Making strategic options fly

M&S profits feel between 1998 and 2002 primarily due to -

Major restructurings

Its key markets became more competitive, it lost competitive advantage, became complacent and failed to renew its strategy

It allowed its costs to get out of control

It tried to get sales back by slashing prices

To understand changes in company profits in a strategic way, it is best to -

To think about shifts in both the competitive environment and in competitive advantage separately for each specific business

To think about shifts in competitive advantage globally across the business

Do much better financial forecasts

To think about shifts in the competitive environment globally across the business

Becoming a Guardian of Shareholder Value means -

Championing profits over the drive to increase sales

Challenging costs at every opportunity

Primarily focusing on the management of the value drivers of investment, tax rate, the cost of capital

Looking at the business strategically, analysing the shifts and the impact on the value and the cost drivers, projecting the cash flows and the business valuation

The seven generic value drivers -

Are too remote from operational managers for them to really worry about them

Track the value of the business and the impact of the strategies and the impact of shifts in this on the value of the business

Help you to anticipate profit warnings

Are a very big help with difficult short term budgeting

Value and cost drivers -

Are the same as Key Performance Indicators

Should be used with the Option Grid, for financial planning generally – and on their own

Are only ever really used on their own

Can only really be applied to very tangible value

A value driver is -

Extra dividends to shareholders and share buy-backs

A short term measure to increase profit

Anything which directly or indirectly generated cash inflows to the business, now or in the future

Anything that pushes up organisational or operational efficiency

A 'Cost driver' is -

An area of cost that is essentially unnecessary

Anything which directly or indirectly generated cash outflows to the business, now or in the future

A negative key performance indicator

A budgetary demand from an expanding department

'Value Segmentation' is -

Simply another way of doing market segmentation

The way in which value is shared between a customer and a supplier

The way in which value is shared between different partners

Value that is captured by different stakeholders or via different activities or processes

A strategy for a Finance Department is best developed by -

By identifying the existing constraints, by then being realistic and substantially working within these constraints on marginal improvements

Seeing it as a stand-alone, functional unit which can determine its own destiny including its mission, objectives and strategies because that is a lot simpler

By establishing a mission, vision etc which reflects what it has essentially done in the past

By looking it as far as is possible a business unit with its own internal clients-like any other

Strategic and Financial Analysis -

Are best kept very separate as they are qualitatively differently

Reflect fundamentally different skill sets and it would be unfair to expect finance staff to be jack-of-all-trades

Would be nice to combine in an ideal world, but one has to be realistic

Are best done as closely integrated as is possible even though that is stretching at times

Making strategic options fly

M&S profits feel between 1998 and 2002 primarily due to -

To understand changes in company profits in a strategic way, it is best to -

Becoming a Guardian of Shareholder Value means -

The seven generic value drivers -

Value and cost drivers -

A value driver is -

A 'Cost driver' is -

'Value Segmentation' is -

A strategy for a Finance Department is best developed by -

Strategic and Financial Analysis -

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