Evaluate other Business Models than Profit
- Evaluate other firm business models: This is possible by redefining S&OIS’s objective function; i.e.; what S&OIS is tasked to determine to be “best possible” for the firm. Different objective functions allow the firm to compare different approaches to firm value. They include:
- Profit
- Revenue: This sacrifices profit as it includes fulfilling demand that is unprofitable
- Customer relationship: Quoting Marketing and Firm Value, Hanssens et al, Foundations and Trends in Marketing, pages 39-40. “…monetizes the expected value firm’s customer relationships as proxy for the firm’s future financial outlook” Also, see “Modeling Customer Lifetime Value,.
- Economic Value Added: Used to evaluate firm’s economic performance. It is based on the concept of shareholder value. It is computed by subtracting the company’s cost of capital from its net operating profits.
