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In Finance, what is Position Building?

Article Details
  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 14 November 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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Position building is a strategy that involves the accumulation of assets in order to ensure that an individual or business is placed in the most favorable financial position possible, given the current circumstances that surround the company or the individual. Creating the right position can help a company be more competitive in the marketplace, as well as aid an individual in achieving financial goals. The term is also often used in reference to investing strategies that govern the choice of different types of investment options, such as stock, bonds, and futures contracts.

Within a company, position building is all about gaining and advantage in the marketplace. This type of position is achieved by considering a number of internal and external factors. Internally, the company will engage in position building by making sure that the cost associated with producing goods and services is kept as low as possible while also maintaining high quality standards. The company also looks at external factors like the public’s perception of the business and the products it offers, how it compares with other businesses that offer similar products, and what must be done in order to improve those perceptions and make the company a forerunner in the market.

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An individual can also engage in position building, especially in terms of creating a solid financial foundation. This includes pursuing an education that will help advance the individual in his or her chosen career, establishing basic financial accounts that make it possible to function in society today, and taking steps to build and maintain a solid credit rating. The individual will also use the basic concept of position building to initiate efforts to amass resources that can be used to aid in securing a home, providing for everyday needs, and preparing for retirement later in life.

Both companies and individuals make use of investment activity as part of the position building process. For businesses, position building may involve acquiring stocks issued by other companies, creating an ongoing revenue stream above and beyond the profits generated by the sale of goods and services. Individuals may choose to create a plan for buying and selling stocks and other types of investments as a means of creating a series of long and short positions that are likely to result in maximizing the return realized on a financial portfolio. Creating this type of favorable financial position helps to ensure the continuing fiscal well-being of the individual or the corporation, positioning them for future growth and the realization of any goals that are set in place.

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