The Comparative Financial Performance of the Four Centres - Case Study Example

Calculate and evaluate the comparative financial performance of the four centres $ billion America % Change Europe % Change Asia % Change Africa % Change Sales $ 2016 5.4 35% 3.6 38% 2.4 59% 0.6 65% Sales $ 2015 5.5 36% 3.52 37% 1.65 41% 0.33 35% Sales $ 2006 4.55 29% 2.45 26% 0% 0% 15.45 100% 9.57 100% 4.05 100% 0.93 100% Costs $ 2016 4.8 38% 3.2 41% 1.6 56% 0.4 60% Costs $ 2015 4.41 35% 3.06 39% 1.26 44% 0.27 40% Costs $ 2006 3.5 28% 1.5 19% 0% 0% 12.71 100% 7.76 100% 2.86 100% 0.67 100% Inv’t $ 2016 104 37% 32 37% 25 56% 8 62% Inv’t $ 2015 100 36% 30 34% 20 44% 5 38% Inv’t $ 2006 75 27% 25 29% 0% 0% 279 100% 87 100% 45 100% 13 100% An evaluation of the comparative financial performance for the for centres Sales Analysis From the evaluation above, it is evident that the company is having a growth in sales level with production in America depicted the highest sales of 15.45 billion for the last three years with a great in Each financial period, followed by Europe depicting a net sales of 9.57 billion with a growth in sales level for each period followed by Asia reporting a sales of 4.05 billion the Africa at 0.93 billion[Chr16]. In this regards, the business must focus on ensuring that the production capacity for every region is met in terms of steady supply of raw material, improved logistics as well as sufficient capital to fund capital project based on the need and extent to business performance as appraised by the size of the company’s profit creation and amount of capital invested. The head office must ensure that there is an effective capital allotment in terms of allotting capital requirement to the regions with the most profit creation and the size of capital investment to the least. This will provide equitable share of resource from head office and hence, it make the sales and business growth by region to be rational and growing very fast which is a signal of business continuity and profit creations. Cost Analysis With regards to cost analysis, it can be observed that America is leading t net cost of 12.71 billion which is growing each followed by Europe at a net cost of 7.76 billion with const growth each year, Asia is the third biggest cost consumer at 2.86 billion and then Africa at 0.67 billion with growth in cost each year respectively. The business must therefore ensure that the is effective cost management in order to ensure that only the relevant cost are incurred in generating profit by every region. Effective cost will make the business to improve on its profitability since, unnecessary cost eats up the business reported net profit and hence, there is need to classify the cost based on fixed and variable cost and to record the cost in their respective classes.= for better cost accounting. Investment Analysis With regards to investment, America is the leading capital investment centre with investment cost of 279 billion, followed by Europe with growth of 87 billion then Asia at an investment cost of 45 billion and then Africa incurring an investment cost of 14 billion. The four cost centres all depict a growth in investment for the three financial periods respectively. Evaluate relevant performance measures for Wingdart Inc and comment on risk issues Profit This is one of the very important performance indicators for the business performance. It is important to examine the gross and net profit for the business to better comprehend the success of the business with regard to income generation. This risk issue of using profit to evaluate business performance is that, profit doesn’t consider the external factors such as the effect of inflation and business competition on the performance of the company and hence, it will be risk to depict on the trend on net profit and gross profit of the business in making future long term performance of Wingdart inc[Jef12]. Examine the business performance based on profit performance is important since, the profitability of a business unit depict the viability of the region and it will provide an opportunity on examining the business unit performance based on whether the region is making more profit with regard to cost incurred since, an ideal business performance should ensure that there is more profit generation with less cost incurrence since, the there is an inverse relationship between the cost incurred and profit generated. Cost Cost evaluate the effectiveness and how reduce the cost and ensure that the business become effective. The risk of using cost as performance measure for Wingdart Inc is that, the company may incur unnecessary cost or the company may be having a huge capital investment now which the c company anticipate to earn positive returns in the future as evaluated by the net present value or the payback period[Chi12]. Making business decision with regards to performance of Wingdart inc based on cost may be riskier since, under the cost analysis, the report may provide that the business incurring a lot of cost at the moment and may be risky for the business and hence, an investment decision is reached based on the company’s cost effectiveness. in this regards, to use cost analysis to evaluate the business performance for Wingdart inc, there is need to classify the cost as fixed or variable cost in order to get a clear understand of the cost management and separation for the business sand to best conclude on the cost analysis that the business analysis will use for anticipating future business situation for Wingdart[Jer09]. Sales by Region By examining the regional sales and whether they are meeting the target will provide better response for the region that is underperforming, in this regards, it will be easier to provide the best investment decision to ensure that the business operate well. This risk in using region sales as a business analysis is that, different regions depict different taste and preference ad well as the economic situation. In this regards, it will be misleading to ascertain business performance based on region with regard to overall business separations. Examine the business performance based on region is ideal since, it will provide the head office with an overview of the general business performance with regards to each division and hence, the business will be in a position of evaluating the region performance and understanding the region that need more capital investment based on profit generation and the regions that require cost reduction based on data on cost and profit performance. This will be easier for the head office to manage business performance for the whole regional effectively and hence, it will encourage business growth across the globe as well as ensuring that the business depicts an effective cost management and profit generations. The implications of Wingdart inc. using investment, profit and cost centres Using the investment as analysis of business performance for Wingdart implies that the business will be in a position of evaluating the extend of capital project since, the capital project depict the business expansion and hence, growth in capital project each year is a sign of strong liquidity situation of the business and possibility of business growth for Wingdart inc[Dan13]. The use of profit and cost is ideal in ascertaining he business performance for Wingdart inc since, a growth in profit depict the improved business performance in terms of profitability while the growth in cost depict a strong correlation with the growth in profits, there is need to ensure that the growth in cost is kept minimal unlike the growth in profit if the business is to realise growth in profit and business expansion. In this regards, there is a strong correlation between growth in profit, cost and investment with regards to evaluation of business performance and the future business situation of Wingdart Inc. The other issues for Wingdart inc. in operating as a global firm Decentralisation and centralisation To ensure that there is growth in business performance and reduction in the level of competition, Wingdart inc must decentralisation some of its activities since, decentralisation involved bring duties and authorities to the lower level subordinate which will ensure that there is fast decision making and problem solving for the business and hence help the business stay on truck in terms of business growth, profitability, solving business problems and managing the level of competition[Dan13]. The decentralisation of business activities will ensure that there is workers motivation which would lead to improved production for the business. The need for decentralising business activities is that, it will make the region manager to be more proactive in meeting their target and duties delegated to them. By ensuring that there is job delegation in every region, it will make the branch managers to be accountable to the head office in terms of business operations, cost and efficiency in terms of profit performance. Performance measurement The company must ensure that there is key performance measurement in each centre and guarantee that the performance measurement meets its desired end objectives. The importance of performance measurement is that, it evaluates the performance of every centre and identify centre that are underperforming in terms of not meeting the target and help in providing appropriate decision to ensure that the centre meets the desired end result on time. Performance management will therefore makes the region managers to ensure that their business units is meeting the target need since, the business will unit will be evaluated based on the performance made in terms of profit generation and cost minimisation. The benefit of performance management is that it will provide an opportunity to the head office to evaluated the regions business performance as well as provide on the best recommendation to ensure that the business remains viable in terms of cutting unnecessary cost, improving production efficiency as well as ensuring that there is steady profit generation. The end result of frequent performance management is that, the business will dpec9it an opportunity of expanding across the global, which is an implication of the growth in profitability and enhanced business performance for the company. Motivation and Performance related pay (PRP) Wingdart should ensure that there is workers motivation at all of its four centres since, workers motivation will encourage productivity, improved communication and ensure that the business meets target in every of the four centres. Workers motivation comprise of reward for the best performance, ensuring that there is job promotion as well as proving the best working environment and best salary packages. When workers are reward for the performance related pay, they always get motivated to work even hard to be reward in terms of good pay and thus. Wingdart Inc must ensure that there is performance related pay to motivate workers to work hard makes the business attain its objectives in term of improved profitability and business growth performance in the future[Rob13]. Bibliography Chr16: , (Albright, 2016), Jef12: , (Butterfield, 2012), Chi12: , (Hwang, 2012), Jer09: , (Jerry, 2009), Dan13: , (Mancini, 2013), Rob13: , (Robert Stine, 2013), Read More