Management Integration - Assignment Example

Management Integration Paper An investment strategy is a composition of policies, conducts and processes that are set to steer an investor through the procedure of choosing the best portfolio for an investment. Customarily, an investor or firm will formulate an investment strategy through incorporation of expectations in the tradeoff of risk-return. The choice of an investment strategy varies across investors or firms. Some choose investment strategies that are of high risk while others choose less risky ones. However, there are principal tools that are used in the formulation of investment strategies, which are uniform. The first tool used to formulate an investment strategy is the feasibility of making concentrated purchases (Fabozzi, F., Focardi, S. & Kolm, P. 2010, 22). Concentrated purchases simply entail the buying of shares or stocks at times when the industry that a firm is operating in has been hit by economic meltdowns. Often, investors or firms cogitate on this tool before formulating an investment strategy. This is because equity markets are believed to yield good returns in the long run. Thus, making concentrated purchases can give a high probability that an investor or firm will earn good returns in the long run when the economy stabilizes (Russell, C. 2006, 34). The second tool is value investment, which involves stock purchases at a cheaper price that is lower than its intrinsic value (Götze, U., Northcott, D. & Schuster, P. 2008, 56). The purchase of stocks at such rates reflects the future value of the stocks to rise as opposed to the present value. The last tool is risk assessment, which generally engrosses the evaluation of the possible risks associated with an investment venture. Before the formulation of a strategy, a firm must always recognize the financial perils exposing themselves to so that they can avert potential risks (Russell, C. 2006, 56). The link between investment strategies of a firm and its environments cannot be dismissed. To begin with, a firm highly depends on the financial markets for profitability when it has invested, say, in shares (Herbst, A. 2002, 29). The dynamics of a financial market within which a firm operates, determine the profit margin that it gets. When the financial markets are selling shares at reasonable prices, a firm can quickly buy them. However, when a market needs to sell its shares and the market price is low, it will end up making losses (Russell, C.2006, 61). Thus, the financial market within which a firm operates is a key determinant of its profitability. This implies that an investment strategy will be determined by the state of the financial market at the time of formulation (Götze, U., Northcott, D. & Schuster, P. 2008, 36). If the financial market is not favorable for the chosen investment strategy such as stock purchases, then the investment strategy will have to be postponed or cancelled for a favorable one (Fabozzi, F., Focardi, S. & Kolm, P. 2010, 36). Similarly, financial crises are always detrimental to a firm’s investment strategies since they determine the success of the investment. After a financial meltdown, financial markets are always grappling to redeem themselves financially. The process of redeeming themselves creates a room for exploitation on all prices of financial services (Herbst, A. 2002, 37). The prices of shares and bonds are always manipulated to integrate the losses that investors incurred during the recession period (Russell, C.2006, 34). Thus, when a firm is about to implement an investment strategy or formulating it during such a time, it is unfortunate that the economy will dictate it. A firm will have to adjust to the exorbitant costs of financial services and goods to achieve the success it requires (Götze, U., Northcott, D. & Schuster, P. 2008, 57). In cases where the economy is not favorable enough for the firm, the investment strategy is forgone, which results to inappropriateness. Correspondingly, formulating an investment strategy during the start of a financial crisis subjects the whole idea to inconsistencies and outright failure. The rate of inflation during financial meltdowns is high, which creates an inauspicious financial environment, which can be financially detrimental to the investment strategy (Götze, U., Northcott, D. & Schuster, P. 2008, 56). This module has been given me invaluable knowledge on the importance of respecting diverse cultures, especially in business. The world is a global home with different people emanating from varied origins. In business, the selling and buying of products and services does not segregate the color, caliber or race of a person. It is thus important to venerate each other’s cultures, and especially in business where the completion of a transaction requires a willing seller and a willing buyer. A non-racist customer will obviously be intimidated to buy a seller’s product or service upon realizing that the seller perpetrates racism. Moreover, there are numerous ethical issues that people must respect for effective execution of global business. They include human rights, employment policies, environmental regulations and honorable obligation of multinational corporations. Any businessperson must understand that human rights must be upheld at any level of work. There are managers who disrespect junior workers in their companies because of their positions. This is callous since effective business will only depend on the productivity of the workers. Thus, global business will be more effective if investors always respect human rights, create a conducive environment for them, as well as ensuring that the environment is not polluted by waste from their companies. The module has helped in honing my business skills through the provision of financial perspectives that offer a pathway to effective global business. The numerous tools that investors must use to ensure that their financial decisions do not reciprocate into losses are ideas that have been of help to me. I have learnt that the financial market is full of uncertainties that require a skillful mind to avert them. The risks that are in the market are evident and subtle. An investor must always make circumspect choices when on the verge of making major investments. This is because of the uncertainties that might rebound and leave the investor bereft of their cash. Thus, studying the financial market before making investments is one of the principal lessons I have learnt from the module. References Fabozzi, F. J., Focardi, S. M., & Kolm, P. N. (2010). Quantitative equity investing techniques and strategies. Hoboken, N.J., John Wiley. Götze, U., Northcott, D., & Schuster, P. (2008). Investment appraisal methods and models. Berlin, Springer. Herbst, A. F. (2002). Capital asset investment strategy, tactics & tools. New York, N.Y., J. Wiley.  Mun, J. (2013). Real options analysis tools and techniques for valuing strategic investments and decisions. Hoboken, N.J., Wiley. Russell, C. (2006). Trustee Investment Strategy for Endowments and Foundations. Chichester, John Wiley & Sons. Read More