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Home > Business Strategy Best Practice

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.

  • A Holistic Approach to Stakeholder Relations to Build Reputation and Mitigate Reputation Risk
    by Elliot S. Schreiber
    Concerns among boards and CEOs about corporate reputation and the risk to reputation have increased dramatically in the past decade (Economist Intelligence Unit, 2005). According to a study of 551 companies by AON Insurance (Varro, 2009), reputation risk is now the number one concern of senior executives and risk managers globally and is one of the top risk concerns of CEOs.Senior executives find reputation harder to manage than other types of...
  • 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...
  • Crisis Management and Strategies for Dealing with Crisis
    by Jon White
    The term “crisis” is much used in the media coverage of events, in public discussion, and by organization leaders describing the situations that they face and try to manage. The consequences of failure to manage these situations may prove more or less damaging to their organizations. However, not all situations that are described as crises should be labeled as such, and it is important to distinguish real crises from other situations as a first...
  • Digital Reputation Management
    by Shireen Smith
    The changes happening in the world with the arrival of social media are having a far-reaching impact on the ways we do business, communicate with one another, and engage with our customers. The impact of social media as a communication channel is apparent when we compare it to earlier developments in society (Table 1).Table 1. Growth of media formatsMedium Time taken to reach 50 million users1 Radio 38 years Television 13 years Internet 4...
  • Digital Strategies for Enhancing Reputation
    by Paul A. Argenti, Georgia Aarons
    TMI. Of all the acronyms to enter the hallowed pages of the Oxford English Dictionary in 2011, this one may be the most apt in describing the world we now live in. Of the thousands of media impressions each of us faces on a daily basis, it seems that many relate to leaked information and corporate scandal, be it investment guru Warren Buffett’s involvement in an insider trading deal, the News of the World phone-hacking scandal, or the most...
  • 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...
  • Engaging Your Stakeholders: How To Make Allies of Investors and Activists
    by Peter Firestein
    No company exists without the consent of widely diverse groups of individuals and organizations. These range from customers to investors to social and civic groups—in fact, to the entire society that surrounds the corporation. It is a mistake—sometimes a fatal one—when any company takes the position that it is free to ignore those who have an interest in its financial health or the impact of its operations. But if the company chooses to take...
  • Framing Reputation: Vague Concept or Measurable Business Asset?
    by Rupert Younger, Genoveffa Giambona
    “One can survive everything, nowadays, except death, and live down everything except a good reputation.” Oscar WildeEveryone has their own favorite reputation quote. The most often cited in business is that attributed to Warren Buffett, who reportedly said: “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you will do things differently.” But what can you do differently? And is it possible to...
  • 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...
  • Governance and Reputation Risk
    by Andrew Tucker
    Reputation risk is diminished when corporate culture and strategy are closely aligned but heightened when they are divergent.2 In this context, the role of corporate governance is to produce and enforce rules and structures to align a firm’s operating procedures and strategy to produce superior performance. Therefore, ensuring that corporate governance arrangements are optimum are a key aspect of managing reputation risk.However, in recent years...
  • 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...
  • Hoshin Kanri: Deploying Your Strategic Intents to Achieve Business Excellence
    by Jeffrey T. Luftig, Steven M. Ouellette
    Many companies strive to be the best in their market. Most never succeed. Many of those that do, do so only temporarily, and subsequently lose their position through misunderstanding how they got there and what is needed to stay there. Very few, as Jim Collins (2001) has stated, are capable of going from “good to great.”Companies that achieve, and subsequently maintain, business excellence have a number of traits in common. One of the most...
  • 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...
  • How the Corporate Website Has Become the Hub for Online Reputation Building
    by Mark Hill
    The Internet is the fastest-growing channel for influencing corporate reputation. It is also, uniquely, where all a company’s different stakeholders and audiences converge. Analysts, communities, customers, employees, investors, journalists, NGOs, regulators, and suppliers all turn up, together, in increasing numbers on the corporate website.So, if reputation is “the net perception of a company’s ability to meet the expectations of all its...
  • 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...
  • Long-Term Reputation Effects in the Global Financial Industry: How the Financial Crisis Has Fundamentally Changed Reputation Dynamics
    by Mark Eisenegger, Daniel Künstle
    The financial market crisis of 2007, global economic crisis, and subsequent debt crisis have moved the concept of reputation into the very center of public debate. Ever since the reputation meltdown of the Wall Street banks, insurance companies, rating agencies, supervisory authorities, and entire national economies, there has been a veritable boom around this concept—in the media and scientific discourse, but also in the daily practice of...
  • Managing Reputational Risk: Business Journalism
    by Jonathan Silberstein-Loeb
    It is taken as given that journalism affects corporate reputation. To understand better how journalism about businesses is written and what can be done to contend with the reputational risk that it may present, this chapter seeks to explain how business practitioners and business journalists perceive each other and interact. It is the central argument of this chapter that establishing mechanisms for credible commitment helps to mitigate...
  • Managing Your Reputation through Crisis: Opportunity or Threat?
    by Magnus Carter
    We know that no organization is immune from crisis. The one thing that is predictable about crises is that they will happen, and a good crisis management plan is essential best practice. Yet my experience as a crisis communications consultant tells me that many organizations, including some substantial ones, do not have such a plan. And of those that do have a plan, surprisingly many consider only the direct threat of disaster, catastrophe, and...
  • Measuring Brand Reputation
    by Andrew Tucker
    Brand, reputation, and strategy are like a three-legged stool—remove one leg and the stool topples. Whole disciplines have grown up around each leg of the stool, but companies only achieve sustained commercial success when all three are well manufactured, balance each other, and can take the weight of expectations. Of course, building sustained commercial success is more complicated than building stools! Amid the mountains of academic research...
  • Measuring Corporate Reputation: Methodology, Findings, and Practical Implications of the BMAC Surveys
    by Michael Brown, Paul Turner
    The growing interest in the resource-based view of strategy and performance in business (Figure 1) brings with it an increasing emphasis on intangibles, such as knowledge, information, and corporate reputation, and on how to articulate their value and ongoing performance.Twenty years ago a team set out to measure the corporate reputation of British companies.1 The result was an annual Britain’s Most Admired Company (BMAC) survey, which has...
  • 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...
  • Reputation and Strategic Issue Management
    by John Dalton
    What is the purpose of a business? According to Peter Drucker, “the purpose of a business is to create a customer.” Such a statement makes good sense, as without customers there can be no functional business. Essentially, if the purpose of any business is to fulfill some human need within society, then that business, whatever its nature, should take an active interest in its own reputation as a way of securing its future prospects. Central to...
  • 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...
  • Smart Use of Reputation Capital: How to Benefit from Different Reputation Investment Strategies
    by Joachim Klewes, Robert Wreschniok
    Today, those responsible for corporate communications are facing tremendous challenges. They are forced to take ever greater risks regarding reputation, and increasingly they are compelled to use more radical methods and messages in the traditional media—above all in advertising communication. This appears to be the only way to catch the attention of consumers and stakeholders.On the other hand, the new social media, digital networks, and blogs...
  • Sustainability and Corporate Reputation: Who Needs Reputation When You’ve Got Cash Flows?
    by William Cox
    Of 1,749 corporate executives from various sectors worldwide, 72% see sustainability as very important in managing corporate reputation. In the manufacturing sector, this proportion was as high as 79%—in both cases sustainability’s impact on reputation was the number one reason cited for getting involved in sustainability (Bonini, Görner, and Jones, 2010). Although these and similar data suggest that executives believe that sustainability...
  • The CEO’s Role in Reputation Management
    by Leslie Gaines-Ross
    “Our reputation is more important than the last hundred million dollars.” Rupert Murdoch, Chairman and CEO of News CorporationCorporate reputation matters more than ever, as Rupert Murdoch would be the first to admit today. An increasingly complex business environment, marked by higher standards of corporate governance, citizen journalism, a more cynical public, and emerging special interest groups, places ever more pressure on leadership to...
  • 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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