Jiali7_600_Workshop1_Intro to Financial Management_Amy0816
Students Name
Institutional Affiliation
Date
Part 1 (opinion)
For an Australian company to align itself with the changing global trends, it needs to take advantage of environmental conservation measures. It would be imprudent to fail to change the policy of rearing cattle from land that has been deforested. Therefore, a company needs to ensure that it has a positive outlook that will not be fostered by continuing with policies that destroy the environment in the long run.
Environmental Conservation gives the company a unique opportunity to explore new methods of producing beef and contribute to the welfare of the stakeholders, to whom the Environment Matters. Therefore, increasing the wealth and value of the shareholders will depend directly on the company’s ability to improve the welfare of the environment and stakeholders. This aspect allows the company to explore new ways of producing beef that is more sustainable and friendly.
Therefore, innovation is another tool that will also add to the company’s valuation directly and impact the value of stakeholders. In the short term, it would be prudent to stick with the current production methods because the company has perfected them over time and instituted measures that ensure the flexible running of operations. It is appreciable that as a long-term approach, it might guarantee continued low production costs. The benefits of this approach, however, are far outweighed by the demerits of the proposal. As such, it will be easier to absorb the slumping business that would come from changing the paradigm of production to reap benefits in the long run.
Part 2 (essay)
Shareholder value maximization is a term that found common usage in business parlance in the early 80s in the corporate world. The term shareholder value maximization refers to a situation in which a company exists to increase the value and monetary wealth of its shareholders. Shareholder value alluded to, in this case, is either the market capitalization of a company or the company’s stocks’ overall trading value.
The idea that the shareholders’ wealth should increase as a company’s operations continue is held sacrosanct by the shareholders who invest in a company. In the case of the Australian beef company, the unique situation that the company faces are that of external changes (Freeman, 1984). Occasioned by global warming and awareness in environmental destruction, change has led to consumer preferences and legislation choices. Australia is the only developed country that features prominently on the list of countries that actively undertake deforestation.
Awareness is increasing amongst consumers globally as to the harmful effects of clearing forest land to create pastures for the rearing of livestock. The global beef industry is set to reorganize itself.
Management should adopt a flexible method of securing shareholder value. At the moment, they may affect the current value of the stocks but protect the long-term valuation of stocks. In addition to that, given the shareholder value maximization, it ought to be multifaceted. It is prudent for the company management to ensure that the values they create are managerial and systemic, as opposed to descriptive and rigid (Freeman, 1984). Thus, any company needs to ensure that it listens to and adapts to the changes that are external to instabilities. In this case, the company can pursue innovative methods of producing beef for the mass market.
References
Freeman, R. E (1984). A Stakeholder Approach to Strategic Management. SSRN Electronic Journal. 10.2139/ssrn.263511.
Kessler, W., McGinnis, L., Bennett, N., Bodner, D. A., & Lee, I.-H. (2012). Organizational simulation in support of global manufacturing enterprises. Information Knowledge Systems Management, 11(1/2), 101–117.