Remove Cost of Capital Remove Industry Remove Marketing Remove Operations
article thumbnail

Adapt Your Strategy to Higher Interest Rates

Harvard Business Review

While many executives and investors were thrown by last year’s interest rate increases, the cost of capital needn’t be a threat. Companies that integrate the cost of capital into their strategy and planning reap real benefits. When something is cheap, people waste it.

EPS 22
article thumbnail

What’s Driving Superstar Companies, Industries, and Cities

Harvard Business Review

To analyze the superstar dynamics of firms, our metric was economic profit, a measure of a firm’s profit above and beyond opportunity cost. (To To do this, we take the firm’s returns, deduct the cost of capital, and multiply by the firm’s total invested capital.)

Insiders

Sign Up for our Newsletter

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

article thumbnail

CEOs Don’t Care Enough About Capital Allocation

Harvard Business Review

” A quarter century later, not much seems to have changed: fewer than five out of the 100 CEOs on HBR’s 2014 list of best-performing CEOs even mention “return on capital” on their official biography — and none of those five lead companies listed in the Dow Jones Industrial Average (DJIA) or in the EuroStoxx50. .”

CEO 8
article thumbnail

How to Quantify Sustainability’s Impact on Your Bottom Line

Harvard Business Review

We chose Brazil’s beef industry as the location of our case study , both for the size and complexity of the industry and for its impact on the planet. We found that sustainable and deforestation-free practices created significant financial benefits for all players in the industry’s value chain. of revenues).

article thumbnail

Shutting Down Stores Doesn’t Have to Be Bad for Business

Harvard Business Review

Managing death more effectively can provide numerous benefits: It can boost profits significantly, lower the cost of capital, and reduce complexity in operations, which can improve the performance of concepts that are in the early and midlife stages. Managers also frequently did not discount deeply enough early in a liquidation.

Retail 8
article thumbnail

We Can’t Study Short-Termism Without the Right Metrics

Harvard Business Review

While a laudable effort in principle, measuring a company’s tendency to make myopic operating and investing decisions is fiendishly complex. But the other indicators probably pick up legitimate differences in how companies in the sample operate, as opposed to whether they are myopic.

EPS 8
article thumbnail

Should Companies Retain "Strategic" Cash?

Harvard Business Review

To enhance financial flexibility, companies have been retaining unprecedented amounts of cash on their balance sheets, calling it "strategic" cash to distinguish it from the "operating" cash that is needed to run the business. energy or telecom) or research-intensive industries (e.g., Facilitate Investments.

Company 13