SFM
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Transcript of SFM
Strategic Financial Management
Definition: “the application of financial techniques to strategic decisions in order to help achieve the decision-
maker's objectives”
Strategy: a carefully devised plan of action to achieve a goal, or the art of developing or carrying out such a plan
Finance: the business or art of managing the monetary resources of an organisation
Management: the organising and controlling of the affairs of an organisation or a particular sector of an organisation
Strategy
Purpose: How will your organisation achieve its desired financial position?
To achieve this, you must ask:
WHAT – future position do you aim to reach?
WHERE – are you now?
HOW - are you going to get there?
According to Professor Michael Porter of Harvard Business School, Fundamental to the success of any company and to any effort to develop strategy is having a proper goal for business clearly in mind.
INTRODUCTION
A business involves the interest of various stakeholders. Stakeholders consist of
Shareholders Interest groups
The shareholders in the process of maximizing their wealth, try to get a leverage on every possible front by rewarding the other interest group.
The interest group includes Vendors and suppliers Lenders Employees Contractors Dealers Customers and Government.
All the shareholders and the interest group tries its level best to
grab maximum possible returns Sustain together Long term growth less controversies
Finally a win – win situation
To bring this win – win situation about all the time then we should have strategic financial management.
STRATEGIC FINANCIAL MANAGEMENT
Strategic Financial Management refer to both the financial implications or aspects of various business strategies and the strategic management of finances.
It has strategic approach to Cost management Sales and revenue management Fund- raising and fund – deployment Cost benefit analysis of
Expansion Diversification Down-Sizing Renovation
THE MAJOR INGREDIENTS OF STRATEGIC FINANCIAL MANAGEMENT
The two major factors of strategic finanacial management is
Cost and Benefit
These two factors rotate around three major ingredients essential for corporate success
People Technology Capital
An equilibrium between all these three ingredients will always acquire recognition and helps for sustained growth in long run.
People Capital Technology
Owners Amount invested Production
Employees Cost of sourcing office administration
Vendors Utilization marketing
Dealers Redemption Distribution
Contractors Communications
Customer Control
Government systems
THE NINE REFERENCES FOR STRATEGIC FINANCIAL MANAGEMENT
Structural Flexibility
Sustainability
Superiority First,Fast,Cheap and
GoodStrategic cost
management
Sensitivity (Time & ability to respond)
Systems
Selectivity (focus)
Soul searching for continued bench
marking
Success
Sanctity
THE NINE ‘S’ MODEL OF SFM
The nine ‘s’ model combines the quantitative and qualitative skills of a strategist .
Selectivity Most appropriate business choices Core competency Stretching of enterprise Profitable diversificationSystems Supportive mechanism Includes the technological,accounting and
operational system
THE NINE ‘S’ MODEL OF SFM Accounting system
• First tier- formal accounting requirements for reporting
• Second tier- purpose of responsibility accounting• Third tier- provide significant data to key
executives for decision making• Fourth tier- assists the owners or promoters in
taking strategic decisions
Sanctity Refers to ‘ethical economics’ of business
An ethical approach to business offers a long- term, sustainable ‘brand – equity’ to the enterprise which ultimately reduces every cost at every stage of product’s life cycle.
THE NINE ‘S’ MODEL OF SFM
Strategic cost management Refers to the micro level strategic analysis of
various cost structures and cost implications. It attempts to indicate the cost- molecules that are of strategic importance.
Sensitivity About strategic information management Strategic use of every piece of information flowing in and out. The highest degree of sensitivity comes from
the most efficient use of strategically important information.
THE NINE ‘S’ MODEL OF SFM
Sustainability Performance in long term strategic planning Combination of business strategy and business
funding strategy Sustainability also means ‘managing new
competitors’ with ‘extra cost on sustenance’
Superiority Position of leadership that an enterprise must attain Strategic plan has to offer the financial difference
between the ‘cost of leadership’ and ‘cost of following others’
Retain one’s identity at any cost in a competitive market
THE NINE ‘S’ MODEL OF SFM
Structural flexibility To achieve strategic advantages the dynamic
organization should have Human flexibility Technical flexibility Systems flexibility Financial flexibility Entrepreneurial flexibility
Soul searching continuous bench marking Financial alertness Innovation Exposure to new variables and parameters.