Jaguar Land Rover Transition to High Performance

Question: Discuss about the report in detail that which are those physical, financial and technological resources that will be required for building new facility to be operated in South England by Jaguar Land rover and also discuss the report mainly emphasized on implementing the budget for next one year operations of the footsteps of Cadburys, Coca Cola opened a Coca Cola Cafe in the heart of London. Answer: 1.0. Introduction This business report will discuss in detail that which are those physical, financial and technological resources that will be required for building new facility to be operated in South England by Jaguar Land rover (Hicks and Upton, 2010). This requirement will be explained in the analysis section, which will be based on the description of the present practices adopted, for existing facilities. This report will analyze various financial options that the company uses and which will be suitable for new facility. This report seeks to understand, that how will an effective management of all its resources such as human, physical, technological and financial resources, help Jaguar to improve its performance. 2.0. Description and Explanation of resources Physical Resources: Their operations are taking place at five manufacturing plants, three plants operates in vehicle manufacturing while the other two are the engineering and design centers in Midlands (Hungerlnder, 2013). They continually invest in these sites to meet the demand and have insured their facilities against any mishap. They adopt sustainability practices in the production of their cars. Technological Resources: Jaguar has invested 800 million in acquiring new technologies which can enable its vehicles to reduce environmental pollution and increase performance. They have developed new technologies to reduce the carbon emission so as to maintain its image among consumers. Since they use world class technologies, and they keep coming up with new and innovative products, it is crucial for them to protect its intellectual property with the help of patents and copyright. They differentiate themselves on the basis of its design, feel and other aesthetics. Therefore, they need to invest in intellectual property protection. Due to rapid technological advancements, they need to acquire new software licenses and renew the old ones. Financial Resources: Jaguar generates its capital from the profits as the internal source of financing. They generated about 2,429 million of net cash from operating activities in financial year 2013. They used these profits as working capital for the next year. The company uses other external sources for financing such as short term deposits. They generate cash from its other subsidiaries, cash generated from external debt and operations. In 2013, Jaguar had 2,167 million of debt which consisted of 1,869 million of long-term unsecured debt that will mature in 2018, 2020, 2021 and 2023 respectively (Hungerlnder, 2013). They also issue unsecured notes of $500 million. All these activities are governed by an agreement that Jaguar entered into as issuer, Citibank, N.A, London branch, as trustee for the holders, Jaguar Land rover Limited and Land rover. They also borrowed short term loans from Chinese subsidiary and each facility was guaranteed by Land Rover. They also used factoring to get finances for the company. 2.1. Analysis of the resource requirement The report has till now discussed, what are the practices used by Jaguar in its existing facilities. Since the company wants to start it operation in South of England they should have the following requirements. Physical Requirement: They will require spending on acquiring new land to build its facility, they will choose a barren land in the outskirts, in order to be sustainable, and therefore, this will cost them less (Jaguar Land Rover / Investition in neues Motorenwerk, 2013). They dont need to have any more design centre as it is already highly operational and sufficient. However, they need to make investment in plant and machinery, waste management techniques and they need to also invest in insurance and security of its facility. Technological Requirement: They do not need to make additional investment on protection on intellectual property as the design centre will remain the same; therefore, it is already taken care of. They already have the technological knowhow so as to reduce the carbon emission; therefore, they can make use of those technologies . Also, since they make use of Virtual engineering, they can cut down on the cost and time of making new vehicles. However, investment will be required on acquiring eco friendly technologies to drive their growth in future. Financial Requirement: As discussed earlier, Jaguar uses a varied combination of internal and external resources to acquire funds for its operations. For the purpose of their new facility, they can make use of their capital generated by the profits and not spend the company savings (Neghabi, Eshghi and Salmani, 2014). They use various external sources, therefore, to operate in South England, they might choose to raise funds by issuing shares but taking short term loans from bank will be most suitable for Jaguar, as the interest rates have dropped to as low as 0.5% in England and the banks will be following loose monetary policy for some time now. Thus, this would be the best option for them as this will reduce cost. 2.3. Evaluation Thus, the report has discussed what the current practices are and what they should do if they want to open up new facility in England to increase productivity. The financial requirement is not very high as they already have the required technological knowhow and they dont have to spend on intellectual property protection mechanism (Rebolledo-Mendez et al., 2014). However they do require investing in the waste management equipments in order to protect the environment in its new location. Physical resource requirements are also minimal. They need to hire new local workers in order to reduce labor cost and increase efficiency. Taking loans will be most beneficial for the company due to low interest rates. 3.0. Conclusion After the detailed discussion on all the resources, it can be concluded that Jaguar Land rover have been using sustainable practices for its business from long. This has been an advantage for the company. They can easily open up new facility in England. They have always adopted strategies to protect the environment (Zeilhofer et al., 2013). Their brand is known for providing eco friendly luxury cars equipped with latest technology and bringing in new and innovative designs. Their product scores high on aesthetic value. Thus, it can be concluded that have effectively managed all their resources which has led to improved performance. This is reflected in their revenues and loyalty among satisfied customer. Introduction: The report mainly emphasized on implementing the budget for next one year operations of the footsteps of Cadburys, Coca Cola opened a Coca Cola Cafe in the heart of London. Based on the given financial information, next one year budgeted profit and loss statement has been prepared on monthly basis. In addition to this, budgeted balance sheet, break even analysis and ratio analysis has been performed for this study. Assumption made for preparing budget: No of customer per day 200 Average earnings per customer 15.50 Wages per month 15,530.00 Cost of goods sold per customer 7.16 Rent per month 20,000.00 Utilities per month 2,600.00 Fixture and fixing 12,000.00 It is also expected that the number of customer in next 6 months will be increased by 2% and from 7 month onwards, the daily number will be increased by 5%. Based on these given information, below is the budgeted income statement for the new venture. Month by moth Assumptions No of customer per day increase Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Year 1 - 2% 2% 2% 2% 2% 5% 5% 5% 5% 5% 5% Budgeted Profit and loss Statements Sales unit 6000 6120 6242 6367 6495 6624 6956 7303 7669 8052 8455 8877 85161 Sales revenue 93,000.00 94,860.00 96,757.20 98,692.34 1,00,666.19 1,02,679.51 1,07,813.49 1,13,204.16 1,18,864.37 1,24,807.59 1,31,047.97 1,37,600.37 13,19,993.21 Cost of goods sold 42,960.00 43,819.20 44,695.58 45,589.50 46,501.29 47,431.31 49,802.88 52,293.02 54,907.67 57,653.06 60,535.71 63,562.49 6,09,751.70 Gross profit 50,040.00 51,040.80 52,061.62 53,102.85 54,164.91 55,248.20 58,010.61 60,911.14 63,956.70 67,154.54 70,512.26 74,037.88 7,10,241.51 Operating expenses Wages 15,530.00 15,530.00 15,530.00 15,530.00 15,530.00 15,530.00 15,530.00 15,530.00 15,530.00 15,530.00 15,530.00 15,530.00 1,86,360.00 Rent 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 2,40,000.00 Utilities per month 2,600.00 2,600.00 2,600.00 2,600.00 2,600.00 2,600.00 2,600.00 2,600.00 2,600.00 2,600.00 2,600.00 2,600.00 31,200.00 Fixture and fixing 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 12,000.00 Total operating expenses 39,130.00 39,130.00 39,130.00 39,130.00 39,130.00 39,130.00 39,130.00 39,130.00 39,130.00 39,130.00 39,130.00 39,130.00 4,69,560.00 Profit before tax 10,910.00 11,910.80 12,931.62 13,972.85 15,034.91 16,118.20 18,880.61 21,781.14 24,826.70 28,024.54 31,382.26 34,907.88 2,40,681.51 Tax @30% 3,273.00 3,573.24 3,879.48 4,191.85 4,510.47 4,835.46 5,664.18 6,534.34 7,448.01 8,407.36 9,414.68 10,472.36 72,204.45 Net profit 7,637.00 8,337.56 9,052.13 9,780.99 10,524.43 11,282.74 13,216.43 15,246.80 17,378.69 19,617.18 21,967.58 24,435.51 1,68,477.06 The above budgeted income statement indicates that over the one month period, the venture will earn 1,68,477.06 as total profit after all deduction. Breakeven analysis: Break even calculation Fixed cost 4,69,560.00 Revenue per customer 15.50 Variable cost per customer 7.16 Breakeven point 56302 According to the overall analysis, the company mainly calculates the breakeven point of the company that is mainly base on the fixed cost that contains fixed cost of the company revenue generated by the company and the variable cost allocated by the organization. The fixed cost of the company is mainly consists wages, rent and utilities cost per month of the company. The company is efficiently able to maintain the breakeven analysis of the organization to maintain the no profit and no loss situation for the company within a given period. Limitations of breakeven analysis Several limitations are occurs during the calculation of breakeven analysis of the company which is mainly related to the maintenance activities of the revenue generated by the company within a particular period. It is difficult for the company to maintain the graphs and analysis each products of the company. The breakeven analysis of the organization is very quickly being affect by the certain changes in the business environment of the company. The breakeven analysis would not support the several activities of the company to take several decisions about the operational activities of the company. The security cost of an organization is increases due to breakeven analysis of a particular organization are fixing in nature. The fixed and variable cost of the production is difficult to categorize in the breakeven analysis of a company. Budgeted balance sheet: Assets Initial balance Cash and short-term investments 19,100.00 Accounts receivable 3,000.00 Total inventory 25,000.00 Prepaid expenses - Deferred income tax - Other current assets 5,000.00 Total current assets 52,100.00 Buildings 1,50,000.00 Land 2,500.00 Capital improvements - Machinery and equipment 10,000.00 Less: Accumulated depreciation expense - Net property/equipment 1,62,500.00 Goodwill - Deferred income tax - Long-term investments - Deposits - Other long-term assets - Total assets 2,14,600.00 Liabilities Initial balance Accounts payable 2,000.00 Accrued expenses - Notes payable/short-term debt - Capital leases - Other current liabilities 100.00 Total current liabilities 2,100.00 Long-term debt from loan payment calculator 1,00,000.00 Other long-term debt - Total debt 1,02,100.00 Other liabilities - Total liabilities 1,02,100.00 Equity Initial balance Owner's equity (common) - Paid-in capital 1,12,500.00 Preferred equity - Retained earnings - Total equity 1,12,500.00 Total liabilities and equity $2,14,600 Ratio analysis: Current ratio Current assets 52,100.00 Current liabilities 2,100.00 Current ratio 24.80952381 current ratio is mainly calculated for analysis of the companys position that an organization is capable enough to pay their short obligations within a given period of time. As this company will be in a new venture so the current ratio of the higher in compare to its competitors is 24.81 which shows that company has enough money to pay their short term obligations in the coming future. Quick ratio current assets 52,100.00 Inventory 25,000.00 Current liabilities 2,100.00 Quick ratio 12.90 A quick ratio shows that a particular company is having good capability to pay their short term obligations which is excluded the inventory of company. In this analysis the company is mainly having quick ratio of 12.90 which shows company will be able to handle the future obligations of their creditors within a given period of time. Gross profit percentage Gross profit 7,10,241.51 sales 13,19,993.21 Gross profit percentage 53.806% From, the above gross profit margin percentage, it can be said that over the next one year, if the organization will perform as per the expectation, then there will be sufficient amount of fund for additional expenses and further savings. Net profit percentage Net profit 1,68,477.06 Sales 13,19,993.21 Net profit percentage 12.763% While, gross profit margin will be in standard position, the above net profit margin indicates that the venture needs to consider its fixed costs with care. Here, the operating expenses level needs to be taken care of. Return on capital employed EBIT 2,40,681.51 Capital employed 1,12,500.00 Return on capital employed 2.139391188 Here, the return of capital employed value is above the standard level. This indicates that the venture will sufficiently manage its capital. Stock turnover Cost of goods sold 6,09,751.70 Inventory 25,000.00 Stock turnover 24.39006811 This particular ratio has explained how efficiently, the venture will transform its inventory to liquid assets. As the value shows, it can be said that the venture will be able to transform the inventory level more than 24 times over the next one year. Reference List: Hicks, J. and Upton, S. (2010). 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