Inter Akea Marketing Strategy

MODULE NAME: Business and Financial Strategy

MODULE TUTOR: Liz Vokes

ASSIGNMENT 2: Financial Strategy

STUDENT NAME: Business and Financial Strategy

STUDENT NUMBER: 14420077

Question 1

In every competitive economy, the quality and performance of management determines the business and as a matter of fact, it survival. Many industries of the past have gone bankrupt as a result of the way they were managed.

Management is a process used to achieve certain goals through the utilization of resources (people, money, materials and time). It is described as a distinct and a leading group in an industrial society . Management, which is an organ of society, is specifically charged with making resources productive, will remain a dominant

The implications are varied and these are both positive and negative:

Advantages Trading on equity i.e., fixed cost capital help in increase in profits available for equity shareholders is one of the major objectives in raising finance by issues of debenture/bonds. The Inter Akea group approach funds for its projects without diluting control of its equity shareholders. The debenture holders have no right to participate and vote in the shareholders meetings except in the case of class meetings. The Inter Akea group can adjust its gearing i.e., debt-equity ratio according to its financial plans just by redemption of debentures or raising of finance. This much ease is not available with the equity capital. The equity capital cannot ordinarily be redeemed or reduced in the ordinary course The interest payable to the debenture holders is a charge on profit and hence tax liability on the Inter Akea group’s profits is reduced, which result in the debentures as a source of finance at cheaper cost compared to the cost of equity capital and preference

In view of the revenue levels of the Inter Akea Group and the amount of financial expenses it is a prudent decision to acquire a fund management firm.

Acquisition is defined as “a purchase of a company or a part of it so that the acquired company is completely absorbed by the acquiring company and thereby no longer exists as a business entity.” Takeover is considered as a form of acquisition.

The strategic motives behind acquisition activities are as follows:

Expansion and growth- If allowed by the government, expansion and growth through Acquisition is less time consuming and more cost effective

Dealing with the entry of MNCs- Merger or joint venture is a possible strategy for survival with the arrival of MNCs. It may be difficult to beat the MNCs without strategically aligning with them.

The following financial motives may necessitate the acquisition activities:

Deployment of surplus funds- The cash rich companies always look around to takeover cash strapped companies with a view to deploy surplus funds in investable