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Strategy and Marketing Strategy Introduction Concepts

Autor:   •  October 7, 2017  •  2,310 Words (10 Pages)  •  324 Views

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by all the companies that are willingness to advertise themselves;

- all internet users

The needs required are quick, effective, efficient search; visibility, spreading information.

COMPETITIVE ADVANTAGE

The competitive advantage is the reason why customers turn to one company to over another. It could be based on:

value differentials: the company’s products and services have an higher value perceived by customers and, thus, they can be sold at higher prices;

cost differentials (price differentials): the company has a lower cost structure compared to competitors and, thus, can offer lower prices.

The competitive advantage has to be:

durable: i.e. lasts over the long term;

defensible: i.e. cannot be easily achieved, imitated by competitors.

A company can mix these two strategies. There is also a third differential: innovation differential. For instance Apple made, with the i-pad, the competition irrilevant. In some case the company can create something new, innovative that it’s not based on cost.

If one company hasn’t a competitive advantage is poor in performance. Most often lack of performance is due to lack of value proposition and focus on the objective, also the main idea has to be strong and not weak. To improve the situation it could be useful carry out a SWOT analysis focusing on the goal/objective.

ECONOMIC VALUE

A company is a entity in which you can see input used in order to produce output or services. In order to do that are used human, technological and financial resources:

The first objective of the company is the ECONOMIC VALUE. This value has changed from the past and it’s an abstract value that goes beyond the sales (value=\turnovers). The companies present their performances through some documents in order to make clear how the company operates and how it is composed.

There are two main actors:

shareholders: they invest/risk money in the company;

stakeholder: they stake/interest in the company (government, customers…).

The economic perspective is strictly related to the balance sheet that represent a statement of financial position. For instance amortization explain the value of an asset concerning a period of time. The balance sheet force to consider this operation. All cost that are determined a cash in/out flow are considered on financial statement.

Balance sheet:

where:

liabilities is defined as an obligation, debt, of an entity arising from past transactions or events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future;

equity are the sources given from the stakeholder. It is the residual value or interest of the most junior class of investors in assets, after all liabilities are paid; if liability exceeds assets, negative equity exists;

Assets are things that a company owns and are sometimes referred to as the resources of the company. The assets have to be divided into current and non-current. A current asset is any asset reasonably expected to be sold, consumed, or exhausted through the normal operations of a business within the current fiscal year or operating cycle (whichever period is longer). Typical current assets include cash, cash equivalents, short-term investments, accounts receivable, stock inventory and the portion of prepaid liabilities which will be paid within a year. Fixed assets, non-current asset also known as "tangible assets" or property, plant, and equipment, is a term used in accounting for assets and property that cannot easily be converted into cash.

Income statement or profit and loss account is one of the financial statements of a company and shows the company’s revenues and expenses during a particular period. It indicates how the revenues are transformed into the net income. It gives a clear situation in what happen in the core business. The first part of it tells which is the core business. There is also a taxation part and other activities, financial (taxes), extraordinary activities etc..

When we speak of financial value, shareholder’s value we have to consider time and risk. These are the two main variables from an equity perspective, from someone who invested in. The company objective is to create value for the shareholders.

where:

NCFt is the Net cash flow at year t for the shareholder (which is equal to dividends + buybacks – capital injection);

Re is the cost of equity capital; the opportunity to have a return is not sure and operating like this you lose the opportunity to invest in a different business. The risk is defined as an opportunity cost.

The shareholder’s value depends on the firm’s ability to generate free cash flow, i.e. cash exceeding the investment needs of the company. Money now is better than money tomorrow.

THE FREE CASH FOW

Free cash flow (C) is measured as:

EBIT + depreciation & amortisation

taxes

investment in fixed capital

changes in working capital

The free cash flow (C) measures what is available for distribution among all the securities holders of a corporate entity including equity holders and debt holders.

THE ENTERPRISE VALUE

The value of an enterprise (EV) is the sum of its free cash flow (C) is the sum of its free cash flow (C) in each year t, discounted at the enterprise’s cost of capital (r):

The relevant cost of capital is the

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