Economic Profit and Firm Objectives

Global strategy = Creating standardized goods for a single marketplace Transnational strategy = Combining global efficiencies with local responsiveness Cost leadership strategy = Competing based on the lowest costs in the industry Differentiation strategy = Offering unique products valued by customers

Internal growth = Investing in one's own structure for production capacity Mergers and acquisitions = Purchasing another firm completely or partially Strategic alliances = Establishing stable agreements between independent firms External growth = Gaining new size by outside means or partnerships

Creativity = Combining ideas in a unique way Innovation = Turning creative ideas into useful products Idea generation = The process of generating new ideas Innovation implementation = Applying creativity to develop new processes

<p>Product innovations = Changes embodied in goods or services Process innovations = Innovations in business conduct Radical innovation = Very new and different solutions Incremental innovation = Minor changes from existing practices</p> Signup and view all the answers

<p>Structure = The arrangement of an organization's hierarchy Culture = Shared values and beliefs within an organization Human resource practices = Policies affecting employee management Market conditions = External factors influencing business operations</p> Signup and view all the answers

<p>Idea generation capability = Ability to generate new ideas Implementation focus = Turning ideas into useful products Risk-taking culture = Embracing uncertainty for innovation Customer engagement = Involving customers in product development</p> Signup and view all the answers

<p>Cost leadership = Lowest production costs Differentiation = Unique product offerings Focus strategy = Targeting specific market segments Market share strategy = Increasing overall market presence</p> Signup and view all the answers

<p>Global strategy = Single marketplace focus Transnational strategy = Balance between global and local needs Cost leadership strategy = Lowest industry costs Differentiation strategy = Distinctive product features</p> Signup and view all the answers

<p>Accounting Profit = Difference between income generated and costs incurred Economic Profit = Reflects the ability to generate future profit Social Responsibility = Management's obligation to improve society’s welfare Profitability = Comparison of accounting profit against financial indicators</p> Signup and view all the answers

<p>Return on Equity = Measure of profitability relative to shareholder equity Return on Assets = Measure of profitability relative to total assets Dividends = Payments made to shareholders from profit Equity Market Value = Valuation of a company's equity in the market</p> Signup and view all the answers

<p>Accounting Profit = Imprecise and relative concept Economic Profit = Accounts for risk Shareholder Profitability = Comparison across similar companies Maximization = Objective of increasing value for shareholders</p> Signup and view all the answers

<p>Classical View = Focuses solely on maximizing profits Socioeconomic View = Includes societal welfare improvements Stakeholder Theory = Considers interests of all parties affected by a firm Corporate Social Responsibility = Efforts to encourage sustainable business practices</p> Signup and view all the answers

<p>EPt = Economic Profit for a specific period EMVt = Equity Market Value at the end of period t EMVt-1 = Equity Market Value at the beginning of period t DIVt = Dividends issued during period t</p> Signup and view all the answers

<p>Accounting Profit = Measure of past results Economic Profit = Calculated externally by the market Profitability Measurement = Relative comparison Maximization Concept = Associated risks not accounted for</p> Signup and view all the answers

<p>Return on Equity = Evaluates firm’s ability to generate profit from shareholders' investments Return on Assets = Indicates efficiency in using assets to generate profits Dividends Yield = Shows returns for shareholders as a percentage of their investment Market Capitalization = Total market value of a company's outstanding shares</p> Signup and view all the answers

<p>Maximization of Accounting Profit = Focus on immediate financial gain Value Creation for Shareholders = Increasing share value beyond competition Sustainability = Management of resources for future profit Shareholder Return = Measures total returns to shareholders over time</p> Signup and view all the answers

<p>Organizational stakeholders = Focus on fair treatment of customers, employees, and investors Natural environment = Responsible management of pollution and ecological impacts General social welfare = Financial contributions to charities and public health Sustainability = Meeting present needs while preserving for future generations</p> Signup and view all the answers

<p>Ethics = Personal beliefs about right and wrong Ethical behavior = Conformance to accepted social norms Managerial ethics = Behavior standards guiding individual managers Code of ethics = Formal statement of organizational values and rules</p> Signup and view all the answers

<p>Corporate strategy = Decision-making about business identification and growth Competitive strategy = Determining how to compete effectively Functional strategy = Focus on efficiency within functional areas Mission = Statement defining an organization's purpose</p> Signup and view all the answers

<p>Strengths = Valuable resources and capabilities of the firm Weaknesses = Lack of resources or poor performance areas Opportunities = Positive trends in the external environment Threats = Negative trends in the external environment</p> Signup and view all the answers

<p>Backward vertical integration = Becoming its own supplier Forward vertical integration = Becoming its own distributor Advantages of vertical integration = Coordination and quality control Disadvantages of vertical integration = High costs and inflexibility</p> Signup and view all the answers

<p>Related diversification = Entering related industries Unrelated diversification = Moving into different businesses Specialization = Focusing on a primary line of business Financial reasons = Pursuing diversification to increase profitability</p> Signup and view all the answers

<p>Corporate strategy = Identifying business sectors for operations Competitive strategy = Gaining competitive advantage Functional strategy = Improving efficiency in specific areas Geographical scope = Physical spread of the firm's operations</p> Signup and view all the answers

<p>How an organization treats its employees = Policies on hiring and wages How employees treat the organization = Confidentiality and conflicts of interest How employees handle customers = Advertising and financial disclosures How employees interact with competitors = Bargaining and negotiation practices</p> Signup and view all the answers

<p>Vertical integration strategy = Augmenting vertical scope in production Specialization strategy = Increasing primary business offerings Internationalization strategy = Expanding into new countries Horizontal scope = Variety of products offered by a firm</p> Signup and view all the answers

<p>Sustainability = Balancing current and future needs Triple bottom line = Assessing performance on social, environmental, and financial criteria Economic activities = Activities that serve present population needs Long-term goals = Pursuit of societal benefits beyond legal requirements</p> Signup and view all the answers

<p>Strategic planning = Setting long-term goals Implementation = Executing the strategic plans Evaluation = Assessing the efficacy of strategies SWOT analysis = Identifying strengths, weaknesses, opportunities, and threats</p> Signup and view all the answers

<p>Treating customers fairly = Charging fair prices and respecting warranties Honesty = Providing accurate and complete information Respecting employee dignity = Creating a fair workplace climate Promoting public health = Contributions to health organizations</p> Signup and view all the answers

<p>Employees treating organization = Honesty and conflict of interest Organization treating employees = Wages and working conditions Employees treating customers = Advertising ethics Organization treating suppliers = Financial disclosures and negotiations</p> Signup and view all the answers

<p>Customers = Fair pricing and respect for warranties Employees = Involving them in decision-making Investors = Transparency in financial practices Natural environment = Reducing harmful emissions</p> Signup and view all the answers