Importance of Financial Management in Organizations

This report discusses the importance of financial management in organizations, its functions, and the role of a financial manager. It covers topics such as capital requirement, profit allocation, financial control, and sources of finance. The report also includes a case study on Tesco and how it uses Maslow's theory to motivate its employees.

Introduction to
Business Studies

Table of Contents
INTRODUCTION ..........................................................................................................................1
MAIN BODY...................................................................................................................................1
TASK 1 (POSTER) ........................................................................................................................1
TASK 2 ...........................................................................................................................................3
TASK 3 ...........................................................................................................................................5
TASK 4 .........................................................................................................................................10
CONCLUSION..............................................................................................................................13
REFERENCES .............................................................................................................................14

INTRODUCTION
Business Studies is basically a field of study which generally supports in dealing with the
economics, management and business principles. Generally the concept of business studies
basically comprises of elements such as organizational studies, accountancy, human resource
management, finance, operations and much more. The organization chosen for this report is Nike
which is an American multinational corporation which is basically involved in activities such as
manufacturing, design, development, worldwide marketing and selling of items such as
accessories, footwear, equipment, apparel and much more. The organization was founded in the
year 1964 and headquartered in Oregon, United States (Allman,2019). The present report
involves the 4Ps which are used in the marketing mix. In addition to that it involves the external
and internal factors which could result in affecting and impacting the business. In addition to that
it comprises of frameworks such as Pestle analysis. In addition to that, the report comprises of
the role of HR managers for the purpose to motivate the employees. Furthermore, the report
involves theories in relation to motivation and HR. Lastly, the report comprises of the concept of
financial management, importance of financial functions among the company, description of the
financial functions and the role of financial manager in the organization with the sources of
finance.
MAIN BODY
TASK 1 (POSTER)
1

TASK 2
(Group Presentation)
Main internal and external factors that affect the business operations
2

3

4

5

6

TASK 3
Human Resource Management: The concept of human resource management is basically
considered to be the practice of managing, recruiting, deploying and hiring the employees within
the company. In reference to organization, the human resource management is basically
considered as the strategic level activity which is basically carried out generally by the
company's top level management.
Motivation: The process of motivation basically comprises of guiding, maintaining and
initiating the goal-oriented behaviours (Avgoustaki and Frankort, 2018). The concept of
motivation generally comprises of social, biological, cognitive and emotional forces which
results in activating the behaviour. In reference to company, the organization encourages its
employees for the purpose to participate in making a positive influence.
Motivational Theories
The concept of motivation theory is basically the deep understanding which helps in driving an
individual towards a particular outcome or objective.
Maslow's Hierarchy of Needs
It is basically the theory of motivation which generally comprises of the five categories
of human needs which helps in dictating the behaviour of individual. In reference to this theory,
it generally presents his hierarchy needs in the form of a pyramid. In case of a person, it moves
on to addressing the higher level needs when the basic needs of the company are fulfilled.
 Physiological Needs: The most lower needs in the pyramid is known as the physiological
needs and it generally comprises of clothing, food, overall health, reproduction, water and
sufficient rest. As per the viewpoint of Mas-low, it basically states that physiological
needs should be addressed before a person moves on to another level. In context to Nike,
the organization offers breaks for eating and sufficient salaries to their employees for the
purpose to purchase the basic necessities of life.
7

 Safety needs: In context to organization, the safety needs basically comprises of factors
such as health security, theft, protection from violence, well being and emotional
stability. In context to NIKE, it basically comprises of safety needs such as retirement
benefits, job security, hygienic and safe environment.
 Love and Belonging needs: In case of the social needs, these are basically described as
the needs related to family bonds, friendships, emotional bonds and much more (Kooij
and Van den Broeck,2022). In context to Nike, it basically comprises of social needs
such as organizing social events and carrying out team working activities.
 Esteem Needs: In context to self esteem needs, it basically comprises of the ego-driven
needs, self respect, self esteem and much more. In reference to NIKE, the company
rewards their employees when they exceed a target or offers them higher position in the
company.
 Self actualization needs: In context to self actualization, it generally comprises of needs
such as self actualization needs, self fulfilment needs, skill development, education and
much more. In case of NIKE, the company helps the employees in developing their
competencies and skills through offering them challenging jobs which help them in
achieving success and looking for growth opportunities.
Herzberg motivational theory
The Herzberg two-factor theory defines that there are factors in the organization which
causes satisfaction and some factors causes dissatisfaction. In an organization individuals need to
be motivated to yield higher productivity and concentrate on work. The factors which add to job
satisfaction are motivators and the factors which causes dissatisfaction are hygiene factors.
Various factors effecting employees in an organisation-
Hygiene factors- These factors are necessary for an employee for satisfaction. In absence of
these factors employees not feel motivated and concentrated and work less hard. These factors
decrease job dissatisfaction. The factors like interpersonal relations, salary, company policies if
not provided will demotivate employees. Here are some examples of hygiene factors-
8

 Salary and benefits- Salary and wages are the basic need of an individual which needs to
fulfilled by every employer.
 Company policies and administration- If the organizational policies and guidelines are
not clear than it may create misunderstandings in communication which can lead to job
dissatisfaction.
Motivation factors- These are the factors which encourage individuals to work harder. These
factors revolve around the performance of the employee (Kundu and Gahlawat, 2018). These
factors are called satisfiers as they satisfy the needs of the employees which enable them to work
hard towards a particular goal and objective. Motivational factors include-
 Recognition- The efforts of employees should be recognized and praised by the
managers and the organization so as to motivate the individual to perform better in the
future.
 Growth and promotional opportunities- Personal development programs and
workshops should be held in the organization for employees so they can grow their skills
and perform well.
Case Study
The study is about Tesco, a British multinational retailer located in Welwyn Garden City,
England. Tesco was founded in 1919, and has expanded rapidly in the global markets. The
company carried out business through retail stores and through e commerce. Tesco offers a wide
range of products , consultancy, insurance services in the UK. Tesco is utilizing Maslow's theory
successfully. It uses different ways to motivate its employees by rewarding them, providing
training and development programs, workshops and personal development of employees. Tesco
motivates its employees by increasing their skills, knowledge and job satisfactions by providing
trainings and praising for their efforts. Tesco needs staff that is highly motivated and are well
trained who can recognize customer needs and provide them with best possible solutions. Tesco
knows the importance of motivation in an organizational structure and help the employees to
achieve the desired goals and objectives. Motivation can be monetary and non- monetary, there
are many ways to motivate employees without money and incentives. If employees are involved
in decision making they will feel the ownership and will try to work harder for the company.
Managers should also involve employees about creative ideas and suggestions which will create
a freedom for employees to express their perspectives. Also Tesco allows work life balance by
9

providing flexible working hours, vacations, week off which also motivate employees and make
their mind fresh and a healthy working environment. There are various theories used by Tesco
but maslow's theory is the most effective one to use in an organization.
Steps taken by TESCO to motivate workforce
1. Provide clear expectations- Employees need to know what an organization needs form
them and what they have to do. This is required to attain expected results and achieve
goals and objectives. If individuals understand clearly what they have to do, than they can
give better results and outcomes (Lin, Li and Lam, 2020). The goals and objectives which
needs to be achieved should be clear and properly communicated to the employees at
TESCO, so as to not create any misunderstanding. Managers at TESCO should be
specific while define the targets and results they want.
2. Provide regular recognition and praise- The second important step in motivation is to
praise the employees regularly when required. Managers at TESCO regularly thank
people for the efforts and the job done. If the employees are not praised they will not get
motivated and will give poor results. If not monetary rewards at least verbal praises can
be given to employees.
3. Provide a clear understanding of the big picture- The third step of the process is to
give the clear understanding of the organization vision, mission and objectives.
Individuals need to know what is happening in the organization so that they will be
prepared for the worst situations. Leaders at TESCO constantly tell if the future is
positive or negative, sales is up or down, business is good or bad. Organizations can hold
quarterly meetings or semi-annual meetings where the financials and department profits
can be discussed with the employees.
4. Providing a caring company attitude- The last step is to let the people of the
organization know that they are important for the company. Organization should
appreciate the employees for the contribution and success of the company. Employees
need to know that the organization is caring about them and their personal goals.
Thus TESCO is aiming at employee motivation to enhance the productivity of the employees, as
motivated employees are likely work harder and will give more time and effort in the business.
TESCO knows employee motivation is the key to organization's success. So employee
motivation is the important part of the organizational structure in TESCO.
10

References
Avgoustaki, A. and Frankort, H., 2018, July. Motivation-enhancing human resource practices
and the dynamics of organizational performance. In Academy of Management
Proceedings (Vol. 2018, No. 1, p. 11223). Briarcliff Manor, NY 10510: Academy of
Management.
Kooij, D. and Van den Broeck, A., 2022. Historical and Contemporary Perspectives on Work
Motivation in Human Resource Management. In Oxford Research Encyclopedia of
Business and Management.
Kundu, S.C. and Gahlawat, N., 2018. Ability–motivation–opportunity enhancing human resource
practices and firm performance: Evidence from India. Journal of Management &
Organization, 24(5), pp.730-747.
Lin, C., Li, X. and Lam, L.W., 2020. Development or maintenance? Dual‐oriented human
resource system, employee achievement motivation, and work well‐being. Human
Resource Management, 59(4), pp.311-325.
TASK 4
Financial management is the planning, organizing, directing, and controlling of the activities
related to finance such as utilization of funds and investments. Financial management helps in
improvement of the profitability of organizations. The report includes the importance of financial
functions and describes the job profile of financial manager within the company. An organization
need capital and investment to expand the business (Block, Hirt and Danielsen, 2018). There are
various sources of finance describe in this report which are used by an organisation for long-term
and short-term purposes to run the business.
Financial management- It is the function that deals with the financials of the business.
Financial management involves investment and disinvestment of funds, return on investment,
profits, business success. Financial decisions taken provides economic stability and also promote
employees to save money. Financial statements helps a organization to analyse the information
about revenue, expenses and profitability. The professionals of financial department organize and
control the transactions related to a business.
Importance of financial functions within organizations
11

The financial management department is headed by managers and professionals. There are
various functions of financial management for the organizations-
Calculating the capital required- The manager should have the overview of the funds required
by the organization to perform daily activities. At the starting of the business, owners bring a
capital which is used for daily activities, but for expanding business more capital is needed. So
the business managers should know the capital required in daily activities and for the the
expansion. If there are financial statements available with the manager they can estimate the
amount required.
Allocation of profits- It is the duty of financial managers to allocate the profits earned by the
organization. Using the profits for innovation, expansion, research and development, buying
machinery, and paying dividends to the shareholders.
Financial control- The financial manager has to analyse and control the firm's finances for the
short run and the long run (Chernov, 2020). There are various tools used by financial managers
such ratio analysis, financial forecasting, profit and cost control which are helpful in evaluating
the financial conditions of the company.
Financial functions are a important source for a organization. It helps the organization in
financial planning and allocation of resources. If the organization is provided by the financial
reports it can take critical financial decisions which can be helpful in improving profitability of
the business. Financial are important for a business as they provide the financial information
which is required by the organization to operate effectively and efficiently.
Role of financial manager in a company
A financial manager is the individual who takes all the decisions, and is accountable for all the
important financial functions of a company. There are various roles of a financial manager other
than making financial reports which are-
Raising funds- A financial manager is responsible for the financial needs of the business. There
should be a balance in between the cash and liquidated funds, so the business can raise funds by
equity or debt.
Allocation of funds- The profits earned by a business needs to be allocated by the manager in a
way that every department is satisfied by the budgets allocated. The manager have to allocate
funds according to the size of the organization.
12

Profit planning- Organization needs to earn profits continuously so as to survive in the market.
So it is the role of business managers to analyse the various factors which effects the profit of a
business. Profits are effected by pricing, state of the economy, demand and supply, cost and
output.
Sources of finance
There are many sources of funds which are available for a organization some can be used for
short-term while some can be used for long-term.
Short-term sources of finance-
 Commercial paper- It is in the form of short-term promissory note. It is unsecured and is
sold in the money market. The commercial papers are issued by large organizations and
are sold to other companies, business firms, commercial banks. This is an alternative
source of finance for the organizations in the short-term.
 Unsecured short-term bank loans- In a business it can happen that the organization is
lacking short-term finances. The cash inflows or cash equivalents with the business are
not sufficient to meet the cash outflow demands (Marqués, García and Sánchez, 2020).
For this excess demand a business needs short-term loans which is given by short-term
banks. It is a temporary source of finance for business, and it has to be paid within a
financial year.
Long-term sources of finances- The long-term sources of finances are needed by the business
during the establishment, expansion,research and development. The long-term finances are
offered for more than a financial year. It is required for long-term investment projects, because
the funds are blocked until the project is completed.
Preference shares- The preference shareholders have the benefits over equity shareholders. The
preference shareholders receive dividends at a fixed rate and are paid before the equity
shareholders. The preference shares carry fixed interest payments.
Debentures- Debentures are often used by many companies to raise long-term funds. A
debenture is a certificate under the common seal name of company (Shapiro and Hanouna,
2019). If a company wants to raise money from the general public, it can issue the debt IPO, in
which if the debentures are allotted the holders will get the certificate and are the company's
creditors.
13

References
Block, S.B., Hirt, G.A. and Danielsen, B.R., 2018. Foundations of financial management.
McGraw-Hill Education.
Chernov, V.A., 2020. Implementation of digital technologies in financial
management. Ekonomika Regiona= Economy of Regions, (1), p.283.
Marqués, A.I., García, V. and Sánchez, J.S., 2020. Ranking-based MCDM models in financial
management applications: analysis and emerging challenges. Progress in Artificial
Intelligence, 9(3), pp.171-193.
Shapiro, A.C. and Hanouna, P., 2019. Multinational financial management. John Wiley & Sons.
CONCLUSION
From the above report it is concluded that, business studies deals with management, principles of
business, and economics. Business studies covers all the functions of a business such as
accounting, finance, research and development, human resource. For a company it is important to
create a successful product offering. Organizations use various marketing strategies to attract
customers in order to increase profits. For a business marketing mix is a important tool as it helps
the business to identify the strengths and weaknesses and helps to reduce costs. It is important for
a business to analyse the internal and external factors which effects the business environment. So
organizations can use PESTLE analysis, which will help in identifying the brand positioning,
growth rates and risks involved in growth and expansion. For the smooth functioning of a
business employees health and well- being is important. If employee is highly satisfied and
motivated, they can increase the long- term profit gains of the organization. If the organization is
performing and earning well it can reward the employees with monetary incentives. For
increasing profits it is important for an organization to expand and reach new customers. There
are various sources of finance available to organizations in short-term and long-term. These
finances have to be allocated by the finance managers so as to increase the productivity.
14

REFERENCES
Books and Journals
Allman, J.M., 2019. # HerskovitsMustFall? A Meditation on Whiteness, African Studies, and the
Unfinished Business of 1968. African Studies Review, 62(3), pp.6-39.
Franco, M. and Haase, H., 2020. The role of reputation in the business cooperation process:
multiple case studies in small and medium-sized enterprises. Journal of Strategy and
Management.
Guercini, S. and Milanesi, M., 2020. Heuristics in international business: a systematic literature
review and directions for future research. Journal of International Management, 26(4),
p.100782.
Jackson, L., 2022. Introduction: The Business of The Business of Letters. In The Business of
Letters (pp. 1-8). Stanford University Press.
15

16