The Challenge of Investor Marketing: A Growing Headache for Many Executives Is How to Achieve a Fair Market Valuation for Their Company. Success in Courting Shareholders Requires the Same Professionalism as in Other Parts of the Business

By Simon, Hermann; Ebel, Bernhard et al. | European Business Forum, Autumn 2002 | Go to article overview

The Challenge of Investor Marketing: A Growing Headache for Many Executives Is How to Achieve a Fair Market Valuation for Their Company. Success in Courting Shareholders Requires the Same Professionalism as in Other Parts of the Business


Simon, Hermann, Ebel, Bernhard, Hofer, Markus B., European Business Forum


It may seem odd to say so at a time when financial markets have just lost 40 per cent of their value 18 months--but the undervaluation of shares is becoming a growing preoccupation for the CEOs of traditional European companies.

[ILLUSTRATION OMITTED]

While Siemens is valued at [euro]47bn (yield: 2.14) other companies in the same industry (or similar ones) are rated much more highly. General Electric, for example, is valued at [euro]296bn (yield: 2.48). In retailing, Germany's Metro has a market capitalisation of just [euro]7bn (yield: 4.36) yet America's Walmart (a company which is pursuing its international ambitions in Germany) has a value of [euro]246bn (yield: 0.55). There are numerous other examples (Source: yahoo.de; September 2002).

Undervalued companies suffer from three major disadvantages. First, they can easily become victims of hostile takeovers. Second, they lack acquisition currency--a crucial handicap when large takeovers are increasingly paid for in shares rather than cash. Third, CEOs are under increasing pressure from the press and investors to improve the firm's overall performance, as well as from employees concerned about the value of their stock options.

What can be done to combat undervaluation? Two things are necessary. First, companies need to make sure that their costs, products and positioning are internationally competitive. But as the CEO of a large industrial company recently explained, this is not enough. "We have worked very hard during the last five years and have reduced costs", he explained. "Our profits have risen from [euro]300m to [euro]600m. Today, we are in good shape. The competition respects us. But the stock market hasn't recognised all this. Our stock price hasn't increased."

The big new challenge facing CEOs, particularly in continental Europe, is Investor Marketing. The senior managers must be able to sell themselves and position the company optimally on the stock markets. Klaus Esser, the CEO of German Mannesmann until mid-2000, fell victim to the largest hostile takeover in history. When asked afterwards at a Senior Management Conference organised by Deutsche Bank in Berlin what he would have done differently, he replied: "We have made the mistake of not being sufficiently aggressive in announcing our progress. We have, in the German tradition, been too cautious communicating our value and our increase in value. If the purchase price of [euro]180bn was correct, should we not have convinced our shareholders earlier, that our market capitalisation was over [euro]100bn? Probably a market valuation of [euro]120bn or [euro]130bn would have produced a different outcome. You have to run a show like Americans do. Even if that doesn't suit many of us, it is good for the health and survival of the company."

A new perspective

Managers need to start looking at Investor Marketing whose purpose is to close the gap between the company's actual performance and its market value--from a perspective that goes far beyond traditional investor relations. Closing that gap is not something that can be accomplished through improved investor communications alone. As in product marketing, the entire marketing-mix plays an important role. The company needs to get its 'product' (its strategy and its story) right. A pricing policy for managing supply and demand must be developed. Access to the 'customer' (distribution) must be optimised. And all of this must be tied together by an integrated communications strategy.

A precondition for success is the improved availability of information. It is imperative that companies understand the needs of their investors and their perception of the company. They must be knowledgeable about supply and demand curves of their stocks and the effectiveness of the most important marketing tools. In this context, Investor Marketing is in its early stages; there is little experience to draw on. When asked how much he spends on information and communication related to Investor Marketing and how this compares with product marketing expenditures, the CEO of a [euro]30bn enterprise answered. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

The Challenge of Investor Marketing: A Growing Headache for Many Executives Is How to Achieve a Fair Market Valuation for Their Company. Success in Courting Shareholders Requires the Same Professionalism as in Other Parts of the Business
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.