Abstract
Macro-economists cannot expect governments or central banks to use them as test objects for their theories. Likewise, we cannot expect firms to submit themselves as test subjects to verify the functionality of our prescriptive paradigm. Therefore we simulate with a surrogate of a real company. The surrogate is system dynamics model of ADI, a high technology electronics firm. The model has over 620 equations to represent ADI’s operational behavior of its functional areas and the firm’s interactions with its external environment. The model’s documentation covers over 400 pages. This chapter models the decision to Maximize the Value of Firm (MVF). The goal is to shield ADI from “vulture hunters”. High market value will make it costly to buy control of the firm. As such, MVF is directed at forces exterior of ADI. Best effort has been made to attach the data for the simulations as appendices and all the calculations are shown and illustrated.
Notes
- 1.
IC yield and manufacturing yield are used interchangeably.
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Appendices
Appendix 5.1 MVF(L81(34,23+1)) Experiment Data Under Uncertainty Regimes
1.1 Appendix 5.1.1 MVF(L81(34,23+1)) at t = 12
1.2 Appendix 5.1.2 MVF(L81(34,23+1)) at t = 18
1.3 Appendix 5.1.3 MVF(L81(34,23+1)) at t = 24
Appendix 5.2 MVF(L81(34,23+1)) Controllable Variables Statistics
1.1 Appendix 5.2.1 MVF(L81(34,23+1)) Controllable Variables ANOVA and Residuals at t = 18
Analysis of Variance L81(34,23+1) MVF t = 18 | ||||||
---|---|---|---|---|---|---|
Source | DF | Seq SS | Adj SS | Adj MS | F | P |
r&d | 2 | 10,036 | 10,036 | 5018 | 1154.58 | 0.000 |
yield | 2 | 82,533 | 82,533 | 41,267 | 9494.95 | 0.000 |
cogs | 2 | 88,669 | 88,669 | 44,334 | 10,200.80 | 0.000 |
price | 2 | 275,285 | 275,285 | 137,643 | 31,669.83 | 0.000 |
yield*cogs | 4 | 9422 | 9422 | 2356 | 541.99 | 0.000 |
yield*price | 4 | 8085 | 8085 | 2021 | 465.04 | 0.000 |
cogs*price | 4 | 6492 | 6492 | 1623 | 373.42 | 0.000 |
yield*cogs*price | 8 | 2609 | 2609 | 326 | 75.04 | 0.000 |
Error | 52 | 226 | 226 | 4 | ||
Total | 80 | 483,357 | ||||
S = 2.08475, R-Sq = 99.95%, R-Sq(adj) = 99.93% |
1.2 Appendix 5.2.2 MVF(L81(34,23+1)) Controllable Variables ANOVA and Residuals at t = 24
Analysis of Variance L81(34,23+1) MVF t = 24 | ||||||
---|---|---|---|---|---|---|
Source | DF | Seq SS | Adj SS | Adj MS | F | P |
r&d | 2 | 20,325 | 20,325 | 10,162 | 2078.86 | 0.000 |
yield | 2 | 63,088 | 63,088 | 31,544 | 6452.87 | 0.000 |
cogs | 2 | 66,048 | 66,048 | 33,024 | 6755.64 | 0.000 |
price | 2 | 247,424 | 247,424 | 123,712 | 25,307.32 | 0.000 |
yield*cogs | 4 | 25,979 | 25,979 | 6495 | 1328.58 | 0.000 |
yield*price | 4 | 24,642 | 24,642 | 6161 | 1260.24 | 0.000 |
cogs*price | 4 | 22,971 | 22,971 | 5743 | 1174.75 | 0.000 |
yield*cogs*price | 8 | 8240 | 8240 | 1030 | 210.72 | 0.000 |
Error | 52 | 254 | 254 | 5 | ||
Total | 80 | 478,972 | ||||
S = 2.21097, R-Sq = 99.95%, R-Sq(adj) = 99.92% |
Appendix 5.3 MVF(L81(34,23+1)) Uncontrollable Variables Statistics
1.1 Appendix 5.3.1 Uncontrollable Variables ANOVA Table and Residuals at t = 18
Analysis of Variance for MVF t = 18 | ||||||
---|---|---|---|---|---|---|
Source | DF | Seq SS | Adj SS | Adj MS | F | P |
LT growth | 1 | 12,879 | 12,879 | 12,879 | 60.17 | 0.001 |
ADI orders | 1 | 171,615 | 171,615 | 171,615 | 801.84 | 0.000 |
Competitor | 1 | 63,637 | 63,637 | 63,637 | 297.33 | 0.000 |
Error | 4 | 856 | 856 | 214 | ||
Total | 7 | 248,987 | ||||
S = 14.6296, R-Sq = 99.66%, R-Sq(adj) = 99.40% |
1.2 Appendix 5.3.2 Uncontrollable Variables ANOVA Table and Residuals at t = 24
Analysis of Variance MVF L81(34,23+1) t = 24 uncontrollable variables | ||||||
---|---|---|---|---|---|---|
Source | DF | Seq SS | Adj SS | Adj MS | F | P |
LT growth | 1 | 29,601 | 29,601 | 29,601 | 60.25 | 0.001 |
ADI orders | 1 | 168,167 | 168,167 | 168,167 | 342.28 | 0.000 |
Competitor | 1 | 89,059 | 89,059 | 89,059 | 181.27 | 0.000 |
Error | 4 | 1965 | 1965 | 491 | ||
Total | 7 | 288,792 | ||||
S = 22.1655, R-Sq = 99.32%, R-Sq(adj) = 98.81% |
Appendix 5.4 MVF(L27(34−1,23+1)) Experiment Data Under Uncertainty Regimes
1.1 Appendix 5.4.1 MVF(L27(34−1,23+1)) at t = 12
1.2 Appendix 5.4.2 MVF(L27(34−1,23+1)) at t = 18
1.3 Appendix 5.4.3 MVF(L27(34−1,23+1)) at t = 24
Appendix 5.5 MVF(L27(34−1,23+1)) Controllable Variables Statistics
1.1 Appendix 5.5.1 Controllable Variables ANOVA and Residuals at t = 18
Analysis of Variance for firm value | ||||||
---|---|---|---|---|---|---|
Source | DF | Seq SS | Adj SS | Adj MS | F | P |
r&d | 2 | 4557 | 4557 | 2279 | 5.17 | 0.019 |
yield | 2 | 28,165 | 28,165 | 14,082 | 31.95 | 0.000 |
cogs | 2 | 29,211 | 29,211 | 14,605 | 33.14 | 0.000 |
price | 2 | 92,834 | 92,834 | 46,417 | 105.32 | 0.000 |
yield*cogs | 2 | 1743 | 1743 | 871 | 1.98 | 0.171 |
Error | 16 | 7051 | 7051 | 441 | ||
Total | 26 | 163,561 | ||||
S = 20.9931, R-Sq = 95.69%, R-Sq(adj) = 92.99% |
1.2 Appendix 5.5.2 Controllable Variables ANOVA and Residuals at t = 24
Analysis of Variance for firm value MVF(L27) t = 24 | ||||||
---|---|---|---|---|---|---|
Source | DF | Seq SS | Adj SS | Adj MS | F | P |
r&d | 2 | 9199 | 9199 | 4599 | 3.26 | 0.065 |
yield | 2 | 20,765 | 20,765 | 10,383 | 7.37 | 0.005 |
cogs | 2 | 22,106 | 22,106 | 11,053 | 7.85 | 0.004 |
price | 2 | 82,669 | 82,669 | 41,335 | 29.34 | 0.000 |
yield*cogs | 2 | 4803 | 4803 | 2402 | 1.70 | 0.213 |
Error | 16 | 22,542 | 22,542 | 1409 | ||
Total | 26 | 162,085 | ||||
S = 37.5350, R-Sq = 86.09%, R-Sq(adj) = 77.40% |
Appendix 5.6 MVF(L27(34−1,23+1)) Uncontrollable Variables Statistics
1.1 Appendix 5.6.1 Uncontrollable Variables: Table and Residuals Graph at t = 18
Analysis of Variance for MVF(L27) t = 18 | ||||||
---|---|---|---|---|---|---|
Source | DF | Seq SS | Adj SS | Adj MS | F | P |
LT growth | 1 | 12,831 | 12,831 | 12,831 | 60.02 | 0.001 |
ADI orders | 1 | 171,516 | 171,516 | 171,516 | 802.31 | 0.000 |
Competitor | 1 | 63,468 | 63,468 | 63,468 | 296.89 | 0.000 |
Error | 4 | 855 | 855 | 214 | ||
Total | 7 | 248,670 | ||||
S = 14.6211, R-Sq = 99.66%, R-Sq(adj) = 99.40% |
1.2 Appendix 5.6.2 Uncontrollable Variables: Table and Residuals Graph at t = 24
Analysis of Variance for MVF(L27) t = 24 | ||||||
---|---|---|---|---|---|---|
Source | DF | Seq SS | Adj SS | Adj MS | F | P |
LT growth | 1 | 29,440 | 29,440 | 29,440 | 60.77 | 0.001 |
ADI orders | 1 | 168,536 | 168,536 | 168,536 | 347.87 | 0.000 |
Competitor | 1 | 89,094 | 89,094 | 89,094 | 183.89 | 0.000 |
Error | 4 | 1938 | 1938 | 484 | ||
Total | 7 | 289,008 | ||||
S = 22.0111, R-Sq = 99.33%, R-Sq(adj) = 98.83% |
Appendix 5.7 MVF(L27(34−1,23+1)) Experiment Responses: Means and Standard Deviations
1.1 Appendix 5.7.1 Response Tables MVF(L27(34−1,23+1)) at t = 18
Response Table for Means | ||||
---|---|---|---|---|
Level | r&d | yield | cogs | price |
1 | 863.0 | 805.1 | 884.1 | 767.9 |
2 | 843.0 | 848.4 | 849.7 | 860.2 |
3 | 831.5 | 884.1 | 803.8 | 909.4 |
Delta | 31.5 | 79.0 | 80.3 | 141.5 |
Rank | 4 | 3 | 2 | 1 |
Response Table for Standard Deviations | ||||
---|---|---|---|---|
Level | r&d | yield | cogs | price |
1 | 185.6 | 181.2 | 178.7 | 179.5 |
2 | 180.3 | 181.2 | 181.0 | 179.9 |
3 | 174.9 | 178.4 | 181.1 | 181.4 |
Delta | 10.7 | 2.8 | 2.4 | 1.9 |
Rank | 1 | 2 | 3 | 4 |
1.2 Appendix 5.7.2 Response Tables MVF(L27(34−1,23+1)) at t = 24
Response Table for Means | ||||
---|---|---|---|---|
Level | r&d | yield | cogs | price |
1 | 759.8 | 698.3 | 765.6 | 659.8 |
2 | 729.8 | 741.4 | 742.7 | 754.0 |
3 | 715.5 | 765.4 | 696.8 | 791.3 |
Delta | 44.3 | 67.0 | 68.8 | 131.5 |
Rank | 4 | 3 | 2 | 1 |
Response Table for Standard Deviations | ||||
---|---|---|---|---|
Level | r&d | yield | cogs | price |
1 | 208.9 | 204.6 | 189.1 | 205.2 |
2 | 196.6 | 198.3 | 198.4 | 196.6 |
3 | 187.8 | 190.3 | 205.7 | 191.4 |
Delta | 21.1 | 14.3 | 16.5 | 13.8 |
Rank | 1 | 3 | 2 | 4 |
Appendix 5.8 MVF(L27(34−1,23+1)) Plots: Means and Std. Dev.
1.1 Appendix 5.8.1 Plots: Means and Standard Deviations at t = 18
1.2 Appendix 5.8.2 Plots: Means and Standard Deviations at t = 24
Appendix 5.9 MVF(L9(34−1,23+1)) Experiment Data Under Uncertainty Regimes
1.1 Appendix 5.9.1 MVF(L9(34−1,23+1)) at t = 12
1.2 Appendix 5.9.2 MVF(L9(34−1,23+1)) at t = 18
1.3 Appendix 5.9.3 MVF(L9(34−1,23+1)) at t = 24
Appendix 5.10 MVF(L9(34,23+1)) Controllable Variables Statistics
1.1 Appendix 5.10.1 Controllable Variables ANOVA Table and Residuals at t = 18
Source | DF | Seq SS | Adj SS | Adj MS | F | P |
---|---|---|---|---|---|---|
r&d | 2 | 3276.7 | 3775.4 | 1887.7 | 18.13 | 0.052 |
yield | 2 | 5835.3 | 6479.2 | 3239.6 | 31.12 | 0.031 |
cogs | 2 | 9537.0 | 13,094.5 | 6547.2 | 62.89 | 0.016 |
price | 2 | 31,861.2 | 31,861.2 | 15,930.6 | 153.02 | 0.006 |
Error | 2 | 208.2 | 208.2 | 104.1 | ||
Total | 10 | 50,718.4 | ||||
S = 10.2033, R-Sq = 99.59%, R-Sq(adj) = 97.95% |
1.2 Appendix 5.10.2 Controllable Variables ANOVA Table and Residuals at t = 24
Analysis of Variance for firm value 24 | ||||||
---|---|---|---|---|---|---|
Source | DF | Seq SS | Adj SS | Adj MS | F | P |
r&d | 2 | 8536.5 | 9182.5 | 4591.2 | 12.29 | 0.075 |
yield | 2 | 3895.9 | 4370.6 | 2185.3 | 5.85 | 0.146 |
cogs | 2 | 10,892.8 | 14,255.3 | 7127.6 | 19.09 | 0.050 |
price | 2 | 27,518.3 | 27,518.3 | 13,759.1 | 36.84 | 0.026 |
Error | 2 | 746.9 | 746.9 | 373.5 | ||
Total | 10 | 51,590.4 | ||||
S = 19.3251, R-Sq = 98.55%, R-Sq(adj) = 92.76% |
Appendix 5.11 ANOVA L9(34−2,23+1) Uncontrollable Variables Statistics
1.1 Appendix 5.11.1 Uncontrollable Variables ANOVA and Residuals at t = 18
Analysis of Variance for MVF t = 18, using Adjusted SS for Tests | ||||||
---|---|---|---|---|---|---|
Source | DF | Seq SS | Adj SS | Adj MS | F | P |
LT growth | 1 | 13,177 | 13,177 | 13,177 | 57.34 | 0.002 |
ADI orders | 1 | 171,735 | 171,735 | 171,735 | 747.27 | 0.000 |
Competitor | 1 | 63,271 | 63,271 | 63,271 | 275.31 | 0.000 |
Error | 4 | 919 | 919 | 230 | ||
Total | 7 | 249,102 | ||||
S = 15.1597, R-Sq = 99.63%, R-Sq(adj) = 99.35% |
1.2 Appendix 5.11.2 Uncontrollable Variables ANOVA and Residuals at t = 24
Analysis of Variance for MVF | ||||||
---|---|---|---|---|---|---|
Source | DF | Seq SS | Adj SS | Adj MS | F | P |
LT growth | 1 | 30,330 | 30,330 | 30,330 | 57.35 | 0.002 |
ADI orders | 1 | 169,396 | 169,396 | 169,396 | 320.31 | 0.000 |
Competitor | 1 | 89,062 | 89,062 | 89,062 | 168.41 | 0.000 |
Error | 4 | 2115 | 2115 | 529 | ||
Total | 7 | 290,904 | ||||
S = 22.9966, R-Sq = 99.27%, R-Sq(adj) = 98.73% |
Appendix 5.12 MVF(L9(34−1,23+1)) Response Means and Standard Deviations
1.1 Appendix 5.12.1 Tables: Means and Standard Deviations at t = 18
Response Table for Means | ||||
---|---|---|---|---|
Level | r&d | yield | cogs | price |
1 | 868.1 | 811.5 | 878.7 | 771.4 |
2 | 835.2 | 838.8 | 855.3 | 846.2 |
3 | 823.2 | 876.1 | 792.5 | 908.9 |
Delta | 44.9 | 64.6 | 86.2 | 137.5 |
Rank | 4 | 3 | 2 | 1 |
Response Table for Standard Deviations | ||||
---|---|---|---|---|
Level | r&d | yield | cogs | price |
1 | 187.9 | 182.9 | 178.8 | 181.2 |
2 | 179.4 | 178.1 | 182.8 | 178.2 |
3 | 174.2 | 180.6 | 180.0 | 182.2 |
Delta | 13.7 | 4.8 | 4.0 | 4.0 |
Rank | 1 | 2 | 4 | 3 |
1.2 Appendix 5.12.2 Tables: Means and Standard Deviations at t = 24
Response Table for Means | ||||
---|---|---|---|---|
Level | r&d | yield | cogs | price |
1 | 772.8 | 709.6 | 760.5 | 669.2 |
2 | 720.6 | 724.0 | 758.1 | 733.9 |
3 | 704.5 | 764.4 | 679.4 | 794.8 |
Delta | 68.3 | 54.8 | 81.1 | 125.5 |
Rank | 3 | 4 | 2 | 1 |
Response Table for Standard Deviations | ||||
---|---|---|---|---|
Level | r&d | yield | cogs | price |
1 | 210.2 | 207.1 | 192.9 | 208.9 |
2 | 196.7 | 196.0 | 197.0 | 195.6 |
3 | 189.0 | 192.8 | 206.0 | 191.5 |
Delta | 21.2 | 14.3 | 13.2 | 17.4 |
Rank | 1 | 3 | 4 | 2 |
1.3 Appendix 5.12.3 Graphs: Means and Standard Deviations at t = 18
1.4 Appendix 5.12.4 Graphs: Means and Standard Deviations at t = 24
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Tang, V., Otto, K., Seering, W. (2018). Verifying Functionality: Maximizing Value of the Firm (MVF). In: Executive Decision Synthesis. Contributions to Management Science. Springer, Cham. https://doi.org/10.1007/978-3-319-63026-7_5
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