SFM is the assessment of Strategic Options, Choices

and Business performance by both strategic and

financial analysis.
SFM examines how a united view of strategic and
financial issues can become a practical reality.
This is achieved by looking at
the links between corporate strategy and SFM
managing for value-enabling financial management
to play a positive and proactive role in strategic
management.
the process of value management
-These include strategic management accounting and
strategic and financial planning.
key applications including strategic investment
decisions, acquisitions, strategic cost management,
and value business change.
implementing SFM.

Simplicity:
Simplicity resides in their being a relatively
a few number of competitive fundamentals
which are limited up to deliver VALUE.
EX: Brand Differentiation.
Service Excellence.
First mover advantage.
Thinking:
Strategy is also about thinking Strategic
Thinking? Where are we? Where do we want
to reach?
Results Focus:
Strategies do not necessarily have very
easily quantified value these strategies
ultimately have only if and when are cashed
in for real money.

Action:
Strategy must also therefore be about action.
Because managers are not held accountable
for
both
the
Strategic
and
Financial
performance of business they can continue to
misjudge the future and get away with it.
Timing:
Strategy very much requires close attention
to the timing, specifically external events of
other competitive conditions. Time-window of
a strategy can have a profound impact on its
Financial value (IBM).
Energizing:
Strategy is essentially an energizing force
provides fresh vigor and sense of purpose
into
managers
otherwise
buffeted
by
operational turbulence.
Goal Driven:
Strategy mean clear linkages with specific
operational and financial goals. This means
not
just
setting
directions
but
also
establishing controls.

Future:
Strategy is about your future.
By integrating strategy more closely with
finance, we are able to show strategy is
relevant because the question is now
always asked What is the value (financial)
of the strategy?
Key links between corporate strategy and
financial analysis:
Strategic Analysis.
Strategic Choice.
Strategic Implementation.
Strategic Value and Learning.
Strategic Analysis:
In strategic analysis we analyze our current
strategic capability, the expectations of
stakeholders and culture.

Strategic Analysis

Financial Analysis

Mission

Is it stretching but
achievable?
And is it the essence of
what we are about?

Does this mission guide (or

misguide)
strategy
development?
Does it distract or even
destroy Share holder value?

Objectives

What are our strategic Are these consistent with

goals?
Financial realities? Present
and future?

Strategies

How do we achieve our What is the value of these

goals with competitive strategies?
advantage?

Actions

Do these support our What is the value of the

Strategies?
sets of strategies decisions
(Strategic project set)?
Are these sufficient?

Control

What strategic milestones What financial

do we need to pass and (profit and cash)
when?
expect?

returns
do we

Strategic Analysis

Financial
Analysis

Behavioral
Issues

Organizational
Structure and
Design

What organizational
structures will meet
the competitive
challenge?

What value is
added, diluted or
destroyed by a
specific
organizational
structure?

Will a particular
structure add value
given our culture?

Resource
Allocation and
Control

What businesses
should we invest
more in or less in and
what competitive
performance do we
expect?

What is the likely

impact of resource
decisions on
financial
performance?

What will prevent

us from reallocating
resources to where
it needs to go?

Managing
Change

What key changes

are needed to
support the strategy
and how should
these be managed?

What is the
targeted value of
organizational
change
programmes (and
their costs)?

What behaviours
would either
enhance or erode
the value of
organizational
change?

Implementation and value in a multinational computer company

Transformational change may seem an abstract notion, but when we
examine specific transformational change programmes these do
have some very specific financial benefits which can be quantified.

Transformational change
Products simplification.
Business process re-engineering.
Acquisitions and alliances.
Organizational flexibility.
Continuous Improvement
Quality management.
Out-sourcing non-core activities.
Management skills.
Team building.

Key financial benefits

Reduced products costs.
Reduced processes costs.
More revenues, margins and
future opportunities.
Accelerates product launchesmore revenues-and reduces costs.
Key financial benefits
Avoids loss of customers and lost revenuesand reduced costs
Improves margins and reduces costs of
distraction.
Costly management errors are avoided; New
opportunities created and harvested.
Costs of undue political activity avoided.

Strategic learning occurs when managers reflect on

their
strategic
and
financial
recipes
which
consciously or unconsciously drive the decision
making process. This may result in insights
including:
Our views on what business we are in or should
be in need to change.
Whether we can make sufficient financial returns
out of certain kinds of business.
We need to review our profit and cash generation
expectations, or our investment priorities.
due to adverse shift in competitive environment
we must realize that we need to undertake major
restructuring and reductions in our cost base and
to remain competitive and profitable.

Strategic Analysis

Financial Analysis

Captures a wide range of variables Focuses on a narrower range of

both external and internal.
variables primarily internal.
Evaluates tangible and less tangible Is primarily concerned with tangible
areas of value.
areas of value.
Involves
measures.

mainly

qualitative Involves
measures.

more

quantitative

Has longer-term horizons.

Has a bias towards shorter-term

(with some exceptions)

Is about creative thinking.

Is more about the control process.

Deals with broader uncertainties.

Employs techniques for measuring

specific risks.