The Investment Process and Decision Making: the Strategic Perspective

This chapter turns from the project level to the enterprise level, mainly because an appraisal which considers an investment project in isolation is inadequate. An enterprise perspective is necessary. The chapter, therefore, adopts a strategic perspective on investment decision making, one which places the appraisal of a single investment project in the context of the overall enterprise strategy, including its relationship with other projects — past, present and future. Such a perspective stresses the role of the enterprise as a maker of strategy. It is consistent with a view which interprets most strategy as emerging from a learning process. It also discusses the strategic risk arising from the strategy of other players before presenting an expanded version of net present value and a decision rule which takes full account of uncertainty. It follows up with a review of the requirements of a relevant information strategy. The chapter concludes with an analysis of a critical aspect of strategy, the appropriate mode of entry to be adopted into international business transactions.