Managerial Finance-Wooden Post Plc

Finance, like time, devours its own children.Honore de Balzac

6AG012STUDENT ID: 100199589

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Table of Content

Abstract………………………………………………………………………….4

Executive Supervision…………………………………………………….…...….3

Major Issues and Crisis...............................................................................…....3

External Environmental Analysis……………………………………………..4

Competitors Analysis……………………………………………………….…..5

Company’s Background………………………………………………………..6

Deliberate Role in Leading the Triumph of an Organization………………...6

Strategic Thinking……………………………………………………………..8

Statements and Justifications…………………………………………….……10

Discussion for Option 1………………………………………………………...12

Discussion for Option 2……………………………………………………..….13

Discussion for option 3……………………………………………………..…14

Financial Analysis……………………………………………………………..15

Recommendation………………………………………………………………..15

Conclusion……………………………………………………………………...16

Review…………………………………………………………………………16

Appendix…………………………………………………………………….….17

Hypothesis………………………………………………………………………19

Bibliography………………………………………………………………….…20

“The financial climate is the worst it's been in 25 years.” Michael O'Donnell

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Organization as a Need Satisfier…..“The purposes of the organization genuinely satisfy the needs of the members (who are necessary and sufficient for the coalition) in the long run”

(Chua., 1993:27)

It is merely consist of vision, mission, values, strategic goals, strategies, system and process that are aligned with completing and attainment of goals. To one side, the management here plays a vital role in bringing up the triumph of the company and deciding what could be the best for the organization, where every single penny could be invested, how to make the best use of resources, how stakeholders wealth can be boosted and multiply, other than these how to satisfy intensifying needs.

Significance and Consequences of Managerial Finance:

It is concerned with the duties of financial manager in the business firm. The financial manager actively manages the financial affairs of a type of business, whether private or public, large or small, profit seeking or not-for-profit. Changing economic and regulatory conditions also complicate the financial management function.

(Gitman, 1999)

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ABSTRACT Wooden Post PLC is a top budding private limited company of UK which reportedly in emergent list over the past ten years. Apparently, due to such development it has become straightforward reason for the company to sell and increase its good will outside the East Midland homes.

Highlights:The company has a firm and well-built control over cost control systems over fabricate and division. Moreover the consequential lower cost and value, had found it comparatively effortless to put on the market of East England.

Executive and Supervision:

Wooden Post’s management team consists of:

1. Managing Director2. Marketing Director3. Finance Director and4. Operation Director.

They all are of innovative nature and belong to well respected industry. However other directors coupled five years ago and were prearranged 10% shares as a “golden hello”. The company further pledge for 15% to them as an additional benefit over the next five years.

Major Issues and Crisis:1. Colossal percentage of wood had to be brought to longer remoteness and

uniformly the transport rate to the secluded retailing outlets were a vast apprehension. The main reason is that the expenses of suppliers are escalating.

2. Production facilities nearer to the markets had been obtained but the site of manufacture competence and the difference in manufacture expenditure in excess of plants are commencement to be big consideration.



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3. The primary home plant has capability to produce up to the demand and generates 70% of total but company is facing tribulations because the transportation cost is rising gradually.

Company’s Current Situation: Strategic Analysis (External Environmental Analysis)

“Strategic analysis will lead to clear and more relevant goals, better quality decisions, and a more secure future as the company must better prepared for what will happen”

It helps to: arenaMOIN226

Anticipate what might happen Evaluate how likely it is to happen Prepare for it happening

(Strategic Analysis)

When done an inclusive and wide-ranging strategic analysis for the Wooden Post’s position in the market, the research advocate that recent growth of the company may be in jeopardy and in due course will lead to eventually slow down in progression in the United Kingdom.

Keeping in view such posture obtained from the study, a business consultancy firm of international reputation constricted and slender the Wooden Post and offers board of company three preferences as feasible long-term strategies to adopt. These are:

1. Acquire the assets of suitable competitors to strengthen the total UK market share.

2. Invest in upgrading WOODENT POST’s production capacity and distribution network in the west and east of United Kingdom.

3. Withdraw from the West United Kingdom market and close the facilities.



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Competitor Analysis:

As Wooden Post falls under concentrated industries and performing a competitor analysis is a vital component of strategic planning.

The goal of performing competitor analysis is to understand:

o Obtaining information about important competitors and

o Using that information to predict competitor’s behavior.

(Competitor Analysis)

The competitors of Wooden Post Plc are:

0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.50%

5%

10%

15%

20%

25%

30%100.00%

100.00%

100.00%

100.00%

100.00%

Market Share Recorded in 2000

Keeping in, the prospects of all five competitors showed in the diagram above will help to identify their strength and weaknesses. Furthermore



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through this analysis it will provide both offensive and defensive strategic context to identify opportunities and threats. (Competitor Analysis)

Company’s Background:

The Firm’s preliminary evolution has come from the matrimony director and a prosperous forestry title-holder from the north of England. Ancestors hold the leading groups of share.

Deliberate Role in leading the triumphs of an Organization.

I Sara Khan being the P.A and subordinator of the founder and administrator of the Company have the distinctive roles and responsibility to deal with. Understanding the Organizations aim’s and objectives is one of the major contractual obligations to fulfill.

Although the employment of mine was based on the condition of the GL Merchant Bank which provided £50m cash infusion some three years in the past and effectively and I epitomize the bank’s 25% shareholding in the Wooden Post LTD.

My Roles and Accountabilities: To ensure strategic management of the firm is adequate:-

To make sure that strategic management of the firm is sufficient and ample because it deals with the major, fundamental issues that affect the future of the organization.

Richard Lynch states:



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"It integrates the functional areas of the organization, covering the range and depth of its activities. It operates at two levels- the Corporate Level (what business are we in?) and the Business Level (what competitive advantage do we have)” (Lynch, Strategic Management, (13 Nov 2008))

Two Main Objectives to overcome under this circumstance:

The survival of the organization at its minimum and The creation of value added at its maximum.

This section will further investigate and cover the area that which approaches the company has taken and which approach would prove to be better one.

Prescriptive Approach Emergent Approach

A prescriptive strategy is one whose objective is defined in advance and whose main elements have been developed before the strategy commences.(Lynch, strategic Management, (13 Nov 2008))

An emergent strategy whose final objective is unclear and whose elements are developed during the course of its life, as it proceeds. (Lynch, Strategic Managment, (13 Nov,2008))

To guide them to Public Limited Company status within next two years.

o Limited Liability Company:

Currently the status of the Wooden Post’s is Limited Liability Company and my responsibility is the conversion from this status to the Public limited Company.



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As the company has one director so his financial liability is limited and the shares are not offered to the public. Although the Shareholders now are not responsible for the company’s debt, on occasion; directors are required to guarantee loans or credits granted to the company.

o Public Limited Company:

Conversion of Ltd into PLc will have a new impact on the company and it will offer shares to the public which is beneficial in raising capital. The company will even have opportunity to have two directors at a time instead of one.

(Contract Eye (UK), 2011)

In order to obtain plc status the Wooden Post must attain the following:

1. Minimum share capital of £50,000,2. Should have two Directors3. Its name must contain Plc or Private Limited Company4. Secure and locked a trading certificate from the Companies House

On achieving this status, the accounts of the company will be in public domain. All the monetary and fiscal records, as well as directors reports will be audited and assess, moreover it will be available to the registrar of the Companies at the Companies House.

Strategic Thinking:

Negative Aspect of Public Limited Company:

The company in this zone is susceptible and vulnerable as the rivals have options to procure shares.

Being a personal assistant and a part of management team this falls under my duty to think more strategically about what I and management team do,



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how we do it, how it could be done in a superior way and how surpass future might be secured for the company.

“Strategic thinking is particularly way of thinking with specific and clear discernible characteristics”Henry Mint berg, 1994

In order to guide the company into right direction I must ensure that company heads towards precise direction and for this the strategic process must includes:

The strategies are to be:AlignedBased on broad thinking:Fact-basedGoal-orientedFocusedAgreed uponAdaptable(CFAR)



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STATEMENTS and JUSTIFICATIONS:

Acquire the assets of suitable competitors to strengthen the total UK market share.

Acquisition means to the facet of corporate strategy which deals with the merging of different companies or parallel entities that facilitate in venture grow swiftly in its market sector or location or in new fields or new location or region.

Analyzing the Cooperative Environment:

It’s not always easy or finest to do everything oneself. Collaboration with other organizations often leads to the better outcomes.

Option 1 suggests that in order to accumulate the growth of Wooden Post Ltd in the market, the company must adopt the co-operative strategy.

“Co-operative strategy is a strategy in which two companies work together with rivals to achieve an agreed objective or to their mutual benefits”

(Lynch, Analysisng the Co-operative Environment, (13 Nov 2008))

http://books.google.com.sa/books?id=7_-67SshOy8C&pg=PA28&lpg=PA28&dq=transferring++its+production+system+beyond+its&source=bl&ots=YmSvtcwcDY&sig=rykSXPlKG7Y_Nzc8YzYK0Qvziik&hl=en&sa=X&ei=HMbsTteUFsLTgAewpMn7CA&sqi=2&redir_esc=y#v=onepage&q&f=false



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Competitor Overture:

London Counties has been the largest supplier of timber since 1940s. This family firm had taken opportunities during and after World War II to develop strong links with councils in the London area. This has provided a stable market in fence and gateposts across a region within a 50-mile radius of London. The biggest source of profit growth had been in supplying timber frames for temporary housing after the war. This sector of the timber market has become technologically based because of the growth requirement for treating the timber against damp and high precision of cutting and drilling. The impact of weak management focus was becoming evident in a fall in market share. One of the main staff members Dr. Alan

Forest had left the company and joined Welshpool Company. (Case)

o The acquisition with the London counties will results in the following

outcomes:1. It will increase the capacity, market share and distribution channels2. Acquisition with the London Counties will strengthen the Wooden Post Ltd

positioning of activities, competitive position in manufacturing facilities spreading fixed cost and more sales.

3. It will result in condense of other competitors.4. Provide with the office facilities.5. Redundancy of 100 staff6. Leicester manufacturing capacity will be fully use with enlarged Wooden

Post having 80% of market share in south Yorkshire and Surrey.7. New firms can develop healthy links in UK.8. London Counties expensive headquarters in UK will be closed and new

Wooden Post’s headquarter will now be in Leicester.9. London Counties having 25% of UK market share will provide with the

49% of market share all together to the Wooden Post Ltd.

(Case)






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Discussion for option 1: Keeping in view the London Counties position in the market, it has a strong links which suggest it has a stable network. Acquisition with the London Counties, the Wooden Post would have numerous benefits. Alongside providing the company huge market share and greater capacities mentioned above, the acquisition will also endow with fast entrance to a new market and a way for international expansion. Further it will assist to build strategy alliance where under this corporation their resources, aptitude and core competence will combine to attain mutual interest in designing, manufacturing or distributing goods and services. The analysis proposed that this option will give high NPV and PVI value. NPV value indicates that good investment will add good value to the firm where as PVI advice high amount of cash flows. As the situation demands Wooden Post to adopt long term strategy to speed up the growth, the firms can also undergo horizontal complementary strategic which offers to combine their resources and proficiency to create value in the same stage of the assessment procession as it mainly focuses on long-run products and services. As London Counties needs to concentrate on the technological side it will also provide advantage in technology development.

Risk Associated with the Co-operative Strategy:1. While cooperative system may also offer some significant risk links

to it which are:2. There might be a chance where Wooden Post rights may held as

captive through explicit investments made with the London Counties.3. It could lead to malfunction or breakdown of partners to make

complementary resources accessible.4. Falsification and distortion could be another mishap with the

partner’s competencies.5. Or fail to develop better contracts.

(Hitt, 2006)



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Managing Cooperative Strategy (Trust Alliance)

Trust is a major asset in coalition and the firms acknowledge the assessment of partnering with other organizations possessing repute for constancy. When reliance exists an association is managed to maximize the detection of opportunities among partners. Two Approaches to overcome these issues:

1. The value maximization demand partners with complementary assets and highlights credulous relationship which is mentioned above.

2. The cost minimization involves firms to construct the abilities to build effective collaborators contracts and indenture scrutinizing faculties. (Michael A.Hitt, 2007)

Invest in upgrading WOODENT POST’s production capacity and distribution network in the west and east of United Kingdom.

The second option involves the joint venture with the Welsphool situated in the Western UK market and with the Glens from the Northern region. It offers to be the most alluring decision for Wooden Post Ltd to adopt. As there is a fewer rate of risk involve because of deficiency of political,

taxation and personnel barriers. (Case)

Discussion for option 2:If Wooden Post Ltd decided to undergo the subsequent option which is contractual agreement, it will propose this will help the Wooden Post to



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grow faster, to enlarge its output and to produce more profits. The Company under this preference would have chance to access the new-fangled bazaar and distribution networks as well as to better resources and technology. The joint venture will also results in development with no scrounging of capital from outside investors because the Wooden Post can have right of entry to the associates services to their existing consumers. As Welshpool plc is a chief supplier of building trade to the Wooden Post ltd, a premium price is demanded which is how much Wooden Post ltd is willing to pay in the local market if the Welshpool plc had ability to produce more manufacturers than it is manufacturing now. However it is less risky and suppler but it usually based on short-run and will only cover those related part of Wooden Post which it do. Moreover, it will restrain the assurance of both revelry and the trade’s disclosure.

Withdraw from the West United Kingdom market and close the facilities.

To depart and retire its division from the West UK market and shutdown the facilities is the third and the preceding option left for the Wooden Post ltd. However this option requires Wooden Post ltd to utilize the premeditated position in the Eastern Division which is best favorable for it and ultimately

shrink the sales in the West. (Case)

Discussion for option 3: Adopting this option entails risk and major loss. Wooden Post has invested a huge amount of capital which is £50 million on the Western region on increasing the production, it may leads to great distress because there might be additional costs which will be obtained as well as closure cost which requires real estate to windup the business matter and closing down the company. It will give birth to management issues, moreover reducing the market share which is very explicit that it is not the crucial and favorable decision for Wooden Post to adopt.



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Financial Analysis:Starting from the lower to top, Option 3 which is straight away vacate from the Western market indicates no outlook for constancy or no new entry to the new market. Even though the Net Present Value for this is on the top of Zero but it involves loss of 6% of the total market share, where as Wooden Post’s ltd objective is to gain distinctive position by adopting long term strategy to increase its production and get a hold on speed which is gradually dawdling. Selecting option 2 will give option of Joint Venture where Wooden Post can upgrade production capacity and distribution network the Net Present Value is also on the top of Zero and the Net Discounted Cash Flows is convinced and optimistic. But it has mediocre cash flow as the initial investment is very low. Now the 1st option has maximum value NPV and Present Value Index results in lucrative and commercial speculation. It will also endow with high returns, high borrowing power, lofty cash flow, high earning per share and moreover a very risk free investment.

Recommendation:Being a Personnel Assistant of the company I would prefer option 1 as the best approach for the Wooden Post ltd because acquisition with the London Counties will result in highest profit and remuneration, stable cash flow, international expansion and greater use of utilizing the competitor advantage, boost the shareholders wealth, speed up the growth. Providing the company with the horizontal complementary resources, huge market share and greater capacities, as well as it will be of long term strategy which will give total new access to new dynamic management along with benefits of new technology. So, Option 1 would be favorable step to achieve another objective to gain the PLC status and prove to be overall superlative method. .



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Conclusion:

Through the analysis we tacit how to take effectual judgments and utilize strength of will in an appropriate way which are both ethically and fiscally suitable, As London counties has a upright image in the national market and a healthy relationship with the government merging with the Wooden Post’s would provide both the corporations to emerge in new way with enhancing the benevolence and amity. This will boost image reputation, increase the power to expand, ability to acquire more capital and funds. However, Wooden Post ltd’s acquirement with the London Counties would be of immense victory, as a Personal Assistant and a part of Wooden Post’ management “ to attain victory is a mission and success is a determination”.

Review:

Scrutinizing this course provided a great chance to augment the decision making authority, to widen and cultivate the good accepted wisdom ability, to broaden the philosophy of mind with optimistic approach and to understand the systematic way in order to attain right direction. This curriculum offers a potential for an individual to contemplate autonomously and takes own initiatives to walk on a path of headship.

Appendix OPTION: 1

Project Life 10 year



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Cost of Capital 10%Option 1Million £ Year 0

2001Year 12002

Y 22003

Y 32004

Y 42005

Y 52006

Y 62007

Y 72008

Y 8 2009

Y 92010

Y 10 2011

Average Likely cash flow of London Counties

20 20 20 20 20 20 20 20 20 20

Average Likely Cost

-35

Cost savings on confederacy

4 4

Cost savings on supplies

6 6 6 6 6 6 6 6

Auction of assets and stock decline

-35

Advancement of Amenities

-20

Redundancy and repositioning provision

-5

Other contingencies

-3 -3 -3 -3 -3 -3

Research and Development

-4 -5

Fusion of Distribution

-3

Net Cash Flows -58 -26 16 23 23 23 26 26 26 26 26Discount Factor

1 0.9091 0.8264

0.7513 0.68 0.620

0.564

0.513

0.466

0.424

0.385

-58 -23.6366

13.2224

17.279 15.70

14.28

14.67

13.343

12.12

11.026

10.02

Total Present Value of Project

40.0542

Internal Rate of project

19%

OPTION: 2

Standard Y 0 Y 1 Y 2 Y 3 Y 4 Y 5 Y 6 Y 7 Y 8 Y 9 Y 10



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Likely Rate

-16.67

-16.27

-16.27

Upgrade Rate

-20

Likely Cash Flow

15 15 15 15 15 15 15 15

Total Cash Flow

-36.67 -16.67 -16.67 15 15 15 15 15 15 15 15

Reduction Issue

1 0.9091

0.8264

0.7513

0.683

0.6209

0.5645

0.5132

0.4665

0.4241

0.3855

-36.67 -15.15 -13.77 11.26 10.24

9.31 8.46 7.69 6.99 6.36 5.78

NPV £ 0.51

Internal Rate of Return

10%

OPTION: 3

Year 0

Y 1 Y 2 Y 3 Y 4 Y 5 Y 6 Y 7 Y 8 Y 9 Y 10

Currency reserved

15 15 15

Closing Price

-4.6 -4.6 -4.6

Total Flow of Cash

10.3 10.3 10.3

Reduction Issue

1 0.909 0.826 0.751

9.40009 8.54497 7.76844

NPV £ 25.69



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HYPOTHESIS:

1. Convinced and Positive cash flows are obtained2. Apparently, rise and fall in the price would be stable3. First two choices would be analogous 4. Third decision cannot be evaluate with the first two choices



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Wilson and Chua, 1.

