The Strategy Seminar: Applied strategy- Assessment of financial indicators for evaluation of business Performance

Authors: Inta Kotane, Irina Kuzmina-Merlino

Riga International School of Economics and Business Administration, Latvia

Using financial ratios and indicators to evaluate a company performance is a universal way over the world. However, which indicators help the investors to figure out the company’s situation the most effectively, especially for a small business? Inta Kotane and Irina Kuzmina-Merlino conducted a research about indicators and ratios in financial statements to apply for evaluation the company’s position.

As you know, it’s hard for a small business to get loan from the credit bureau since its financial resources which is contributed from an owner or partnership is limited. Therefore, the purpose of this paper is to suggest building up a financial indicator system which then is applied to evaluate small company’s financial position in Latvia. Although the objective of this study aimed to small business in Latvia, in my opinion, the feasibility of these study outcomes is worth for small business over the world.

Coming up to the target of the research, the authors looked into the necessary of financial indicators and then prove their crucial roles in identify a company performance. Then they applied their findings into the practical situation in Latvia. From that, they generate a model of financial indicators system to measure how good the small business is operating.

The methods used in this research are: “logical analysis ad synthesis, content analysis and a monographic method.” The data is collected from “Lursoft Ltd.” and “Latvia Central Statistical Bureau”, the largest “information provider” in Latvia.

After the research, some financial indicators, such as current ratio, net working capital to sales ratio, debt to equity, financial cycle, sales margin, return to equity, and maturing are identified as foundation for the model used for evaluating the performance of the small business. More indicators to supplement to the system depend on the features of the industry. The more indicators the system has, the more accurately the performance of the company is judged. However, the system must include those indicators above; and these indicators are required correlated and correspondent to each other. In order to get the right evaluation basing on the system, the examiners have to make sure that the financial statement is prepared strictly according to the international financial reporting standards (IFRS). Otherwise, at least the data in the financial statement are proved to be objective. The level of accuracy from this system prediction is counting on the precision of the financial statement as well.

This research is valuable for not only financial analyst but also investors and strategists. For the strategists, ratios in a financial statement are effectively strategic tools when they can translate the meaning information from the financial statement in management. They are the supportive tools for analyzing the operation of the small business since it can help to save time with reliable results. The examniers need to focus on these main financial indicators which are listed above initially as analyzing to have an overview of the operation. Then relying on the size and specific features of each manufacture, they can supplement other necessary financial indicators in their analysis.

Source: Inta Kotane, Irina Kuzmina-Merlino, Assessment of financial indicators for evaluation of business performance, ISSN 1822–8402 European Integration Studies. 2012. no. 6, http://dx.doi.org/10.5755/j01.eis.0.6.1554

The Strategy Seminar: Applied strategy- CRM Is All About Bringing People, Processes & Technology Together - A Case Study Of Banking Sector In India

Bihari, Suresh Chandra. "CRM Is All About Bringing People, Processes & Technology Together - A Case Study Of Banking Sector In India." Romanian Journal of Marketing 1 (2012): 50-56. Business Source Complete. Web. 17 Oct. 2012.

The main purpose of this article is to define what Customer Relationship Managements (CRM) is, “the process or methodologies used to understand customers’ needs and behaviors to build stronger relationships with them,” how to develop it, what are the challenges in the implementation, and how it can be applied to the banking sector, specifically, the Indian banking sector. (Bihari 2012)  Second, the article shows why CRM is important in banking, an industry which historically is focused on transactions not creating customer relationships.  Third, it focuses on innovations in CRM and what the future of CRM will look like in India.  Lastly, the author analyzes select Indian and global banks to provide examples of CRM in action. 

The paper’s research found CRM is currently popular because of increased competition between banks through globalization.  Banks used to be transaction based but are now focusing more on customers.  Customers are increasingly expecting more services and products from their banks.  Increases in information technology (IT) not only give consumers more banking options from banks, but it also gives banks more options to analyze their customers’ behaviors.  Banks realize there is a significant advantage in acquiring new customers and by keeping customers they already have profits can increase up to 35% (Bihari 2012). 

The study suggests banks can develop a CRM strategy by identifying and creating initiatives with the overall strategy of the firm in mind.  Bank must set growth objectives for each of the initiatives.  Initiatives should include increases in new and existing customers (Bihari 2012).  There are, however, problems associated with CRM. First, it is hard to establish good and effective measurements of CRM.  If effective measurements cannot be established it is easy to see how banks would not go forward with an investment with its Net Present Value (NPV) unknown or hard to measure (Bihari 2012).  Second, true profitability of a bank is hard to measure and accounting standards for financial performance may not replicate true performance (Bihari 2012).  Third, banks have a rule for pricing decisions.  The 80-20 Rule is that 80% of profits come from 20% of customers.  If a bank provides poor services to these customers they can move to competitors (Bihari 2012).

The implications for bank managers are with increased competition banks need to come up with new ideas.  Good customer experience leads to customer acquisition and retention which then leads to increased profits.  By focusing on customers, banks can acquire vast quantities of customer information and make informed decision about what customers want and when.  CRM can increase overall profitability through better infrastructure and performance as it relates to customers relationships (Bihari 2012).  Much like in marketing, CRM allows banks to study and segment their customers.  This permits banks to see which customers are profitable and which are not (Bihari 2012).

The Strategy Seminar: Applied strategy – An underlying market based strategy for insurers

In 2010, according to the data of the United States Census Bureau, the GDP of finance and insurance industry accounted for $1,235 billion dollars, roughly 8.42% of the overall GDP of the country. Meanwhile, insurance industry plays several important roles for the society: (1) it functions as a financial intermediate institution, (2) it helps individuals and organizations to manage their risks, (3) it is the biggest investor of any other industry, and (4) it provides indemnity against loss, which actively secures the development of the economy. Recognizing the importance of the insurance industry, the authors attempted to examine the customer relationship management (CRM) strategies used by insurance firms. Specifically, they conducted this research for three purposes: (1) to understand technological applications in insurance industry, (2) to know how the insurance firms utilize CRM to analyze the customer potential, and (3) to find out a more sufficient approach to input customers’ data to the CRM systems.

The research was conducted under semi-structured, in-depth interviews. The authors interviewed 30 individuals from three Indian insurance firms. These 30 individuals ranged from first-line employees to executives. The four insurance firms were: ICICI Prudential LifeInsurance, Aviva India, Birla Sun Life, and HDFC Standard Life. The authors then concluded the findings as follows:

1.         Most of the firms used Talisma software as their CRM system but some developed their own systems.

2.         The CRM was used to record customers’ profiles, transaction details, and reminder services. These were all fundamental functions of the CRM.

3.          Lack of updating customers’ data.

4.          The CRM also provided customers’ preferences in activities and risks accompanied.

5.          The employees’ perception of CRM did not match with the current systems.

6.          The employees had positive responses to the current CRM.

7.          The firms desired to employ CRM as a catalyst between themselves and the channel partners.

8.          The employees were aware that service quality was necessary for differentiation.

This study provides some valuable understanding of the CRM applied in the insurance industry for managers of insurance firms. Based on the research, we may know that to cope with the stiff competition in insurance, a better quality of service is needed. And CRM is a useful tool for insurers to realize everything about their customers. A major work for insurers is to update their CRM system constantly to reflect the reality. The CRM should not only provide customers’ names, addresses, phone numbers, or policies hold, these are all basic data; the system should provide more, such as customers’ financial situations and life plans. The more comprehensive an insurer can know its customers’ potential, the better a firm can serve its customers, and the more it can differentiate itself from others.

Source: Synergy (Jan, 2011). Vol. IX No.1
Authors: Dr. Mercy S. Samuel and Prof. Pallavi Mittal