Search Results

The value management approach provides organizations seeking an IT-leveraged path to competitiveness with a model to help identify improvements in customer-focused processes. It begins by understanding business objectives and value. Next, it reviews the business process changes necessary to obtain the business value. Finally, the information technologies necessary to change the business process that will bring the business value are defined.

This chapter describes the three traditional methods of valuing a business: the market approach, asset approach and income approach. For each, he describes a valuation principle and an underlying mathematical equation. The author describes the income or “discounted cash flow” approach is a workhorse of practical valuation. He observes the heavy reliance on subjective adjustments in actual use of this approach, which he argues supports the critique of the net present value rule and the weakness of this and other approaches in which subjective judgment, rather than actual use of a method, is the dominant factor. Finally, two of these traditional approaches are used to value three example firms, with the weaknesses in certain methods and the dominance of subjective adjustments made apparent.

This chapter presents the theory behind the novel value functional method. This includes the importance of the definition of the firm introduced in this book, which includes separation, replicable business practices, and an objective of the firm that is not restricted to profit maximization, the maximization of value, rather than profit, a whirlwind introduction to control theory, and the distinction between the familiar concept of a function and the obscure notion of a functional. The author then presents a functional equation (or Bellman equation) that relates the value of a firm to specific optimization by the manager or entrepreneur. This theory is the basis for the tenth approach to valuation described in this book: the “recursive” or “value functional” approach. The author concludes by proposing conditions for the existence of a solution to the value functional equation for actual firms, basing these in human transversality conditions that he outlines.

This chapter demonstrates practical uses of the value functional approach in the estimation of the value of operating businesses. It includes a detailed discussion of state and control variables, a presentation of four different ways to formulate and solve a value functional problem, including dynamic programming (also called “stochastic control”), Markov Decision Problem (“MDP”), Hamilton-Jacobi-Bellman (“HJB”) method, and “by hand.” The author also presents computational designs for these methods, and observations on the practical difficulties of using them. Finally, the author demonstrates the use of this approach on three actual companies. This allows the reader to see the difference in results (and of the necessity for subjective adjustments) among the value functional and other valuation methods described in this book.

This chapter presents the available information on the number of businesses in the United States, and the number by size class, the share that fulfill a common definition of “small” business, and the data on survivorship rates for newly-established businesses in multiple countries. It critically examines the stylized facts about such businesses in the United States. Finally, it provides updated data on the value of privately-held businesses in the U.S., following the methodology of Anderson (2009). Those data suggest that equity in privately held firms form a larger share of household assets than stocks in publicly-traded firms among U.S. households.

The author argues that start-up firms, distressed firms, and near-bankrupt firms are the exception, not the rule, in the modern economy. This raises the question of whether such firms, which are commonly small and financed largely by the entrepreneurs involved, have value. The chapter also discusses the applicability of traditional valuation methods for such firms, compared with the novel value functional or recursive method. The author concludes that, when properly evaluated, start-ups and distressed firms do have value.

This chapter begins with a discussion of Japanese business and social values. It then describes how Zen combines some of the best elements of two ideal, yet seemingly contradictory, forms of behavior in medieval Japan—the Warrior and the Hermit—which can be effectively applied to contemporary affairs. This is followed by a discussion of the Unmoving Mind, which is characterized by a firmness and lack of vacillation that derives from confidence and inner strength.

This chapter explores the moral and ethical dimensions of Indian corporate life. Adopting a historical approach, the links between prevailing models and the differentials in pre-colonial and postcolonial socio-cultural and business scenarios are identified. In particular, the greed-based management model is critically examined. An inspiration-based management model rooted in the indigenous Indian thought and cultural practices, which impress upon a deep sense of morality is advanced. The potential for such an approach is substantiated with the help of instances of contemporary business leaders who developed their enterprises on the same value system. Such cases are deliberated and their implications for current practices are indicated. Interventions are becoming necessary in contemporary business world where malpractices are increasing. Taking a historical route, the chapter also analyses the complexities of current corporate scandals across the world. Finally, the implications for strengthening the moral order in organizational behaviour are highlighted.