Capital Management And Shareholder Value Creation (Research Paper Sample)

CAPITAL MANAGEMENT AND SHAREHOLDER VALUE CREATION: MARKS & SPENCER CASE STUDY
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Executive Summary
In the recent years, business organizations have recognised the need to embrace effective management of existing capitals as well as the creation of value for stakeholders in the global market. The different types of capital have brought a great impact on the operations of the business since they facilitate the production, marketing, distribution and the consumption process of a product. The paper will analyze how the Marks and Spencer Retail Company has effectively managed its capitals and created value for stakeholders through their Plan A strategy. The paper presents an in-depth analysis of the case study and the management of the human, financial, natural and social capitals. The paper also examines how the M & S company has undertaken the process of value creation for the various stakeholders such as the customers, the employees, and the investors. Through its efficient plan A strategy, the company has adopted goal-oriented measures such as the reduction of production cost through proper waste management and the use of renewable energy.
Table of Contents TOC \o "1-3" \h \z \u Executive Summary PAGEREF _Toc482696555 \h 2Introduction PAGEREF _Toc482696556 \h 4Financial capital management PAGEREF _Toc482696557 \h 4Human Capital Management PAGEREF _Toc482696558 \h 5Social and Relationship capital management PAGEREF _Toc482696559 \h 7Natural capital management PAGEREF _Toc482696560 \h 8Value creation for the stakeholders PAGEREF _Toc482696561 \h 8Effective utilization of the business resources/inputs PAGEREF _Toc482696562 \h 9Development of favourable value network and risk management PAGEREF _Toc482696563 \h 10Development of an effective value capture method PAGEREF _Toc482696564 \h 11Conclusion PAGEREF _Toc482696565 \h 12Reference List PAGEREF _Toc482696566 \h 12
Introduction
The contemporary business organizations have adopted various strategies aimed at creating an enabling environment for the management of important capitals such as financial, human, natural, manufactured, as well as the social and relationships capital. Proper management of business capitals results in the achievement of sustainability and thus improves the operations of business in both the local and the global market. According to the case study, Marks & Spencer Retail Company purchases clothing products and food from manufacturers and resells them to the consumers in various locations (Bell et al. 2009, p.511). The decrease in operations in the company characterized by the increase in the cost of energy and the changes in consumer purchasing behaviour made the chief executive officer, Sir Stuart Rose to adopt Plan A strategy. The plan was thus responsible for ensuring efficient capital management and value creation for the stakeholders.
Financial capital management
One of the most important capitals in any business organization is financial capital. The capital management entails cost structure, value configuration and the management of production costs. M & S, through the Plan A strategy, has embraced several measures aimed at controlling the usage of financial resources in the company. One of the ways through which the multinational retail company has managed financial capital is through waste management. This is because waste management reduces the financial loss incurred by the business when there is a waste of the products (Kale et al. 2001, p.465). M & S, through innovation, has introduced efficient refrigerators that maximize the time that the perishable food can take before they are purchased by the consumers. The new technology ensures cooling of the food products hence reducing a number of wastages. Through the adoption of technology, the company has managed to reduce the cost of production by $ 60,000. Moreover, M & S has embraced the use of renewable sources of energy such as wind power and solar panels. The use of the clean energy has enabled it to save $ 13 million annually. Through recycling of waste materials such as packaging materials, the retail company has managed to save % 15 million per year. The financial management has therefore improved the operations of the business since it been in a position where it experiences an annual increase in sales and revenue since the adoption of the plan A strategy. Besides, the company has in the recent years abolished the use of plastic bags in the packaging of its products such as clothing. The measure has enabled the company to save $ 4.5 million per year. The changes in supply chain management have also led to the efficient management of financial capital. M & S has introduced a highly sophisticated transport system that has enhanced fuel consumption in the company. The Teardrop trailers are fuel efficient and have managed to save $ 0.5 million for the company. This is because the new mode of transport is fast and efficient thus reduces the quantity of food products that are wasted through delay in reaching the market. The measures highlight the extent to which M & S has effectively managed the critical financial capital thus leading to the achievement of sustainability.
Human Capital Management
Human capital plays a significant role in the daily operations of a business organization. Therefore, through creating a sustainable environment within the workplace, a business can effectively manage the human capital (Adam & Frost 2008, p.293). According to the Plan, A strategy, S & M retail company has undertaken employee training and skill development initiatives with the aim of improving the operations of the business. The company initiated the training process of 570 employees in each store. The workers were thus trained on how to improve their performance and productivity in the organization. The training process was, therefore, critical for the workers since the gained knowledge and experience on how to operate in the global market in regards to the changing consumer needs. According to Richard Gilles, the director of the Plan A strategy, the company undertook the training process of the employees to develop their skills and enhance their productivity. Employee skill development is crucial in business since it enables the workers to gain expertise and skills in performing the assigned duties. M & S also improved the relationships between the employees and the managers and the supervisors. Through the adoption of efficient communication channels, the workers could now communicate with the seniour managers and also participate in decision and policy making (Cooper et al. 1994, p.388). The company has also created awareness among the employees on the need to adopt the changes that have been undertaken by the company. For example, though informing the juniour employees about the measure to recycle waste products, the workers have embraced the initiative since they feel that their presence is being recognized by the company.
The employees are also allowed to participate in crucial decision-making process within the organization. Motivation plays a tremendous role in creating a sustainable environment for the employees. M & S has adopted initiatives meant to motivate the employees. The workers who actively participate in waste reduction in the company are recognized and rewarded. Moreover, in each store, the workers are motivated through incentives and bonuses that are aimed at boosting their morale at the workplace. Through their commitment towards improving the welfare of the human capital, M & S has been receiving an increased number of job applicants who want to work in the company. This is because the workers believe that the company has put into place measures that are geared towards attaining sustainability (Wiig 1997, p.402). The people believe that M & S is a responsible global retail company. The staff engagement has boosted the relationship between the employees and the business. The employees at the different departments such as marketing, human resource, and supply chain work as a team with the aim of achieving the goals and objectives of the company. According to Hamed (2013 Plan A Report), the company’s chief executive officer, Sir. Stuart Rose have implemented policies and regulations that ensure that the employees have an enabling working environment where their skills are fully utilized, and their welfare and contribution in the organization is appreciated.
Social and Relationship capital management
M & S has also undertaken effective measures that have resulted in the management of the social and relationship capital within the organization. One of the critical business models is the target customers. The business, therefore, should ensure that it develops efficient relationships with the customers and the society as a whole (Nahapiet & Ghoshal 1998, p. 251). M & S has introduced corporate social responsibility programs that have enhanced the social and relationship capital management in the retail company. Among the CSR strategies that the company has undertaken is a price reduction. The company has reduced the prices of various products such as the clothing as well as the food products. This measure is aimed at making the products affordable to the customers and the people living in the local communities around the company’s stores. Moreover, the company provides discounts to highly perishable food products. The consumers, therefore, can easily purchase these products at affordable rates instead of being wasted. The company has also recognized the changes in the consumer behaviour over the years. According to the CEO Sir Stuart Rose, the consumer buying habits has shifted into showing preferences to companies that have embraced initiatives...