On Financial Strategy

Abstract

In today's rapidly changing business world success is often achieved through simultaneous operations; nevertheless, the critical functions of finance and strategy are frequently practiced in isolation. The approach that we advocate, which we call Financial Strategy, temporally links critical strategic and financial activities throughout a firm thus leading to better executive decision-making, as well as increased understanding and buy-in throughout the firm. Incorporating performance measurement into the Financial Strategy framework reinforces this linkage. The result is a strategy that clearly guides production, resources that are allocated to efficiently execute strategic initiatives and performance measurement that serves as a cohesive management and feedback system rather than simply a method of reward and punishment. As we will show, Financial Strategy is not simply the linkage of three critically important disciplines, but a way of capitalizing on the interaction of each within a comprehensive framework to create value over time.

Keywords: Firm Objectives, Organization and Behavior

JEL Classification: G39, L29, M10, O20