Strategic Investments are those aligned with the strategy of the business. In this way, they seek to achieve medium and long-term objectives.
In other words, strategic investments are of paramount importance to the company’s goals. Thus, the idea is to allow the firm to remain and consolidate in the market.
It should be remembered that the business strategy or business can be defined as the actions the organization will take in order to achieve its objectives.
Examples of strategic investments
Some examples of strategic investments may be the following:
- The acquisition or merger with a rival company (horizontal integration) or with a signature that so far has been a supplier or customer (vertical integration).
- Entering a new market.
- Expand the portfolio of products offered to customers, seeking diversification.
- Invest in research and development with the aim of offering an innovative good or service in the market in the future.
- Adopt a new technology or a new merchandise distribution system.
- Use a new raw material in the production process.
- Investment in capital, such as machinery and diverse equipment.
- Financing decisions through the issuance of bonds or shares.
Dimensions to Analyze the strategic dimensions
- Strategic Dimension: If the investment is consistent with the company’s strategy. For example, there are businesses that are founded from the beginning with a global look. So, it makes sense that they are committed to expanding into a new market.
- Financial dimension: It is necessary to verify that the benefits of the investment will be greater than the costs.
- Risk dimension: All the scenarios that the company may face, and not only two (success or failure), but a wider range of possibilities must be analyzed.
- Political-economic dimension: The company must take into consideration the political decisions that may affect its project. For example, it is important to know if a new government can change trade policy and impose restrictions on exports.