Managing Financial Resource and Performance: Coca-Cola and Barclays - Assignment Example

Management of financial resources and performance Table of Contents Table of Contents 2 2 Task I: Coca Cola Company 3 Task II: Barclay’s audit 5 Strategic Analysis of the company 6 Financial Appraisal 8 Task III: 123 LTD Company 9 USA 9 France 9 Switzerland 10 Reference List 11 Task I: Coca Cola Company The company chosen for the purpose of stakeholder’s analysis is Coca Cola. The company is engaged primarily in the business of bottled aerated drinks. Over the years, it has expanded its product scope and entered into various other brands under the company name. The size of its business guarantees a huge group of stakeholders who are associated with the company in some form or the other. The stakeholders of the company include the customers, the employees, the shareholders, the suppliers and the regulatory authorities. Each company has some responsibility towards each one of these categories of stakeholders. Different stakeholders have competing and sometimes even conflicting interests with the company. It is the job of the company to ensure that a proper balance is strike between the two types of interests (Reeve, Warren and Duchac, 2012). Figure 1: Stakeholder Mapping Model (Source: Professional Academy, n.d.) Government: The government is concerned with the compliance o food grade standards and production quality maintenance of Coca Cola Company. Coca cola has to make sure that the food produced is of highest quality and complies with the adherence standards of the regulatory norms. Creditors: for the benefit of its creditors which include company distributors and vendors, the company organizes creditor meetings and also conducts regular surveys through distribution satisfaction survey. Training programs educate on the manner of sales and distribution is conducted at regular intervals by the company at its various head offices (CCI, 2010). Suppliers: for the benefit of suppliers and for engagement in sustainable relationships with the suppliers and contractors of the company, Coca Cola Company conducts Improvement Audits on a regular basis. It also organizes regular training programs among its suppliers for proper and standardised sourcing of ingredients for its produce. Plant visits educate suppliers about their quality standards and compliance level expected off them. Media: For the media, the company has regular publications of annual reports, press releases and CRS reports. The analysts can also come to investor conferences and analyst meetings when they are held. On any occasion the media can contact the company of the CCI Corporate Website and put their queries through the Online Feedback forms. Regulatory Bodies: the regulatory bodies are concerned with the environment friendliness of the production and waste disposal processes undertaken by the company. The production line and waste management teams of the operations department at Coca Cola have to assure that all different standards of environmental compliances are adhered to and managed (Hood and Lee, 2011). The aim of Coca Cola is to provide for safety in the work environment and there is a special team that is dedicated towards regular inspections towards environmental compliance. The team CCI is also the first registered member of the Copenhagen Communiqué and the Cancun Communiqué which addresses the issues pertaining to global warming and changes in climate. Competitors: Board of Directors: the company has a responsibility towards the board of directors to sustain profitability and maintain businesses in a sustainable manner. The company has had a sparkling performance and a sound track record since its foundation. The present profit figures of the company provide a remarkable Unions: Towards the unions which protect the rights of different shareholders, the Coca Cola Company has assumed responsibility by forming various collective labour agreements which work towards employee welfare. It also conducts regular plat visits and promotes the annual selection of union representative who shall work towards the benefit of the employees and speak up for the segment of stakeholders (CCI, 2010). Management and Staff: the company has identified its responsibility towards its employees. For the purpose of understanding the direction of employee interests and welfare situation in the company, it takes part in surveys like Employee Loyalty and satisfaction survey and Internal Customer Satisfaction survey. To enhance communication with the employees and also to be heard well by this group of people, the company conducts regular open door meetings to hear the views and pinions of its management and staff (Tham and Vélez-Pareja, 2003). The company also provides enough opportunities for growth and development of its staff within the organization through various CCI training programs. Such training programs also include leadership training programs, sales development training system and sales incentive systems. The company recognises its staff for high performance and for the purpose of motivating its employees and promotion of innovative thinking within he company, Coca Cola organises the CCI inventor competition program. Shareholders: Over the years, the company has floated abut USD 500 million worth of securities under both fixed and floating models (Reeve, Warren, & Duchac, 2012, Pp3485). The beverage company also plans to raise profits to the tune of USD 200 billion within bottling section alone. For the purpose, Coca Cola plans to raise prices of its beverages and also develop methods by which it can attract additional customers towards consuming its beverages. Lobby Groups: Lobby groups who protect the right of employees and NGOs that seek the support of Corporate for financial and physical assistance have not been disappointed by Coca Cola. In Jordan, Coca Cola educated about 1230 students in association with INJAZ and USAID (Schofield and Bowler, 2011). The Coca Cola Company transferred about 3% of its pre-tax profits towards Coca Cola Life Plus Foundation and Anadolu Education and Social Aid Foundation that work towards development of community within which the company operates. Industry Organizations: Industry organizations refer to those organizations that have been working for the benefit and right behaviour of industry at large. Consumers: For the registration of consumer complaints and to be heard by the ultimate consumer over their issues and problems, Coca Cola Company has a dedicated customer support cell over their website. To keep the consumer aware of the latest updates on the company as well as about various food products produced by them and of the different details pertaining to these items, the company has a Coca Cola Information Centre which is dedicated solely towards the task of consumer information. The company is also regular with different publications and also organizes plat visits for consumer interests (Friedlob, 2002). Task II: Barclay’s audit The company chosen for the purpose of analysis is Barclays Bank which is listed on the FTSE 250 list. Barclay is a major financial service providing company that is originally based in the United Kingdom (UK). It has grown over the years to become the indisputable leader of the financial sector in the presence of a coordinated and multinational global financial services sector. An analysis of the present financial position of the company indicated that the firm is presently having issues with its profit making ability and is facing a declining trend in profits. The profits were £131,400 in 2010 and it fell to £149,673 in 2011. The declining trend continued and the profits fell to £121,907 in 2012. Over the years, the company has spread over 7 nations across the world and employs more than 80,000 people globally. The mission of the financial service provider is to become the innovative company and to deliver customer oriented high quality and extensive products to its clientele. With this, they aim to ward raising he standards of living of communities within which they serve and prosper through delivery of their services. The current business strategy of Barclays bank is to entail perpetual advancement in business performance and this shall be central to its motivation objective for its staff and the cornerstone for achievement of its business success. Under the leadership of Mr Mark Carawan, the firm has conducted extensive and outline evaluations of audits conducted in several regions with an intensive approach (Albrecht, Stice & Stice, 2011). This gauges and re-assessment of the work conducted guaranteed notable improvement if quite some critical areas. It also helped in providing insights about the primary target areas where subsequent alteration and improvements were made possible through the audit analysis. Such improvements were guided towards development and enhancement of methodologies that were applied towards the audit process. Regular and timely scrutiny of the methods adopted for data analysis made sure that those delicate and touchy issues were exposed and such issues were pertaining to development and implementation of new methods for operations development at the managerial levels. Continuous scrutiny also guaranteed that the earlier methods of audit processes was converted and evolved to suit the changing trend of the business scenario and also made them upgraded to gain compliance standards as set by the new rules in the banking sector. The banks have, in the process, become upgraded to higher technology platforms and communications standards (Baker, 2010). Strategic Analysis of the company Barclays has recently announced its strategic review and plans to make sea changes and aim to make Barclays a ‘Go To’ bank for all its stakeholders. The plan includes a rigorous review of about 75 different business units in order to determine their ability to make profits and also make them generate sustainable return on equity. Such a move is aimed at developing strategic attractiveness of units along with a development of brand reputation within them. The highlights of the commitments of the new strategic revamp plan are: Provision of higher disclosures and transparency norms Publish of annual scorecard for performance assessment and embed a purpose of values all across Barclays. On the financial front, the business aims at delivering a return on equity for the entire group that is over and above the estimated cost of equity at 11.5% (Team Trefis, 2014). The banks plan to accelerate the progressive nature of its dividend policy and thereby increase the pay-out ratio to 30%. The group plans to reduce its cost base by about £17 billon till 2015. Such a reduction shall also encompass a reduction in interim costs of £17.5 in 2014 and excludes a single time cost of £ in 2014 and £0.7 billion in 2015 towards strategic planning (Barclays, 2013). In the same plan, Barclays also aims to reduce labour by about 3700 people of which 1800 shall be reduced from investment and corporate banking while 1900 shall be removed from Retail and business banking in Europe (Barclays, 2013). For strategic review of the risk weighted assets, the company aims towards targeting a total risk weighted assets of about £440 billion till 2015 (Akuoko, 2012). The actions to be taken in attempting towards attainment of the above objectives, Barclays provide strategic review. The aim of the company is to focus solely towards all those activities that might help the company in attainment of support of its customers and clients in different businesses and geographic markets and develop areas where Barclays enjoys a competitive advantage and scale of operations. The strategic attempts also aim towards UK, Africa and USA for investment opportunities and developing a presence across the European markets as well as Asian markets for supporting its global investment banking franchise. The businesses also aim towards restructuring the company’s European retail operations along with investment banking scenario and focus towards mass affluent segment of customers. Repositioning Barclays European equities and Asian equities along with the investment banking sector shall reflect the market opportunities and also help in maintaining a relevant proposition of the clientele. In the attempt towards cost reduction, the business aims at closing down its structured capital market businesses. These actions and commitments built by Barclays is a part of the ‘transform’ program undertaken by the company that comprises of three levels, turnaround phase, generating acceptable number of returns and sustaining a forward momentum. Performance appraisal is a tool for evaluation and assessment of the performance of employees within the organization. It also acts as a motivation tool for employees. Barclays, is seen as a group that has a distinct culture and identity which is more dynamic, collaborative an innovative. This is supported by a management who has set clear expectations regarding behaviour of its employees. Such expectations have led to development of customer satisfaction scores and an employee behaviour that is increasingly playing a higher role in performance appraisal processes within the bank. This has also been a source of deciding remuneration in the past.it has been heard that the group has a dedicated leadership team which is devoted towards the task of laying emphasis over the issue. This perhaps, pervasively highlights the distinct nature of Barclaycard culture and can be taken as a pride for making an effort towards the challenge of giving purpose and values to the transform program. The employee opinion survey results have shown relatively higher results that the rest of the banks and the employees have ranked quite high on showing abilities that can help in change the traditional ways of doing business in Barclays, developing effectiveness in line management and building a strong culture for cooperation. Financial Appraisal Barclays Bank has shown a consistent growth strategy over the years and sustained it even during the years of financial crisis across the globe. The revenues for the year 2013 have shown a rise from £26925 million to £30192 million. The gross operating income saw a significant rise frim -£1528 million to a £1449 million. This led to a rise in operating margin from -5.7% to 3.8%. The net income for the concern also saw a rise from negative figures to a positive of GBP 540 million in 2013 (Financials.morningstar, 2014). On the front of ratios the company saw a rise in return on equity from -1.91 to 0.99. The return on assets also saw a significant rise from-0.07 to 0.04. This shows that ‘transform’ project seems to be taking some shape in the economy. Similarly the financial leverage of the company has fallen to 23.69 indicating fall in debt obligations and interest payments of the firm. The debt equity ratio also saw a decline from 2.68 to 1.57 which shows that Barclays is reviving and coming towards the ideal ratio requirements of debt equity ratio (Financials.morningstar, 2014).. On delving into cash flow analysis, it was found that the company is incurring a negative cash flow to sales ratio indicating that it does to have enough cash to run its daily operational needs of the business. The cash flow position has also seen a fall from the previous levels in 2012 when it ran positive. While determining efficiency of the company, it was found that the fixed asset turnover rose to 7.29 while asset turnover was stagnant at 0.2 (Financials.morningstar, 2014). This indicated that operational outflows were much higher while the inflows were low and had an impact on the turnover. This put additional cash burden on the firm. The stockholders equity of the firm saw a rise from 3.6% to 4.22% where liabilities fell from 96.4% to 95.78%. Such fall in liabilities was on account of a fall in long term debt from .64% to 6.61%. Task III: 123 LTD Company The investment appraisal technique appropriate for this project based on the available data is the Return on capital employed method or the ROCE. The investment appraisal technique makes an assessment of the expected levels of returns from a particular investment proposition in exchange of the expenditure made and it also estimates the future cost and benefits that accrue over the life of the project (Mizrahi, 2013). The ROCE uses average annual profits made by the company before interests and taxes and divides it by the initial capital to get the returns. It is also known as the ARR or the accounting rate of return (Laro, 2005). The advantage of ROCE technique is that it is simple to use and can be easily linked to the accounting measures. The disadvantages of the ROCE method are that it does not take the project life or the cash flow timing into consideration. USA Revenue: USD700k Average Revenue for 6 years with exchange rates provided: [700/2.1+700/2.2+700/2.3+700/2.1+700/2.25+700/2.5]/6= (333+318+304+333+311+280)/6=1897/6= £313 Annual Running Expenses: £210k Average annual Approval fee expenditure: £22k Average Annual Profits = 313-232 = £81k ROCE: [81/ (210+22)] * 100= 35% The annual approval fee is included within the annual expenditure. The return on investment is expected to be about 200% on an annual investment of £210k for running the operations of the business in USA. France Revenue: EURO 450k Average Revenue for 6 years with exchange rates provided: [450/1.8+450/1.9+450/2.0+450/2.1+450/1.95+450/1.9]/6=1394/6= £232 Annual Running Expenses: £190k Average annual Approval fee expenditure: £25k Average annualised Royalty fee: £25k Average Annual Profits = 232-240 = -£8k ROCE: [-8/ (190+25+25)] * 100= -3% The paper provides for exchange rates of Pound Sterling to Euro and the expenses have been assumed to be constant for the 6 year period. The data has been used to calculate the average annual expenditure over 6 years. The returns obtained by the project upon investment do not yield profits. The losses however are close to breaking even giving losses to the tune of 3% to the company. Hence the possibility of investment in France is rejected as it fails to yield any profits. Switzerland Revenue: Swiss Franc 3800k Average Revenue for 6 years with exchange rates provided: [3800/10+3800/12+3800/14+3800/12+3800/13+3800/14]/6=380+317+271+317+292+271=1848/6= £308 Annual Running Expenses: £200k Annual License fee expenditure: £30k Average annualised Inspection fee: £70k/3 = £23.3k Average Annual Profits = 308-253.3 = £54.7k ROCE: [54.7/ (200+30+23.3)] * 100= 22% The total inspection fee is £710 for 3 years and it has to be continually paid. Hence, the annual inspection fee comes out to be about £23.3k. The paper provides for exchange rates of Pound Sterling to Swiss Francs and the expenses have been assumed to be constant for the 6 year period. The data has been used to calculate the average annual expenditure over 6 years. Investment in Switzerland provides profits to the tune of 22% with an investment of £253.3k. Hence this project is also viable. Between the project in USA and that in Switzerland, the project in USA is chosen because it assures higher returns to the tune of 35% as against 22% in Switzerland. Additionally, USA commands lower investment requirements of £240k as against higher investment requirements of about £253.3k in Switzerland. Reference List Akuoko, K. O., 2012. Performance appraisal as employee motivation mechanism in selected financial institutions in Kumasi, Ashanti region of Ghana. International Journal of Multidisciplinary Research, 2(6), pp. 20-37. Albrecht, W. S., Stice, E. K. and Stice, J. D., 2011. Financial accounting. Mason: South-Western/Cengage Learning. Baker, R. 2010. The trade lifecycle behind the scenes of the trading process. New Jersey: Wiley. Barclays, 2013. Barclays Strategic Review. [online] Available at: [Accessed 12 July 2014] CCI, 2010. Corporate Social Responsibility Report. [online] Available at: [Accessed 12 July 2014] Financials.morningstar, 2014. Barclays PLC. [online] Available at: [Accessed 12 July 2014] Friedlob, G. T. 2002. Essentials of Financial Analysis. New Jersey: John Wiley & Sons. Hood, L. P. and Lee, T. R., 2011. A Revierers handbook to business valuation practical guidance to the use and abuse of a business appraisal. New Jersey: John Wiley & Sons. Laro, H. D., 2005. Business Valuation and Taxes Procedure, Law, and Perspective. New Jersey: Wiley. Mizrahi, C. S., 2013. Getting started in value investing. New Jersey: Wiley. Professional Academy, No date. Stakeholder Mapping. [online] Available at: < http://www.professionalacademy.com/news/stakeholder-mapping-marketing-theories> [Accessed 12 July 2014] Reeve, J. M., Warren, C. S., and Duchac, J. E., 2012. Accounting: using Excel for success. Mason: South-Western Cengage Learning. Schofield, N. C. and Bowler, T., 2011. Trading the fixed income, inflation and credit markets: a relative value guide. Chichester: Wiley. Team Trefis, 2014. A Look At Barclays Revamped Strategy And Its Impact On The Banks Shares. [online] Available at: [Accessed 12 July 2014] Tham, J., and Vélez-Pareja, I., 2003. Principles of cash flow valuation. Oxford: Oxford. Read More