MGT 4394 Ch. 5

Producer surplus

also called profit; difference between price charged (P) and the cost to produce (C) or (P-C)

Balance scorecard

framework to help managers achieve their strategic objectives more effectively; has internal and external performance metrics in order to balance financial and strategic goals

Market capitalization

captures the total dollar market value of a company's total outstanding shares at any given point in time (# outstanding shares * share price)

Opportunity cost

captures the value of the best forgone alternative use of the resources employed

Value

denotes the dollar amount (V) a consumer attaches to a good or service; determined by perceived benefits a good or service provides to the buyer

Economic value created

difference between a buyer's willingness to pay for a product and the firm's total cost to produce it

Profit

difference between price charged (P) and the cost to produce (C) or (P-C); also called producer surplus

Consumer surplus

difference between value a consumer attaches to a good or service (V) and what he or she paid for it (P)

Planet

ecological dimension emphasizes the relationship between business and the natural environment

Profits

economic dimension captures the necessity of businesses to be profitable to survive

Business model

firm's plan that details how it intends to make money

Triple Bottom Line

fundamental to a sustainable strategy; three Ps (profits, people, planet)

Shareholders

individuals or organizations that own one or more shares of stock in a public company -- are the legal owners of public companies

Reservation price

maximum price a consumer is willing to pay based on total perceived consumer benefits

Risk capital

money shareholders provide in return for an equity share, money that they cannot recover if the firm goes bankrupt

Total return to shareholders

return on risk capital, including stock price appreciation plus dividends received over a specific period

People

social dimension emphasizes the people aspect, such as PepsiCo's initiative of the whole person at work

Sustainable strategy

strategy along the economic, social, and ecological dimensions that can be pursued over time without detrimental effects on people or the planet