Thus far, the discussion of the cash drivers in a strategic sense has focused on the evaluation of alternative strategic cash uses and testing for appropriateness of fit between and among the cash drivers. Let’s now take a step back and look more broadly at issues on a higher strategic level. The main such area is competitive advantage.

As you consider your most immediate and likely competitors, you need to be aware of where you stand in terms of relative strengths and weaknesses. If, for example, your competitors have considerably stronger balance sheets than you do, then a strategy that tends to make the business more capital- intensive will probably not be wise. If, on the other hand, you have some advantage in recruiting and training top-notch sales people, a strategy that expands your geographic market area and intensifies sales coverage might have particularly high payback. To the extent that your product or service has any significant proprietary content beyond your competition, investments to further enhance that value or increase the perception of that value in the marketplace might be appropriate.If your track record of union relationships is smoother and more amicable than that of your competitors, a wellconstructed plan for increased automation, with some of the benefits going to union members, might considerably improve your long-term competitive position.

In some cases, of course, the competition will have an edge. If your production equipment is older and more limited in terms of sizes or formats of output than that of your competitors, you probably
don’t want to launch a marketing campaign that unduly emphasizes range of choices. Instead, you might want to identify areas in which you can create some economies associated with the narrower
range of choices. The key will always be to maximize cash flow as a return on investment through your decisions in a competitive context. Where can you likely get that return better than the competition? And, how can you avoid getting into competitive positioning situations where others get better cash-flow returns on investment than are available to you?

Taken From : Cash Rules