Behaviour of divisional senior executives, Strategic Management

Assignment Help:

Q. Behaviour of divisional senior executives?

EVA can affect the behaviour of divisional senior executives in the following ways.

1.  They would concentrate their investment decisions on maximising shareholder value or financial wealth of their shareholders.

2.  They would concentrate on the maximisation of cash or contribution which is more likely to maximise shareholder value e.g. EVA cannot be manipulated by a manager's choice over the accounting policies they might use.

3.  They would focus on long-term decisions as opposed to short-term decisions e.g. with relative measures like return on investment (ROI) often new investments deliver low profit and have high accounting book values in the early years. This often discourages managers in the short-term from undertaking investment due to a low ROI.

4.  Because a finance charge is applied against the replacement cost of assets, it forces managers to use and invest in assets more efficiently.

5.  EVA will not discourage expenditure on long-term assets building for the future such as marketing or research and development.  This is because these items will not be deducted entirely when arriving at economic profit, instead amortised over the period of the expenditures useful economic life.  This would lead to perhaps greater EVA when compared to the measure of accounting profit.  With accounting profit it is more likely the entire cost would be deducted and therefore could deter a manager if assessed on accounting measures such as residual income or return on investment.


Related Discussions:- Behaviour of divisional senior executives

Discuss the different conflict handling strategies, ZEZ Company is in the b...

ZEZ Company is in the business of designing and printing bottle labels for soft drinks distributors. The company is, at present, facing very difficult times as recessionary economi

Importance of strategic management , Discuss What is the importance of stra...

Discuss What is the importance of strategic management towards the success of a business? Ans) Strategic management used to play a dissimilar after the Second World War. Strateg

strategy options for an organization, a) Use modelling tools to make strat...

a) Use modelling tools to make strategy options for an organization. b) Make a comparative understanding of activity from organizations in the market. c) Make options to form the

Describe packaging or labelling features, 1. Describe the brand you will es...

1. Describe the brand you will establish across as many dimensions as you think are relevant 2. What will your brand association be?  i.e.  what is the one thing, above al

Explain the importance of strategy development, Question 1: Custom Wine...

Question 1: Custom Wine Colorado Glasses of Leadville, Colorado, has just collected data from 75 defects from the day's production. a) As quality expert, you decide to con

Evaluate the organisation''s strategic planning processes, Undertake the fo...

Undertake the following tasks : 1. Develop a position paper for enhancing the organisation's strategic capability by influencing the strategy in action. 2. Evaluate the organ

Fixing the knowledge gap, Fixing the Knowledge Gap: Planning  Now com...

Fixing the Knowledge Gap: Planning  Now commence the 'Fixing knowledge gap' phase by identifying the broad nature of the solution required, as follows:  a)  Wherever you h

Market segmentaion, how to write an assignment on market segmentaion

how to write an assignment on market segmentaion

Strategic planning, advantages and disadvantages of strategic planning

advantages and disadvantages of strategic planning

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd