Financial Strategy

0 Comment

Last year was a very challenging period for the company as its total operating profit fell from ‘ 500 million (in 2004) to ‘ 302 million in 2005 [1].
The company has set as its mission [1] the delivery ‘of great service and results through its people and the achievement of leadership in chosen foodservice markets’. The basis for the achievement of the above target is the commitment towards the employees, the shareholders and the customers (Parnell, 2003). Moreover, the firm recognizes the need for high levels of customer satisfaction which it aims to achieve through the extension of its activities and the development of its relationship with the client. Towards, this direction the use of innovative strategic plans is been considered as a useful tool towards the increase of the company’s performance on a long-term basis (Hodgetts et al., 2003).
Historically [4] ‘strategic decision analysis focused on the effects on individual firms. decisions were based solely on firm optimization criteria, such as return on investment and net present value. Increasingly, firms are recognizing that their internal strategic choices affect their suppliers and customers. however, traditional firm profit-maximizing criteria (e.g., return on investment and net present value) often reject new and emerging technologies’ (Shank and Govindarajan, 1993)
The firm’s strategy for the future has to be based on the effort to retain its place in its industry while trying to secure its level of development throughout the years (Winston, 2002). On the other hand, the chosen plan has to be in accordance not only with the market’s current trends but also with the company’s financial strength and its ability to respond effectively in every issue appeared in the daily commercial transactions of the specific industry sector. The influence of particular elements has to be taken into account during the design of the corporate strategy for the future (Pritsker, 1997).
In order to estimate the effects of the firm’s strategy in the future we could use the strategic cost management framework as stated by Shank and Govindarajan which [2] ‘demonstrate the strategic power of value chain analysis, i.e., linking external value creating activities all the way from basic raw materials, to component suppliers, and through to the ultimate end-use product delivered to the consumers’. Moreover, the specific framework helps to examine ‘how cost management and cost control must be differentiated depending on the strategic positioning chose by the firm, be it cost leadership or product differentiation’ [2].
Relative Market position
Compass Group is – as always stated – a leading company in its area of operations. Moreover, the company is listed on the London Stock Exchange and is a member of FTSE100 [1]. In addition, as always stated above, the firm currently operates in over 90 countries around the world, an achievement that supports its recognition as the leading company in the specific industry. On the other hand, the company has achieved to extend its activities through the establishment of a series of brands which currently dominate