According to Broadbent (2017), strategic financial management is one of the greatest tasks of every business firm to maintain its effective money management. Financial management indicates the management of funds of the organization to maximize profitability and wealth. This report focuses on the financial management of Tesco that is the biggest retailer in the United Kingdom. It has 6600 locations around twelve countries in the world. This retailer has 476,000 staff and great profitability history in the global market due to its huge customer loyalty. It has earned a gross profit of 55,917 million and a net income of 54 million in 2018 (Tesco Annual Report, 2018). In Task 1, this report identifies, evaluates and assesses the impact of three key resource decisions have both internally and externally on Tesco’s performance and effectiveness. Then, it identifies the risks of inadequate resources in Tesco business with the proper planning and allocating resources for mitigating the risks. Then, it evaluates the financial statement, financial ratio and intangible and tangible resources of Tesco to determine the financial position and provide recommendations for improving the financial performance of this company. Finally, this report presents the importance of the pricing strategy and costing system for Tesco along with the improvements of the costing and pricing systems for Tesco.
1.1 Identify, evaluate and assess the impact that three key resource decisions have both internally and externally on Tesco’s performance and effectiveness
Human Resource Decision
Human resource decision is the most important decision in any business and production-oriented organization. According to Torrington et al. (2016), Human resource decision indicates the overall activities of identifying, evaluating and assessing the manpower in relation to the organizational goals and objectives of an organization. According to Tesco Annual Report (2018), Tesco Company follows the human resource functions effectively and efficiently comparing with the goals and objectives of the company. Human resource decision affects internally Tesco’s performance and effectiveness in several ways. First, it helps Tesco to hire the right people for the right position at right time. Second, it helps to motivate staff, to retain and make loyal staff, and to reduce staff turnover and overall costs.
Third, effective human resource decision helps in staff performance measurement and management that in turn help in achieving organizational goals. On other hand, Human resource decision affects externally Tesco’s performance and effectiveness in several ways. First, effective human resource decisions attract people from diverse cultures and backgrounds that give wider knowledge and understanding to Tesco’s business. Second, effective human resource decisions motivate staff and attract skills and experienced people that increase brand image and brand awareness of Tesco. Effective human resource decisions and employment also helps Tesco in attracting potential and existing customers and maintaining a good relationship with other external stakeholders that improve business performance and productivity (Tesco Annual Report, 2019).
Financial Resource Decision
Finance is the most important element for organizing and operating an organization. Burke (2017) stated that financial resource decisions must have to take compared with the production cost, transportation cost and channel, profit and loss, investment projects etc. Tesco has taken financial resource decisions justifying the probable losses and gains, inflation and deflation, business purposes and activities, distribution channels, cost minimization and profit maximization activities (Butler, 2018). In Tesco, the internal effects of financial decisions are effective financial decisions including its bask features support Tesco’s internal strategy. Additionally, the internal financial strategy focuses on business goals, patterns and alternative designed that optimizes and improve financial management to gain business desire outcome.
Then, the working capital decision helps Tesco in the management of its short-term assets and liabilities and ensures resource adequacy for its business operation. Next, the finding decision helps in long-term debt and capital management. For example, Tesco has taken an action to serve its products through their own transportation system to reduce the transportation cost and increase the channel of supply (Tesco Annual Report, 2018). On the other hand, in terms of external effects, the financial decision helps in achieving and maintains business competitiveness and support to survive in a competitive market with sustainable competitive advantages. additionally, external investment decisions bring investment opportunities for Tesco that create value for its business, taking into account the magnitude, opportunity and risk of the future cash flows of investment (Tesco Annual Report, 2019).
Physical Resource Decision
Broadbent (2017) stated that physical resource includes lands and buildings, raw materials, technologies etc. Physical resource decision is one of the most important decisions for an organization for obtaining the goals and objectives of the business. Tesco has created the physical resource decision observing the proper utilization of lands and buildings, raw materials and technologies (Statista, 2018). Effective physical resource decision affects internal functions of business of Tesco in different ways. First, physical resource (including tangible items) management helps Tesco to run its business function smoothly. This is because these physical resources take space, have value, and are sued for managing the business operation of Tesco. As a product-based business, Tesco uses its physical resources for providing goods for sales and operation of the business.
Additionally, managing physical resources includes planning usages as well as obtaining resources with monitoring of their value for money. On the other hand, physical resource decision affects Tesco business in different ways. First, effective physical resource decisions support Tesco in ordering, storing and distributing its products. Then, it helps to maintain good and long-term relationships with its suppliers and customers and other stakeholders. Additionally, effective physical resource decision supports a business to increase its brand image and reputation. For example, Tesco has thousands of stores with attractive buildings and properties across the UK that helps it to increase its brand image (Tesco Annual Report, 2019).
1.2 Evaluate the risks that can occur from inadequate resources in Tesco business
Manpower is a vital element for operating a business and production function. According to Beers (2020), Manpower risk includes selecting uneducated and inexperienced manpower, positioning then manpower at the wrong place, employee strikes, dishonesty, ineffective leadership about human resources etc. According to Tesco Annual Report (2018), Tesco PLC strictly controls and manages manpower risks through human resource management techniques.
Technology (Cybersecurity) risk
Technology is the key element that must be needed of an organization for obtaining the goals and objectives of an organization. According to Davis (2019), Technological risk is one of the vital problems for operating and gaining the objectives of the business. Cyber-attack, brain drain, data defaulting, information gaps etc are the main technological risk for an organization. According to Tesco Annual Report (2018), Tesco handles technological risk very carefully and effectively for obtaining the goals and objectives of the business. For example, cyber attackers stole £2.26m from Tesco Bank customers due to poor debit card security and a “series of errors” in 2016 (Palmer, 2018).
Finance is the lifeblood of business. Organizing and operating business finance are the most important factors. Davis (2019) stated that financial risk includes inflation and deflation, interest rate risk, managing debt and capital etc. Financial risk can destroy a business as well as hamper the operational activities of an organization According to Tesco Annual Report (2018), Tesco PLC technically handles and overcomes the financial risk of the business.
Reputation is another important long-term asset that helps to create a good figure of sales and profit margin of the business. Davis (2019) stated that reputational risk is mismanaged or poorly managed other business risks. Tesco always tries to overcome the reputational risk using social media and other tools (Statista, 2018)…………………………….
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