METHODS TO ACHIEVE CORPORATE GROWTH
Introduction
Capital investment is referred to as the financial resources invested in a business or firm with an aim of furthering its objectives. Capital can also be a business’ acquisition of fixed assets and capital assets which it expects to use to attain its objectives over a long period of time. In the modern business world, there are many sources of capital investment they include angel investors, equity investors, venture capital, financial institutions and banks. In most cases, investment capital is used to ensure long term survival of the business through acquiring long term assets. However, a part of capital investment can be used as working capital.
Due to the presence of vast sources of capital investment, companies have access to a huge amount of capital investment. However, whether or not the amount of capital acquired by a business will foster corporate growth depends on a number of aspects. While capital investment ensures that the business has adequate resources for growth. There are those issues that the relevant corporate leaders must keep in consideration in order to ensure that the financial resources are put to good use. Such aspects include accountability and making viable investment that will see to it that the company achieves its goals.
Capital investment and business failure
As stated earlier, capital investment refers to the resources that an entity put to use to ensure it attains its objectives. There are many ways in which businesses utilized capital investments. Whether or not the business will be successful depends on how company leaders put the resources to use. In this business environment, good companies get access to a huge amount of capital investment due to the presence of many investors willing to put their money to companies which have a future since it is expected that such companies will succeed. However, it is important to consider the fact that capital investment is a two way traffic concept where the company receives financial resources and how the company uses these resources to attain its goals. Therefore, whether or not the business will grow does not only depend on the financial resources available at the company’s disposal but also how the company utilizes those resources.
However, the corporate world has witnessed companies that had access to huge amounts of capital investment but still failed to meet its long term and short term maturing objectives due to poor resource management and accountability. Such organizations also failed to attain corporate growth due to lack of resources. Therefore, apart from ensuring that the company has capital investments, there are other aspects that have to be considered for the company to attain corporate growth. While stakeholders ensure that the company has access to all financial resources necessary or growth, they should also strive to ensure that the management is accountable and that it makes investments in line with the company’s objectives. Business failure can also result to lack of proper measures when it comes to measuring performance.
Decision making and capital investment
If there is something that will remain in play in the modern business world is change. The world keeps witnessing changes in technology, markets and products. Therefore, a company whose management is quick in adapting to such changes will be able to survive and attain competitive advantage. Ensuring that the company has a flexible annual budget is important in attaining success. This is because, the management does not know when there will be changes in the business world and having a rigid budget will make it hard for the business to adapt to such changes. The management should come with a budgeting system that accommodates certain changes in the market and financial environment. This will the company cope up with situations such as financial recessions and changes in market trends.
Therefore, when it comes to making capital investments such as acquitting assets and markets, the company must act fast and in line with prevailing conditions in the business world. This will see to it that the company seizes opportunities available before the competitor does. Competitive advantage is a very important aspect considering the nature of competition in the current business environment. Being in a good competitive position and proper capital investment plays an important role when it comes to ensuring corporate growth. Therefore, capital investment alone is not the proper ingredient when it comes to fostering corporate growth. There is also need to ensure that there is flexibility and speed in decision making.
It is also important to look at the concept of viable decisions. A company always has a wide range of investment alternatives. However, whether or not the company will profit of grow from a given investment always depends on the viability of the investment opportunity taken. It is important to make investments that are in line with the company’s capabilities and goals. Most businesses fail to grow due to poor investment decisions made by management. Therefore, even if the company has adequate financial resources to help it pursue its goals, it is always vital to make the right capital investment choice if indeed the company wishes to grow.
Corporate governance, capital investment and corporate growth
Corporate governance refers to the act of ensuring that everything being done at the company is done in line with set rules and regulations. Proper corporate governance also ensures that stakeholder needs are taken care of from time to time. It also ensures that the management does not benefit themselves at the expense of shareholders. Therefore, it is safe to say that proper corporate governance is essential when it comes to business success. This is because, it is through proper corporate governance that a company is able to operate according to the set rules and regulations hence attracting investors and other stakeholders. This increases the amount of capital that the company has access to from investor and lenders. This aspect contributes to company growth if the right investments are made by executive directors.
This ensures that the company has access to the required financial resources as a result of good reputation. Therefore, there is a relationship between corporate governance and the amount of capital investment that a company receives from investors and lenders. It is also through proper corporate governance that the company is able to ensure that investment from shareholders is put to good use hence ensuring company growth. Improper governance can result to misuse of such resources hence barring corporate growth development due to poor leadership. As it was the case with Enron. Corporate governance is also an important aspect when it comes to ensuring accountability at organizational level. Non-executive directors should be given full autonomy and ensure that executive directors work in line with company objectives.
Maximized return on capital
This is a very important aspect when it comes when it comes to ensuring that the business grows. Maximizing return on capital means the company has to put resources received from shareholders and other sources to use in order to make profits. As stated earlier, the amount of capital investment has increased in the modern business world both by the companies and investors. However, there are many aspects that have to be considered in order to ensure that the company gets return for capital therefore fostering growth and ensuring that shareholders get a profit for their investment.
The first aspect is accountability, financial managers and other executives are responsible for controlling resources received from lenders and shareholders. Accountability at corporate level can take many dimensions. First, the financial managers and the accounting team have to make sure that whatever they are reporting is right and reflect the true and fair position of the organization. Executive managers also have to ensure that the internal controls set up at the organization do not give room for fraud and errors. Another important aspect of accountability that has to be taken care of is to ensure that everything at the company is done as per the outlined guidelines both corporate and legal.
Such measures in place do not only ensure that all amounts received from investors and lenders are accounted for but also ensure that all investments made by the company are accounted for. Apart from just looking at the way resources are utilized, it is also important to look at the return on investment. Therefore, when it comes to investments when by the company it is not important to look at the amount of capital invested but the returns realized on the invested capital. It is through the return on investment that stakeholders will be able to determine whether or not the company is performing well or not. Therefore, as apart from ensuring accountability in expenditure and reporting, investors and lenders should ensure that executives report on Returns on Investment each time they make a capital investment.
It is very hard for those companies that do not report their returns on investment to succeed. This is because such information is important when it comes to corporate growth. It is essential for a business to know its current position so that it can determine measures to be taken to ensure success in the future. Therefore, accountability is all business aspects are important when it comes to utilizing capital investment and ensuring corporate growth. The success of the Organization greatly depends on the information available to stakeholders and executive directors on performance since it helps in making decisions that will take the company to the next level. Inadequate accountability and controls in presenting such information could greatly hinder corporate growth and can lead to failure. This was the case with Enron and New Century Corporation where wrong information on returns was presented to stakeholders due to lack of adequate controls to ensure accountability in reporting.
Conclusion
Capital investment is a very important aspect that contributes to corporate growth. Capital investment can take two dimensions. One, financial resources available to the business from shareholders and lenders that the business utilizes to help attain its goals and two, assets acquired by the business to help attain its long term goals. Such assets include manufacturing plants and vehicles used for delivery. Though it can be viewed that a company with a vast capital investment base is likely to grow, there are those aspects that executive directors, stakeholders and non executive directors have to consider in order to ensure corporate growth because capital alone is not enough. This is because; the corporate world has seen companies with huge capital investments fail due to one reason or another.
The organization has to ensure that there is adequate accountability in all operations. Other than the normal internal controls and reporting controls, the company has to ensure that directors report on return on investments. This is because this is the ultimate measure of performance and will help chant the direction forward for the company hence contributing to growth. On the other hand, the company has to ensure that adequate corporate governance controls are set up to ensure that the company follows all legal and corporate regulations. This is an important aspect when it comes to building accountability at company level. The management team also has to make sure that investment decisions are made quickly and in line with prevailing business and market conditions hence boosting competitive advantage which is a very important aspect of business growth. Competitive advantage, proper corporate governance, accountability and proper decision making alongside with adequate capital investment contribute to organizational growth.
