Creating Value Essay

687 WordsFeb 2, 20143 Pages
No, a firm can create value and not capture the value. There are more stories of companies failing than there are succeeding. Companies fail by not capturing the value of their product or service. This failure can happen initially by not choosing the best location for the business or their prices. Other companies fail over time as management is not able to adjust to changes. As companies grow, CEO’s and other top management for example, can become too confident in their abilities or not facilitate the flow of market information. A company is doomed when management explains away reasons for not capturing value instead of making the needed changes to capture the value, such as WorldCom (Charan and Useem, 2002). A firm is able to create value by understanding their customers and their own operations. What is considered valuable to one customer may not be shared across the board. There are several ways that a firm can create value such as reducing production costs, transactions costs, and or increasing demand (Brickley, Smith, and Zimmerman, 2009). Any or all actions by the firm can increase the value of the product, but if the company does not respond to the value, no value is captured. Any sane person can rationalize that if a company was to reduce production costs and pass those savings onto the consumer, sales would increase and value can be captured. has become a successful company by giving their customers something they wanted at price they wanted, free. This created value for the company. The value was captured by keeping the website free of charge and always operating. Free of charge and always working, how is that possible? Facebook is able to charge third party organizations to be on their website in a form of advertising. If Facebook had tried to capture all the value of their product, they could have begun charging customers to

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