Strategic Investments

When the demand schedule was discussed Section, it was tacitly understood that the demands for strategic investments would not be integrated into the demand schedule. Strategic investments, also called irreducible investments cannot be quantitatively evaluated as investments per, and hence, cannot be assigned "merit" in terms of expected earnings, or BCR (PI). Yet they are necessary investments in the judgement of management. Examples are : providing for health care of employees, constructing and running a recreation centre and conducting annual sports meets; investing money in preparing for a line of business so as to maintain leadership and/or secure a market share. In these instances, returns can neither be calculated, and, if at all calculable, will be insignificant. Then, to define, strategic investments are necessary investments in which a low or insignificant rate of return is overwhelmed by irreducible considerations or advantages. 

For these investments, management would follow reasonable methods for fund allocations - viz. by envisaging the demands (as for health care services, sports, etc.) or by a percentage of the total supply (for market research for diversification, or support to educational and research institutions).