In financial terms, we can argue that value creation occurs when the investment returns exceed the cost of capital. On the other hand, customers perceive value when the service or product exceeds their expectations. Value creation is a corporate goal that, in conjunction with other goals, shapes and determines how decision makers at all levels evaluate alternative strategies. The focus on value affects the decision-making process and performance evaluations. As markets become more competitive and shareholders exercise their rights, management must maximize value creation.
Value occurs at many different levels in the organization.
Each organizational level has different variables and performance metrics that drive the value creation. A production supervisor, for instance, may measure value in terms of increased throughput and faster inventory turnover. Corporate managers, for their part, may measure value in terms of return on invested capital or earnings impact. Different stakeholders in the business perceive value differently. Just as the context of the organization level shapes the value metrics, so do the various stakeholder perceptions.