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
