(July, 16th, 2010. 0:42AM)
After several months being so busy with my daily activities, finally I can spent my time tonight or you can say, this early morning to write down again some thoughts which keep circling in my head for a topic which being a cynosure, at least for me, conditioned in the company which I work with. To cut short this chit chat, hope you enjoy the notes..oh..before I forgot, this note will be mainly discuss about corporate financial strategies.
Corporate decisions to sell its ownerships of a business unit are based on several factors, few of it would be:
1. Need for a Cash, or Money. This condition could be as the results of:
- Business expansion. A corporation that would like to expand it business, such as its productions unit, its business subsidiary, anything related to the planning to achieve growth of the company. All of these plans will need a quite amount of money to provided. Hence no other choice to sell!
- Business goes bad. Such as increasing debts, liabilities, failed products which lead to huge penalties by the clients, or even client who got bankruptcy which lead to inability to pay for the products its ordered - this is a very bad condition for a company who laid his business using money lend from a bank
2. Downturn of business activities.
- In contrary with expansion, are downturn of the corporate business activities. These could be means of many things. Loss of markets, loss of shares values, loss of product sales due in time,etc
- Political, security, economical, uncertainty of regulated law in which create an environment which
lead to a condition where the company can not perform it business activities.
Now, we have analyze several factors which affects the decisions of a corporate to sell its ownership of a business unit. We shall go through to several factors affecting the reasons of why a corporate wants to buy a business unit. These could be:
1. Expansion of area of business activities. It is a common practice performed by a corporate to be able to sustain its growth. A company shall be able to foster a promising market that can give profits as the returns, even though the market itself was not the core business for the corporate.
Certainly, prior to perform this step, the corporate should already considered whether they are able to run it by considering its resources (e.g. technology, human resources, funds, organizations,expertise, etc) and also the surrounding environment they faced (e.g.economic, politics, societies, regulated law, etc).
2. To secure the business activities. In business there's a word "If you can't fight them, buy them"...no..no this is just my word..Well, anyway, its also a common practice in business to buy your potential competitor. One's who performing this will be able to secure its activities in the market, since it will rarely have competitor.
Whether selling or buying a business unit, as long as it involves change of corporate ownerships (business ownership), it will impacts to the business strategies aftermath. To be inline with the title and not to broaden the analyze, I will focus on the corporate operational policies affected by the change of ownership.
Every corporation should be focus on its financial performance, no doubt on that. But what are the derivative for the financial performance in terms of corporate operational policies? Is it Assets, liabilities, or another factors?? Well, I can say another two: cash flow and sales.
A corporate which relay on one of the two shall have a quite different policies running its operational business activities.
CASH FLOW DRIVEN
The cash flow oriented corporation shall be laying its foundation in return driven strategy which challenge the management to understand the nature of cash flow information and its component of valuation as well as the myriad strategic decisions that lead to valuation (Strategic decisions and cash flow, by Frigo, Mark L, Graziano, Ron). Considering the recently financial crisis which happen in most of the European and US countries, there are still risk to the business that can't be ignored, to named a view:
- A potential upturn in inflation, with higher interest rates
- Under forming pension assets
- Sluggish or declining revenues in a prolonged period of sub par economic growth
- Deteriorating credit quality of buyers and suppliers.
Any of these risks could threaten the corporation's ability to fund necessary expenses such as debt service and pension obligations, or to pay dividends. And no one is betting that financial volatility won't come back with a vengeance, wreaking havoc on company which oriented in cash flows.
Here's below what the corporate shall be performing to secure its operational activities:
- Securing positive cash flow. To be able to perform so, the corporate shall starting to define - firstly - identified the state of it cash. If we considering a corporate with core business in product or service, it will start to identified which product or service has an out of positive cash flow performance, down tothe outstanding payment, and than analyze on its cash flow planning for further operational.
- Strictly avoid loans from banks. These need to be performed, based on risks above, due to uncertain inflation and interest rates (especially in European country and US) due to the economic subdued of the economic growth.
For private company, it is also much harder to get loans from the bank, why, because some of the reasons could be poor financial performance report, difficult administration, etc.
- More preference on projects that forecast-ed to give a positive cash flow performance during the executions. This need to be performed to avoid impacts of negative cash flow by a projects which can affects another projects that already in a good financial performance.
- Policies in the corporate itself that can sustain a good cash. Sorry, for this point analyze, I keep it for myself.
The point is that, everybody that involve in this type of operation oriented shall be more professionally manage not only their cash, but also their planning, forecasting, performance, and attitude towards the goals of corporate objectives.
SALES DRIVEN
It is not so much difference than the cash flow driven corporation. The difference is only the focus of the goals/plan of the operational working order of the business and the type of company that sales driven is STATE COMPANY.A sale is the pinnacle activity involved in the selling products or services in return for money or other compensation. It is an act of completion of a commercial activity (http://en.wikipedia.org/wi
The seller - the provider of the goods or services - completes a sale in response to an acquisition or to an appropriation or to a request. There follows the passing of title (property or ownership) in the item, and the application and due settlement of a price, the obligation for which arises due to the seller's requirement to pass ownership. Ideally, a seller agrees upon a price at which he willingly parts with ownership of or any claim upon the item. The purchaser, though a party to the sale, does not execute the sale, only the seller does that. To be precise the sale completes prior to the payment and gives rise to the obligation of payment. If the seller completes the first two above stages (consent and passing ownership) of the sale prior to settlement of the price, the sale remains valid and gives rise to an obligation to pay.
Easy words is: in sales driven corporation, cash reach after products delivered! Of course, it will keep involving cash. But in this sales driven, delay in payment will not so much affecting the operation performance due to the company still able to manage the operational cost using its own financing cash. The questions is why they able to do so? As previously inform, the sales driven company usually practiced by state company, which means it can easily get loan from bank with lower rate and easy administration, and also it is guarantee by the state. In case the company fell suffer about cash, state will be able to injects some cash for its operation cost, which payed with lower rate after the company able to perform its operation.
I hope my notes can give some point of view about what is or what should be improve in oneself to be able to compete with the more challenging and professional working environment faced.
Anyway, this notes planned to be a non profit oriented abstract, which can be seen later on.
After several months being so busy with my daily activities, finally I can spent my time tonight or you can say, this early morning to write down again some thoughts which keep circling in my head for a topic which being a cynosure, at least for me, conditioned in the company which I work with. To cut short this chit chat, hope you enjoy the notes..oh..before I forgot, this note will be mainly discuss about corporate financial strategies.
Corporate decisions to sell its ownerships of a business unit are based on several factors, few of it would be:
1. Need for a Cash, or Money. This condition could be as the results of:
- Business expansion. A corporation that would like to expand it business, such as its productions unit, its business subsidiary, anything related to the planning to achieve growth of the company. All of these plans will need a quite amount of money to provided. Hence no other choice to sell!
- Business goes bad. Such as increasing debts, liabilities, failed products which lead to huge penalties by the clients, or even client who got bankruptcy which lead to inability to pay for the products its ordered - this is a very bad condition for a company who laid his business using money lend from a bank
2. Downturn of business activities.
- In contrary with expansion, are downturn of the corporate business activities. These could be means of many things. Loss of markets, loss of shares values, loss of product sales due in time,etc
- Political, security, economical, uncertainty of regulated law in which create an environment which
lead to a condition where the company can not perform it business activities.
Now, we have analyze several factors which affects the decisions of a corporate to sell its ownership of a business unit. We shall go through to several factors affecting the reasons of why a corporate wants to buy a business unit. These could be:
1. Expansion of area of business activities. It is a common practice performed by a corporate to be able to sustain its growth. A company shall be able to foster a promising market that can give profits as the returns, even though the market itself was not the core business for the corporate.
Certainly, prior to perform this step, the corporate should already considered whether they are able to run it by considering its resources (e.g. technology, human resources, funds, organizations,expertise, etc) and also the surrounding environment they faced (e.g.economic, politics, societies, regulated law, etc).
2. To secure the business activities. In business there's a word "If you can't fight them, buy them"...no..no this is just my word..Well, anyway, its also a common practice in business to buy your potential competitor. One's who performing this will be able to secure its activities in the market, since it will rarely have competitor.
Whether selling or buying a business unit, as long as it involves change of corporate ownerships (business ownership), it will impacts to the business strategies aftermath. To be inline with the title and not to broaden the analyze, I will focus on the corporate operational policies affected by the change of ownership.
Every corporation should be focus on its financial performance, no doubt on that. But what are the derivative for the financial performance in terms of corporate operational policies? Is it Assets, liabilities, or another factors?? Well, I can say another two: cash flow and sales.
A corporate which relay on one of the two shall have a quite different policies running its operational business activities.
CASH FLOW DRIVEN
The cash flow oriented corporation shall be laying its foundation in return driven strategy which challenge the management to understand the nature of cash flow information and its component of valuation as well as the myriad strategic decisions that lead to valuation (Strategic decisions and cash flow, by Frigo, Mark L, Graziano, Ron). Considering the recently financial crisis which happen in most of the European and US countries, there are still risk to the business that can't be ignored, to named a view:
- A potential upturn in inflation, with higher interest rates
- Under forming pension assets
- Sluggish or declining revenues in a prolonged period of sub par economic growth
- Deteriorating credit quality of buyers and suppliers.
Any of these risks could threaten the corporation's ability to fund necessary expenses such as debt service and pension obligations, or to pay dividends. And no one is betting that financial volatility won't come back with a vengeance, wreaking havoc on company which oriented in cash flows.
Here's below what the corporate shall be performing to secure its operational activities:
- Securing positive cash flow. To be able to perform so, the corporate shall starting to define - firstly - identified the state of it cash. If we considering a corporate with core business in product or service, it will start to identified which product or service has an out of positive cash flow performance, down tothe outstanding payment, and than analyze on its cash flow planning for further operational.
- Strictly avoid loans from banks. These need to be performed, based on risks above, due to uncertain inflation and interest rates (especially in European country and US) due to the economic subdued of the economic growth.
For private company, it is also much harder to get loans from the bank, why, because some of the reasons could be poor financial performance report, difficult administration, etc.
- More preference on projects that forecast-ed to give a positive cash flow performance during the executions. This need to be performed to avoid impacts of negative cash flow by a projects which can affects another projects that already in a good financial performance.
- Policies in the corporate itself that can sustain a good cash. Sorry, for this point analyze, I keep it for myself.
The point is that, everybody that involve in this type of operation oriented shall be more professionally manage not only their cash, but also their planning, forecasting, performance, and attitude towards the goals of corporate objectives.
SALES DRIVEN
It is not so much difference than the cash flow driven corporation. The difference is only the focus of the goals/plan of the operational working order of the business and the type of company that sales driven is STATE COMPANY.A sale is the pinnacle activity involved in the selling products or services in return for money or other compensation. It is an act of completion of a commercial activity (http://en.wikipedia.org/wi
The seller - the provider of the goods or services - completes a sale in response to an acquisition or to an appropriation or to a request. There follows the passing of title (property or ownership) in the item, and the application and due settlement of a price, the obligation for which arises due to the seller's requirement to pass ownership. Ideally, a seller agrees upon a price at which he willingly parts with ownership of or any claim upon the item. The purchaser, though a party to the sale, does not execute the sale, only the seller does that. To be precise the sale completes prior to the payment and gives rise to the obligation of payment. If the seller completes the first two above stages (consent and passing ownership) of the sale prior to settlement of the price, the sale remains valid and gives rise to an obligation to pay.
Easy words is: in sales driven corporation, cash reach after products delivered! Of course, it will keep involving cash. But in this sales driven, delay in payment will not so much affecting the operation performance due to the company still able to manage the operational cost using its own financing cash. The questions is why they able to do so? As previously inform, the sales driven company usually practiced by state company, which means it can easily get loan from bank with lower rate and easy administration, and also it is guarantee by the state. In case the company fell suffer about cash, state will be able to injects some cash for its operation cost, which payed with lower rate after the company able to perform its operation.
I hope my notes can give some point of view about what is or what should be improve in oneself to be able to compete with the more challenging and professional working environment faced.
Anyway, this notes planned to be a non profit oriented abstract, which can be seen later on.
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