Hlobak Domnika

The problem of the definition of financial strategy

In a market economy, enterprises' independence and responsibility for their activities are to determine trends in financial position, orientation in the financial situation, prospects (obtaining bank loans, foreign investment), are assessing the financial status of other entities. Companies use financial strategy when you want to solve problems.

In order to be sustainable, an organisation must:

- have a clear strategic direction;

- be able to scan its environment or context to identify opportunities for its work;

- be able to attract, manage and retain competent staff;

- have an adequate administrative and financial infrastructure;

- be able to demonstrate its effectiveness and impact in order to leverage further resources;

- get community support for, and involvement in its work.

That’s why it is important for a business to have a clear financial strategy.

In Ukraine, the issue devoted to the financial strategy, were studied by I.A. Blank, N.N. Martynenko, I.A. Ihnatiyeva, S.F. Pokropyvnyy, L.V. Davidova, S.A. Ilminska, G.A. Kramarenko, A.E. Chorna, and others.

It is a relevant research topic as there is no single methodology for determining financial strategy that leads to significant errors and problems in business entities.

The objective of the paper is to determine the total and the only statement in the sense of financial strategy and analysis of existing definitions of this concept.

There is no one clear and unified approach to the definition of financial strategy. Researchers generally considered the financial strategy from two perspectives:

- As one of the functional strategies;

- As key strategy in the overall concept of development.

As a functional strategy, financial strategy is subordinate to the general nature of the corporate business strategy, because its main purpose is to provide a competitive market position. In this respect, a financial strategy is often seen in conjunction with the investment strategy.

Let’s consider some definitions of financial strategy.

A financial Strategy is a strategic program of development of financial resources and capital investments from their own and borrowed funds and foreign capital, their distribution between the corporate, functional and specific strategies and their effective use in the implementation of strategies (M.M. Martynenko, I.A. Ihnatiyeva) [5]. This notion does not account for the formation of long-term financial goals, as well as the most effective ways of using financial resources.

A different approach states that financial strategy is a long-term course of fiscal policy, meant for the future that involves solving large-scale tasks of the enterprise (A.V. Ivanyscheva) [4]. The financial strategy includes not only large-scale tasks of the enterprise. It also includes all the tasks of the enterprise, regardless of their size, according to the goals.

A financial strategy is a way to implement the long-term financial performance goals, elimination of contradictions between the need for financial resources and abilities of their formation (A.M. Poddyerohin) [6]. The financial strategy is not only a way to implement and achieve financial goals in the long run, it is a form of these goals, the most effective ways to achieve them.

According to another definition, financial strategy is a subsystem of corporate (or business) strategy, presented in the form of long-term program of concrete actions from its own and attracted external financial resources in the organization to achieve strategic competitive advantage (V.A. Vasilenko, T.I. Tkachenko) [2]. This concept almost completely characterizes the essence of the financial strategy, but does not consider alternative ways of achieving financial goals, as well as their adjustments according to changes in environmental conditions.

The financial strategy outlines the picture of the organization in the future, it is the basis for selecting an alternative that makes the nature and direction of financial relations (N.A. Khrusch) [8]. This definition ignores the fact that financial strategy is one of the most important types of functional strategies, it should characterize the current business as well as a strategic terms, rather than focus their attention on future development.

A financial strategy is not only a means of forming and using leverage resources to achieve competitive advantage. Since it takes into account most of the internal parameters and external benchmarking.

A financial strategy is a special kind of practical human activity – financial work, which is to develop a strategic financial decisions (in the form of forecasts, projects, programs and plans) than provide for the nomination of these goals and strategies of financial activity, implementation of which ensures their effective functioning in the long term, rapid adaptation to changing environmental conditions (G.A. Kramarenko, A.E. Chorna) [7].

In our opinion, the most complete definition of “financial strategy” was formulated by Blank I. A., and namely: “a financial strategy is one of the most important types of functional business strategy that provides all the main lines of its financial performance and financial relations by forming long-term financial goals , choosing the most effective ways to achieve them, adequate adjustment directions of formation and use of financial resources by changing environmental conditions” [1, 458].

The basic problems of defining a financial strategy are:

- Lack of methodology;

- Obscure the process of selecting strategies;

- Lack of classification of risks;

- Little experience determining the financial strategy and its application as of changing external environment.

Therefore, the most appropriate definition of financial strategy is the key to stable business entities, and their competitiveness from the strategic perspective.

To achieve this, one must:

- Create a unified legal framework for determining the financial strategy and its main components;

- Develop a financial strategy taking into account the risk of defaults, inflation fluctuations, currency fluctuations, the financial crisis;

- Involve highly qualified staff in development of financial strategies;

- Create a unified approach to creating financial plans for the enterprise.

Thus, an effective financial strategy is the way a company, can raise its economic stability and increase profits. The financial strategy is an element which determines the future economic consequences of activity of industrial enterprises.

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