Finance and Strategic management module Assignment, Assignments of Management Theory

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Finance and Strategic Management

RUBIMBURA BRIAN

R2003D

Financial Management for Managers/ UU-MBA-710-ZM Mary Mandiringana 3 rd^ December 2020

Table of Contents

• INTRODUCTION..................................................................................................................
• BUSSINESS BACKGROUND AND STRUCTURE.......................................................................
  • Background...................................................................................................................................
  • Structure.......................................................................................................................................
• MACRO ENVIRONMENT ANALYSIS.....................................................................................
  • THE PESTLE ANALYSIS....................................................................................................................
    • Political.............................................................................................................................................................
    • Economic Environment....................................................................................................................................
    • Social Environmental........................................................................................................................................
    • Technology.......................................................................................................................................................
    • Legal environment............................................................................................................................................
• MICRO ENVIRONMENT ANALYSIS.......................................................................................
  • Strength........................................................................................................................................
    • Weakness.........................................................................................................................................................
    • Opportunities...................................................................................................................................................
    • Threats..............................................................................................................................................................
• FINANCIAL PERFORMANCE.................................................................................................
• PRODUCT MANAGEMENT................................................................................................
  • BCG MATRIX................................................................................................................................
• PERFORMANCE MANAGEMENT SYSTEM..........................................................................
• CONCLUSION....................................................................................................................
• RECOMMENDATIONS.......................................................................................................
• REFERENCES.....................................................................................................................

Background Established in 1972 headquartered in Ireland, Kerry group plc is a public food company that is customer-centric and leading industry integrated solutions that makes it the global leader in the development of taste and nutrition solutions for food, beverage markets and pharmaceutical industries. The mission of the company explains why they lead the global market. It states that “We are committed to the highest standards of business and ethical behavior, to fulfilling our responsibilities to the communities which we serve and to the creation of long-term value for all stakeholders on a socially and environmentally sustainable basis.” (Kerry Group plc, 2016). With more than 23, 000 employees, the Kerry group has €5.8 billion revenue as of the financial year ended 2016. Structure Koontz (1994) defined business structure as creating power relation and linking it to either tall or flat structure with in a business organization. Therefore, Kerry group’s business structure servers an important role by providing guidance and clarity on different managerial decisions and a well-defined work flows and responsibilities. From the definition above, a business may have tall or flat structure depending on the nature of the business, market coverage, management style and the size of the business. Kelly group has tall structure due to the size of the business and market coverage. Thus, the company has put different hierarchies, flows of work responsibilities and levels of authority in place. (Kerry Group plc, 2016). Powered by an extensive technology used in production which helps to ensure world class ingredients are available at the market, makes the company a global leader in nutrition solutions. With their mission which embraces co-creating with their client’s satisfaction helps the management of the company predict the

available opportunities earlier and innovates faster. However, the management of the company faced challenges in addressing problems that comes with market dynamics such as establishing different channels for delivering and offering their products to the final consumers; building an e-commerce platform to grow their market sales; regulating and controlling proteins and fats found in their products; and lastly focusing on the health and safety of the products provided by the business.

MACRO ENVIRONMENT ANALYSIS

Macro environment analysis, involves the collection of all factors and conditions that has the capability which influences the business positively or negatively. Those factors may include political, social, legal and the surrounding environment. THE PESTLE ANALYSIS Political Kerry group operates in different markets either developed or developing markets, such markets comes with challenges of managing the risks associates with macro-economic environment. Therefore, developed markets tend to have low political risks since the policies, rules and regulations are stable compared to developing countries which has instable political changes and currency instabilities. Economic Environment.

Legal environment. Legal environment has great impact on the company, if not taken seriously can result into regulatory fines imposed to the company. Complying to laws governing corporates and taxation laws are among rules that should be managed. International trade agreements such as infant nutrition must be recognized, failure to comply may result into fines.

MICRO ENVIRONMENT ANALYSIS

Simple but yet a powerful tool SWOT analysis, helps the company identify its strength, weakness, opportunities and threats and take the available chances for success. SWOT analysis helps companies in making the decisions that would affect in a long term and shot term of the business. Dess and Davis urged that some of the decisions includes; the allocation of resources where needed, the investments to be done, etc. as it helps companies to build on what they do better and address what they are lacking, minimize the risks and lastly take the available possible chances of success. Strength Strength stands for what the company does well and better in a manner that distinguishes it from their potential competitors. Thus, Kerry group possess many strength factors that distinguishes them from their competitors, some of them includes; more than 9000 products of different ingredients makes Kerry group one of the universal companies with enormous portfolio. The investments made in technology and researches towards the development also makes Kerry group standout among their competitors. The lever of technology used by the company in production processes of different products such as nutritional, specialty protein and savory ingredients. The available rich markets that

includes UK and Ireland. High skilled and motivated employees make the production process and sales succeed. Stable growth of revenue that is approximately €5.8 billion as of the year ended 2016. Weakness. Weakness of the company involves what is not going well within the company, the areas of improvement and different practices that a company should avoid. Therefore, Kerry group has their own weakness that should be addressed if the company is to succeed. Those weaknesses include; lack of raw materials used in production processes due to bad crop production in UK and Ireland. Unstable revenues because of inflation caused by concentrating on same market UK and Ireland. High competition from Asian countries such as China and Japan. Opportunities. Opportunities represents the chances for something positive to happen. So, the company has to take the advantage and seize those available opportunities. Therefore, Kerry group’s opportunities includes; the growing trend of people wanting to eat ready to eat meals known as MRE makes the production of the company expand. The world growing of ingredient markets. Globalized customers which expands the market of the company. Threats

CFROI is used by the management of the company to asses and determine investment decisions. The shareholders also use CFROI in comparison while ensuring that the essential rate of return capital surpasses this rate. Kerry group has intentions of investing in big growing segments in order to meet clients needs. For those investments to shine or succeed, depends heavily on the financing strategy the business embraces, such investments also will help the management of Kerry group to manage the cost of capital. The year ended 30 th June 2016 Kerry group net debt was equaling to €1,119 M cooperating floating rate debt of €244M and fixed debt rate of €875M. The net debt to Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) shows a decrease of 1.7 times as the year ended 30th^ June 2016 compared to the previous year which was at 1.9 times. Kerry group adequately leveraged due to their equity and debts as shown in this report. Kerry group also had available money for security holders from free cash flows recorded €379M at the year ended 2016 from €192M at the year ended 2015. This money will be used in future investments projects, dividends and share buyouts.

PRODUCT MANAGEMENT

BCG MATRIX BCG matrix also known as growth-share matrix is defined as a business tool that uses relative market share and industry growth rate factors to evaluate the potential of business brand portfolio and suggest further investment strategies. (Ovidijus 2013). Therefore, Kerry group put into place a sustainable program which will ensure the continuity of achieving sustainable development and improvement. To achieve that more energy was put into product development and marketing. The

Boston consulting group in 2010 was hired to use tools like BCG matrix to analyze company’s products, their market branding and Kerry’s strategic management in order to maintain a competitive edge, and they come up with 4 categories of their products.  Cash cows: this category involves products that will not require unusual marketing or branding because they are already reputable and well known by the clients. Such products generate cash flows and they are well industrialized. Kerry group’s strategy is to keep earning from those products because they tend to have high market share and low prospects of market growth.  Dog/Pets: Dog/ Pets are contrary to the cash cows because they tend to have less market share and less growth rates. Such category run the risks of encountering losses once they are not put into the next category called stars. With unstable and low revenues, the Kerry group management aims to get rid of such products.  Question marks: In this category it involves products that generate less earnings and cash flow is in negative because of they pose high growth rate but less market share. Because such products are unstable the management of the company has to make a comprehensive analysis to determine their future.  Stars: The final category knows as Stars involves products with high market-share and high growth rate. These products are often categorized into cash cows, however, due to competition and market growth they may be categorized into dog/pet category. These products also need high investments because of advertising and marketing costs. Based on the review of the product category group, China stands a big threat of the Kerry group, this is because of their concertation on baby infants’ food, the

environment therefore, if Kerry group is to survive and maintain competitive advantage, the management has to be agile enough and adapt to environmental changes, the business meets short-term and long-term objectives, increase and protect the value of shareholder’s interests. However, to achieve that the company needs to embrace the good governance system and put into place different financial management tools. As we have seen earlier in this report different frameworks such as SWOT and PESTLE analysis have been put into place, this helps Kerry group plc maintain a competitive edge and ensures business sustainability in the long-run. In order to manage, control and divert risks Kerry group also implemented performance management system. Having to decide their management decisions based on SWOT and PESTLE analysis, those tools became a backbone for strategic management and financial management of the Kerry group business.

RECOMMENDATIONS

From the report shared Kerry group management, it is clear that the company performed well on the market and the company have seen a growth in financial revenues. However, the following endorsements should be considered if the company is to survive and maintain a competitive advantage. The following recommendations were drawn based on the report shared for the year ended 2016. They include;  The company has to establish their quality control function unit which will be responsible in maintaining and regulating the quality of the products.  Provision of trainings and required skills to the employees in order to boost the quality of the foods and beverages provided by the company.

 As food and beverage-based company, Hygiene of the raw materials used and packing process should be more emphasized to produce a safe and secure product to their daily customers.  Establishment of an e-commerce platform that would ease the process of selling their products and delivering.  The company should develop a culture of using natural ingredients and natural texture for the well-being of their customers.

REFERENCES

Business argons (2020). Macro Environment. Retrieved from _https://businessjargons.com/macro-environment.html