.Value Creation Definition
There is talk of Value Creation as the ability of companies or societies to generate wealth or profit through their economic activity.
In the area of strategic management, it is defined as the main objective of commercial companies and their reason for being.
In the economic and especially business literature, the aim of a company has been from its origin the search for the maximum possible profit.
The theory of the company has currently developed this idea and points out that it is the factor to take into account when designing a business plan and operating in an activity.
According to the theory of the company, commercial or economic organizations base their work and operation on value creation.
What is the Measurement of value creation?
The accounting of the created value has a large number of modalities and possibilities in the economic literature within the strategic direction.
- In other words, it is a field of analysis and study in which the concept of value itself is subjective. And also, varies according to the author or researcher.
- For this reason, It is a difficult parameter to accurately estimate.
- The most extensive trend takes into account the benefit obtained. But it also necessarily specifies those costs that the company has incurred in achieving it.
- Logically, if the results obtained are quantitatively greater than the resources used in economic activity. We will say that there has been a creation of value.
What is the Difference between company value and value creation?
- It is important not to confuse the concept of it with the value of a company. Since it is often an existing problem and needs explanation.
- The main difference between both definitions is that the value of a company is a background variable.
- While the creation of value is flow and takes place in a period of time in question.
- It is true that both variables influence each other since large companies have greater possibilities of creating more value.
- And also, alternatively, a company that manages to create a lot of value has more possibilities of survival and of becoming a bigger company.