MGT 3659 Chapter Notes - Chapter 5: Performance Metric, Total Return, Market Capitalization
Document Summary
This chapter demonstrated three traditional approaches for assessing and measuring firm performance and competitive advantage, as well as two conceptual frameworks designed to provide a more holistic, albeit more qualitative, perspective on firm performance. We also discussed the role of business models in translating a firm"s strategy into actions. 5-1 / conduct a firm profitability analysis using accounting data to assess and evaluate competitive advantage. To measure competitive advantage, we must be able to (1) accurately assess firm performance, and (2) compare and benchmark the focal firm"s performance to other competitors in the same industry or the industry average. To measure accounting profitability, we use standard metrics derived from publicly available accounting data. Commonly used profitability metrics in strategic management are return on assets (roa), return on equity (roe), return on invested capital (roic), and return on revenue (ror). All accounting data are historical and thus backward-looking.
