Question

How does the financial strength of an organization influence decision making and outcomes?

Answer 1

Finance is the lifeline of every organization. Business decisions or business projects requires adequate finance and funding for the successful completion of projects or proper implementation of decisions.

The financial strength of an organization thus helps in decision making and outcome through;

• Provides the needed funds to be used in the strategic decision making process. Suppose an organization wants to enter into a new market as a part of expansion decision . It can take such step only if it has adequate finnaces.
• The funds provides the sustainability for the company operational decisions.Setting up of new manufacturing plant , increasing the number of workers, installing new machinery to incresase the operations, all such decisions are possible if organization has sufficient funds.
• The financial strength determines whether the decision chosen can be implemented or not.Suppose an organization wants to enter into a new product line. Only if it has adequate finnaces for production, sales and marketing, then it can take such a decision.
• The financial strength is the driver of implementation to achieve the desired outcome.Suppose a company fixes a sales target for a particualr month. For acheiving that target expenses on sufficient manpower, sales and marketing, advertising and many other expenses have to be incurred.
• Sometimes the quality of a decision is determined by the financial strength or the funds available.A company can enter into new ventures only if has sufficient funds. Acquiring a competitor requires sufficient funds.Hiring high quality manpower to improve the quality of work will require high salaries to be paid.