There are many factors that affects a business and that encompasses many internal or external factors on many aspects. Business works in an economic environment and that is affected by the society and the environment in which the company is operating. In this assignment the various factors that affects the retail sectors of the company has been discussed.
The various internal factors that affects the business includes Human resources, capital resources, operational efficiency, infrastructure and innovation. These are the factors that are controlled by the decisions of the management of the company. These operations are funded by the finances of the company and they need to regulate that. Having skilled labours is important so that work can be done in a timely manner and quality is also maintained(Abdullah & Said, 2017). Capital resources includes the finances of the company and the various investing decisions that they take to support their operations. The company also decide when to expand and how to use their overall investments accordingly. This is also guided by the economic factors of growth and stability that is affected on many grounds by the decisions that the company makes. The various business economics concepts of benefits, incentives and marginal analysis plays an important role to support the management to take rational decisions in which the overall success is guided by the actions that it takes (Kaufmann, 2017). The management should analyse all the given options and based on that should decide which are the areas in which it does want to invest so that the overall marginal benefit for the company is more. The various external factors that can affect the growth of the company includes the overall economic situations which relates to the GDP of the nation in which the company is operating, the various legal regulations that governs the operations of the company and it is mandatory for the companies to be compliant in these scenarios (Belton, 2017). Economy theories can be applied to various theories of the demand and supply to the relevant market that the company is targeting. In case the demand and supply and such other factors are not in support of the operations done by the company, it would be hard for the company to grow and progress and make an impact. These legal regulations often seem to be a barrier when the companies want to go for cross border expansion and there are many areas in which they are not able to expand and grow because of this. Thus, the aim for the management of the company should be to strike a balance between the provided resources and the legal and economies scenarios so that the overall success is achieved. The aim should always be to make sure that success should be curated from the efforts of the company keeping in mind the scenarios of economies and growth (Boghossian, 2017).
When it comes to retail sector there has been major changes over the year, people have now switched to e-commerce platforms that serves a great way of shopping and getting the desired products at their own convenience. The overall experience of consumer shopping has also changed over the years and that is affecting the companies on many ends. The retail sector is regulated heavily by the demand and supply needs of the consumer and in case the company is not able to support the same it will not prosper. When it comes to retail sector and consumer shopping one of the biggest company in this field is Alibaba. It is a very popular Chinese company that has a huge ecommerce platform and a retail market through which it deals in variety of consumer products. It provides both business to business, business to consumer and consumer to consumer sales. The overall revenue of the company goes into millions(Borit & Olsen, 2012). It has operations in more than 200 countries and it is the largest retailer of the world and that has also made China, which has the largest population in the world, the biggest market for consumer products and goods followed by India and other Asian Countries. If we see the overall growth of Alibaba in the retail sector it goes up to around 61% over the last 5years which is great given the increase in the ecommerce sector with the help of the internet. It can also be seen that the major reasons for the growth of this sector has been that Alibaba has always been consumer centric and it enjoys a great loyal consumer base that supports all its operations and there is huge demand for its products. So here we can apply the theories of demand and supply as we see that there is demand so the company has been able to create a supply. Demand has been made possible by the company by providing quality products at reasonable prices and thus developing consumer loyalty. It is important that consumer should be in support of the company then only they can create a balance in the overall demand and supply and deliver as per the needs of the company (Coate & Mitschow, 2017). The company has also brought innovation and changes in its overall products and that has also contributed to the success of the company. Apart from that it is having a great business organisation and the internal and external factors that works in its favour (Kusolpalalert, 2018).
Demand and Supply are the major constraints in any market. Both are directly proportional to each other and it is stated that as demand goes up the supply also increases and vice versa. The aim of this is to fulfil the needs of the customer by providing them with the necessary products as and when they need it. But there can be such situations when it becomes difficult to ascertain proper equilibrium between the demand and supply situations in any market and that is what then affects the companies a lot. There are many factors that affects the demand and supply of a product and that includes trends in the market, presence of alternatives to the product, the overall buying capacity of the consumers, the overall changes in the credit level and income credibility of the consumers, changes in the price due to various other factors. All these seems to affect the growth of the business in an economy with relation to causing a disequilibrium in the overall pricing scenarios(Covaleski, et al., 2003). Thus, the overall aim should be to regulate the same by taking necessary steps in this regard. It can be seen closely that in case of consumer-oriented industries that are retail based this disequilibrium affects more. Like in case of companies like supermarkets Asda and service sector firms like McDonalds, these operates on the demand of the consumer. If the consumer demands products from McDonalds, then only their business will run. In case there is a decrease in the consumer demand and they decide to swift to more healthier options and not demand junk food then the business of such companies will go down. Same goes for super markets they bring in a variety of products as per the needs of the consumer and decides accordingly what are the products that the consumer demands and stores them all. In case the demand for such products goes down then the supermarkets will suffer badly as most of the products are perishable and they will suffer losses in that regards. So, we see overall the entire retail sector works on this concept of meeting the needs of the consumer (Kusnadi & Wei, 2017). The demand and supply scenarios affect these company on large extents and thus efforts should be taken to reduce these disequilibrium in the market, by proper analysis and research. It is important to understand what the consumer needs, what are the competitors providing them with and what are the ways the company can do better than them. It is important that equilibrium should be there demand and supply among the companies (Egelund-Mu¨ller, et al., 2017).
Based on the overall analysis it can be said that businesses are affected by the changing scenarios of the market and the economies and it is important that all of this should be controlled to larger extent so that the success of the business is not affected by this and the overall changes are positive for the companies and they are able to deal with it as per their needs.
Financial Intermediaries helps in facilitating transactions between the lender and the borrowers, by reducing the complexities that is there in their transactions. They help in connecting the ones with excess funds with ones who need it. Thus, this helps in providing them with secure channels through which transfer of funds becomes easy. These intermediaries play an important part in management of the funds in case of the retail sector also. Retail sector when in need of fund can contact these financial intermediaries and they can connect them with people who can provide them with the necessary fund. In case of UK the four different kinds of financial intermediaries are Banks, Brokers, insurance companies and Credit unions (Ghofiqi, 2018). There are many other types of financial intermediaries also, but these are the most prevalent in UK and provides major funds to the retail sector by providing them with various secure channels to manage their funds. The Major work that is done by these financial intermediaries includes concerting short term liabilities into long term assets by providing credits to qualified clients and converting them to debt instruments and get premium on the same. The intermediaries also help in risk transformation, by converting the risky instruments into free risk instruments. They help in providing secure channels so that there is flow of funds and the companies do not suffer due to the lack of it. They also help in reducing the transactions cost and helps in increasing the profits that is associated with management of funds (Grundy, et al., 2017). In case of retail sector, the companies have the following advantages that they have while dealing in such kind of funds through intermediaries, these includes advantages in terms of cost over the lending and borrowing. It also helps in protection over the market failure that might occur with the lack of stability in the movement of funds all over. Thus, we see that they get high benefits if they deal through banks or brokers and not through management of funds. It also helps them in achieving economies of scale and economies of scope. There are few disadvantages also that can be associated with such kind of funds movement like lack of transparency, and there is less concern about the environmental and social concerns and thus we see that there is a lack of direct link among the movement of funds (Svahn, et al., 2017). But overall, they help in movement of fund and liquidity of funds in case of retail sectors. The business organizations get their required funds and since there are chances that there might be loss in case of instability of funds in the market and the movement of that can affect their business very badly in all contexts and their financial intermediaries comes and play a very important part for the company and the organizations. By applying the theories and concepts of these concepts we see that as an economy functions there is no security on how funds will function, and many economic factors can affect the movement of the same (Iggers, 2018). So, in that case these intermediaries help in regulating the same. For example, if X requires 10000$ they can take that fund either from the market or through money lenders but in this case the chances of risk is very high. Also finding funds in the market also becomes difficult, but if we see the same movement of funds through intermediaries we see that they can help in getting the funds through secured sources and help in regulation of the same they will cut their commission from the same but provide secure channels to X and thus that will be helpful to him in the long run (Johan, 2018).
Current Ratio – It is a liquidity ratio and it reflects the ability of the company to pay off its current liabilities with the current assets that it has. It is one of the most common ratio that helps in understanding the liquidity position of the company. In case of the given company we see that both 2017 and 2018 the company is having the same ratios 1.2. This shows that the liquidity position is same in both the years, and there is no change. A higher current ratio more than 1 reflects that the company is having enough current assets to pay off their current liabilities and company is in a secure position. The same can be seen in this company also (Kang, et al., 2016).
Quick Ratio – Quick ratio is also known as the acid test ratio, in further refines the current ratio by taking into consideration the most liquid assets that the company is having. It excludes current assets like inventory and other assets that are difficult to be converted into cash by the company. A higher quick ratio reflects that the company is having a better liquidity position. In the given case we see that in 2017 the ratio was 1.2 and in 2018 the ratio was 1.1, so we see that there is a decrease in the ratio and thus this reflects that the liquidity position of the company is decreasing, and they are having less liquid assets in comparison to the prior year (Charles H, et al., 2015).
Debtors Payment Period- The debtors payment period reflects how quickly cash can be collected from the debtors. In both the years we see that the collection period is same so there is no change in that case. This ratio helps in indicating that the policy of the company to issue credits to its customers and then generating cash from them in return. So, in case of this company also the debtor’s payment period is stable, and the company can get the funds from them, so it can be said that the overall credit policy of the company is stable.
Stock Turnover Period – The stock turnover period reflects in how many days the company can sale its inventory and replace it with new inventory. In the given case we see that there is a decrease in the stock turnover period from 16 days to 14 days for the current period. So, we see that the company can replace its old inventory with new inventory in less days then the prior year. So that indicates that the overall position of the company with respect to its inventory has improved in the current period with respect to the past period (Yadao, 2018).
Overall the financial position of the company is stable, but we see that there are no major changes in the same between the two years and hence we cannot say that there is any kind of growth or not. In the coming year 2019 the company should try to get more funds so that they can improve their liquidity position in terms of the debtors they should try to improve their credit policies so that collect cash from the debtors more easily. The inventories also need to be managed by the company so that the inventory turnover period can be reduced more. So overall, they need to regulate better credit giving policies so that the overall return that they generate is more and the overall financial position of the company improves (Webster, 2017)
So, based on the overall analysis it can be seen that there is negative return as per the capital budgeting and hence both the projects should not be considered, as the present value of the inflows of the company is less than the overall outflow with relation to the projects and hence the company should not invest in these projects and should look for alternative options, so that the overall return is more and there is no loss for the company.
References
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