Strategic Financial Management: Implications for AIA Group Business

This report critically assesses strategic financial management within the AIA Group, a leading insurance services organization. It identifies business resources, both internal and external factors influencing AIA, and applies key financial theories like the Efficient Market Hypothesis and Bottom Line Theory to understand their impact on decision-making. Strategic implementation techniques such as the Balanced Scorecard and portfolio management tools are examined for their role in achieving organizational goals. Furthermore, the report explores the influence of organizational culture on strategy and conducts a stakeholder analysis to highlight its significance in strategic planning. The analysis provides a comprehensive overview of how strategic financial management principles can be applied in a multinational organization to enhance performance and achieve strategic objectives. Desklib provides students access to similar past papers and solved assignments for academic support.

STRATEGIC FINANCIAL
MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK-1............................................................................................................................................3
BUSINESS RESOURCES TO MEET ORGANIZATIONAL OBJECTIVES-..........................3
INTERNAL AND EXTERNAL FACTORS OF AIA-...............................................................4
TASK-2............................................................................................................................................5
KEY FINANCIAL THEORIES-.................................................................................................5
FINANCIAL THEORIES AND DECISION-MAKING-...........................................................6
STRATEGIC IMPLEMENTATION TECHNIQUES-...............................................................7
TASK-3............................................................................................................................................8
ROLE OF ORGANIZATIONAL CULTURE ON STRATEGY-...............................................8
SIGNIFICANCE OF STAKEHOLDER ANALYSIS-...............................................................9
APPLICATION OF STAKEHOLDER ANALYSIS-...............................................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Strategic financial management is a term used to describe the process of managing the
finance of a company to meet its strategic goals (Boyle, 2021.) It is a management approach
which uses different techniques and financial tools to devise a strategic plan. The report will be
discussing business resources and their utility in meeting organizational objectives. It will also
identify and discuss various theories to understand the business environmental factors and their
impacts on the business. In context of AIA group key financial theories and application on
financial decision-making will also be discussed broadly. Balance score card and portfolio
management tools will be intensively elaborated to perceive the strategic implementation in the
entity. In the last task the report discusses role of organizational culture on strategy. Latter on the
report carried out stockholder analysis along with stating the significance of it.
TASK-1
BUSINESS RESOURCES TO MEET ORGANIZATIONAL OBJECTIVES-
AIA group is one of the leading organization in Hong Kong which is engaged in mostly
insurance services. AIA Ltd is a multinational organization so having a huge amount of
resources in order to fulfil the requirements of its widely spread customers.
It is having its financial resources of around 160 billion USD. It is being operated in more
than 18 countries currently so having a good portfolio of human resources from all these nations.
The one of the big resource of the entity is its CEO who is Lee Yuan Slong (McIntyre, 2020.)
AIA Ltd also possesses aristocratic physical resources like having its premises and
equipments in the countries where it is getting operated. For attracting more customers it is also
offering attractive and durable hoardings and banners etc.
The other prominent resource for a company is their educational resources the AIA group
is being developed over the time with a greater rate. It is also providing financial and other allied
services but mainly focusing in expansion of insurance business.
To ace the goal AIA is also frequently using its emotional resources For this purpose it is
raising health awareness, education and providing medical insurance for safe future of the

customers. This technique is aiding them in making people emotionally connected and being
loyal customers (Castro, 2022.)
INTERNAL AND EXTERNAL FACTORS OF AIA-
SWOT analysis of AIA-
Strengths  Global presence
 Financial Position
 Affordable Insurance
 Leading the segment
Weakness  Low interests
 Diversity in the workforce
 High Employee Turn over rate
 Low investment in customer oriented services
Opportunity  Favourable Future Trends
 Transport Industry
 Online Insurance services
Threats  Global Competition
 Gig Economy
 Exchange rates
 Political uproar
(Forte, 2020.)
PESTLE analysis of AIA-
Political
elements
AIA Ltd is currently working in more than 18 countries. So having big threat of
political variability. Special status of Hong Kong lighted conflicts between
residents and government such issues can impact its business operations.
Economic It is currently favouring AIA Ltd. Since after pandemics people became more

elements health conscious and it gave a boom to its business of insurance. But at the
same time the other elements like poor performance of global market is a
horrific thing for the entity.
Social
elements
As AIA Ltd. is promoting itself in the market the company is frequently giving
prominence to healthier life, children's education, preparedness for medical
expenses, securing from critical illness. It made the social elements favourable.
Technological
elements
The company is conscious with this regard it is timely upgrading the
technology. Yet due to growing competition it may be a threat in the future. It
has earlier made a few changes to get the online customers closer like
introduction of online portal and timely reassessment has been a fabulous move
for the company.
Legal elements Taxation policies had helped it in past but it may not be there longer so can
cause more cost. WTO regulations may also create perils. On the other side the
tightening global legal compliances have also caused calamities to the
organization.
Environmental
elements
Customer activism, fast emerging recycling demand, renewable technology,
pairs climate agreement these all aspects may pour on more responsibility on
AIA Ltd. Climate change is already the issue which has surged the
responsibilities of multinational organization.
(Büyüközkan, Mukul and Kongar, 2021.)
TASK-2
KEY FINANCIAL THEORIES-
(1) Efficient Market Hypothesis- This is the financial theory which states that share prices reflect
all information. It is having three states. The week form suggests that share prices reflect all
information of the past. Semi strong form says that stock prices also adjust new public
information. Whereas strong form believes that stock prices get impacted by available, publicly
known and unknown information as well (Widya Yudha, Tjahjono and Kolios, 2018.)

(2) Fifty percent principle- It is a rule of thumb that anticipates the size of a technical correction.
It believes that when a stock or other asset begins to fall after a period of rapid gains, it will lose
at least 50% of its most recent gains before the price begins advancing again. Since it is just a
rule of thumb so it can perform differently for different companies and their stokes. Applying
this strategy requires intensive contemplation on the personal characters of the entity.
(3) Short interest theory- it believes that heavily shorted stocks are more likely to rise in the
future. It is a contrarian approach because most investors view short interest as a bearish
indicator. This is hugely based on the theory that if the stokes are overvalued then there is a huge
possibility they will be toppled soon and such avenues are having no worth to be invested in.
(4) Bottom line theory- Rather than profit or financial gains a company should focus on social
and environmental concerns as they do on profits. It is very prominent since these factors
ultimately derive good amount of financial advantage to the entity. The main aim of the theory is
to make the management believe that considering finance only won't help, it needs to pay
attention on the other aspects as well which will derive the financial supremacy to the entity.
FINANCIAL THEORIES AND DECISION-MAKING-
As a multinational company AIA is obliged to practice better financial theories while
making its financial decisions.
(1) Efficient market hypothesis- AIA is a global entity and working in more than 18 countries. It
is also listed on various share markets to can propose its shares to the wide range of potential
investors. For controlling its financial position it keeps focusing on this theory. As a global
entrepreneur the share prices of the entity are very fluctuating and it also practices buy back,
bonus share etc. The theory helps in assessing the impacts of information on the prices.
(2) Fifty Percent Theory- The management of AIA takes it as a precious tool to take its futuristic
decisions. It is a rule of thumb so AIA decides its criteria separately and then anticipate the
variations in the share prices. For further investments and expansion the company use this
formula with greater emphasis (Leković, 2018.)

(3) Short Interest Theory- This theory aids the management of AIA in making decision with
respect to investing or controlling other entities. If the stocks are overrated then it won't be a
good decision to dive into. At the same time the right decision of making entry is when the
stokes are traded on the lower prices than their intrinsic value. For instance AIA Australia is also
a part of this group due to greater control in term of its equity.
(4) Bottom Line Theory- The management of AIA is rigorously practising this theory. As they
have presented their self before the customers as a philanthropist. They are promoting better
health, sanitation, offering wide range of insurance services etc. furthermore it is also
contributing in Social Corporate Responsibility role as well.
STRATEGIC IMPLEMENTATION TECHNIQUES-
(1) Balance shore card-
1) Customer
For achieving the vision of greater expansion
AIA plans to make its appearance stronger to
its customers and potential customers. It has
planned to present itself an altruistic business
entity. So can bring more customers since after
experiencing pandemic insurance is no longer
a luxury it became a need or a compulsion, this
emotion can be utilized for expansion policy of
the organization.
2) Financial
For succeeding the aim AIA will be
diversifying its sources of finance so can
reduce the cost of capital and can incentivize
the present shareholders. Company can also go
for financial source diversification since for
competing the global giants it is eventually
needed to have well-managed financial
portfolio.
3) Internal Business Process
The internal business process is utterly best on
business democracy principle. All employees
are given equal right and voice to be heard.
The process is following norms by
governments and WTO in order to comply
with legality and can avoid legal glitches.
4) Learning and Growth
To make the vision possible the entity is
contently investing in R&D along with for the
purpose of growth it is ready for collaboration.
The company can go for market research
which can explore the behaviour and mood of
the potential customers so ultimately it helps in

expansion policy.
(Nwanegbo-Ben, 2021.)
(2) Portfolio management tools- is the tool which helps in managing, organizing, analysing the
finance of the entity.
AIA Ltd. is using a range of portfolio management tools in making better financial
decisions. For instance, it is using tools- Arithmetic mean, Holding period return, Ratio analysis,
Tracking errors, Information ratio, Demand analysis etc. These tools are assisting it in making
lucrative financial decisions. The act of managing portfolio is a tougher task since it is being
operated in so many countries and having global finance providers.
These tools are helping the entity in managing and implementing their strategies. Since
managing the financial portfolio is a dynamic task and for carrying it out an entity is having
rigorous need to practice supporting tools. The portfolio management tools not only help in
predicting the market mood but also assist in making suitable policy(del Carmen Gutiérrez-Diez,
2019.)
AIA Ltd is having its business well expanded and for further expansion it may go for
exploration of new market. And without finance management this task is impossible so for
management of funds and making financial decisions the entity is widely using these tools. For
instance before making investments the entity is using standard deviations and Bita analysis of
the securities and then only moving forward which helps it in understanding the expected
deviations or fluctuations of the securities and reaching to the most appropriate avenue.
TASK-3
ROLE OF ORGANIZATIONAL CULTURE ON STRATEGY-
An organization's culture defines the proper way to behave within the organization.
Culture consists of shared beliefs and values established by leaders and then communicated and
reinforced through various methods, ultimately shaping employee perceptions, behaviours and
understanding. It can be redefined as inculcation of such belief system in the organization and

specifically among the employees working there. In the success of an organization or any
strategy the organizational culture plays a big role.
For the success of the organization AIA Ltd is practising hybrid culture at the same time
to turn out better results. The clan culture of the organization considers all its employees as part
of the family or tribe like culture were all are considered on unit. It makes the employees more
loyal and for grabbing the goals or strategical aim they give their hundred percent. But for
controlling the recklessness and mismanagement it introduced hierarchy culture so can manage
them impact fully(Quagliotto and Fin, 2018.)
Market culture which emphasizes competitiveness not only between the organization and
its market competitors but also between employees. This is making the work aggressive of AIA
Ltd which is forcing the organization to accept the challenges and face the perils come on the
way. Strategies are always made for long run and in today's business environment competition
can not be nullified. If the internal environment of the organization is results-oriented then it will
oblige the employees to over perform.
The hierarchy culture of AIA Ltd believes in management of aspects by the most
deserving people it is bringing efficiency in both decision-making and working efficiency. It
paves the way forward and keep the entity well-managed. Which ultimately brings better results
to it in term of succeeding the strategy. In the organization the levels of management fetch a
disciplinary operation. If one person is getting command from more than one people or if being
guided by many people then the outcomes would be impact less and ultimately the strategy won't
be succeeded so this working culture is boosting up the goal orientation of AIA Ltd.
SIGNIFICANCE OF STAKEHOLDER ANALYSIS-
Stakeholder analysis is a process of systematically gathering and analysing qualitative
information to determine whose interests should be taken into account when developing or
implementing a policy or program. The analysis is prominent for the organization because
without being aware of the position of stakeholders the strategy would be like a stillborn baby,
dead from the beginning. So the significance of stakeholder analysis is as follows-

Make the orientation clear- AIA Ltd is being impacted by so many stakeholders due to
the wide range of services and its character of an MNCs (Hardcopf, 2021.) While
operationalizing business it comes as prominent question in the mind of the management that
whom should be kept in centre while formulating the strategy for the organization. Here in above
cases it is conceived that AIA Ltd is planning to expand its area of services so for this purpose if
the all participating stakeholder and their level of importance and involvement is clear then
making decisions would be a simple task. Which stakeholder should be given priority over others
and whose interests can be compromised in attempt to ace the aim.
Removes the barriers- The management may be in dilemma if it is not clear that who is
the most precious stakeholder. In absence of this while making strategy it will get hindered,
while implementing, while assessment, while encountering on every and each stage. AIA Ltd is
now giving priority to its customers in its new market. Here formulation of strategy is customer
centric which keeps the customers first at every and each stage whereas in the markets where it is
well-established the centre point of the fund providers.
Measurement of relative importance of stakeholders- This analysis is relative in approach
where various dimensions of the associated stakeholders will be evaluated. It makes the
judgement process easier and more rational. So the relative prominence of the stakeholders can
be seen and on the basis of that priority can be given to them. As it is earlier discussed how AIA
Ltd is prioritizing various stakeholder as per the requirement of the situation and it is ending up
as key element in bringing success to the organization.
APPLICATION OF STAKEHOLDER ANALYSIS-
Keep satisfied
Customers
Relevant small entities
Manage closely
CEOs
Those Charge With Governance

Monitor
Competitors
Potential entrepreneur
Keep Informed
NGOs
Educational institutions
(Chatterjee, Pereira and Bates, 2018.)
Keep Satisfied-
They are referred to as latent, they currently are not interested in our business, but they
have the power to impact our project in future greatly. For AIA Ltd it is their potential customers
and small industries. Since as it is known the company is planning its expansion and for that it
will be exploring new markets so at present the potential customers are not interested in the
services of AIA Ltd, but they are having great potential to impact it in the future. The same way
small entrepreneurs who are in the same business must be satisfied.
Manage closely-
These are the stakeholders who are the most important, and they are directly interested in
the projects or strategies of the institution. In AIA Ltd. CEOs and THWG (Flodén and
Woxenius, 2021.) are this stakeholder who are directly responsible for the outcomes. The
company has planned to get expanded in new regions and for all possible consequences the said
parties will be impacted greatly. They are needed to be given first priority due to the key position
they are holding and having power to impact the entire strategy.
Monitor-
Those parties who are not too much interested in the project of expedition at present but
keeping eyes on them is must need since they are having good potential to impact the operations
in case of AIA Ltd their competitors and potential entrepreneurs are these elements. Since being
a big giant of the market generally it is avoided to consider the competitors but in insurance
market indigenous companies get more preference by the local customers. So this would be area
of monitoring for the company.
Keep Informed-

Those stakeholders who are interested in our project, but they are not having too much
power over, yet they should be kept informed. AIA Ltd will be considering NGOs and Other
educational institutions to come and do research or study of the process and services so that they
can raise awareness in the society about the importance of insurance. Ultimately it will be
impacting the business strategy and outcomes (Alexander and Hjortsø, 2019. )
CONCLUSION
From the report above it can be concluded the various forms of resources in an
organization plays key role in ensuring strategical success. The report applied academic theories
to understand the various internal and external factors of an organization. For the purpose of
evaluation of financial strategies in context to AIA Ltd. Financial decision theories taken into
consideration. The report also applied strategic implementation techniques using balance score
card and portfolio management tools. Further the report had presented a well-articulated picture
of the company in term of its financial management and strategies in term of managing the
finance. For sake of it the role of business culture has been examined and stakeholder analysis
for AIA Ltd also carried out which revealed the preferences of the entity in order to ace the aims.