Going for Growth by Investing in People, Products and Plant - Essay Example

?Going For Growth by Investing In People, Products and Plant Table of Contents Table of Contents 2 Question 3 Introduction 3 Discussion 3 Conclusion 4 References 5 Question 2: 6 Introduction 6 Discussion 6 Conclusion 7 References 8 Question 3: 9 Introduction 9 Discussion 9 Conclusion 10 References 12 Question 4: 13 Introduction 13 Discussion 13 Conclusion 14 References 16 Question 1: What is meant by investment appraisal? Discuss three main reasons that led Hazlewood Sandwiches to make capital investment. Introduction Investment appraisal can be considered as a key factor for any business that influences a firm’s decision to make cash outflow with the intention of gaining substantial cash inflow in future. It is often used to identify the potential capital investment made by a firm as well as measure its potential value (Lumby, 1988; Gessinger, 2009). Discussion The three primary reasons that led towards Hazlewood Sandwiches to make capital investment include growth opportunity, opportunity to earn higher return on the capital invested through utilising modern facilities and increase its overall productivity substantially in future. Contextually, it can be stated that the sandwich market in the UK is constantly increasing and thereby creating greater demand for the product. In this similar context, it has been apparently observed that people in the UK have less time to cook food and prefer prepared food such as sandwiches rather than making their own as they are engaged in performing various works. Unarguably, it can also be stated that the quality of food product of Hazlewood such as sandwiches has been improving considerably that ultimately attract the customers and thus raises business reputation. Additionally, the improvement in the technologies has also increased the production capacity of the company by a significant level. Thus, in order to grab the advantages of the above stated opportunities, Hazlewood Sandwiches has made considerable capital investments. Apparent to the vast opportunity within the UK sandwiches market, the company has made two vital investments in its manufacturing procedure. The investment was made in the year 1998 when the company acquired Breadwinner Sandwiches in London having the production capacity of 1 million sandwiches per week. In addition, Hazlewood Sandwiches has invested ?25 million to build a factory site named Manton Wood in order to prepare several quantities of sandwiches. This factory site of the company is regarded as the largest sandwich producing plant in the world (Driver &Temple, 1999). Conclusion Investment appraisal is one of the crucial factors that for obtaining internal and external source of funds. Hazlewood Sandwiches has made two significant capital investments in the past years. The primary objectives behind the company’s substantial capital investments was to avail the prevailing opportunities in the UK sandwich market to gain higher rate of return on the capital invested and thereby to attain superior growth and expansion (Driver &Temple, 1999). References Driver, C. & Temple, P., 1999. Investment, Growth and Employment: Perspectives for Policy. Routledge. Gessinger, G. H., 2009. Materials and Innovative Product Development: Using Common Sense. Butterworth-Heinemann. Lumby, S., 1988. Investment Appraisal and Financing Decisions the VNR Series in Accounting and Finance. Taylor & Francis. Question 2: Discuss the differences, advantages and disadvantages of the three investment decision techniques mentioned in the case. Introduction Hazlewood Sandwiches undertook three primary methods of investment appraisal namely payback method, Net Present Value (NPV) and Accounting Rate of Return (ARR) method in order to apprise and evaluate the value of the investment made by the company (Gotze, & et. al., 2008). Discussion The payback method critically considers the length of time in order to recover capital invested by the company. It is worth mentioning that the payback method takes into concern cash flow activities. The major advantages of this method are that it enables quick evaluation of the investments made at reasonably low costs. On the other hand, one of the major disadvantages of the method is that it disregards the time value of money (Rohrich, 2007). Similarly, in order to determine the NPV of an investment, entire list of cash flow activities need to be prepared and collected. After compiling the entire cash flow information, the net cash flows are discounted on the basis of cost of capital. It is the crucial point to be noticed that when NPV is negative, the investment decision should be rejected, while when NPV is positive, the investment decision should be duly accepted. Accordingly, the major key advantages of the NPV method can be related as the method considers both time values of money as well as entire cash flow activity. On the contrary, the major drawbacks of the method are that the method expresses in terms of dollars rather in percentages as well as the method requires estimated costs of capital for calculating the NPV (Rohrich, 2007). In addition, the method of ARR involves the utilization of accounting numbers and average net profit is derived from the company’s income statement. Additionally, it has been viewed that the companies determine their respective ARR and compare the calculated ARR with the amount of investments made. Notably, if the calculated ARR is greater than those set by the company, it implies that a particular project can be accepted. The key advantage of the method is that it is easy to calculate while as oppose to NPV, the method does not considers effective cash flow generation and time value of money (Rohrich, 2007). Conclusion The three primary methods of investment appraisal and evaluation have their own distinctive advantages and disadvantages that facilitate the management of Hazlewood to select one of the any aforementioned methods. Notably, payback method can be considered as the simplest method of all the other two methods. This is owing to the reason that payback as well ARR method does not take into consideration the time value of money. On the contrary, NPV method expresses in dollars instead of percentage that often makes it difficult to appraise the investment (Rohrich, 2007; Jones, 2004.). References Gotze, U. & et. al., 2008. Investment Appraisal: Methods and Models. Springer. Jones, T., 2004. Business Economics and Managerial Decision Making. John Wiley & Sons. Rohrich, M., 2007. Fundamentals of Investment Appraisal: An Illustration Based on a Case Study. Oldenbourg Verlag. Question 3: Explain why it’s important for organizations to invest in people. Describe ways in which organizations, such as Hazelwood, invests in its employees. Support your answer with other examples. Introduction It has often been argued that people are the most important resources within a particular organisation. It is the people who deal with other resources accessible in an organisation that ultimately raises its operational efficiency as well as productivity by a considerable level. Thus, it can be perceived that the organisations should make considerable investments especially on its people for sharpening their skills and knowledge in order to ensure greater productivity as well as quality of products and thereby attaining enhanced profitability (Aswathappa, 2005). Discussion In relation to Hazlewood Sandwiches, the company can be regarded as labour intensive. Though, machines and equipments are used in the company during the manufacturing process, but human hands are still used to add a few of the major ingredients that are needed to make the sandwiches delicious and tasty. Thus, it is equally important that the labour productivity within the company remains reasonably high while the absenteeism remains relatively low. At the same time, the company should strive hard to reduce labour turnover and recruit those individual who possess much talent and quality (Phillips, 2005). It has been apparently observed that Hazlewood Sandwiches invests in its employees through several ways. The ways include providing excellent working surroundings and designing attractive induction programs among others. However, it is not an easy task for the company to achieve its predetermined business goals without focusing upon its people or making substantial capital investments. Therefore, it is been suggested that the company should thoroughly conduct the performance appraisal of its employees in order to identify the major strengths as well as weaknesses of its entire workforce. Designing an effective employee training and development programme may result in making considerable investments on the part of the company but it will benefit the company to retain skilled and competent employees providing long term benefits to it. Moreover, the company should also design attractive reward programmes and recognize the outstanding performance of its employees in order to motivate them towards serving their best to the company (Phillips, 2005). For instance, McDonald’s in recent times has introduced effective staff training and developmental programs that eventually facilitated the company to deliver quality products or services through its several restaurants across the globe (Pride & et. al., 2006). Conclusion Staff training and development is one the crucial factors that need to be critically understand by the entire organisation in order to accomplish better results from the efforts derived from their employees. With respect to Hazlewood Sandwiches which is viewed to be a labour intensive company will require making investments particularly on staff training and development programme. This initiative would support the company to develop as well as to retain skilled employees resulting in enhanced productivity and substantial revenue generation (Phillips, 2005). References Aswathappa, K., 2005. Human Resource and Personnel Management, 4e. Tata McGraw-Hill Education. Phillips, J. J., 2005. Investing In Your Company's Human Capital: Strategies To Avoid Spending Too Little or Too Much. AMACOM Div American Mgmt Assn. Pride, W. M. & et. al., 2006. Business. Cengage Learning. Question 4: “Many businesses see their workforce as their greatest asset”. Discuss from the HRM function and the accounting function perspectives. Introduction The competitive workforce possessing necessary skills and knowledge is extremely important for the success of any organisation. Unarguably, it can be stated that without the competent workforce, all the other sources of production are inefficient. Thus, it is crucial for every organisation to consider their workforce as greatest assets (Werner & DeSimone, 2011). Discussion In this highly dynamic business world, the role of human resource (HR) in enhancing business or operational productivity has grown significantly. It is also admitted that the role of HR is further likely to expand in the years to come. Contextually, it has been argued that the primary reason behind the increasing role of HR is intangible assets. Intangible assets in this sense can be defined as the assets that add to the value of an organisation but cannot be ascribed to physical or tangible assets. It is often regarded as the outcome of the skills and competencies possess by the entire workforce of an organisation. Furthermore, from the standpoint of human resource management (HRM), recruiting, training, developing and retaining workforce is considered to be the vital elements for the prosperity of an organisation. It has been often been advocated that skilled and competent workforce can contribute significantly to an organisation that can help in increasing its productivity and efficiently managing its customers by ensuring utmost customer satisfaction (Analoui & Karami, 2003). In relation to accounting function, the role of workforce is much crucial for an organisation to attain its predetermined business targets. Workforce dealing with accounting functions plays a decisive part in identifying as well as addressing various issues faced by an organisation such as risk management, financial reporting and other operational or business areas. The accounting workforce of any organisation has to deal with three vital accounting functions that include financial accounting, management accounting and cost accounting. As a function of management accounting, the workforce implements the strategies into actions for creating value for customers. Similarly, as financial accounting function, organisational workforce is required to track and record every transaction made by the organisation. Furthermore, this workforce is also held responsible for reporting organisational financial position to external and internal stakeholders. Additionally, the workforce dealing with cost accounting is liable for analysing as well as measuring financial information followed by non-financial information that provides insights about the procurement of resources needed for conducting smooth operational functions of an organisation (Belkaoui, 2004). Conclusion The role of workforce from both the functional perspectives of HRM and accounting is pivotal for any organisation. In this current business environment, workforce of any organisation is required to perform multiple tasks in order to conduct their business operations successfully. Thus, it can be stated that skilled and competent workforce in the business is the greatest asset of a specific organisation (Analoui & Karami, 2003; Belkaoui, 2004). References Analoui, F. & Karami, A., 2003. Strategic Management: In Small and Medium Enterprises. Cengage Learning EMEA. Belkaoui, A. R., 2004. Accounting Theory. Cengage Learning EMEA. DeSimone, J. M., 2011. Human Resource Development. Cengage Learning. Read More