Examples of Strategic Asset Allocation in the following topics:
-
- Depreciation refers to two very different but related concepts: the decrease in value of assets (fair value depreciation), and the allocation of the cost of assets to periods in which the assets are used (depreciation with the matching principle).
- Any business or income producing activity using tangible assets incurs costs related to those assets.
- The costs are allocated in a rational and systematic manner as a depreciation expense to each period in which the asset is used, beginning when the asset is placed in service.
- the expected salvage value, also known as residual value of the asset
- The cost of an asset so allocated is the difference between the amount paid for the asset and the salvage value.
-
- Strategic planning involves managing the implementation process, which translates plans into action.
- The following stages constitute the strategic implementation process:
- Allocating and managing sufficient resources (financial, personnel, operational support, time, technology support)
- One of the core goals when drafting a strategic plan is to develop it in a way that is easily translated into action plans.
- The strategic management process never ends.
-
- Strategic management can depend upon the size of an organization and the proclivity to change the organization's business environment.
- Henry Mintzberg stated that there are prescriptive approaches (what should be) and descriptive approaches (what is) to strategic management.
- No single strategic managerial method dominates, and the choice between managerial styles remains a subjective and context-dependent process.
- As a result, Mintzberg hypothesized five strategic types:
- Strategy as plan: a directed course of action to achieve an intended set of goals; similar to the strategic planning concept
-
- Activity ratios provide useful insights regarding an organization's ability to leverage existing assets efficiently.
- Activity ratios are essentially indicators of how a given organization leverages their existing assets to generate value.
- Through identifying the profit compared to the investment in these core assets, the overall efficiency of the organization's utilization can be derived.
- Understanding how to use these ratios, and what the implications are, is central to financial and managerial accounting at the strategic level.
- For other businesses, asset turnover is a central activity metric.
-
- The financial forecast is a key input to strategic planning, a firm's process of defining strategy and making decisions about allocating resources.
- Strategic planning is an organization's process of defining its strategy, or direction, and making decisions about allocating resources to pursue this strategy.
- This is a mathematical model designed to represent a simplified version of the performance of a financial asset or portfolio of a business, project, or any other investment.
- Financial modeling is a general term that means different things to different users; the reference usually relates either to accounting and corporate finance applications, or to quantitative finance applications.Typically, financial modelling is understood to mean an exercise in either asset pricing or corporate finance, of a quantitative nature.
- Financial forecasting is essential for a company's strategic planning, management, and organization.
-
- In the resource-based view (RBV), strategic planning uses organizational resources to generate a viable strategy.
- The resource-based view (RBV) of strategy holds company assets as the primary input for overall strategic planning, emphasizing the way in which competitive advantage can be derived via rare resource combinations.
- Upper management must carefully consider what resources are at the company's disposal and how these assets may equate to operational value through strategic processes.
- In a perfectly competitive strategic factor market for a resource, the price of the resource will reflect expected future above-average returns.
- This advantage can be sustained if competitors are not able to duplicate this strategic asset perfectly.
-
- The notion of real options was developed from the idea that one can view firms' discretionary investment opportunities as a call option on real assets, in much the same way as a financial call option provides decision rights on financial assets.
- The option is "real" because the underlying assets are usually physical and human assets rather than financial securities.
- The commonality in applying option-pricing models for real assets and for financial securities is that the future is uncertain.
- A strategic implication of real options theory is that investment will be discouraged by exogenous uncertainty.
- For example, firms usually undertake research and development investments to strategically position themselves for the economic value from commercialization when market conditions turn favorable.
-
- When considering strategic entry into an international market, licensing is a low-risk and relatively fast foreign market entry tactic.
- When considering entering international markets, there are some significant strategic and tactical decisions to be made.
- This agreement will describe the terms of the strategic alliance, allowing the licensor affordable and low risk entry to a foreign market while the licensee can gain access to the competitive advantages and unique assets of another firm.
- In order to circumvent this strategic barrier, the licensor finds a local sports drink manufacturer to license their recipe to.
- Licensing is low risk in terms of assets and capital investment.
-
- Asset allocation is the theory that any portfolio should have a set of target weights for different asset classes based on time frame and risk tolerance.
- At this point, we have a total portfolio of $110,600 and an asset mix of roughly 62% stocks and 38% bonds.
- The theory can feature different strategies, including strategic asset allocation, tactical asset allocation, and others, but the ideas are the same as the implications for return.
- A portfolio should consist of a variety of classes of assets to take advantage of zero and negative correlations between those classes, and it should be designed to achieve a target mix of assets that are rebalanced when one grows in relation to another.
- Different returns are expected for different asset allocations given historical averages
-
- When considering commercial banks, it's useful to understand that they act as an outlet for strategic financial decisions for businesses to offset certain risks, procure resources, invest, and store assets.
- Liquidity Risk – Risk that an acquired asset cannot be traded quickly enough to capture profit.
- Market Risk – Virtually any capital asset has a market, and is therefore subjected to the risks of it's respective market.
- This image demonstrated the ongoing consolidation of the banking industry, through displaying the overall assets owned by the largest 5 banks.