Financial Strategy Analysis Of Enterprise Business Lifecycle

Financial strategy is a very important part of enterprise's strategy. It serves for the enterprise's strategy on one hand, and is relatively independent on the other hand. The main purpose of financial strategy is to control the general risks faced by the enterprise in business development so that the enterprise can achieve sustainable competitive advantage, which will result in maximization of shareholder's value.The construction of financial strategy shall not only be based on the characteristics of the enterprise, but also shall comprise the influence of outside factors. Those outside factors include macro-economic factors (economy system, economic level and economy system, etc. ) and micro-economic factors as well (enterprise's structure, technology and human resource ).The financial strategy mainly consists of 3 parts: financing strategy, investment strategy and profit allocation strategy. The financing strategy is to minimize the WACC with controlled financial risk; the goal is to achieve a rational capital structure. The investment strategy is to balance between return and risk and choose the investment that has the highest return under given risk. The profit allocation strategy is to determine the dividend policy according to the capital market situation and enterprise's needs, this policy shall harmonize the short-term interest and long-terminterest of the enterprise well.The business life cycle of an enterprise mainly consists of 4 phrases: starting, developing, maturity and transferring. The enterprise shall adopt different financial strategy at different business life cycle stage. So adjustment is needed when enterprise moves along the life cycle.Traditional research adopts mainly method of static analysis applied to all industries. Dynamic analysis is seldom exploited in development of financial strategy varying according to an enterprise's different development stages. Based on the thorough study on the mentioned three core financial strategies, this article proposes each specific strategy against related interval of an enterprise's life cycle and tactics for its implementation.Finally suggestions on the guidelines for crafting financial strategies for China's enterprises, with consideration of their existing situation, are proposed.