Must Finance and Strategy Clash?

Marketing and finance don't always agree on which strategic investments to make. But they should. They are, after all, interested in the same thing: the long-run success of the business. The tenets of competitive analysis do not contradict those of financial analysis. When conflict arises, it's not the theory that's at fault. It's the practice. When the analysis is done correctly, an investment that makes good marketing sense will have a positive net present value, and a project with a positive NPV will provide some form of competitive advantage. Good project evaluation considers all the relevant factors, including hard-to-quantify costs and benefits like product brand. It also takes into account the more neglected consequences of not investing. If the company fails to make an investment, for instance, sales won't necessarily hold steady but may instead fall off as competitors innovate and win market share. Good project analysis also recognizes the value of opening up options. When Nestle was considering its takeover of Rowntree, it paid close attention to intangible assets like the marketing and distribution options Rowntree's brands provided. Good analysis does not undervalue projects by arbitrarily restricting the time horizon or setting the discount rates too high, and it considers separately investments that are often proposed together, like a retailing operation and the storefront itself. Both finance and marketing have a role to play in ensuring that the strategic investment is sound. When they conflict, it is time to question the details of the strategy and the assumptions that underlie the numbers. [ABSTRACT FROM PUBLISHER]