Portfolio Strategy Assignment

Assignment, Pages 9 (2237 words)

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Introduction

One of the most important factors that any organization should prioritize is to have an effective business strategy. A strategy that can be as effective if applied to the many aspects of business processes, like one in the human resource management, financial management or even in the customer management, etc. These are just some of the key points that are important to be considered as high priority in the business.

In this paper, it will focus on the strategy relating to financial which is for most company have also been unsuccessful due to many reasons.

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In this paper, it will provide some best practices applied by theory as well as real life application by some of the world’s best performing companies on how they invest their money well and later on achieved stability. Lastly, this paper also provides some of the standard concepts and theories of financial decision making and how this can be applied effectively and efficiently in the business.

Strategic Decision making Concepts and Theories

In business, structured portfolio strategy, is simply a business strategy that created by business leaders or investors that is designed to match if not surpassed the performance of some specific liabilities that will need to be paid in the future. (Structured Portfolio Strategy, n. d. ). In any business, it is true that the very first important thing that needs to secure is money or financial capability of the business to start. The main reason here is that no business even it was well studied that it will be as progressive and expected to be a “boom” or progressive without the required money to start that business.

In other words there are financial management that needs to work well first in order to start the business well and in a very secure manner. Like take for instance in the healthcare business, strategic financial decision making is being considered as the nuts and bolts of business. Business needs to see its potential and the cost of that business to start. One of the best business practice that is done by financial analyst is to learn first the NPV or Net Present Value of the business for the investment to be allocated.

Like for the first five years or even 10 years if you are projecting longer years. After you have learned, like for instance for the first 5 years of the business, it would cost the investor 3 million US dollars, then that should be the initial amount to be allocated for the business to formally start. The second important concept as well as one of the best practices being conducted is to study the financial return, of course it should all start with learning the positive financial return.

But for financial analysts, this would only be effective if you really studied carefully and deeply the positive and strengths of the business. That is why for any business to starts there are a lot of studies and research that needs to be conducted in order to arrive of finding the positive financial returns in the business. This does not only become a “come on” to the investors but also it would also create excitement and confidence in the business.

The third important concept or practice that needs to understand by business people is that financial business strategy is not really a discussion or presentation of cash flows in the business instead, it is more focus on providing alternatives or learning business options for the investment before it will proceed of starting the business. One of the popular models that is applying this concept is Black-Sholes Model this model consist of these factors that would help valuing the options of the investor.

Exercise price,
stock price, like looking at the same business as the one that you would want to start and see its strength in stocks.
Time to expiration,
variance of the returns on the stock, and lastly
risk-free rate of return.

These factors would really help investors in weighing in the potential of the investment and not just investing because of the misleading business trends that is happening around the business world. (Tarantino, D. , 2003).

Common Best Practices in Business Financial Strategy

Changes are always here in his world and business should also adopt that very constant approach of business that everything changes and needs to anticipate it all times. That is why with these uncontrolled changes, many companies whether big multinational or small local companies suffer business failure and one of the main reason is that most of them do not want to adopt these changes in their business. They say that service matters a lot in any business, service that focuses on how they can satisfy their customers as well as how they can encourage new customers to get into their business.

Business Partnership

Service is really not just a simple word that companies should apply, in fact most of the company strategies are focus on it. The main reason also is that service is not as simple as learning how you will provide service to your customers but also how that service is applicable to as many types of customers as possible and most of all how it can sustain loyal customers and attracts new ones. The first strategy is Business Partnership, where it is a way of combine management of business by two or more people. As a partner, you can provide knowledge or ideas, money or even property.

Money is always a common one for every partner, and from the amount of money that partner has provided it would also be the main basis of the benefit or simply profit that they could earn from the business. Partnership has also existed due to added stability on the business, most specially those who are on a starting up stage. For others, it is not only money, like for some ideas are the ones that they provide for the business, with ideas that may consists of business processes and techniques and influence, this type of partner somehow has more impact on the business even though they do not provide money for the company.

There are actually different types of partnerships:

General Partnership, or those partners that has equal rights on the business. They both or all of the partners have same level of ownership and rights in the business. This is one of the simplest types of partnership because everybody has an equal responsibility and assumes the same role as main caretaker of the business. Secondly,
Limited partnership, unlike in the general partnership, limited partnership has a limited rights and ownership in the business or company where he or she has been considered as partner. Limited in the sense that their partnership is only measured or based only from the amount of investment they provide for the company. The only good thing or negative about this limited partnership is that their profit and loss that they might have will only be restricted on the amount they have invested. Lastly,
Limited Liability Partnership, the first difference of this type of partnership is that, it retains the tax advantage of the general partners and they offer some personal protection, like they are free and not responsible for any mismanagement that may be done by other partners.

Capital Investment Company

Regardless of what partnership may be selected or applied by anybody, the main important thing is that, there should be a clear-cut or written agreements that should take place in order for the right of every partner be respected and secured. (Types of Partnership, 2008). The second (2) strategy is Capital Investment Company, or can be referred as financial Investment Companies are just some of the many type of company that provides support for other companies in ensuring that other companies continue to operate and perform business due its support of financial assistance.

These companies main purpose is to invest on some potential companies, provided they show a good business plan and proven effective techniques to perform business. They also not only encourage business to recover from major downfall due to mismanagement or lack of financial funds. Capital investment companies is one of the prime movers in the business today, because they keep most of the companies operate long-term and also being able to be behind major innovations since they provide substantial monetary support if in case companies needed it.

Some of the common companies or institutions that have a high demand for capital assistance are: aerospace, telecommunications and medical devices. Financial investment can again be possible if companies provide better documentations like business plan. The said documents will then be studied carefully for possible investment to be provided for the requesting company and that will also be the main basis for approval by the financial investor. There is also what they called as Investment Funds; this is however used to establish funding of money to be used in operating a business.

Micro financing and small business venture

This is becoming one of the most popular trends in financial support for micro financing and small business ventures. The main reason is that it is being run by small groups that help them support their small businesses. (Capital Investment Company-Finacial Investment-Investment Funds, n. d. ). In these two types of financial business strategies that were provided in this paper we can already say that there are options to takes and effective study to have before selecting the right strategy for the business.

Like take for instance if you would start business in selective areas or strategic locations whether business runs in the US, or in Europe or even in Asia, each of these major regions tries to deliver an approach that captures their respective business areas. But what matters the most is on how they play the game. It is right, sports or major sports endorsement is still one of the major avenue for business supremacy.

Second, is entertainment, it has generate major customer patronage on major artists, it does not only because both sports and entertainment has permanent followers but they just really create a common impact to customers due to trends they adopt and products they prefer. From cold drinks to sneakers and even to the food they eat and prefer, artists have always been a constant impact to business. The following are just some of the major business trends that companies must look at most specially for financial institutions need to look at in order to have a good and viable partnership with other companies.

The first one is looking at the world as small as possible, never thinks only for a single business location or region. Take for instance business trends in the US, should not only be for US customers only, always thinks global, what are some potential styles and trends that could be set. With this, the company can generate more business opportunity because it attracts not only specific brand of customers but also others as well which will eventually be the main key for globalization and stability in the long run.

Second, treating information carefully, information is one of the main key why other companies established greater advantage over the competition. They continuously perform research and development, finding more and more information which could anticipate problems and eventually being able to be first always in every opportunity possible. Information is one of the most important assets for business, and these should be treated carefully and at the same time be used for the greater advantage of your business.

Thirdly, always get used to the world, meaning businesses or companies must start to adopt that changes in customers preferences happens most of the time and increase in cost of materials and service comes hand in hand in business. With that companies will be able to provide some sound strategies that could turn things around for the better. In this way companies will be competitive. Lastly, capitalism always rules. This might be hard to achieve to some countries or to some companies.

But, capitalism is really the one that can help companies expand and perform effectively. Financial stability helps company performs better research and development of products as well as extending its operation in order to be on top of the competition. This is clearly shown in big highly industrialized countries like China, Japan, US and European countries. They manage business with financial strength, because they know that in order for them to compete well, they make sure that they have sufficient funds to operate and all these made possible through better management.

This only shows that the strategy should go for awakening customers likes and preferences, it is not about having the biggest funds in the business but it is all about extra hard work of financial analyst and researchers in the business on how they can see their product deliver the right customer product is what matters the most and that could already can convert income and stability for any business in the world, regardless what business it may be.

This is also the strategy that GE or General Electric applied for them to be successful up to this time and continues to re-invent and be there for their customers. Secondly, they always look on how they can provide convenience, quality and most especially affordable products to offer for their customers. This is the first important things that needed to be addressed before any strategy needs to take. (Wacker, W 2004).