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21-438: In business, total value added is calculated by tabulating the unit value added (measured by summing unit profit — the difference between sale price and production cost , unit depreciation cost, and unit labor cost ) per each unit sold. Thus, total value added is equivalent to revenue minus intermediate consumption . Value added is a higher portion of revenue for integrated companies (e.g. manufacturing companies) and

42-617: A classification of stakeholders to consider has been criticized as creating a false dichotomy between the "shareholder model" and the "stakeholder model", or a false analogy of the obligations towards shareholders and other interested parties. Any action taken by any organization or any group might affect those people who are linked with them in the private sector. For examples these are parents, children, customers, owners, employees, associates, partners, contractors, and suppliers, people that are related or located nearby. Broadly speaking there are three types of stakeholders: A narrow mapping of

63-430: A company's stakeholders might identify the following stakeholders: A broader mapping of a company's stakeholders may also include: In the field of corporate governance and corporate responsibility , a debate is ongoing about whether the firm or company should be managed primarily for stakeholders, stockholders ( shareholders ), customers , or others. Proponents in favor of stakeholders may base their arguments on

84-452: A lower portion of revenue for less integrated companies (e.g. retail companies); total value added is very nearly approximated by compensation of employees , which represents a return to labor, plus earnings before taxes , representative of a return to capital. In microeconomics , value added may be defined as the market value of aggregate output of a transformation process, minus the market value of aggregate input (or aggregate inputs) of

105-400: A transformation process. One may describe value added with the help of Ulbo de Sitter 's design theory for production synergies. He divides transformation processes into two categories, parts and aspects. Parts can be compared to timeline stages, such as first preparing the dish, then washing it, then drying it. Aspects are equated with area specialization, for example that someone takes care of

126-444: Is a synonym for "stakeholder". Post, Preston, Sachs (2002), use the following definition of the term "stakeholder": "A person, group or organization that has interest or concern in an organization. Stakeholders can affect or be affected by the organization's actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees, government (and its agencies), owners (shareholders), suppliers, unions, and

147-401: Is assessed incrementally on a product or service at each stage of production and is intended to tax the value that is added by that production stage, as outlined above by unit value added. Profit (accounting) Profit , in accounting , is an income distributed to the owner in a profitable market production process ( business ). Profit is a measure of profitability which is

168-413: Is obtained by deducting intermediate consumption from gross output . Thus gross value added is equal to net output . Net value added is obtained by deducting consumption of fixed capital (or depreciation charges) from gross value added. Net value added therefore equals gross wages , pre-tax profits net of depreciation, and indirect taxes less subsidies. Value-added tax (VAT) is a tax on sales. It

189-486: The bearers of externalities are included in stakeholdership. In the last decades of the 20th century, the word "stakeholder" became more commonly used to mean a person or organization that has a legitimate interest in a project or entity. In discussing the decision-making process for institutions—including large business corporations , government agencies , and non-profit organizations —the concept has been broadened to include everyone with an interest (or "stake") in what

210-511: The community from which the business draws its resources. Not all stakeholders are equal. A company's customers are entitled to fair trading practices but they are not entitled to the same consideration as the company's employees. The stakeholders in a corporation are the individuals and constituencies that contribute, either voluntarily or involuntarily, to its wealth-creating capacity and activities, and that are therefore its potential beneficiaries and/or risk bearers." This definition differs from

231-564: The company's products from those of its competitors. The factors of production provide "services" which raise the unit price of a product (X) relative to the cost per unit of intermediate goods used up in the production of X. In national accounts , such as the United Nations System of National Accounts (UNSNA) or the United States National Income and Product Accounts (NIPA), gross value added

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252-404: The entity does. This includes not only vendors, employees , and customers , but even members of a community where its offices or factory may affect the local economy or environment. In this context, a "stakeholder" includes not only the directors or trustees on its governing board (who are stakeholders in the traditional sense of the word) but also all persons who paid into the figurative stake and

273-513: The first usage of the word in a 1963 internal memorandum at the Stanford Research Institute . The theory was later developed and championed by R. Edward Freeman in the 1980s. Since then it has gained wide acceptance in business practice and in theorizing relating to strategic management , corporate governance , business purpose and corporate social responsibility (CSR). The definition of corporate responsibilities through

294-450: The following four key assertions: A corporate stakeholder can affect or be affected by the actions of a business as a whole. Whereas shareholders are often the party with the most direct and obvious interest at stake in business decisions, they are one of various subsets of stakeholders, as customers and employees also have stakes in the outcome. In the most developed sense of stakeholders in terms of real corporate responsibility ,

315-420: The members of the overall community to focus the organisation's scarce resources on the most significant stakeholders. Example The holders of each separate kind of interest in the entity's affairs are called a constituency, so there may be a constituency of stockholders , a constituency of adjoining property owners, a constituency of banks the entity owes money to, and so on. In that usage, "constituent"

336-643: The older definition of the term stakeholder in Stakeholder theory (Freeman, 1983) that also includes competitors as stakeholders of a corporation. Robert Allen Phillips provides a moral foundation for stakeholder theory in Stakeholder Theory and Organizational Ethics . There he defends a "principle of stakeholder fairness" based on the work of John Rawls , as well as a distinction between normative and derivative legitimate stakeholders. Real stakeholders, labelled stakeholders: genuine stakeholders with

357-449: The owner is able to keep to themselves in the income distribution process. Profit is one of the major sources of economic well-being because it means incomes and opportunities to develop production. The words "income", "profit" and "earnings" are synonyms in this context. Stakeholder (corporate) In a corporation , a stakeholder is a member of "groups without whose support the organization would cease to exist", as defined in

378-411: The owner's major interest in the income-formation process of market production. There are several profit measures in common use. Income formation in market production is always a balance between income generation and income distribution . The income generated is always distributed to the stakeholders of production as economic value within the review period. The profit is the share of income formation

399-408: The part of the counter that consists of glass, another takes care of the part that consists of plates, a third takes care of cutlery. An important part of understanding value added is therefore to examine delimitations. In macroeconomics , the term refers to the contribution of the factors of production (i.e. capital and labor) to raise the value of the product and increase the income of those who own

420-399: The persons to whom it may be "paid out" (in the sense of a "payoff" in game theory , meaning the outcome of the transaction). Therefore, in order to effectively engage with a community of stakeholders, the organisation's management needs to be aware of the stakeholders, understand their wants and expectations, understand their attitude (supportive, neutral or opposed), and be able to prioritize

441-418: The said factors. Therefore, the national value added is shared between capital and labor. Outside of business and economics, value added refers to the economic enhancement that a company gives its products or services prior to offering them to the consumer, which justifies why companies are able to sell products for more than they cost the company to produce. Additionally, this enhancement also helps distinguish

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