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Über dieses Buch

The current transformation of the global economy is being driven by new fundamental innovations, digitalization, industry dynamics and climate change. The impact of this transformation in terms of value migration, industry boundaries, investment and firm continuity is vast. The fourth edition of Strategy, Value and Risk examines these issues, and how they will influence firms and industries in the future. Those aspects of the business environment that will have a significant impact on strategy, business models, investments and value are identified, and the accounting, finance, economic and quantitative principles that provide a foundation for the analysis of these issues are discussed.

Part I: Strategy, Value and Risk provides the strategic, economic, accounting and financial framework. Strategy discusses technology and innovation, industry dynamics, globalization and industry concentration, climate change, industry boundaries and future value. Value discusses the accounting framework and corporate finance and investment, while Risk covers investment risk, corporate risk management and value and risk. Part II: Quantitative Analytics provides an overview of financial statistics, derivatives and derivative applications, and provides a background on the financial economics used in the analysis of physical, intangible, financial and energy assets. Part III: The Analysis of Investments, Transformation and Value examines platforms, data and analytics, the energy sector, pharmaceutical and biotech, a growth firm and media transformation, and applies the accounting, economic, financial and quantitative concepts.

This fourth edition lays out scenarios that will likely shape firms and industries in the future, and has relevance to CFOs, corporate finance and investment professionals. Business model disruption, data and analytics, intangible assets and dynamic analysis are now key issues within the CFO role. Investment professionals are required to see the larger economic environment in which firms compete, assess a firm’s industry and its position within that industry, recognize which investments best serve its broad strategic goals and identify a firm’s capabilities and options.

A background in the accounting, finance, economic, quantitative and valuation concepts that are relevant to the digital economy, new industries, business models and technologies is essential for finance professionals. This book addresses these issues within the context of the fundamental changes underway in the global economy, and provides applications of the techniques to illustrate the concepts.

Inhaltsverzeichnis

Frontmatter

Strategy, Value and Risk

Frontmatter

1. Strategy

Abstract
The objective of all firms is the creation of value. A firm’s strategies describe how it intends to create value over an immediate time frame, and the value opportunities it is searching for over the long term. Value, however, has different meanings to different stakeholders. Firms manage resources to create value through their capabilities to deliver products or services that provide customer value, maintain relationships with resource providers and customers, and organize activities through governance, management systems and processes. To do this, a firm has to create an equitable balance between stakeholders such as management, customers, employees, financiers, unions, suppliers, shareholders, government and society in general.
Jamie Rogers

2. Value

Abstract
To deliver sustainable shareholder value, management has to simultaneously manage operations in the short term while delivering on plans for the long term. Commitments in the short term include delivering on earnings and maintaining liquidity, while in the long term, they involve developing and executing on strategy and investments. The following framework discusses the metrics that encompass current and future performance.
Jamie Rogers

3. Risk

Abstract
Corporate management will typically develop strategies and allocate resources to increase shareholder value. Shareholders, on the other hand, will focus on the cash growth of their investments. As to whether there is value in any potential cash flow growth will depend on the risks associated with these investments. Investors will generally demand a higher rate of return from investments that are perceived to be relatively riskier. The risks associated with corporate investments are found in variables such as prices, quantities, costs, competition, market share and project lifecycles. These variables can be unpredictable and result in cash flow volatility, which will therefore have an impact on any net present value (NPV) calculations.
Jamie Rogers

Quantitative Analytics

Frontmatter

4. Financial Statistics

Abstract
The econometric analysis of economic, financial and business time series has become an integral part in the research and application of quantitative descriptions of the real world. A time series typically consists of a set of observations of some observational unit or variable, y, which is taken at equally spaced intervals over time (Harvey 1993). A time series can be considered from two aspects—analysis and modelling. The objective of a time series analysis is to identify and summarize its properties and describe its prominent characteristics. The analysis can be framed in either the time domain or the frequency domain. In the time domain, the focus is on the relationship between observations at various points in time, whereas in the frequency domain, the analysis focuses on the cyclical movements of a series.
Jamie Rogers

5. Derivatives

Abstract
A derivative is a financial instrument whose payoff depends on the values of other more basic variables. The variables underlying derivatives are often the prices of traded securities. Derivatives separate market and credit risks from the underlying assets and liabilities, and offer the ability to reduce a risk exposure through its transfer to a party that is prepared to take on and manage those risks. Derivative securities are also known as contingent claims, and can be contingent on almost any variable—from the price of a commodity to weather outcomes. There are two basic types of derivatives—futures/forwards and options.
Jamie Rogers

6. Derivative Model Applications

Abstract
The Black–Scholes GBM (geometric Brownian motion) model can be generalized to other models that are more realistic for particular markets. The various simple extensions to the Black–Scholes model assume constant parameters for ease of calculation. In reality, the properties of time series such as volatility, mean reversion, long-term levels and jump behaviour will at the very least vary through time with reasonably predictable patterns. These characteristics can be included in spot models.
Jamie Rogers

Part III

Frontmatter

7. Platforms, Data and Analytics

Abstract
Platforms now play a significant role in the digital economy, with platform firms reaching the scale and dominance last seen with the huge vertical corporations of the early 1900s. Platform business models have broad implications for firms across all industries seeking to leverage information technology (IT). Digital technologies are increasingly being integrated into strategy frameworks, with platforms and platform complements providing the potential for future growth.
Jamie Rogers

8. Energy

Abstract
The energy market is the largest market in the world after currencies. The two most significant drivers of energy demand are population and income growth. Since the start of the twentieth century, the world’s population has more than quadrupled, with real income and primary energy consumption growing by factors of 25 and 22.5, respectively. Over the twentieth century, the global annual average 3% GDP growth rate was sustained by an annual 2% growth rate in the energy supply, while energy consumption increased from an annual equivalent of 4 barrels (23.2 MM Btu) to 13 barrels (75.4 MM Btu) of oil per person.
Jamie Rogers

9. Pharmaceuticals and Biotechnology

Abstract
The pharmaceutical (pharma) industry dominates the healthcare sector with a market capitalization of $2.7 trillion, while the biotechnology (biotech) industry is a significant component of the sector with a market capitalization of $863 billion. Both industries focus on the discovery, development, manufacturing and sale of prescription drugs, and have drivers that are both similar and unique to the industries. These include a focus on innovation and patents, drug licensing and a significant regulatory and political environment.
Jamie Rogers

10. A Growth Firm

Abstract
Industry sectors are generally defined through the products they create or the services on offer. Industries are also identified by their response to economic and business cycles, typically defined as growth, defensive or cyclical. The industry life cycle considers an industry’s viability over time, with the four stages of pioneer, growth, mature and decline indicating a phase in an industry’s evolution.
Jamie Rogers

11. Firm Transformation and Divesture

Abstract
Many industries follow life cycles that are defined by convention as pioneer, growth, mature and decline. An industry in decline either has negative growth or is not expanding at the general economic growth rate. These industries are typically identified by extreme price competition, excess capacity, a lack of innovation, a dwindling number of competitors and buyouts.
Jamie Rogers

Backmatter

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