www.sharexxx.net - free books & magazines

Managing the Strategic Alignment of Organizations 85
THE EFFECT OF ECONOMIC AND SOCIAL
IMPLICATIONS DURING THE ALIGNMENT OF
STRATEGIES
Organizations have to assume that there are some basic definitions that ensure
that all terminology is clearly understood: There are two types of implications that
managers can use: economic and social; there is a connection to these factors. Some
basic definitions that can be used are:
• Asset structure - Assets the organization wants to finance or funds that they
want to use to expand during e-commerce.
• Financial structure - Available funds or possible financing available to the
organization.
• Financial leverage -The ratio of funds from outside the organization to the
total assets of the organization. The act of borrowing is said to create financial
leverage.
• Operating leverage - Refers to the extent to which total operating costs vary
with changes in the operating revenues and these revenues could be affected
with e-commerce.
• Business risk - Financial leverage increases risk because it makes the return
realized by the investor more sensitive to any event affecting the performance
or the asset purchased.
This chapter looks at the possible economic and social impact on alignment
during e-commerce investment and expansion of the e-commerce operation. IT
assets and the finance of the IT assets as demonstrated could be financed by the use
of equity and of foreign economic financing. Leverage is a ratio that is calculated and
shows any possible investor or manager (especially the e-commerce manager or ecommerce
director) how a possible opportunity to obtain funds can have any effect
of the organization and on alignment as the decision would be a strategy that would
affect any other strategy.
Financial leverage affects analysis of interest and liquidity because of fixed
commitments due to economics of funds from outside the organization. If the return
on assets were higher than the cost of the debt, management may find that leverage
has a positive effect. Leverage can increase the return on owner’s equity but there
is a risk factor that managers have to keep in mind. Financial leverage involves the
use of funds obtained at a fixed cost in the hope of increasing the return to the owners
of the organization. If funds are thus being obtained to help with e-commerce,
managers have to keep in mind that a successful project could increase the return
Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written
permission of Idea Group Inc. is prohibited.