Creating Value: Actions that Make a Difference

Which of these actions creates value?

a. Buying a struggling firm and selling off its assets for more than the purchase price.

b. A baseball slugger drawing paying fans into the ballpark.

c. A student increasing his decision-making ability with an MBA.

Answer:

Both option (a) buying a struggling firm and selling off its assets for more than the purchase price, and option (b) a baseball slugger drawing paying fans into the ballpark create value in different ways.

Option (a) creates value by utilizing business acumen to identify undervalued assets and subsequently selling them for a higher price. This action involves strategic decision-making, financial analysis, and market expertise. By acquiring a struggling firm and maximizing the value of its assets, the buyer generates a profit and potentially revitalizes the business. This process can lead to job retention, increased economic activity, and the potential for future growth.

Option (b) creates value by attracting paying fans to the ballpark through the skill and entertainment provided by a baseball slugger. The slugger's performance, charisma, and ability to hit home runs captivate the audience, resulting in increased ticket sales, concessions revenue, and overall fan engagement. This generates revenue not only for the slugger but also for the team, supporting player salaries, stadium maintenance, and other operational expenses. Additionally, the increased attendance and fan enthusiasm can have positive effects on the local economy, benefiting businesses in the surrounding area.

In contrast, option (c) of a student increasing their decision-making ability with an MBA primarily creates personal value for the student rather than direct economic value. While acquiring an MBA can enhance an individual's skill set and knowledge, enabling them to make better decisions in their professional career, the value generated is primarily at an individual level rather than in the broader economic context. However, it is worth noting that individuals with improved decision-making abilities can indirectly contribute to the overall economy by making more informed and effective decisions in their respective roles.