Business as War

Graduate School Business School - MBA
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<p>
[quote]
Sorry, I need to clarify...my investments are not in the stock market. They are small private equity investments.

[/quote]

So you're essentially doing angel stuff, or do you pool your money?

[quote]
Since you do not agree with me or my level of credibility, I went ahead and googled "maximize shareholder wealth"...the first google result is the following powerpoint...I think you might find it interesting since there's a "Dr." in front of the guys name who wrote it.

[/quote]

Nothing you quoted has to do with market conflicts or strategies.</p>

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<p>
[QUOTE]
Nothing you quoted has to do with market conflicts or strategies.

[/QUOTE]
</p>

<p>The goals of the firm determine the strategies it uses to achieve them...think big picture before you think little picture.</p>

<p>Please pay close attention to these:
**
The Goal of the Firm
The shareholders wealth maximization goal states that management should seek to maximize the present value of the expected future returns to the owners of the firm.</p>

<p>To maximize shareholders wealth--shareholders wealth is represented by the market price of a firm’s common stock</p>

<p>1) Goal of financial management</p>

<p>Is not maximization of EPS
Is not maximization of profits
Is not maximization of Sales</p>

<p>2) Maximize Economic Value Added (EVA)**</p>

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<p>By the way... here are two links that go into a little depth on EVA...</p>

<p>[Valuation[/url</a>]</p>

<p>[url=<a href="http://www.12manage.com/methods_eva.html%5DEconomic"&gt;http://www.12manage.com/methods_eva.html]Economic&lt;/a> Value Added (EVA)](<a href="http://pages.stern.nyu.edu/%7Eadamodar/New_Home_Page/lectures/eva.html%5DValuation%5B/url"&gt;http://pages.stern.nyu.edu/~adamodar/New_Home_Page/lectures/eva.html)&lt;/p>

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<p>
[quote]
The goals of the firm determine the strategies it uses to achieve them...think big picture before you think little picture.

[/quote]

I am capable of reading. The argument on the preceding page was unless the goal is to actively engage competition the process of engaging competition is rarely the best way to increase shareholder wealth. What you've been quoting doesn't say "war" is the best way to increase shareholder wealth (and if it did claim that it sure would be interesting, as the last 60 years or so since the great depression has been dedicated to study of this topic and it has only resulted in the creation of a multitude of models and theories), and from what I read of it that isn't even mentioned. You're extrapolating from what was written when there is nothing to justify that extrapolation. I'm not seeing how you're drawing any conclusions from that paper relating back to the argument on whether hostilities with another company is a coherent and effective wealth building mechanism.</p>

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<p>
[QUOTE]
The argument on the preceding page was unless the goal is to actively engage competition the process of engaging competition is rarely the best way to increase shareholder wealth.

[/QUOTE]
</p>

<p>Where did I say actively engaging competition was the goal???</p>

<p>This is what I said...</p>

<p>
[QUOTE]
Vector, business is not about growing your profits...business is about maximizing value to the firms shareholders. As such, businesses are always taking the initiative to gain market share when possible.

[/QUOTE]
</p>

<p>The initiative to gain market share when possible I mention is just one possible way of achieving an increase in shareholder wealth. By no means did I mean to imply that it was the only way or that it was the best way. I said this in the context of responding to Vector's post regarding pepsi/coke living happily ever after.</p>

<p>I think there's a misunderstanding with what you think I'm trying to portray. I'm not sure how I can make my stance any more clear. When I say, "When possible", it's assuming you have a rational opportunity to directly take on a competitor and gain market share. Typically, increased market share also increases EVA and shareholder wealth. </p>

<p>
[QUOTE]
What you've been quoting doesn't say "war" is the best way to increase shareholder wealth

[/QUOTE]
</p>

<p>I wasn't trying to prove that price wars or eliminating competition were the best way to increase shareholder wealth. I'm simply saying they are options on the table which can be used to gain competitive advantage and add value for shareholders. The gist of what I'm saying is that if you can strategically take advantage of a competitor and it financially/fundamentally makes sense to do so, you do it. Hopefully this clears up some apparent confusion.</p>

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<p>by the way... just for general reference... quickly browsing through the link i posted...theres a ton of cool/useful information on that page...it belongs to professor Damodaran of NYU Stern</p>

<p>Damodaran</a> home page</p>

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<p>
[quote]
The initiative to gain market share when possible I mention is just one possible way of achieving an increase in shareholder wealth. By no means did I mean to imply that it was the only way or that it was the best way. I said this in the context of responding to Vector's post regarding pepsi/coke living happily ever after.</p>

<p>I think there's a misunderstanding with what you think I'm trying to portray. I'm not sure how I can make my stance any more clear. When I say, "When possible", it's assuming you have a rational opportunity to directly take on a competitor and gain market share. Typically, increased market share also increases EVA and shareholder wealth.

[/quote]

The best way to gain market share is to increase the size of the market. I understand what you're saying, but even industries that reached a saturation point and started jockeying for position (oil) started to see growth (increased demand in current markets, rise of China and India) when it was unexpected by analysts and commentators.</p>

<p>When I say "war" I don't mean a price war either, a price war is generally the last resort unless price reductions are a selling point of one of the businesses involved in the hypothetical situation (etailers are the most recent example I can think of). Whatever was being referenced in the OP has more to do with less than savory tactics, not price wars.</p>

<p>Of course there are a multitude of options, but I also noticed you nonchalantly threw aside the idea of customer service. From a corporate standpoint, investments in CS infrastructure are proving to become vital amongst some of the larger industries that haven't been able to find ways (sometimes due solely to saturation) to grow markets, like b&m retail and telecommunications. The cost of gaining a new customer in the cellphone industry iirc from some analytics that are a few years old was estimated to be ~$300. Even if you consider that a cost of doing business, CSR issues have (and are) resulting in legislation and regulation, which is incredibly costly.</p>

<p>Dell reached a point of no growth not that long ago, and probably their single most successful initiative was an overhaul of their customer service infrastructure on their website. They're still in trouble, but direct response seemed to quiet the "Dell sucks" choir for a time, which helped sales.</p>

<p>Adobe has been experiencing rapid growth but restrictive DRM is starting to turn people away from them, and incompetent customer service (something they were never known for) is resulting in ire from early adopters--which is a tremendous problem for a company that survives by releasing updated versions of the same thing over and over again to the same people. It never hurts to be customer-centric, even if it is a ******** facade.</p>