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UTILIZING CAPITAL EFFECTIVELY
- THE FOUNDATION FOR BUILDING SUSTAINABLE
ADVANTAGE
In economic theory, land, labor, and capital resources are the three factors
of production and distribution of goods and services. In free markets,
production and distribution activities are intended for profit, and the prices
that determine gross revenue are set by supply and demand. Net income
results from operating profit (revenue less cost and expenses), dividends,
net interest, gains on sales of capital assets, and other miscellaneous items.
Net interest income comprises interest revenue less interest expense. Net
income creates wealth, which is a source of future capital, and so the cycle
repeats.
Land is a collective term for natural capital. Labor is a collective term for
human capital and the intellectual capital it uses. Labor includes
entrepreneurs, executives, managers, and associates (supervisors and
staff). Intellectual capital includes but is not limited to those methods that
are learned as competencies (knowledge and skills). Capital, or more
specifically financial capital, means wealth in the form of money or
monetary equivalents used in the production and distribution of goods and
services, and is intended to generate income.
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Natural:
Historically, natural capital has been available at lower cost than its real
value because sustainability has been ignored. In the future, natural
capital is likely to cost more to cover both the remedial efforts to repair the
environment, and the preservation efforts going forward. The risk of
investment is misuse, which be lowered by avoiding the use of
contaminants and pollutants, and by encouraging energy conservation and
recycling programs. Opportunities should be pursued to use alternative
fuels and other materials that do not impact the environment negatively.
Human:
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Ongoing education and on-the-job training programs to develop
knowledge and skills are essential to keeping individuals economically
productive as conditions change. Hence, education and training programs
should be considered to be an investment, not an expense, when relevant.
Well educated and trained employees must follow responsible leadership
that motivates them to be productive and efficient. The value of well
educated, trained, productive, and efficient human resources appreciates
over time. However, to use human resources the most effectively, it is
important for management to obtain feedback from its people, especially
those on the front line.
Intellectual:
Almost every enterprise has some form of intellectual capital ranging from
the "secret sauce" in the recipes of menu items at lifestyle restaurants to
the code in Microsoft Windows. The Coca-Cola Company has a secret
recipe for the ingredients of the world famous beverage, and non-generic
products of pharmaceutical enterprises are covered by patents.
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The risks of investment in intellectual capital include its failure to perform
as specified, which could cause product liability claims, or its inability to
generate income at all. The returns on investment include profits from
competitive advantage not otherwise available, and revenue from licensing
opportunities offered to third-parties.
Financial:
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For more information...
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About Nigel A.L Brooks...
www.nigelalbrooks.com
www.bldsolutions.com
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THE BUSINESS LEADERSHIP DEVELOPMENT CORPORATION
13835 NORTH TATUM BOULEVARD 9-102
PHOENIX, ARIZONA 85032 USA
www.bldsolutions.com
(602) 291-4595