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The Link Between Company Value And Competitive Advantage

The Link Between Company Value And Competitive Advantage. Donald C. Collier, CEO. PeerValue. . Providing corporate managers and stakeholders with advanced competitive analysis and financial bench marking services for business optimization, performance measurement, and reporting.

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The Link Between Company Value And Competitive Advantage

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  1. The Link Between Company Value And Competitive Advantage Donald C. Collier, CEO PeerValue

  2. . Providing corporate managers and stakeholders with advanced competitive analysis and financial bench marking services for business optimization, performance measurement, and reporting. ProLytiX = Professional + Analytics PeerValue

  3. Back To The Basics • “This is a football…” PeerValue

  4. Equity Investment 101 • The ultimate measure of a Corporation’s value is it’s stock price. • Stock price = investors seeking best risk-adjusted return on their money. • The process is inherently Darwinian… • Poor investors lose their capital. • Good investors increase their capital. PeerValue

  5. Reaping And Sowing • Most defining characteristic of a good investment = competitive advantage. • Competitive advantage predicts future earnings and a healthy stock price. • Capital flows toward competitive advantage and abandons competitive disadvantage. PeerValue

  6. Competitive Advantage Determines... • Which markets should we attack? • Which strategies should we pursue? • Which partners should we endorse? • Which tactics should we execute? • Which businesses should we abandon? • Interestingly, investors will let you know over time which directions make sense. PeerValue

  7. Foundational Principle • To win, you must know what is “Core” and what is “Context”for your business. • “Core” tasks directly affect your competitive position in target markets. • Assign your “A” team to these. • “Context” tasks represent the overwhelming bulk of activities • Outsource & minimize focus PeerValue

  8. Real-life Examples • Round Table Pizza = Quality ingredients • Domino’s Pizza = Delivery time • Chuck E. Cheeze Pizza = Entertainment PeerValue

  9. Real-life Examples (Cont’d) • Semiconductors • Fab = Foundary and process is core • Fabless = Intellectual property and design expertise is core…tools, IT, process is context. PeerValue

  10. Avoiding The Trap • Don’t stick with outdated core/context paradigms…Continually re-purpose resources, or lose competitive advantage. • How do you think startups pick off legacy companies in their own target markets? PeerValue

  11. 2 Questions To Ask • “If maintaining certain in-house resources can’t improve our stock price, why are we worrying about them?” • “Why not let someone else, whose stock price depends on excelling in this area, do our worrying for us?” • “Its Core for them and Context for us.” PeerValue

  12. Competitive Rating System • Define which metrics best reflect your company’s core activities? • Gather the same metrics on your competitors/peers. • Regularly measure, compare, and communicate results to those who are in a position to do something about it. PeerValue

  13. Closing The Loop • Management compensation should be directly linked to competitive advantage • If investors tell a company what it is worth by its stock price… • …then a company should tell management what it is worth by its paycheck…”nothing focuses the mind like self-interest.” PeerValue

  14. Top Concerns Of CFO’s • “Re-engineering the planning and budgeting process. Companies and CFO’s spend too much time being internally focused when they should be looking at their competitors and the marketplace. How can they make the process more efficient?” __________CFO Magazine PeerValue

  15. Sample Rating System-Financial • Return on sales (EBIT/Sales) • Profit growth (historical & projected by analysts) • Asset efficiency (assets-cash-payables/sales) • Market value/sales (reflects the street’s expectations) PeerValue

  16. Sample Rating System-Strategic • Measures how well your business model will protect your profit stream in future. • Strategic control index • similar to “balanced scorecard” PeerValue

  17. PeerValue

  18. Global Perspective “So it is said that if you know others and know yourself, you will not be imperiled in a hundred battles; if you do not know others but know yourself, you will win one and lose one; if you do not know others and do not know yourself, you will be imperiled in every single battle.” _______________Sun Tzu, “The Art Of War.” PeerValue

  19. Competitive Context • Placing the planning process within a competitive context...  Benchmarking your organization against best-of-breed competitors.  Analyzing the overall economics of your industry to formulate a winning business model. PeerValue

  20. Proprietary Divisional Analysis PeerValue

  21. What You Will Know • Prevailing economics and trends of your business sector as a whole • The key ratios for your competitors and “best-of-breed” subgroups • Where your company ranks now--who is gaining ground? Who is losing ground? • What it will take to be successful PeerValue

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