The Consistency Between Investment Management Process and Business Strategy

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This paper examines the management process for each strategic type of firm (namely, Defenders, Prospectors, Analyzers, and Reactors) as a new way of analyzing capital budgeting from a managerial accounting perspective. Using a 2009 survey of Japanese manufacturing firms, we reveal the following. To start with, Defenders seldom search for new investment projects because they establish a stable status in a limited operation domain. Therefore, the principal purpose of capital investment in this strategic type is to improve cost competitiveness. As a result, Defenders develop the investment project in their own way, and then evaluate profitability thoroughly following implementation. In contrast, Prospectors continuously search for market opportunities, and evaluate and select projects in order to pioneer new product markets and profit opportunities. Thus, the main purpose of capital investment in this strategic type is to produce new products. Consequently, Prospectors emphasize profitability and timing in the development phase, and then carefully compare the alternative projects available. Finally, Analyzers carefully deliberate and decide upon the optimum timing of investment in order to seize upon market opportunities using their existing technology. As a result, this strategic type does not aggressively pursue capital investment.

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  • 経済志林

    経済志林 80 (3), 99-127, 2013-03-15

    法政大学経済学部学会

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