Tesco and Morrisons - Business Performance - Case Study Example

March 3, Business_Performance Task The term Efficiency refers to business activities that uses the least possiblecosts to accomplish the prescribed targets, goals or objectives. For example activity one requires paying two neophyte employees to perform is less efficient compared to hiring one expert employee to finish the same job within the same length of time and with the same quality output. In the same manner, efficiency occurs when activity one requires one employees using lesser time length to perform the same task than another employee producing the same quality output (Hilton, 2011). Further, the effectiveness term refers to business activities that accomplishes the same prescribed tasks. For example, Salesperson A’s February 2015 sales exceeds the sales benchmark by 20 percent. Salesperson B’s February 2015 Sales is 10 percent below the prescribed monthly performance targets. Salesperson A’s business activity effectively reaches the prescribed benchmark. Salesperson B’s sales activity is effective enough to meet prescribed sales goals. Task 2 Businesses are interested in achieving higher efficiency levels and effectiveness levels because the result is reduced expenses. Activities that accomplish the assigned tasks using the least possible expense amounts (salary expense and other related expenses) will generate savings needed for other urgent expense-laden activities. Second, accomplishing the assigned tasks within the shortest possible time at the same quality will contribute to more sales compared to production taking twice the amount of time to produce and sell. The time saved will result to more products sold within the same time period. By hiring experts in the production process, the company is able to produce high quality products within lesser time than hiring a neophyte or new employee who had no prior experience on the assigned production tasks or responsibilities. New employees need apprentice training to learn how to work better and faster during their early employment period, compared to hiring experts. Third, activities that accomplish assigned tasks with less time and less expenses will increase organizational net profits. The net profit in accounting and business parlance is called the bottom line. Managers and business entities are judged using the net income output. If the company generates a net income output for one accounting period, the business company is favourably performing profitably or viably. However, a net loss output unfavourably shows the business entity is unfavourably not performing well. With the efficient and effective management of the company’s scarce resources, the net profit output will increase. On the other hand, wasteful production and marketing activities may lead to a reduction of the projected net income, possibly creating an avoidable impression on the investors that the company’s performing, net loss, generates a failed grade. Task 3 A. Based on the above total_assets turnover_ratio table, Tesco more efficiently used its total assets to generate revenues (Hilton, 2011). Tesco’s 2014 total_assets turnover_ratio, 2.31 is favourably higher than its 2013 ratio, 1.26 (Tesco, 2014). On the other hand, Morrisons’ 2013 total_assets turnover_ratio, 1.70 is unfavourbly higher than its 2014 ratio, 1.66 (Morrisons, 2014). B. The above fixed_assets turnover_ratio table clearly shows Morrisons’ fixed_assets turnover_ratio is favourably better than Tesco’s ratio (Hilton, 2011). Morrissons’ investment in fixed assets was more than adequate to generate a higher ratio, 6.861 than its 2013 ratio, 1.949. Tesco’s 2014 ratio for 2014, 3.024 was more than adequate to generate its revenues compared to its 2013 period which only generated a lower 1.455 ratio. C. The above revenue to working capital ratio table indicates Morrisons had more efficiently used its working capital to generate revenues during 2013, (17.30), than its 2014 period’s ratio, 43.93 (Hilton, 2011). Similarly, Tesco had more efficiently used its working capital to generate revenues during 2013, (10.99), than its 2014 period’s ratio, (11.02) D. The above table operating ratio table shows Morrisons’ cost of operating the business for the two years remained fixed at 95 percent. Similarly, Tesco’s cost of operating the business for the two years remained fixed at 95 percent (Hilton, 2011). E. Based on the above return_on investment table, Morrisons was more efficiently during 2013 in using its total assets to generate net profits, 8 %, than its 2014 operations, 6%. However, Tesco business operations indicated Tesco’s efficiency for 2013 and 2014 remained the same, generating 1 % ratio (Hilton, 2011). Task 4 The use of financial ratios as performance indicators has some drawbacks. First, the financial ratios do not take into consideration the product quality or the employees’ customer service quality in the computation of each ratio. Second, the ratios indicate past performance but do not assure 100% the same trend will replicated in the future. A good example is the 2008 global financial depression that proved financial ratios are not 100 percent foolproof. Third, the financial ratios may contain significant errors or fraudulent amounts. A good example is the infamous Enron accounting scandal where fraudulent ratios fooled and victimized many innocent investors who relied on the financial ratios (Hilton, 2011). Task 5 Business Process Perspective. The business perspective focuses on how managers will gauge the operations of the entire organization. Metrics are used as guide for the managers’ and subordinates’ job performance. Line and staff employees must do their best to help achieve the company’s mission, vision, goals, and other objectives. For example, sales managers may be gauged by the amount of revenues generated by one’s department. If the sales subordinates cannot meet group quota, the lackluster performance of the subordinate sales performance may create a negative image of how the sales manager recruits, trains, develops, promotes, or fires employees (Niven, 2010). Customer Perspective. The business must focus on how well customers’ needs are met. The business must prioritize finding the needs of the prospective customer by conducting feasibility studies and regular surveys. The customers are encouraged to submit their complaints. In return, the company’s complaints department will do its best to resolve (fix) the customers’ complaints. The company is gauged on whether their products and services fill the current and future needs of the customers. A low revenue production may indicate that the customers may not be interested in the company’s various products. Management can implement certain strategies to improve the customers’ current low demand for the company’s products and services. One strategy is increasing its marketing (advertising) efforts. Another strategy is to bring the products to the prospective customers by setting up branches within the prospective customers’ reach. Another strategy is to improve the quality of the products. A third option is to offer reasonable or even possibly start up low sales prices to attract new, unfamiliar, and doubting prospective clients. The company must determine if why some of the company’s current customers are shifting to the competitors’ products and services. By doing so, the company can implement marketing strategies that will bring back the straying customers such as resolving customer complaints and lowering the prices to the level of the competitors (Niven, 2010). Learning & Growth Perspective. The learning as well as growth perspective focuses on the process of training employees to deliver quality work outputs. The company explains the company policies and culture to the employees to ensure compliance. By understanding the company policies, the employees are aware of what is expected of them in every situation within the company premises. Funds may be allocated to train the greenhorn employees to gain the expertise needed to complete each task within the required time and how to ensure employees generate the expected quality outputs. After the training, the employees’ workouts are taken. Management may implement several strategies to improve the lackluster performing employees. Training success involves several parties. Well trained trainers will enhance the employees’ learning process (Niven, 2010). Task 6 Based on the above discussions, Both Tesco performed financially well during 2013 and 2014. Morrisons was able to generate favorable total_assets turnover_ratio (Hilton, 2011). Similarly, Tesco was able to generate favorable total_assets turnover_ratio for both 2013 and 2014. In addition, Both Tesco and Morrisons was able to generate favorable fixed_assets turnover_ratio for 2013 and 2014. Morrisons had a higher increase in its revenue from 2013 to 2014 to working capital ratio than Tesco’s performance from 2013 to 2014. Both Tesco and Morrisons generated similar 95 percent operating expenses to generate sales for both 2013 and 2014. Lastly, Morrisons performed better than Tesco in the use of total assets to generate each year’s net profit figure or return_on investment picture. In terms of the balanced scorecard, both Tesco and Morrisons generated favorable outputs in the three non-financial factors. Both Tesco and Morrisons used sales, expenses, assets, expenses and other metrics to determine if the company performed financially better or worse in one accounting period. Similarly, Both Tesco and Morrisons focused its marketing and production activities to delivering quality products needed by customers at reasonable prices. Finally, both Tesco and Morrisons ensure all sales personnel are trained with the capabilities to serve the different needs of the current and future customers, including knowing the location, prices, benefits, and other information on the customer’s requested grocery items, other products as well as services (Niven, 2010). References: Hilton, R. (2011). Managerial Accounting. London: McGraw-Hill Press. Morrisons. (2014). Yahoo Finance. Retrieved March 3, 2015, from https://uk.finance.yahoo.com/q/bs?s=MRW.L&annual Niven, P. (2010). Balanced Scorecard. London: J. Wiley & Sons Press. Tesco. (2014). Yahoo Finance. Retrieved March 3, 2015, from https://uk.finance.yahoo.com/q/is?s=TSCO.L&annual Read More