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INTRODUCTION
invest its current fund most efficiently in the long term assets in anticipation
organization resources into a unique and viable posture based on its relative
1
environment and the contingent moves by intelligent opponent. Therefore
principal policies and plans for achieving this goals and defines the range of
2
determine the overall direction of the firm, major goals, policies and action
(strategic) dimensions are not only a success but also confronted with series
of problems such as; what should we expand on or acquire within our core
investment capital and resources within the context of the internal and
How do we measure success, returns to the firm and market share of our
among others.
wrong step taken with a view of addressing any of the above problems will
adversely affect the smooth running of the organization for instance, the
expected cash flow over a series of years that is irreversible and even if
3
The internal and external environment trend that gives the firm its
identity, its power to mobilize its strength and its likelihood of success in the
As Charles Darwin said that it is not the strongest of the species that
survive nor the most intelligent, but the one most responsive to change. In
the market place is war, you have injuries and casualties and the best
strategy wins, and (Hamel & Prahalad, 1994:69) said the essence of strategy
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1.1 STATEMENT OF THE PROBLEM
is;
The objective of the study in line with the stated problems is;
The significance of the study lies in its ability to unveil the benefit of
which the firm exist rather that adhering to the traditional methods which is
5
more or less a rule of thumb before committing the scare resources of an
To the general public, the study will serve as an eye opener to them on
investment decision.
“broad insight” to appreciate corporate strategy. The research also equips her
with the art and science of carrying out a similar or more complex research
in the future.
6
1. Inability to obtain necessary information due to administrative
7
firms decision to invest its current funds most efficiently in the long term
determines and reveals its objectives, purposes, goals, produces the principal
policies and plans for achieving these goals and defines the range of
The origin of the business stretch back to the 1950s first as an activity
serve the local consumer markets with the famous Cadbury products. An
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company was incorporated in January 1965 when the current 42-hectare
factory site was opened, and went public in 1976. The initial staff strength of
less than 200 has grown to more than 2000 colleagues who have chosen to
make a career in Cadbury. They are the embodiment of the talent, skills,
knowledge and other intellectual property behind the success of the business.
opening of a shop that sold cocoa product by John Cadbury in 1824. The two
confectionary and food drinks, with a Portfolio of branded offers that meet
real needs of consumers, our quality brand are enjoyed through out the entire
of well established brands within its core business areas each of them
providing functional benefit to our customers and hands reward for our
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customers. Many of the key brands are long established, and reflect the
1. Bournvita 1960
6. Malta 1979
7. Éclairs 1989
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16. Chocki 2004
While the premium brands cutting across West African are 5 key
categories;
III. Medicated
underpinning strength of the business, and the board has revalidated their
long term growth target with milestones in the context of opportunities in the
the valve chain and considerable resilience to the wide swings in the external
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2. To create robust and sustainable positions in its core segments
materials and other inputs from local companies even if we have to provide
technical support to ensure the quality standards that meet our stringent
specification.
5. To expand our brand offering new and profitable market and serve
taken, with 15% growth in net asset per share and 14% growth in
shareholder’s funds.
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CHAPTER TWO
LITERATURE REVIEW
2.0 INTRODUCTION
has been placed on the view that a business firm facing a complex and
overall corporate strategy. This approach provides the decision maker with a
and managers use the term differently, For example, some include goals an
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objectives as part of strategy while others make firm distinctions between
them.
the pattern or plan that integrates organizations’ major goals, policies and
and when results are to be accomplished, but they do not state how the
results are to be achieved. Policies are rules or guidelines that express the
limits within which action should occur. Programs specify the step by step
against whom, when, where and for what. Kotler and Keller, (2006:54)
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on its relative internal competencies and shortcomings, anticipated changes
a plan which specifies what choices (the player) will make in every possible
unified, comprehensive and integrated plan designed to ensure that the basic
is a link between the multiple goals and objectives pursued by the firm to
satisfy its various stakeholders and the plans and policies used by it to guide
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its objectives. The definition highlights distinctive competences (resources
competitive advantage can stem not only from product/ market positioning
but also from unique resource deployments. Thus, the ultimate success of the
firm may not simply depend on the scope but it can also be greatly
direct competition, where threats and feints and various other maneuvers are
reminding us that the concept is an empty one if it does not take behaviours
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of consistency in organizations behaviour. As Position; strategy encourages
their positions and protect them in order to meet competition, avoid it, or
values and how patterns of behaviour become deeply ingrained in the group.
defines the business (es) that the company will pursue, new opportunities
and threats in the environment, and the growth objectives that it should
achieve, which provides an overall direction that serves as the framework for
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involves four kinds of initiatives:
Gale, (2006:1,6-7) opines that Corporate Strategy is the big picture view
equipment and other resources are distributed), for market definition is the
alliances) and plans for the entire organization, change as industry and
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specific market conditions warrant. According to Gale, It have a tremendous
amount of both latitude and responsibility, in which one way to deal with the
distribution(forward integration)
19
iii. A diversification strategy entails moving into different markets
business that they know, and see no need to make the psychological and
industries or product markets, also it is what makes the corporate whole add
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up to more than the sum of its business unit parts which is concerned with
two key questions. What businesses the firm should be in and how the
objectives.
its objectives, purposes, or goals, produces the principal policies and plans
for achieving these goals, and defines the range of business the company is
pattern is one that is effective over long periods of time affecting the
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anticipation of an expected flow of benefits over a series of years (the long-
term assets are those that affects the firms operations beyond the one-year
influence a firm’s growth in the long-term, affect the risk of the firm,
situation which company add capacity to its existing product lines to expand
22
existing operations which is an example of related diversification. Also a
firm may expand its activities in a new business which requires investment
in new products and a new kind of production activity with in the firm. If a
produce ball bearings, which the firm has not manufactured before, this
a company acquires existing firms to expand its business. In either case, the
investment.
following reasons:
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Growth: the effect of investment decisions extend into the future and
have to be endured for a longer period than the consequences of the current
decisive influence on the rate and direction of growth. A wrong decision can
difficult for the firm to compete successfully and maintain its market share.
gain but causes frequent fluctuations in its earnings, the firm will become
more risky. Thus, investment decisions shape the basic character of a firm.
funds, which make it imperative for the firm to plan its investment
to find a market for such capital items once they have been acquired. The
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Complexity: investment decisions are among the firm’s most difficult
or unrelated diversification.
25
2 To enhance the strategic competitiveness of the entire company
employment risk.
economics:
a. sharing activities
26
b. transferring core competences sharing activities which brings
reduce the costs of its primary and support activities below the
corporation.
27
businesses in the external market with the intent of increasing
regulations and tax laws and internal firm incentives include low
reduction.
diversification;
28
Table 2.1: Motives, Incentives and Resources for Diversification
have for one reason or another, pursued unrelated diversification. And a few
have diversified into both related and unrelated business. These reasons are
tabulated below:
29
Figure 2.1: Strategy Alternatives for a Company looking to Diversify.
30
Other reasons for strategy include:
that will produce sustainable bottom line success for the enterprise.
the firm.
31
10. It emphasizes interaction by managers at all levels of the
budgeting decisions are taken in the context of its overall corporate strategy
divisional and corporate strategy is a lot like throwing darts in a dark room.
Similarly, Hastie in Pandey (2005:275) argues that we have erred too long
exaggerating the improvement in decision making that might result from the
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rather than precise answer to the approximate problems. There is little value
should spend its time improving the quality of assumptions and assuring that
all the strategic questions have been asked, rather than implementing and
2005:276).
assume that they are separable from the problem of efficient resource
1975:170).
evaluation. What are the specific experiences of the companies in India and
USA in this regard? Example of six companies showing how they defined
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satisfied yardsticks is accepted. This company found a low profit
technology capabilities.
2. To take up new projects for expansion in the fields, which have closer
project (of deep sea fishing and ship building while it accepted a
marginally profitable project (of plant system) since it was very close
3. To have moderate growth for saving taxes and to set up plants for
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5. To dispose of those parts of our business which do not or cannot
resource allocation in practice it is not simply the use of the most refined
DCF techniques.
1. Apart from the profitability of the project other features like its
decisions.
35
2. Technological developments play a critical role in guiding investment
on these.
existing products and the new project capital investment for expansion
projects as shown by the DCF analysis. What is being stressed is that the
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External Internal
Environment
Strength
Strategic Weakness
Planning Market Scope
Competences
Growth Image
Capital
Budgeting Origination
System Development
Evaluation
Authorization
Control
Nature of
Investment
Strategic
Middle Administration
Management
Lower Operating
Management
Figure 2.2: Capital Investment Planning Control Model. Pandey (2005:281), Financial
Management.
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2.8 FACTORS THAT ACCOUNT FOR A SUCCESSFUL
STRATEGY
resources, degree of risk, match to the personal values of key figures, time
competition, but the overriding goals of the strategy for all units must
action and enhance commitment? Does it set the pace and determine
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3. Concentration: Does the strategy concentrate superior power at the
disadvantages.
must be so chosen and motivated that their own interests and values
times with surprise and correct timing, success can be achieved out of
positions.
7. Security: Does the strategy secure resource based and act vital
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intelligence system sufficient to prevent surprises by opponents? Does it
develop the full logistics to support each of its major threats? Does it use
used to evaluate the merit of one strategy over another and determine
40
and other aspect of the enterprises external environment. Unless a
fails:
41
d. Incomplete understanding of many of the concept by those claiming to
apply them.
b. Fighting brands
c. Price wars
strategy
4. Failure to coordinate;
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b. Organizational structure not flexible enough
change
9. Poor communication;
43
10.Failure to focus;
that it will lead to increased profit for the firm. This is especially true of a
manufacturing firms. The authors found that formal planners who took a
financial criteria that measured sales, assets, sales price, earnings per share
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and the earnings growth. The planners were also more accurate in predicting
and House, who studied 36 firms in six different industries. They found that
formal planners in the petroleum, food, drug, steel, chemical and machinery
House research dealing with a drug and chemical companies. His findings
supported the earlier study and, in fact suggested that the disparity between
overtime.
management are more successful than those without. Their findings did not
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because strategic planning among these firms was a recent phenomenon and
designed to measure the profit impact of market studies (PIMS). This PIMS
investment (ROI). The researcher concluded that ROI was most significantly
direction.
large firms, a 1982 report found that strategic planning had a favourable
service and manufacturing firms over a three year period. Robinson found a
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businesses engaging in strategic planning when compared to firms without
performance.
creating new customer offers with distinct winning competitive edge, as well
years, the group has added new products to broaden its range in the core
believed it did not have , or could not build, sustainable business models or
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successfully advanced its drive to serve export markets in the ECOWAS
region.)
possible and source packaging materials and other inputs from local
support to the vital small and medium scale sector, and we have seen these
of emerging concerns over health and nutrition. Our commitment covers the
have taken on very ambitions growth targets over the next seven years, and
to:
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I. Deliver superior shareowner returns on the back of superior business
performance
adjacent categories.
III. Expand our brand offerings into new and profitable markets and serve
IV. Ensure that the Group’s capabilities and business processes are best in
capability, create the roadmap for the next generation ERP (environment
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2.13 Cadbury expansion investment decisions.
state- of – the art Bubble Gum Factory. This has been followed by the
Ginger, Bubba Bubble Gum, Halls Take 5, and Chocki, with Chocki
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However, it should be noted that 2005 was the second of their four-year
strategic plan in re-defining the path and pace of their future growth.
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CHAPTER THREE
RESEARCH METHODOLOGY
3.0 INTRODUCTION
testing the truth for the existing knowledge and generating a new body of
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secondary data. This chapter is basically concerned with the strategies
employed in generating the relevant data for the study. Here, discussions
were made regarding the main source of data, the research hypothesis,
research design, data collection method, and the method of data analysis.
In line with the objective of the study, the researcher tested this
hypothesis:
HO: Cadbury Nig. Plc strategic pattern does not affect the company’s
H1: Cadbury Nig. Plc strategic pattern affects the company’s expansion
investment decisions.
facts).which stem from the fact that the events to be studied have already
taken place and the data are in existence. As such, the researcher does not in
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any way attempt to control or manipulate variable, but only create a situation
details have been obtained and on which the results and conclusions from
the study are based. The researcher used only secondary sources of data to
gather relevant information which were used for the purpose of the study.
For the purpose of this research work, the secondary source of data
Nigeria Plc. That is, 2005 annual reports and accounts showing a five year
to predict, compare and evaluate firm’s earning ability, which also aids
includes; Balance Sheet, Profit and Loss Account and Cash flow Statements.
obligations (liabilities and owners equity) at a point of time. The Profit and
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Loss Account reflects the results of the business operations by summarizing
revenue and expenses during a period of time, and the Cash flow Statement
provides information on the source of cash inflows into the company and
The variables of interest are sales turnover, net profit after tax, net
asset, and number of ordinary shares outstanding. These data are obtained
from the Profit and Loss Account and Balance Sheet section of the financial
hypothesis: Cadbury Nig. Plc strategic pattern does not affect / affects
business unit strategic pattern performance are sales growth, profit growth,
coverage, market share or other accounting and market based variables. See
also (Michael & Robert, 1997:52, Pearce & Robinson, 1998:17-19, 279-
299).
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Thus, from the above requisite variables mentioned and the
Net Asset Per Share (NAPS) is a ratio that indicates the amount of net
opposite. It must be noted that increase in net assets could result from
from the investor’s perspective is the one resulting from asset acquisitions.
Net profit margin or Return on sales shows after tax profit per naira of
sales sub pars profit margins. It indicates that the firms sales are relatively
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and selling product. This ratio measures the overall firm’s ability to turn
each naira sales into net profit. If the net profit is inadequate, the firm will
survive in the face of falling selling prices, rising costs. The formular for
Sales
Earnings Per Share shows the earnings available to the owners of each
share of common stock. It does indicate whether or not the firm’s earnings
power on per-share basis has changed over a period (it simply shows the
2005:517-549.
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3.4 DATA ANALYSIS.
and observations which have been obtained through primary and secondary
the data. The analysis permits certain statistical manipulations and final
efficiency of operations, while equity holders and owners hope for value
added from investments through income from dividends and growth from
competitors.
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CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.0 INTRODUCTION
and the analytical tools to be used in testing the hypothesis were stated. This
chapter presents in details the analyses of the data so generated as well as the
accounts of Cadbury Nigeria Plc (2001-2005). The year 2001 has been taken
The variable of interest for analyses have been extracted from the
profit and loss account, and the balance sheet section of the company’s
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annual financial reports and accounts for the period under study: (2001-
2005).
a. Sales turnover,
d. Net asset.
Restatement of hypothesis:
HO: Cadbury Nig. Plc strategic pattern does not affect the company’s
H1: Cadbury Nig. Plc strategic pattern affects the company’s expansion
investment decisions.
60
Table 4.1: showing analysis of Cadbury’s Expansion Programmes:
The analysis shows only two year (2004 and 2005) record because
year ‘2005 was the second of our four year strategic plan in redefining the
path and pace of our future growth’ ( Cadbury Nigeria Plc annual report,
2005:8)
following indices:
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2. Net Profit Margin
1200
1000
800
600 1098 1086
915 945
400
200 414
NAPS(K)
0
2001 2002 2003 2004 2005
Chart 4.1: Net Asset Per Share. (Annual financial statement of Cadbury Nig. Plc, 2005)
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Table 4.2 and Chart 4.1 show the value and trends of the Net Asset
Per Share of the company. From the table, there was a tremendous rise from
262%.
performance,
decisions.
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All these are imbibed in Table 4.1, showing that the company’s
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Net Profit Margin
120% 117%
108% 108%
100%100%
80% 75%
60% NPS(Trend in
Percentage)
40%
20%
0%
2001 2002 2003 2004 2005
Chart 4.2: Net Profit Margin. (Annual financial statement of Cadbury Nig. Plc, 2005)
rise in its Net Profit Margin. Recording 12k for every #1 sales in 2001, 14k
in 2002, while in 2003 and 2004, the NPM was constant at 13k for every #1
sales and in 2005, NPM reveals a drop from 12k in 2001 to 9k in 2005 for
segment,
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b. Profitably increase our share of the market in which we choose
c. Expand our brand offerings into new and profitable markets and
The company have been able to add more to their product line due to
Ahomka Ginger, Bubba Bubble Gum, Halls Take 5, and Chocki, with
Crème Rollers in 2005, has taken place, showing offerings to the market
achievement.
However, the drop in NPM in 2005 was due primarily to two factors:
for all serving employees. A total provision of #500 million has been
provision will however impact the profits for another two years.
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2. Material Cost Escalation
iii. Tin Plate: The impact of high oil prices (tin plate
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5% duty, intermediate products 10% and finished products
20%, with the scope to raise duty on special items where local
400
357
300 300 281 270
200 206
EPS(K)
100
0
2001 2002 2003 2004 2005
Chart 4.3: Earnings Per Share. (Annual financial statement of Cadbury Nig. Plc, 2005).
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Table 4.4 and Chart 4.3 show the value and trends of the Earnings Per
Share of the company. It should be noted that the EPS values have been
abstracted directly from the company’s financial annual report but, have
From table 4.4, there was a steady rise from 206k in 2001 to 300k in
2002 and a further increase in 2003 to 357k, decreased in 2004 to 281k and a
2004-2005.
4.3 FINDINGS
single minded pursuit of strategy has been the underpinning strength of the
yielding positive results as shown in the analysis of Net Asset Per Share, Net
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CHAPTER FIVE
5.0 INTRODUCTION
suggestions for further research will be made in the area under study.
In line with the objective of the study, the researcher formulates this
hypothesis:
HO: Cadbury Nig. Plc strategic pattern does not affect the company’s
H1: Cadbury Nig. Plc strategic pattern affects the company’s expansion
investment decisions.
In analyzing the company’s strategic pattern, the analytical tools - Net asset
per share (NPS), Net profit margin (NPM) and Earnings per share (EPS),
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were used to justify the expansion programme as captured in Table 4.1 of
1. The Net asset per share indicates the amount of net assets attributable
growing. From the analysis, it was discovered that there was an increase in
net asset per share, premising on the trends in percentage. See Table 4.2 and
2. The Net profit margin, measures the overall firm’s ability to turn each
naira sales into net profit. Table 4.3 and chart 4.2 isolates the movement of
(expansion) profile, is in accord with the strategic intent in the long term.
The drop in operating profit return in 2005 was due primarily to the
requirement (This provision effectively dipped profits in the short run and is
the analysis revealed that Cadbury Plc was able to expand their product
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3. The Earnings per share is the last key measure. Table 4.4 and chart 4.3
show the net growth over the last four years. The Earnings per share
number of shares.
5.3 CONCLUSION
Cadbury Nigeria Plc was used as a case study. The scope of the study was
for a period of five years (2001 – 2005). Literatures relevant to the study
were reviewed with a view to providing a theoretical basis for the purpose of
the study. Relevant data were collected from the annual reports and accounts
of Cadbury Plc. Profitability ratio was used in the analysis of data, alongside
research work. Table 4.2 shows a tremendous rise with a 21% increase from
2001 to 2002, 20% in 2003 and 15% in 2005. In Table 4.3 there was a rise
by 16% from 2001 to 2002, a steady increase in 2003, 2004 and 30%
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decrease in 2005. In Table 4.4 an increase of 46% from 2001 to 2002 was
juncture, the researcher can adequately put forward that corporate strategy
decisions.
5.4 RECOMMENDATION
In line with the findings from the analysis the researcher makes the
following recommendations:
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business strategy should be well crafted before embarking on any venture
higher efficiencies, etc should be the major inputs to be made into the
planning process.
recommends that scholars and researchers should see this as a challenge and
as such further probe into this area if necessary. Research and development
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Ross, S.A, Westerfield, R.A & Jeffrey, J (1996). Corporate Finance. 4th ed.
McGraw-Hill Companies. Inc.
Tony, W.T & Reuer, J (2006). Corporate Investment Decisions and the value
of Growth Options. McColl Building Chapel Hill
Curcio, R.J & Wolf, F.M (1996): Corporate Environmental Strategy; Impact
upon Firm Value. Journal of Financial and Strategic Decisions Vol. 9
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UNPUBLISHED LECTURE NOTES
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