Finance, Strategy and Strategic Value Analysis [antikvár]

VII Preface The business world of today is turbulent. Organisations of all types have to niake choices about how to manage scarce resources in a climate so often characterised by considerable and rapid change. In such a world sound strategic thinking, analysis and direction have been acknowledged as being particularly important, as has finance. Having identified a potential strategic option for an organisation, like a potential merger, acquisition, restructuring, buyout, alliance, partnership or joint venture, there is clearly the need to evaluate whether it will be worthwhile in financial terms. But, how should you evaluate the acceptability of a strategic option in financial terms? Is there more than one approach that can be used? Which is preferable? Why? These are some of the questions we will address in this book. As we will demonstrate, the application of finance enables the acceptability of a particular proposed strategy to be assessed meaningfully, provided the most appropriate approach is used. This is essentially because when used properly, finance enables the creation (or destruction) of value to be measured and thus strategies may be evaluated in terms of the value they add to the organisation. The approach developed in this book we refer to as Strategic Value Analysis. This represents an extension of the approach which has been popularised as Shareholder Value Analysis and which has gained prominence in the United States since the late 1970s. Its primary focus of attention has been upon one particular group of stakeholders, the shareholders, and it has become associated with measuring the benefit to them of potential strategic courses of action. Strategic Value Analysis is a tool that links strategy and finance, particularly in the evaluation of potential strategic options. However, it is all too often seen as a corporate plarming tool rather than an approach that can be used in managing the business. It is also seen as being somewhat restricted because of its origins which were in measuring value to shareholders of large, publicly quoted companies in developed equity markets. The reality is that the principles that underpin Shareholder Value Analysis have been applied in some organisations more extensively than simply a corporate planning tool. Furthermore, the approach may be applied to smaller companies and in relation to less developed equity markets. For this reason we prefer to think of the approach in terms o f Strate gic Value Analysis. The basic principle which underpins it is discounted cash flow analysis, which makes it universally applicable beyond just the corporate environment. Even organisations without shareholders, like the National Health Service, face resource management issues for which the approach is well suited to handle. Roger W. Mills, March 1994.