Different Approaches to Effective Decision Making in Financial Management

This study focuses on different formal and informal approaches to support effective decision making in financial management. It discusses the role of stakeholders and the impact of decision making on company growth. The study is based on Morrison, the largest supermarket chain in the UK.

FINANCIAL
MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................3
LO 1.................................................................................................................................................3
P 1 Different formal and informal approaches to support effective decision making................3
LO2..................................................................................................................................................4
P2. Assessing key principles of financial management which company need to follow for
achieving financial strategies for long run financial sustainability.............................................4
LO 3.................................................................................................................................................6
P 3 Role of management accountant and their value to organization.........................................6
P 4 Use of accounting control system and their value to company............................................7
LO4..................................................................................................................................................9
P5. Evaluating ways in which the financial decision-making is crucial for supporting the long
term financial growth..................................................................................................................9
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Financial management referred as the strategic planning, directing, controlling and
organizing the financial undertakings within an organization. It also involves application of the
management principles to that of financial assets of an entity whereas also playing an essential
part in the fiscal management (Mitchell, 2017). In other words, it means as effective & efficient
management of the wealth for the purpose of fulfilling objectives of an entity. The present study
is based on Morrison, the largest supermarket chain of UK operating as the retail supermarket
outlet in overall UK. Furthermore, that includes different types of the approaches for making
suitable decisions and principles that the firm should follow for attaining long term
sustainability. Moreover, the study highlights role of the MA and the use of different accounting
systems in order to achieve value.
LO 1
P 1 Different formal and informal approaches to support effective decision making
In the modern and global world, the business need to take many different decisions for
the successful operation of the company. This is essential because of the fact that if the decision
will not be taken in proper and effective manner then the company will not be able to lead the
business in successful and effective manner. Thus, for this the decision making need to very
effective and good. Decision making is referred to as the selecting of one of the best suited
alternative from a list of different types of alternatives to carry on the task. For the decision to be
good and effective it is necessary that it consider all the necessary information like the objective
of the business, all the factual information and facts and figures relating to the decision to be
taken and many other different information and facts and figures (Herdjiono and Damanik,
2016).
For taking the decision there are two major types that is formal and informal decision
making practices. The formal decision making is a system which follows the structure and the
hierarchical structure and then take the decision for the betterment and growth of the company.
On the flip side, informal decision making is a technique which includes the decision taking
based on the personal relation and networks of the people within the company (Shapiro and
Hanouna, 2019). The major difference between formal and informal decision making is that the
formal decision making ensures that the decisions are being taken by following the whole

hierarchical structure and chain of command. But on the flip side the informal decision making
does not involve any type of structure or hierarchy but the decisions are taken on basis of
informal discussion and on basis of intuition or advice from other people not necessarily to be
connected with the company (Bekaert and Hodrick, 2017).
The stakeholders of Morrison have a very important role within the whole process of
decision making. This is majorly due to the fact that the stakeholder are the people who are
interested in the growth and development of the business to a great extent. The major stakeholder
that is both internal as well as external stakeholders of the company like employees, suppliers,
investor, consumers, owner and many other different types of stakeholders. All the different
stakeholders are interested in taking effective decision because if the decision will be good then
this will help company in growing profits. Thus, because of this the need and interest of the
stakeholders will be satisfied. Thus, the different stakeholder has different role within the
decision making and it is very essential for the company to get successful.
Make and buy decision- this is also a type of decision to be taken the stakeholders as
there are many a time situation where the stakeholder need to decide that whether the company
need to buy it or not. Thus, here the stakeholder need to decide that whether that it will be
profitable for the company to manage the working of company or not.
The limiting factor over the sales and growth maximization is that if the decision will not
be made in good and effective manner then the company will not be able increase the sales of the
company and this will limit the growth of the company. On the other side the key factor analysis
is to include both the internal as well as external factors also before taking the decision in more
effective and efficient manner.