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Understanding the Logic - Overview

The overall logic of MikesBikes-Advanced is captured in the diagram above. The ultimate objective is assumed to be to maximize value to the shareholder. This is determined by current and future profits and by (largely uncontrollable) exogenous factors that relate to economic conditions and competitors' actions. The first of these is less controllable than the second, since competitors can be influenced by a variety of legal (e.g. signaling) as well as illegal activities (e.g. collusion).

Current profit is determined by the interaction of demand and supply, and future profit is determined by investments in product, plant and acquisitions, etc.

Future profit and current profit are determined by the interaction of business strategy and the competitive actions. And business strategy is assumed to come from marketing, operations, finance, human resources and product development. (Information technology is an area that is largely unrepresented in this model.)

In This Section

Logic - Competitor Analysis

Logic - Marketing

Logic - Finance

Logic - Demand

Logic - Shareholder Value

Logic - Operations

Logic - Product Development

Logic - Accounting

See Also

Introduction

Measuring Your Firm's Success

Background to the Industry

Developing a Long Term Strategy

Screen - Main Decision

Factors to consider in making decisions

Viewing and Copying Reports

Firm Performance Indicator

Key Performance Indicators (KPIs)