In the world of large hedge funds and stock prices the risks to company decision making compound as leaders seek to maintain short-term stock value while often ignoring the fundamentals of good business. As the fundamentals are improved the overall stock value rises as a result of organizations that develop strong strategic plans for 5 and 10 years out. Beating the stock market market rests on a higher level competitive position with relevant products and services.
It is an addictive game to play the stock market like a short-term trader seeking to make small adjustments everyday to keep the stock price high. As we do this the decisions we make may make sense in the short-term but could impact a business as it seeks to grow and gain market share. Such decisions often come across as arbitrary and not well thought out.
Let me give you an example. When times are tough companies often lay off employees but then fail to retain those skills needed to capture new revenue streams. While lay offs may work as a readjustment strategy to incorporate people with new skills generally they are the sign of a dying company. Cutting your way to profit also cuts your opportunities and is a self-defeating game.
If a company isn't doing something that has market value it will lose its position. The trend may have changed or consumers might not find the value as high as it once did. Instead of laying off employees or making radical cuts to budgets to raise profit margins it would make more sense to develop new streams of income by readjusting those profits to growth opportunities.
That is a different way of thinking that moves from the what is to what could be. Investors are in the business of making money and not in the business of management. However, attracting longer term investors that are not as radical in their buying and selling of stock is helpful in lowering this pressure. Attracting those that want to build a long-term organization and receive bottom prices upon entry and see those dividends grow over a few years is a better bet.
When something isn't working right then it is time to change the strategy. Create customer value at the lowest and deepest levels by focusing on the fundamentals of one's core offerings. Raising value may mean improving current products, adding new products, or changing the entire approach of business based on market demand. Transitioning to long-term decision making may be difficult but is not impossible if proper information and goals of the organization are clearly communicated to investors. Keeping them informed helps them to stick out the tough times and be attracted to long-term ventures they believe in.