Question

Discuss the financial resource implications of expansion, contraction, and maintenance of scope adaptive strategies.

Answer 1

The various adaptive strategies have a definite financial implication. Although each of these have different impacts as outlined below:

• The strategies involving expansion and maintenance of scope make it sometimes absolutely imperative for firms to raise new funds through may be tapping the capital market or arrange funds through loans and long term debts.

• A strategy involving market development which would involve an enlargement of scope would typically happen through investment in new products, increasing the distribution setup or through mergers and acquisitions and all of which would involve large sum of money.

• Even the seemingly conservative strategies which would only involve sustenance and maintenance of existing assets and facilities would involve requirement for capital and funds to ensure that the facilities are operating at an optimal level.

• A contraction of business is not a healthy sign but it is sometimes needed and would typically be carried out using strategic divestiture and that would generate cash in the short term for the company.