VALUE BASED MANAGEMENT

i think vbm is the main aim of an org is value creation.ie creating value for sharholders..all people at all level (strategic,tactical n operational) in an org should work towards same aim ie creating value.each one should identify the key drivers for value creation.At strategic level will use measure such as eva.n operational level measures such as profit margin. Pls correct me if am wrng

ill let Mr gromit correct you:). I think its the same concept as lynch and cross where all the levels work together to meet the corporate vision or mission and mixed with performance prism which focuses on shareholders. We could also then mention about the quality,idle time,flexibility and productivity as they all create value so im wondering if we will get credit in the exam if we mention these particular points. Activity based management can also be mentioned here as it will identify those areas with high costs and then rectifying it will help set competitive prices and too will add value.

VBM is managing companies consistently to maximizing shareholder value. This means that the decisions made today are not simply driven by short-term profit considerations. Instead, the longer-term effects that the decisions will have on organizational sustainability and profitability, reflected in future cash flows. A fundamental principle of VBM is the belief that future cash flow and growth are the source of a company's value. Looking at accounting-based measures (such as quarterly earnings, earnings per share, and the price/earnings ratio) is not how decisions should be made under VBM. Making decisions based on long-term, future cash flows can be difficult, particularly if there is significant pressure from short-term investors. See December 2010 Q3

thank you for the reply, shall practice it more.