Business Financial Strategy


Financial strategy examines the financial implications of corporate and business-level strategic options and identifies the best financial course of action. It can also provide competitive advantage through a lower cost of funds and a flexible ability to raise capital to support a business strategy. Financial strategy usually attempts to maximize the financial value of the firm.

The trade-off between advancing the desired debt-to-equity ratio and relying on internal long-term financing via cash flow is a key issue in financial strategy. Many small and medium-sized companies try to avoid all external sources of funds in order to avoid outside entanglements and to keep control of the company within the family. Many believe that only by financing through long-term debt can a corporation use financial leverage to boost earnings per share, thus raising stock price and the overall value of the company. Higher debt levels not only deter takeover by other firms (by making the company less attractive), but also leads to improved productivity and improved cash flows by forcing management to focus on core businesses.

A very popular financial strategy is the leveraged buy out—a company is acquired in a transaction financed largely by debt—usually obtained from a third party, such as an insurance company or an investment banker. Ultimately the debt is paid with money generated from the acquired company’s operations or by sales of its assets. The acquired company, in effect, pays for its own acquisition. Management of the leveraged buy out is then under tremendous pressure to keep the highly leveraged company profitable. Unfortunately the huge amount of debt on the acquired company’s books may actually cause its eventual decline by focusing management’s attention on short-term matters.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Organization Structure


Any group possessing common goals is an organization. But business organizations can be classified according to the nature of their internal authority relationships. Although there are five forms of organization structure, four forms are common: line, line and staff, committee, and matrix. The line structure is the oldest form and is frequently used today in smaller organizations. The functional form uses specialist managers entirely responsible for their own fields within the operation. The line and staff form uses specialists to assist line officers. This is commonly used in medium and large size firm. The fourth and fifth types, committees and the matrix organizations exist in many firms but only ready as the sole types. They are typically used as a sub-organizational form within a line and staff structure.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Business Cards


Business cards can be plain and straightforward for big company executives. The executive’s name, company name, address, and phone number are enough. Perhaps a title is also necessary. But for a smart practitioner of individual enterprise, that business card ought to contain a lot more information.

A business card can double as a brochure, a circular, a walletized advertisement. The cost to produce such a card is not much more than one pays for a standard card. But the need is different. Lacking a large stockpile of hard currency, the small businessperson must make use of all the advertising media available. A business card can be more than a mere listing of one’s name, address, and phone number, it can be an advertising medium.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Foreign Exchange


An international marketer needs to transact financial transfers across nation lines in order to close deals. The financial transfers from one country to another are made through the medium of foreign exchange.

Foreign exchange is the monetary mechanism by which transactions involving two or more currencies take place. Transacting foreign exchange deals presents two problems. First, each country has its own methods and procedures for effecting foreign exchanges—usually developed by its central bank. The transactions themselves take place through the banking system. Thus, both the methods and procedures of the central bank and commercial banking constraints must be thoroughly understood and followed to compete a foreign exchange transaction.

The second problem involves the fluctuation of  the rates of exchange. Fluctuations in exchange rates are based on the supply and demand of different currencies. The rate of exchange between two countries can fluctuate from day to day. This produces a great deal of uncertainty since a business person cannot know the exact value of foreign obligations and claims.

To appreciate fully the complexities of foreign exchange, a few terms must be understood. Their understanding also will provide a historical perspective on the making of payments across national boundaries. The terms are gold standard, gold exchange standard, gold bullion standard, inconvertible currencies, and hard and soft currencies.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Basic Organizational Structures


Although there is an almost infinite variety of structural forms, certain basic types predominate in modern complex organizations. There are three basic organizational structures. The conglomerate structure is a variant of divisional structure and is thus not depicted as a fourth structure. Generally speaking, each structure tends to support some corporate strategies over others.

  • Simple Structure has no functional or product categories and is appropriate for a small, entrepreneur-dominated company with one or two product lines that operates in a reasonably small, easily identifiable market niche. Employees tend to be generalists and jacks of all trades.
  • Functional structure is appropriate for a medium-sized firm with several related product lines in one industry. Employees tend to be specialists in the business functions important to that industry, such as manufacturing, marketing, finance, and human resources.
  • Divisional structure is appropriate for a large corporation with many product lines in several related industries. Employees tend to be functional specialists organized.
  • Strategic business units (SBU)are a recent modification to the divisional structure. Strategic business units are divisions or groups of divisions composed of independent product-market segments that are given primary responsibility and authority for the management of their own functional areas. An SBU may be of any size or level, but it must have 1) a unique mission, 2) identifiable competitors, 3)an external market focus, and 4) control of its business functions. The idea is to decentralize on the basis of strategic elements rather than on the basis of size, product characteristics, or span of control and to create horizontal linkages among units previously kept separate.
  • Conglomerate structure is appropriate for a large corporation with many product lines in several unrelated industries. A variant of the divisional structure, the conglomerate structure (sometimes called a holding company) is typically an assemblage of legally independent firms (subsidiaries) operating under one corporate umbrella but controlled through the subsidiaries’ boards of directors. The unrelated nature of the subsidiaries prevents any attempt at gaining synergy among them.

If the current basic structure of corporation does not easily support a strategy under consideration, top management must decide if the proposed strategy is feasible or if the structure should be changed to a more advanced structure.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

 

Personal Letters


Not direct mailings of large quantities of letters and brochures, but simple, personal letters is one of the most effective, easy, inexpensive, and overlooked methods of marketing. Certainly the large corporations don’t consider using this type of communication, because it doesn’t reach enough people to enrich their coffers. But it’s just the ticket for many an individual businessperson. If you can write clear English, spell properly, and keep your message short enough, you ought to be able to develop enough business through this mode of marketing so that you need employ many other methods. Even if you’re a dismal grammarian, professional typists can usually help put your ideas into acceptable form on the printed page.

The primary value of a personal letter is that it enables you to convey a truly personal feeling and reach a special place in the mind of the reader. You can say specific things in personal letters that are just not practical in any other medium except for certain kinds of telephone marketing.

In a personal letter you can, should, and must include as much personal data as possible. Mention the person’s name, of course. But also  mention things about the person’s life, business, car, home, or—if you ‘re in the gardening business—the person’s garden. By doing so, you will be whispering into someone’s ear rather than shouting through a distant megaphone. Naturally, you can mention personal things unless you know them. So do your homework and learn about your prospective customers: their working and living habits, their hopes and goals, their problems. You can get much of this information from your chamber of commerce. You can get more by conducting your own informal research with the aid of a simple questionnaire, or by personal observation. Include in your letter these feelings, and you will be dazzled at the effect the letter has.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

 

Product Knowledge


You have to be expert before you even start your business. The old saying, “We learn by our mistakes” will not do your business reputation any good if it applies to your lack of expertise. You have to know your products or service inside out. You may love a business for the product lines, but will your customers love the products too? When problems arise with a product, or when a customer asks technical questions, are you knowledgeable enough to resolve these problems and answer their questions competently and confidently?

One way to increase your product knowledge is to contact the manufacturers or local distributor. They are usually happy to send you product information and answer your questions. Some of the questions you should research about your product lines (or service) are these:

  • How long have these products been on the market?
  • Are they seasonal, and when do most sell?
  • How often are these products upgraded or changed?
  • Could you be caught unexpectedly with obsolete inventory?
  • What do the manufacturers’ warranties cover?
  • Are replacement parts readily available?
  • Are the products competitively priced?
  • Are buying trends increasing or decreasing?
  • Are the products high, medium, or low in quality?
  • How do the products compare to the competition?
  • What are groups do these products appeal to?
  • What is the life expectancy of the products?
  • Could the products become obsolete due to changing technology?

After these questions are answered, you may find that the business is not viable after all. The product pricing may be too high compared to the competition, or you may discover that over the previous five years, overall demand for the products is declining due to technological changes and shifts in consumer buying trends. In another five years, the demand could become substantially less. The products may appear high in quality on sight, but you may discover that they are poorly made and not something that you would feel confident selling. Perhaps the manufacturer’s guarantees are inadequate, or replacement parts are priced exorbitantly and hard to secure.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Internet and Knowledge Management


The Internet and knowledge management function as catalysts or stimuli for each other. The Internet provides a physical medium of the organization’s sharing and co-creation of knowledge. It also acts as a catalyst for the cultural shift in attitudes, which encourages cooperation and collaboration among all of the players in the activities of an organization including co-workers (by co-workers mean all employees regardless of their status), suppliers, customers, business partners and in some cases even among competing firms. Knowledge management, on the other hand, requires a medium like the Internet for the distribution, facilitation and promotion of knowledge transactions. The Internet is reshaping collaboration and we ought to know how this is taking place and how we can take advantage of it.

Not only has the Internet functioned as an excellent medium for the practice of knowledge management by speeding up the pace of innovation and the force for bringing knowledge to the fore as today’s principal source of wealth. In the age before computing and the Internet, when change was not so rapid as it is today, all players had more or less the same opportunity to acquire the knowledge to conduct business. In today’s rapidly changing environment the ability to access and create knowledge is absolutely essential to success and , hence, the emergence of knowledge management.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Market Survey


Stated most simply, the objective of a market survey is to determine a reasonably attainable sales volume in a specific market area for a specific type of business. This means finding out how many potential consumers of the planned merchandise or service there are in this market and how many of them can reasonably be expected to become customers of the firm under consideration.

The thoroughness of a market survey will vary under different conditions. The survey is essential for stores that plan to develop much of their own customer traffic. If sales are to depend on the firm’s merchandising policies, sales promotion efforts, special services, or uniqueness, a particularly thorough market survey should be made in advance. Firms that plan to rely on the established customer flow already generated by other businesses in the area may follow less thorough procedures. The latter types of firms have often been described as “parasite stores,” meaning that their location has been dictated by the existing firms in the area that have attracted a substantial traffic flow and which the new firm will tap for its own sales. Examples of small firms in this category are a restaurant in a skyscraper lobby, a medium-priced dress shop next to a large department store, an office-building tobacco shop, or a drugstore in an airline terminal. In these cases, the amount and nature of the traffic and its sales potential are pretty well established. Such firms may still, however, exert various types of sales promotion activities to increase total income within the traffic.

The chief concern here is with the types of firms that may rely heavily on a market survey to help them build much of their customer traffic.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Training and Community Colleges


The power of images and names deceives us into picturing big companies as big concentrations of people. They rarely are. Most of the work of any major organization goes on at a multiplicity of small to medium-sized shops, offices, or factories, often widely separated from one another as well as from the head office. Each work site may be no longer than an independent small or medium-sized enterprise in its neighborhood.

Since the operations performed at one work site may bear little resemblance to those at another in the same company, work sites may differ in their training needs as widely as they differ in geography. Accordingly, each work site normally administers most of its own training, with the exception of specifically managerial subjects or skills so company-specific, important, and widely needed that it is more cost effective to conduct them at a central location.

By the same token, each work site has finite resources of staff, space, equipment, and money available for training. One point it must therefore decide about any particular need is whether it is more cost-effective to conduct the training in-house or outside. More and more work sites have turned to community and junior colleges to run training programs for them. So community colleges have evolved various arrangements for working with employers. They have thus employed business-industry coordinators, who learn what services the employers need tell them what the colleges can do to help. Some colleges hire and train industry people to execute the colleges’ training assignments.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

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