounting
Unit 3
Introduction
Cost management is important for all businesses and is used to plan and control the budget. This is done by analysing business practices, predicting expenditures in advance and reducing the chance of over spending in relation to income. Using the client provided data for a business involved in the catering and events industry we can evaluate how productive and effective her business is.
Provide an accurate solution.
We can see from the data in the attached costing sheet that the company has a break even point of 3158 events. To come to this conclusion, we calculated the revenue per event (Current revenue / number of events) $22,500,000 / 5000 = $4,500. We also require our Contribution margin (Revenue per event - Variable cost per event) $4,500 - $2,600 = $1,900. To calculate the Breakeven point, we simply take the Fixed cost and divide that by the Contribution margin = 6,000,000 / 1,900 = 3157.89
Hypothetically, if the company decided they’d like to improve their revenue and increase their profits from $3,500,000 to $5,000,000 we can use the data to calculate the number of events required to reach that target. Using the Units to Achieve a Target Income formula (Total fixed costs + Target income) / Contribution margin per unit = (6,000,000 + 5,000,000) / 1,900 = 5789.47 = 5789 events (Walther, L. M. & Skousen, C.J., 2009).
Provide a narrative that defines and discusses the purpose of assigning cost categories of fixed and variable costs.
Operating a business incurs a range of costs. These can be defined as either fixed costs which don’t change in relation to activity and variable costs which do. These costing structures will likely differ between businesses and industries. Companies have even been known to use different costing structures between different internal departments. (CFI., n.d.)
Many fixed costs are going to be unavoidable and come from the simple operational side of your business. Costs such as depreciation, taxes and rent will likely remain unchanged however other fixed costs such as advertising budgets are more discretionary. Variable costs are also able to be altered depending on the size and scale of your business. For example, order quantities can be increased to bring unit costs down however before committing to such decisions forecasting your sales based on this should also be carried out to ensure you don’t end up grossly overstocked (Walther, L. M. & Skousen, C.J., 2009).
In order to maximise profits companies are required to minimise or eradicate unnecessary costs any way they can, ideally with no impact on the quality of the final product. A manager must understand both of these categories and the importance they play in the overall running of the business if they’re ever going to effectively improve the business model, reduce costs and remain profitable.
Provide a narrative that defines and discusses.
Financial Analysis on Recession Period at M&M TractorsProjects Kart
Financial ANalysis (also stated as financial plan analysis or accounting analysis) refers to an assessment of the viability, stability and profitable of a business, sub-business or project. Visit www.projectskart.com for more information. It is performed by professionals World Health Organization prepare reports exploitation ratios that create use of data taken from monetary statements and different reports. These reports area unit typically given to prime management mutually of their bases in creating business selections.
Keith turner quick silver funding solutions the role of finance in the stra...keithturnerquicksilverfun
A good strategic plan includes metrics that translate the vision and mission into specific end points. This is critical because strategic planning is ultimately about resource allocation and would not be relevant if resources were unlimited.
Assignment 2 Operations DecisionDue Week 6 and worth 300 points.docxrock73
Assignment 2: Operations Decision
Due Week 6 and worth 300 points
Using the regression results and the other computations from Assignment 1, determine the market structure in which the low-calorie frozen, microwavable food company operates.
Use the Internet to research two (2) of the leading competitors in the low-calorie frozen, microwavable food industry, and take note of their pricing strategies, profitability, and their relationships within the industry (worldwide).
Write a six to eight (6-8) page paper in which you:
1. Outline a plan that will assess the effectiveness of the market structure for the company’s operations. Note: In Assignment 1, the assumption was that the market structure [or selling environment] was perfectly competitive and that the equilibrium price was to be determined by setting QD equal to QS. You are now aware of recent changes in the selling environment that suggest an imperfectly competitive market where your firm now has substantial market power in setting its own “optimal” price
2. .
Given that business operations have changed from the market structure specified in the original scenario in Assignment 1, determine two (2) likely factors that might have caused the change. Predict the primary manner in which this change would likely impact business operations in the new market environment.
3.
Analyze the major short run and long cost functions for the low-calorie, frozen microwaveable food company given the cost functions below. Suggest substantive ways in which the low-calorie food company may use this information in order to make decisions in both the short-run and the long-run.
TC = 160,000,000 + 100Q + 0.0063212Q2VC = 100Q + 0.0063212Q2MC= 100 + 0.0126424Q
4. Determine the possible circumstances under which the company should discontinue operations. Suggest key actions that management should take in order to confront these circumstances. Provide a rationale for your response. (Hint: Your firm’s price must cover average variable costs in the short run and average total costs in the long run to continue operations.)
5.
Suggest one (1) pricing policy that will enable your low-calorie, frozen microwavable food company to maximize profits. Provide a rationale for your suggestion.
(Hints:
· In Assignment 1, you determined your firm’s market demand equation. Now you need to find the inverse demand equation. Having found that, find the Total Revenue function for your firm (TR is P x Q). From your firm’s Total Revenue function, then find your Marginal Revenue (MR) function.
· Use the profit maximization rule MR = MC to determine your optimal price and optimal output level now that you have market power. Compare these values with the values you generated in Assignment 1. Determine whether your price higher is or lower.
·
6. Outline a plan, based on the information provided in the scenario, which the company could use in order to evaluate its financial performance. Consider all the key drivers of performance, such a ...
8.1 What Is Corporate StrategyLO 8-1Define corporate strategy.docxpriestmanmable
8.1 What Is Corporate Strategy?
LO 8-1
Define corporate strategy and describe the three dimensions along which it is assessed.
Strategy formulation centers around the key questions of where and how to compete. Business strategy concerns the question of how to compete in a single product market. As discussed in Chapter 6, the two generic business strategies that firms can follow to pursue their quest for competitive advantage are to increase differentiation (while containing cost) or lower costs (while maintaining differentiation). If trade-offs can be reconciled, some firms might be able to pursue a blue ocean strategy by increasing differentiation and lowering costs. As firms grow, they are frequently expanding their business activities through seeking new markets both by offering new products and services and by competing in different geographies. Strategic leaders must formulate a corporate strategy to guide continued growth. To gain and sustain competitive advantage, therefore, any corporate strategy must align with and strengthen a firm’s business strategy, whether it is a differentiation, cost-leadership, or blue ocean strategy.
Corporate strategy comprises the decisions that leaders make and the goal-directed actions they take in the quest for competitive advantage in several industries and markets simultaneously.3 It provides answers to the key question of where to compete. Corporate strategy determines the boundaries of the firm along three dimensions: vertical integration along the industry value chain, diversification of products and services, and geographic scope (regional, national, or global markets). Strategic leaders must determine corporate strategy along the three dimensions:
1. Vertical integration: In what stages of the industry value chain should the company participate? The industry value chain describes the transformation of raw materials into finished goods and services along distinct vertical stages.
2. Diversification: What range of products and services should the company offer?
3. Geographic scope: Where should the company compete geographically in terms of regional, national, or international markets?
In most cases, underlying these three questions is an implicit desire for growth. The need for growth is sometimes taken so much for granted that not every manager understands all the reasons behind it. A clear understanding will help strategic leaders to pursue growth for the right reasons and make better decisions for the firm and its stakeholders.
WHY FIRMS NEED TO GROW
LO 8-2
Explain why firms need to grow, and evaluate different growth motives.
Several reasons explain why firms need to grow. These can be summarized as follows:
1. Increase profits.
2. Lower costs.
3. Increase market power.
4. Reduce risk.
5. Motivate management.
Let’s look at each reason in turn.
INCREASE PROFITS
Profitable growth allows businesses to provide a higher return for their shareholders, or owners, if privately held. For publicly trade.
8.1 What Is Corporate StrategyLO 8-1Define corporate strategy.docxblondellchancy
8.1 What Is Corporate Strategy?
LO 8-1
Define corporate strategy and describe the three dimensions along which it is assessed.
Strategy formulation centers around the key questions of where and how to compete. Business strategy concerns the question of how to compete in a single product market. As discussed in Chapter 6, the two generic business strategies that firms can follow to pursue their quest for competitive advantage are to increase differentiation (while containing cost) or lower costs (while maintaining differentiation). If trade-offs can be reconciled, some firms might be able to pursue a blue ocean strategy by increasing differentiation and lowering costs. As firms grow, they are frequently expanding their business activities through seeking new markets both by offering new products and services and by competing in different geographies. Strategic leaders must formulate a corporate strategy to guide continued growth. To gain and sustain competitive advantage, therefore, any corporate strategy must align with and strengthen a firm’s business strategy, whether it is a differentiation, cost-leadership, or blue ocean strategy.
Corporate strategy comprises the decisions that leaders make and the goal-directed actions they take in the quest for competitive advantage in several industries and markets simultaneously.3 It provides answers to the key question of where to compete. Corporate strategy determines the boundaries of the firm along three dimensions: vertical integration along the industry value chain, diversification of products and services, and geographic scope (regional, national, or global markets). Strategic leaders must determine corporate strategy along the three dimensions:
1. Vertical integration: In what stages of the industry value chain should the company participate? The industry value chain describes the transformation of raw materials into finished goods and services along distinct vertical stages.
2. Diversification: What range of products and services should the company offer?
3. Geographic scope: Where should the company compete geographically in terms of regional, national, or international markets?
In most cases, underlying these three questions is an implicit desire for growth. The need for growth is sometimes taken so much for granted that not every manager understands all the reasons behind it. A clear understanding will help strategic leaders to pursue growth for the right reasons and make better decisions for the firm and its stakeholders.
WHY FIRMS NEED TO GROW
LO 8-2
Explain why firms need to grow, and evaluate different growth motives.
Several reasons explain why firms need to grow. These can be summarized as follows:
1. Increase profits.
2. Lower costs.
3. Increase market power.
4. Reduce risk.
5. Motivate management.
Let’s look at each reason in turn.
INCREASE PROFITS
Profitable growth allows businesses to provide a higher return for their shareholders, or owners, if privately held. For publicly trade ...
Business Valuation Principles for EntrepreneursBen Wann
This insightful presentation is designed to equip entrepreneurs with the essential knowledge and tools needed to accurately value their businesses. Understanding business valuation is crucial for making informed decisions, whether you're seeking investment, planning to sell, or simply want to gauge your company's worth.
Building Your Employer Brand with Social MediaLuanWise
Presented at The Global HR Summit, 6th June 2024
In this keynote, Luan Wise will provide invaluable insights to elevate your employer brand on social media platforms including LinkedIn, Facebook, Instagram, X (formerly Twitter) and TikTok. You'll learn how compelling content can authentically showcase your company culture, values, and employee experiences to support your talent acquisition and retention objectives. Additionally, you'll understand the power of employee advocacy to amplify reach and engagement – helping to position your organization as an employer of choice in today's competitive talent landscape.
Discover the innovative and creative projects that highlight my journey throu...dylandmeas
Discover the innovative and creative projects that highlight my journey through Full Sail University. Below, you’ll find a collection of my work showcasing my skills and expertise in digital marketing, event planning, and media production.
Cracking the Workplace Discipline Code Main.pptxWorkforce Group
Cultivating and maintaining discipline within teams is a critical differentiator for successful organisations.
Forward-thinking leaders and business managers understand the impact that discipline has on organisational success. A disciplined workforce operates with clarity, focus, and a shared understanding of expectations, ultimately driving better results, optimising productivity, and facilitating seamless collaboration.
Although discipline is not a one-size-fits-all approach, it can help create a work environment that encourages personal growth and accountability rather than solely relying on punitive measures.
In this deck, you will learn the significance of workplace discipline for organisational success. You’ll also learn
• Four (4) workplace discipline methods you should consider
• The best and most practical approach to implementing workplace discipline.
• Three (3) key tips to maintain a disciplined workplace.
VAT Registration Outlined In UAE: Benefits and Requirementsuae taxgpt
Vat Registration is a legal obligation for businesses meeting the threshold requirement, helping companies avoid fines and ramifications. Contact now!
https://viralsocialtrends.com/vat-registration-outlined-in-uae/
Improving profitability for small businessBen Wann
In this comprehensive presentation, we will explore strategies and practical tips for enhancing profitability in small businesses. Tailored to meet the unique challenges faced by small enterprises, this session covers various aspects that directly impact the bottom line. Attendees will learn how to optimize operational efficiency, manage expenses, and increase revenue through innovative marketing and customer engagement techniques.
"𝑩𝑬𝑮𝑼𝑵 𝑾𝑰𝑻𝑯 𝑻𝑱 𝑰𝑺 𝑯𝑨𝑳𝑭 𝑫𝑶𝑵𝑬"
𝐓𝐉 𝐂𝐨𝐦𝐬 (𝐓𝐉 𝐂𝐨𝐦𝐦𝐮𝐧𝐢𝐜𝐚𝐭𝐢𝐨𝐧𝐬) is a professional event agency that includes experts in the event-organizing market in Vietnam, Korea, and ASEAN countries. We provide unlimited types of events from Music concerts, Fan meetings, and Culture festivals to Corporate events, Internal company events, Golf tournaments, MICE events, and Exhibitions.
𝐓𝐉 𝐂𝐨𝐦𝐬 provides unlimited package services including such as Event organizing, Event planning, Event production, Manpower, PR marketing, Design 2D/3D, VIP protocols, Interpreter agency, etc.
Sports events - Golf competitions/billiards competitions/company sports events: dynamic and challenging
⭐ 𝐅𝐞𝐚𝐭𝐮𝐫𝐞𝐝 𝐩𝐫𝐨𝐣𝐞𝐜𝐭𝐬:
➢ 2024 BAEKHYUN [Lonsdaleite] IN HO CHI MINH
➢ SUPER JUNIOR-L.S.S. THE SHOW : Th3ee Guys in HO CHI MINH
➢FreenBecky 1st Fan Meeting in Vietnam
➢CHILDREN ART EXHIBITION 2024: BEYOND BARRIERS
➢ WOW K-Music Festival 2023
➢ Winner [CROSS] Tour in HCM
➢ Super Show 9 in HCM with Super Junior
➢ HCMC - Gyeongsangbuk-do Culture and Tourism Festival
➢ Korean Vietnam Partnership - Fair with LG
➢ Korean President visits Samsung Electronics R&D Center
➢ Vietnam Food Expo with Lotte Wellfood
"𝐄𝐯𝐞𝐫𝐲 𝐞𝐯𝐞𝐧𝐭 𝐢𝐬 𝐚 𝐬𝐭𝐨𝐫𝐲, 𝐚 𝐬𝐩𝐞𝐜𝐢𝐚𝐥 𝐣𝐨𝐮𝐫𝐧𝐞𝐲. 𝐖𝐞 𝐚𝐥𝐰𝐚𝐲𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞 𝐭𝐡𝐚𝐭 𝐬𝐡𝐨𝐫𝐭𝐥𝐲 𝐲𝐨𝐮 𝐰𝐢𝐥𝐥 𝐛𝐞 𝐚 𝐩𝐚𝐫𝐭 𝐨𝐟 𝐨𝐮𝐫 𝐬𝐭𝐨𝐫𝐢𝐞𝐬."
In the Adani-Hindenburg case, what is SEBI investigating.pptxAdani case
Adani SEBI investigation revealed that the latter had sought information from five foreign jurisdictions concerning the holdings of the firm’s foreign portfolio investors (FPIs) in relation to the alleged violations of the MPS Regulations. Nevertheless, the economic interest of the twelve FPIs based in tax haven jurisdictions still needs to be determined. The Adani Group firms classed these FPIs as public shareholders. According to Hindenburg, FPIs were used to get around regulatory standards.
Personal Brand Statement:
As an Army veteran dedicated to lifelong learning, I bring a disciplined, strategic mindset to my pursuits. I am constantly expanding my knowledge to innovate and lead effectively. My journey is driven by a commitment to excellence, and to make a meaningful impact in the world.
Event Report - SAP Sapphire 2024 Orlando - lots of innovation and old challengesHolger Mueller
Holger Mueller of Constellation Research shares his key takeaways from SAP's Sapphire confernece, held in Orlando, June 3rd till 5th 2024, in the Orange Convention Center.
1. 1
1. ADDING Value1
Pankaj Ghemawat
The introduction explains that international or global strategy requires distinctive content
because the state of the world is one of semiglobalization, in which the differences
between countries continue to be substantial. Global strategy requires dealing with this
complex reality, in which neither the interactions between countries nor the differences
that continue to divide them can be ignored, in order to create and claim more value
across borders than a collection of single-country enterprises could do on their own. In
other words, the fundamental objective of global strategy is to account for differences so
as to produce a whole that exceeds the sum of its national parts by as large a measure as
possible.
This section introduces the ADDING value scorecard and uses it to identify and calibrate
the levers through which global strategy can create (or destroy) value, and to assess
alternative strategy options. Some of the levers are likely to be familiar from single-
country strategy but others are new or applied in rather different ways, as discussed in
this section. The next section, on the CAGE distance framework, identifies and explores
the effects of cross-country differences of various sorts on international economic
interactions. Taken together, sections 1 and 2 supply the basic tools necessary to pursue
the objective articulated in the introduction: applying a firm-centric, value-focused
perspective to a substrate of cross-country differences.
The ADDING Value Scorecard
The late C. Northcote Parkinson noted in one of his less famous laws that businesspeople
tend to do detailed cost-benefit analyses of relatively small decisions but simply throw up
their hands and surrender to animal spirits when making large ones.2
There is a sense in
some quarters that global strategic moves are so complex and so subject to uncertainty
that they essentially become matters of faith. The ADDING value scorecard presented
here is intended as an antidote to this kind of thinking.3
ADDING is an acronym that
parses the assessment of international business strategy into the individual levers via
which value is created, each of which is amenable to careful (and in many cases
quantitative) analysis: Adding volume, Decreasing costs, Differentiating or increasing
willingness to pay, Improving industry attractiveness, Normalizing risks, and Generating
knowledge and other resources.
The components of the ADDING value scorecard are meant to be commensurable, and to
add up to determine overall value addition or subtraction. The first four components
should be familiar from single-country strategy: adding volume (or, with a more dynamic
frame, growth), decreasing costs, differentiating or increasing willingness to pay, and
increasing industry attractiveness. They reflect what might be called the fundamental
equation of business strategy:
SAMPLE
2. 2
Your margin = industry margin + your competitive advantage
Michael Porter’s famous five-forces framework for the structural analysis of industries
has explored the strategic determinants of industry profitability (the first term on the right
side of the equation).4
Porter and other strategists, notably Adam Brandenburger and Gus
Stuart, have probed the determinants of competitive advantage (the second term on the
right side of the equation), and emphasized characterizing it in terms of willingness to
pay and (opportunity) costs:5
Your competitive advantage = [willingness to pay – cost] for your company –
[willingness to pay – cost] for your competitor = your relative willingness to pay
– your relative cost.
In other words, in single-country strategy a company is said to have created competitive
advantage over its rivals if it has driven a wider wedge between willingness to pay and
cost than its competitors have done.
The final two components of ADDING value—normalizing risk and generation of
knowledge and other resources—reflect the large differences that persist across countries.
Thus, they are customary add-ons in global strategy. The relationships among the
components are summarized in exhibit 1-1.
Exhibit 1-1. The Components of the ADDING Value Scorecard
Applying the ADDING Value Scorecard
When applying the ADDING value scorecard, it is useful to begin by quickly thinking
through the list of value components and brainstorming about the ways that economic
value could be increased or decreased under each heading. Then, go back and review the
lists to figure out elements that might still be added and to begin to think through the
impact of each. It is generally very helpful to quantify numerically (at least to a rough
Economic
Value
Volume
Margin
Competitive
Advantage
• Costs
• Differentiation
Industry
Attractiveness/
LeverageUncertainty/
Risk
Knowledge/
Resources
+
3. 3
order of magnitude) those elements that are amenable to quantification. For what cannot
be quantified, note the direction of the impact and your general assessment of its
magnitude (e.g., “++” for a large positive impact or “–” for a small negative one). Then,
add up the quantified impacts and weigh them against the collective impact of the
elements that could not be quantified. While complete quantification is rarely possible,
partial quantification makes clear how much positive or negative impact the remaining
elements must have to sway the decision, improving the ultimate conclusion.
The following sections offer specific suggestions to consider when analyzing each
component of the ADDING value scorecard.
Adding Volume or Growth
Assess the economic profitability of incremental volume—that is, determine accounting
profits minus capital recovery costs. While this may seem like an obvious requirement
for a value-focused analysis, it is worth noting that research indicates many large
companies maintain significant country operations that generate negative economic
returns over long periods of time.
Understand the level at which economies of scale or scope really matter and
calibrate their magnitudes. While it is often assumed in global strategy that global scale
is what counts, there are many other possibilities: national scale, plant scale, share of
customer wallet, and so on. Economies of scale or scope should ideally be calibrated
rather than just identified since their strength varies substantially across industries and
can be dependent on other aspects of a firm’s strategy.
Assess the other effects of incremental volume. The previous point focused on
economies of scale, particularly on the cost side. But incremental volume can also have
other effects—not all of them positive—on a company’s economics. If a key input is in
short supply, for instance, additional volume may raise rather than lower costs.
Decreasing Costs
Unbundle cost and price effects. Expressing costs as a percentage of revenues can
obscure the true effects of cross-border moves on a company’s cost structure. Instead,
think about other ways to normalize costs. In some cases, it is useful to analyze cost per
unit of output to clearly separate volume and price effects. In other cases, it can also be
useful to normalize cost per unit of a key input, such as capital or labor.
Unbundle costs into subcategories. Cross-border moves typically have different
impacts on various line items within a company’s cost structure, so it is important to
analyze each of the major cost components separately. Don’t forget to consider capital
costs in addition to operating costs. Fixed and variable costs also represent another key
distinction, particularly for purposes such as breakeven analyses.
Consider cost increases as well as decreases. This point, already made briefly, is
worth reiterating. Consider, for example, takeover premiums and transaction costs
involved with cross-border mergers. Remember that increases in complexity may impact
not only production costs but also selling, general, and administrative costs.
4. 4
Look at cost drivers other than scale and scope. Strategists know that there are
many other potential drivers of costs beyond scale and scope: location (particularly
important in a cross-border context), capacity utilization, vertical integration, timing (e.g.,
early-mover advantages), functional policies, and institutional factors (e.g., unionization
and governmental regulations such as tariffs).
Relate the potential for absolute cost reductions to labor intensity or the intensity
of other inputs. Labor is just one avenue for potential economic arbitrage; capital, natural
resources and specialized inputs represent others. Arbitrage opportunities will be
elaborated on in section 5.
Differentiating or Increasing Willingness to Pay
Relate the potential for differentiation to R&D-to-sales and advertising-to-sales ratios for
your industry. These ratios are the most robust markers of multinational presence, which
is why product differentiation is considered key to strategies that seek to tap scale
economies by expanding across borders. R&D expenditures equal to 0.9 percent of sales
revenues define the bottom quartile of U.S. manufacturing, 2.0 percent of revenues the
median, and 3.5 percent of revenues the top quartile. The corresponding cutoff points for
advertising-to-sales ratios are 0.8 percent, 1.7 percent, and 3.5 percent. Compare a
company’s and industry’s ratios versus these benchmarks to quickly check the scope for
differentiation that it is likely to afford.
Focus on willingness to pay rather than prices paid. There are at least two
problems with using price as a proxy for the benefits for which buyers are willing to pay.
First, prices mix a number of other influences related to industry attractiveness and
bargaining power. Second, a focus on willingness to pay encourages envisioning things
as they might be rather than as they actually are—supporting development of a more
creative range of strategy options.
Think through how globality affects willingness to pay. There are some cases of
cross-border presence directly boosting willingness to pay—for instance, for individual
customers who travel internationally or want to belong to a global community, or for
companies that are themselves global and value consistent products and services across
locations. But especially in consumer businesses, cross-border appeal is more often
rooted in specific country-of-origin advantages (e.g., French wine).
Analyze how cross-border heterogeneity in preferences affects willingness to pay
for the products offered. In the next section, the CAGE distance framework will be
introduced to help discern more precisely the cross-country differences that firms must
account for in their strategies. For now, lets just say that while differences sometimes
support country-of-origin advantages, they more often reduce willingness to pay for
foreign products or services. Even subtle differences can render a product that works well
in one country inferior or entirely unsalable in another.
Segment the market appropriately. Segmentation obviously picks up on
differences in willingness to pay (and, sometimes, differences in costs). Typically, the
number of segments to be considered increases with diversity in customer needs and ease
in customizing the firm’s products or services. The greater diversity companies face
operating internationally increases the benefits of market segmentation.
5. 5
Improving Industry Attractiveness or Bargaining Power
Account for international differences in industry profitability. Substantial differences in
average firm profitability across countries, even within the same industry, are often
overlooked. Be sure to understand these patterns when assessing markets.
Understand concentration dynamics in your industry. Contrary to what many
assume, global integration does not necessarily increase global concentration.6
Analyze
the concentration dynamics of an industry at the global, regional, and country levels for a
basic check of the current competitive context and how it is likely to evolve.
Look broadly at other changes in industry structure. Consider how the factors in
Michael Porter’s five-forces framework are changing. For example, are shifts in sales or
production to emerging markets changing the bargaining power of buyers or suppliers?
Think through how you can de-escalate or escalate the degree of rivalry. Conduct
detailed structural and competitor analysis to figure out competitors’ likely responses to
strategic moves.
Recognize the implications of your actions for rivals’ costs or willingness to pay
for their products. Raising rivals’ costs or reducing their willingness to pay can do as
much for a company’s profits as improving its own position in absolute terms.
Attend to regulatory, or nonmarket, restraints—and ethics. Behavior aimed at
building up bargaining power is always a sensitive matter, and the legal status of the
strategies listed under the preceding two headings, in particular, varies across countries.
Be careful of the legal and ethical considerations that may arise around these types of
strategies.
Normalizing Risk
Characterize the extent of key sources of risk in a business (capital intensity, demand
volatility, etc.). A useful way of summarizing risks is in terms of the learn-to-burn rate: a
ratio that looks at how quickly information resolving key uncertainties comes in versus
the rate at which money is (irreversibly) being spent.
Assess how much cross-border operations reduce risk—or increase it.
International operations can provide geographic risk pooling, but can also create new
sources of risk. For example, a company reliant on cross-border supply chains faces very
different risks from one with more localized production.
Recognize any benefits that might accrue from increasing risk. Risk can, given
optionality, be valuable for the same reason that financial options are more valuable in
the presence of greater (price) volatility. Thus, some multinationals think of emerging
markets as strategic options rather than just as risk traps.
Consider multiple modes of managing exposure to risk or exploitation of
optionality. For example, a company may enter a foreign market with a fully owned
greenfield operation, make an acquisition, work with a joint venture partner, or simply
export there. Or, given widely diversified shareholders, it may make more sense to rely
on shareholders to eliminate industry-specific risks and, given that possibility, to discount
them in formulating company strategy.
6. 6
Generating Knowledge—and Other Resources or Capabilities
Assess to what extent knowledge is location-specific versus mobile and the implications
for knowledge transfer. Cross-country differences may require explicit attention to
knowledge decontextualization and recontextualization. Otherwise, knowledge transfer
can make matters worse rather than better.
Consider multiple modes of managing the generation and diffusion of knowledge.
In addition to formal mechanisms, don’t forget about informal ways that knowledge
diffuses across borders: through personal interactions; working with buyers, suppliers, or
consultants; open innovation; imitation; contracting for use of knowledge; and so forth.
Think of other resources in similar terms. Knowledge transfer is sometimes
thought of purely technically—a tendency reinforced by the ease with which patents can
be counted. But other kinds of information, such as business-model or management
innovations, can also be transferred across borders. Even more generally, other
organizational resources/capabilities with broad effects might be analyzed in similar ways.
Avoid double-counting. While it is important to avoid double-counting in all of
the components of the scorecard, be aware that it is particularly likely to arise here. If you
have already accounted for the effects of generating (or depleting) a resource on cost,
willingness to pay, and so on—which is generally recommended—do not repeat them
here.
Conclusion
The ADDING value scorecard parses cross-border value addition (or subtraction) in
manageable, commensurable components to facilitate robust and meaningful analysis of
international strategies. By applying the scorecard, one can avoid typical strategic errors
such as “sizeism” that may result, for example, from focusing on narrow metrics like the
percentage of a company’s revenues earned outside its home country. The scorecard may
also be used outside-in to assess a competitor’s global strategy and to try to predict its
future moves. More broadly, it is also useful to think about the sustainability of each of
the sources of value addition or subtraction to add a dynamic perspective to the analysis.
Exhibit 1-2 summarizes the guidelines presented here for applying the ADDING value
scorecard.
7. 7
Exhibit 1-2 Applying the ADDING Value Scorecard
Working through the ADDING value scorecard also helps surface some of the
opportunities and challenges that result from semiglobalization and the reality of
persistent cross-country differences. The CAGE distance framework is introduced in
section 2 to sharpen the analysis of such differences.
Components
of Value Guidelines
Adding Volume
/ Growth
Look at the true economic profitability of incremental volume (taking into
account cost of capital)
Probe the level at which additional volume yields economics of scale (or
scope): globally, nationally, at the plant or customer level, etc.
Calibrate the strength of scale effects (slope, percentage of costs/revenues
affected)
Assess the other effects of volume
Decreasing
Costs
Unbundle price effects and cost effects
Unbundle costs into subcategories
Consider cost increases (e.g., due to complexity, adaptation, etc.) as well as
decreases and net them out
Look at cost drivers other than scale/scope
Look at labor cost/sales ratios for your industry (or company)
Differentiating /
Increasing
Willingness-to-
Pay
Look at R&D/sales and advertising/sales ratios for your industry
Focus on willingness to pay rather than prices paid
Think through how globality affects willingness to pay
Analyze, in particular, how cross-country (CAGE) heterogeneity in
preferences affects willingness to pay for products on offer
Segment the market appropriately
Improving
Industry
Attractiveness /
Bargaining
Power
Account for international differences in industry profitability
Understand the structural dynamics of your industry
Look broadly at the impact of trends and moves in changing important
elements of industry structure
In particular, think through how you can deescalate/escalate rivalry
Recognize the implications of what you do for rivals’ costs or willingness to
pay for their products (worsening their positions can do as much for added
value as improving your own)
Attend to regulatory/nonmarket restraints—and ethics
Normalizing (or
Optimizing)
Risk
Characterize the extent and key sources of risk in your business (capital
intensity, other irreversibility correlates, demand volatility, etc.)
Assess how much cross border operations reduce or increase risk
Recognize any benefits that might accrue from increasing risk
Consider multiple modes of managing risk or optionality
Generating
Knowledge (and
other Resources
or Capabilities)
Assess how location-specific versus mobile knowledge is, and the implications
for knowledge transfer
Consider multiple modes of generating (and diffusing) knowledge
Think of other resources/capabilities in similar terms
Avoid double-counting
8. 8
1 Pankaj Ghemawat And Jordan I. Siegel, “Cases on Redefining Global Strategy” , (Harvard
Business Review Press, 2011):1-10
2
C. Northcote Parkinson, Parkinson’s Law and Other Studies in Administration (Boston:
Houghton Mifflin, 1956).
3
For more detail about the ADDING value scorecard and its application, see chapter 3 of Pankaj
Ghemawat, Redefining Global Strategy (Boston: Harvard Business School Press, 2007); and for a general
discussion of value creation and capture in a single-country context, see Pankaj Ghemawat, Strategy and
the Business Landscape, 3rd ed. (Upper Saddle River, NJ: Pearson Prentice Hall, 2009).
4
Michael E. Porter, Competitive Strategy (New York: Free Press, 1980).
5
Michael E. Porter, Competitive Advantage (New York: Free Press, 1985); and Adam M.
Brandenburger and Harborne W. Stuart Jr., “Value-Based Business Strategy,” Journal of Economics &
Management Strategy 5, no. 1 (1996): 5–24.
6
Pankaj Ghemawat and Fariborz Ghadar, “Global Integration ≠ Global Concentration,” Industrial
and Corporate Change, August 2006, especially 597–603.