We have discussed what financial strategies are in the: Learn Financial Strategies to Drive Performance and Value essay. So let’s just recall what a financial strategy is: Managing the finances of a company to meet a strategic goal. When we talk about strategies in the big world of IT (internet technology) companies we have to know which financial strategies are going to be essential to the company’s future growth, performance, cost effects, managing human resources, innovating new technologies, and so on.
The IT industry is very large and competitive and it’s also very dynamic, what that means is that future or current IT businesses should be very flexible. Flexibility means adaptive because the IT industry is constantly growing and changing, so when a new technology arrives the company and the employees have to adapt to it, if it doesn’t it risks being obsolete.
Great marketing strategies will need to be a must because marketing can drag a lot of costs the managers have to be rational. They can use social media with the help of SEO (search engine optimization) which can help be more visible to the consumer that the company wants to target, and for e.g. it’s an ad for the IT company web site it will stay longer so the viewer can notice it. In conclusion, there are great financing options to advertise the brand and not spend lots of monetary value.
An important question is how is the company going to be financed? That depends on the current stage of the company: new, old, large, medium, small and etc. Let’s say the company XY (IT company) is small to medium in its development stage. They have a choice to be financed via banks, they can borrow from a bank and then return the borrowed asset, they can also do a more common loan borrowing such as credit framework and line. It also depend on when the receivables are being paid, if it takes longer they can offer a discount or sell it to a factory company.
The IT company can also choose an aggressive or more conservative strategy to be financed. So what is those two kinds of strategies :
Conservative – That means a company would finance its long and short-term assets from long-term loans.
Aggressive – It means that a company is financing its long-term assets with long-term loans, and its short terms assets with short-term loans.
Namely, the use of short-term sources is cheaper, due to interest rates. For that reason is riskier because a loan is requested if and only if necessary, which can be rejected and the company can remain not illiquid, or if the demand for money increases the rate can also increase.
The conservative strategy is more costly because even the money is not using the company is still paying the rate for the loan and the aggressive is riskier.
They can also invest in stock which can also be a passive and active strategy!
Passive strategy means when you buy a stock you don’t do many transactions with it (buy-sell), and active investments which is more work and is involved with more dynamic playing, which can be very risky if played wrong. These strategies are fundamental and are not limited just to It companies, but for many sectors, we are just getting into the very shallow basic financing tactics, for other more complex strategies it needs more research and that drags monetary cost.