Financial Report: Comparative Analysis of Unilever Plc Group

This report presents a detailed financial analysis of Unilever Plc Group, comparing its performance with competitors Nestle and P&G using key financial ratios such as Return on Capital Employed (ROCE), Gross Profit Margin, Operating Profit Margin, Gearing, and Interest Cover for the years 2015 a...Read More

Running head: FINANCIAL MANAGEMENT
Financial Management
Name of the Student
Name of the University
Author Note

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Table of Contents
Part 1:...............................................................................................................................................3
Introduction..................................................................................................................................3
Background of the companies.....................................................................................................3
Comparative Financial Analysis of the main firm Unilever Plc Group......................................4
Recommendations and conclusion............................................................................................10
Part 2..............................................................................................................................................11
Introduction................................................................................................................................11
Budget- How it works................................................................................................................12
The different budgetary techniques...........................................................................................12
The comparison between the two main global company budgeting techniques:......................15
The benefits of Incremental Budgeting:....................................................................................15
The disadvantages of incremental budgeting:...........................................................................16
The benefits of zero based budgeting:.......................................................................................16
Conclusion.................................................................................................................................17
Part 3..............................................................................................................................................17
Introduction................................................................................................................................17
Discussion..................................................................................................................................18
Various techniques of performance measurement.....................................................................18
Conclusion.................................................................................................................................21

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Part 4..............................................................................................................................................22
Introduction................................................................................................................................22
The process of decision making by the managing director in the large global firms................22
The key issues that the manager faces in decision making.......................................................24
Conclusion.................................................................................................................................25
References:....................................................................................................................................26

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Part 1:
Introduction
The current section elucidates in detail the processes of assessing viability, profitability
as well as stability of a firm to arrive at improved economic decisions. This study at hand utilize
key financial ratio to analytically evaluate financial condition of the main selected company
Unilever Plc in comparison to its peers Nestle and P&G over the time period 2015 and 2016.
Background of the companies
Unilever Plc is essentially a Dutch multinational consumer goods firm headquartered in
Netherland. The products of the company comprises of personal care products, food and
beverages and many others. In spite of operating in the soft markets, the company registered a
sales growth of approximately 3.7% that is ahead of the market and sales enhanced by around
4.3% whilst turnover that is at current rate, decreased 1%(Brooks 2015).. The net profit of the
company has increased by 5.5% to around € 5.5 bn. One of the peers of the main company
Unilever Plc chosen for the study at hand is Nestle Group. Nestle Group is referred to as one of
the world’s leading food and Beverage corporations. This Swiss multinational firm,
headquartered in Switzerland operates more than 2000 brands that range from global icons to
regional favourites across 191 nations around the entire world. In itself, the profit figure of the
company during the current year has declined although sales has enhanced. Another peer firm
selected for the present study is P&G. P&G, an American transnational corporation,
headquartered in Ohio, operates in the section of consumer goods. P&G’s sales in the period
2016 have declined to $65299 million although the operating profit has increased during the

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same period. In addition to this, the EPS registered for this company is 3.8 in the year 2016 as
compared to 2.5 in the year 2015(Brooks 2015)..
Comparative Financial Analysis of the main firm Unilever Plc Group
• Return on Capital Employed: As correctly put forward by Bekaert and Hodrick (2017)
return on capital employed refers to a profitability ratio that enumerates the extent of efficiency
of a business concern to create profit from the firm’s employed capital. This is carried out by
comparing net operating profit to firm’s employed capital. Essentially, this ratio is enumerated
by calculating by dividing net operating profit or in other words Earnings before Interest and Tax
(EBIT) by the firm’s employed capital (Brooks 2015).. In case if employed capital is not
provided in a current issue or in the financial statement declaration, then it can be calculated by
subtracting current liabilities from particularly total assets (Barr 2018). The formula that is used
for enumeration is as presented below:
Return on capital employed = Net Operating Profit/ (Total Assets-Current Liabilities)
Fundamentally, a higher ratio implies more desirable position of the firm since it implies
that more profits are generated by capital employed (Titman et al. 2017).
The return on capital employed for the main firm Unilever Plc is registered to be 0.21 in
2016 as compared to the year ago figure of 0.23 in 2015. This reflects a decline in the ratio
replicating an undesirable financial condition of the firm. On the other hand, the return on capital
employed calculated for Nestle Group is registered to be 0.1368 in 2015 and 0.1395 in 2016,
reflecting an insignificant increase in the current period. Then again, the return on capital
employed for the firm P&G is recorded to be 0.11 in 2015 and 0.13 in 2016. This shows that the
return on capital employed has increased for the firm reflecting a desirable financial condition

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during the current period (Brooks 2015). However, it can be hereby witnessed that this ratio is
recorded to be the highest for the main firm Unilever Plc, replicating a better efficiency of the
firm in comparison to its peers.
2015 2016 2015 2016 2015 2016
Unilever Nestle Group P&G
0
0.05
0.1
0.15
0.2
0.25
Return on Capital Employed
Return on Capital Employed Series2
Series3 Ratio
• Gross profit margin: This is essentially a profitability ratio that enumerates the overall
percentage of sales that surpasses the total cost of goods sold (COGS). This enumerates the
extent of efficiency of a company in utilizing the materials as well as labour to produce and at
the same time sell products profitably (Finkler et al. 2016). Basically, this is calculated by using
the formula:
Gross Profit Margin Percentage= (Total Sales-Cost of Goods Sold)/Sales

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Analysis of the gross profit margin reveals that a higher one is more desirable as it
reflects higher efficiency on the part of the company to produce as well as sell products (Petty et
al. 2015).
The gross profit margin of the main firm Unilever plc has decreased during the period
2016 although insignificantly to 0.4265 in the year 2016 in comparison to the year ago figure of
0.4213(Zainudin and Hashim 2016).. This replicates an undesirable financial condition of the
firm in terms of profitability of the firm. On the other hand, the ratio is observed to have
increased for the peer firm Nestle Group as well as P&G. Also, gross profit margin of the main
firm is recorded to be less than that of both the peers.
2015 2016 2015 2016 2015 2016
Unilever Nestle Group P&G
0
0.1
0.2
0.3
0.4
0.5
0.6
Gross Profit Margin
Gross profit margin Ratio
• Operating profit margin: This ratio replicates profitability ratio that enumerates the overall
percentage of total revenue that is made from the operating income (Attig et al. 2016). In itself,
this operating profit margin is enumerated by using the following formula:
Operating Margin Ratio = Operating Income/Net Sales

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A greater operating margin can be considered to be more desirable in comparison to a
low ratio as this reflects that the business is making adequate money from numerous ongoing
operations to pay off for different variable costs along with fixed costs (Rodrigues and Rodrigues
2018).
Operating margin for the main firm Unilever Plc is recorded to be 0.1413 in 2015 and
0.1479 in 2016. This shows that the operating margin of the firm has increased although
insignificantly(Zainudin and Hashim 2016).. In itself, it reflects a better financial condition of the
firm in terms of profitability. Essentially, this demonstrates that during the current period a
higher proportion of revenue remains available for covering different non-operating costs
(Amelec and Carmen 2015). On the other hand, the operating profit margin has increased from
0.13 in 2015 to 0.14 in 2016, reflecting steady financial condition. Again, for the peer firm P&G,
this ratio has significantly increased from 0.15 in 2015 to 0.20 in 2016, indicating a sound
financial condition of the firm. However, it can be hereby observed that in terms of operating
margin, P&G has a better financial steadiness among the three firms.
2015 2016 2015 2016 2015 2016
Unilever Nestle Group P&G
0
0.05
0.1
0.15
0.2
0.25
Operating Profit Margin
Operating profit margin Ratio

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• Gearing: Gearing ratio can be considered to be an effective tool for analyzing the structure of a
company and reflects the proportion of funds delivered by debt in comparison to the funds
delivered by equity (Shin et al. 2016). This ratio is enumerated by way of the following formula
stated below:
Gearing Ratio= Total liabilities/Total Assets
Essentially, low gearing ratio normally means more steady business with higher potential
of longevity as this company with lower ratio also possesses lower level of debt (Vogel 2014)
For the main firm Unilever Plc, the gearing ratio is recorded to be 0.6924 in 2015 and
0.6990 in 2016. Essentially, this indicates a very slight increase, replicating an undesirable
financial condition in comparison to the year ago period. However, for the peer firm Nestle
Group, the gearing ratio shows an upward movement from 0.48 in 2015 to 0.499 in 2016,
reflecting a unstable financial condition as compared to the year ago period. Again, the gearing
ratio for the firm P&G is registered to be 0.51 in 2015 and 0.54 in 2016. This too shows an
increase in the ratio in 2016 as compared to the previous period, indicating an unfavourable
financial condition (Zainudin and Hashim 2016). Nevertheless, comparative analysis of the three
firms replicates that Unilever has registered the highest ratio among the three firms reflecting the
most unfavourable financial health.

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2015 2016 2015 2016 2015 2016
Unilever Nestle Group P&G
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Gearing
Gearing Series2 Series3 Ratio
• Interest Cover: Marozzi (2016) suggests that interest coverage ratio is necessarily a financial
ratio that enumerates capability of a business to disburse interest payments on the debt in a well
timed way. Essentially, interest coverage ratio can be enumerated by a formula as mentioned
below:
Interest Coverage Ratio= Earnings before Interest and Tax/Interest Expends
In this case, a higher ratio indicates towards a better financial position as this indicates
the business concern has adequate income to meet all its obligations to pay the interests.
The interest coverage ratio for the firm Unilever Plc is registered to be 16.33 in 2015 and
21.25 in 2016, reflecting an increase in the ratio as compared to the year ago period. This shows
a favourable financial condition for the corporation and financial steadiness to make interest
payments. However, interest coverage ratio for the firm Nestle Plc is registered to be 24 in 2015
and 24.24 in 2016, reflecting an increase in the ratio in comparison to the previous year period.
In essence, this replicates a better financial condition of the corporation as compared to the prior
period. On the other hand, the interest coverage ratio for the firm P&G is observed to have

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increased from 17.65 in 2015 to 23.21 in 2016. This upward moving trajectory of interest
coverage reveals a better financial condition of the firm in the current period in comparison to
the year 2015. However, comparative analysis of the three firms reveal that Nestle Group has the
highest interest coverage replicating greater financial steadiness of the firm to disburse the
interest (Amelia 2015).
2015 2016 2015 2016 2015 2016
Unilever Nestle Group P&G
0
5
10
15
20
25
30
Interest Cover
Interest Cover Series2 Series3 Ratio
Recommendations and conclusion
Detailed financial analysis of the pecuniary statements of the firm utilizing key ratio
helps in gaining clear understanding regarding the financial position of the main firm in terms of
its competitors in the market across the two year time period (2015-2016). Thorough analysis
using the ratio reveals that the main firm Unilever Plc has better financial condition among the
peers when considered in terms of return earned on employed capital of the firm, although the
same has decreased during the specified period 2016. Thus, it can be hereby mentioned that
management of the firm can focus on enhancement of the operating profit of the firm for
correcting the figures. Analysis of the gross profit margin ratio calculated for the three different

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firms helps in understanding the fact that the main firm Unilever plc has comparatively lower
efficiency to produce as well as sell as compared to its peers, although the same has remained at
the same level during the specified time period. Thus, management of the main firm can
concentrate on tactically enhancing of the efficiency of firm to generate higher profit out of the
sales of the firm. Again, in terms of operating margin, the main firm is said to be in a better
position in terms of Nestle Group whereas it is lagging behind in comparison to P&G. As such,
the gearing ratio is also recorded to be the highest for the main reflecting unfavourable financial
condition in comparison to both the peers. Therefore, the finance managers of the firm can
concentrate on lessening the liabilities of the firm to improve the condition. In terms of interest
coverage, the peer firm Nestle Group is said to have the most favourable condition among the
three. However, the same is said to have increased for the main firm during 2016 as compared to
2015, reflecting a desirable financial condition.
Part 2
Critical discussion of the techniques of budgeting that might be most useful to a large global
company to allow it to best understand the operational performance its divisions.
Introduction
The process of budgeting is a integral part of effective running of the business. They are
the most efficient plan of the future actions for the managers and stand as a point of comparison
of the various yearly performances of the organization.
In a simpler form, budgets refer to the amount of money hat is kept separately to allocate
the various expenses that help in the business operations (Codesso et al.2015). The performance
and operations becomes much easier when it is determined beforehand the questions like how

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much to spend, how much to spend and how to spend(Bacon Rogers and Chahal 2016).. Most of
the companies start with a static budget that is based on the planned inputs and outputs of each of
its division. To find out the numbers, the firm mangers make use of economic forecasting
process to determine a realistic static budget (Andor, Mohanty and Toth 2015).
Budget- How it works
The budget helps in evaluation of the business performance. A budget flexible is the
budget when it contains figures that are based on the actual output (Becker et al. 2016).
Comparison is then made with the static budget of the company to get the differences between
amount of expected spending and the actual spending(Bacon Rogers and Chahal 2016)..
There are many of differences that can take place in the static system of budgeting. The
two most basic differences are the sales-volume budget variance and flexible budget variance.
The flexible budget variance and the flexible budget are then compared to find out the net results
(Uyar et al.2017). The result enables to determine the effects of the price and cost on the
operations. With the help of these two budgets, a company develops the individual flexible and
static budgets for any element of its operations. In case of unfavorable sales volume that is when
the flexible budget is less than static budget, the sales of the company will turn out to be less than
expected. Similarly, the unfavorable flexible budget variance there would be a negative effect on
the price and cost (Mohamed, Kerosi and Tirimba 2016). By getting the knowledge of the
company’s deficit or excess, the job of the manager to evaluate the firm’s performance becomes
easier. It also helps in making changes and innovations in firm’s performance.

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The different budgetary techniques
A budget refers to the basic plan of action for the upcoming period of organisation and a
sound planning of budgeting should involve all the divisions of the organization and its actions.
It is crucial in both the terms of profitability and performance to construct an effective budget, as
without having an cost awareness it is not too easy to anticipate the loss as well as the profits
(Gooneratne and Hoque 2016).
Three main budgeting techniques are useful for most the organizations are:
Zero-based budget:
As the name suggests, the zero based refers to the system of budgeting that requires
budgeting to commence with the assumption that every cost has a zero base. Then it is followed
by the cession making process of analyzing of the items that related to the expenditure, whether
the purchase or the expense is necessary or not(Bacon Rogers and Chahal 2016).Then different
options of purchasing associated with the specific item are explored as a means of ensuring the
item is obtained as cost-effectively as possible. One of the main drawbacks of system of the
zero-budgeting is that it can take an huge amount of time to work through each individual cost in
this way (Thien 2015). However, it is important to add that using this technique will then provide
database that is extremely useful and contains valuable, timesaving information for the years to
come.
Incremental budget:
The approach of incremental budgeting combines the identified costs from the previous
period of accounting with certain additions. These percentage additions are efficiently utilized to
cover two key areas that include increase in cost as a result of inflation or higher cost of purchase

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and various predictions associated with the cost increases and income as a result of volume of
business predictions(Callaghan, Hawke. and Mignerey 2014).
The one of the disadvantage pointed out of the incremental system of budgeting is the
procedure in which there is addition of percentages in a blanket fashion that results in the
likelihood of higher long-term overall costs (Bacon Rogers and Chahal 2016). This may then
also result in a business having to increase prices of sales to a new level that is no longer
competitive (Hopkins, 2015).
Flexed budget:
Similarly, in this case, according to the name of the budgeting technique it includes
“flexing” of the normal budget. This technique of budgeting is the most suitable to adapt the
various external changes. This approach helps the managers to provide the key informations
resulting in an achievable budget, optimistic budget and pessimistic budget (Yan 2016).
Through implementation of this process of flexed budgeting, managers are better able to
make useful decision relating to expenditure and risk, having gained a wider perspective on
worst and the best results.
Rolling budget:
A rolling budget is a budgeting procedure that was continually updated to add a new
budget period as the latest budget period is completed. Therefore, it involves the incremental
extension of the budget model that is existing (Rubin, 2015). By this process, the organization
especially the global ones have a budget that extends up to more than a year.

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This technique involves more attention of the management as this activity of management
is s repeated every month. Additionally, if the company uses participative budgeting to create its
budgets on a rolling basis, the total employee time used over the course of a year is substantial.
Consequently, it is best to adopt a leaner approach to a rolling budget, with fewer people
involved in the process (Jones 2017).
This Technique has the strength of having someone constantly attend to the budget model
and revise assumptions of the budget for the last incremental budget period. The weakness of this
approach can be said that it may not yield a more achievable than the traditional static budget, as
the budget periods before the incremental month are not revised.
Therefore, according the focus in the above discussion, the three main categories
associated with budgeting, which include incremental, rolling budget, zero-based and flexed
budgeting. All the approaches have various advantages and disadvantages with the latter
approach being able to provide information that is more accurate.
The comparison between the two main global company budgeting techniques:
The main purpose of this discussion is to critically analyze the two main methods for
preparing budgets - the incremental approach and the zero-based approach. Both of these have
been used in global companies, with varying degrees of success of its performances.
Incremental budgeting refers to the budgeting method that is traditional. here, the
preparation of the budget is done by taking the budget of the current period or the actual
performance as a base, with the amounts that are incremental are then added for the next budget
period. The amounts that are incremental are included in the adjustments of inflation, or planned
increases in cost of sales.

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The benefits of Incremental Budgeting:
According to the above discussion, the incremental Budgeting is more easy to prepare
and it comparatively faster to prepare. Therefore, it can be allocated to staffs that are junior.
Moreover, the incremental budgeting is less costly. Since incremental budgeting is consistent and
includes less confusion, it prevents conflicts between the managers of the departments.
The disadvantages of incremental budgeting:
The one of the major limitations of the incremental budgeting is that it assumes that the
cost and the current activities are still needed without any detailed examination. Incremental
budgeting is backwards looking rather than forwards looking. While this is not such a problem is
stable businesses, it will cause problems in rapidly changing business environments. Moreover,
there is no incentive for departmental managers to reduce cost (Shah et al. 2015). The money is
being saved as it is obvious that if the money will be allocated the following year. Another
problem faced is that the performance target is not challenging as the inefficiencies of the present
year are carried forward to the next year, the managers are not encouraged to gear up and
improve the efficiency.
On the other hand, Zero based budgeting the whole process starts from zero. There is no
reference made with the prior budget period or the actual performance (Gao and Chen 2016). All
the budget heads of the Budget starts from zero balance whereas in incremental budgeting the
balance of the last year is carried forward to the next year. All the functions of the divisions is
then comprehensively reviewed and after approving the required expenditures. the budget is
made (Zhang et al. 2017).

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The benefits of zero based budgeting:
The zero based budgeting is to achieve the optimal allocations of the resources, even the
parts that are not being needed. Since it does not take in hand, the previous year allocation of
resources the present year is focused upon. Therefore, the values that are inefficient and obsolete
are ignored. There is no waste. This is the biggest benefit of the zero based budgeting that is not
present in the incremental budgeting (Sun, Liu and Wu 2018). Moreover, it is more challenging,
it enables questioning of the attitude of the managers. As a whole, it is more efficient in the
allocation of the resources.
Conclusion
According to the analysis of the two main techniques of budgeting, that large global
company may follow; the Zero-based budgeting is the more effective and can lead to more
efficiency. Since it requires justification of all the cost, it is more efficient and practical. On the
other hand, increment budgeting although being easier and quick it gives rise to inefficiency,
inaccuracy and budgetary slack.
Part 3
Introduction
The performance management is the process of monitoring of the budgets and the targets
against actual outcomes for the establishment of the best technique to analyze how well the
business and the employees are functioning as a whole as one unit. The business organizations
face high increase in the demands for measurement of the performance of the
environment(Olszak and Ziemba 2012). This is important for the achievement of the sustainable
development to make the financial stakeholders reassured that the investments made by them are

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not at risk, to satisfy the regulators demands and other non‐financial stakeholders and to disclose
the company information to the employees and customers. Measures can be named into ten
categories that are impact, , emissions, risk , input, , efficiency, resource ,customer, financial,
normalized and aggregate. There are six different techniques to measures the performance that
are ‐ production, ecological, auditing, accounting, quality and economic.
Discussion
The discussion deals with the performance measurement of different market
environment. There are two kinds of environment in a business, namely internal environment
and external environment(Olszak and Ziemba 2012). The internal environment deals with the
factors that influence the organization that are present in the business, it helps in controlling of
the business. the another environment includes the external factors that impacts the outsiders of
te business like the suppliers, customers, stakeholders and the economic market.
Various techniques of performance measurement
The two major ways to measure the business performance in the two business
environments at present are as follows:
Balanced Scorecard Framework and Function
Balanced Scorecard (BSC) is an execution administration instrument that started as an
idea for estimating whether the small scale operational units of an organization are adjusted with
its bigger scale counterparts regarding vision and system (Hoque 2014). By concentrating not
just on budgetary results yet in addition on the operational, promoting and formative
contributions to these, the Balanced Scorecard gives a more far reaching perspective of a
business, which thus enables associations to act in their best long haul interests. In 1993, Robert

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S. Kaplan and David P. Norton started publicizing the Balanced Scorecard through a progression
of research articles. In 1996, they distributed the book The Balanced Scorecard(Olszak and
Ziemba 2012). Since the first idea was presented, Balanced Scorecards have turned into a prolific
field of hypothesis, examine and counseling practice. The Balanced Scorecard has developed
significantly from its foundations as a measure determination system. While the fundamental
standards were sound, numerous parts of Kaplan and Norton's unique approach were
unworkable.
Actualizing Balanced Scorecards ordinarily incorporates four procedures:
1. Making an interpretation of the vision into operational objectives;
2. Conveying the vision and connection it to singular execution;
3. Business arranging
4. Criticism and learning, and altering the procedure likewise.
The Balanced Scorecard is a system, or what can be best described as a ―strategic
administration system that cases to join all quantitative and unique measures of genuine
significance to the endeavor (Al-Najjar and Kalaf 2012). Numerous books and articles alluding
to Balanced Scorecards confound the plan procedure components what is more, the Balanced
Scorecard itself. Specifically, it is normal for individuals to allude to a strategy mode‖ similar to
a Balanced Scorecard. In spite of the fact that it helps concentrate on vital issues and the
administration of the execution of system, recall that the Balanced Scorecard itself has no part in
the development of system. The gathering of execution measures all in all classes (points of

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view) apparently aids in the social affair and choice of the proper execution measures for the
venture.
The Balanced Scorecard has proposed four general points of view:
“Financial point of view; Customer point of view; Internal process point of view; Innovation
and learning point of view.”
The money related point of view looks as if the organization's usage and execution of its
system are adding to the main issue change of the organization(Olszak and Ziemba 2012). It
speaks about the long haul vital goals of the association and hence it fuses the substantial results
of the system in customary money related terms. The three conceivable stages as portrayed by
Kaplan and Norton (1996) are quick development, support and reap. Budgetary targets and
measures for the development stage will originate from the improvement and development of the
association which will prompt expanded deals volumes, securing of new clients, and
development in incomes and so on (Anandarajan, Anandarajan and Srinivasan 2012).
Benchmarking
Another technique used to measure the performance of the business. It is the process
of comparison of the business processes and the metrics of performance with bests practices of
other industries. In process of project management, benchmarking supports the selection, plan
and project delivery (Al-Najjar and Kalaf 2012). The benchmarking helps in the measurement of
the time, quality and cost. By this method, the management gets to know how well the company
targets are ahieved and the business processes are analyzed.
Level of bench marking

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Internal bench marking:
In this level of Benchmarking comparison takes place of departments, divisions, and
sections of the companies is made in order to find out the improvements chances.
Competitor bench marking:
This level compares with the processes and products of rival product in order to obtain
knowledge of the competitive advantage (Hoque 2014). The process of collection of the
information given above from rival company is much difficult but these efforts can be made to
snatch information needed in the process of benchmarking.
Functional bench marking:
The process comparison of processes or functions is made with the best company in the
industry worldwide. The efforts are on to follow the processes and functions of the best company
to improvisation of the results. Benchmarking is a systematic process of comparison of
performances and practices. The firm’s success depends upon the culture of the work prevailing
in the company.
Strategic bench marking:
Strategic benchmarking involves in the verification of what peer companies doing in
terms of top capabilities of management, strategic initiatives, product competitiveness
development and other long-term qualities that are long term and procedures that are successful.
it refers to the Determination of what a company does strategically is at times easier than
learening how the individual procedures are managed.
Steps involved in benchmarking:

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The process of Benchmarking takes place in five steps. The first step is the identification
of the objective of the project of benchmarking. General large subjects are less appropriate for a
benchmarking study than single procedures or concepts. Next is the identification of the
company that excels in the particular procedure or concept so that comparison can be made for
analysis. Then comes research and study of the rival company’s performance, process, profits
and other relevant factors. The fourth step refers to the analysis of gathered information that is
received by the procedures of the rival company’s procedures (Hoque 2014). The final step
consists of application of the various techniques to cope up with the performance of the chosen
rival company and measure the backlogs.
Critical success factors
Critical Success factors (CSFs) are the basic territories of the business that must be
performed well if the mission, destinations and objectives of the business are to be accomplished.
CSFs go about as a typical perspective to quantify the achievement of the business. CSFs assist
everybody in the group to know precisely what they have to do to guarantee the achievement of
the business (Olszak and Ziemba 2012). This enables representatives to play out their own
particular work in the correct setting thus pull together towards a similar general means to
accomplish objective compatibility. Critical Success factors ought not be mistaken for progress
criteria. The last are results of a venture or accomplishments of an association important to
consider the undertaking a win or the association fruitful. Achievement criteria are characterized
with the targets and might be measured by key performance idicators (KPIs). The idea of
"achievement factors" was created by D. Ronald Daniel of McKinsey and Company in 1961. The
procedure was refined into basic achievement factors by John F. Rockart in the vicinity of 1979

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and 1981. In 1995, James A. Johnson and Michael Friesen connected it to numerous segment
settings, including human services.
Graphic Rating Scales
Graphic rating scales are perfect for creation situated workplaces, and additionally for
different work environments that move at a quick pace, for example, those found in the “food
and beverage” industry. A rating scale comprises of a rundown of occupation obligations,
execution principles and a scale ordinarily from 1 to 5 for rating worker execution (Lunenburg
2012). This technique for estimating worker performance requires arrangement simply like
different strategies; notwithstanding, it can be finished moderately rapidly, which is an or more
for administrators who oversee huge offices or contending assignments in a situation that leaves
brief period for workforce administration obligations (Sekaran and Bougie 2016). Attributes of a
decent Graphic Rating scale are:
 Performance assessment measures against which a company must be evaluated must be
all around characterized.
 Scales ought to be situational.
 Ambiguous practices definitions, for example, reliability, genuineness and so on ought to
be maintained a strategic distance.
 Ratings ought to be important to the conduct being estimated.
Conclusion
Performance management is a part of the workplace that is integral as it provides a
platform for managers and the supervisors to measure employee performance and for the

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determination that whether workers are coping up with the expectations of the company and
adapt will the business environments. The performance measurement method of the businesses
varies according to the work environment, type of business and, to some extent, the employee's
occupation. The business performances are analysed in several new ways. The company has to
efficiently chose the correct technique and maximize its production along with the profit.
Part 4
Introduction
Decision-making deals with the regular activities of the individuals and the firms. When
it comes to a large public company, decision-making is a process as well as a habit. Successful
and Effective decisions make profit to the company and unsuccessful making of decisions make
losses (Heyler et al.2016). Therefore, the process of corporate decision-making is the most
critical operation. In the process of decision-making, a certain course of action from a few
possible alternatives is chosen. Many tools, techniques and perceptions are used. Additionally,
both personal decisions and collective decisions are considered. In usual case, the process of
decision-making is hard task (Block et al. 2016). In most of the cases, the corporate decisions
involve level of conflict or dissatisfaction with another party.
The process of decision making by the managing director in the large global firms
The initial process of decision-making is the identification of the purpose of the
decisions. Here the pros and cons of the strategy are thoroughly analyzed. When a financial
proposal is given, there arise many issues from the divisional directors there are various
questions that are to be answered in this step (Romiszowski 2016). The questions are:
What is the exact issue?

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Why the issue is needed to be solved?
Who are the parties affected by the issue?
Does the issue have a specific time-line or a deadline?
The next step is gathering of the informations, the decision-making issues of a firm
consist of many stakeholders. Additionally, there can be ample of factors involved and affected
by the problem. In the issue solving process, the information related to the factors of the
shareholders is gathered with tools such as 'Check Sheets' are effectively used (Royo-Vela and
Hünermund 2016).
The following step is finding of the alternatives. In this step, the main criteria for the judgment of
the various substitute and alternatives are set up. While defining the criteria the goals of the
organizations and the culture of the company must be taken in consideration (Snyder. and
Diesing 2015). For example, one of the main concerns in all the process of decision-making is
profit. The large companies unless it is an exceptional case, do not make decisions that reduce
profits. Similarly, base principles should be identified related to the in hand problem.
The next step is listing down of all the ideas, which are considered as the best option.
Before the idea generation step, it is important to understand the reasons of the issues and
prioritization of issues. For this, Cause-and-Effect diagrams and Pareto Chart tool are used.
Cause-and-Effect diagram enables in the identification of all possible reasons of the issues and
Pareto chart helps in the setting the priorities and identify the cause and effect of the issue (Saaty
2008).

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In the next step deals with judging the principles and criterion of decision-making to
evaluate the alternatives. The experience and effectiveness of the judgment principles ate taken
in hand. The pros and cons of the alternatives are analyzed.
Once the evaluations of the issues are done and the best alternatives are found out the
selected decision is informed and implementation takes place. Then after the execution the
outcome is obtained((Royo-Vela and Hünermund 2016).There is complete utilization of the
resources and sound management. This technique is one of the best practices of decision-making
and can increase the profits as well as the production.
The key issues that the manager faces in decision making
Most of the decisions that the manager faces issues are due to the level of uncertainty,
complexity and ambiguity (Saaty 2008). This is because most of them are unprogrammed. A
manager is someone who analyses the results of the cases and takes decisions according to the
objectives of the organization. When a financial expenditure proposal is given to a managing
director, the various issues that are faced by the manager are as follows:
Issues of measurement: Identification and measurement of the costs and effects of the decision
of a proposal of capital expenditure tends to be difficult. This is more so when a capital
expenditure has to bear some other company activities like cutting into sales of some existing
product or consequences that are tangible like improving the worker moral.
Uncertainty: Costs and benefits are involved in the capital expenditure decisions that extend for
into future. It is impossible to make the prediction as to what exactly is going to happen in future.
Therefore, there is an existence of a huge uncertainty featuring the costs and benefits of the
decision of a financial expenditure proposed by the directors.

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Temporal Spread: Over a long period of time the costs and benefits associated with a capital
expenditure decision are spread out, usually for industrial projects it takes 10-20 years and for
infrastructural projects it needs 20-50 years. Such a temporal spread creates some issues in
discount rates estimation and establishment of equivalence.
There exist many measures to the issues faced by the managers in taking the managerial
investment decisions that give firms an estimation of the return over many investment projects.
To be able in determination of a specific projects value, the three most methods that are
commonly used - payback method, net present value method, and the IRR methods (Royo-Vela
and Hünermund 2016). These are the different kind of ways that are put to use while taking
financial investment decisions.
Conclusion
In times of making decisions, the managing director must always weigh pros and cons
of the consequences of the business and should be in favor of the positive results.
This helps to eradicate the possible losses of the organization and keeps a smooth functioning of
the business with sustained growth. At times, avoiding decision-making seems to be easy
specially, when there is a lot of confrontation after finalizing the toughest decision.
However, decision-making and acceptance of its consequences is the only method to stay in
control of business operations.

28FINANCIAL MANAGEMENT
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