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Firm level challenge - A1
Global Firm and Its Financial Perspective
Coca-Cola is a global company that outsourced its processes. The important outsourcing and going public decisions are influenced by a number of business compulsions. These factors need to be analyzed on a theoretical level. On a number of occasions, the company agrees on a takeover policy that should be reflectively diagnosed.
Outsourcing Decisions
A global firm channelizes its customary in-house decision making powers and production-related procedures to external sources that are expressed through legal provisions. This mechanism is called outsourcing that is implemented and operationalized by way of the involvement of components of manufacturing and resolution undertaking. Outsourcing is the act of transferring some of an organizations recurring internal activities and decision rights to outside providers, as set forth in a contract (Greaver, 1999, p. 3).
There are definite organizational, trading, profit-oriented and outlay-motivated advantages of outsourcing projects. Strategic outsourcing entails a corporates enduring calculated plans. The outsourcing initiative becomes strategic when it is aligned with the organizations long-term strategies (Greaver, 1999, p. 8) that are intended to generate consequential out-turns for the corporation and when the results, either positive or negative, will be significant to the organization (Greaver, 1999, p. 8).
Outsourcing generally incorporates those extraneous programs that interfere with a firms inner absorption. Distracts from this focus will be considered for outsourcing of facilitating entrepreneurial culture, customer satisfaction, managements undivided attention on building core competencies and serving customer needs (Greaver, 1999, p. 13).
Outsourcing is an effectual design in the utilization of the firms existing and upcoming cutthroat challenges. However, apparently an outsourcing proposal can achieve cost reduction at the expense of depressing the type of employment support necessary for team building (Greaver, 1999, p. 26).
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Outsourcing proposals engage precarious possibilities. Nonetheless, volatile markets command risky ventures that remain stagnant. In todays fast-changing environment staying the same is riskier than outsourcing (Greaver, 1999, p. 26).
Decisions to Go Public
According to Loughran and Ritter, private concerns may be induced by the profile of overestimation of shares in gaining low cost equity capital and go public (Alimov & Mikkelson, 2008, p. 3). In view of Fischer and Merton, irrationally high prices offer directors the favorable chances for their firms equity by issuing stocks and investing the proceeds (Alimov & Mikkelson, 2008, p. 3). The agency theory of overvalued equity, as propounded by Jensen (2005), holds that managers are bound by irrational forces of market caprice to serve the stock exchange by making excessive investments to meet investors implied and unrealistic growth forecasts, thereby empowering overvaluation suppositions (Alimov & Mikkelson, 2008, p. 3). Hence, Jensens theory suggests that firms opting to go public and subserving investors whims simply undermine the positive utility of the speculations with negative net present value (Alimov & Mikkelson, 2008, p. 3).
On the other hand, the investment opportunities paradigm, formulated by Pastor and Veronesi (2005), proposes that auspicious market circumstances unlock the window of an opportunity to go public for firm managers in the normal or unfavorable market conditions (Alimov & Mikkelson, 2008, p. 3).
Global firms seek to utilize advantages of good chances of the market and comply with investors demands by going public. The investment opportunities hypothesis describes the owners decision to go public as a strategy to raise capital to finance profitable growth (Alimov & Mikkelson, 2008, p. 7).
Takeover/Merger Deliberations
Takeover initiatives are opposed from a number of angles. One such conflict arises from the ground of managerial myopia (Stein, 1988, p. 62). Managers are under duress of takeover schemes and they are fraught with their underrated estimations. These tendencies together press the managers to focus more heavily on short-term profits rather than on long-term objectives (Stein, 1988, p. 62). Baron in 1983 proposed a model of management feedback to takeover a peril that may have unwelcoming consequences (Stein, 1988, p. 75). Managerial shortsightedness is often overlooked because of informational asymmetries among managers, raiders, and shareholders (Stein, 1988, p. 76).
Policy Implementation
The financing alternatives for global firms range from borrowing money to issuing shares to reinvesting cash in fresh ventures. In the case of borrowing, the corporation is pledged to repay the loan with an interest. The shareholders who contribute the cash are entitled to a portion of future profits and cash flow (Brealey, 2012, p. 4). It is called an equity financing. In the event of cash flow not being reinvested, the firm may hold the cash in reserve for future investment, or it may pay the cash back to its shareholders (Brealey, 2012, p. 5).
Marketing is a firms strategic orientation of products and services in the minds of the customers (Proctor, 2013, p. 2). Marketing is commercialization of the organizations branded products through the establishment and supervision of coalitions with other organizations, the development of strategic alliances and networks, where firms work together towards shared goals and collaborate in their operations (Proctor, 2013, p. 3). Competition is an incentive to the firms intelligent exploitation of marketing opportunities and a boost to a credible ranking in the marketplace against its contenders. A firm must be able to position itself competitively... in important respects in relationship to competitors (Proctor, 2013, p. 3).
The operations management is a sector that is entrusted with the adherence to precise liabilities within the organization and not be limited to a specific department (Brown, Bessant, & Lamming, 2013, p. 13). Operations procedures are the routine practices of the supply chain comprising suppliers and distributors in the finalization of the firms goods and services to end customers (Brown, Bessant, & Lamming, 2013, p. 13). One of the prime operations managerial responsibilities is resource governance, while Hill (2004) estimated that up to of 70 per cent of assets my fall under the responsibility of operations management (Brown, Bessant, & Lamming, 2013, p. 14).
The present scenario of globalization is characterized by the diversified growth of multi-national corporations. The financial speculations and processes that global firms conceptualize and operationalize are determined by cashable purposes and challenging situations.
