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MAHATMA EDUCATION SOCIETYS

PILLAI COLLEGE OF ARTS, COMMERCE & SCIENCE


Re-accredited A grade by NAAC

A PROJECT
ON
STUDY OF FINANCE AND MARKETING STRATEGY OF ASIAN PAINTS
PVT. LTD in the subject Strategic Management.

SUBMITTED TO
UNIVERSITY OF MUMBAI
FOR SEMESTER -1 OF
MASTER OF COMMERCE

BY
JAYESH SUNIL PARANGE
ROLL NO: -3770
UNDER THE GUIDANCE OF
Prof:- SEEMA SOMANI
YEAR 2013-2014

MAHATMA EDUCATION SOCIETYS


PILLAI COLLEGE OF ARTS, COMMERCE & SCIENCE
DR.K.M. VASUDEEVAN PILLAIS CAMPUS SECTOR 16,
NEW PANVEL
DECLARATION BY THE STUDENT

Jayesh Sunil Parange student of m com part- I roll no 3770 hereby declare that the
project for Submitted by me for study of finance and marketing strategy of asian
paints PVT LTD semester 1 during the academic year 2013-14, is based on actual
work carried out by me under the guidance and supervision of Prof:- Seema
Somani I further state that this work is original and submitted anywhere else for
any examination.

INTERNAL ASSESSMENT PROJECT 40 MARKS


Name of the student
First name : Jayesh
Father name: Sunil
Surname : Parange

class

division

Roll no

M COM PART-I

3770

Subject: Strategic Management


Topic for the project: study of finance and marketing strategy of asian paints

DOCUMENTATION

MARKS AWARDED

Internal examiner
(out of 10 marks)

External examiner
(out of 10 marks)

Presentation
(out of 10 marks)

Viva and interaction


(out of 10 marks)

Total marks (out of 40 marks)

SIGNATURE

EVALUATION CERTIFICATE

This is to certify that the undersigned have assessed and evaluated the project on
study of finance and marketing strategy of asian paints Submitted by Jayesh Sunil
Parange student of M com part 1To project is original to the best of our knowledge
and has been accepted for internal assessment.

Internal examiner

External examiner

principal

INDEX
Serial No

Particulars

Page No

Company Profile

6.

Quality Policy

10.

Information Technology

11.

Definition of Marketing Strategy

13.

Types of marketing

15.

Scope of strategic marketing

17.

Definition of Financial Strategy

23.

The Role of Finance in the Strategic

31.

Finance Growth Of Business

32.

10

Conclusion

34.

11

Bibliography

35.

COMPANY PROFILE

Since its foundation in 1942, Asian Paints has come a long way to become Indias largest and
Asias third largest paint company, with a turnover of Rs. 109.70 billion. Asian Paints operates in
17 countries and has 25 paint manufacturing facilities in the world servicing consumers in over
65 countries.

Asian Paints has always been a leader in the paint industry, pushing new concepts in India like
Colour Worlds, Home Solutions, Colour Next, and Kids World.

Vision
Asian Paints aims to become one of the top five decorative coatings companies world-wide by
leveraging its expertise in the higher growth emerging markets. Simultaneously, the company
intends to build long term value in the industrial coatings business through alliances with
established global partners.

History

The company has come a long way since its small beginnings in 1942. It was set up as a
partnership firm by four friends who were willing to take on the world's biggest, most famous
paint companies operating in India at that time. Over the course of 25 years, Asian Paints became
a corporate force and India's leading paints company. Driven by its strong consumer-focus and
innovative spirit, the company has been the market leader in paints since 1967. Today, it is
double the size of any other paint company in India. Asian Paints manufactures a wide range of
paints for decorative and industrial use.

Awards & Recognition

Asian Paints was included in Forbes Magazine's - Asia's Fab 50 List of companies in
2011, 2012 and 2013.

Asian Paints was ranked 13th amongst the top paint companies in the world by Coatings
World - Top Companies Report 2013 (July 2013 Issue).

In March 2012, Asian Paints was presented the Asian Centre for Corporate
Governance & Sustainability Award for the Best Governed Company in 2011.

Mr. P M Murty, the then MD & CEO, Asian Paints received the 'CEO of the Year' award
from Business Standard, one of India's leading business dailies (March 2011).

Asian Paints receives the Best Audit Committee Award from the Asian Centre for
Corporate Governance & Sustainability (Feb 2011)

Awarded the "Sword of Honour" by the British Safety Council for all the paint plants in
India. This award is considered as the pinnacle of achievement in safety across the world.

Forbes Global Magazine, USA ranked Asian Paints amongst the 200 'Best Small
Companies of the world' in 2002 and 2003 and amongst the top 200 'Under a Billion Firms' of
Asia in 2005.

The Asset - one of Asia's leading financial magazines ranked Asian Paints amongst
the leading Indian companies in Corporate Governance in 2002 and 2005.

Asian

Paints

received

the

Ernst

& Young Entrepreneur of

Manufacturing award in 2003.

the Year

Environment and Safety

Asian Paints approaches the environment issue from the perspective of waste minimisation and
conservation of resources. Determined to reuse, recycle and eliminate waste, Asian Paints'
material losses in manufacturing have reduced substantially over the last few years.
All the paint plants and chemical manufacturing plants of Asian Paints have ISO 14001
environmental certification.
All our paint plants have achieved 'zero industrial discharge' capability. This has been achieved
by the installation of upgraded effluent treatment facilities and installation of reverse osmosis
plants in conjunction with appropriate recycling and reuse schemes. Our emulsion manufacturing
facility has also achieved 'zero waste' status. We have adopted the principles of "green
productivity".

Some of our innovative schemes which enhance green productivity are dealer tinting systems
which has resulted in large batch sizes ; bulk storage facility for monomers which reduces
wastage; Use of natural gas which is a cleaner fuel ; solvent recovery plants have been set up
which has resulted in zero reduction of solvent disposal ; improved incinerating systems and
reverse osmosis.

Safety at its best

The company has made significant investments in the area of safety over the past several years.
Its steadfast commitment to safety is reinforced by the fact that four of Asian Paints plants were
conferred with the 'Sword of Honour' by the British Safety Council for the second time in quick
succession. The British Safety Council is the world's leading occupational health, safety and
environmental organizations, working closely with the world's leading companies in developing
safe systems for work. The 'Sword of Honour', instituted by the BSC, is recognized the world
over as the pinnacle of achievement in safety management systems.

CII national conservation awards

Another recognition received in FY 2006 was the CII (Confederation of Indian Industries) Award
for National Energy Conservation received by the Ankleshwar and Patancheru plants. The award
function was held at VigyanBhavan, New Delhi, where the Ankleshwar facility in the state of
Gujarat was honoured with the second prize, while the Patancheru plant in Andhra Pradesh
received a certificate of merit. The awards were presented by His Excellency, the President of
India, Dr. A P J Abdul Kalam. The CII Award for National Energy Conservation is yet another
testimony of Asian Paints commitment towards the continual improvement in our work process
to help the environment through the manufacturing excellence programme.

Age Care
Age Care is another focus area of Asian Paints in its CSR activities. The company conducts
various health camps for the aged. Asian Paints operates Mobile Medicare Units (MMUs) in
association with the NGO Helpage India to provide medical aid to the doorsteps of the needy
senior citizens.

Total Water Management

"Water is precious. Every drop counts." Fresh water is a limited and scarce resource that's often
taken for granted. Ever imagined a time in the future when there won't be water for even
drinking, leave alone wasting? That time is nearer than you think. And more than anything else,
our mindless wastage of water is the prime reason. Today we are on the brink of water scarcity.
We, at Asian Paints, endeavour to create awareness about this alarming issue. So, save water
today. Water will save you tomorrow. Asian Paints has built a Total Water Management (TWM)
Centre, at its Bhandup manufacturing facility, which is the first of its kind in the entire country.
The TWM centre showcases live working models on water conservation and rainwater
harvesting.

Asian Paints provides expertise to citizens free of charge to implement rainwater harvesting and
total water management solutions. The water management schemes could be designed in phases,
so investments are not significant. Also a payback period can be determined for investments. So
if you are interested in implementing rain-water harvesting and total water management
solutions in your society, institution or your organisation, do let us know. We would be glad to
provide you all expertise at no cost. You can also visit the TWM centre to understand the various
concepts of total water management.

Quality Policy

We shall provide products and services that meet stated standards on time, every time

10

We shall continually improve our processes to understand changing customer needs and
preferences

We accept Zero Defect as a quality absolute, and shall design and operate our quality
system accordingly

We shall organise our work practices to do a job right the first time, every time

We are committed to continual improvement in quality in all business processes and shall
track such improvement through measurable indicators.

Supply Chain

Asian Paints has harnessed the powers of state-of-the-art supply chain system using cutting edge
technology to integrate all its plants, regional distribution centres, outside processing centres and
branches in India. All the company's paints plants in India, two chemical plants, 18 processing
centres, 350 raw material and intermediate goods suppliers, 140 packing material vendors, 6
regional distribution centres, 72 depots are integrated.

The supply chain runs through a wide spectrum of functions right from materials planning to
procurement to primary distribution. It has played a pivotal role in improving operational
efficiencies and creating agile procurement, production and delivery systems. It has also
enhanced the flexibility of operations, lowered output time and reduced delivery costs, while
improving customer-servicing levels and profitability.

The Supply Chain Management is backed by IT efforts that help the company in demand
forecasting, deriving optimal plant, depot and SKU combinations, streamlining vendor
relationships, reducing procurement costs and scheduling production processes for individual
factorie

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Information Technology

Information technology (IT) plays a key role in enabling the company to grow and generate
profits. Asian Paints is the only company in India to have integrated Supply Chain Management
(SCM) Solution from i2 Technologies, and Enterprise Resource Planning (ERP) solution from
SAP. With these IT tools firmly in place and with the backing of an extensive communication
platform, we are an internally enabled enterprise. The road ahead is to integrate all our
stakeholders including suppliers, employees and customers and create an extended enterprise.

Asian Paints has launched a supplier portal that includes an automated digital document
exchange facility that will improve the efficiency and effectiveness of interaction with suppliers.
An employee portal has also been set up. Customer Relations Management (CRM) tools are
being used in Asian Paints Helpline and Home Solutions initiatives.

The successful deployment of ERP, CRM, Business Intelligence and Portal software from
leading solution providers and integrated SCM systems has helped improve efficiency in the
business as well as increase the transparency and accuracy of information across the company. In
order to affect 24x7 availability of our IT infrastructure, we are setting up a disaster recovery site
in South India.

To match the pace of growth of our international business, we are focusing on improving
transaction systems and messaging platforms. Implementing of a portal platform for improved
collaboration and sharing of information across all geographies is already underway.

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Research and Development

At Asian Paints, Research & Development has played a significant role in the growth of the
organization. The company has continuously invested in R&D. The entire decorative coatings
portfolio for the Indian market and for overseas ventures has been developed in-house. Our
technologists not only develop new products and improve upon existing formulations; but also
act as a pillar of support to other functions,

Supports Manufacturing in process cycle time reduction & improves productivity by


alternate / break through processes

Provides solutions to environmental issues by minimizing waste at the time of generation


and also in recycling

Aids Marketing in providing technical tools/USPs to demonstrate and push new products

Support Materials by providing new Raw Materials as alternate to current one to give
them negotiating power and also alternate vendors for supply chain flexibility.

13

Definition of Marketing Strategy


An organization strategy that combines all of its marketing goals into one Comprehensive plan..
A good marketing strategy should be drawn from and focus on the right product mix in order to
achieve the maximum profit potential and sustain the business. The marketing strategy is the
foundation of a marketing plan
The action or business of promoting and selling products or services.

Importance of Marketing Strategic


Strategic marketing planning, as the name suggests, discourages business owners from making
ad hoc and impulsive business marketing decisions. The process involves collecting
marketing information in a systematic manner and then integrating that data into a detailed
analysis that helps project long-term marketing goals. Your strategic marketing plan must cover
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as long a time horizon as you can be comfortable with; however, it is also a fact that many things
will change with time, so there has to be an element of flexibility in the plan as well.
There are multiple benefits of conducting strategic marketing planning. All of them are
intrinsically linked to the growth and success of your business.
A strategic marketing plan helps you identify where you want your business to go. It involves
establishing solid, tangible goals that pin your business down to specifics (time periods, cost,
profit, products, and customer-related goals).
Strategic marketing planning aids in removing unproductive initiatives and enhances focus on
important factors, just as you trim off the unproductive branches of a tree.
You arrive at a carefully designed framework that acts as a reference for your budgeting,
customer service, and course of action.
A strategic marketing plan gives you an in-depth understanding of your targeted markets and
customers.This information acts as the foundation for long-term decision-making.
Seen in the light of todays struggling economy, spending time and effort on a well-structured
marketing plan can make all the difference between a successful marketing run and a failed one.

Marketing is the process of planning and executing the conception, pricing, promotion, and
distribution of ideas, goods, and services. A marketing strategy is composed of several
interrelated components called the marketing mix: The Marketing mix consists of answers to a
series of product and customer related questions.

The Marketing Mix

15

1.

Market selection

2.

a. Who are the customers or subset (segment) of customers you are targeting?
Product planning
a.

What products are the companies going to design or OEM for the selected

b.

What are the products features uniquely targeting this market?

c.

How will the product be packaged?

a.

Pricing is a quantitative expression of the value of the product to the

b.

Pricing should be designed like a feature consistent with the use of the

c.

What will you charge for and How much?

d.

How will the customer pay and when?

e.

See also the discussion of the Price/Features matrix

customers?

3.

Pricing

customer.

product.

4.

Place

a. Which channel, direct, wholesale or retail channels best moves and delivers
the product and its benefits to the selected market?
5.

Promotion

a. Positioning: What is the message that states the purpose and benefits of the
product in the market and how it competes?
b.

Selling: Direct or indirect through others?

c. Communications How will people be informed about your product, showing


them how it can be useful, and persuading them to buy it? What role should branding play?

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d. Support and Service How does the customer get help if needed to make the
product work and replacing or repairing it when its broken?

Types of marketing
Affinity Marketing - Also known as Partnership Marketing, this technique links

complementary brands, thereby creating strategic partnerships that benefit both companies.
While one adds value to existing customers by generating more income, the other builds new
customer relationships.
Alliance Marketing - Here two or more entities come together to pool in their resources

to promote and sell a product or service, which will not only benefit their stakeholders, but
also have a greater impact on the market.
Ambush Marketing - This strategy is used by advertisers to capitalize on and associated

themselves with a specific event without the payment of any sponsorship fee, thereby
bringing down the value of sponsorship. It has sub-categories like direct or predatory
ambushing or indirect ambushing by association, to name a few.

Call to Action (CTA) Marketing - CTA is a part of inbound marketing used on websites
in the form of a banner, text or graphic, where it is meant to prompt a person to click it
and move into the conversion funnel, that is, from searching to navigating an online store
to converting to a sale.

Close Range Marketing (CRM) - Also known as Proximity Marketing, CRM uses
bluetooth technology or Wifi to promote their products and services to their customers at
close proximity.

Cloud Marketing - This refers to the type of marketing that takes place on the internet,
where all the marketing resources and assets are transferred online so that the respective
parties can develop, modify, utilise and share them.

17

Community Marketing - This technique caters to the needs and requirements of the
existing customers, as opposed to using resources to gather new consumers. This
promotes loyalty and product satisfaction and also gives rise to word of mouth marketing
among the community.

Content Marketing - In this case, content is created and published on various platforms
to give information about a certain product or service to potential customers and to
influence them, without making a direct sales pitch.

Cross-media Marketing - As the name suggests, multiple channels like emails, letters,
web pages etc are used to give information about products and services to customers in
the form of cross promotion.

Database Marketing - This utilizes and information from database of customers or


potential consumers to create customised communication strategies through any media in
order to promote products and services.

Digital Marketing - This strategy uses various digital devices like smartphones,
computers, tablets or digital billboards to inform customers and business partners about
its products. Internet Marketing is a key element in Digital Marketing.

Direct Marketing - This is a wide term which refers to the technique where
organisations communicate directly with the consumer through mail, email, texts, fliers
and various promotional materials.

Diversity Marketing - The aim of this strategy is to take into account the different
diversities in a culture in terms of beliefs, expectations, tastes and needs and then create a
customised marketing plan to target those consumers effectively.

Evangelism Marketing - It is similar to word-of-mouth marketing, where a company


develops customers who become voluntary advocates of a product and who promote its
features and benefits on behalf of the company.

Freebie Marketing - Here a particular item is sold at low rates, or is given away free, to
boost the sales of another complimentary item or service.

Free Sample Marketing - Unlike Freebie Marketing, this is not dependent on


complimentary marketing, but rather consists of giving away a free sample of the product
to influence the consumer to make the purchase.

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Guerrilla Marketing - Unconventional and inexpensive techniques with imagination,


big crowds and a surprise element are used for marketing something, a popular example
being flash mobs.

By keeping in mind the distinctive features of the product, the demographics of the target
consumer and their spending power, and the current strategies of existing companies, an effective
marketing strategy may be successfully created.The types of marketing keep evolving with new
developments in technology and changes in the socio-economic structure of a market. I try to
keep up, and update the list as things develop. Please let me know if Ive forgotten anything from
the list by leaving a comment.

Scope of strategic marketing


Marketing is a philosophy that leads to the process by which organizations, groups and
individuals obtain what they need and want by identifying value, providing it, communicating it
and delivering it to others. The core concepts of marketing are customers needs, wants and
values; products, exchange, communications and relationships. Marketing is strategically
concerned with the direction and scope of the long-term activities performed by the organization
to obtain a competitive advantage. The organization applies its resources within a changing
environment to satisfy customer needs while meeting stakeholder expectations. Implied in this
view of strategic marketing is the requirement to develop a strategy to cope with competitors,
identify market opportunities, develop and commercialize new products and services, allocate
resources among marketing activities and design an appropriate organizational structure to
ensure the performance desired is achieved.
There is no unique strategy that succeeds for all organizations in all situations. In thinking
strategically about marketing many factors must be considered: the extent of product diversity
and geographic coverage in the organization; the number of market segments served, marketing
channels used, the role of branding, the level of marketing effort, and the role of quality. It is also
necessary to consider the organizations approach to new product development, in particular, its
position as a technology leader or follower, the extent of innovation, the organizations cost
position and pricing policy, and its relationship to customers, competitors, suppliers and partners.
The challenge of strategic marketing is, therefore, to manage marketing complexity, customer
and stakeholder expectations and to reconcile the inuences of a changing environment in the
context of a set of resource capabilities. It is also necessary to create strategic opportunities and
to manage the concomitant changes required within the organization.
In this world of marketing, organizations seek to maximize returns to shareholders by creating a
competitive advantage in identifying, providing, communicating and delivering value to
customers, broadly dened, and in the process developing long-term mutually satisfying
relationships with those customers.Strategic Marketing Market orientation Market research
Product research and development Production Communications Sales Technology orientation

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Sales orientationincreasing consumption (A focus on sales means a focus on individual


customers rather than market segments or market classes.
Such organizations are very knowledgeable about individual accounts and the variableswhich
inuence specic sales transactions but they are less interested in developing an approach to an
entire segment of similar needs and wants in the market. A technology orientation is similar to a
sales orientation except that theorganization also engages in product research and development
A marketing approach attempts to determine ways of offering superior value to the more
protable segments without damaging individual customer relationships
. A marketing approach reects an integrated approach based on research and feedback.
Customer needs are rst evaluated through market research, an integrated marketing effort is
developed to satisfy customers so that the organization achieves its goals, especially those
affecting shareholders. This is a customer orientation and contrasts very bluntly with a narrow
competitor orientation based on sales in which the organization by capitalizing on the
weaknesses of vulnerable competitors or by removing its own competitive weaknesses attempts
to obtain high sales and long-run prots In many situations marketing evaluates itself and
presents its case to senior managers of the organization based on sales, efciency or, worst of all,
internal awards, not marketplace outcomes or nancial success.
Senior managers deal with issues that involve the allocation of resources and how such
allocation affects the return on investment. These hurdle rates are calculated differently from one
organization to another but they need to be understood for a marketing programme to be
effective and accepted. In a business world dominated by nancial considerations the ability of
the organization to produce award-winning marketing programmes or attractive but fuzzy images
in TV commercials is not of much value. Traditional marketing thinking assumes that the
organization is in complete control of the marketplace, whereas interaction and market
integration are required.

Strategic marketing concept


Marketing has been dened as the management function responsible foridentifying, anticipating
and satisfying customer requirements protably. Marketing is, therefore, both a philosophy and a
set of techniques which address such matters as research, product design and development,
pricing, packaging, sales and sales promotion, advertising, public relations, distribution and
after-sales service. These activities dene the broad scope of marketing and their balanced
integration within a marketing plan is known as the marketing mix. A modication of a denition
of marketing by Doyle (2000) suggests that marketing is the management process that seeks to
maximize returns to shareholders by creating a competitive advantage in providing,
communicating and delivering value to customers thereby developing a long-term relationship
with them. This denition clearly denes the objectives of marketing and how its performance
should be evaluated. The specic contribution of marketing in the organization lies in the
formulation of strategies to choose the right customer, build relationships of trust with them and
20

create a competitive advantage (Doyle 2000, p. 235). A marketing strategy consists of an


internally integrated but externally focused set of choices about how the organization addresses
its customers in the context of a competitive environment. A strategy has ve elements: it deals
with where the organization plans to be active; how it will get there; how it will succeed in the
marketplace; what the speed and sequence of moves will be; and how the organization will
obtain prots (Hambrick and Fredrickson 2001, p. 50). The organization must identify the
problem that its customers use its products and services to solve. It is also necessary to identify
the benets customers seek from using a product or service available in the market. A market
consists of all the potential customers who share a particular need or want who might be willing
and able to engage in exchange to satisfy that need or want. A marketing orientation helps to
dene the organizations business. Marketing is concerned with problem solving and customer
benets. The organization must be able to answer the following questions: What is the problem
customers are trying to solve? What benets do customers seek? How well does the
organizations product solve this problem and provide these benets? A statement that the
organization is in the movie business is not very useful. An organization is not in the movie
business because that says nothing about customer needs. Some movie organizations assumed
they were in the movie business when the entertainment business left them behind! Marketing is
a philosophy that encourages the organization to ensure that the needs and wants of customers in
selected target markets are reected in all its actions and activities while recognizing constraints
imposed by society. This marketing concept rst received formal recognition in 1952 by one of
its leading exponents, the General Electric Organization the marketing concept:

Internal marketing
In addition to equipping the organization to cope with the outside world of customers and
competitors, it is also necessary to train and motivate all staff within the organization to provide
the appropriate level of service to customers. Internal marketing is very closely related to human
resource management and the way in which the organization develops its own distinctive
corporate culture. Internal marketing is the task of successfully hiring, training and motivating
able employees who want to serve customers well. It is obvious that it is necessary to determine
the organizations internal culture before venturing forth to serve customers in the external
world. This internal market must be motivated to react in a certain desired way which is best
described as marketing-like (Gronroos 1984, p. 3). Internal marketing helps employees make a
strong connection to the products and services sold by the organization. Without such a
connection employees may unwittingly undermine expectations set by the organizations
marketing communications. When people believe in what the organization does and stands for,
they are motivated to work harder and their loyalty to the organization increases. According to
21

Mitchell (2002), however, in most organizations internal marketing is done poorly, if at all, and
few organizations understand the need to convince employees of the organizations mission and
purpose; they take it for granted. Since satisfying customers is central to the task of marketing, it
is essential that everybody in the organization who deals with customers must be imbued with a
sense of marketing which means internal marketing for some and external marketing for others.
Customers exist, therefore, both within and outside the organization. By focusing on customers,
in this way a different perspective of the organization is obtained. In traditional organizations the
chief executive and senior manager appear at the top of the chart with sales and other front-ofce
people at the bottom. In many such charts customers are not represented at all. A contrary view,
driven by a strong sense of marketing and especially internal marketing places the customer on
top, the front-ofce people next, middle managers below that and nally senior managers (Figure
1.4). As the front-ofce people meet and serve customers, they should receive a lot sources of
marketing advantageSources of marketing advantage are reputation, brands, tangible assets,
knowledge, customer service and people. To be worthwhile the marketing advantage must be
sustainable. It must, therefore, be tangible, measurable and capable of providing competitive
protection for some time. An illusory marketing advantage is one that is easily matched by
competitors. The organizations marketing advantage depends on how well it chooses its
strategy:
Concentrating on selected market segments.
Offering differentiated products.
Using alternative distribution channels.
Using different manufacturing processes to allow higher quality at lower
prices.
Superior skills and resources, taken together, represent the ability of the
organization to do more and better than its competitors. Superior skills are
the distinctive capabilities of people in the organization that distinguish

Strategic marketing effectiveness


22

Marketings role in strategic planning for the organization means identifying the optimal longterm positions that will ensure customer satisfaction and support. These optimal positions are
determined largely by fundamental changes in demographic, economic, social and political
factors (Anderson 1982, p. 24). Thus, strategic positioning is more likely to be guided by
longterm demographic and socioeconomic research than by surveys of consumer attitudes, the
hallmark of the market-driven organization. Value in marketing is a combination of product or
service quality, reasonable or acceptable prices and responsive service. It is noteworthy that
marketing value combines high quality with acceptable prices. It is not low quality products at
low prices or high quality at high prices.
Value in marketing means delivering on a whole range of promises to the customer. Marketing
effectiveness is not necessarily revealed by current marketing performance. Good results and
growing sales may be due to the organization being in the right place at the right time rather than
having effective marketing management. This is frequently the situation during the
entrepreneurial phase of an organizations growth and development. The innovator frequentlyhas
considerable discretion in the market. At this stage the driving force is entrepreneurship rather
than marketing. With acceptance of the product or service in the market and with the rise in
competition which normally accompanies the acceptance of a new product or service,
performance becomes more marketing-dependent. In a competitive environment, especially
where customers have learned how to respond to various offerings, the situation changes.
Improvements in marketing in the organization might improve results while another organization
might have poor results in spite of excellent marketing planning.
It depends on how well the organization matches its own resources against those of the
competition to attract and hold the loyalty of customers. The marketing effectiveness of the
organization in serving customers in the face of existing and potential competition is reected in
the degree to which it exhibits ve major attributes of a marketing orientation: demonstrated
customer philosophy
integrated marketing orientation
possesses adequate marketing
information adopts a strategic orientation experiences a high level of operational efciency. The
performance of the organization on these individual attributes may be used to indicate which
elements of effective marketing action need most attention. It should be recognized, however,
that this evaluation provides general information only but has the merit of obtaining an
approximate

marketing success factors


The organization attempts to convert skills and resources into superior market positions and
thereby meet performance objectives. Knowledge of the key marketing success factors is
essential to enable the organization to invest in markets and marketing to ensure performance
23

objectives are attained. By identifying the key success factors the organization can identify ways
of obtaining the greatest improvement in performance for the least expenditure.
The key success factors of any business are the skills and resources which exert measure of the
orientation of the organization Marketing focus on customers Marketing means identifying
values desired by customers, providing them in some way, communicating these values to
customer groups and delivering the value. Customer values refer to those benets focused on
solving customer problems and not merely on the products and services themselves. The focus is
on the customer and on solving problems faced by the customer. This is an integrated longerterm view of marketing .
Seeking value from the customers perspective means building a long-term mutually protable
relationship with customers instead of trying to maximize prots on each transaction. An
emphasis on relationships rather than individual transactions focuses on the customer as the
prot centre, not the product. It also means that attracting new customers is an intermediate
objective in the process of maintaining and cultivating an existing customer base. This
interactive approach views marketing as a continuous relationship with customers in contrast to
the more traditional and almost adversarial view which is short term and focused on immediate
sales. The rst sale to a customer is often very difficult, costs a lot and results in little or no
prot. With a strong continuing relationship the customer becomes more protable. Such longterm relationships are established through the exchange of information, products, services and
social contacts. In this way the organizationcustomer relationship is commercialized. The
fundamental issue is to understand the customers perception of value and to determine a
superior value position from this perspective and to ensure

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Financial Strategy
Managing an organization's financial resources so as to achieve its business objectives and
maximize its value. Strategic financial management involves a defined sequence of steps that
encompasses the full range of a company's finances, from setting out objectives and identifying
resources, analyzing data and making financial decisions, to tracking the variance between actual
and budgeted results and identifying the reasons for this variance. The term "strategic" means
that this approach to financial management has a long-term horizon.

financial strategy
Practices a firm adopts to pursue its financial objectives

FINANCIAL STRATEGY
We must start this section with a disclaimer: although we will use some strategic models, this is
not a book on competitive strategy. Many excellent tomes discuss that subject, setting out the
whys and wherefores of determining and pursuing appropriate strategies. This book is about
corporate nancial strategy and it is in this context that strategy is discussed. However, because
we make this distinction, we have to de ne our terms very clearly, so that you, the reader, are
left in no doubt about our purpose. Consider the representation of a company in Figure 1.2 . To
most people, a company is seen as an end in its own right.
It serves markets, manufactures products, employs staff, and its strategy should be about
selecting the most appropriate markets, production facilities or employees in which to invest.
(Throughout the book, the term product will be used to describe both goods and services, and
the term markets will be used to cover groups of customers or speci c channels of
distribution.) Corporate growth and success often measured in terms of turnover or pro t
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are what s seen as important, and the business develops a momentum of its own. But Figure 1.2
shows that the investment process does in fact extend over two stages: investors choose the
companies in which they want to invest, and the companies choose how to apply those funds to
their activities.
For example, as investors we can choose to invest our funds in the UK or elsewhere in the
world. We can opt to put our money into the pharmaceutical sector, or into printing or food
production or any other sector we choose. And if we do care to be exposed to UK
pharmaceutical companies, we can decide speci cally, for example, to buy shares in
GlaxoSmithKline or in Oxford BioMedica. The top process in Figure 1.2 relates to this investor
decision.
The lower process shows how the company (acting through its directors decisions) decides that
yes, it does want to be in the pharmaceuticals sector; that it will apply this strategy by
developing its own drugs (or perhaps by buying the results of others research, or perhaps by
selling generics); that it will sell in various speci c geographical markets but not others, perhaps
investing in a dedicated sales force, etc. The projects referred to in the lower box in Figure 1.2
refer to how the company con gures its assets, ranging from how many staff it chooses to
employ, through to whether it should develop a new product, acquire a competitor, or move into
a different sector. The energies of most business people tend to be applied to the lower box, to
improving the investment in the project portfolio, to making it a better business . But in
corporate nancial strategy our aim is different: we are trying to
improve matters in the top box, to make it a better investment for shareholders, to create
shareholder value. This leads us to two de nitions, one for each of the processes shown in

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The two de nitions of value shown in Working insight 1.1 correspond to the two-stage
investment model. Investor value is about creating value in the top box , for investors.
Corporate value, the one with which most business people are more familiar, is about con
guring the company to be a better business. It is a prime role of management to ensure that
the shareholder value properly
re ects the corporate value; this is one of the roles of nancial strategy. Further, as we will
discuss later, our working de nition of investor value comes down to value for shareholders
, focusing on a speci c category of investor. It is possible for a business to generate value in
one box, but not the other. In analyzing a company, there are four (at least four) questions to ask:
Is it a good product? Is it a good business? Is it a good company? Is it a good investment?
Working insight 1.2 illustrates this.
Why This Is Important
What is the foundation of a companys financial health? A strong balance sheet, positive cash
flow, profitability, and effective use of assets. To maintain or improve that health, it is important
that you have an effective, efficient financial infrastructure in placeand that you plan for
uncertainty. We are here to help you develop your companys financial strategy. Our consultants
business acumen and strong financial, accounting, and tax knowledge will help you address
financial challenges and ensure your continued success
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The Role of Finance in the Strategic-Planning and Decision-Making Process


The Strategic-Planning and Decision-Making Process
1. Vision Statement
The creation of a broad statement about the companys values, purpose, and future direction is
the first step in the strategic-planning process. The vision statement must express the companys
core ideologieswhat it stands for and why it existsand its vision for the future, that is, what
it aspires to be, achieve, or create.

2. Mission Statement
An effective mission statement conveys eight key components about the firm: target customers
and markets; main products and services; geographic domain; core technologies; commitment to
survival, growth, and profitability; philosophy; self-concept; and desired public image. The
finance component is represented by the companys commitment to survival, growth, and
profitability. The companys long-term financial goals represent its commitment to a strategy that
is innovative, updated, unique, value-driven, and superior to those of competitors

3. Analysis
This third step is an analysis of the firms business trends, external opportunities, internal
resources, and core competencies. For external analysis, firms often utilize Porters five forces
model of industry competition, which identifies the companys level of rivalry with existing
competitors, the threat of substitute products, the potential for new entrants, the bargaining
power of suppliers, and the bargaining power of customers.

For internal analysis, companies can apply the industry evolution model, which identifies takeoff
(technology, product quality, and product performance features), rapid growth (driving costs
down and pursuing product innovation), early maturity and slowing growth (cost reduction,
value services, and aggressive tactics to maintain or gain market share), market saturation
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(elimination of marginal products and continuous improvement of value-chain activities), and


stagnation or decline (redirection to fastest-growing market segments and efforts to be a low-cost
industry leader). Another method, value-chain analysis clarifies a firms value-creation process
based on its primary and secondary activities.

This becomes a more insightful analytical tool when used in conjunction with activity-based
costing and benchmarking tools that help the firm determine its major costs, resource strengths,
and competencies, as well as identify areas where productivity can be improved and where reengineering may produce a greater economic impact.
SWOT (strengths, weaknesses, opportunities, and threats) is a classic model of internal and
external analysis providing management information to set p set priorities and fully utilize the
firms competencies and capabilities to exploit external opportunities, determine the critical
weaknesses that need to be corrected, and counter existing threats.

4. Strategy Formulation
To formulate a long-term strategy, Porters generic strategies model is useful as it helps the firm
aim for one of the following competitive advantages: a) low-cost leadership (product is a
commodity, buyers are price-sensitive, and there are few opportunities for differentiation); b)
differentiation (buyers needs and preferences are diverse and there are opportunities for product
differentiation); c) best-cost provider (buyers expect superior value at a lower price); d) focused
low-cost (market niches with specific tastes and needs); or e) focused differentiation (market
niches with unique preferences and needs).

5. Strategy Implementation and Management


In the last ten years, the balanced scorecard (BSC) has become one of the most effective
management instruments for implementing and monitoring strategy execution as it helps to align
strategy with expected performance and it stresses the importance of establishing financial goals
for employees, functional areas, and business units. The BSC ensures that the strategy is
translated into objectives, operational actions, and financial goals and focuses on four key
dimensions: financial factors, employee learning and growth, customer satisfaction, and internal
business processes

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The Role of Finance


Financial metrics have long been the standard for assessing a firms performance. The BSC
supports the role of finance in establishing and monitoring specific and measurable financial
strategic goals on a coordinated, integrated basis, thus enabling the firm to operate efficiently and
effectively. Financial goals and metrics are established based on benchmarking the best-inindustry and include:
1. Free Cash Flow
This is a measure of the firms financial soundness and shows how efficiently its financial
resources are being utilized to generate additional cash for future investments. It represents the
net cash available after deducting the investments and working capital increases from the firms
operating cash flow. Companies should utilize this metric when they anticipate substantial capital
expenditures in the near future or follow-through for implemented projects.

2. Economic Value-Added
This is the bottom-line contribution on a risk-adjusted basis and helps management to make
effective, timely decisions to expand businesses that increase the firms economic value and to
implement corrective actions in those that are destroying its value It is determined by deducting
the operating capital cost from the net income. Companies set economic value-added goals to
effectively assess their businesses value contributions and improve the resource allocation
process.

3. Asset Management
This calls for the efficient management of current assets (cash, receivables, inventory) and
current liabilities (payables, accruals) turnovers and the enhanced management of its working
capital and cash conversion cycle. Companies must utilize this practice when their operating
performance falls behind industry benchmarks or benchmarked companies.
4. Financing Decisions and Capital Structure
Here, financing is limited to the optimal capital structure (debt ratio or leverage), which is the
level that minimizes the firms cost of capital. This optimal capital structure determines the
firms reserve borrowing capacity (short- and long-term) and the risk of potential financial
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distress. Companies establish this structure when their cost of capital rises above that of direct
competitors and there is a lack of new investments.

5. Profitability Ratios
This is a measure of the operational efficiency of a firm. Profitability ratios also indicate
inefficient areas that require corrective actions by management; they measure profit relationships
with sales, total assets, and net worth. Companies must set profitability ratio goals when they
need to operate more effectively and pursue improvements in their value-chain activities.
6. Growth Indices
Growth indices evaluate sales and market share growth and determine the acceptable trade-off of
growth with respect to reductions in cash flows, profit margins, and returns on investment.
Growth usually drains cash and reserve borrowing funds, and sometimes, aggressive asset
management is required to ensure sufficient cash and limited borrowing. Companies must set
growth index goals when growth rates have lagged behind the industry norms or when they have
high operating leverage.

7. Risk Assessment and Management


A firm must address its key uncertainties by identifying, measuring, and controlling its existing
risks in corporate governance and regulatory compliance, the likelihood of their occurrence, and
their economic impact. Then, a process must be implemented to mitigate the causes and effects
of those risks. Companies must make these assessments when they anticipate greater uncertainty
in their business or when there is a need to enhance their risk culture.

8. Tax Optimization
Many functional areas and business units need to manage the level of tax liability undertaken in
conducting business and to understand that mitigating risk also reduces expected taxes.
Moreover, new initiatives, acquisitions, and product development projects must be weighed
against their tax implications and net after-tax contribution to the firms value. In general,
performance must, whenever possible, be measured on an after-tax basis. Global companies must
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adopt this measure when operating in different tax environments, where they are able to take
advantage of inconsistencies in tax regulations.

Research, Time and Knowledge


Financial management requires a significant amount of information, which takes time to collect.
Once the data is gathered, you must take time to analyze it properly and discuss it with others
involved. If you aren't sure how to approach a financial question, you must either learn about it
or call in an expert, especially as company objectives change or the market shifts.
Cost
The expertise, information and time involved with financial management has a very real price
tag your company must take into account. You must pay those in your accounting department or
the consultants you hire, and even if you handle the finances of the business alone, you cannot
work for free.
Revision and Attention
The financial needs and situation of a business shift constantly, based on market variables and
the results of internal controls. For example, you may find that the cost of a part rose 10 cents
from the previous budget period -- this drives up your cost of production and forces you to
evaluate your budget. Financial management, therefore, is not a do-it-and-leave-it task. You must
revisit it and do so often.
Power
Managers often have to make the final call on where money goes in a business. Employees may
take it personally if you don't allot money to them or their projects. This can lead to bad relations
within the company.
Money Availability
When you manage your finances well, you know exactly what you're spending and what you're
earning. You also know when funds will be available. With this knowledge, it's much less likely
that you'll run into debt or be unable to pay back what you already own. You know that money
will be available when you need it.
Planning
When you manage your business funds, reviewing the financial data allows you to identify
specific trends and make some forecasts for the future. Because your finances connect directly to
what you can do in the business, this lets you develop new strategies for your operations and plan
what you're going to do from both the short- and long-term perspectives. You also can assess
your areas of risk and take steps to fix problems.
Accountability
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Financial management forces you and everyone else in the business to make a case for
everything on which they're spending. With proper financial controls, you also can prevent
instances of fraud. Financial management thus is a major tool for keeping everyone in your
business accountable.
Confidence
Proper financial management usually means that a company can grow in one or more areas, or at
the very least, remain stable. It also provides you with an opportunity to follow through on your
policies and plans. When these things happen, your employees and investors may have more
confidence in you as a business leader. This often translates into continued loyalty.
Sponsored Links
One of the biggest impediments to the growth of a business is not having sufficient cash to
support the increase in activity. A business may require additional funds to cover everything from
higher wages, increases in debtors and stock levels, additional plant and equipment, and a
general increase in business overheads.
The type of finance used to fund business growth may be very different from that used for other
purposes. As with any form of financing, it is important to match the finance facility with the
purpose, to ensure that it does the job it is intended to do.
If your business plans to build additional premises such as a warehouse, you may need to
consider your long-term financing arrangements. Cash flow and working capital needs will
require a totally different approach. One of the more common pitfalls is that a business could tie
up its cash flow by not matching its need directly with the right financing solution.
While many businesses will fund their growth using a bank overdraft or bill facility, these are not
necessarily the best options.
Ideally, the finance facility used to provide the cash flow that a business needs to grow should
have the following features:

the flexibility to increase automatically as the business grows and requires increasing
amounts of working capital

the flexibility of a come-and-go feature to match the cash flow of the business

the ability to draw down as and when needed on short notice

a cost structure allowing for interest and charges only on the funds used at any time

the ability to accelerate cash flow.

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How to finance growth in your business


One of the most effective ways to address this financing issue is to leverage the current assets of
the business by using commercial debtor finance facilities.
There are a number of different types of facilities within this category.

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Debt factoring
This form of finance has been around for many years and has been used widely in Europe and
the United States. It was traditionally a popular finance method in the garment industry in these
markets but since then has been used far more widely in the general business community. In
Australia, some stigma has become attached to the product and it has been far less popular as a
means of providing cash flow finance.

Receivables and inventory loans


This is a loan secured against the value of your debtors ledger and may also include inventory.
The lending margins will generally be significantly less than that available under a commercial
debtor finance facility for debtors. A different margin again will probably be set for inventory.
The quality of the book debts will need to be high and the financier will require regular reports
on the value of the security. They will also require some auditing procedure to regularly confirm
that the value and quality of their security continues to support the loan. If your business is
expanding with new or increasing sales to overseas markets, a number of finance products are
available specifically to cater for export sales.

Trade finance or export debtor finance


Trade finance, or export debtor finance is another option open to businesses needing cash flow to
finance expansion/sales growth.

Trade finance:

ensures your cash flow keeps pace with your growing export sales.

enables you to export with confidence, knowing that you can be protected from the risks
of bad debts

generates cash flow to fund further sales and growth, while offering extended terms to
your export customers

delivers the convenience and competitive advantage of being able to offer open account
terms

usually provides access (via overseas branches or affiliated banks) to international credit
control expertise to help collect debts effectively and efficiently

can be with or without credit protection depending on your needs and spread of risks
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allows you to conduct your own collections or use the bank services to assist.

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Conclusion

The introduction of the balanced scorecard emphasized financial performance as one of the key
indicators of a firms success and helped to link strategic goals to performance and provide
timely, useful information to facilitate strategic and operational control decisions. This has led to
the role of finance in the strategic planning process becoming more relevant than ever.
Empirical studies have shown that a vast majority of corporate strategies fail during execution.
The above financial metrics help firms implement and monitor their strategies with specific,
industry-related, and measurable financial goals, strengthening the organizations capabilities
with hard-to-imitate and non-substitutable competencies. They create sustainable competitive
advantages that maximize a firms value, the main objective of all stakeholders.

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Bibliography

www.google.com
www.wikipedia.com
www.pidilite.com

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