Strategic Investment
The Basic Idea
Strategic investment at a company might look like:
- An acquisition or merger with a company’s competitor
- Getting into a new market (i.e., expanding from cell phone batteries to tablet batteries)
- Adopting a new technology system
- The utilization of novel raw materials for the production process
- Creating an innovative service through financial investment in research and development1
An example: Coca Cola invested $5.5 billion USD in development in Africa between 2006 and 2016 with the intention of building brand loyalty. As the continent continues to develop and the population acquires more disposable income, they will choose to spend it on Coca Cola products.2 While the company has had a presence in Africa since 1928,3 it’s betting big on high growth: by 2025, McKinsey estimates that African business opportunities will be worth $5.6 trillion USD.4
This example highlights the premise of strategic investment: while the costs might be high at the start, there is a sense of faith (working in tandem with data and analytics) that the return investment will ultimately pay off.