Business Decision Making in Marketing - Desklib

This report contains the computation of investment appraisal techniques such as payback period and Net present value. The company chosen is DD, plc which deals in manufacturing vegetarian food items. It is located in the UK. It is used to make investment decisions that are long term and carries a huge amount of funds. This also includes the financial and non-financial decisions which directly or indirectly impact the working of the enterprise.

Business decision
Marketing

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Calculation of payback period of DD plc...........................................................................1
2. Calculation of Net present value of two different projects.................................................2
3. Explaining financial and non-financial factors for the business decision making process.3
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Business decision marketing is a process in which all the premises framed are evaluated
step by step to take decisions of the enterprise. It aids in delivering its products to the target
customers by taking the correct decision in terms of operation and finance (Chandramohan,
Perera and Dewagoda, 2020). This report contains the computation of investment appraisal
techniques such as payback period and Net present value. The company chosen is DD, plc which
deals in manufacturing vegetarian food items. It is located in the UK. It is used to make
investment decisions that are long term and carries a huge amount of funds. This also includes
the financial and non-financial decisions which directly or indirectly impact the working of the
enterprise.
MAIN BODY
1. Calculation of payback period of DD plc.
Payback period - It is a traditional method of capital budgeting that does not consider the
time value of money and discounting factor. In this technique, the shorter payback is considered
viable in respect of investment (Castelli and et.al., 2018). The project having a greater payback
period is ignored. It is calculated by taking initial investment divided by annual cash inflows.
Project A (smoothies) Project B (non-diary)
Year Cash flow Cumulative cash
flows
Cash flow Cumulative cash flow
0 -158000 -158000 -155000 -155000
1 72000 86000 71,000 -84000
2 78000 -8000 73,000 -11000
3 82000 74000 97,000 86000
4 110000 184000 118,000 32000
5 125000 309000 121,000 153000
Payback period (project A) = 2 year + 8000 / 82000
= 2 year + 0.097
= 2.09 years.
Payback period (project B) = 2 years + ( 155000 - 144000 ) / 97000
= 2 Years + 11000 / 97000
= 2.11 years
From the above computation of the payback period, it signifies that project A will be able
to recover its investment in 2.09 years and project B in 2.11 years. Therefore, it can be concluded
that Project A will be more viable for investment purposes because its Payback is low as
compared to another project.
2. Calculation of Net present value of two different projects.
Net present value - It is a modern method of capital budgeting that consider the time
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value of money and helps in selecting mutually exclusive projects. It is computed by taking the
difference between net present inflows and outflows (Jessri, Kosmidou and Ahuja, 2020). If the
net present value is greater than zero, the project will be accepted whereas NPV less than zero,
the project will not be selected.
Project A (Smoothies) Project B (Non-dairy)
Year Cash flow Discount
factor @15%
Present
value
Cash flow Discount
factor
@15%
Present value
1 72000 0.87 62568 71,000 0.87 61699
2 78000 0.756 58968 73,000 0.76 55188
3 82000 0.66 53874 97,000 0.66 63729
4 110000 0.57 62810 118,000 0.57 67378
5 125000 0.5 62125 121,000 0.5 60137
300345 308131
Project A = Net present value of cash inflow – Net present value of cash outflow
= 300345 – 158000
= 142345
Project B = Net present value of cash inflow – The net present value of cash outflow
= 308131 – 155000
= 153131
From the above enumeration of NPV, it can be analysed that DD plc. will select the
project which is having Higher NPV. By inspecting the above two projects., Project B which
deals in non-dairy products will be viable. On the other hand, Project A which deal in smoothies
will be rejected.
3. Explaining financial and non-financial factors for the business decision making process.
Financial factors - The factors which directly impact the decision making process and
can be quantified are known as financial factors. There are some financial factors which can be
discussed as given below -
Leverage is the term used to signify the amount of debt used in the business which
increases the return and profitability of the organisation (Balasubramanian and et.al., 2019).
There is a benefit of using leverage in the firm as it reduces the liability of the tax because
interest is a deductible expense and deducted from the income statement. Therefore, the level of
leverage employed helps in the decision making process.
Liquidity refers to the number of liquid assets such as cash which helps in operating day
to day activities of the business. The amount of liquidity also requires equilibrium because
higher liquidity will decrease the profitability and a low level of liquidity creates issues in
conducting managerial operations.
Non-financial factors - Those factors which are not directly responsible for the decision-
making process but have an indirect impact on the business are known as non-financial factors.
The legislation and the policies framed by the government of each country impacts the
current decision making process. For example, Increase in tariff rates will reduce international
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trade and eventually lead to a decline in the revenue of the company. Thus, laws and policies
hamper or boost the revenue of the firm (Naveed and et.al., 2020).
A market is a place that is dynamic and constantly keeps on changing. It is a tough task to
cope with the changing needs and demands of the customers. satisfaction of customers will lead
to increased sales and most importantly goodwill of the firm can be achieved by fulfilling the
consumer demand. Hence, customer satisfaction indirect impact the working of the organisation.
CONCLUSION
From the above report, it can be concluded that the Business decision-making process
helps to attain the organisational goal which leads to improving the managerial and financial
performance of the organisation. The application of investment appraisal techniques helps to
know the returns and profitability level. There are some financial and non-financial factors that
directly or indirectly impact the decision-making process.
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REFERENCES
Books and Journals
Balasubramanian, S.A. and et.al., 2019. Modeling corporate financial distress using financial and
non-financial variables: The case of Indian listed companies. International Journal of
Law and Management.
Castelli, G. and et.al., 2018. A participatory design approach for modernization of spate
irrigation systems. Agricultural Water Management. 210. pp.286-295.
Chandramohan, A., Perera, B.A.K.S. and Dewagoda, K.G., 2020. Diversification of professional
quantity surveyors’ roles in the construction industry: the skills and competencies
required. International Journal of Construction Management. pp.1-8.
Jessri, M., Kosmidou, V. and Ahuja, M.K., 2020. Employees’ decision to participate in corporate
venturing: A conjoint experiment of financial and non-financial motivations. Journal of
Business Venturing Insights. 13. p.e00161.
Naveed, M. and et.al., 2020. Role of financial and non-financial information in determining
individual investor investment decision: a signaling perspective. South Asian Journal of
Business Studies.
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