Self‐Study Questions

1. Since long‐run profitability requires that a firm is sensitive to the

interests of its customers, employees, suppliers, and society‐at‐
large, whether a firm is run in the interests of its shareholders or
its stakeholders makes no real difference. Do you agree? Are
there situations where shareholder and stakeholder interests
diverge?
No, I do not really agree. Investors and partners have competing
interests, which neither can manage alone, as these interests must be
pursued jointly in order to be viable. Investors frequently support
consolidations and acquisitions because of the higher profits they
would receive, while organization partners such as workers, providers,
and the board may not support such arrangements because they might
result in job losses and supply chain disruptions. Investors and
partners' opinions are determined by their interests. The organization's
major job for investors is to increase stock prices, deliver mineral
earnings, expand into new company areas, increase profit, and make
the firm more appealing to increased speculation. They require the
organization to achieve both organic and inorganic growth. To increase
their earnings through speculation. Partners are more concerned with
achieving long-term goals, better working conditions, and improved
help conveyance. For some workers, job security, higher salary, and
expanded government assistance packages are more important than
increased overall earnings.
2. Table 2.1 compares companies according to different profitability
measures.
1. Which two of the six performance measures do you think are the
most useful indicators of how well a company is being
managed?
Because the purpose of business is to provide a benefit for the
customer and then to extract a percentage of that client esteem
as profit, I would concur that Market Capitalization and Return to
Shareholders are the most useful indicators of an all-around
well-run company. The absolute dollar value of an organization's
remarkable offers is measured by its market capitalization.
Rather than sales or total resources, this statistic is used to
determine an organization's size. If the company is providing a
benefit to its customers, its market valuation will increase. The
amount of the organization's compensation that is returned to
investors as profit is known as get back to investors. The
genuine benefit that the business is eliminating for the client's
esteem is this share profit. The more fruitful the organization, the
more benefit is returned to the organization's investors.
 2. Is return on sales or return on equity a better basis on which to
compare the performance of the companies listed?
Return on Equity (ROE) is a superior foundation of correlation of
the businesses' recorded presentation. The pre-charge
advantage expressed as a percentage of total deals is known as
return on deals. This avoids various charges in relation to the
circumstance and creates an erroneous sense of return. The
Return on Equity (ROE) is the total gain expressed as a
percentage of the year-end investor's value. This enables the
correlation to occur with the organization's true benefits.
3. Several companies are highly profitable yet delivered very low
returns to their shareholders during 2017. How is this possible?
It is feasible to be extremely beneficial yet causing undesirable
investor re-visitation. If the company needs to reinvest its capital
gains, this may have an impact on the final output to the
investors.
3. With regard to Strategy Capsule 2.2, what additional data would
you seek and what additional analysis would you undertake to
investigate further the reasons for UPS's superior profitability to
FedEx?
Every generation assumes that easier access is a better indicator of
what the world has to offer in terms of true value. There are more items
and administrations, more data and considerations, and more people
and places. FedEx was the source of that desire. UPS is the world's
largest package delivery organization and a pioneer in production
network management, with a wide range of options for synchronizing
the movement of goods, information, and resources. UPS, based in
Atlanta, services more than 200 nations and regions throughout the
world and operates the world's largest establishment carrying network.
4. The CEO of a chain of pizza restaurants wishes to initiate a
program of CSR to be funded by a 5% levy on the company's
operating profit. The board of directors, fearing a negative
shareholder reaction, is opposed to the plan. What arguments
might the CEO use to persuade the board that CSR might be in
the interests of shareholders, and what types of CSR initiatives
might the program include to ensure that this was the case?
Corporate social responsibilities play a substantial role in influencing
customers' practices and perspectives in organizations, as they have a
higher level of client retention as a result of better items and
administrations. Great administrations build up the trust of clients, who
are essentially the organization's investors who help with direction to a
large extent. Clients are also obligated to refer other clients to the
organization, resulting in the mentioned clients' faith in the business.
Client and investor satisfaction is enhanced by corporate social
 responsibilities, since they are assured of the greatest administrations
or products. There are various types of CSR campaigns that can be
used to ensure that they have a significant impact on the firm. They
include: Ethical Corporate Practices and The concept of social
responsibility focuses on ensuring that all clients and investors are
treated equally.
5. Nike, a supplier of sports footwear and apparel, is interested in
the idea that it could increase its stock market value by creating
options for itself. What actions might Nike take that might
generate option value?
Nike should accept new innovations and fabricate developments to
interface more with clients by ruling their assets in order to stimulate
optimal value. Nike may conceive of a way to aid the entire society by
employing repurposed natural materials in their products. Bringing in
things that are environmentally friendly can increase their value.
Moreover by utilizing sustainable types of energy like geothermal, wind
or daylight powered energy to modernize protection of the climate.