Discussion Topic 3
This is a 2-part assignment
Please make an initial post of a minimum of 200 words
Requires correct grammar and at least one citation in proper APA style.
For this discussion, you will read from the Annual Editions: Maidment, F. (2013). Annual Editions: Management (17th ed.). New York, NY: McGraw-Hill/ Dushkin.
ISBN-10: 1121833810 or ISBN-13: 9781121833814 textbook article, “From Maximizing Shareholder Value to Delighting the Customer,” and then answer the following questions:
1. What is the difference between delighting the customer and increasing shareholder value?
2. Which strategy do you think makes the most sense?
Please respond to the two initial posts given with a minimum of 100 words each.
I don’t believe that there is a difference between delighting the customer and increasing shareholder value. This is because delighted customers do increase shareholder value. When customers are happy with a company, the shareholders can be assured of their loyalty and return business. This drives shareholder value up.
Consumers are getting more and more sophisticated. They will tolerate low quality products and less than excellent service less and less. When a company tries to increase shareholder value by raising prices or cutting costs that result in lower quality, their customers are driven away, and shareholder value goes down.
The better strategy is to focus on the customer experience and let the shareholder value rise naturally. This means being intentional about costs, choosing to spend less money when it does not lower the quality of the product or service offered. The same holds true for setting the prices the company charges the customer. The company will need to cover its costs and turn a profit but should not charge more than the customer feels the product or service is worth. Setting the price correctly and providing a quality product or service will allow the customer to be happy and the company to make money to pass on to shareholder.
Increasing shareholders’ value places the company’s primary focus on the shareholders quarterly returns. This approach is forcing the company to make short term profits the company’s only goal. So, if you are a CEO and want to retire early in life you would not concern yourself about the longevity of the corporation only increasing the value of your stocks as quickly as possible so you can cash out. If the company bankrupts who cares, you are rich and everyone else is out of a job. Customer delighting focus is long-run longevity. The company still wants to see quarterly profits, but not to the point where innovation is sacrificed. Some of the profits must be spent on improving products, updating equipment, training employees, wage increases to maintain that employee’s employment, and the willingness to not profit one quarter in order to profit the next fifty quarters.
I believe that delighting the customer is the better strategy. The textbook stated that Procter & Gamble said, “consumers first and shareholders naturally follow” (Maidment, p.53). I as a shareholder would rather receive a modest profit quarterly for thirty years than profit substantially for a brief period. If P&G had tried to cover up the poison aspirin incident for the sake of higher quarterly profits, the company may have gone bankrupt. P&G’s willingness to take a hit for a few quarters has built customer trust and loyalty. Since this loss, P&G customers’ commitment has led to many profitable quarters, leading to greater gains for the shareholders.