The ultimate indicator of the value of a firm, the market price or the stock price, is being affected much less by the earnings or the asset base of the company. Rather, value creation in today’s company is being increasingly represented by intangible factors like innovation, human capital, ideas, brands, corporate social responsibility initiatives, customer relations, technology, management capabilities and others (Creating Value, n.d.).
To provide vision, mission and objectives and ethical position: At the very outset, the leader has to enumerate the purpose of the company’s existence. It is the vision statement. It may also be referred as the dream of a company. The next step is to describe the mission statement. The mission statement deals with the ways to deal with the vision. In other words, it says about the path to achieve those dreams. The objective of a company describes the immediate steps that are to be taken to achieve the vision and the mission. Ethical position implies that the company should have certain social bindings and should not forego its moral nature for the purpose of its profit.
Portfolio Management: The ultimate objective of any company is to earn profit. For the purpose, the company must invest in those sectors or fields which it thinks would generate more profit. Since we know that resources are scarce, so the management must take utmost care to fix proper allocation of resources for the generation of higher revenue. The portfolio of the company must be guided by financial indicators like ROCE (Return on Capital Employed). Where,
ROCE = Profit before Interest and Tax / Capital Employed
The company should essentially invest only in the fields where the ROCE is above the WACC (Weighted Average Cost of Capital), otherwise, it cannot generate revenue.
Managing the Strategic Value Drivers: It is said there are three strategic value drivers. Namely,
Quality and Differentiation – The company must have a differentiated product from its competitors in the industry. Also, it should be qualitatively superior. It is very tough to get into the mind of the market i.e. potential customers, if the company does not meet the basic requirements.
Cost – As the saying goes, a penny saved is a penny earned. The cost for the company should be kept as minimum as possible. All the major business leaders are following this principle with due diligence.
Intellectual Property – Of late, this value driver has been recognised. As we know, intellectual property deals with the rights on patent, trademark, copyrights, etc, so the management of the company should understand how crucial this value driver is. This could be a source of long term benefit.
Role of Business Leader Visible in the Proposed