Research Theme – Manufacturing in the UK

In your research you should consider: the impact of technological change on businesses manufacturing in the UK the impact of increasing globalisation on businesses manufacturing in the UK the impact of government policy on businesses manufacturing in the UK the factors affecting UK location decisions by manufacturing businesses the opportunities and threats facing businesses manufacturing in the UK.

You are strongly recommended to: compare and contrast different manufacturing businesses and forms of manufacturing in the UK consider decisions by businesses to locate manufacturing in the UK, to offshore manufacturing from the UK and to re-shore manufacturing to the UK consider how the nature, profitability and international competitiveness of businesses manufacturing in the UK can change over time

consider how the importance of manufacturing based in the UK – for example, in terms of its scale – is changing over time consider how changes in technology, globalisation and government policy might affect the strategy of businesses manufacturing in the UK.

Understanding financial objectives

Learning Objective To be able to identify and analyse financial objectives. To be able to evaluate the performance of a business using their financial objectives. To be able to evaluate the internal and external influences on financial objectives

Starter Complete the card sort.

Typical financial objectives of a start-up Survival Breakeven Profit

Financial objectives are the goals or targets a business sets itself for its financial performance. Financial objectives for an established business may relate to: Cash flow targets Cost minimisation Return on Capital employed Shareholders’ returns

The Importance of cash flow Revenue is vanity Profit is sanity Cash is KING Source: traditional banker’s mantra

Cash Flow Targets What is cash flow? Cash flow measures actual movements of cash in and out of the business It is important that a business has enough cash to meet commitments as they fall due Cash flow targets will relate to this need

Cash flow Targets Targets may relate for the need for cash at a particular times of the trading year – e.g. a business may need to make a large capital investment in August

Cost Minimisation Targets Examples of cost minimisation objectives could include: Reducing staffing levels Adopting lean production techniques Finding cheaper suppliers Reorganisation Outsourcing activities Waste minimisation

Cost Minimisation Why would a business want to minimise costs? What potential impact could this have on the business?

Return on Capital Employed ROCE measures the amount of profit a business makes in relation to the amount invested by the owners, generally measured on an annual basis. Profit X 100 = % Capital Employed This can be used to compare current performance against past performance. Enables comparisons with other businesses/ investments

Shareholders’ Returns Dividend per share. – Total dividend /total number of shares Dividend Yield – Dividend per share/share price x 100 =..% Total Shareholder Return - A measure of financial performance combining both the dividends paid and the change in share price.

Tesco Read the Tesco case and in groups discuss the questions raised and think about how you would go about answering them.

Internal Influences on Financial Objectives Stakeholders – it is likely the strongest stakeholder (senior manager) will influence the financial objectives. Capacity – May act as a constraint on financial objectives Corporate strategy – Likely objectives will be linked to strategy of overall business. Nature of product – Product that has price elastic demand may set cost minimisation objective Ethical Stance – May devote more resources to minimising their effect on the environment. Meaning financial objectives are less of a priority.

External Influences on Financial Objectives Economic Climate – A stable, growing economy allows more freedom for determining financial objectives. Competition – Activities of other businesses can impact the financial objectives. Consumer tastes – Changes in the market conditions impacting in changing demand levels will alter the scale of financial objectives. Political factors – A change in government can lead to revised financial objectives in some markets. Legislation – More legislation = more costs = less optimistic financial objectives.

External Influences on Financial Objectives World Events – Changing commodity prices will impact a businesses financial objectives Pressure Groups – May persuade companies to focus more on environmental targets such as Greenpeace. Population Trends – Currently the UK has an ageing population, so some markets may benefit from increased demand which influences their financial objectives.

In pairs pick one of the businesses below. What might be their financial objective and what could be the internal and external influences on this?

Canon Read through the case study and answer the 10 mark question.

Homework Using the Invicta Case Study answer the Analysis and Evaluation Question provided for Homework 1. Due this time next week.