Analysis Of Critical Value-Driven Factors And Value-optimization Approach Of Enterprises Based On Value Management And Its Case Studies

Value-based management, which is a new kind of enterprise management model, is promoted with the progress of modern capital market and firm institution. It makes the value philosophy as the core of the principle position in the enterprise management, and it concentrates on promoting the overall value of the enterprise. However, as a result of history, most of our enterprises are lack of value-based management philosophy. They are still chasing formalization and multiplication blindly and focusing on annual financial targets one-sidedly. So they can not maintain their competitive advantages. This has been a bottle-neck hindering the existence and development of our enterprises. In regard of this, we consider that our enterprises should abandon their obsolete management idea and set up the value-based management philosophy.But value-based management is an all-embracing management system; it is difficult to be utilized in the enterprise management. So it is necessity for us to explore a simple and effective system to promote value-based management model. As we know, the effective value creation strategy is the core of value-based management, and the difficulty of the forming of the value creation strategy lies in distinguishing critical value-driven factors and choosing an appropriate value-optimization approach. Based on such background, our prime task is to excavate critical value-driven factors hiding behind enterprises and then to explore a simple effective value-optimization approach.We consider that the critical value-driven factors are composed by the profit, the growth and the risk. Corresponding, the duties of value-based management are composed by the pursuing of the profit, the management of the growth and the control of the risk. We will quote the free cash flow commutation model to prove the above viewpoint specifically in this paper. Because different enterprises face different strategic challenges, we consider that their balance points between the profit, the growth and the risk are dissimilar. Therefore, each enterprise’s concrete value-optimization approach is not same. But each enterprise’s basic value-optimization approach is the same. Each enterprise should try their best to make a reasonable three dimensional balanced relation between the profit, the growth and the risk, and to establish an appropriate value-optimization approach to create value.At the last part of this paper, we made an empirical study on the Chenming Paper Group. After analyzing critical value-driven factors of the Chenming Paper Group very thoroughly, we consider that the Chenming Paper Group is lack of the value-based management philosophy. Because of its chasing formalization and multiplication blindly, its core competitive advantages have not been able to be established truly, and it has fell into an awkward region of big but not strong now. If the Chenming Paper Group wants to get rid of this predicament, it has to change its obsolete management idea and set up the philosophy of value-based management at first. Secondly, it should abandon its obsolete formalization and multiplication strategy, and establish a new strategy. It should pay greater attention on the growth in its management. Finally, we propose three concrete value-optimization approaches according to the actual present situation of the Chenming Paper Group.This paper’s main innovation spots include that:(?) We quota the free cash flow commutation model to proof that critical value-driven factors hiding behind enterprises are composed by the profit, the growth and the risk. And we statement that the duties of value-based management are composed by the pursuing of the profit, the management of the growth and the control of the risk. We also consider that each enterprise’s balance point between the profit, the growth and the risk is dissimilar because of their different strategic challenges. Each enterprise should try their best to make a reasonable three dimensional balanced relation between the profit, the growth and the risk and to establish an appropriate value-optimization approach by transforming their management mentality.(?) When making empirical study, we pay a great attention on applying the front finance theoretical in anglicizing realistic question. For example, we use the reorganization financial reporting technology to separate the non-managerial property and the capital structure from the managerial property, thus we can remove the deviation caused by the non-management achievements. Moreover, we use the restructuring sustainable growth model founded by Professor Fan Xing Jian of Southwestern University of Finance and Economics to analyze the actual growth constitution of the Chenming Paper Group.(?) We pay much attention on the financial data when anglicizing the management achievements. But we pay more attention on excavating the deep reasons caused by the non-financial factor. For example, when analyzing the return on the invested capital of the Chenming Paper Group, we discoverer that the drop of gross profit rate and property operation efficiency are related with not-booming of market and own unreasonable product mix. And its unreasonable product mix is the primary reason. In our opinion, the Chenming Paper Group has been suffered from the big enterprises’ diseases because of its chasing formalization and multiplication blindly.