Chapter 2 Maximizing Customer Delight

Submitted By Kuser
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Pages: 6

Chapter 2 maximizing customer delight
Example the shareholder behind the customer, all focus customer instead of shareholder
1.Pg.43. Crude oil into water(gulf, livelihoods affected, Hayward apology but overshadowed), damage control mode ( bp, Hayward) -> case study, johonson and Johnson(j&j) done know how many bottle was affected in market, ->it affect lower company's profit, value -> (bruke) chairman James warning hospitals, recall every single bottle, advertising, -> become standard Hayward's action suggest that bp's profit were at the heart of its crisis response plan. Competitively successful and performance driven are codes for shareholder value-oriented priorities, protecting company's share price. Burke's action lead the j&j customer come first, employees are second, communities third, and the shareholders absolutely last. He put "profit expectation" at the bottom. Investor and shareholder believe the fair return in future, because j&j is as big company., p&g, customer come first and shareholder value naturally follow,,49. Apple, shareholder that theydont matter much and that they certainly won't interfere with apple pursuit of its original customer focus purpose
Difference situation, apple- backdating option, p&g- recall, j&j-being slow to act in issuing a series of recalls related to product quality.
B. the maximization challenge maximize return to shareholder or maximize customer measure,? Cannot make it both, only one thing at time.
Example of production of oil or fuel process, choice only one thing between high profit or high volume option Object optimization
C. The primary objective of businesses pg.54
A business must choose how to optimize its production resource,it must also choose it's primary objective, ultimate purpose.
Shareholder value theory-> clearly to maximize the shareholder value first.
New intangible assets and goodwill recorded in accounting in2001 that have to write the asset down if its impaired.
If CEO fail to manage the upward expectation of shareholder risk being, it may size down the asset. Therefore, firm have clear incentives to place shareholder value front and center as primary objective.
Argument for shareholder value maximize, no clear data supporting making shareholder value maximize actually does maximize shear holder value over long term.
Agent, self interest maximize their own outcome, Jensen and neckline argue that changing the rule can overcome this self interest, but they may underestimated how hard the new rules would be for executives.
In logic, expectations race far ahead of reality.
(Stock based compensation, shareholder value enhancement, expectation market, )
Initial public offering(iPo), company actually received and put to use all of the money that it raised in the offering. -stock holder sold the stock $100 to third parties which ipo cost 20 only, the holder profit 80, but the stock company didn't join in this party which high up due to high expectation only.
The biggest downside of real vs. expectation -> length executive can and will go to attempt to produce returns that will satisfy expectation. This pressure shortens the competitive cycle of far too many companies, as they chase market expectations while financed by much lower levels of real equity.
D. The case against shareholder value maximize
1976, Jensen and Meckling argued that owners were getting short shrift from these professional managers who enhanced their own financial well being at the expense of the shareholder in a way that an owner manager would not have done.-> low return on their investment because professional manager wasting resources by padding their own bank accounts.
~way to calibrate CEO compensation : determine the total compensation dollars earned per dollar of net income earned by the company.-> higher result = greater take of management vs. shareholder.
The age of shareholder value maximization worked