Business Modernization and the Role of Business Finance

Name: Laggui, Mac Dwaine B.

Course number: CA202205867
Professor: Calderon, Anthony
Deadline: March 31, 2023
Abstract

In today's fast-paced industry, businesses must adopt a modernization plan to stay

competitive and relevant. The phrase describes the procedure of modernizing corporate
operations, procedures, and technology in order to increase effectiveness, productivity,
and profitability. Yet major expenditures are necessary to achieve modernization, which
is where corporate financing comes into play. This term paper investigates how
corporate finance helps firms become more contemporary. The introduction of the
essay defines corporate modernization and the advantages it provides. Afterwards,
several modernization techniques and technologies including automation, cloud
computing, and artificial intelligence are explored. The benefits of each technique are
discussed, as well as how they advance modernization. The study then explores the
various company financing options, including crowdsourcing, debt, and equity. The
report describes how each of these sources operates, their benefits and drawbacks,
and when organizations need to use them. In order to ensure that the funds are spent
properly and economically, the article also covers financial planning and forecasting.
The following section of the essay looks at case studies of businesses that effectively
used business financing to modernize their operations. The case studies provide light
on the difficulties firms have during modernization and the methods they might employ
to solve them.

The vital function that company finance plays in the modernization of firms is highlighted
in this term paper's conclusion. Companies may successfully fund their modernization
initiatives and achieve sustained development and profitability by knowing the various
sources of money and creating a good financial strategy.
I. Introduction

Businesses continuously strive to update their operations to stay up with the newest
technical breakthroughs and industry trends in today's highly competitive and rapidly
changing business algorithm. Businesses must modernize if they want to remain
competitive, increase operational effectiveness, and experience sustainable
development. Making good use of corporate finance is one of the main components
of modernizing a company. This term paper will examine the function of company
finance in modernizing an organization and the significance of implementing
financial strategies that help organizations adapt and prosper in a rapidly shifting
business environment. Modernization has turned into a crucial component of any
organization's strategy to maintain growth and compete in today's ever evolving
business environment. The adoption of new technology, procedures, and business
practices that increase productivity, profitability, and efficiency is referred to as
business modernization. It is a continuous process that helps companies to stay up
with shifting consumer expectations, market needs, and legal constraints. The
function of corporate finance is a crucial component of business modernization.
Every organization depends on sound financial management, which is also essential
for advancing modernization efforts. The management of financial resources, such
as investments, assets, obligations, and income streams, falls under the umbrella of
business finance. Businesses may maximize their resources, save expenses, and
increase profitability with effective financial management. This term paper's objective
is to analyze the importance of company modernization and the crucial function that
business finance plays in advancing modernization projects. We will look at how
modernization affects corporate operations and strategy, as well as the possibilities
and problems it presents. We will also explore the many financial management
techniques that can assist companies in maximizing modernization and enhancing
their bottom line. This essay is structured as follows: initially, we'll give an outline of
business modernization and how it affects the commercial environment. Next, we'll
talk about how corporate financing influences modernization projects. Thirdly, we'll
look at the financial management techniques that organizations may use to benefit
from modernization and increase profitability. Lastly, we'll wrap things up by outlining
this paper's major conclusions and their business-related effect.
 II. Body

A. Factors Driving Business Modernization.

Business modernization is a critical process that allows companies to adapt to the ever-changing
business landscape and remain competitive. With advancements in technology, changes in consumer
preferences, and increased global competition, businesses need to continuously evolve to meet the
demands of the market. In this context, several factors are driving the need for business modernization,
including technological advancements, changing consumer behavior, and increasing market
competition, among others.

• Technological Advancements

What are Technological Advancements?

We, human beings, love exploring, and this is how we know we will keep on developing new things.
Basically, technological advancement is our attempt at understanding how things work to further
develop processes, products, or services to move ahead and simplify our life. Our experiments to
understand how things work and use them to develop new things can be called technological
advancement.

How it is important?

It’s hard to imagine running a business without technology. Technological advancement has changed the
way businesses interact with their customers. Right from launching the products or services into the
market to delivering them to the customers, technology plays an important role. Businesses can reach a
wider audience and offer them quality products and services.

Consider the internet, if it was not the internet, then how would businesses let others know about their
presence and what they have to offer? Now, running a business is more than just lots of initial
investment and contacts. You can be a beginner and still find your place in the business world.
Technological advancement with the use social media and other online platforms allows you to set up
your business, reach out to your target audience, offer them your products and services, and take
feedback from them to grow further.

These are some examples of Digitalization in Business:

a. Artificial Intelligence (AI) has been one of the most significant advances in business technology in
recent years. AI systems can learn and adapt, making them practical tools for businesses seeking a
competitive edge. For instance, the newly develop ChatGPT which is chatbot applications where it can
be integrated with messaging platforms, websites, or other software systems to interact with users in
natural language. ChatGPT can also be used for various other applications like language translation,
content generation, and sentiment analysis.

A lot of AI applications have emerged as technology advances. These applications can provide
businesses with instant assistance in areas such as management, marketing, accounting, and improving
efficiency and cost savings.
b. Business Management Application. With the introduction of its CRM platform in 1999, Salesforce
began to popularize the concept of cloud-based, multi-tenant business applications. One example of a
business management application that uses AI is Salesforce. Salesforce is a cloud-based customer
relationship management (CRM) software that utilizes AI to automate various business processes. It can
help businesses manage their customer interactions, track sales leads, and automate marketing
campaigns. Additionally, Salesforce uses machine learning to provide data insights and predictions to
assist with decision-making and improve business performance.

c. Web Conferencing

The rapid growth in the usage of applications such as Zoom and Google Meet has provided more
salespeople and customer support representatives with an easy way to communicate with prospects
and customers visually.

• Changing Consumer Preferences

Changing consumer preferences refer to the shifts in the desires and demands of customers regarding
products, services, or experiences they seek to acquire. These changes can be driven by various factors
such as cultural, social, technological, economic, and environmental changes. As consumer preferences
change, they tend to influence the decisions that individuals make when purchasing goods and services.
For example, as people become more health-conscious, they may prefer products that are organic,
natural, or free from harmful chemicals. Another example is McDonald’s. Initially, they began offering
the classic combo of hamburgers and fries but due to demand of coffee and tea in the recent years, so
they responded and adding frappes, hot tea and shakes to their menu.

Understanding changing consumer preferences is crucial for businesses as they need to adapt their
strategies to meet the evolving needs and demands of their customers to remain competitive in the
marketplace.

• Globalization

What is Globalization in Business? Globalization is the increase in the flow of goods, services, capital,
people, and ideas across international boundaries. As they say, "We live in an age of globalization".

One of the benefits of globalization for business is that it gives a large scale of market which lead to
increase of sales, revenue, and profits. It also facilitates the exchange of knowledge and ideas between
businesses, leading to innovation and improved efficiency.

On the other hand, it also presents challenges for business. There are a lot of factors need to consider
how it impacts the organization. Businesses also need to navigate complex legal, political, and cultural
differences when operating in different countries. Additionally, the environmental factors that give
positive and negative effect. For instance, the global sharing of information about renewable energy has
led to the development of more affordable and efficient technologies like solar and wind power.
Conversely, it has also led to increased consumption and production, which has put a strain on natural
resources and contributed to environmental degradation like deforestation, mining and oil drilling.
 B. Sources of Business Finance in Modernization
• Internal Sources
Internal finance is provided by the company. It is a form of independent funding. For
established firms with available stock or assets, internal finance is frequently simpler to
secure. On the other hand, external finance might be crucial for tiny and start-up
enterprises that require a financial boost to get off the ground. Of course, larger
companies may find it simpler to obtain outside funding since their track record may
make them more dependable debtors. The selling of shares is the most typical
illustration of an internal source of funding. The product or service that is traded for
money is the most basic component of your business. Debt collection falls within the
category of internal funding as well. Usually, this relates to money owing for goods or
services that were previously provided, but there may have been a delay in both the
provision and the payment. The sale of fixed assets owned by the company is another
significant instance of internal financing and is advantageous when more funding is
required to sustain ongoing sales.

• External Sources
Any funding that comes from outside a firm is considered to be from external sources of
finance. Few new business owners invest their own money in their companies; instead,
the majority of funding originates from other sources. This might entail asking a friend or
family member for help or visiting a bank to obtain a loan.
While it is frequently difficult for them to obtain the necessary funding to launch the firm,
external sources of money are quite beneficial for business owners. One may only
invest a certain quantity of assets in their own company.
It is simple for company owners to have the first capital to create a start-up or receive
extra money to expand thanks to external sources of funding. It's crucial to keep in mind
that external funding sources are often more expensive than internal ones.
The fact that external sources of funding help a firm expand is one of its key benefits.
Businesses frequently seek outside funding to support expansion plans that would be
difficult for them to finance on their own. Large capital equipment purchases that are
essential to the company's expansion are often hard to fund internally. External finance
sources may be helpful in this situation.
 C. Financial Planning for Business Modernization
Creating and implementing a strategy for your financial future is known as financial
planning. The steps in the financial planning process include assessing your net worth
and risk tolerance, creating short- and long-term financial objectives, and periodically
reviewing your goals as needed. It also includes methods for planning for your family's
future and retiring without concern for money.
You must assess your existing financial condition before starting your long-term
financial planning procedure. You'll have a better idea of where to start if you do this.
• Budgeting
The tactical execution of a company strategy is budgeting. A fully descriptive business
plan with performance indicators and measurements is necessary to accomplish the
objectives of a company's strategic strategy. So that we reach the intended goals, we
may then make adjustments along the route.
Operating, capital, and cash budgets are the several types of budgets. The process of
creating a budget allows managers to establish connections with other areas of the
business and get an understanding of how diverse teams and departments work
together to serve the organization as a whole. An essential social component of the
process that guarantees that everyone has a clear grasp of how they help the business
is communicating plans to management. It promotes the sharing of individual objectives,
strategies, and efforts, all of which contribute to the growth of the company. Moreover, it
makes that the right people are held responsible for carrying out the budget. It
encourages managers to work hard to meet the budget's objectives. Budgeting causes
managers to concentrate on their involvement in the budgeting process. By tying
remuneration to performance in relation to the budget, it gives employees and
management a goal or challenge. Analyze the managers' performance. Budgeting is a
way to let managers know how well they are doing at achieving the goals they have set.
• Forecasting
Almost every company management decision in every industry requires the use of
projections. Business managers may discover and comprehend planning flaws, adjust
to changing conditions, and achieve effective control of corporate operations by using
the information provided by business forecasting.
Examples of business forecasting include assessing how feasible it is to compete
against current rivals, gauging the likelihood of creating demand for a product,
calculating the costs of recurring monthly bills, forecasting future sales volumes based
on data from the past, allocating resources effectively, forecasting earnings and
budgeting, and examining the suitability of management decisions. Have a backup plan
Although if establishing a financial plan is a fantastic first step, it is not without its share
of difficulties. There's a chance that plans won't always work out. If your automobile
breaks down, you could have to spend a lot of money on a new one. Your employment
might be lost.
In instances like this, it is advised to have 6 to 12 months' worth of expenditures saved
in an emergency fund. You'll have ample time with these savings to start over. If you do
utilize funds from your emergency fund, you should always try to add to it.
• Risk Management
Develop a Risk Profile. Each has a unique risk profile. Risk-taking comes naturally to
some people while it may not to others. What your investment portfolio should look like
and how much debt you are ready to take on will depend on how risk-tolerant you are.
You may finally begin defining your financial objectives once you have assessed your
present financial condition and identified your risk profile. Make sure these objectives
are sincere and feasible. These objectives can be divided into:

Creating a monthly budget, paying off credit card debt, setting up an emergency fund,
and other such short-term objectives are examples.
Medium-term objectives - These objectives include putting money aside for your
wedding, getting a new automobile, constructing an investment portfolio, etc.
Long-term objectives: Long-term objectives include things like purchasing your own
home, setting aside cash for retirement, etc.

D. Financial Analysis for Business Modernization

• Cost Benefit Analysis
In a cost-benefit analysis, the costs and benefits of a choice or course of action are
subtracted from each other to determine the benefits of the decision or course of action.
When determining whether to proceed with a project, a cost-benefit analysis looks at
quantifiable financial criteria like the money generated or costs avoided.
The intangible costs and advantages of a choice, such as staff morale and customer
happiness, can also be included in a cost-benefit analysis.
Sensitivity analysis, cash flow discounting, and what-if analysis for various choices may
all be included in a more complicated cost-benefit analysis.
Generally speaking, a project for the firm will be advantageous to pursue if the analysis
yields more benefits than expenses, other things being equal.
• Return On Investment (ROI) Analysis
The primary indicator of the profit made from any venture is return on investment (ROI).
A gain or loss from an investment in relation to its cost is compared using this ratio.
Whether you are assessing the success of your stock portfolio, taking into account a
company investment, or choosing whether to start a new project, it is helpful in
analyzing the present or projected return on an investment.
ROI and other cash flow indicators, including internal rate of return (IRR) and net
present value (NPV), are important metrics that are used in business research to
assess and prioritize the attractiveness of various investment options.
Despite the fact that ROI is a ratio, it is usually stated as a percentage.
 III. Conclusion

In conclusion, the process of business modernization is essential for companies looking

to stay competitive in today's fast-paced business environment. This involves the
adoption of new technologies, strategies, and processes to improve operational
efficiency and customer satisfaction. One critical aspect of modernization is the role of
business finance, which provides the necessary resources to implement modernization
strategies and ensure sustainable growth. Financial planning, budgeting, accounting,
and investment management are just a few of the many tasks that go under the
umbrella of business finance. Companies may strategically engage in modernization
initiatives including improving IT infrastructure, creating new products, and entering new
markets by efficiently managing their financial resources.
Modernization and corporate finance, however, can pose difficulties for businesses.
Businesses need to strike a balance between short-term financial objectives and long-
term investments in modernization that might not produce immediate profits. Companies
also have to deal with financial management-related regulatory and compliance
challenges. In general, a strategic approach to corporate finance is necessary for the
effective modernization of a corporation. Companies may achieve sustained
development and maintain competitiveness in a business environment that is always
changing by carefully managing their financial resources and investing strategically in
modernization initiatives.
Modernizing a firm is adjusting to shifts in the marketplace, such as advances in
technology, shifting customer tastes, and escalating competition. New tools and
methods that can help firms reach a larger audience and provide high-quality goods and
services are considered technological developments. Applications using artificial
intelligence, company management tools like Salesforce, and online conferencing
services like Zoom are a few examples. Businesses must adjust to shifting consumer
preferences in order to remain competitive. Shifting consumer preferences relate to
changes in what customers demand from products and services. The term
"globalization" refers to the expansion in the flow of products, services, capital, people,
and ideas across international borders, which offers possibilities and problems for
organizations.
For example, selling shares or recouping debts are examples of internal sources of
funding for a business. Outside of the business, external sources of funding include
things like bank loans and personal investments from friends and family. In contrast to
internal financing, external financing might be more expensive but is beneficial for
beginning and growing businesses.
Developing and putting into action a plan for your financial future is known as financial
planning. It entails evaluating your present financial condition, setting short- and long-
term financial objectives, and reevaluating them as needed. Budgeting is a crucial
component of financial planning, which aids in efficient money management and the
achievement of financial objectives. Making educated business decisions also requires
forecasting. To cover unforeseen expenditures, it's crucial to establish an emergency
reserve. Financial planning also includes risk management, which entails knowing your
risk tolerance and establishing practical financial objectives. These objectives might be
short-, medium-, or long-term, such as debt repayment, retirement planning, or property
ownership.
By weighing the costs and benefits of a project or decision—including intangibles like
employee morale and customer satisfaction—it is possible to determine if it is
worthwhile. Generally, a project is worthwhile if the advantages outweigh the
disadvantages.

An investment's profit or loss in relation to its cost may be calculated using return on
investment (ROI) analysis, which is often reported as a percentage. ROI and other cash
flow metrics are used to assess the allure of various investment opportunities.
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