Financial Performance and Sustainability of Strategy

Giorgio Gandellini, Alberto Pezzi and Daniela Venanzi
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Giorgio Gandellini: University of Rome III
Alberto Pezzi: University of Rome III

Chapter Chapter 5 in Strategy for Action – II, 2013, pp 101-117 from Springer

Abstract: Abstract Performance measurement plays a key role in developing and implementing strategic plans and evaluating the achievement of firm’s objectives, with crucial implications on rewarding managers and providing them the correct incentives. As firms began focusing on shareholder value as the primary long-term objective of the organization, the measurement of a strategy’s financial performance uses value-based metrics that explicitly incorporate the cost of capital into calculations. In this chapter, the most important value-based measures are discussed and compared, by focusing on their measurement logic and highlighting their differences and similarities. Their application in measuring the value creation of a strategy, developed consistently with the Strateco Dashboard approach, is therefore presented. Finally, the financial sustainability of a strategy is discussed, presenting the most widespread models that connect potentially conflicting strategic objectives such as profitability and growth.

Keywords: Strategy’s financial performance metrics; Economic value added (EVA); Cash flow return on investment (CFROI); Shareholder value added (SVA); Financial feasibility of a strategy; Self-sustaining growth (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:spr:spbrcp:978-88-470-2475-5_5

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DOI: 10.1007/978-88-470-2475-5_5

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