Value-based Management Research

Recently the creation and implementation of value have gained more and more attention, and have become the specific goals of many companies' operations. As we know, all of the activities of the companies are oriented by value-creating, from strategy to investment, skills, R&D, producing, selling, financial activities, human resource activities and firm culture. All of these activities are to create value. All the areas which can create value should become focuses of the management's attention in every company. However, the concept of value is very abstract. Everyone wants to create more and more value by means of his own management while few people knows what on earth the value is? Where is value from? How to create value? What kind of standard should we use to measure the value? Value-Based Management appears just under such kind of condition.Two decades ago, VBM first appeared in the western managerial practices and theory-research areas represented by North America, then prompt development followed. Compared with the progresses of the western research, the practices and research of VBM in China is still not enough although we really have some result. The main deficiency is that there are still not the notion of value inside companies. Only a few companies bring into effect some specific aspects of VBM from the financial standpoint of view, and there measure and evaluation approaches are very simple. Standing at this point, this thesis adopts domestic and international literatures and empirical analyses as the base, according to the main clue of analysisof VBM theory-construction of VBM framework-implementation of VBMin China, analyzes and reviews VBM generally.The thesis can be divided into 5 parts:First part, introduction. It generally describes the topic of this thesis, reviews the related literatures domestically and internationally, offers reasons of choosing this topic and the main perspectives. The contents in this part are the basis for the following parts to further developing theories and empirical analyses.Second part, review of VBM development. Indeed, in the long history of the management in which value is the start point or the focus, VBM has appeared since two decades ago. The development of VBM is closely related to development of the environment inside and outside companies. When the size of the company is not big, outside financial and marketing environment are rather simple, the focus on VBM is not outstanding. Also, the value here was not mentioned to shareholder value, rather, is was owner's value. So indeed, during this period, "value" is very abstract. Till the size of the company is developed to a specific level whose funding, investing and operating style have changed a lot, especially after the appearance of limited corporation, companies began to pay more and more attention on value, especially on shareholder value. During this period appears the real VBM. In addition, the author also analyzes the applying condition of VBM in China and in foreign countries in this part, summarizes the main models of VBM posed by Chinese experts and foreign ones such as McKinsey model, Deloitte model, Alfred Rappaport mode, Gary Ashworth model and Tang Guliang, Lin Changquan model, Peng Chunjun, Wang Huifen model, Peng Xiaofeng, He Ying model, Wang Pingxin, Wu Qinghua model posed by Chinese scholars. All these documents provide VBM framework in this thesis very useful information.Third part, related theories of VBM. If we want to construct reasonable VBM framework, we have to know related theories about VBM. So first, the author make clearer the theories supported VBM including Activity-Based Costing method, Strategic Cost Management and Balanced Scorecard. Then generally analyzes the concept, features and significance of VBM. Although VBM has been in use for very long time abroad, indeed, there is no uniform opinion about the concept and focuses of VBM while lacking of this unification is harmful to the construction of VBM framework. Based on the opinions of the western and domestic concepts of VBM, in this thesis VBM is defined to be a managing notion and a managing approach by which we have to implement all the activities including planning, forecasting and decision-making according to the goal of increasing shareholder value to finally create more and more values for shareholders. The description of the concept, features and significance of VBM provides a solid basement for the construction and implementation of VBM in the next part. ;Fourth part, construction and implementation the managing system under VBMframework. This part is the main part of this thesis. In this part, the author pay moreattention in constructing the framework of VBM, that is to say, from the selecting ofthe aim, based on the appropriate value concept, through identifying thevalue-driven factors, implementing VBM strategic decision-making and VBM,finally evaluating performance. Since there is still debate on which one shouldcompanies choose, maximization of firm value or shareholder value, the authorposes, the answer should be shareholder value. The main reason lies in thatshareholders are the final owner of the company. However, even we are reallyaiming at gaining the maximization value for shareholders, we shouldn't neglect allother factors, so under specific condition, using option-based value will take morebenefits to shareholders. Identifying value-driven factors is a very important step inVBM. Only if we realize which factors are indeed creating value and which ones areimpairing value, then could we gain the final aim to increase value. However, onlyidentifying value-driven factors is far from enough. VBM works by means ofdecision-making. Under VBM, the main contents of strategic decision-making is tounify value and processes of decision, making all the activities of the companyaligned, and making them more validity. Successful implementation of VBM has toemphasize several key aspects, they are: leadership and commitment of topmanagement, adapting to the managing procedure, education and training,communication, time sphere and turn of tasks, and supporters including contentsupporters and procedure supporters. Finally, performance has to be evaluated, so inthe end of this part, the author describes the performance evaluation standards,indexes and approaches under VBM framework while in the evaluation indexes twogroups are included, financial indexes and nonfinancial indexes.Fifth part, implementation of VBM in China. The main content of this part is to describe the implementation of VBM in China aiming the special condition of our country. Since VBM brings challenges to both traditional financial management and company managing style, the author analyzes the detailed condition when implementing VBM in China including strengthening financial management, building up the value notion, gaining and keeping core competitiveness for company, increasing consciousness of risk, making perfect risk-managing system, using financial skills to balance financial resources and perfecting regulation of performance evaluation, carrying out risk-responsibility system. Finally issues in implementing VBM are reaffirmed.