Академический Документы
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3 Shareholder Value
Business Strategy
4 External Environment
5 Internal Environment
6 Competitive Positioning
Corporate Strategy
7 Diversification
8 Mergers & Acquisitions
9 Global Strategy
Strategy Process
10 Organizational Structure and Control
11 Strategic Leadership
© 2007 Prof. Dr. Bernd Venohr 2
Agenda
Introduction to Strategy
3 Shareholder Value
- Summary
3 Shareholder Value
Strategy Process
Organizational
10 Structure and
Control
Strategic
11 Leadership
© 2007 Prof. Dr. Bernd Venohr 4
Agenda
Introduction to Strategy
3 Shareholder Value
- Summary
Total Shareholder
Shareholder
CORPORATE Return
Value Added
OBJECTIVE - Dividends
(SVA)
- Capital gains
KEY - Working
- Sales growth
VALUE capital
Value growth - Operating Cost of
DRIVERS investments
duration profit margin capital
- Fixed capital
- Income tax rate
investments
KEY
MANAGEMENT
DECISIONS Operating Investment Financing
Source: Alfred Rappaport; Creating Shareholder Value, The Free Press 1998
© 2007 Prof. Dr. Bernd Venohr 8
Need for link between stock market (shareholder value) and
strategy (competitive advantage)
The shareholder approach: firm exists to maximize the wealth of its owners.
– to replace assets, firm must earn return on capital > cost of capital
– to avoid acquisition, firm must achieve stock-market value > break-up value
Source: Michael Porter; Sybille Sachs, Der strategische Managementansatz “Stakeholder View”;
Robert M. Grant, Contemporary Strategy Analysis: Concepts, Techniques, Applications (5th edition, Blackwell, 2004)
© 2007 Prof. Dr. Bernd Venohr 11
Financial Indicators
Future
Source: Accenture, Value Creation III
© 2007 Prof. Dr. Bernd Venohr 12
The spread of economic return over economic
cost of capital drives shareholder value-creation:
US industries 2004
2.0X Luxury goods
R2 = 78%
Pharma
1.9X
Telecom equipment
1.8X Medical
technology
Business
1.6X Media serv ices
Consumer
products
Market Value / 1.4X Semiconductors Bev erages Robell
Book Value*
1.2X
Market ex-financials
1.0X Leisure
Capital goods
0.8X Tele-
com
Transportation Aerospace
0.6X Paper
0.2X
0.0X
0.0X 0.2X 0.4X 0.6X 0.8X 1.0X 1.2X 1.4X 1.6X 1.8X 2.0X
ROIC / WACC
Source: Goldman Sachs Global Equity Research, September 11, 2003 , page 15 *EV / GCI **CROCI / WACC
1.2X 2001
1997
Market Value / 1.0X 2002
Book Value*
1996 2003E
0.8X 1995
2004E
0.4X
0.2X
0.0X
Source: Goldman Sachs Global Equity Research, September 11, 2003 , page 19 *EV / GCI **CROCI / WACC
© 2007 Prof. Dr. Bernd Venohr 14
TRS – Basic: Simple example to calculate average annual
total shareholder return
^(1/n) ^(1/3)
Ending Stock Price + Accumulated Dividends $70+$3
-1 = -1 = 13.4%
Beginning Stock Price $50
^(1/n) ^(1/4)
Ending Stock Price + Accumulated Dividends 44,61+4,70
-1 = -1 = -1,55%
Beginning Stock Price 52,50
Organic
Growth
Growth
Growth
through M&A
Organic
Growth
Growth
Growth
through M&A
NOPLAT
ROIC =
Invested Capital
Capital provided by
debt and equity
investors
Total revenues
- Cost of goods sold
- Selling, general and administration expenses
- Depreciation expense
- Other operating expenses
Reported EBIT
- Taxes on EBIT
NOPLAT
Assets Liabilities
Current Assets Current non-interest bearing liabilities
1 3
2 4
Invested Capital ≈ 1 - 3 + 2 = 4
Working Capital
Source: Accenture, Value Creation III
© 2007 Prof. Dr. Bernd Venohr 21
Example Volkswagen Calculation of NOPLAT 2005
2005 in € million
NOPAT
3.000
2.500
2.000
1.500
1.000
500
0
2001 2002 2003 2004 2005
Where
Invested? Where From?
Assets Total current assets 57.846
(€ Million) 75.235
Total non-current assets
Invested Capital
100.000
80.000
60.000
40.000
20.000
0
2001 2002 2003 2004 2005
ROIC
5,00%
4,00%
3,00%
2,00%
1,00%
0,00%
2001 2002 2003 2004 2005
ROIC 3,92% 4,01% 1,31% 1,98% 1,97%
Organic
Growth
Growth
Growth
through M&A
Operating Capital
Margin Utilization
Source: Accenture, Value Creation III
© 2007 Prof. Dr. Bernd Venohr 29
ROIC can be further broken down into a tree format
to gain insight concerning a companies value drivers
describing how a company creates shareholder value
ROIC tree ILLUSTRATIVE
EBITA/
Revenues SG&A/ Revenues
15.0% 28.8%
Depreciation/
Revenues
3.5%
Pretax ROIC X
32.9%
Working Capital/
Revenues
14.0%
ROIC X
23.2% Revenues/ Net PP&E/
1- Invested Capital Revenues
2.18 38.5%
Cash tax rate
on EBITA
29.0% Capital Other Assets/
Revenues
Utilization -6.7%
Research
Marketing
Business and Deve- Mergers and
Pipeline and Sales
Mix lopment Acquisitions
Capabilities
Capabilities
Geographic
Focus
Key is linking financial and strategic value drivers to the operational level
and specific decisions of front-line managers
Source: Alfred Rappaport, Creating Shareholder Value, page 50 – 77, Timothy Koller, What is value-based management?
© 2007 Prof. Dr. Bernd Venohr 33
Spread – Weighted Average Cost of Capital
Value creation roadmap
Operating
Return on Margin
Invested
Capital (ROIC) Capital
Efficiency
Spread –
Weighted
Average Cost
of Capital
(WACC)
Total Return
Value
to Share-
Creation
holders (TRS)
Organic
Growth
Growth
Growth
through M&A
WACC
+ Weighted
Weighted
cost of
cost of debt
equity
Kd* D E
X Ke X
(1-t) D+E D+E
Market value Market value
of debt of equity
After tax cost
Market value Cost of equity Market value
of debt of debt and of debt and
equity equity
WACC
6,00%
4,00%
2,00%
0,00%
2001 2002 2003 2004 2005
ROIC
Spread –
WACC
1,97 %
-1,29 % –
3,26 %
RIOC - WACC
0,00%
-0,50%
-1,00%
-1,50%
-2,00%
-2,50%
2001 2002 2003 2004 2005
^(1/n) ^(1/4)
Ending Stock Price + Accumulated Dividends 44,61+4,70
-1 = -1 = -1,55%
Beginning Stock Price 52,50
23.647
17.781
?
Market value VW Equity stated in
shares 2005 Balance Sheet
2005
12/2005 : € 44,61
vs.
12/2006: € 90,70
Organic
Growth
Growth
Growth
through M&A
- Summary
- Summary
– what kind of internal shareholder value creation measure is your company using?
Economic profit ambiguous goal (total profit vs. rate of profit; over what
time period?)
Ke = rf + (rm – rf) * ß