Growing or sustaining a business requires management to recognize the impact of the variables surrounding a company’s decisions. Finance plays a key role in building business models, suggesting business alternatives, and identifying key variables that can influence the company’s bottom line, strategy, and mission.
The key to optimizing decision making is to create a proper context for evaluating a set of choices. Management relies on its finance department to understand both the business model and the economic environment in which the company operates. The finance department’s knowledge and understanding of various types of contractual alliances can provide management with critical business alternatives to minimize risk while maintaining acceptable returns. The future of the company depends on creative but prudent thinking.
For example, in the food industry, companies often launch new products through a co-packer contractual alliance, especially when the company employs an innovative technology for packaging or embarks on a product line different from its baseline of products. Consider Olive Garden, A US-based Italian restaurant chain owned by Darden Restaurants. For many years, Olive Garden’s customers have attempted to copy its Italian salad dressing recipe. Last year, the company decided to work exclusively with Sam’s Clubs to sell its salad dressing at all Sam’s retail stores. Olive Garden also used its restaurant dressing supplier co-packer, T. Marzetti Co. The three companies formed an alliance, thereby tapping their market strengths to test the new product’s marketability.
Consider how a proposal that lowers risk and maintains returns on a new growth strategy or reverses a downward spiral can help management. Recognizing how to build alliances for each party’s benefit represents a tremendous opportunity for the finance function to add value to the company. In Olive Garden’s case, it brokered a deal that ensured the new dressing’s retail distribution and manufacturing used experts in both those fields.
Do you want to be invaluable to your company and contribute to its growth in a meaningful way or explore and advise on exciting new deals? Do you want to be part of your company’s future? Take the lead. Be creative. Learn to reduce risk and maintain returns by considering all available business alternatives and recommend decisions that will improve your company’s bottom line. The Accenture Academy course Analyzing Finance’s Role in Building Contractual Alliances
provides robust examples of how the finance department can make a difference to its management teams and its companies.