In ethics, value denotes the degree of importance of something or action, with the aim of determining what actions are best to do or what way is best to live or to describe the significance of different actions.
1. Accounting: The monetary worth of an asset, business entity, good sold, service rendered, or liability or obligation acquired.
2. Economics: The worth of all the benefits and rights arising from ownership. Two types of economic value are (1) the utility of a good or service, and (2) power of a good or service to command other goods, services, or money, in voluntary exchange.
3. Marketing: The extent to which a good or service is perceived by its customer to meet his or her needs or wants, measured by customer’s willingness to pay for it. It commonly depends more on the customer’s perception of the worth of the product than on its intrinsic value.
4. Mathematics: A magnitude or quantity represented by numbers.
Dock Aesthetics and Property Value: Owning a property along the water’s edge comes with a unique set of opportunities and challenges. While the tranquility and scenic beauty of waterfront living are undeniable. The aesthetics of your property can significantly impact its value. One often overlooked aspect of enhancing waterfront property value is the design and upkeep of docks. A well-designed and maintained dock not only adds functionality to your property. But can also elevate its curb appeal and overall worth.
Dock Aesthetics and Property Value: Enhancing Your Waterfront Investment
In this article, we will explore the various ways dock aesthetics contribute to property value enhancement. From designing an attractive dock profile to understanding the psychology of colors and their impact on the surroundings.
Photo from ilearnlot.com
Curb Appeal on Water: Designing an Attractive Dock Profile
The first impression is vital, even when it comes to waterfront properties. A dock that seamlessly integrates with the natural beauty of its surroundings can greatly enhance the curb appeal of your property. Designing an attractive dock profile involves selecting the right materials, considering the layout, and incorporating architectural elements that harmonize with the landscape. The combination of sleek lines, durable wood, or composite materials. And thoughtful lighting can transform a simple dock into a captivating focal point of your waterfront property.
Landscaping Around Docks: Creating a Cohesive Waterfront Environment
A visually appealing dock is just the beginning. To truly create a captivating waterfront environment, landscaping plays a crucial role. Incorporating native plants, ornamental shrubs, and decorative elements around your dock can create a cohesive and inviting atmosphere. Landscaping not only adds aesthetic value but also contributes to environmental sustainability by preventing erosion and supporting local ecosystems. This integration of dock and landscape ensures that your property appeals to potential buyers and admirers alike.
Waterside Seating: Comfortable Areas for Relaxation and Socializing
Waterfront living often revolves around relaxation and socializing by the water. Including comfortable seating areas on your dock can provide the perfect space for residents and guests to unwind, enjoy scenic views, and engage in meaningful conversations. Adirondack chairs, benches, and even built-in seating options can transform your dock into an extension of your living space. These well-placed seating areas not only enhance the aesthetics. But also create a functional space for leisure, further enhancing the property’s allure.
Color Psychology: Choosing Dock Tones that Complement the Surroundings
Colors have a profound impact on our emotions and perceptions. When designing your dock, choosing the right color tones is essential to create a harmonious blend with the natural surroundings. Earthy tones like browns and greens evoke a sense of serenity and connection to nature. While brighter colors can add a playful touch. The goal is to strike a balance between blending in with the landscape and making a statement that reflects your style. These color choices extend beyond the dock itself to any accessories or furnishings you add to the space, creating a cohesive aesthetic.
Appraisal Impact: How a Well-Maintained Dock Elevates Property Value
Now that we’ve explored the various elements that contribute to dock aesthetics, let’s delve into how these efforts translate into property value. A well-maintained and visually appealing dock not only adds to the overall ambiance of the property. But also signifies meticulous care and attention to detail. Potential buyers and appraisers recognize the added value of a functional and aesthetically pleasing dock. Which can set your property apart from others in the market. Elements like dock fenders, which protect your dock and boats from damage, showcase your commitment to preserving the integrity of the waterfront infrastructure and contribute to the property’s overall appraisal.
Your waterfront property is not just a place to live; it’s an investment in tranquility, natural beauty, and an unparalleled lifestyle. Enhancing its value through dock aesthetics is a strategic way to maximize your returns while indulging in the serenity of waterfront living. From crafting an inviting dock profile to integrating thoughtful landscaping and choosing the right colors, every aspect contributes to a property that captivates and inspires. Remember that each detail, including dock fenders, plays a role in maintaining the longevity and appeal of your waterfront investment. So, whether you’re looking to sell or simply want to enjoy your property to the fullest. Investing in dock aesthetics is a decision that will pay dividends for years to come.
In the final analysis, financial and tax consulting services are a branch of corporate consulting management. The essential feature is to solve problems for customers and achieve goals. What are the main contents of fiscal and tax compliance?
Here are the articles to explain, What are the value points of financial and tax consulting services?
Many people focus on financial and tax consulting services on plan reports. What exactly does tax consulting do? They did not grasp the essential characteristics of the matter and took a detour. No matter how many reports were written and how many proposals were issued during the service process. From the perspective of customers, the final value of financial and tax consulting services will be as follows What time is it:
Increase income
Financial and tax consulting services help clients increase income mainly in the following directions:
Help entrusted enterprises to research and analyze the latest business models in the industry;
Help to entrust enterprises to study market changes and customer behavior from the perspective of finance and taxation;
Also, Help to entrust enterprises to study sales-end organizational forms and contributions from the perspective of finance and taxation. Such as joint ventures, partnerships, mergers and acquisitions, and affiliation;
Help to entrust enterprises to make correct investment decisions, including equity investment and financial investment;
Help to entrust enterprises to provide reasonable suggestions on the 4P (product, price, promotion, channel) strategy. Such as housing pricing, apartment design, product ratio, etc. for real estate enterprises;
Help to entrust enterprises to research financial incentives and subsidies in the industry.
Reduce costs
Financial and tax consulting services help customers reduce costs mainly in the following directions:
Help entrusted enterprises to study the business model and quotation composition of major suppliers at the supply chain end. Establish a relatively complete supply chain management system, and reduce procurement costs;
Help to entrust enterprises to research the R&D situation in the industry, and sort out and optimize the R&D process. Formulate an R&D cost control mechanism, and reasonably control R&D costs;
Also, Help entrusted enterprises to study and analyze manufacturing technology, process, and energy consumption from the perspective of a third party, focusing on the analysis of problems such as over-orders, high scrap rates, and energy consumption, to reduce manufacturing costs;
Help entrusted enterprises to research and analyze corporate debt ratios and asset liquidity, reasonably control asset-liability ratios and reduce corporate comprehensive financial financing costs;
Help to entrust enterprises to research and analyze the per capita output value or contribution of enterprises, and reasonably control labor costs;
Help entrust customers to study and analyze industry tax policies. Reduce comprehensive tax burden costs in transactions and operations through reasonable prior business planning.
Improve efficiency
Financial and tax consulting services help clients improve efficiency mainly in the following directions:
Help to entrust enterprises to analyze asset turnover rate, including accounts receivable turnover rate, investment payback period, cash flow recovery cycle, etc., formulate improved and perfect plans and assist in implementation;
Help entrusted enterprises to analyze the utilization rate of core assets, including equipment utilization rate (OEE), etc., formulate improvement plans, and assist in implementation;
Help entrusted enterprises to analyze the efficiency of personnel orders, formulate improvement plans and assist in implementation.
Risk Control
Financial and tax consulting services help clients control risks mainly in the following directions:
Help entrusted enterprises to research and analyze business risks, including business models, transaction methods, etc., formulate risk response plans, and assist enterprises in their implementation;
Help to entrust enterprises to research and analyze tax risks, formulate risk response plans in advance and assist enterprises to implement them, to achieve the purpose of paying taxes correctly and paying wronged taxes, and avoid large administrative fines caused by false invoices, tax evasion, and tax inspections risk;
Help entrusted enterprises to review and correct financial accounting risks, including rectification of two sets of accounts, financial accounting confusion, and inconsistent accounts, etc., issue accounting improvement opinions following the accounting system and tax requirements, and assist enterprises in implementation;
Help entrusted enterprises to inspect and evaluate financial risks, including financial team quality assessment, capital chain cost assessment, etc. Help enterprises formulate optimization plans and assist in the implementation.
The Value Net Framework, otherwise called the Coopetition Framework is a scientific methodology instrument created by Adam Brandenburger and Gary Nalebuff in 1996, joining system and game hypothesis, to portray and break down the conduct of different players inside a given industry or market. Also, The Value Net Framework is a choice to Porter’s Five Forces framework, broadens the five powers framework broader by looking at the function of reciprocal.
Here is explain the article about What is the Value Net Framework? Their Definition, Use, and Components.
The framework’s key though is that collaboration and rivalry coincide. Participation and rivalry are both important and alluring while working together. Collaboration needs to build advantages to all players (center around market development), and rivalry is expected to split the current advantages between these players (center around pieces of the overall industry).
Definition of Co-opetition or Value Net Framework:
It is a neologism speaking to the vacillation of rivalry and collaboration in business connections. Also, Co-opetition is part of rivalry and part collaboration. It portrays the way that in the present business climate, most organizations can make more progress in a unique industry than they actually could working alone. In particular, when organizations cooperate, they can make a lot bigger and more significant market than they actually could be working exclusively.
According to Adam Brandenburger and Barry Nalebuff:
“Co-opetition recognizes that business relationships have more than one aspect. As a result, it can occasionally sound paradoxical. But this is part of what makes co-opetition such a powerful mindset. It’s optimistic, without being naive. It encourages bold action while helping you to escape the pitfalls. It encourages you to adopt a benevolent attitude towards other players, while at the same time keeping you tough-minded and logical. By showing the way to new opportunities, co-opetition stimulates creativity. By focusing on changing the game, it keeps business forward-looking. Through finding ways to make the pie bigger, it makes business both more profitable and more personally satisfying. By challenging the status quo, co-opetition says things can be done differently – and better.”
Organizations at that point rival each other to figure out who gets the biggest portion of that market. As well as, Co-opetition takes into account this present reality business circumstance that there can be various champs in the commercial center. Business, in contrast to war, isn’t a victor takes recommendation. Also, The goal is to amplify your degree of profitability – paying little mind to how well or how ineffectively others or different organizations perform.
Use or Utilizing the Value Net Framework:
The Value Net Framework portrays the different parts of the players. A similar player can involve more than one job all the while. Planning the Value Net for business is the initial move toward changing the game.
As per the game hypothesis, the game has five components: players added values, rules, strategies, and extension. To change the round of business, you need to adjust at least one of these five components.
Players:
The undeniable first errand is to sort who the pertinent players are and what jobs they play. Regarding molding methodology, an organization should consider whether getting extra players can work for its potential benefit (extra providers to diminish costs, extra reciprocal to expand the value of the item to buyers). Inquiries to pose in this setting are:
What are the open doors for collaboration and rivalry in your organization’s associations with clients and providers, contenders, and supplements?
Might your organization want to change the cast of players? Specifically, what new players might your organization want to bring into the game?
Who stands to pick up if your organization turns into a major part of a game? Who stands to lose?
Added Value:
Identify your organization’s additional value from the point of view of every one of the market members. Also, Attempting to raise your additional value or lower the additional values of different players can make you a more significant player. A few different ways to raise your additional value are fitting your item to clients’ necessities, assemble a brand, use assets all the more productively, and so on Then again, making rivalry among your providers, controlling creation to general a lack of your items, utilizing ware parts in your items, and so forth, are some potential approaches to bring down the values of others. Inquiries to pose in this setting are:
What is your organization’s additional value?
How might you increment your organization’s additional value? Specifically, would you be able to make steadfast clients and providers?
What are the additional values of different parts in the game?
Is it to your greatest advantage to restrict their additional values?
Rules:
Each industry and market has rules and guidelines. Some are composed and authorized by law, some unwritten yet by and large acknowledged practices. An illustration of that could be a “most preferred country” statement where a client demands an agreement with a provider to get the best value that some other client may likewise get. Inquiries to pose in this setting are:
Which rules are helping your organization? Which is harming?
What new principles might your organization want to have? Specifically, what agreements would you like to keep in touch with your organization’s clients and providers?
Does your organization have the ability to make these standards? Does another person have the ability to topple them?
Strategies:
Tactics characterize as “moves that players make to shape the impression of different players”. As well as, The round of business play in a field of vulnerability, where every one of the players has a thought (view) of the circumstance and methodologies of different players, at the end of the day is questionable about the truth of those players’ circumstances and procedures. Inquiries to pose in this setting are:
How do different players see the game? How do these discernments influence the play of the game?
Which discernments might you want to protect? Which insights might you want to change?
Do you need the game to be straightforward or misty?
Extension:
Scope portrays the limits of the game. Directors ought to continually assess the chance of growing or contracting those limits. Regularly, a market isn’t disengaged yet is connected to different business sectors. A lot of ongoing models have indicated that product, equipment, media, internet business, promoting, and broadcast communications markets are either firmly interlinked, or major parts in certain business sectors have taken purposeful vital moves to supportive of effectively connect them. Inquiries to pose in this setting are:
What markets might be connected?
How your organization could make value-added from connecting the organization’s items and administrations to that market?
How that may influence the discernments and activities of different players?
Components or Segments of Value Net Framework:
Any organization (or industry) works in a climate having four primary gatherings that impact the course of any business. These four gatherings are:
Clients purchase your organization’s items and administrations, in return for cash.
Providers give assets to your organization, in return for getting paid.
Contenders offer substitutes (immediate or roundabout) to your organization’s items and administrations. Note that your organization’s rivals contend both on the client-side (offering comparable items and administrations) and on the provider side (purchasing comparable assets).
The supplement gives items or administrations that permit a client to get more value out of your items or administrations on the off chance that they purchase both. Once more, there is a comparable dynamic at chip away at the provider side.
The Value Net Framework is a schematic guide intended to speak to all the major parts in the game and the between conditions among them. Also, Cooperations occur along with two measurements. Along with the vertical measurement are the organization’s clients and providers.
Other things:
The vertical measurement (providers organization clients) is the fundamental wellspring of value (or financial excess) creation. Along with the level, measurement is the players with whom the organization cooperates yet doesn’t execute. Also, They are its rivals and correlative.
Contenders diminish the organization’s additional value alongside the vertical pivot and correlative expands your additional value along with the vertical hub. Brandenburger and Nalebuff express that “supplement is only the identical representation of contenders”. Clients value your item more when there are correlative while they value your item less when there are substitutors.
Understanding this relationship features an insufficiency in current serious practices – just zeroing in on the most proficient method to dispose of one’s rivals. Or maybe associations ought to likewise endeavor to create product supplement which in the drawn-out expands an association’s general value to a client.
What is the Value Net Framework? Definition Use Components; Image from Pixabay.
Introduction of Exit Value Accounting; Exit value accounting is a form of current cost accounting which is based on valuing assets at their net selling prices (exit prices) at the balance sheet date and on the basis of orderly sales. Exit value is a maximum price a currently held asset could be sold for in the market less the transactions costs of the sale (the net realizable value for the asset). What is Economic Value Added? Definition, Calculation, and Implementation.
Know and understand the Exit Value Accounting.
This normative accounting theory was developed by Raymond Chambers and labeled as Continuously Contemporary Accounting (CoCoA). The theory relies on assessments of the exit or selling price of an entity’s liabilities and assets. These values are usually calculated under the assumption that the entity which controls. The thing being valued would be going out of business and liquidating.
By contrast, real-world values for things sold by companies which remain in business can be very different. Because these companies can afford to hold out for a good price and they are not liquidating large amounts of goods. And, alerting buyers to the fact that bargains may be obtainable with a little bit of negotiation.
In addition, the profit for a certain time should also be related to the alteration of the current exit-prices of the assets and hence. Profit should reflect changes in an organization’s capacity to adapt. The benefit of exit value accounting system is the relevance of the information it provides.
With this approach, the balance sheet becomes a huge statement of the net liquidity available to the enterprise in the ordinary course of operations. It thus portrays the firm’s adaptability, or the ability to shift its presently existing resources into new opportunities.
Meaning and Definition of Exit Value Accounting:
The exit value accounting theory was developed under the following key assumptions. Firstly, firms exist to increase the owners’ wealth. Secondly, the organization’s ability to adapt to changing circumstances is the basis of successful operations and Finally, the capacity to adapt will be best reflected by the monetary value of the organization’s assets, liabilities, and equities at balance date. Where the monetary value is based on the current exit or selling prices of the organization’s resources.
All assets in the exit-price accounting should be recorded at their current cash equivalents. Which represented by the amounts expected to be generated by selling the assets and an orderly sale determine the net-sales or exit-prices. Depreciation costs would not be realized within exit-price accounting as the model is based on the current cash equivalents.
Liabilities would be similarly valued at the amounts it would take to pay them off as of the statement date. The income statement for the period would be equal to the change in the net realizable value of the firm’s net assets occurring during the period, excluding the effect of capital transactions.
Expenses for such elements as depreciation represent the decline in net-realizable value of fixed assets during the period. The exit value accounting model is based on immediate sale. Which seems under the control of the entity although some estimation of the future may be included. As a result, the asset does not contribute to an entity’s capacity to adapt to changing circumstances if it is not ready to sell (as it does not have a sales price).
What is Fair value?
As know, Fair Value; In accounting and in most Schools of economic thought, fair value is a rational and unbiased estimate of the potential market price of a good, service, or asset.
Introduction to Exit Value Accounting, Meaning, and Definition, #Pixabay.
Explanation of Exit Value:
Exit value is the estimated price which would be received for the sale of an asset or transfer of a liability on the open market. People determine exit values for accounting purposes and these values may be used in a variety of ways. Exit values are distinct from entry values, which reflect the price which would be paid to acquire something. Several different methods can be used to think about exit value. People can look at the present value of the asset, the current selling price, or the net realizable value.
Because times are not always favorable for sales, one important thing to consider is what the current market conditions are. If the market is poor an exit value may be low because it is determined by acting. As though something needs to be sold immediately and thus a strategic wait for a better price is not possible. Exit values can be used in the assessment of a business by a valuator. A determination of a fair asking price, and a number of other settings.
When calculating exit value, third-party evaluators are often used to avoid bias. The person who owns the asset or liability under consideration may be inclined to overvalue it or otherwise fail to estimate the value properly. While someone who has no interest in the value can make a more neutral estimate.
Welfare Economics is a normative branch of economics that is concerned with the way economic activity ought to be arranged so as to maximize economic welfare. The hallmark of welfare economics is that policies are assessed exclusively in terms of their effects on the well-being of individuals. Welfare economics has been defined by Scitovsky as “That part of the general body of economic theory which is concerned primarily with policy.”So, what is the question of the topic we are going to discuss; What does Welfare Economics mean? Measuring and Value decisions!
Explain about Welfare Economics mean, Measuring Welfare, and their Value decisions!
Accordingly, whatever is relevant to individuals well-being is relevant under welfare economics, and whatever is unrelated to individuals well-being is excluded from consideration under welfare economics. Economists often use the term utility to refer to the well-being of an individual, and, when there is uncertainty about outcomes, economists use an ex-ante measurement of well-being, so-called expected utility.
Welfare economics employs value judgment s about what ought to be produced, how production should be organized, the way income and wealth ought to be distributed, both now and in the future. Unfortunately, each individual in a community has a unique set of value judgments, which are dependent upon his or her attitudes, religion, philosophy and politics, and the economist has difficulty in aggregating these value judgments in advising policymakers about decisions that affect the allocation of resources (which involves making interpersonal comparisons of utility).
Definition of Welfare Economics:
The branch of economics called welfare economics is an outgrowth of the fundamental debate that can be traced back to Adam Smith, if not before. It is the economic theory of measuring and promoting social welfare.
In The Wealth of Nations, Book IV, Smith wrote:
“Every individual necessarily labors to render the annual revenue of the society as great as he can. He generally indeed neither intends to promote the public interest nor knows how much he is promoting it…. He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”
J. De V. Graff,
“The proof of the pudding is indeed in the eating. The welfare cake, on the other hand, is so hard to taste, that we must sample its ingredients before baking.”
R.W. Emerson, Work and Days,
“The greatest meliorator of the world is selfish, huckstering trade.”
The literature on welfare economics has grown rapidly in recent years. The utilitarians were the first to talk of welfare in terms of the formula, ‘the greatest happiness of the greatest number’. Vilfredo Pareto considered the question of maximizing social welfare on the basis of general optimum conditions.
Marshall and Pigou, the neo-classical economists, concentrated on particular sectors of the economic system in their postulates of welfare economics. It was Professor Robbins’ ethical neutrality view about economics that led to the development of welfare economics as an important field of economic studies. Kaldor, Hicks, and Scitovsky have laid the foundations of the New Welfare Economics with the help of the ‘compensation principle’ avoiding all value judgments.
On the other hand, Bergson, Samuelson, and others have developed the concept of the Social Welfare Function without sacrificing value judgments. In the discussion that follows we shall refer to certain basic concepts of welfare economics and then pass on to Pareto’s welfare conditions for an understanding of modern welfare economics.
Explanation of Welfare Economics:
Economists have tried for many years to develop criteria for judging economic efficiency to use as a guide in evaluating actual resource deployments. The classical economists treated utility as if it was a measurable scale of consumer satisfaction, and the early welfare economists, such as Pigou, continued in this vein so that they were able to talk in terms of changes in the pattern of economic activity either increasing or decreasing economic welfare.
However, once economists rejected the idea that utility was measurable, then they had to accept that economic welfare is immeasurable and that any statement about welfare is a value judgment influenced by the preferences and priorities of those making the judgment. This led to a search for welfare criteria, which avoided making interpersonal comparisons of utility by introducing explicit value judgments as to whether or not welfare has increased.
The simplest criterion was developed by Vilfredo Pareto, who argued that any reallocation of resources involving a change in goods produced and/or their distribution amongst consumers could be considered an improvement if it made some people better off (in their own estimation) without making anyone else worse off. This analysis led to the development of the conditions for Pareto Optimality, which would maximize the economic welfare of the community, for a given distribution of income.
Pareto optimality is thus a dominance concept based on comparisons of vectors of utilities. It rejects the notion that utilities of different individuals can be compared, or that utilities of different individuals can be summed up and two alternative situations compared by looking at summed utilities. When ultimate consumers do not appear in the model, as in the pure production framework, a situation is said to be Pareto optimal if there is no alternative that results in the production of more of some output, or the use of less of some input, all else equal.
Obviously saying that a situation is Pareto optimal is not the same as saying it maximizes GNP, or that it is best in some unique sense. The Pareto criterion avoids making interpersonal comparisons by dealing only with uncontroversial cases where no one is harmed. However, this makes the criterion inapplicable to the majority of policy proposals that benefit some and harm others, without compensation. There are generally many Pareto optimal.
However, optimality is a common good concept that can get common assent: No one would argue that society should settle for a situation that is not optimal because if A is not optimal, there exists a B that all prefer. Nicholas Kaldor and John Hicks suggested an alternative criterion (the compensation principle), proposing that any economic change or reorganization should be considered beneficial if, after the change, gainers could hypothetically compensate the losers and still be better off.
In effect, this criterion subdivides the effects of any change into two parts:
Efficiency gains/losses, and.
Income‐distribution consequences.
As long as the gainers evaluate their gains at a higher figure than the value that losers set upon their losses, then this efficiency gain justifies the change, even though (in the absence of actual compensation payments) income redistribution has occurred. Where the gainers from a change fully compensate the losers and still show a net gain, this would rate as an improvement under the Pareto criterion.
Where compensation is not paid, then a second-best situation may be created where the economy departs from the optimum pattern of resource allocation, leaving the government to decide whether it wishes to intervene to tax gainers and compensate losers. In addition to developing welfare criteria, economists such as Paul Samuelson have attempted to construct a social welfare function that can offer guidance as to whether one economic configuration is better or worse than another.
The social‐welfare function can be regarded as a function of the welfare of each consumer. However, in order to construct a social‐welfare function, it is necessary to take the preferences of each consumer and aggregate them into a community preference ordering, and some economists, such as Kenneth Arrow, have questioned whether consistent and noncontradictory community orderings are possible.
Despite its methodological intricacies, welfare economics is increasingly needed to judge economic changes, in particular, rising problems of environmental pollution that adversely affect some people while benefiting others. Widespread adoption of the ‘polluter pays’ principle reflects a willingness of governments to make interpersonal comparisons of utility and to intervene in markets to force polluters to bear the costs of any pollution that they cause.
How to Measuring Welfare?
There are mainly two concepts for measuring welfare. The first relates to a Pareto improvement whereby social welfare increases when society as a whole is better off without making any individual worse off. This proposition also includes the case that when one or more persons are better off, some persons may be neither better off nor worse off. It is, thus, free from making interpersonal comparisons.
Hicks, Kaldor and Scitovsky have explained social welfare in the Paretian sense in terms of ‘the compensation principle’. In the second place, social welfare is increased, when the distribution of welfare is better in some sense. It makes some persons in society better off than others so that the distribution of welfare is more equitable. Also study, Why Entrepreneurs Required the Capital? to Pursue Business!
This is known as distributional improvement and relates to the Bergson social welfare function. Dr. Graaf, however, refers to another concept which he calls the paternalist concept. A state or a paternalist authority maximizes social welfare according to its own notion of welfare without any regard to the views of individuals in society.
Economists do not make use of this concept to measure social welfare because it is related to a dictatorial regime and does not fit in a democratic set-up. Economic welfare, thus, implies social welfare which is concerned primarily with the policy that leads either to a Pareto improvement or distributional improvement, or both.
What does Welfare Economics mean? Measuring and Value decisions! Image credit from #Pixabay.
Value Decisions in Welfare Economics:
The following Value Judgments or Decisions below are:
Alt ethical judgments and statements which perform recommendatory, influential and persuasive functions are value judgments. According to Dr. Brandt a judgment is a value judgment if it entails or contradicts some judgment which could be formulated so as to involve any one of the following terms in an In ordinary sense: “Is a good thing that” or “Is a better thing that”, “Is normally obligatory”, “Is reprehensible”, and “Is normally praiseworthy”.
Value judgments describe facts in an emotive way and tend to influence people by altering their beliefs or attitudes. Such statements as “This change will increase economic welfare”, “Rapid economic development is desirable”, “Inequalities of incomes need be reduced”, are all value judgments. Welfare is an ethical term. So all welfare propositions are also ethical and involve value judgments.
Such terms as “Satisfaction”, “Utility” are also ethical in nature since they are emotive. Similarly, the use of a highly emotive word as “social”, “community” or “national” in place of “economic” is ethical. Since welfare economics is concerned with policy measures, it involves ethical terminology, such as the increase of “social welfare” or “social advantage” or “social benefit”. Thus welfare economics and ethics cannot be separated.
They are inseparable, according to Prof. Little, “because the welfare terminology is a vague terminology. Since welfare propositions involve value judgments, the question arises whether economists should make value judgments in economics.” Economists differ over this issue. The neo-classical were concerned with the measurability of utility and the inevitable interpersonal comparisons of utility.
Pigou’s income-distribution policy, based on Marshall’ postulate of equal capacity for satisfaction, implied that interpersonal comparisons of utility were possible. Robbins, in 1932, led a frontal attack against this view. He maintained that if economics was to be an objective and scientific study, economists should refrain from making interpersonal comparisons, for policy recommendations tend to make some people better off and others worse off.
It is, therefore, not possible to make interpersonal comparisons, i.e. the welfare of one person cannot be compared with that of another. The majority of economists agreeing with Robbins switched over to the Paretian ordinal method in order to avoid interpersonal comparisons of utility. Kaldor, Hicks, and Scitovsky formulated the ‘compensation principle’ free from value judgments.
Accordingly, economists can make policy recommendations on the basis of efficiency considerations. The objective test of economic efficiency is that the gainers from a change can more than compensate the losers. But this test of increased efficiency implies a value judgment because the gainers from a change are able to compensate the losers.
The very idea of compensation involves value prescriptions. So even the formulators of the ‘New Welfare Economics’ have not been successful in building value-free welfare economics. Prof. Bergson also agrees with Robbins that interpersonal comparisons involve value judgments. But he along with Samuelson and Arrow holds that no meaningful propositions can be made in welfare economics without introducing value judgments.
Welfare economics, thus, becomes a normative study which, however, does not prevent economists from studying it scientifically. Even the Paretian general optimum theory is not value-free. It states that an optimum position is one from which it is not possible to make everyone better off without making at least one person worse off, even by reallocation of resources. This welfare proposition contains certain value judgments.
The Paretian optimum is related to the welfare of the individual. In order to attain the optimum position every individual act as the best judge of his welfare. If any re-allocation of resources makes at least one person better off without making others worse off, then the welfare of the society is said to have increased. These are all value judgments which Pareto could not avoid despite the fact that he used the method of ordinal measurement of utility.
Boulding’s view merits consideration in this controversy:
“Whatever may be the case in the Elysian Fields of pure economics, the social fact is that we make… interpersonal comparisons all the time, and that hardly any social policy is possible without them, for almost every social policy makes some people worse-off and some better-off. The Paretian optimum itself is a special case of a social welfare function, for if we assume this to be a social ideal it implies that nobody should ever be made worse-off, whereas most societies have defined certain groups (e.g., criminals or foreigners) who should be made worse off…”
What is the Time Value of Money? If an individual behaves rationally, then he would not equate money in hand today with the same value a year from now. In fact, he would prefer to receive today than receive after one year. The time value of money or TVM is a basic financial concept that holds that money in the present is worth more than the same sum of money to be received in the future. The time value of money is the greater benefit of receiving money now rather than later. It is founded on time preference. How do you Understand the Time Value of Money in Cost of Capital?
Here is explained the Time Value of Money in Cost of Capital.
Time value of money (TVM) is the idea that money that is available at the present time is worth more than the same amount in the future, due to its potential earning capacity. This core principle of finance holds that provided money can earn interest, any amount of money is worth more the sooner it is received. The time value of money explains why interest is paid or earned: Interest, whether it is on a bank deposit or debt, compensates the depositor or lender for the time value of money. It also underlies investment. Investors are willing to forgo spending their money now only if they expect a favorable return on their investment in the future, such that the increased value to be available later is sufficiently high to offset the preference to have money now.
The reasons cited by him for preferring to have the money today include:
The uncertainty of receiving the money later.
Preference for consumption today.
Loss of investment opportunities, and.
The loss in value because of inflation.
The last two reasons are the most sensible ones for looking at the time value of money. There is a ‘risk-free rate of return’ (also called the time preference rate) which is used to compensate for the loss of not being able to invest in any other place. To this, a ‘risk premium’ is added to compensate for the uncertainty of receiving the cash flows.
The required rate of return = Risk-free rate + Risk premium
The risk-free rate compensates for the opportunity lost and the risk premium compensates for risk. It can also be called as the ‘opportunity cost of capital’ for investments of comparable risk. To calculate how the firm is going to benefit from the project we need to calculate whether the firm is earning the required rate of return or not. But the problem is that the projects would have different time frames of giving returns. One project may be giving returns in just two months, another may take two years to start yielding returns.
If both the projects are offering the same %age of returns when they start giving returns, one which gives the earnings earlier is preferred. This is a simple case and is easy to solve where both the projects require the same capital investment, but what if the projects required different investments and would give returns over a different period of time? How do we compare them? The solution is not that simple. What we do in this case is bring down the returns of both the projects to the present value and then compare.
Before we learn about present values, we have to first understand future value.
Future Value:
Future value is the amount that is obtained by enhancing the value of a present payment or a series of payments at the given rate of interest to reflect the time value of money. If we are getting a return of 10 % in one year what is the return we are going to get in two years? 20 %, right. What about the return on 10 % that you are going to get at the end of one year? If we also take that into consideration the interest that we get on this 10 % then we get a return of 10 + 1 = 11 % in the second year making for a total return of 21 %. This is the same as the compound value calculations that you must have learned earlier.
Future Value = (Investment or Present Value) * (1 + Interest) No. of time Periods
The compound values can be calculated on a yearly basis, or on a half-yearly basis, or on a monthly basis or on a continuous basis or on any other basis you may so desire. This is because the formula takes into consideration a specific time period and the interest rate for that time period only. To calculate these values would be very tedious and would require scientific calculators. To ease our jobs there are tables developed which can take care of the interest factor calculations so that our formulas can be written as:
Future Value = (Investment or Present Value) * (Future Value Interest Factor n, i)
where n = no of time periods and i = is the interest rate.
Present Value:
When a future payment or series of payments are discounted at the given rate of interest up to the present date to reflect the time value of money, the resulting value is called present value. When we solve for the present value, instead of compounding the cash flows to the future, we discount the future cash flows to the present value to match with the investments that we are making today. Bringing the values to present serves two purposes:
The comparison between the projects become easier as the values of returns of both areas of today, and.
We can compare the earnings from the future with the investment we are making today to get an idea of whether we are making any profit from the investment or not.
For calculating the present value we need two things, one, the discount rate (or the opportunity cost of capital) and two, the formula. The present value of a lump sum is just the reverse of the formula of the compound value of the lump sum:
Present Value = Feature Value/(1 + i)n
Or to use the tables the change would be:
Present Value = Future Value * (Present Value Interest Factor n, i).
where n = no of time periods and i is the interest rate.
Perpetuity:
If the annuity is expected to go on forever then it is called perpetuity and then the above formula reduces to:
Present Value= A/i
Perpetuities are not very common in financial decision making as no project is expected to last forever but there could be a few instances where the returns are expected to be for a long indeterminable period. Especially when calculating the cost of equity perpetuity concept is very useful.
For growing perpetuity, the formula changes to:
Present Value= A/i – g
All these calculations take into consideration that the cash flow is coming at the end of the period.
Present Value of Future Money Formula:
The formula can also be used to calculate the present value of money to be received in the future. You simply divide the future value rather than multiplying the present value. This can be helpful in considering two varying present and future amounts. In our original example, we considered the options of someone paying your $1,000 today versus $1,100 a year from now. If you could earn 5% on investing the money now, and wanted to know what present value would equal the future value of $1,100 – or how much money you would need in hand now in order to have $1,100 a year from now – the formula would be as follows:
PV = $1,100 / (1 + (5% / 1) ^ (1 x 1) = $1,047
The calculation above shows you that, with an available return of 5% annually, you would need to receive $1,047 in the present to equal the future value of $1,100 to be received a year from now. To make things easy for you, there are a number of online calculators to figure the future value or present value of money.
Time value of money principle also applies when comparing the worth of money to be received in future and the worth of money to be received in further future. Time value of money is the concept that the value of a dollar to be received in future is less than the value of a dollar on hand today. One reason is that money received today can be invested thus generating more money. Another reason is that when a person opts to receive a sum of money in future rather than today, he is effectively lending the money and there are risks involved in lending such as default risk and inflation.
What is Goodwill?Meaning of Goodwill; Goodwill is the value of the reputation of a firm built over time concerning the expected future profits over and above the normal profits. So, what is the topic we are going to study; Valuation of Goodwill – Meaning, Need, Factors, and Methods (In Hindi). A well-established firm earns a good name in the market, builds trust with the customers, and also has more business connections as compared to a newly set up business. Goodwill in accounting is an intangible asset that arises when a buyer acquires an existing business.
Here are explained how to Valuation of Goodwill? Meaning, Need, Factors, and Methods.
Goodwill represents assets that are not separately identifiable. Goodwill does not include identifiable assets that are capable of being separated or divided from the entity and sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract, identifiable asset, or liability regardless of whether the entity intends to do so.
Valuation of Goodwill Meaning:
There are various circumstances when it may be necessary to value goodwill. Some of the circumstances are; First, In the case of a partnership, when there is an admission, retirement, death or amalgamation, or a change in the profit-sharing ratio take place, the valuation of goodwill becomes necessary. Secondly, In the case of a company, when two or more companies amalgamate, or one company absorbs another company, or one company wants to acquire controlling interest in another company or when the Government takes over the business, valuation of goodwill becomes necessary.
Third, In the case of a sole trader concern, goodwill is valued at the time of selling die business, to decide the purchase consideration. Finally, In the case of individuals, goodwill is valued for Estate Duty, Death Duty, etc. On the death of a person.
Need for Valuation of Goodwill:
Valuation of goodwill may make due to any one of the following reasons:
A Sole-Proprietorship Firm:
If the firm sells to another person.
It takes any person as a partner, and.
It converts into a company.
A Partnership Firm:
If any new partner takes.
Any old partner retires from the firm.
There is any change in the profit-sharing ratio among the partners.
Any partner dies.
Different partnership firms amalgamate.
Any firm sale, and.
Any firm converts into a company.
A Company or Firm:
If the goodwill has already been written-off in the past but the value of the same is to records further in the books of accounts.
An existing company taking with or amalgamated with another existing company.
The Stock Exchange Quotation of the value of shares of the company is not available to compute gift tax, wealth tax, etc., and.
The shares are valued based on intrinsic values, market value, or fair value methods.
Factors Affecting the Value of Goodwill:
The following factors affect the value of goodwill:
Location:
A business which locates in the main market or at a place where there is more customer traffic tends to earn more profit and also more goodwill. If the firm centrally locates or locate in a very prominent place, it can attract more customers, increasing turnover. Therefore, the locational factor should always consider while ascertaining the value of goodwill.
Time:
The time dimension is another factor that influences the value of goodwill. The comparatively old firm will enjoy a more commercial reputation than the other one since the old one is better known to its customers, although both of them may have the same locational advantages.
Nature of Business:
A firm that deals with good quality products or has stable demand for its product can earn more profits and therefore has more value. This is another factor which also influences the value of goodwill which includes:
The nature of goods.
Risk involved.
Monopolistic nature of the business.
Benefits of Patents and Trade-marks, and.
Easy access to raw materials, etc.
Capital Required:
More buyers may interest to purchase a business that requires a comparatively small amount of capital but the rate of earning a profit is high and, consequently, raise the value of goodwill. On the contrary, for a business that required a large amount of capital but the rate of earning a profit is comparatively less, no buyer will interest to have the business and, hence, the goodwill of the said firm pull down.
Owner’s Reputation:
An owner, who has a good personal reputation in the market, is honest and trustworthy attracts more customers to the business, and makes more profits and also goodwill.
Market Situation:
The organization has a monopoly right or condition in the market or having limited competition, enables it to earn high profits which in turn leads to a higher value of goodwill.
The trend of Profit:
The value of goodwill may also be affected due to the fluctuation in the amount of profit (i.e., based on the rate of return). If the trend of profit is always rising, no doubt the value of goodwill will be high, and vice versa.
The efficiency of Management:
Efficient management may also help to increase the value of goodwill by increasing profits through properly planned production, distribution, and services. An organization with efficient management has high productivity and cost-efficiency. This gives it increased profits and also high goodwill. Therefore, to ascertain the value of goodwill, it must note that such efficiency in management must not be curtailed.
Special Advantages:
A firm that has special advantages like import licenses, patents, trademarks, copyrights, assured supply of electricity at low rates, subsidies for being situated in a special economic zone’s (SEZs), etc. possess a higher value of goodwill.
Other Factors:
The condition of the money market.
The possibility of competition.
Government policy, and.
Peace and security in the country.
Precaution to Take in Valuing Goodwill: We know that the amount of goodwill always pays for in the future. The buyer will pay a little more than the intrinsic value of assets only when he expects that he will enjoy some extra benefits from such goodwill shortly. On the other hand, if the buyer thinks that there is no possibility of having such advantages in the future, he will not be ready to pay anything for goodwill—even if the value of goodwill is very high.
Valuation of Goodwill: Meaning, Need, Factors, and Methods. Image credit from #Pixabay.
Methods of Valuing Goodwill:
There are two methods of valuing goodwill:
Simple profit method, and.
Super-profit method.
Simple Profit Method:
There are two methods based on simple profit:
Purchase of Past Profit Method, and.
The capitalization of the Average Profit Method.
A. Purchase of Past Profit Method:
Under this method, goodwill is expressed as a purchase of a certain number of years’ profit based on the adjusted average profit of a given number of years.
This method involves two steps:
The profits for an agreed number of years preceding the valuation average to arrive at the average annual profit earned during that period. This will have to adjust in the light of future possibilities and the average future maintainable profit determined. If the profits have been fluctuating, a simple average use. If profits show a steadily increasing or decreasing trend, appropriate weights are used giving greater weightage for profits of the later year.
The average future maintainable profit is multiplied by a certain number of years to find out the value of goodwill. The number of years selected for this purpose base on the expectation of the number of years’ benefit to derive in the future from the past association.
For example, if the average future maintainable profit is Rs.25, 000 and it expects that this profit would earn for at least another 3 years, then the goodwill will be:
Goodwill,
= Rs. 75,000 (25,000 x 3).
= Average of profit x number of years.
The number of years over which the profits are averaged and the number of years’ purchase applied may vary considerably in practice but generally falls between one and five years. Estimating future profit beyond a period of say, 5 years would be quite difficult and unrealistic.
The method suffers from two defects:
The difficulty of finding out the right number of years’ purchase of profits as it depends on so many factors and
Ignoring capital to employ in the business.
B. The capitalization of the Average Profit Method:
The following steps are to take in ascertaining the value of goodwill under this method:
Ascertain the average future maintainable profit, as explained already.
Capitalize this average profit at the normal rate of return on investment on the type
Of business under consideration:
This will give the net worth of the business.
Find out the value of net tangible assets (i.e., net assets other than goodwill) of the business.
Deduct the net tangible assets from the capitalized net worth of the business and the difference is goodwill.
Super-Profit Method:
Strictly speaking, goodwill can attach only to a business that is earning above-normal profits of super-profits. If there is no anticipated excess earning over normal earnings, there can be no goodwill.
Such excess profits know as super-profits and it is the difference between the average profit earned by the business and the normal profit based on the normal rate of return.
Hence for finding to the super-profits, the following information will require:
The estimated average future profits of the firm (ascertained as already explained),
The normal rate of return on investment and
The fair value of the average capital employed in the business.
The normal rate of return:
The normal rate of return refers to the rate of earnings that investor, in general, expect on their investments in a particular type of industry. It varies depending upon general factors like the bank rate, general economic conditions, political stability, etc., and specific factors like period of investment, risk attached to the investment, etc.
Normal profit and Super-profit:
If the average capital employed and the normal rates of return know, the normal profit can ascertain. For example, if the average capital employed is Rs. 1, 00,000 and the normal rate of return is 10%, the normal profit is 1, 00, 000 x 10/100 = 10, 000.
Super-profit is the simple difference between the actual average profit earned and the normal profit. If in the above example, the average profit is Rs. 25,000, then the super-profits will be Rs. 25,000 – Rs. 10,000 = Rs. 15,000
Goodwill based on Super-Profit:
There are four methods of calculating goodwill based on the super-profit.
They are:
Purchase of super-profits Method,
Sliding-scale Valuation of Super-profit Method,
Annuity of Super-Profit Method and
The Capitalization of Super-Profit Method.
1. Purchase of Super-profit Method:
Goodwill as per this method = Super profit * Number of years. If, for example, the super-profit is Rs. 15,000 and goodwill agree to be 3 years’ purchase of super-profits, then the goodwill will be s.45,000 (15,000 * 3)
2. Sliding-scale Valuation of super-profits Method:
This is the only variation of the first method. It is based on the logic that the greater the number of super-profits, the more difficult it would be to maintain. Higher profit will naturally attract competition and soon the firm’s ability to make super-profits is curtailed.
3. Annuity super-profit Method:
Under this method, goodwill calculates by finding the present worth of an annuity paying the super profit per year, over the estimated period discounted at the given rate of interest. Usually, the reference to the Annuity Table will give the present value of an annuity for the given number of years and at the given rate of interest.
Goodwill = super-profit * annuity.
For example, if the super-profits are Ts. 15,000 and the annuity of re. 1 at 10% for 3 years is 2.48,685, then the goodwill is = Rs. 15,000 * 2.48,685 = Rs. 37,302.75. This method takes into consideration the interest loss involved in paying a lump sum as goodwill in anticipation of the future of profit.
4. The Capitalization of Super-Profit Method:
This is similar to the capitalization of the average profit method as already explained. Under this method, the super-profits when capitalized at the normal rate of return will give the value of goodwill.
Goodwill,
= Rs. 1, 50, 000 (Rs. 15, 000/10 x 100).
= Super Profit/Normal rate of return x 100.
This method gives the maximum value for goodwill. Since the contention that super-profits will continue for long is unreasonable, this method is not safe for one to follow.
FedEx as a service company that mainly focuses on transportation or shipment services, channel played an important role leading to success. FedEx need a good channel to get and reach more customers. FedEx has a strong network structure linking all the market together. FedEx serves more than 220 countries and territories currently. Further, these networks are linked up by land, air and ocean transportation. Also learn, Case Study of Using Marketing Channels to Create Value for FedEx Customers, with How companies create value for customers? How is Value Created and What Does It Do?
Understanding and learn what? Case Study of Using Marketing Channels to Create Value for FedEx Customers.
FedEx’s service covered all around the globe, making services available for customers from many countries and almost every place. FedEx has many drops off location around the globe. A customer can choose either one drop- off location that is nearest to them.
FedEx has great air network, having more than 320 daily international flight and 654 aircraft ready to ship the packages. FedEx has many hubs around the world working as a midpoint for delivering the packages. There are four hubs in the Asia Pacific. That is Shanghai, Osaka, Seoul and Guang Zhou. Besides, FedEx has hubs in London, Cologne, Frankfurt, and Paris which will later ship the parcel around the European area. Moreover, hubs that link Latin America, the Caribbean and Canada were in Memphis and Miami.
One thing that makes FedEx so special out of so many transportation or shipping company is the collection of airplane uses by FedEx in order to ship the parcel. FedEx is the first company who use the plane called the Boeing 777. The uniqueness of the plane is the plane is a fuel saver. It shorter the transit time with larger space to put the parcel. This had made the overnight courier service possible.
FedEx was famous for its overnight service. Customers can receive their packages at the same time on the next day. The strong backbone of shipping network structure by FedEx makes this service available. An example is given to explain how FedEx manage to ship the parcel between 24 hours and reach 10.30am. A customer decided to ship his parcel from Shang Hai to New York City. FedEx pick up the shipment in time to make the same-day trans-oceanic flight. FedEx picked up the package from the client at the time of 4:50 pm, Tuesday. The package was delivered to Shang Hai’s facility for sorting process.
Then, the package reaches Shang Hai Pudong International Airport at 9:30 pm. At 11:30 pm, the package leaves China and in the Boeing 777 aircraft on the way direct to Memphis, Tenn. The flight travel east of the Pacific Ocean and passed the International Date Line. At the time 11:30 pm, the package arrived in Memphis. In Memphis, the package was on loaded, cleared, sorted and reloaded on to a flight from Memphis to Newark. In Newark, the shipment ship by truck to New York City. This is how the package from Shang Hai reach the client in New York City and at the time 10:30 am Wednesday.
From the example, the package was first picked up and sends to the facility for the process, then to the airport. The package then reaches the hub and been process again. Finally, the package was delivered by motorized vehicle. FedEx has more than 43,000 motorized vehicles which make FedEx manage to reach many places in the different country. Example of motorized vehicle commonly used by FedEx was trucks, vans, containers, and also tricycles.
FedEx delivered by electrically-assisted tricycles in Paris to avoid the traffic jam in order to ship in time. The tricycle was designed to put packages back on the tricycle. It has a removable storage container that places between the back two wheels. It is 100 percent electrical and it has to start manually. It is 100 percent eco-friendly and it enables delivery work more efficient even faster than a car or truck.
FedEx not only ship with aircraft and motorized vehicles, but also by ocean cargo. It provides another choice for the customer to choose from. The ocean cargo services provided by FedEx linking North America, Latin America, the Asia-Pacific region, Europe and the Middle East together. Besides, FedEx has enough amount of ocean cargo to make their services, choosing the space of cargo available.
For example, allow the customer to have full-container-load (FCL) for the user that need huge space and less-than-container-load (LCL) for those customers that does not need so much cargo space. Further, FedEx has ocean cargo with the different facility like the refrigerator, onboard cranes, on the cargo ship to provide the service like ship dry or liquid bulk shipments and handle heavy shipments to smaller ports.
Moreover, customers usually expect their package to ship in time with good condition. FedEx understand that and come out a solution that is provided packing service. It tried to help in avoiding damage in packages. In order to make the service available, one of the FedEx’s subsidiaries company was designed to become one of the channels in helping customers to pack their packages. So, customers can now bring their package to any of the FedEx Office and ask for pack up service.
Further, FedEx knows that this the era of information technology. Everyone seems to be online often and many things can be done online. FedEx understand that there is a need to open a website as a channel in order to make the service available for more people, especially for those who seldom go out and always do online shopping. The website makes the process of shipping easier. Everyone can use the service. Now, FedEx’s customer can ship online with few steps and avoid many processes of filling up the forms.
FedEx reach customers in many different ways. Beside of online, by air, by land, and by sea, FedEx reach customers by telephone and fax. This is another channel provided by FedEx to the customer called and picks up service. In order to provide convenience to the customer, understanding some people might think lazy to go out just for dropping a small package, and also for people who definitely very busy and lack of time, called and pick up service is a very good way to reach them. The customer can just dial FedEx’s customer service number and ask for a pickup. FedEx will pick up the package from you and the great thing was the time count once the package was picked up by them. Further, Customer can fax to the company to have the service.
In another hand, mobile phone or smartphone are using as a channel to reach more customers. Smartphone becomes very popular nowadays. People tend to have one smartphone to do many tasks on the go. FedEx makes the website of FedEx available for the smartphone user, trying to attract more customers to use their service. FedEx customer can do tracking of the parcel, schedule a pickup, and even billing by using the phone. It makes the service become very convenient especially for those who usually travel around and wish to deliver their parcel.
FedEx understands the importance of customer service. So, a company called FedEx Service is there specialized in information technology. They providing back up and information like tracking information, customer’s detail, and customer’s history of using FedEx’s services, estimate the duties and taxes and handle the claims and complaints. Besides, the company also provides information about the service and company. It is to make the customer service and online tool available at all the time whenever customer needed them. Furthermore, it is a guide for the customer because much information was provided on the website.
One of the channels in marketing is the employee. As a service provider, the employee is the first who reach the customer and make the service available. It often leads to satisfaction of the customer. In order to make the service delivery to a certain standard, the employee is trained. The employees required to test every six months to ensure their skills meet minimum acceptable requirements. Extra training was required for those who have not met the minimum requirement. Employees need to go through computer-based training, satellite broadcast training, and staff-conducted training in order to perform the service to the customer.
FedEx’s channels are backed by the computer system called COSMOS. That is Customers, Operations, and Services Master Online System. It is a centralized computer system to manage people, packages, vehicles and weather scenarios in real time. It is to make sure all the channels are working properly.
How companies create value for customers?
With these concepts in mind, think about ways you can improve customer value to grow your business. This is article presenting by inc.com. Here are 5 steps you can take:
Step 1: Understand what drives value for your customers.
Talk to them, survey them, and watch their actions and reactions. In short, capture data to understand what is important to your customers and what opportunities you have to help them.
Step 2: Understand your value proposition.
The value customers receive is equal to the benefits of a product or service minus its costs. What value does your product or service create for them? What does it cost them–in terms of price plus any ancillary costs of ownership or usage (e.g., how much of their time do they have to devote to buying or using your product or service?)
Step 3: Identify the customers and segments where are you can create more value relative to competitors.
Different customers will have varying perceptions of your value relative to your competitors, based on geographic proximity, for example, or a product attribute that one segment may find particularly attractive.
Step 4: Create a win-win price.
Set a price that makes it clear that customers are receiving value but also maximizes your “take.” Satisfied customers that perceive a lot of value in your offering are usually willing to pay more, while unsatisfied customers will leave, even at a low price. Using “cost-plus” pricing (i.e., pricing at some fixed multiple of product costs) often results in giving away margin unnecessarily to some customers while losing incremental profits from others.
Step 5: Focus investments on your most valuable customers.
Disproportionately allocate your sales force, marketing dollars, and R&D investments toward the customers and segments that you can best serve and will provide the greatest value in return. Also, allocate your growth capital toward new products and solutions that serve your best customers or can attract more customers that are similar to your best customers.
Your customers are the lifeblood of your business. They are the source of current profits and the foundation of future growth. These steps will help you find more ways to grow your business by better serving your best customers.
How is Value Created and What Does It Do?
Value is created just as much by a focus on processes and systems as much as it is my mindset and culture. Mindset and culture are much more difficult to change, and also difficult to emulate. It is easier to copy products and systems than to change mindsets and culture. Therefore, for long-term success, mindset and culture are important and lasting. These, along with systems create great experience and value.
Value changes during the use of a product or during the Customer Journey. Value is perceived during the purchase intent, the shopping, the actual purchase or buying, the installation or start-up, the use, and even the re-sale. We sometimes call this the waterfall of needs. Needs change during the Customer Journey.
Creating Customer Value increases customer satisfaction and customer experience. (The reverse is also true. A good customer experience will create value for a Customer). Creating Customer Value (better benefits versus price) increases loyalty, market share, price, reduces errors and increases efficiency. Higher market share and better efficiency lead to higher profits.
