Introduction: Creating and Measuring Value
At the macro level, creating value requires organizing land, labor, and capital in ways that provide goods or services that markets value. The extent to which markets value goods or services is expressed through the relationship of price and demand volume. At the firm level, value creation is expressed as the residual amounts remaining after payments have been made for the factors of production used to provide those goods or services. Firms that are capable of providing goods or services while maintaining higher residual amounts are deemed to have competitive advantage. Those firms that are unable to pay for the factors of production and still retain funds for future development will eventually exhaust their capital and disappear. The measurement of value creation, at its basis, is the measurement of returns to the factors of production and to those with stakes in the firm’s performance.
Discussion 1:
Creating Value
After reading and reflecting on this week’s articles and your own research, discuss the roles of human resources, capital, entrepreneurship, and other stakeholders in creating value. Consider the importance of each and the tensions that arise in the distribution of value.
Discussion 2:
Measures of Value
Drawing on your readings throughout this course, discuss the pertinent measures of value and the insights they provide. How might investors’, employers’, management’s, and society’s assessments and perspectives align or differ?