Tesco Plc Company’s Revenues And Market Segment Free Writing Sample

Introduction

Acquisitions increase the company’s revenues and market segment base. The research shows that Tesco Plc generated the increase in revenues by expanding its market base. The company acquired several companies to increase its market share. The company ventured into marketing diverse products to retain its leadership in the grocery and retail chain market segment. Tesco Plc is one of the top revenue generators in the retail chain market segment.

History of Tesco Plc

Hughes1 emphasised that supply chain management is the key to the Tesco Plc success. Tesco Plc had been established by Jack Cohen in the year 1991. The Cohen started with marketing tea during the starting years. The teas had been imported from T. E. Stockwell Company. The name Tesco came from the first three letters of the T. E. Stockwell Company name. Mr Cohen set up his first store a year before 1930 in Edgware, Middlesex. Clive Humby emphasised the original Tesco Plc store focused on marketing food and beverage products.

In addition, the Tesco Plc brand includes the renting of movie CD to movie enthusiasts. The clients would rent the Tesco movies and pay a minimal fee for enjoying the movies. The company offered its online clients the chance to download music and other entertainment films for a minimal fee. The company’s blossoming conglomerate of companies included the entry into the software market segment. The company sold software to the company’s software clients.

Jack Cohen sold groceries and other basic home necessities starting as far back as the birth of the company in 1919. Mr. Cohen’s target market included the busy businessmen working in London’s version of Wall Street. Tesco Plc offered its shares of stocks to prospective investors in the London Stock Exchange. During the 1940s, the Tesco Plc Company experimented with the self –service marketing strategy with the opening of its Tesco store in St. Albans during the middle of the 1950s. The store continued to take its regular sales to satisfied clients until it surpassed the year 2009. The company bought more than 69 Williamsons stores in the later part of 1950s. Mr. Coehn renamed the purchases stores as Tesco Plc stores. The Tesco Plc marketing strategy included buying more than 198 Harrow stores during the later part of 1950s. The Tesco Plc Company proudly includes the purchase of over 96 Charles Phillips stores in 1964. In addition, the company made acquisition of all Victor Value retail stores in 1968.

According to Luger2, Tesco Plc used the diverse local cultures to its advantage in marketing the company’s products around the world. The company’s a grocery store has its headquarters in Cheshunt, United Kingdom. The Tesco Plc stores initially catered to the grocery and retail merchandising needs of the local community. The company expanded to fill the needs of clients from the United States, Asia, and Africa. The Tesco Plc Company is on fourth place in terms of total revenues within the United Kingdom market segment alone. The top three competitors of Tesco are Wal-Mart, Carrefour, and Metro.

These companies surpassed the revenues generated by Tesco Plc. However, Tesco ranks second, following after Wal-Mart, in terms of net profits. Tesco Plc has set up several Tesco stores in more than many branches in over thirteen countries around the world. The branches are strategically located to generate sales. The Tesco branches are located in Asia, United States, and European Union. In the United Kingdom, Tesco Plc retains the leadership in the United Kingdom grocery industry. In terms of market share, Plc owns more than 25 percent of the United Kingdom’s grocery market segment alone.

In terms of generating profits, Maquire3 theorized the success of the Tesco Plc stores is grounded on Jack Cohen’s motto of selling the products at wholesale prices; wholesale prices are normally lower than regular prices. This is in line with the economic demand theory. The economic demand theory states: the demand for the products and services will increase when the prices of goods and services decrease. On the other hand, the same theory can be interpreted as: the demand for the products and services will decrease when the prices of goods and services increase.

Humbey4 reiterated that Tesco Plc had successfully acquired the Hillards chain of stores during the 1980s. The Hillards stores were strategically established in 40 locations within the North of England. During the 1990s, Tesco Plc bought the William Low chain of stores. The William Low stores were strategically located in more than 50 strategic points within the United Kingdom alone. In addition, Fisk5 emphasised Tesco Plc ventured into the offer of discounts to repeat clients during the later part of the 1950s.

Czintoka6 reiterated Tesco Plc opened its website to cater to online clients to increase its online global domination of the grocery chain and other market segments within United States alone. Tesco Plc acquired an estimated 33 percent of Grocery Works chain of stores in the United States. Dubrin7

Financial Statement Analysis

The financial statement ratios are used by management as basis for its decision making activities. The ratios are used to determine the company’s solvency. In addition, the ratios are used to determine the company’s profitability. Further, the ratios are used to determine the company’s ability in managing scarce resources. Lastly, the ratios are used to determine the company’s capacity to generate profits from the investments.

Sources of Finance

There are two major sources of finance8. First, investments from the stockholders are used to finance the company’s daily business operations. The stockholders receive dividends for the use of their investments. Second, the company borrows funds from creditors. The company pays interest on the borrowed funds. In terms of gearing, the best finance structure is to have similar monetary amounts for both loans and investments.

Group profitability ratio

Gross Profit Ratio

Tesco:

= 36,367.00 = 0.10
356,467.00

Wal-Mart:

= Gross Profit
Revenues
= 103,557,000.00 = 0.25
408,214,000.00

The Gross profit ratio is used to determine the relationship between gross profit and net revenues. A higher gross profit ratio shows a better financial picture of the company when compared to a lower gross profit ratio. The Tesco gross profit ratio of 10 percent is lower than the gross profit ratio of Wal-Mart. This means that Wal-Mart fared better than Tesco during the year 2009.

Net Profit Ratio

Tesco:

Net Profit Ratio = Net Profit
Revenues
= (5,265.00) = (0.01)
356,467.00

Wal-Mart

Net Profit Ratio = Net Profit
Revenues
= 14,335,000.00 = 0.04
408,214,000.00

The Net profit ratio is used to determine the relationship between net profit and net revenues. A higher net profit ratio shows a better financial picture of the company when compared to a lower net profit ratio. The Tesco gross profit ratio of -1 percent is lower than the gross profit ratio of Wal-Mart of 4 percent. This means that Wal-Mart fared better than Tesco during the year 2009.

Return on Investment

Tesco

Return on Assets = Net Income
Average Total Assets
= (5,265.00) = (0.01)
467,894.00

Wal-Mar

Return on Assets = Net Income
Average Total Assets
= 14,335,000.00 = 0.09
167,067,500.00

The return on assets is used to determine if management of Tesco and Wal-Mart are using their funds wisely. Based on the above computation. Tesco generated a -1 percent return on assets for the year ended 2009. On the other hand, Wal-Mart generated a return on Assets figure of 9 percent. Based on the two financial statement ratios above, Wal-Mart did financially better than Tesco.

Tesco Plc:

Return on Equity = Net Income
Total Equity
= (5,265.00) = (0.01)
362,159.00

Wal-Mart:

Return on Equity = Net Income
Total Equity
= 14,335,000.00 = 0.20
70,749,000.00

The return on Equity is used to determine how much income was generated by the equity portion of the balance sheet. The Tesco return on equity is -1 percent of the stockholders’ equity portion of the balance sheet. On the other hand, the Wal-Mart Company generated a return on equity ratio of 20 percent. Thus, Wal-Mart fared financially better than Tesco during the year 2009.

Return on Capital Employed

Tesco:

Return on Capital = Net Income
Employed Total Assets- Current Liabilities
= (5,265.00) = (0.01)
383,230.00

Wal-Mart:

Return on Capital = Net Income =
Employed Total Assets- Current Liabilities
= 14,335,000.00 = 0.08
170,706,000.00

The return on capital employed to determine if the resulting figure is higher than the rate at which the company agrees in a long term loan agreement. Based on the computation, Tesco generated a ROCE ratio of only -1 percent. On the other hand, the Wal-Mart company generated an ROCE ratio of 8 percent. Thus, Wal-Mart fared financially better than Tesco for the year 2009.

Return on Investment

Tesco:

Return on Investment = Net Income
Investment
= (5,265.00) = (0.03)
175,987.00

Wal-Mart:

Return on Investment = Net Income
Investment
= 14,335,000.00 = 37.92
378,000.00

Tesco

Current Ratio = Current Assets
Current Liabilities
= 211,700.00 = 3.57
59,325.00

The current ratio is used determine if there are enough current assets available to pay the maturing current liabilities. The ratio shows that Tesco and Wal-Mart are able to pay their maturing obligations.

Wal-Mart

Current Ratio = Current Assets
Current Liabilities
= 48,331,000.00 = 0.87
55,561,000.00

Quick Ratio

The quick ratio is used determine if there are enough of the company’s most liquid assets available to pay the maturing current liabilities. The ratio shows that Tesco and Wal-Mart are able to pay their maturing obligations.

Tesco:

Quick Ratio = Current Assets – Inventory
Current liabilities
= 137,361.00 = 2.32
59,325.00

Wal-Mart:

Quick Ratio = Current Assets – Inventory
Current liabilities
= 48,331,000.00 = 0.87
55,561,000.00

Cash Ratio

The quick ratio is used determine if there are enough of the company’s cash, cash equivalents, and marketable securities available to pay the maturing current liabilities. The ratio shows that Tesco and Wal-Mart are able to pay their maturing obligations.

Tesco:

Cash Ratio = Cash + Cash equivalent+ Marketable Securities
Current Liabilities
= 39,930.00
59,325.00
= 0.67

Wal-Mart:

Cash Ratio = Cash + Cash equivalent+ Marketable Securities
Current Liabilities
= 7,907,000.00
55,561,000.00
= 0.14

Sources of finance including discussion of the company’s capital structure and gearing

Tesco:

Gearing Ratio = Total Debt =
Total Equity
= 80,396.00 = 0.22
362,159.00

Wal-Mart

Gearing Ratio = Total Debt =
Total Equity
= 99,650,000.00 = 1.41
70,749,000.00

The gearing ratio is use to determine how much of the total cash inflows came from loans and investments. The most appropriate ratio is a 1 to 1 ratio in terms of loan and investment contributions. This means that for every cent borrowed, there is a corresponding cent invested by the stockholders. Tesco generated a 22 percent debt to equity ratio. On the other hand, Wal-Mart had a 141 percent debt to equity ratio. This shows that Tesco has a better gearing or debt to equity cash investment ratio than Wal-Mart.

Limitations in the use of ratios

Maguire emphasised (2007) there are some limitations in the use of ratios. The ratios are based on historical figures. The historical figures may not be repeated in the future. Thus, Tesco may fare better than Wal-Mart in 2011 or 2012; no one can predict the future. Another limitation of ratios is based on accounting theory, not economic theory. Thus, the demand for Tesco products may increase if there is news that Wal-Mart products are poor in quality. Basic ratios can be manipulated to fit the whims, caprices, and biases of the person making the ratios. The ratios do not include significant off balance sheet items (loans fraudulently not included in the balance sheet to show a better financial statement ratio). Managers must not solely rely on ratios for decision making activities.

Conclusion

IN A NUTSHELL, Tesco Plc is one of the top revenue generators in the retail chain market segment. The research shows that Tesco Plc generated the resulting increase in revenues by expanding its market base. The Company acquired several companies to increase its market share. The company ventured into the sale of various products to ensure its lead in the grocery, retail chain, and other related market segments.

Comparing the financial statement analysis ratios above, Wal-Mart consistently had better financial picture compared to the financial picture of Tesco.

Indeed, acquisitions increase the company’s revenues and market segment base.

Detailed Timetable of Group Work

Member A Member B
JAN 18 Finding 5 companies Finding 5 companies
19 Choosing 2 companies Choosing 2 companies
20 Research History of Tesco Research History of Wal-Mart
21 Research History of Tesco Research History of Wal-Mart
22 research financial statement analsyis research financial statement analsyis
23 Rest day Rest day
24 research financial statement analsyis research financial statement analsyis
25 research financial statement analsyis research financial statement analsyis
26 Gather Financial statement Tesco Gather Financial statement Wal Mart
27 Gather Financial statement Tesco Gather Financial statement Wal Mart
28 compute financial statement ratios Tesco compute financial statement ratios Wal-Mart
29 compute financial statement ratios Tesco compute financial statement ratios Wal-Mart
30 Rest day Rest day
31 compute financial statement ratios Tesco compute financial statement ratios Wal-Mart
FEB 1 compute financial statement ratios Tesco compute financial statement ratios Wal-Mart
2 Make a draft of the entire paper Make a draft of the entire paper
3 Edit the paper Edit the paper
3 Edit the paper Edit the paper
4 Submit the Paper Submit the Paper

REFERENCE LIST

Dubrin, A. Essentials of Management. Cengage Press, London, 2008.

Czinkota, M. International Marketing, Cengage Press, London, 2007.

Feldman, M. Crash Course in Accounting and Financial Analysis, Cengage Press, London, 2008.

Fisk, P. Marketing Genius, Wiley & Sons Press, London, 2006.

Hughes, W.Transforming Your Supply Chain, Thompson Press, London, 1998.

Humbey, K. Scoring Points; How Tesco Continues to Win Customer Loyalty, Kogan Page Press, London, 2007.

Kotler, P.Corporate Social Responsibility, Wiley & Sons Press, London, 2008.

Luger, E. Hofstede’s Cultural Dimensions. Grin Press, London, 2009.

Maguire, M. Financial Statement Analysis. Grin Press, London, 2007.

Wal-Mart Financial Statements, 2011, Web.

Tesco Financial Statements, 2011, Web.

Footnotes

  1. E Hughes, Transforming Your Supply Chain, Thompson Press, London, 1998, p 11.
  2. E Luger, Hofstede’s Cultural Dimensions, Grin Press, London, 2009, p. 12..
  3. M Maguire, Financial Statement Analysis. Grin Press, London, 2007.p.13
  4. K Humbey, Scoring Points; How Tesco Continues to Win Customer Loyalty, Kogan
  5. Page Press, London, 2007, P. 227
  6. P Fisk, Marketing Genius, Wiley & Sons Press, London, 2006. P. 10
  7. M. Czinkota, International Marketing, Cengage Press, LNew York. Cengage Press. 2007, p. 189
  8. A Dubrin, Essentials of Management, Cengage Press, London, 2008, p. 26.
  9. M Maguire, Financial Statement Analysis. Grin Press, London, 2007.p.13

Volvo Company’ Branding Strategy In Saudi Arabia

PESTEL framework for Volvo

The following is a political, economic, social, technological, environmental, and a legal framework analysis of Volvo in Saudi Arabia. It presents an overview of the external business environment that the Volvo brand faces presently and in the immediate future. The report focuses on Volvo’s business area that deals with Volvo trucks, buses, and cars.

Political

Changes are happening in Saudi Arabia on the political, economic, and social front, but the country is fairly stable and predictable in the area of politics. This predictability provides businesses with an ample environment for making long term plans about their marketing and brand-building strategies in the county.

The government is interested in attracting manufacturing companies in the country to help grow the economy and supplement the importers of goods that sustain the general consumption. It has been at the forefront of enacting favourable policies on industrialization. The government’s industrial diversification strategy places the domestic automatic industry as one of the highest priority industries. It is expected that the commitment towards the sector will last for several coming decades (Berger 2013).

There are some concerns about corruption in the government authorities, which favour businesses that have a long-term relationship with the authorities. This challenges the certainty of doing business in the country (Waite 2006). Nevertheless, the government maintains a corruption-free zone within all its offices and interactions when it comes to service provision and policymaking.

Saudi Arabia is a kingdom, and its leaders belong to the royal family. For example, its kings have always been sons of former kings, and this tradition began with the founder of the country. Leadership challenges are attributed to the large family size of the royal family that presents so many candidates (princes) for a succession of the present king (Waite 2006). However, there have been no reported succession crises in history, and the situation is expected to remain the same.

Economical

The Saudi government supports the policies of the World Trade Organization and has liberalized many of its productive economic sectors (Waite 2006). The existence of natural oil resources in the Middle East provides an easy source of income for most households employed in the sector or benefiting from government assistance (Nakov & Nuño 2013). In 2000, Saudi Arabia created the Saudi Arabian General Investment Authority (SAGIA), an institution that has eased the process of Foreign Direct Investments (FDI) inflows in the country.

Saudi Arabia has been able to increase its FDI inflows from 20 billion dollars in 2006 to 80 billion dollars in 2010 as a result of the institutional framework for FDI. The country is still one of the largest car importers in the Middle East, which is a testament of its large economy size, relative to other countries in the region. Its dependence on its vast natural oil resources also ensures that Saudi Arabia does not suffer greatly from foreign currency shortages. The result of the constant flow of exports is that Saudi households still continue to afford imported goods (Long & Maise 2010).

Nevertheless, there are impending changes to foreign-made vehicles as cars made in Saudi Arabia are likely to begin selling by 2017 (Murad 2014). In fact, the company responsible for the Saudi-made cars plan is Jaguar Land Rover, which is one of the rivals to Volvo. The proposed investment to have a local manufacturing plant in the country is a product of a favourable FDI inflow environment in the host country, as well as the persistent increase in the aggregate consumption in the GDP. It is expected that other car manufacturers will also move their manufacturing to Saudi Arabia to cover the regional market and to enhance their brand identity among locals (US-SABC 2013).

Absolute foreign ownership of investments is permitted in the country. In addition, the country does not levy taxes on income, value-addition and land, as well as property (Waite 2006). Joint investments with the locals may also benefit from easy access to capital from the government through its Saudi Industrial Development Fund, which was established to fulfil the industrialization plans of the government (SIDF 2014).

Social

Market needs are changing as people become aware of international vehicle brands. Most of the customers in the Middle East prefer western car brands for their associated prestige (Murad 2014). People from around the region freely interact with Saudis and this interaction creates a favourable environment for cultural exchange. Saudi Arabia is also well connected to the world due to advancement in globalization. Therefore, many western culture influences are evident within its borders, such as the preference for luxury and the demand for entertainment amenities and sports.

The population of Saudi Arabia continues to increase, and this growth has implications for the government challenges of delivering social services (Berger 2013). It, therefore, has an indirect influence on political and social stability. The country’s population is expected to double by 2025. The country is also embracing reforms that are allowing women to exercise more freedoms, which is expected to increase the demands for accountability for the government and business in the country.

The recognition of women as equal citizens is also expected to spur demand in male-dominated markets, such as the automotive industry (Renard 2008). On the other hand, discrimination of women also creates a separate social characteristic and differentiates Saudi Arabia from other countries. Its women have activities and discourses that are only for women and managed by women (Renard 2008). From a marketing perspective, this separation calls for the use of special branding and marketing strategies that specifically target the women’s gender group.

Technological

Technological advances in car manufacturing are allowing car manufacturers to cut the time it takes between the creation of new car concepts and the actual delivery to markets. Better visualization and improved testing ensure that newer designs are being made to be safer, faster, and more appealing than the older models. A consequence of rapid innovation is a heightened competitive situation in the market.

Saudi’s industrial output is forming a cluster of technologies relevant to the automotive industry. Advances in the industries related to automotive manufacturing, such as the capturing and storing of carbon dioxide emissions and aluminium folding technologies make are sure to attract more car manufacturing companies (US-SABC 2013).

As a Muslim nation in the Middle East, Saudi Arabia’s social fabric presents extremist threats against expatriate workers. Some citizens in the country are likely to sympathize with extremist groups that support terrorism activities or religious seclusion. Such cases divide society and present marketing challenges for businesses in the region. The government is making efforts through policy and security-related actions to crack down on extremist groups to sustain ample social cohesion in the country (Black 2014).

Environmental

Car owners are increasingly becoming aware of the environmental costs of car emissions and now show concerns for individual or household carbon footprints (Griskevicius & Kendrick 2013). Among the remedies proposed to deal with the excessive car, emissions are to buy cars with smaller engine capacities, buying cars with adequate emission control technologies and to opt for electric cars because of their lack of emissions (Latham & Watkins 2010).

Saudi Arabia follows the Kyoto protocol, which is an international agreement on cutting down carbon emission. Vehicles are regarded as one of the most significant contributors to carbon dioxide emissions. They are also one of the easiest to regulate. Countries have national pledges of cutting emissions and are expected to periodically alter their environmental policies to apply behaviour changes and to meet their targets. Therefore, any car manufacturing company seeking to operate in the Saudi market has to consider the implications of government environmental policy on its product features and ability to meet market needs. The country relies on a General Environmental Law (GEL) to enforce its environmental regulations, such as the prohibition of acts that have diverse environmental effects of any kind (Latham & Watkins 2010).

Legal

Although environmental regulations on car emissions are mostly voluntary and advisory, failure of the vehicle manufacturing industry to meet the targets of reducing emissions set up by quasi-government authorities triggers concerns. First, there is likely to be a governmental directive on vehicle dealers to cut emissions, irrespective of their engine sizes.

Businesses in Saudi Arabia have to comply with its religious laws, which many Western-owned companies may not be familiar with. All laws enacted within the country subscribe to the provisions of the Sharia law, which is a collection of fundamental principles (Latham & Watkins 2010). The country recognizes internationally registered intellectual property and it has laws for protecting various forms of intellectual property and business assets.

Saudi Arabia’s basic law affirms the Kingdom’s status. The monarchy relies on its council of ministers to establish laws, contracts, international agreements, special rights, and other legal instruments that govern social order and business activity. At the same time, there are bylaws that are specific to any of its 13 provinces or governorates within the provinces (Latham & Watkins 2010). Parties feeling aggrieved in their business relationships have the option of seeking arbitration within Saudi Arabia under the country’s laws or abroad because the country is a signatory to the UN Conventions that address foreign arbitration awards (Latham & Watkins 2010).

Strategic advice to Volvo

Although Volvo has not entered the Saudi market as a car manufacturer yet, it has the opportunity to do so given that the government’s long term support is assured. Currently, many consumers only import Volvo cars and trucks personally or through dealerships.

Transportation continues to play critical roles for a globalized economy and road transport is still the preferred way of moving goods in short distances and in areas where alternative transport is unavailable. The ease of developing road infrastructure compared to air or rail also makes transportation via vehicles as the most affordable form of transport in the short-term.

Many small businesses first opt to invest in small-capacity trucks before advancing to large capacity trucks or outsourcing their logistics to third-party companies. Either way, the growth of businesses ensures that there is a growing demand for goods transportation in an economy. In this regard, there will be opportunities in the goods transport sector that Volvo can exploit with its truck business.

The various initiatives by the government on improving the prospects of Saudi Arabia as a manufacturing destination and transforming the economy industrially are also attractive for Volvo as a foreign investor. A proper way to take advantage of the government initiatives would be through seeking joint ventures with local companies that not only have the necessary distribution and marketing knowledge of the economy, but also have established interests and capacities in either dealership or manufacturing. These local companies would be eligible for government support and provide Volvo with co-branding opportunities to help the Volvo brand rapidly build its reputation in the local economy (Rauch 2012).

Unfortunately the lack of restrictions on foreign ownership of investments within Saudi Arabia makes it easy for companies to enter the market. While this is a good thing for Volvo, it also encourages its competitors to move into the market and grow their presence in the country. As a result, Volvo will likely face considerable competition challenges in the coming years, which will be heightened by the start of local manufacturing of vehicles by various companies.

Market segmentation would be a preferred way of tackling competition in Saudi Arabia. Other than dividing the population based on gender and age to influence brand-targeting campaigns, the company can also divide its truck and car business. A separation will increase the brand’s focus and response to market changes for each segment (Kotler 2012).

The current organizational and business differences between Volvo cars and Volvo trucks already lays the necessary foundation for carrying different brand campaigns for the two products and their target markets. It is important to have different marketing strategies because the needs of commercial customers for buses and trucks are different from the need of luxury car buyers. For example, trucks are marketed for their fuel efficiency and robust engines, while cars are marketed for their safety and design (Volvo Cars 2014).

Innovation in car safety and compliance with environmental directives on emissions is also another area where Volvo ought to increase its investments to sustain competitive advantages (Griskevicius & Kendrick 2013). As mentioned in the PESTLE analysis on social dimensions of Saudi Arabia, the country’s population is well versed with consumerism trends in the developed Western world. Therefore, Volvo should expect Saudi nationals and expats living in the country to prefer vehicles that are innovative in their environmental and safety features.

Already, Volvo has been in an advantaged position over its rivals because it created a collision warning system that is incorporated in its branded vehicles to prevent accidents (Baltas & Saridakis 2010). The technology relies on wide-angle sensors placed strategically around the vehicle to act like radars (Quinn 2011). Drivers and car occupants only have to watch out for warnings from the car collision sensor equipment. In extreme cases, the artificial intelligence of the car is able to take over the steering of the car to prevent collision.

Other noteworthy technological innovations by Volvo include Alco-key, which seeks to lower alcohol related driving and Sleep Detection system that relies on lane departure warning systems and driver alert control systems to ensure that drivers remain alert and drive carefully on the road (Quinn 2011). These technologies catapult the Volvo brand to the number one position of car safety. Customers would be attracted to the brand if it emphasized these features because consumers are looking for safety as one of the criteria for picking cars.

Another avenue for technological advancement to gain brand superiority would be to come up with consumer cars and commercial trucks that use hybrid fuels. Although in the Saudi Arabian perspective, consumers may not be too concerned about fuel efficiency due to the high income status of the country, they will still respond to global trends in embracing hybrid fuel cars. On the other hand, the business will prefer to have vehicles that allow them to manage their transportation costs (Baltas & Saridakis 2010). Consumers in Saudi Arabia will embrace opportunities to become hybrid owners in their quest to show their affiliation to environmental conservation ideologies. In this regard, embracing the hybrid tag for Volvo brand is welcome (Urde, Baumgarth & Merrilees 2013).

As a kingdom, Saudi Arabia has a socio-political environment that fosters the cultivation of traditions among different generations. Brand penetration strategies that will work in this society must consider is religious, political, and social characteristics. One way for Volvo to build on these factors would be by embracing consumer oriented advertising and association. Volvo has an advantage over other vehicle brands from other regions because most consumers already prefer Western brands for their associated superiority.

However, it will continue to face still competition from other Western car brands. It must ride on consumer’s familiarity instead of introducing novel concepts abruptly. Consumers prefer self-protection and will likely reject a brand that radically transforms its image and associated features within a short time (Griskevicius & Kendrick 2013). Therefore, as Volvo embraces segmentation and works in co-branding relationships with joint venture partners, it must seek to retain its notable brand features within the Saudi market.

Reference List

Baltas, G & Saridakis, C 2010, ‘Measuring brand equity in the car market: a hedonic price analysis’, Journal of the Operational Research Society, vol. 62, no. 2, pp. 284-293.

Berger, L 2013, ‘Saudi Arabia’, Political Insight, vol. 4, no. 3, pp. 22-25.

Black, I 2014, Saudi Arabia intensifies crackdown on extremist groups.

Griskevicius, V & Kendrick, DT 2013, ‘Fundamental motives for why we buy: How evolutionary needs influence consumer behavior’, Journal of Consumer Behavior, vol. 23, no. 3, pp. 372-386.

Kotler, P 2012, Marketing management: Setting the product and branding strategy, 5th edn, Prentice Hall International, New York.

Latham & Watkins 2010, ‘Doing business in Saudi Arabia’, Research Report, Latham & Watkins LLP.

Long, DE & Maise, S 2010, The kingdom of Saudi Arabia, 2nd edn, University Press of Florida, Gainesville.

Murad, A 2014, Saudi-made cars are on the way.

Nakov, A & Nuño, G 2013, ‘Saudi Arabia and the oil market’, The Economic Journal, vol. 123, no. 573, pp. 1333-1362.

Quinn, JR 2011, ‘Simpler antidote for heavy eyelids’, The New York Times, 2011.

Rauch, C 2012, Corporate sustainable branding, Springer, Heidelberg.

Renard, AL 2008, ‘”Only for women:” Women, the state and reform in Saudi Arabia’, Middle East Journal, vol. 62, no. 4, pp. 610-629.

SIDF 2014, Saudi Industrial Development Fund, Web.

Urde, M, Baumgarth, C & Merrilees, B 2013, ‘Brand orientation and market orientation – from alternatives to synergy’, Journal of Business Research, vol. 66, no. 1, pp. 13-20.

US-SABC 2013, Saudi Arabia – A booming market and new auto manufacturing hub for the Middle East, Web.

Volvo Cars 2014, Volvo.

Waite, B 2006, ‘Foreign direct investment in Saudi Arabia: leaping ahead’, The Risk Advisory Group, 2006.

Public Administration: Public Budgeting Methods

Lessons from Serving as a Public Budgeting Leader and Manager in the Public Sector

Public budgeting refers to a field of administration that revolves around the assessment of the available resources and their allocation to the various activities of a firm or organization. I have learned that public budgeting managers must possess relevant financial analysis skills to conduct their roles effectively (Fudge, 2013).

One of the key roles that I learned about a budgeting manager is that the person must be well equipped with the knowledge to analyze a variety of financial information, which may include revenues, expenditures, and the opportunity costs to determine the feasible projects in which the available resources should be assigned (Lee, Johnson, & Joyce, 2012).

Other than financial analysis for decision-making, the budgeting manager must conduct regular internal audits to ensure that the costs at each stage of project implementation are in line with the budget. It is important to note that the primary objective of budgeting is to track costs, a purpose that can only be achieved by regularly comparing the actual costs with the budgeted ones. Next, I learned that the budgeting manager must reconcile the budgeted cost against the actual expenditure at the end of every financial year or at the completion of each project (Fudge, 2013). Any variances between the budgeted and the actual costs must be explained. Other roles include offering professional advice to other departments of the firm and participating in meetings to discuss the various budgeting issues.

Skills and Knowledge Attained

One of the important skills I have attained from the course is the processes and approaches to preparing a suitable budget for an organization. As it currently stands, a budgeting manager can apply several methods to formulate a budget. One of the approaches that may be used to develop a financial plan is the “lump sum” budgeting. The stated method involves estimating the revenues and expenditures as lump sums without indicating the various units of disbursement (Stillman, 2012).

The other method of budgeting is the line-item approach, which involves breaking down the estimated revenues from each unit and linking such income with the corresponding expenditures. Another approach to budgeting is the balanced budget, which involves estimating the revenues and expenditure of each item to make sure that the income exceeds the disbursement. Next is the performance budgeting method, which involves the assessment of the outcomes of funds allocated to various projects. Others include program budgeting, PPBS budgeting, zero-based budgeting, flexible freeze, and priority-based budgeting, among others.

Can Budgetary Decision-making be Rational

A rational decision can be described as a course of action taken after considering several courses of action. In taking such a decision, the responsible person considers several courses of action. The individual chooses the best one. Some of the factors that a decision-maker considers include the resources required to implement the program, the capital available to the firm, the human assets accessible, technological needs, and the opportunity costs (Henry, 2015).

Based on such analysis, the decision-maker considers the course of action, which maximizes the revenues of the firm with minimal costs. In other words, the rational decision is the one, which yields maximum revenues to the firm. A company can implement such decisions with the available resources. It is important to note that a project may be profitable. However, a company may lack the resources necessary to implement it. This situation underscores the need to consider the available resources to ensure that the chosen course of action is executable.

Based on the described explanation of rational decisions, it may be concluded that the budgeting process is characterized by level-headedness. As stated previously in this paper, the budgeting process involves assessing the revenues of a company for a specified period and assigning the revenues to the various projects available for investment. The budgeting process is characterized by the assessment of the costs associated with mutually exclusive projects to determine the one that is worth investing (Mikesell, 2013).

The budgeting manager is charged with the responsibility of assessing the costs associated with each project to prepare a report regarding the most feasible project. In addition to assessing the costs, the budgeting manager also assesses the human capital needs of the project to determine whether the company has the necessary labor and technology to successfully implement the project without failure. In the absence of such assessments, the project would fail at different stages of implementation, a situation that may negatively affect the profitability of the business.

The Origin of Line-item Budgetary Structure

The line-item budgeting refers to a method of preparing the budget, which involves grouping individual financial statement items based on the unit price and departments (Joseph, 2017). The method offers a comparison between the figures for the past accounting periods and those of the current or future transactions. This structure was invented as a remedy to the gaps created by the lump-sum budgeting approach in terms of tracking the costs associated with each department or unit.

As stated previously, the lump-sum budgeting method involves estimating the revenues and expenditures as a whole. The method could not clarify the amount that each department contributed to the total revenues or costs. This situation made the accounting of the departmental costs a hectic task to the extent of necessitating the development of a budgeting method that could track the revenues and costs associated with each section.

Scholars’ Primary Criticisms of this Budgetary Structure

Although the line-item budgeting approach has notable strengths over the lump-sum method, it faces several criticisms from scholars. One of the shortfalls of this budgeting method that critics use to discredit the approach is that the budgeted items are not accurate (Joseph, 2017). The reason for such allegations is that this method utilizes historical figures to predict current and future revenues and costs. Basing the future estimates on historical figures is a major shortfall since such numbers may change with fluctuations in the business environment. For example, inflation and currency fluctuations may affect future costs, which may not be reflected in the historical figures.

The other shortfall of the line-item approach is that it may precipitate overspending by the departmental managers (Joseph, 2017). Since the budgets are formulated based on historical figures, the departments are assigned a standardized amount of money each year. If the money assigned to a section is not fully exhausted at the end of a financial year, the departmental managers are motivated to spend it in a rush for fear of budget slash in the subsequent period.

Factors that Account for its Broad Acceptance and Continued Use

However, as much as the line-item budgetary method has several shortfalls, it also has a certain level of strength, which makes it attractive to budget managers. One of the strengths of the method is that it is simple to apply. It can also give accurate figures. The view is grounded on the fact that the method bases its estimates on past figures (Joseph, 2017). A budget manager only needs to scrutinize the trends in revenues and expenditure for a particular item to estimate the costs for the subsequent period. This situation creates simplicity, which makes it attractive to small and medium-sized enterprises.

References

Fudge, M. (2013). Performance budgeting within state and local governments: The disconnect between public manager efforts and legislative action. PA Times. 

Henry, N. (2015). Public administration and public affairs. Abingdon, England: Routledge.

Joseph, C. (2017). Advantages & disadvantages of a line-item budget.

Lee, R., Johnson, R., & Joyce, P. (2012). Public budgeting systems. Burlington, MA: Jones & Bartlett Publishers.

Mikesell, J. (2013). Fiscal administration. Boston, MA: Cengage Learning.

Stillman, R. (2012). Public administration: Concepts and cases (9th ed.). Boston, MA: Cengage Learning.

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