Operating Profit & Profit Margin of the company in Nakfa Financial Performance Indicators of the firm. Strategies and Objectives of the Company at the Divisional Level What managers do to increase value in Operations of the firm.
Research Topic
Introduction
Keeping the conceptual presentation in mind, managers will be asked using the questionnaire what actions they are taking to increase the value of the company using Rappaport's seven value drivers framework. As part of this the distribution of value created will be discussed under the heading of compensation and communication.
Company Background
Literature Review
The value of the business is the present value of the expected sequence of future cash flows that the business will generate for the owners. Each of the individual value drivers affects one of the three valuation components of 'Cash Flow from Operations', 'Discount rate' and 'Debt', which are ultimately used to derive shareholder value added (SVA) - the sole corporate objective of the strategy presented here.
Motivation of the Study
Research Benefits
This is essential for people to understand value creation and discover how the decisions they make affect the amount of value created.
Objectives of the Study
Research Design
Data Collection Methods
The first objective of the study concerns the recognition of the determinants of the company's value. The third objective is also about what managers are doing to increase the value of the company in the value creation process.
Data Collection Approaches
The second objective relates to how and to what extent the company creates value. Based on the conceptual framework, a questionnaire was distributed to company managers to learn about their efforts to increase company owner value.
Sampling
Moreover, performance indicators are used to see the profitability, asset utilization and efficiency position of the company. The results of the questionnaire are analyzed to see to what extent the efforts of the company managers to increase the value of the company are successful.
Limitations of the Study
Structure of the Study
Introduction
Value and value creation of a company
Although the definition of cash flow described in the last section still applies, these cash flows will be generated by forecasts of profit, net capital expenditure and working capital. One of the most important inputs into any valuation is the expected growth rate of operating income.
Why Focus on Value?
Value Creation and Enhancement Process
Performance measurement
- Options for measuring financial performance
To measure the company's cash flow in one period, we can add these non-cash costs together. This framework clearly includes a link between the value-based measures and the Balanced Scorecard framework, through the financial perspective of the scorecard. The customer perspective of the Balanced Scorecard focuses on how your customers view your company.
The next section of the business plan describes the financial resources needed to run your business and the sources of those funds.
Compensation
These cause-and-effect linkages are a key feature of the balanced scorecard and can be used to embed real understanding of the value drivers throughout the hierarchy. These are some of the questions that should be asked and answered in a value-based management culture. A one size fits all design does nothing to meet the individual needs of employees and misses the opportunity to construct categories or pay package differentiation by group that better meets the needs of both the company and the employee.
According to Knight, senior management will want to start by understanding the principles behind the compensation strategy.
Value communication
One of the success factors necessary for effective communication is how well a leader is educated about and embraces the value concept. Redundancy means incorporating value concepts into as many of the company's activities as possible. Internal communication should begin with each of the key management processes and then extend to operational decision-making.
As business plans are finalized, the iterative communication involved in the planning process should emphasize the value implications of the business plan.
Conclusion
Value drivers help make strategy real at a level of specificity that is both meaningful and actionable. These operational value drivers define the strategy for people in the organization and ultimately lead to behavioral change. From the various performance metrics available, choosing which one is right for your business is an important activity that can make a huge difference in the way decisions are made.
The selected performance measures should provide managers in the organization with guidance and support for good decision-making.
Introduction
Environmental Situation
GDP Growth
The manufacturing sector expanded by about 50 percent from 1993 to 1997, according to rough estimates compiled by the International Monetary Fund. Subsequently, the manufacturing sector was largely stagnant during the war years, and most likely a large percentage of that production was related to the war effort. Although the manufacturing sector accounts for a small percentage of GDP, the Government of Eritrea emphasized its development because it is central to the growth strategy through the export of light, labor-intensive manufacturing.
Inflation
In 1997, the dual exchange rate (the exchange rate of both countries, Eritrea and Ethiopia) was unified and the Central Bank of Eritrea was established. In early 1998, the exchange rate was stable, supported by reserves that reached almost 5 months of imports of goods and services, and 15 foreign exchange bureaus traded foreign currency. During the war, the government kept the nominal exchange rate from falling in line with inflation and the real exchange rate appreciated.
In 2000, foreign currency was rationed, pushing the black market rate to as much as double the official rate.
Company Background
Although hard figures for 2002 inflation are not yet available, it would be surprising if it is not back in double digits given continued high defense spending, slow demobilization progress, financing problems among some donors, and problems at the border with Sudan (Cotton, et al, 2002). Although this gap narrowed significantly for a time in 2001, the currency premium grew again in 2002 and was around 60 to 70 percent in October 2002 (albeit in an admittedly thin and volatile market). Since then, $13 million has been invested in building a completely new bottling plant, making it one of the most modern Coca-Cola factories in Africa.
Recently the company has introduced two new popular products as Krest Soda Water and Krest Tonic Water to increase sales.
Value of the company
Discount rate
This can indicate the efficiency and marketing ability of the company's employees. As shown in Table 3.8, a company creates value when the reinvestment rate is greater than 60%. In other words, EVA is the profit as defined by the company's shareholders.
The company's economic value added for the given years is shown in table 3.10 above.
Introduction
Value creation and enhancement process
Identifying Value Drivers
- Fixed Capital Investment Decisions
Using these strategies can be helpful in increasing the value of the company. Some of the respondents also support a strategy for changing the company's product mix. All these plans are expected to increase the company's sales and profit margin.
Each effort on the seven value drivers positively or negatively affects the value of the company.
Compensation
Indeed this can have a negative impact on employee performance, which ultimately affects the value of the company. Each of the company's employees will be given a gift at the party, regardless of their performance. The sales force will try their hardest to increase sales, which will ultimately increase the value of the company.
In order to further exploit the potential of the company's employees, the incentive of the company should not be limited to money.
Communication
The company sets goals to be achieved and sets strategies to achieve its targeted or spelled out goals. If this is the case, the company management must ensure that the goals and strategies are well understood at all levels of the company's operations. To put it simply, the company must be able to lay a solid communication channels or systems.
Three out of six respondents strongly agree and the remaining three also agree that there is sufficient insight at all levels of the company as to which actions and decisions can influence the value of the company.
Conclusions
What managers are doing to enhance value of the company
It is these drivers that help the company run a successful business in the country. However, from the questionnaire, the respondents rejected using export sales as a strategy to increase the sales of the company. Inventory turnover increases from year to year, which IS a good sign of the company's improved inventory management.
This may be due to the company's inability to adjust the wages and salaries in parallel with the increasing inflation rates.
Recommendations
In addition, the use of publications can have broad coverage to bring other stakeholders to the attention of the company. From the financial data it could be deduced that the company incurs a lot of tax costs. Reducing these costs by using a long-term liability could be a source of creating value for the company.
Therefore, the use of appropriate measurement techniques is recommended in capturing the economics of the company's business.
APPENDICES
Appendix B
QUESTIONNAIRE
What reasons can you give why the company and/or your division is not achieving the set objectives? If your answer to question number 8 is No, please write down the possible reasons why you are not using this option. Value drivers: the driving forces that enable the company to be successful; For example: (a) The organization has a focus on continuous improvement. b) The organization has effective cost management processes).
At every level of the organization there is sufficient insight into how actions and decisions influence the value of the company.
Thank you for completing this questionnaire
