Text 11. Financial Management
In the past financial management was not a major concern for a business. A company used to establish relations with a local bank. The bank handled the financing and the company took care of producing and selling.
Today only a few firms operate in this way. Usually businesses have their own financial managers who work with the banks. They negotiate terms of financial transactions, compare rates among competing financial institutions. Financial management begins with the creation of a financial plan. The plan includes timing and the amount of funds and the inflow and outflow of money.
The financial manager develops and controls the financial plan. He also forecasts the economic conditions, the company’s revenues, expenses and profits. The financial manager’s job starts and ends with the company’s objectives. He reviews them and determines the funding they require. The financial manager compares the expenses involved to the expected revenues. It helps him to predict cash flow. The available cash consists of beginning cash plus customer payments and funds from financing.
The financial manager plans a strategy to make the ending cash positive. If cash outflow exceeds cash inflow, the company will run out of cash. The solution is to reduce outflows. The financial manager can trim expenses. The financial manager also chooses financial techniques. One of them is short-term financing. Another is long-term financing.
At the end of the fiscal year the financial manager reviews the company’s financial status and plans the next year’s financial strategy.
Text 12. Wholesaling
Wholesalers are the institutions which stand between the manufacturer and the retailer. A wholesaler buys goods in bulk from producers and sells them in small quantities to retailers. In doing so he helps the production process. If you want to be a successful manufacturer you should make high quality products at a reasonable price for selected markets.
The most important function of a wholesaler is to contact manufacturers and potential customers. Thus nine contacts and deliveries are necessary if three firms supply directly three retailers, where each producer deals with a wholesaler, reducing the total number of transactions to six.
Wholesalers are used for information and advice. Suggestions which customers make to the retailer are passed to the wholesaler who conveys them to the manufacturer. Thus the latter can improve his product.
A wholesaler keeps stocks. Shoppers like to obtain goods immediately. This requires stocks. Often, however, neither the producer nor the retailer has extensive storage facilities, and responsibility falls on the wholesaler.
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Moreover, he arranges imports from abroad. Foreign manufacturers can rarely bother to ship small parcels to individual retailers abroad. They prefer to deal with a wholesaler, an import merchant with established trade connections.
Wholesalers may be classified into three groups: manufacturer-owned operations, merchant wholesalers, merchandise agents and brokers. Manufacturers can establish the own wholesaling office or branch, the latter providing more services to its customers. Depending on the industry or geographical location merchant wholesalers are called distributors, jobbers or dealers. Among merchandise agents there are selling agents, brokers, commission agents and action companies. They are all compensated by either a commission or a brokerage fee.
Text 13. Retailing
The retailer performs the last stage of the production process, for it is he who puts the goods in the hands of the actual customers. His work is “to have the right goods in the right place at the right time”.
There are four types of retailing institutions: 1) speciality stores; 2) supermarkets; 3) general merchandise stores; 4) nonstore retailing.
Often speciality stores sell one type of product, such as clothing, jewelry, furniture, books. These stores having a better feeling of their market, they compete against giant department stores. They can adjust more quickly to market conditions.
Big supermarkets are usually well located. All the goods are arranged on trays and shelves. All the prices are clearly marked. The goods are ready-weighed and beautifully packed. There you can find everything you need. The prices are reasonable.
General merchandise stores (GMS) carry a wide variety of products. There are three types of GMS: a) departments stores, b) discount stores, c) hypermarkets. Big department stores started in America more than 50 years ago, and then the idea was brought to European countries. These stores are wonderful places. People can do all their shopping under one roof. All the things for sale are displayed so that they can be easily seen, and customers walk around and choose what they want.
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The department store is divided into departments: women’s clothes, men’s clothes, shoes, toys, sports goods, china and glass, etc. There may be a restaurant with an orchestra and sometimes a tea-room as well. You will also find a room where you can rest if you are tired. There is an office where you can book seats for a theatre or arrange to travel anywhere in the world.
Low price is the major attraction of the discount stores. These stores sell themost important items, colors and sizes. The stores keep long hours and are usually open on Sundays. Hypermarket is a type of discount store that was developed in Germany. They are very large stores with low price and high turnover products.
There are three major types of non-store retailing: a) vending machines; b) door-to-door sales, and c) catalogue sales.
Text 14. Marks & Spencer
Marks & Spencer, the British food and clothes company, is the most famous British shop in the world. At the moment, there are 283 M&S shops in Britain, and other shops in France, Belgium, Holland, Spain and Portugal. Currently, they are building a new store in Paris. In North America the company owns Brooks Brothers, and there are about fifty stores in Canada. More and more people from Hong Kong to Lisbon are buying the clothes and food from M&S.
The company employs about 50000 people worldwide. Sales have increased by 80% over the last ten years, mainly due to expansion overseas. Many of the shops abroad are franchises. Owners of franchises buy all their stocks from M&S and pay the company a percentage of their turnover.
The clothes vary from country to country. In Thailand, e.g. M&S sell more short-sleeved shirt because of the climate. In Japan they sell smaller sizes because of the average size of the population. In Austria, they stock very large clothes. Food departments sell typically British food: tea. Cake, biscuits, etc., and the shops in Paris are very popular at lunchtime for the sale of sandwiches.
Why is M&S so successful? The standards of quality are very high. All suppliers have regular inspections. All customers can return any item which they think is not satisfactory. Stocks are limited. Shelves lives are short. This means that items only stay in the shop for six to seven weeks. 80% of the suppliers are British; in fact. M&S buy twenty per cent of the total clothes produced in Britain. Prices are high, so is the quality. In Britain, one man in five buys his suit at M&S and one woman in three buys her underwear there.
What about the future? At the moment the company is studying plans for development in Eastern Europe, Japan and even China, Next century it is possible that one Chinese in five will wear M&S’s suits. That’s a lot of suits!
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