Value structural drivers

Structural Drivers of Value Creation in the Chemical Industry... 

Structural Drivers of Value Creation in the Chemical Industry Eric Bartels, Thomas Augat, and Florian Budde 27... 

A perfect structure and process flow does not necessarily mean that the supply chain is performing well. For this purpose, key performance indicators and the drivers for the economic value added (EVA) are calculated. 

Figure 8a. Grid of energy differences between results from the standard MM2 option -1 driver and the modified option -2 driver. Positive values indicate that the -2 driver gave a lower value (gtgtRR starting structures only).

Perfect capital markets should see through the cycle and the reaction of valuations to purely cyclical fluctuations in the industry return on capital should be insignificant. To examine this, we again compared the actual valuation level to a fundamental predicted valuation level for commodity chemical companies. To pinpoint the effects of cyclicality, however, we used a slightly different approach. As we wanted to evaluate capital market expectations, we compared the actual valuation level with a fundamental valuation level based on perfect foresight , i.e., assuming that the capital market knew the actual development of the key value drivers for the next 8 years and evaluated this information in line with its implied fundamental value creation.4 Furthermore, we used a capital structure-adjusted market-to-book ratio instead of an earnings-based metric for the valuation level. 

Our discussion so far has dealt with the broad context of value drivers and has not dealt with their application to network performance planning in any network structure the partners are a series of suppliers and customers, and at each transaction point both expect to meet the performance requirements of their value drivers. 

Essentially, value drivers are performance drivers for each network partner and transactions are negotiated around the notion of optimizing the performance of the outcome of the transaction such that each partner has the result that meets the satisfaction of internal stakeholders (employees and shareholders) and external shareholders (end-user customers). Without this outcome, the longevity of the network structure is in doubt either it will fail due to the lack of overall economic viability or it will undergo structural (or repositioning activities) in order to find a structure that meets the returns expectations of all partners. 

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