Challenges of Implementing Economic Value Added

Abstract

In this case we present the process of implementation of an economic value added (EVA) framework in Godrej Consumer Products Limited (GCPL), a leading fast moving consumer goods (FMCG) company in India, and the challenges faced by the company. It covers in detail the reasons for implementing the EVA framework in GCPL and the benefits derived by the company from it in the form of the SWOT analysis. It is shown that there is a positive link between the implementation of an EVA framework and improvement in the financial performance of a company. It ends with a debate on the effectiveness of EVA.

Get full access to this article

View all access options for this article.

References

Al Ebrhar and G.B. Stewart. III . 1999. ‘ The EVA Revolution ’, Journal of Applied Corporate Finance, 12(2).

Arumugam, S. (ed.), 2000. Indian Capital Markets Trends and Dimensions New Delhi: Tata McGraw-Hill Publishing Co. Ltd .

Bhattacharya, A.K. and B.V. Phani . ‘Economic Value Added, A General Perspective’. Available at http://www.ssrn.com.

Business Line. 2001. ‘Godrej Group Implements EVA-based System’, Bureau , 30 August.

Dasgupta, A. 2002. ‘Why Godrej is Captivated by EVA—Evaluation’. Available at http://www.sternstewart.com.

Drucker, Peter . 1995. ‘ The Information Executive Truly Need ’, Harvard Business Review, Jan–Feb.

Pinto, F. 2001. ‘Economic Value Added’. Available at http//:www.evanomics.com (accessed on 3 June 2002).

Pettit, J. 1998. ‘ Governing for Value ’, Ivey Business Quarterly, 62(3).

Roztocki, N. and K.L. Needy . 1998. ‘EVA for Small Manufacturing Companies’, Working Paper, University of Pittsburgh, Department of Industrial Engineering, USA .

10.

Stewart III, G.B. 1991. The Quest for Value. New York: HarperCollins .

11.

Verma, B.P. 2000. ‘Economic Value Added by Indian Banks—A Study’, UTI Institute of Capital Markets. www.Geojit.com.

12.

Godrej. 2001. ‘Godrej Completes EVA Framework Implementation to Add Shareholder Value’, Press Release by the Company in August at Mumbai . www.godrejinds.com.

13.

Young, S.D. 1999. ‘ Some Reflections on Accounting Adjustments and Economic Value Added ’, Journal of Financial Statement Analysis, 4(2): 7–19 .

14.

Young, S.D. and M.J. Epstein . 1999. ‘ Greening with EVA ’, Management Accounting Journal, 80(7): 45–49 .