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What are typical strategic gains (non-financial gains) a company considers when making an investing//divesting decision?

As title suggests

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am 10. Aug. 2017

Hi Anonymous,

First of all, when talking about non-financial gains, it's important to begin by understanding company's strategy and strategic goals. 

Afterwards, a company's portfolio manager together with senior management should prioritize qualitative factors that are important in achieving those strategic goals. Those factors will be used to evaluate the investment.

Let's assume that we are talking about an airline similar to SWA. We could formulate the strategy as: "Grow nationwide as an airline known for outstanding service and corporate culture".

Therefore, we can see already 3 qualitative factors here:

  1. Expansion - will the investment help the company to capture bigger market share and wider geography?
  2. Customer satisfaction - how the investment will affect the perception of customers?  Will the service quality increase/decrease for some reason?
  3. Company's culture - will it be affected by our investment? If a company is buying another airline, are we talking about compatible cultures? If we are divesting, how it affect employee morale short-term and overall culture long-term?

Thus, to summarize:

  1. Define strategy
  2. Define factors that affect the strategic goals
  3. Evaluate decision based on the list

The approach is similar to what we are using, when creating Balanced Scorecard, and BSC has similar purpose - it helps to evaluate non-financial performance of a company.

- Tadeus

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