Quantitative Evaluation of Sustainable Competitive Advantage by Defining CSV

To understand why CSV often goes away and how important strategic thinking is, a manager should understand the relationship between competitive advantage, value creation, and business strategy. Every manager knows something about those things individually. Competitive advantage means outperforming competitors along dimensions like cost, technological capability, and acquisition of raw materials or providing superior value to customers. Value creation is the increase in shareholder value, which requires that the company earn more than its cost of capital, but not every manager understands how competitive advantage and shareholder value interact. A sound strategy generates both: for a strategy to win in the marketplace, it must create sustainable advantage; only when a strategy wins in the marketplace, it can generate sustainable shareholder value. In this paper, we will define and analyze shareholder value creation. To help us understand this concept better, we will use Iranian Banks, between 2007 and 2014. To obtain the created shareholder value, we must first define the increase of equity market value, the shareholder value added, the shareholder return, and the required return to equity. We have collected necessary data through Comprehensive Database of All Listed Companies. Results show that 45 percentage of total created shareholder value in banking industry created by only two leading Iranian banks.