Process Organisational Reports

INTRODUCTION

The success of an organisation highly depends on the strategic development process. Management has to consider several stakeholders as well as their perception of the company for developing several business plans. This report discusses the importance of stakeholders in the business decision-making process used by Tesco (Bradbury and Schröder, 2012). This report also examines the role of a wide range of organisational reports for the accomplishment of social goals and assessment of support of stakeholders. In the present investigation, the role of financial ratios is also evaluated in business decisions. In this regards, the financial statement of Benedict Co. has been evaluated with the help ratios. This report also presents the usage of financial ratios for assessment of the current fiscal position of an organisation.

TASK 1

A stakeholder is termed as an individual, group or entity that has some interest or concern towards a particular organisation for different objectives. Stakeholders have a significant impact on an organisation's actions, decisions making as well as objectives setting processes and policies (Albu, Albu and Alexander, 2014). In order to manage several business operations, an organisation has to consider different kinds of stakeholders such as creditors, directors, workers and employees, regulatory bodies, owners (shareholders), partner companies, suppliers, trade unions, environment and citizen. Stakeholders play an important role in the decision-making process of retail companies like Tesco. This is because business operations and profitability of the retail firm is highly associated with views or perception of stakeholders of towards Tesco (Eccles, Rogers and Serafeim, 2012). Furthermore, it is determined that the success of an organisation is greatly influenced by the satisfaction level of stakeholders like customers, suppliers and their relationship with the company.

In the context of retail industry, management of Tesco has to develop coordination and relationship different kinds of stakeholders for the attainment of objectives or goals of the business entity. This is because top authorities of Tesco have to consider the views and perception of stakeholders in order to develop different business strategies as per the current market trends (Chua, Cheong and Gould, 2012). As per the current market trends, the three most important stakeholders of Tesco are evaluated below:

Customer: Tesco is one of the biggest retail company in the UK. Therefore, management focuses on developing all business operations and products with reference to the needs and desires of buyers. For establishment of long-term relationship with customer, the management of Tesco considers several elements in decision-making process such as price of products, market share competitor’s products, change in demand of customers, availability of raw material, selection of wide range of promotional tools, identification of target customer or market, etc (Giner and Arce, 2012). By applying an appropriate customer handling process and selecting the best product chain, the business can ensure higher satisfaction level of customers. It plays an important role in the success of the firm along with the growth of the company. Highly satisfied customers can help the company to generate higher revenues and maintain its profitability (Brown, Preiato and Tarca, 2014).

Government: An organisation has to follow different rules and regulations developed by the government for managing the business operations. Therefore, it is stated that the government and its several agencies are the most important stakeholder. In this context, the management of Tesco evaluates various regulations of domestic and international authorities while developing different kinds of business strategies with reference to current business objectives (Kothari and Lester, 2012). Furthermore, Tesco has to consider product quality standards in the determination of the quality of a wide range of goods. In addition to that, any change in government rules regarding the safety of the environment also influences management decision associated with consumption of energy and other resources.

Investors: It includes shareholders, debtors, loans and advances etc. that meet the capital requirements of the company. Therefore, top managers of Tesco assess views and suggestion of investors in the strategic planning process for long-term expansion. This is because the business entity needs the appropriate support of an investor in huge capital-intensive projects like the expansion of the business in a new market, establishment of new plant or store, etc. (Wang, 2014). In addition to that, Tesco has to develop a good relationship with different external and internal investors. Therefore, management of Tesco provides a wide range of information about profitability, liquidity, debt, loan volume, etc. to their investors so as management gets optimum support for investors in various projects.

In the context of current market trends, the success of the organisation is highly associated with the relationship of the company with its stakeholders. Therefore, the management of Tesco presents different kinds of reports such as environmental and social review as well as the corporate governance report through which the company is able to present its performance to stakeholders.

Importance of Environmental and Social Review:

This report plays important role for creation of a fair public image of the company (Arnold, 2012). With the help of this report, the management of Tesco has presented a systematic review of all activities and business plan carried out by the company for the attainment of objective related to health and safety of employees as well as the public, the safety of environment and satisfaction level of customers. With reference to Environmental and Social Review of Tesco top authorities of the retail company have developed several strategies and implemented different plans for ensuring the health and safety of employees along with target customers (Rice and Weber, 2012).

In this process, management pays extra attention to the quality of products and safety procedures. All these practices play a significant role for creation good image of company among customers and general citizens. This helps management in ensuring growth and profitability of the firm for a long duration. This is because success and growth of the firm are significantly associated with its customers. Therefore, the customer is termed as key stakeholder for Tesco. In addition to that Environmental and Social Review of Tesco determines that the company has adopted several strategies in order to reduce waste of food products along with a reduction in carbon emissions. The company attempts to reduce its carbon footprint through the application of a highly efficient transportation system and development of a systematic supply (Annual report and Financial Statements, 2016).

These practices have played an important role in reducing the wastage of food as well as safeguarding the environment. This has helped Tesco in creating good image among government bodies. By considering environmental safety concerns in a wide range of business operations, the management is able to assess significant support of public authorities in various expansion projects as well as new business planning. Therefore, the government is also identified as the most important stakeholder of the retail firm because Tesco has to follow a wide range of government rules and regulations of public authority associated with the safety of environment (Schaltegger and Csutor, 2012). All these practices provide significant assistance to the management of Tesco in fulfilment of social responsibilities of the firm as well as ensuring long-term success with the fair public image. Furthermore, it has been evaluated that the success of a business entity is highly correlated with a satisfaction level of stakeholders. Therefore, it can be stated that Tesco can create good public image by meeting its social goals (Christensen, Walker and Zeng, 2015).

Corporate Governance Report:

Every organisation makes efforts for the development of an efficient management and control system with the help of an efficient team of managers and leaders. In this regards, Tesco presents its organisational structure or chain of command through its corporate governance report. This report increases the understanding and knowledge of stakeholders like public authorities, employees, customers, employees etc. about management system so as a wide range of business issues and problems of employees, customers, other people can be resolved with best possible method (Grez, Valcke and Roozen, 2012). Efficient management helps Tesco for the establishment of a proper communication system with public authorities so the company can develop a wide range of expansion of plans with the support of the government.

Furthermore, it is addressed that support of government also helps management of Tesco for the acquisition of funds from different resources such as shares, banks, lenders etc. without any difficulties. In addition to that, an efficient governance management system has been found to be very effective for assessing support of customers and employees in a wide range of business decision as well as the development of new product chain. This is because customers would get proper feedback of their queries and issues so that Tesco ensures a long-term relationship with customers that is considered as a very important factor of organisational success and business growth (Barth, Lang and Williams, 2012).

Furthermore, a proper understanding of management structure among employees helps the top authorities of Tesco for the development of an effective communication system at the different level of management through which the optimum flow of information can be ensured. This approach provides great support to Tesco in the decision-making process and feedback of employees about various business strategies, and current market trends help managers in implementing new system and formulation of new plans for organisational changes. This ensures organisational growth and effective operations in the current highly competitive retail industry.

TASK 2 ANALYZING AND EVALUATING THE FINANCIAL POSITION OF BENEDICT CO. WITH THE HELP OF RATIOS

For developing a wide range of business policies, financial ratios play an important role in the assessment of the financial strength of the profitability of the company. These ratios also provide significant assistance to the management of Benedict Co. for assessment of change in financial position of the company due to changes in external and internal business environment. Therefore, purpose and relevance of some important ratios are explained below:

Net profit ratio: It is a part of profitability ratio through which management of Benedict Co. can examine the percentage of net profit after deduction of all taxes and interests over the total sales of the company (Lin, Riccardi and Wang, 2012). This ratio shows the volume of net profit of the company over total sales. This way management is able to examine the costing among several business operations and its relationship with a net profit of the firm so as the company increases profit through systematic plans.

Gross profit ratio: This ratio helps Benedict Co. to determine the relationship between a gross profit of the company and net sales. This way a business entity can create appropriate business plans in order to reduce the cost of goods sold so as the gross profit of the company can be increased.

Current ratio: This financial ratio determines the relationship between the volume of current assets and current liabilities. This way management of Benedict Co evaluates the liquidity position of the company as per the requirement of the current market and business requirements (Mahdjoubi, Moobela and Laing, 2013). Furthermore, this ratio provides significant assistance to determine the value of total current assets like inventories and current liabilities such as bank credit. This helps management in examining credit requirement and availability of funds to meet short-term credit requirements.

Quick ratio: In the context of current market trends, sometimes current assets may contain huge amounts of inventory, prepaid expenses etc. so as top managers of Benedict Co. have to consider several other aspects of financial ratios. Sometimes, current ratio interpretations are negative interpretation as these are not very liquid (Shih and Chen, 2013). To resolve this issue, the retail organisation has to consider the Cash and Cash equivalents and Receivables so as the management gets a better picture of the coverage of short-term obligations. This ratio is also termed as Acid Test.

Assets turnover ratio: Asset turnover ratio has been found to be very effective to examine the value of a company’s sales or revenues with reference to the value of its assets. The Asset Turnover ratio can often be used by the management of Benedict Co as an indicator of the efficiency through which a company can examine the volume of total assets for generating revenue (Yuan, Kim and Kim, 2013).

Dividend per share: In the context of present investigation, dividend per share ratio is termed as important tool for investors because the amount a firm pays out in dividends is directly considered as an income for the shareholder, and the dividend per share is the most straightforward figure for an investor along with the management of Benedict Co. It can be used to calculate the dividend payments capabilities of the company on shares of a stock over time (Lieser and Groh, 2014). Meanwhile, a growing DPS over time can also be a sign that a company's management believes that its earnings growth can be sustained.

Change in value of net profit and gross profit: It is termed as a most important reason that influences movement in ratios (Lin, Riccardi and Wang, 2012). With reference to this movement, the management of Benedict Co can examine change in the profitability of the company due to several internal and external factors.

Change in cost of goods: In the context of current market trends, cost of production is identified as a very important factor that has a direct impact over the growth and profitability of the company, and that also creates a significant impact on financial ratios.

Change in value of current assets: Current assets play an important role in the attainment of the short-term obligation of Benedict Co. Therefore, it is addressed that some little change in current assets or current liabilities creates significant movement in the volume of current ratios and quick ratios because it has a direct impact on the liquidity position of the company.

Change in current market trends: In the context of current business trends, a wide range of internal and external factors have a direct impact over a wide range of business operations along with needs and interest of customer (Shih and Chen, 2013). All these factors are having a significant impact on sales and revenue generation capabilities of a business entity.

In a similar way, the liquidity ratio graph of the company shows that the current ratio of Benedict Co is also reduced to 1.19 times as compared to 1.25 times. This shows that company’s efficiency in meeting its short-term obligation has been reduced. The main reason behind this reduction in liquidity is a reduction in the profitability of the company (Eccles, Rogers and Serafeim, 2012). This information leads to a negative impact on the perception of suppliers and various creditors.

In addition to above, the asset turnover graph shows that assets turnover ratio for the year of 20X1 and 20X0 are respectively 0.6063 and 0.639 which determines negative trends and a reduction in the overall efficiency of the business entity. That is, the company has not properly employed its assets as its generating less than what has been invested in them. The main reason behind this is obsolete technology. Thus, it is essential for the company to upgrade its technology.

Apart from that dividend per share ratio reflects some positive trends because the dividend per share in 20X1 and 20X0 is respectively 0.25 and 0.20. This way the management is able to present a positive image of company among shareholders. It can help the company to achieve the significant support of the investors and simplify the decision-making process and enhance its long-term sustainability in the market.

In the context of the present investigation, financial ratio analysis is a very effective tool to assess the financial performance of Benedict Co. It determines the financial position of an organisation with different aspects of financial management such as profitability, liquidity, efficiencies, etc. In present business era, bankers are mainly using profitability, liquidity and investment ratios so as the investors can examine the borrowing ability of business as well as the ability of business entity for regularising scheduled interest payments along with repayments of the principal loan amount (Kothari and Lester, 2012). In addition to that investors also use profitability and investment ratios for examining the profitability and performance of business so as they can ensure safety & security of their investment in the highly volatile market. In addition to that government also considers financial ratios for the assessment of taxation, grants and subsidies. In the context of Benedict Co, suppliers play an important role for ensuring overall growth and development of business along with an assessment of satisfaction level among the suppliers, so they are more interested in knowing the ability of the business.

On the other hand, there are several limitations of the financial ratios. It has been evaluated that many large firms are managing business operations in various divisions among different industries. For the companies like Benedict Co, it is very crucial to find a meaningful set of industry-average ratios with reference to current market trends (Lin, Riccardi and Wang, 2012). Furthermore, inflation has negatively affected the company's balance sheet. In this case, profits will also be affected. On the other hand, the ratio analysis of Benedict Co among different ages must be interpreted with judgment. In addition to that seasonal factors also distort the ratio analysis process.

CONCLUSION

On the basis of the above investigation, it can be concluded that stakeholders play an important role in the overall decision-making process as well as the development of a wide range of business strategies. Further research has found that Tesco has to consider the interest of several stakeholders such as employees, government, customers, environment etc. for ensuring success in the strategic management process. This report has addressed that the Environmental and Social Review and the Corporate Governance Report of Tesco played an important role for creating a good image of company among different stakeholders so as overall growth and profitability could be increased as per the current market trends (Kothari and Lester, 2012). This report has determined that financial ratios provide significant assistance to the management of Benedict Co. to examine the financial position of the firm.

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