Marks & Spencer Financial Resources and Profitability

This report investigates the correlation between effective financial resource utilization and organizational profitability, focusing on Marks & Spencer (M&S) as a case study. The introduction highlights the importance of financial resources in business operations, emphasizing their role in achieving desired profits and ensuring long-term sustainability. The study explores the significance of financial management, covering forecasting, budgeting, and asset management within the retail sector. Research questions address issues in cash flow management, the relationship between resource utilization and profitability, and strategies to increase M&S's profitability. The research objectives include evaluating resource allocation, studying factors affecting profitability, assessing the relationship between resource use and profit, and recommending ways to enhance M&S's financial performance. The literature review discusses how effective resource utilization, including financial, human, and technological resources, impacts business success. It examines the importance of financial resources for day-to-day activities, expansion, and innovation. Furthermore, it explores the relationship between profitability and factors like market competition, demand, promotional techniques, and cost of production. The research methodology involves an interpretivism philosophy, a deductive research approach, and a qualitative research type, using a descriptive research design. The data will be collected from secondary sources and analyzed using thematic analysis. The report aims to provide insights for retail managers to improve business profitability and gain a competitive advantage in the market.

To identify the relationship between effective
utilization of financial resources and
profitability of organization: Study on Marks &
Spencer
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Table of Contents
1. Title and Introduction..................................................................................................................3
Title .............................................................................................................................................3
Introduction..................................................................................................................................3
2. Significance of the study..............................................................................................................4
3. Research questions.......................................................................................................................4
4. Research Objectives and Framework...........................................................................................5
Research Objectives.....................................................................................................................5
Framework ..................................................................................................................................5
5. Literature Review.........................................................................................................................6
6. Research Methodology and Design...........................................................................................10
7. Ethical Considerations ..............................................................................................................12
8. Outcomes ..................................................................................................................................13
9. Timeline and Gantt chart...........................................................................................................13
10. References ...............................................................................................................................15
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1. Title and Introduction
Title
“To identify the relationship between effective utilization of financial resources and profitability
of organization: Study on Marks & Spencer
Introduction
To conduct effective practices in business, an organization requires proper resources
whether it is human capital, financial resources and technological expertise. The proper use of
business resources is the key of success. Whatever the resources are physical including property,
equipments, material, and tangible resources including monetary funds are to be used in a better
manner to achieve the goal of enterprise (Melero and Sese, 2015). As a result, the management
of finance is inseparable from the management of the business as a whole. According to many
management leaders including Kotler, financial resources are the back bone of business that
helps in running the operations smoothly and making desired profits. It has been increasingly
witnessed that manufacturing, selling or even retailing business cannot be survived for a long
run, in the lack of financial resources. However, effective balance better existing and future
financial funds generally depends on the effective use of financial resources. The retailing
business that makes consistent profits may survive in the market for long runs and can gain the
attention of stakeholders (Arbidane and Ignatjeva, n.d). The business offering of retailer’s i.e.
new products and services is totally depends to their capacity to make profits. To a greater
extend, financial aspects of retailing business generally covers forecasting, budgeting, profit
planning, asset management, and effective allocation of business resource. The major question of
present investigation is that if there is a relationship between effective utilization of financial
resources and profitability of organization. To identify the fact behind the research statement, a
leading entity of UK retailing market namely Marks and Spencer’s is taken into consideration.
The major aim of retailing corporate entities is to achieve maximum profits so as to
customers can be offered with innovative products. Marks & Spencer is witnessed as the most
profitable retailer in Europe along with having presence in global market as a global supermarket
chain. The global reputation for company is achieved on the basis of effective use of business
resources (Annual report of Marks and Spencer, 2014). The major issue associated with research
is that business entity is continuously making huge investment in research & development that
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involves huge monetary resources. This shows availability of sufficient funds and higher
profitability in business to run operations smoothly (Kumar, Shah and Venkatesan, 2006). The
rational of present study is to assess the major reason of profitability whether it is an effective
allocation of financial resources. Recently, company has been observed to make continuous
investment retained earnings in many of projects with the aim of making huge profits; hence, it is
trying to manage its funds. The company is also preparing budget to make effective allocation of
funds for each activity so, through the present investigation the relationship between effective
utilization of financial resources and profitability of organization.
The current investigation intends to know whether there is any relationship between
utilization of financial resources in Marks and Spencer and its profitability. This investigation
will specifically focus towards Marks and Spencer’s and its financial system. With the help of
the present study, retailing managers can take sufficient steps towards the improving profitability
of business. After analysing the importance of financial management in retailing business Marks
and Spencer can make the profitability position better than other competitors and also attain huge
market share (Agarwal, 2015).
2. Significance of the study
The present investigation is significant for scholars, academicians, researchers as well as
retailing business. This study purposes at identifying the relationship between effective
utilization of financial resources and profitability. The significance of present research topic is in
judging the competitive advantages of an organization against the proper allocation of financial
resources. The scholars will be benefited from the findings of investigation as they will be aware
with the importance of effective allocation of financial resources as well as the factors of
improving business profitability (A Marks and Spencer case study, 2013).
3. Research questions
 What are the issues involved in effective cash flow management in financial resources?
 Is there any relationship between effective utilization of financial resources and profitability
of organization?
 What are the different ways through which profitability of Marks and Spencer can be
increased?
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4. Research Objectives and Framework
Research Objectives
 To evaluate the allocation of financial resources in organization
 To study the various factors affecting profitability of retailing business
 To assess the relationship between effective utilization of financial resources and
profitability in business of Marks & Spencer
 To recommend the ways to enhance the profitability of Marks & Spencer through
management of financial resources
Framework
Research philosophy: The use of research philosophy intends to gain sufficing
knowledge in regard to the research problem. Further, the requirement of a deep investigation
into the research problem suggests the use of interpretivism philosophy. Research philosophy
Research approach: Research approach is the way that defines the framework in which
the entire study will be conducted. For the present investigation, deductive research approach
will be used.
Research type: Qualitative research type will be used to identify the relationship between
effective utilization of financial resources and profitability of organization.
Research design: There are various kinds of research design including Descriptive,
Correlation, Semi-experimental, Experimental and Meta-analytic. Descriptive research design
will be used to conduct this investigation.
Data collection: To conduct a proper investigation, it is crucial to collect the information
that is pertaining to the research problem. Through primary sources data are to be collected for
the first time, on the other hand, through secondary sources, data are obtained that are already
collected from other researchers (Chapman and McNeill, 2004).
Data Analysis : Data analysis In the present investigation, secondary sources will be used
for which an in-depth analysis is required; therefore thematic analysis will be used as data
analysis technique.
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5. Literature Review
To the view point of Wilson-Jeanselme and Reynoldsm (2005) the success of a corporate
entity depends upon the effective use of business resources. There are major three resources that
play a vital role in the company such i.e. human resource, financial resources and technological
resources. According to Kumar, Shah and Venkatesan (2006) financial resources are essential in
every aspects as the application of such resources can be seen to the availability of other two
resources. According to Chapman and McNeill (2004) finance is a life blood of every
organization and without it company cannot carry out its operations and other working. For
every aspect fund is required and organization cannot survive without finance. It is used for
purchasing raw materials from suppliers, for paying fix and variable cost, for hiring and
remunerating human resources, for investing in physical resource and many more. Thus, in every
step and process finance is required. For this purpose, it is necessary for the company to
recognize and analyze all types of financial resources so that at time of requirement fund can be
availed quickly and effectively, hence time and cost both can be saved.In the study conducted by
Maswadeh (2015) presented that in lack of financial resources business entities could not
sufficient human resource as well as technical expertise, hence, it crucial to have sufficient
amount of funds to run business operations. However, the management and proper allocation of
financial resources is witnessed essential for continuously offering products and services to the
consumers.
Maswadeh (2015) stated that it is very important to have financial resources in the
company because without it company cannot survive. Also it is required for day-to-day activities
such as stationary, miscellaneous expenses, daily wages to the labors, etc. when company plans
to expand its business or diversify its venture than for that purpose one important thing required
is finance, if company lacks the finance than expansion or diversification cannot be done. When
new product has to be produced for that purpose machinery is needed and to purchase the
machinery, fund is required. If company do not possess fund than it cannot install new
machinery and thus, innovative product cannot be launched. To get success in the market and in
this dynamic environment company requires appropriate fund without incurring high cost on
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them. According to Friedlob and Schleifer (2003) Company require fund for hiring and
remunerating personnel because without compensation people will not work for the organization.
At initial level company has to pay to the employees from its capital but later payment is done
through profit margin. But it is necessary that company should avail these resources from
appropriate sources after evaluating all types of sources by keeping in mind several factors such
as cost, time, risk, future consequences, etc.
Financial resources can also be raised through profitability as taken from the study
conducted by Stolowy and Lebas (2006). He defined that profitability is an ability of an
organization to earn a profit and a profit is a revenue which is left after deducting cost. This act
as one of the sources of finance. If company earns good profit than it could raise its fund from
profit margin also. But there are many factors which affect the profitability of a company. If the
market is highly competitive and there are many competitors present in the industry than
profitability can be affected. Because market share get divided and similarly customers also get
divided. Thus, company can earn less profit due to this reason which profitability of company
get reduced. Also if demand is very high during certain time than there are chances that company
can earn maximum profit by supplying goods and services of customer's need. Further, the good
promotional technique also affect the profitability of company in a positive manner. As per the
view point of Shapiro (2008) products and services are promoted using integrated promotional
techniques such as advertising including sales promotion and also above-the-line techniques are
combined with the below-the-line technique than this results in sales maximization which
ultimately leads to profit maximization. Substitutes of good also affect the profitability of a
company if less substitutes are available in the market than the firm can charge high price for
their products and thus it will increase the profitability of a company whereas, if more substitutes
are available than firm has to charge lower price and hence it will lead to lesser profitability.
Moreover, the degree of cost of production also affects the profitability of an enterprise as the
price of product mainly depends upon the fixed and variable cost which have been incurred at
the time of production. But it is essentially required by the company to enhance its profitability
so that firm can get success in a dynamic environment.
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Wilson-Jeanselme and Reynolds (2005) cited that there are many sources through which
company avail their financial resources. These sources are basically bifurcated into two types
that is internal source and external source. Internal source is one which is present inside the
organization and company can avail the fund internally. These can be retained profit,
shareholders fund, etc. It is good if fund gets availed from internal sources because amount of
risk get reduced. If fund is raised through retained profit than it will be available in less period of
time and also at lowest cost, however company's liquidity will get reduced and further it cannot
expand. While raising fund from shareholders by issuing shares, then it can also be easy to avail
fund in a shorter time and with less cost but it is not necessary that people may buy the shares of
the company and existing shareholder may sell their shares. Risk associated is that it will become
necessary to repay the amount at the time wind up. Whereas, external sources include banks,
financial institutions, debentures, government bonds, etc. From these sources fund can be availed
in a good amount but involve lot of time. If bank loan is taken or loan from World bank or other
financial institution is taken than this require lot of formalities to get complete and it also involve
high amount of risk as timely installments have to be paid along with interest. If any installment
get missed than company can come under debt-trap. Debentures fund can be taken but firstly
payment have to be done to them at the time of wind up. Thus, Merriam (2009) said that internal
sources should be adopted while raising fund for the organization as it involve less time, cost and
amount of risk is also low. But Weil (2012) argued that fund should be raised from both internal
and external sources so that cost, time and risk get divided and company could not depend solely
on one source of finance.
In a recent article written by Agarwal (2012) financial resources are required by a retail
firm to run its business as well as to meet day to day requirements. Nevertheless, the
investigation made by Melero and Sese, (2015) found that the degree of financial resource
management as well as allocation of funds within the organization impacts the overall
performance of business. Today's retailing sector has become more competitive and to be at the
first position and to beat the competition the business entities required sufficient knowledge to
earn market share and to gain profitability (Rahim, 2014). In the general phenomenon, it has
been observed that the profitability of an enterprise depends upon management of financial
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resources as well as business operations. However, financial resources are witnessed as crucial
factor that limits the growth potential. To the point of view of (Arbidane and Ignatjeva, n.d)
success of business is highly depends upon continuous movements of funds in and outside the
business. Within the retailing business financial management depends upon the activities such as
allocation of financial resources, effective use of finance resources, maximizing income sources,
minimizing expenses. In respects with the leading relater of United kingdom namely Marks and
Spencer, it has been witnessed that a single financial step taken by financial department impacts
a lot to each store (A Marks and Spencer case study, 2013).
Profitability of a corporate can be increased following these guidelines which have been
given by Shim and Siegel (2008). According to him, company should firstly manage its cost of
production and other cost so that profitability can be increased. For this purpose, firm should do
the close management on the cost and search out the method which can reduce unnecessary cost
and stop them to incur in future. For this work company can hire the employee which can do
close management by taking into concern all the related aspect and also making effort to
improve them. Further, organization should review its existing offer that is product or services in
respect to its features, benefits, quality, pricing, etc. this will help in focusing on the loopholes
and improvements can be bring so that more sales can be done which will ultimately leads to
increase in profitability. Further, Palmer (2012) stated that company can concentrate on their
promotional techniques and also bring changes and improvement in the existing technique. This
will help in communicating the information about the products and services in a better manner
and this may influence the customers and potential customers to buy the products and do repeat
purchase which will lead to the enhancement of profitability by increasing the profit margin. By
following these methods profitability can be increased.
As per an illustration there could be seen some financial implications of new delivery
schedule, store development, as well as the putting expenses on day to day activities. The
management of Marks and Spencer is committed to hire logical, analytical and business-minded
people who can perform locally-based financial management (Rahim, 2014). As per the case
study related to financial management of Marks and Spencer stated that financial planning of
preparing budget for each store is the major task for management. It has been witnessed the
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management team of each store look back at the previous year’s sales as well as income and
expenses so that future financial projections can be made. The major reason behind the task is to
allocate sufficient amount to each activity to make a maximum use of finance resources and to
make huge profits (A Marks and Spencer case study, 2013). From the financial statement of
2014, it has been witnessed that Net margin of company has been increased from previous year
(2013), which is all due to the increased sales and reduction in expenses. A major part of
company's cash is used for purchasing fixed assets that is significantly increased from previous
years (Annual report of Marks and Spencer, 2014). In addition, the Capital expenditure of
business entity is witnessed fluctuating for al the years. However, the position of cash is the
business has also improved after 2012 (Morning star, 2015). The effective cash flow
management can lead to reduce unnecessary costs which makes store financially sound.
However, it will lead to create competitive advantage for the business and provide a path to
achieve desired profitability.
6. Research Methodology and Design
Research philosophy
This is the way that gives a clear path to the researchers for conducting present
investigation and collecting information. There are three major philosophies such as positivism,
realism and interpretivism (Kothari, 2011). The aim of present investigation is to assess the
relationship between effective utilization of financial resources and profitability of organization,
therefore an in-depth knowledge is required, hence, the use of interpretivism philosophy is
suitable.
Research approach
In the research world, there are two major research approaches such as inductive and
deductive. The use of inductive approach suggests for the application of new theories and
development of new model to investigation the research objectives (Chapman and McNeill,
2004). On the other hand, deductive approach is used to investigate into depth. The rationale
behind suggesting this approach is that the study is focused towards the specific company
namely Marks and Spencer. In additional, the approach will provide a clear path to draw
effective findings.
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Research type
To investigative the nature of present study, it is crucial to imply specific research type.
The academic research is divided into two parts such as qualitative and quantitative. The
qualitative research is seen to be based on the human behaviour aspect and observational theories
(Merriam, 2009). On the other hand, quantitative research type presents the facts in terms of
numerical forms. The present investigation will be qualitative one as it is going to be based on
the in-depth investigation into the research problem. The finding will be presented in a
qualitative so as to reach the objectives.
Research design
The research design is also known as the blue print of entire investigation that presents
the way in which the investigation has been conducted (Kothari, 2011). The selection of effective
research design is based on the chose approach and nature of investigation. For the present
research work descriptive research design will be used that will be effective in conducting
investigation to a specific company.
Data Collection
To conduct a proper investigation, it is crucial to collect the information that is pertaining
to the research problem (Kothari, 2011). Mainly, there are two major methods of data collection
such as primary and secondary. . In regard to the present investigation secondary data collection
methods will be used or the data will be collected from secondary sources. To collect the data
online and physical libraries will be approached (Merriam, 2009). The evidence of secondary
information will be shown in literature review section. Further, to collect secondary data, various
books, journals and online published articles will be used. In addition, to assess the profitability
and the use of financial resources, the financial reports of past 5 years of Marks and Spencer will
be evaluated. This will also call as the secondary source of data collection.
Data Analysis : There are various techniques of data analysis such as descriptive,
quantitative, qualitative, statistical etc that would be used to assess the information that is
collected from primary and secondary sources (Kothari, 2011). With the use of thematic analysis
method researcher will become able to generate valuable insights and findings through analysing
the information through various themes. The information gathered from secondary sources such
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as financial statement ad online sites, will be used to assess the reason of profitability of
company.
Barriers and Limitations of the proposed research
There might be some challenges faced by the researchers during a course of work that
need to be overcame in a well effective manner to reach out the objectives. The major barriers
that are going to be faced by the researchers are of limited funds, manpower, availability of
enough financial information, etc. The researcher faced difficulty to obtain accurate information
that might hamper the authenticity of information (Miller and Birch, 2012). In order to overcome
this limitation, investigator will seek for the permission of Marks and Spencer's managers for
using past financial records. The shorter time limit of the study herewith will be a major
limitation of the investigation. Along with this, availability of sufficient funds and management
of such funds is major challenging areas of present investigation. Such barriers can be resolved
through applying time management strategies as well as concentration of researcher (Kothari,
2011).
7. Ethical Considerations
During this work, it is mandatory to keep eye on the ethical practices that are to be
followed to make a research valid and accepted. It is also mandatory to identify the ethical issue
that can be faced at the time of conducting investigation (Kothari, 2011). The knowledge of
researcher in regard to the research topic is an ethical aspect of investigation hence, in the
present investigation researcher is going to earn huge knowledge in regard to the research topic.
It is also important to obtain the data from reliable sources (Miller and Birch, 2012). This study
is going to be secondary one and the researcher is going to collect the financial information of
company after taking a permission from the management. To assess the factors of profitability,
management of Marks and Spencer will be the perfect research participates and it is quite
necessary to take out the permission from such participants. The information that is collected
from the secondary sources will be keep confidential and will be used for research purpose.
However, honesty and integrity will be maintained throughout the research that is the foremost
considered ethical ground.
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