Strategic Management: Formulation and Implementation

Finance For Strategic Management

One of the most important tools for assessing the strength of an organization within its industry is financial analysis. Financial analysis is a comprehensive term that refers to any use of available financial data to evaluate the performance, condition, or future prospects of organization.

The finance function is unique both as an instrument of strategic analysis and as a creative strategic tools. This function has the responsibility of ensuring that the strategic plans and objectives of the firm are feasible for the (financial) resources which it has.

Especially, financial analysis helps managers to answer the following questions about a proposed strategy:

  1. Is the strategy appropriate, given the company's current financial position in the industry?
  2. Does the company have the financial resources to initiate the strategy and carry it out?
  3. Are financial resource being allocated correctly to achieve the firm's strategy?

Finally, through using published financial data, the strategist can analyze the behavior and competence of rival firms within the industry and make judgements about his own firm's relative competitive position.