Strategic financial management

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Table of Contents

Introduction
The strategic position of Sony
Alternative strategic direction
Consolidation
Divestment
Harvesting
Recommendation
Conclusion
Reference List

Introduction

Strategic management is defined as the field of management that deals with the emergent and intended initiatives that are usually taken by the firm’s general leadership group on behalf of the board of the company. The strategic direction entails the specification of resource utilization, the objectives, mission, and vision of the firm, plan and policy development, and resource allocation for plan and policy implementation. (Hill. 2008. p. 479)

Financial strategic management is the identification of the best strategies that will maximize the market value of an organization. It involves resource allocation among the existing competitive opportunities. Financial strategic managers are supposes to determine the best ways to allocate the scarce resources In order to maximize on profits. Financial strategic management basically involves financial, investment and dividend decisions of the organization. (Hoaghant.2005.p .7)

The strategic position of Sony

The strategic position of Sony was to regain its profitability by penetrating more into the market and reducing their operating costs. After recording their first loss since 1995, Sony in 2009 decided to take a growth-based strategic direction that was meant to develop their products and marked.

Having made a great loss of 98.94 billion for the year ending 31^st march 2009, Sony decided to restructure its organization. As part of the restructuring process, Sony made great changes by closing down eight manufacturing sites among its fifty seven, and downsizing its employee number by 16,000 workers. This was mainly geared towards reducing the operating cost of the company.

Sony also changed the structure of its competitive divisions that included the manufacture of Televisions, music players, gaming consoles and electronic reader. This saw Sony re-structure into two cross company units namely the network products and service group, and the consumer products group.

The growth-based strategic management option entails product and market development, diversification and market penetration. This approach is applied with companies that have that can further enter the market by providing products that are suitable and acceptable.

Alternative strategic direction

There are several strategic options that an organization can decide to take. The specific directions taken by any firm at a given point in time entirely depend on the available resources of the organization, and the nature of the performance of the product in the industry. The major strategic direction options include; growth based consolidation, divestment, and harvesting.

Consolidation

In general, the term consolidation refers to the act of merging many things into one. In business context, the term consolidation refers to the act of merging or the acquiring smaller companies into bigger ones. There are four types of business consolidation and these include statutory merger, statutory consolidation, stock acquisition and amalgamation.

Statutory merger is the coming together of several firms that leads up to the assets liquidation of the firm that is bought and the buying company continue to exist. Alternatively, statutory consolidation is a coming together of firms that brings up a new entity in which all the involved companies stop to exist.

Stock acquisition is the combination of firms in which the firm buying gains more than 50 percent of the entire stock of the firm that is being bought and both of them continue to exist after the merger. Amalgamation is the act of a firm being completely owned by another one. In this case the consideration is paid and the purchasing one survives (Patherick 2009.p.57).

This strategy is best used by managers who uncover the strength and weaknesses of their organizations through feasibility studies and come up with the best ways of coming up with one a powerful venture. Before such a decision is taken, thorough feasibility studies of the organizations in question have to be done (Justis.1979.p.35-42)

Divestment

Divestment is a management strategy in which the given organization reduces its assets for ethical or financial goals or sale of an already running business by an organization. Divestment simply means de-investing. Organizations can divest in order to do away with a line of business that is out of its interest in order to pay more attention on what it does. (Levicki.1984.p.1)

Divesting can also be done in order to obtain funds or when the break up value of the organization is higher than the organization itself, then divesting can be done. Part of an organization may also be divested in order to create stability or to do away with a department that is performing poorly. The final motive of divestment may de an order from regulatory authorities with aims of creating competition in the market among other reasons. (McKienan, 1992.p.49)

When an organization is running a line of business that is not suitable towards attaining its objectives, then the most important strategic decision is divesting. This enables it to concentrate on the line that suits its operations well (Kotter.2002.p34)

Harvesting

Harvesting is the complete withdrawal of the product from the market. An organization that is achieving its goals may make a decision of harvesting their product or service by allowing it to be completely eradicated from the market, if its market analysis shows that its performance is poor compared to the other products.

In case a firm has a product that is not acceptable in the market, then the most important strategic decision is to withdraw the product or service completely from the market and fully concentrate on the lines of business that suit the given firm.(Madera, 2007.p.34-58)

Recommendation

Even though Sony expected their operating loss to go even higher to 120 billion for the year ending 31^st march, 2010, they reported a loss of 25.7 billion at the end of the first quarter. This was lower than expected and the reduction was attributed to the operating costs that went down by 19.2 percent.

In my opinion, I would recommend that Sony would have divested. Given that it handles a variety of products, it makes the company become too big to be managed. The best thing that Sony would do was to sell part of its huge assets in order to pay close attention to the divisions that would yield good returns. This would make the company more stable and the finances received from the sell of some of the business lines would be pumped back into the main business.

Restructuring the organization whose break up is higher than it self does not add value to the organization as such. In real sense it doesn’t eliminate the fact that the firm is just too big to be managed at divesting at such a point comes in handy as a strategic financial management direction.

Conclusion

As a conclusion, financial strategic management is a crucial management practice that needs to be handled very carefully. There are various directions an organization can take and each option has its own advantages and disadvantages. Managers need to determine the best direction because any cause of action taken has its own to impact to the organization, in as much as the attainment of its goals is concerned. This impact may be either negative or positive hence has to be guarded.

Reference List

Hill, C.W. 2008. Strategic management, Boston: hoghton Miffin Company

Hoagland. P.P.2005. introduction to financial management. Belmont: Thompson Higher Education.

Madura.J. 2007. Introduction to business Canada: Thompson south western.

Justis, R.T, 1979. The feasibility study as a tool of venture analysis. Burlington: Elsevier academic press.

Levicki.C. 1984, Small business: theory and policy, Sydney: Croom Helm Ltd

McKiernan.1992. Strategies of growth: maturity, recovery and Internationalization, London: Routlege, chapman and hall.

Kotter.j.p, 2002, the Heart of people and change.Boston: Harvard publishing School. New Jersey: Humana press

Patherick. W. 2009. Principles of management and leadership, Burlington: Elsevier academic press.

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