Financial Valuation Techniques - Research Proposal Example

Financial Valuation Techniques Introduction This paper will primarily focus on a comparative study of the various Financial Valuation Techniques adopted by RBS (Royal Bank of Scotland) and Barclays Bank. The aim of this study is to throw light upon the competitive environment and the internal capabilities of the chosen companies and how the same have combined to influence their financial management strategies and development. The first few pages of this case study will give a brief history of the company and what changes have taken place in the company over the past few years. Aims of the dissertation In this dissertation, a comprehensive study of various Valuation Techniques prevalent in the Financial Markets pertaining to the Royal Bank of Scotland (RBS) and Barclays Bank will be conducted. The research will be conducted from the perspective of strategic valuation and financial valuation. Strategic valuation will relate to historical analysis of the companies and application of models like SWOT, Porter’s Diamond, Porter’s Five Forces Model, Ansoff Analysis and Balanced Scorecard Analysis. Financial valuation shall be related to DuPont Analysis, Key Ratios, Capital Budgeting, and Cash Flow analysis, Income Analysis, Asset Analysis and Market Analysis. The final outcome shall be a critical comparison of future forecasts of the selected companies applying all the theories.   Background of the Company The Royal Bank of Scotland (RBS) has global assets which are worth more than $1120 billion. The RBS is the 2nd biggest private bank in Europe, and the 6th biggest in the world. RBS is the 14th biggest company in the world (Forbes Global 2000). Apart from this RBS are an enormously important private investor of oil and gas extraction. This is not only high levels of funding for oil and gas projects, but RBS are ‘the oil and gas bank’. They are the central driver of development of the oil and gas industry. The position of RBS on global climate change is far less liberal than many other banks. In spite of stating that the bank “distinguish the considerable global threat laid by climate change”, RBS has reported it as ‘preposterous’ to admit liability for the climate affects ensuing from their loans to fossil fuel projects. Barclays is a financial services group based in UK. It is also an international banking organisation having branches all over Asia-Pacific, Europe and South America. The company is primarily engaged in banking, investment banking and investment management. With regard to market capitalisation, Barclays is one among the top ten banks in the world. Barclays also provides interconnected global services to translational corps and financial institutions all over the world. It is a leading UK retail and business bank with around 76,200 employees and with operations in more than 60 countries. Research Questions The research would help in identifying the following: 1. The role of management in the working environment of both the banks. 2. The major difference in the financial analysis between the two chosen banks. 3. What are the various Valuation Techniques prevalent in the Financial Markets pertaining to the Royal Bank of Scotland (RBS) and Barclays Bank? Scope of the Research Study Both the banks have grown to be really big so it is very difficult and complex to study its operations in a comprehensive way. Thus this research study will be limited in its quantitative dimension. The questionnaires and interviews will be conducted by limiting the number of employees of both the banks. Due to limitations of the resources it is not possible to conduct a comprehensive quantitative study. On the other hand, the qualitative dimension of this research project will be much more comprehensive since it is easier to find secondary data for the Literature Review. So the strength of this research study will be focused on its qualitative dimension. Methodologies Information for the conduct of this study has been retrieved chiefly from books, newspapers, trade journals, industry portals, governmental agencies and survey reports. PESTEL analysis is used to assess the overall performance of both the banks. The global economic and industrial slowdown and its impact especially in UK banking sectors are thoroughly examined, in this study. Recommendations are made to improve the customer service level of the banks. Research Design A comparative and cross-sectional design will be used to enable a collection and comparison of data. Quantitative data related to a few variables to detect patterns which can hopefully answer the research questions will be gathered. Sampling Plan Non-probability sampling will be applied for both primary data collection methods. For the questionnaire, quota sampling will be used for the type of company to achieve comparative results. Within each company, the researcher will try to initiate snowball sampling to get as many results as possible. Overall, 450 questionnaires will be send to individuals within companies, additionally some independent marketing professionals will be chosen. A response rate of 15% will be targeted, which is relatively low due to the sector. Generally companies keep their marketing strategies in secret to a certain extent. The researcher will try to overcome this problem with personal contacts. The semi-structured interviews will be chosen via purposive sampling from the respondents who ticked the question of availability for an interview in the questionnaire. Data Collection A range of techniques for carrying on an explorative research has been proposed which will be used for the purpose of the research. These include searching a relevant literature, discussing with the experts in the subject and conducting interviews of an appropriate sample. Secondary data collected by reviewing literature of international marketing. A short review of both primary and secondary data collection is as follows: Secondary Data Written materials like textbooks, journals, newspapers and reports will be used to explain the circumstances of the proposed research. Other methods of survey will be carried out to study and discover the similarities if any and to research further facts. Hofstede (2001) will be used to get a detailed insight in different characteristics of cultures impact on the international marketing practices. Primarily, electronic databases like Emerald, Business Source Premier and Lexis-Nexis will be used, and newspapers like the Financial Times and other imminent journals like Harvard Business Review would be used for gaining better understanding of the underlying theories. Primary Data Questionnaire will be used to gain information about the working environment at the banks. Around 450 questionnaires will be mailed to different employees. The questionnaire will be of two parts. The information derived from the questionnaire will be mostly quantitative. A pilot test would be conducted before the actual questionnaire is sent to different professionals. Interviews Interviews will deepen the understanding of the financial analysis and the strategies to be followed by the banks. In the case, the researcher would conduct 5-6 semi-structured interviews on a one-to-one basis. This will enable researcher to prepare questions to some key topics, with the flexibility to extend the projects framework. Each interview will be 30-45 minutes long and recorded with the permission of the interviewee so that the research team would be able to make notes concerning body language and expressions. A disadvantage of this procedure is that it could “make respondents anxious and less likely to reveal confidential information” (Blaxter et al. 2001). Data Analysis Using Microsoft’s Excel and Statistical Package for the Social Sciences (SPSS), the research team will use descriptive and inferential statistics to analyse the data of the questionnaire. The results will be examined in three ways: Univariate: investigating country or company type at a time Bivariate: analysing two variables together, performance and country or company type and country Multivariate: examining three variables together to ascertain patterns. This will never exceed the extent given in the example with two parameters for three variables to avoid too high complexity. Using these analyses, the research team will present in different kinds of charts and tables separated according to the objectives of the research, and will also make comparisons where ever possible to give an indication on how to proceed with the research problems. Furthermore, the research team would make a comparison of strategies in different market stages if appropriate. Interviews will be analysed by category and also within their context. A mixture of an inductive and deductive approach will be used, and hence some proposition derived. To achieve a reasonable amount of useful data, the data will be reduced and simplified so that they can be displayed in matrices. Ethical Considerations As the research team is planning to ask investment managers for their gender, it would have to tick the first question on the Ethics checklist. Other than that, there will not be any as vulnerable considered people contacted. Additionally, the research team has to ensure that all respondents understand what research’s purpose is, and that they have the opportunity to refuse answers to any questions. If respondents are prepared to give an interview, they chose by themselves to be identified. Any confidential material will be kept secure, and the interviews will just be recorded with the permission of the interviewee. Furthermore, the interviewer has to promise that their behaviour will be ethical and the respondent’s as well as interviewees’ safety are ensured. Finally, the research team would act according to the data protection principles, the Data Protection Act and data security measures. Additionally, the research will quote every piece of text taken from another document and cite every idea taken from somebody else. It will accurately relay all information used for the citation. Research Schedule The research team believes that the proposed research would require duration of about 3 months approximately by taking into consideration the procedures involved in the data collection and report writing involved in the research project. The research team has come to the conclusion on this duration based on the previous researches being conducted and a rough guess from the literature on the timing of the research. References: 1. Anderton, A (2001) Economics Third Edition, Causeway Press BBC News Articles 2. Barclays Bank: Reports and Accounts, London 1994. 3. Ciborra, C. Jelassi, T. (eds.): Strategic Information Systems: A European Perspective, Chichester 1994. 4. Financial Times: Barclays In-house Revolution, 20. June 1994. 5. Hofstede, Geert. “Culture's Consequences, Comparing Values, Behaviors, Institutions, and Organizations Across Nations Thousand Oaks” CA, Sage Publications, 2001. 6. Kling, R; Scacchi, W. The Web of Computing: Computer Technology as Social Organization, in: Advances in Computers 21(1982), pp 1-90. 7. Lorraine Blaxter et al, How to Research, Buckingham: Open University Press, (third edition) 2001, pp.336, ISBN 033521746X 8. Markus, M. L.; Robey, D.: Information Technology and Organizational Change: Causal Structure in Theory and Research, in: Management Science 34(1988)5, pp 583-598. 9. Pfeffer, J. Organizations and Organization Theory, Marshfield, MA 1982. 10. Scott Morton, M. S. (ed.): The Corporation of the 1990s: Information Technology and Organizational Transformation, New York 1991. 11. http://news.bbc.co.uk/2/hi/business/7359940.stm 12. http://moneycentral.msn.com/investor/invsub/results/compare.asp?Symbol=RBS 13. www.rbs.co.uk 14. http://www.financialadvice.co.uk/news/1/bankaccounts/11668/The-history-of-Barclays-Bank.html 15. http://news.bbc.co.uk/1/hi/business/621123.sm 16. http://news.bbc.co.uk/1/hi/business/639201.stm 17. http://news.bbc.co.uk/1/hi/business/ the_company_file/456551.stm 18. http://www.coursework4you.co.uk/sprtfina33.htm [04/09/2009] 19. http://www.coursework4you.co.uk/sprtfina33.htm [04/09/2009]. 20. RBS okay for UK's biggest rights issue - CNN.com 21. RBS now 58% owned by UK Government Telegraph, 28 November 2008. Read More