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Strategic financial management also means that short-term goals may occasionally
need to be sacrificed to meet longer-term objectives. A typical example is when a
loss-making company trims its asset base through factory closures or headcount
reduction in order to reduce operating expenses. While such actions have a
detrimental effect on near-term results because of restructuring costs and other
one-time items, it positions the company to achieve profitability in the longer term.
This is just one example; companies often engage in lengthy legal wrangling to gain
a technological advantage through patents (case in point: the ongoing AppleSamsung patent lawsuits). The message is quite clear: superior technology can offer
tangible real-world benefits to businesses.
Example: Amazon invests in delivery drones
A couple of months ago, Amazon stirred the imaginations of futurists and sci-fi fans
everywhere when it announced that it was developing drones for delivering small
packages. Although drones have been around for some time, most of them were
used in military applications. Using drones is a sound business strategy for Amazon
for four reasons:
By using drones, Amazon will gain a real technological advantage over competitors
who must rely on less efficient ground transportation
Nearly 86% of Amazon packages are under less 5lbs, which makes drones the
perfect delivery vehicles.
Drones will allow Amazon to reach rural areas where delivery networks arent as
efficient.
Drones can significantly improve delivery times in dense urban areas.
This is one example where a near-futuristic technology offers real-world advantages
to a business.
4. Pricing strategies
Businesses essentially have two choices when pricing their products:
Keeping prices low to attract more customers. Since profit margins are very low, the
business must sell a lot of products to make money.
Pricing a product beyond the reach of ordinary consumers, and hence, giving it
aspirational value.
Lets look at some examples of these two approaches:
Example: Walmart, Ikeas low prices
Walmart uses its position as the largest retailer in the world to bargain for low prices
with suppliers and manufacturers. At the same time, Walmart keeps its profit
margins very low, selling in volume instead. This enables the company to price its
products far below competitors which ultimately helps it sell more.
The Swedish furniture brand Ikea follows the same approach. By selling its selfassembled furniture pieces in large volumes (the retailer has 338 stores in 40
countries), Ikea is able to price its products very aggressively.