Wednesday, June 8, 2011

Tactical Maneuvering for Strategic Direction and Opportunities

An important part of maintaining a robust and flexible strategic plan in company operations is to integrate short term financing strategies (operational leveraging, cash-flow and business risk management) with all the functional components of a business’s value chain. The tactical prowess and synergy of management functions in responding to internal strengths and weaknesses related to operational efficiency and marketing positioning, results in the ably “competing through organizational agility” (Donald Sull: McKinsey Quarterly 2010).

In, “Why do Firms reduce Business Risk”, Raphael Amit explains that reducing by reducing business risk, firms are able to acquire needed resources at lower financing costs and thus operate more efficiency.

This means that cost savings inbound logistic activities can be used to increase consumer equity without having invest in product quality improvements, which also means that owner equity can also be improved, or develop a reserve capacity to take advantage of strategic activities.

The paper also explains that businesses used their resources to take advantage of opportunities in diversified business lines, have a relatively lower return on assets than businesses that used focused market strategy, however, in the long run they were able to maintain more stable financial performance.

The logical result being that their product image could be maintained even over periods of volatility far better than businesses that have a focused market offering.
Perhaps this is why a long term view strategy has always been preferred over a short term approaches to creating value for customers, consumers and shareholders.

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