Business Strategy
What are the business strategies?
Growth, long term profitability, cost leadership, short term profitability, differentiation, survival
How finance strategy can supply growth strategy?
cash sales or short payment term to customers, long payment term from vendor, outsourcing, listing, acquisition, leasing instead of owning fixed assets, tax planning
How finance strategy can achieve organic growth strategy?
longer payment term
How finance strategy can supply short term profit strategy?
cost reduction, share service center, outsourcing, automation, closure of loss making operating unit, business, customers
How finance strategy can support survival strategy?
Disposal of fixed assets, closure of loss making business, breakeven pricing, factoring
Which three business strategies support IPO strategy, cashflow, growth, profitability, risk management?
Automation, outsourcing, Growth
Which are the two growth strategies?
organic growth and external growth
What are external growth strategy, investment, merger and acquisition?
Development of new market, new product and new services
What strategy support external growth, merger and acquisition, cost reduction, share service center, outsourcing?
Listing
Which strategy support organic growth strategy, CRM, Cost reduction, Processing improvement, productivity, automation and efficient improvement?
CRM strategy
Which strategy support acquisition, Standardization, best practice, automation?
Outsourcing
Which strategy support productivity, KPI measurement, workflow, work study, benchmarking, competitive strategy?
Cost Reduction strategy
Which business structure fits for growth strategy?
Thin and flexible cost structure
Does funding strategy affect profitability strategy?
affect interest cost
Partnership strategy support profitability strategy and grow strategy?
volume discount and frequency of service
Taxation strategy affect profitability strategy but not consumer service strategy?
Yes, it is true
What should be included financial strategy?
- Cashflow strategy
- Critical Cost control
- Revenue management
- Risk management
- Inventory control
What are cost reduction methods?
- Tax planning, compliance, tax risk management
- Growth strategy, consolidation, overhead sharing, volume discount
- Early termination of R & D without commercial value
- Procurement/Sourcing management
- Contract negotiation and Contract backing management
- Risk management
- Performance measurement for Idle product, lease, manpower and waste management to improve efficiency and remove unnecessary cost
- Avoid unabsorbed cost by customers
- Funding options to minimize costs
What are pricing strategy?
- Cost plus pricing for new market/ service which involves additional risk
- Breakeven pricing or penetrating price for breaking into market (rely on cost leadership)
- Activity Base Costing to remove all unnecessary cost to customers (have set up ABC cost model)
- Life time cost and total ownership of costs in quoting to avoid unabsorbed costs by customers
What finance strategy should be considered when buying a ship?
- To buy or to lease
- When to buy taking into account long manufacturing cycle
- How to fund?
- Which bank is to fund?
What are priority for finance strategy?
- Cashflow and risk management
- Revenue management which affects volume discount
- Cost reduction and process improvement
What are pricing strategy to maintain and grow business?
- Penetrating price
- Cost plus pricing
- Breakeven pricing
- Marginal pricing
- Premium pricing for dominant products
- Discount price
- Single source pricing
- Lowest pricing/deferred pricing
- Performance pricing
What is the advantage of growth strategy?
- Volume discount in purchasing
- Consolidation
- Retain Talent to generate business
- Share of overhead
- Reduce Idle
Can you give some example of finance strategy for freight forwarder in Hong Kong?
- Cost reduction to support competitive prices and support recruitment of talent with multi-task ability and to provide further training to staff
- Process improvement within finance in HK and across the countries and among different departments to extract resource for account management of high margin customers
- Proper cashflow planning, contingent plan and early funding arrangement
- Comprehensive risk management
- Proper tax planning in China (no full licenses in China)
- Formal investment appraisal to avoid loss making quotes and incorrect investment
- Consider to relocate support function to South China
How to ensure internal growth?
- Avoid lost of business/Identify competitor alliance/identify lower competitor price by Source Of Change report
- Attend each bidding
- Maintain the business by satisfactory service by reporting claims & compensation as contingent liability, dispute on debts relating to complaint on service as provision for bad debt, credit note based on accrual concept
- Existing customers and Target growth customers and market by P & L owner, monitored & controlled by budget and forecast
- New service development by P & L owner, monitored & controlled by budget
- Auto-renewal in contract
- Contract management (renewal and restraint of trade by vendor and employee)
How to ensure growth by acquisition?
- Cost reduction scheme/synergies to boost the margin of acquired company and acquiring company
- Due diligence to avoid tax liability
- Reduce cost of capital to increase the number of acquisition opportunity
- Consider vertical acquisition
What is finance strategy for a manufacturing company?
- Strong and reliable Cashflow to invest and negotiate the best buying cost
- Monitoring Volume discount (logistics and procurement), share of administration cost (overhead and management) and reduction of idle capacity and manpower taking into account of the anticipated growth in volume
- Cost reduction through procurement such as single sourcing, contract negotiation with vendors and efficiency improvement control
- Risk management of new customer, product, market development
- Hedging of purchase raw materials
- Set up minimum level and maximum level of inventory
- Funding by HKD and US$ for investing taking into account of appreciation of RMB
What should be considered for vendor management strategy?
- Single source for volume discount and dual source for reliable supply
- Partial Insourcing to put pressure on vendor
- Heavy penalty for fault
- Holding payment if there is a fault
- Long payment term to pressure on high quality delivery
- Assess going concern and add value ability of vendors in selection
How to supply growth strategy by cashflow strategy?
- Credit, appropriate payment terms to customers, cash discount or long payment term
- Credit control to ensure reliable cashflow for payment
- On time payment to vendor to maintain the service quality
- On time payment to avoid stop run
- Payment on discretionary expense should be approved with proper analysis such as benchmarking, compare cost with the benefit