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Article: Balancing customer and shareholder value.
- Article from:
- Financial Executive
- Article date:
- March 1, 1997
- Author:
CopyrightCOPYRIGHT 1997 Financial Executives Institute. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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In the 1970s, Schlitz was the number-two beer maker in America. But the company's management was dissatisfied with Schlitz's stock price, so it embarked on a financially driven strategy to improve the company's standing. After analyzing the income statement, management decided to cut expenses and increase margins by using less expensive hops in its beer. And after analyzing the balance sheet, it decided to reduce the assets tied up in the business by cutting the time Schlitz aged the beer.
Sure enough, profit margins increased, asset turnover went up and the stock price jumped. But then something happened in the marketplace: Customers noticed that Schlitz didn't ...