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Business Strategy Best Practice

Best Practice

Internationally renowned finance leaders, experts and educators distil and summarize the most important aspects of finance best practice. Each Best Practice essay has an Executive Summary for quick reference, outlining the main points. The Making It Happen feature illustrates practical applications, and where relevant authors have provided illustrative case studies and definitions.

  • An Approach to Understanding Reputation Risk in Financial Services
    by Philip Whittingham
    The Oxford English Dictionary 2010 defines reputation as “the beliefs or opinions that are generally held about someone or something.” If we follow that definition, reputational risk must be the potential for loss or damage that occurs to an organization through an adverse impact on its reputation. In other words, something must happen that causes people to doubt previously held beliefs. We assume, of course, that these are “good” beliefs that...
  • Assessing Opportunities for Growth in Developing Countries of Micro, Small, and Medium-Size Enterprises
    by Montague Lord
    The predominance of micro, small and medium-size enterprises (MSMEs) in the business activities of countries generally reflects the magnitude of growth, employment, competition, and poverty within those countries. The density of MSMEs, measuring their number per 1,000 persons, is greater in high-income countries such as the United States and members of the European Union than in middle- and low-income countries such as Malaysia and Bangladesh...
  • Assessing Opportunities for Growth in Small and Medium Enterprises
    by Frank Hoy
    Many companies experience rapid growth at some stage of their life cycle. For some, this may happen soon after they are launched. Others have multiple spurts, followed by a leveling-off period or even a decline. A consistent characteristic of the growth stage is that demands exceed existing resources. Consequently, business owners must be creative in acquiring and managing the resources needed to seize growth opportunities.Successful...
  • Avoiding the Mistakes of the Past: Lessons from the Startup World
    by James E. Schrager
    Failure is a wonderful teacher. The new-economy revolution had many of the trappings of a genuine economic revolt: vast fortunes forged in a fortnight, dashing young heroes and heroines, rotten institutions brought to their knees. It held such great promise, yet today even the dreams feel thoroughly eviscerated. What to learn from the revolution that never was? What lessons can be applied to new ventures?There is no better place to look for...
  • Corporate-Level Strategy
    by David Sadtler
    Implementing a successful corporate-level strategy has become an urgent priority for all corporations. Parent companies must demonstrate that they are creating stockholder value by their own actions and initiatives, and not just reaping the profits of the businesses in their charge. The sanctions for being seen to fail in this challenge can be severe. At the very least, stock prices will suffer; at the other extreme, predators will force a...
  • Employee Stock Options
    by Peter Casson
    Employee stock options are a component of the compensation package of many employees and executives. As well as providing a mechanism for linking pay with the performance of the company’s stock price, stock options can facilitate the recruitment and retention of employees. The effectiveness of stock option compensation derives from the basic characteristics of options and from particular features found in many employee stock options. This...
  • Globalization and Regional Business Strategy
    by Alan Rugman
    Recent research suggests that globalization is a myth. Far from taking place in a single global market, most business activity by large firms takes place in regional blocks. There is no uniform spread of US market capitalism, nor are global markets becoming homogenized. Government regulations and cultural differences divide the world into the triad blocks of North America, the European Union, and Japan. Rival multinational enterprises from the...
  • Growing and Maximizing SME Profitability Without Compromising ROI
    by Neil Marriott
    Small and medium-sized enterprises (SMEs) are, more than ever, the lifeblood of regional and national economies. The structural shift from goods to service sectors favors the creation of more small firms, where a smaller size is an economic choice for a business vehicle. This shift was exacerbated by technological changes such as the extensive use of microchip technology, which now makes smaller-scale production more economically viable.SMEs can...
  • How Firms Should Fight Rumors
    by Andrew Hiles
    To understand how to fight rumors, we need first to understand what a rumor is and then how and why it circulates.There are many definitions of “rumor,” but what they have in common is that a rumor comprises unverified, unconfirmed information of uncertain origin and doubtful veracity that has got into general circulation. It may contain elements of truth as well as unfounded allegations. A rumor may be positive (“This stock is going to...
  • Human Risk: How Effective Strategic Risk Management Can Identify Rogues
    by Thomas McKaig
    Best practices in strategic risk management are intended to prevent weaknesses within corporations causing damage or even pulling down the firm. However, effective strategic risk management tools and techniques became harder to implement as business operations grow, become more complex, and operate in multiple locations. The controls that might have once been deemed acceptable in keeping employees within corporations on the same page begin to be...
  • Joint Ventures: Synergies and Benefits
    by Siri Terjesen
    A joint venture (JV) is a formal arrangement between two or more firms to create a new business for the purpose of carrying out some kind of mutually beneficial activity, often related to business expansion, especially new product and/or market development. A JV is the most popular type of contractual alliance among firms; other types include formal long-term contracts, informal alliances, and acquisitions. JVs may take the form of a...
  • Political Risk: Countering the Impact on Your Business
    by Ian Bremmer
    Over the past several years, and across a broad range of companies, corporate decision-makers seeking opportunities overseas have learned that it is not enough to have a knowledge of a foreign country’s economic fundamentals. They also have to understand the forces and dynamics that shape these countries’ politics. This is especially true for emerging markets, where politics matters at least as much as economic factors for market outcomes. Of...
  • Project Planning Techniques for Small and Medium Enterprises
    by Damian Merciar
    One working definition of a project would be that it is a one-off job that has a known start time, a planned end time, and an intended outcome, and that it would include a defined scope of work, a budget, and personnel assigned to carry out the work. What distinguishes a project from regular work is that it is multi-task in nature—it is not a single job repeated.This is where the Project Management Institute Body of Knowledge (PMBOK) comes to...
  • Real Options: Opportunity from Risk
    by David Shimko
    The origin of the term “real option” derives from financial options. For example, the right to buy a house for a fixed period of time at a fixed price is a call option,1 except that the underlying asset is a real asset, not a financial asset. Business people and economists discovered that many business processes involve options, and that financial mathematics can be brought to bear to value those options. Some popular examples include:the right...
  • Risk—Perspectives and Common Sense Rules for Survival
    by John C. Groth
    We are fortunate to live in a world characterized by risk and uncertainty. Absent risk and uncertainty, with work, diligence, and access to information we could know each event that was to transpire. We would lose the opportunity for expectations, dreams, surprises, good fortune, and much more. We might as well have these “good” things, since in a certain world we presumably would still have “bad” events. Conceptually, in an uncertain world we...
  • The Cost of Reputation: The Impact of Events on a Company’s Financial Performance
    by Daniel Diermeier
    CEOs and board members routinely list reputation as one the company’s most valuable assets. Yet every month a new reputational disaster makes the headlines, destroying shareholder value and trust with customers and other stakeholders. During the last year, leading companies such as Toyota, Goldman Sachs, BP, Johnson & Johnson, and HP battled severe reputational crises. In all cases, financial markets punished the companies, leading to a severe...
  • The Impact of Demographics on Business and the World Economy
    by Gabriel Stein
    A World Divided Into Savers and Spenders Who Need to Change PlacesOne of the key causes behind the global financial crisis of 2007/08 has been the division of the world into “savers” (countries with a savings surplus) and “spenders” (countries spending someone else’s surplus). The problem with this division is that it is asymmetrical. There is no theoretical limit to how much people can want to save. But spending someone else’s savings involves...
  • Toward a Total Global Strategy
    by George Yip
    In the 1980s and the 1990s, many companies were still debating whether they should globalize. For most, this debate has now ended. Companies assume that they should globalize unless they can find very good reasons not to.The spread of the internet and the Web provides one compelling reason. Any company that creates a website has instant global reach, with corresponding demands for delivery and service. In addition, evidence shows that companies...
  • Understanding Reputation Risk and Its Importance
    by Jenny Rayner
    Reputation is the single most valuable asset of most businesses today—albeit an intangible one. A 2007 global survey1 rated damage to reputation as the top risk, although half the respondents admitted that they were not prepared for it. Hard-earned reputations can be surprisingly fragile in the globalized, technologically interconnected 21st century. The trust and confidence that underpin them can be irrevocably damaged by a momentary lapse of...
  • Using Financial Analysis to Evaluate Strategy
    by David Sadtler
    Many well-known tools and techniques of financial analysis are used by investors, stockbrokers, and corporate managers to assess corporate performance. Their use is particularly prevalent in mergers and acquisitions and in the analysis of capital expenditure. But how often do we say: “Let’s do some financial analysis to see if this strategy is any good. Let’s take a view on the corporate portfolio and the extent to which value is added by the...
  • What Entrepreneurs and Small Business Owners Can Do to Increase Their Chances of Success in the Global Economy
    by Neuman F. Pollack
    Entrepreneurs and small business owners are motivated to solve problems or deliver services better, faster, cheaper than others in the market. Entrepreneurs harness creativity and innovation to seize opportunities and offer alternatives in the marketplace. Successful entrepreneurs manage risk by closely monitoring business processes and financial obligations, as well as by focusing intently on their market and the challenges of building market...
  • Why EVA Is the Best Measurement Tool for Creating Shareholder Value
    by Erik Stern
    Financial measuring tools are many and varied. The media and equity analysts focus on financial accounting metrics such as sales and sales growth, margin, operating profit and operating profit growth, bottom-line earnings and its partner earnings per share (EPS), market value, return on equity, and return on assets or cash flow.Each of these metrics is flawed. Neither sales nor operating profit accounts for the financial requirements necessary...

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