Amity Business School MBA Class of 2010, Semester IV Strategic Financial Management Prof Akhil Swami/Anuj Srivastava
SFM---CALSS 1 AND 2 Role of finance and strategy in management process 1.Strategy, Management process.
<ul><li>Strategic management allows an organization to be  more proactive than reactive in shaping its own future ; it all...
<ul><li>Which stage does your company belong? </li></ul><ul><li>There are  three stages  of a turnaround strategy:  </li><...
Future is uncertain so challanging <ul><li>Nobody can really guarantee the future, but in this era of Strategic Management...
Scenario analysis <ul><li>choose that alternative plan which will be according to the anticipated future and finance, mark...
MNC decision making <ul><li>MNC ‘S evaluate a FDI,  they compile a list of prospective  investments, next objective is to ...
<ul><li>1. Difference between project and parent co, cash flow. </li></ul><ul><li>2. Foreign Tax Regulation. </li></ul><ul...
Tough discretion/decision required <ul><li>Managers need to understand the options available. ------expanding or contracti...
Strategy droop <ul><li>Strategy Droop--- </li></ul><ul><li>The organization as a whole may have taken too many projects si...
Hubrious hypothesis <ul><li>Gap Analysis thus is a useful tool to avoid strategic droop . Gap analysis has to be backed up...
Role of Finance and strategy in Management process  <ul><li>Management   Process ----Planning, Organizing, staffing, leadi...
<ul><li>Strategic management allows and organization to be more proactive than reactive in shaping its own future ; it all...
Benefits of SFM <ul><li>Financial Benefits:  1.Improvement in sales.  2.Improvement in profitability.  3.Improvement in pr...
Some important terms <ul><li>Balloon payment mortgages- ---Mortgages that requires payments for a three to five year perio...
<ul><li>Contagion effect ---- Adverse effects of a single firm that becomes contagious throughout the industry . </li></ul...
<ul><li>Noise trading- ---Theory used to explain that  stock prices may deviate from their fundamental values as a result ...
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12fe2 Sfm Class 1 & 2

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  • Amity Business School
  • 12fe2 Sfm Class 1 & 2

    1. 1. Amity Business School MBA Class of 2010, Semester IV Strategic Financial Management Prof Akhil Swami/Anuj Srivastava
    2. 2. SFM---CALSS 1 AND 2 Role of finance and strategy in management process 1.Strategy, Management process.
    3. 3. <ul><li>Strategic management allows an organization to be more proactive than reactive in shaping its own future ; it allows an organization to initiate and influence activities and thus to exert control over its own destiny. Small business owners, chief executive officers, presidents and managers of many for-profit and non-profit organizations have recognized and realized the benefits of strategic management. Historically, the principle benefit of strategic management has been to help organizations formulate better strategies through the use of the more systematic, logical and rational approach to strategic choice. </li></ul>
    4. 4. <ul><li>Which stage does your company belong? </li></ul><ul><li>There are three stages of a turnaround strategy: </li></ul><ul><li>I – Pre-turnaround </li></ul><ul><li>II – Period of Crisis </li></ul><ul><li>III – Period of Recovery </li></ul>
    5. 5. Future is uncertain so challanging <ul><li>Nobody can really guarantee the future, but in this era of Strategic Management, those firms, even in bad times will be able to survive, who will size up the chances, calculate the risk involved, estimate own ability to deal with them , </li></ul>
    6. 6. Scenario analysis <ul><li>choose that alternative plan which will be according to the anticipated future and finance, marketing, HRM and Production all will have to work in the same way and position as per the scenario anticipated. </li></ul>
    7. 7. MNC decision making <ul><li>MNC ‘S evaluate a FDI, they compile a list of prospective investments, next objective is to select a combination of Projects that maximize the shareholders wealth. They face problems which are not faced by local companies. </li></ul>
    8. 8. <ul><li>1. Difference between project and parent co, cash flow. </li></ul><ul><li>2. Foreign Tax Regulation. </li></ul><ul><li>3. ex –Appropriation. </li></ul><ul><li>4. Blocked Funds. </li></ul><ul><li>5. Exchange rate changes and Inflation. </li></ul><ul><li>6. Project specific training. </li></ul><ul><li>7. Difference between the basic business risk of Foreign and domestic projects. </li></ul>
    9. 9. Tough discretion/decision required <ul><li>Managers need to understand the options available. ------expanding or contracting a project, abandoning the project, employing new techniques, entering new line of business, involvement of project managers in determining the financial policy, combining with the norms of lending and credit. </li></ul>
    10. 10. Strategy droop <ul><li>Strategy Droop--- </li></ul><ul><li>The organization as a whole may have taken too many projects simultaneously. Top management knows that there is going to be strategic slippage or strategic droop . </li></ul><ul><li>They start too many projects at a time, in the hope that this will compensate for disappointing results . This cultivates in harmful interpersonal rivalry, excess competition for recourses, bad politics and sometimes the resulted are inferior to what otherwise could have been achieved if lesser number of projects were started. </li></ul>
    11. 11. Hubrious hypothesis <ul><li>Gap Analysis thus is a useful tool to avoid strategic droop . Gap analysis has to be backed up with strategic plan. CRAP analysis----creating anticipation plans. </li></ul><ul><li>Hubrious Hypothesis------ </li></ul><ul><li>When the Manager pushes a project too hard, because of his misplaced conviction, that he can make no wrong. Does not listen to correct advice and ultimately the project suffer ? </li></ul>
    12. 12. Role of Finance and strategy in Management process <ul><li>Management Process ----Planning, Organizing, staffing, leading and controlling. </li></ul><ul><li>Role of Finance in strategic Management--------Role of Finance in strategic Management-------- </li></ul><ul><li>Investment Principle----The firm is expected to invest in only those assets where they are expected to get greater returns than minimum expected return or Hurdle Rate. Riskier projects have to have higher returns. </li></ul><ul><li>Financing Principle----Mixture of Debt and Equity on the basis of type of industry/ Product /future trends, so as to minimize the hurdle rate. </li></ul><ul><li>Dividend Principle-----If the firm cannot find investment opportunities that can earn higher return than Hurdle rate, money is refunded to investors as Dividend. </li></ul>
    13. 13. <ul><li>Strategic management allows and organization to be more proactive than reactive in shaping its own future ; it allows an organization to initiate and influence activities and thus to exert control over its own destiny. Small business owners, chief executive officers, presidents and managers of many for-profit and non-profit organizations have recognized and realized the benefits of strategic management. Historically, the principle benefit of strategic management has been to help organizations formulate better strategies through the use of the more systematic, logical and rational approach to strategic choice. </li></ul>
    14. 14. Benefits of SFM <ul><li>Financial Benefits: 1.Improvement in sales. 2.Improvement in profitability. 3.Improvement in productivity. Non-Financial Benefits: 1.Improved understanding of competitors strategies. 2.Enhanced awareness of threats. 3.Reduced resistance to change. 4.Enhanced problem-prevention capabilities. </li></ul>
    15. 15. Some important terms <ul><li>Balloon payment mortgages- ---Mortgages that requires payments for a three to five year period , at the end of the period , full payment of the principal is required. </li></ul><ul><li>Bullet Loan .-----loan structured so that interest payments and the loan principal are to be paid off in one lump sum at a specified future date, </li></ul><ul><li>Chattel mortgage bond—which is secured by personal property. </li></ul>
    16. 16. <ul><li>Contagion effect ---- Adverse effects of a single firm that becomes contagious throughout the industry . </li></ul><ul><li>Dirty float- ---System whereby exchange rates are market determined without boundaries. But subject to government intervention. </li></ul><ul><li>I ndenture ---- legal documents specifying the rights and obligations of both the issuing firm and the bond holders . </li></ul>
    17. 17. <ul><li>Noise trading- ---Theory used to explain that stock prices may deviate from their fundamental values as a result of the buy and sell positions of uninformed investors(noise traders ).A market correction may not eliminate the discrepancy because of the uncertainty surrounding the stock’s fundamental value. </li></ul>

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