U.S. Airways Conflict Between Delivering Short-Term Earnings vs. Long-Term Value Creation

U.S. Airways Conflict between Delivering

Short-term Earnings Vs Long-Term Value

Creation

For any company to be able to provide short-term profits short-term thinking, budgeting and planning is required. On the other hand short-term business decisions are often unable to support the long-term viability of the business leading to heavy losses. This conflict of interest in companies like U.S. Airways is common were the company is responsible to shareholders and fund managers.

To be able to provide short-term earnings decisions supporting current market growth are given priority over those that deal with laying the foundations for longer term value creation of the brand or service. This is supported by the employment packages offered to the top notch employees in large corporations. It mostly encourages them to take decisions with short terms company advantage in mind. A similar story is of those company executives who would be retiring within the next few years.

Furthermore, companies are always under pressure to keep the earning graph rising which may at times call for the long terms advantages to be sacrificed. This need is supported by how simple and at time effortless it is to be able to show increase in short-term earning. One such example is to reduce the marketing budget. The resulting impact will not be felt immediately but in the medium term.

Another possible option is available for companies like U.S. Airways operating in the service industry. Generally heavy reliance is placed on training and a cut back in this would mean that the quality of staff would reduce. The fall in quality will irritate the customer in the long run and thus the fall in demand and loss of labor capital will be eventual. The shareholders on the other hand will immediately benefit from the fallen cost. Public companies are able to extract these benefits largely due to the inadequate disclosure of information policies and the inappropriate dividend on shares structure.

On the other hand is a www.conservationeconomy.net/content.cfm?PatternID=1" conservation economy which is planned in such a way that it is financially consistent and prosperous over a long period of time. For this to happen it is very much required that decisions are taken keeping in mind a large time scale. Since the time at hand is sizeable major plans can be put underway such as the development of forests and an industrial city. These are others plans like them require much transformation which are not possible when decisions are made for a short-term profitable economy.

Generally companies with long-term prosperity in mind share certain common features. To begin with they are committed to adopting and sometimes even introducing technological advances which requires financial commitments. Secondly they are devoted to well-articulated core values providing a sense of identity not only to their customers but also to their employee. This always for employees to work as a part of the family to satisfy customers.

Fiscal conservatism is also very important since in its absence companies are unable to take up opportunities which will be monetarily beneficial in the long run. It cannot however be ignored that most if not all of such values require more often then not surrender of the short-term aims and objectives. Some public companies understanding the importance of maintenance of such values have held sessions with shareholders to explain to them their significance towards profitability and viability. As mentioned above maximizing profits for a single quarter is a much easier task.

Activities such as evasion of taxes and improper release of waste products do not only fall within the bracket of environmentally and socially destructive behavior but also cause problems within the market. This is primarily because the negative influence they cause on long-term feasibility. For any country to develop industrially payment of government taxes and the honest use of these taxes is crucial. It is through these taxes that the infrastructure initially and later further development work takes place.

The presence of taxes along with the swing in the products markets causes fluctuation in the cost of production. When this rise has not been anticipated, a common element of short-term planning the company can run into financial difficulties. To avoid this it is very important that the company develops labor capital who are able to anticipate the rises and falls. This will give preparation time to the company so that they are better prepared to deal with such issues. Long-term planning entails careful design of the interplay of people, place, government and capital.