Economic Value Creation for Long Term Development

1. Economic value creation for long term development

The sum of producer surplus and the consumer surplus generates the economic value. The producer surplus is the difference between the price that sellers offer and the cost of the resources employed. Meanwhile, the consumer surplus is seemed as the difference between the price consumers actually pay for goods and services and the highest price they willing to pay. Due to buyers are willing to pay a higher prices for the products, the more value will be created if any good or service can satisfy the present needs of the consumers better. Likely, if the producer can use better technology or integrate resources more effectively or pay lower prices for all of them, then the economic value is created again. Once the consumers maximize their utilities and the companies maximize profits for their owners, an economic optimum in terms of the maximization of social value for the whole economy is reached. To let this happen, firms should know that value is not built based on the independent contributions of isolated factors but by cooperation among the factors (Freeman et al., 2004). There are social and ethical problems which effect the results and legitimacy of the process. If the companies want to create value for stakeholders, they should find out the way to balance benefits for all of them. For example, employees always seek the intangible extrinsic value which is provided by the company such as training courses or recognition. Intangible extrinsic value is complementary to economic value because employees also want to be recognized by their company beside salary or a substitute for it like an honorary distinction may be a form of remuneration, in place of a salary increase.

2. Bringing powerful ability for good management and strong influence to organization

Most definition of stakeholders involves some element of power (Mitchell et al.,