Rofiat Akinremi

RESOURCE MANAGEMENT PRESENTED BY: ROFIAT AKINREMI CONTENTS ➢ INTRODUCTION ❖ Toyota Overview ❖ BMW Overview ➢ SWOT Analysis❖ BMW ❖ Toyota ➢ HUMAN RESOURCE ❖ Organization Structure ❖ Motivational Theories o Application of Theories ❖ Change Management Models ❖ HRM Strategy ➢ FINANCIAL ANALYSIS ❖ Profitability Ratio o Gross Profit Margin o Net Profit Margin o ROCE o ROSF ❖ Liquidity Ratios o Current ratio o Quick ratio ❖ Efficiency Ratios o Fixed Asset Turnover o Inventory Turnover o Credit Payment Days o Debtor Payment Days ❖ Gearing Ratios o Gearing o Interest Cover ❖ Investor’s Choice o Performance Chart o Forecasting o Mathematical model application Automotive Industry Overview The automobile industry was the second largest in the United Kingdom as far back as the mid-20th century. (Statista,2023). Recently, production mainly focuses on a few remaining British prestigious brand as well as housing plants for foreign manufacturers like Nissan, BMW ,Ford etc. The automotive industry has contributed to about 14.1billion of the UK economy. The sector is also an employer of over 782,000 people as of 2021 and offered roughly 182,000 jobs. (Statista,2023).Despite these facts, the car production segment experience the worst in 2020 as a result of covid-19 pandemic which made car output to be roughly 30percent lower than ever as far back as 1984. 10,000 jobs was lost in 2020 due to the impact of corona virus (Covid-19) and economic recession. The cascading effect of Covid-19 as led to global chip shortage and disruption of supply chain worldwide. (Statista,2023). Toyota Overview Toyota was established in 1933 as a division of Toyota Automatic Loom Works Ltd., under the direction of Kiichiro Toyoda. The company was encouraged to develop automobile production by the Japanese government as a result of the war with China as the country needed domestic vehicle production. The division produced its first model A1 passenger car in May 1935 and G1 truck in August 1935. The company has expanded rapidly over the 1960’”s and 1970’s. It took it’s name Toyota Motor Corporation in 1982 (History of Toyota, 2022) BMW Overview BMW is a car manufacturing company that was established in 1916 as Bayerische Flugzeug-werke, a builder of aircraft engines which later assumed the name Bayerische Motoren Werke in 1917. Initially it engaged in the production of motorcycle in the 1920’s but later entered the automobile industry in 1928. The company was on the verge of collapse as at 1959, however it pulled out of it. Consequently, the German enterprenuer Herbert Quandt acquired a controlling interest in the firm established. BMW purchased the Rover group in 1994 but lost approximately $4billion before selling the brand in year 2000 to Ford. The company witness great success in 2001 after relaunch of British Mini in 2001. In addition, BMW acquired Rolls-Royce in 2003. • • • • • • • • SWOT Analysis- Toyota It has a strong global presence thereby • Overdependence on suppliers • It has a high recall rate. • Poor marketing of eco-friendly cars. • Poor marketing strategies of the dominating the automotive industry market with It has a large port-folio consisting of different varieties of vehicles. Strengths Great brand recognition and strong Weaknesses awareness. company make some of its brands High technological advancement makes it unrecognised. an innovator and leader in the market. It has the most extensive supply chains which support resilience. Opportunities Investing in new markets as well as taking advantage of growing demand for cars. Exploiting the demand for autonomous vehicles. Increasing its investments in the Threats • High global competition from competitors. • Over-Investing on technology can lead to bankruptcy • Unavailability of raw material. • Covid-19 has shown that automakers are vulnerable in case of a worse global pandemic in the future. SWOT Analysis- BMW • highly valuable brand - They produce high quality cars that are perfectly engineered to give comfort for daily use. • 21st World's most valuable brand • It has assembly points across 140 countries and over 30 operating plants. It has a strong global presence. • One of the most recognised companies • It has a diversified source of revenue thereby making the company possess long term sustainability. • It has amassed decades of experience in hybrid and full-electric technology. • Offering eco-friendly mobility as one of the leaders in the electric car market. • It exploit new market Or It can exploit unsaturated emerging markets. • BMW can expand into autonomous vehicles in the future. S O W T • It lacks product differentiation strategy. • BMW has a record of controversial recall • It is entangled in various lawsuits. • Uncontrollable unpredictable high manufacturing cost. • Government stringent rules and regulations to combat emission. • High competition from peers such as :• Global recession; The aftermath of Covid-19 Pandemic Toyota Organizational Structure Source: Łukasik & Wasowicz, 2015 BMW Organizational Structure Source: BMW GROUP, 2023 Employee Motivation Theories Content Theories Process Theories Maslow's Hierarchy of Needs V-room Theory Herzberg's 2 Factor Theory Locke & Latham's Goal Setting Theory Maslow’s Hierarchy of Needs Maslow's Hierarchy of needs, an idea proposed by American psychologist Abraham Maslow in "Theory of human Motivation" was written in 1943, in the Journal Psychological Review, which describes the idea of his observations of Human's Innate Curiosity. The theory aims to reflect needs of society as it's base and then proceeding to emotions. This theory has two key themes involved which are individualism and prioritization needs. The theory is usually shown as pyramid illustrations. Moreover, according to the theory for motivation to occur at the next stage, the prior stage must be satisfied by an individual. The goal in Maslow's Hierarchy is to attain the level of self-actualization. Source: Wikipedia, 2023 Application of Maslow’s Theory of Motivation- Toyota • Rendering support to manager to have discussion about flexibility. • Toyota offers career talent development to managerial level staff. • Creation of employment to aged staff.markets. • Staffs are included in organization, they have a voice and been heard with no discrimination. • Employees are heard and their insight is sought and respected. • Toyota enables an inclusive and engaging working environment that allows diverse talent. • Employees can show their full potentials and be their true self. Self actualization Belonging and Love Needs Safety Needs Esteem Needs • Rotational graduate programme which assist in recognizing strength and potentials. • Training and development of employees. • Development structure is in place which allows 70% training time, 20% learning from others as well as 10% of formal activities. Maslow’s Theory Physiological Needs • Individual differences are being accommodated thereby making people feel secured, welcomed and empowered. • The company has a Disability confident scheme that takes care of people with disabilities or long term health condition. • Provision of limited degree apprenticeship which encourages real life experience. • Provision of health and safety culture policy.. • Creation of positive work life for staff. • The company encourages employees to work flexibly and values flexibility at work which is tailored towards individual staff. • Salaries are reasonable and competitive in the market. • Quarterly business briefing that gives employees • Continuing • Over 4,700 young platform to raise questions development of staffs people are currently and suggestions to the with leadership soft skills enrolled in senior management • provision of flexible and technicalities vocational training team. which support working hours, and talent • Financial Year Employees professional growth. sabbatical or • Encourage employees development - were invented to mobile working. to enjoy the learning programmes of the participate in online process & actively • Everyone is company. GLOBAL ALL Employee enable them to • Training development, Survey which helps welcomed for the become involved in coaching, skill company to access differences they shaping the future of acquisition through employees concern and BMW group. bring and there's a quarterly business aspirations. • Career Development huge amount of through Performance briefings conducted on • Diversity and inclusion has respect for diverse process which is in the campus site in been adopted by BMW place to appraise characters and Fanborough. to allow people to be employees • Management in place treated fairly and talent. performance by target to prevent equitably. • Initiative company achievement. discrimination in the • Creation of • Employee Consultation working on work place,which "MindMatters", a focus forum which involves promotion of quiet and engagees promoted through a group that brings spaces, inclusive of employees through numbers of in house together passionate consultation, permitting restaurant. network groups such as employees from BMW them to contribute to “Mental Health and community who seek to the success of the Disability”. Physiological Needs drive Belonging and Lovecultural Needschange Safety Needs Esteem Needs organization. surrounding issues of mental health. Application of Maslow’s Theory of Motivation- BMW • BMW has help in fostering expertise & Leadership qualities. • Developing leaders who stand out for personal initiative as for their ability to successfully manage teams & build networks. • International expert career programme which was rolled out in 2019 enables the company to offer additional career path opportunity at international level. • Managers have a decisive role to play in digital & agile transformation. • Development and further training for managers by rendering innovative programmes which address the current requirements placed on leadership such as central CAMPUS PROGRAMMES. Self Actualization Hetrzberg's 2 Factor Theory (Motivators)- BMW Achievements ❖Staff receive yearly bonus and pay raises ❖Engage in apprenticeship encouraging young talent Work Itself ❖ To ensure employee safety, the company undergoes continuous evaluation through certifications such as ISO 45001, OHSAS 18001 an OHRIS to improve work safety ❖Risk assessment tool such as the Safety and Ergonomics Risk Assessment (SERA) are used in production areas Advancement ▪ Employee apprenticeship focused on futureoriented fields like Artificial Intelligence (AI), automation and electrification ▪ Promotion opportunities ▪ Programmes that train employees on personal growth and enable them cover future needs Growth ▪ In order to ensure sustainability, employees are encouraged to give ideas for a reward ▪ The company aims at increasing the share of women in management positions to 22% by 2025 ▪ Employees are engaged in programme and trainings that will meet their personal growth plan and closed identified knowledge gaps Recognition ▪ BMW Group advocates diversity, equality and inclusion ▪ Focus on promoting women in the work place. Management programme aimed at increasing the share of women in all levels ▪ Provide barrier-free and inclusive work environment for the staff with disabilities Hetrzberg's 2 Factor Theory (Motivators)- Toyota Achievements ▪ ▪ Employees are given yearly bonus Through their Global 21 programme, Toyota provides training for their skilled employees equipping them with global Toyota executive skills Work Itself ▪ Toyota maintains and promote a confident believe in the brand ▪ Toyota has developed a sustainable operations over time Advancement ▪ Through Toyota loops Corporation, employees with disability provide ideas on the developing automated driving vehicles ▪ Programmes to ensure mental health of employees are in place ▪ Employees’ growth and development are prioritized ▪ Opportunities for promotion exits and staff are constantly trained to fill such gaps Growth ▪ Initiatives aimed at creating suitable work environment supporting women trying to balance work and childcare Toyota has a special purpose subsidiary called Toyota Loops Corporation which supports working with persons with disability and caters for their peculiar needs in as employees Recognition ▪ Toyota advocates diversity, equality and inclusion ▪ Focus on promoting women in the work place. Management programme aimed at increasing the share of women in all levels ▪ Special trainings and programmes to create awareness and empowerment for women in the workplace are in place Vroom Motivational Theory Effort-Performance Relationship This s the belief held by employees that putting in a specific amount of effort will result in a performance standard that is acceptable. An organization reacts to this by identifying factors that motivate employees to deliver best possible performance. Victor Vroom created the Expectancy Theory of Motivation in 1964. Although the majority of the evidence supports the notion, there are others who disagree. Both good and negative employee motivations can be explained by the Expectancy Theory. The expectation theory of motivation is connected by three relationships: effortperformance relationship, performance-reward relationship and reward-personal goal relationship. Performance-Reward Relationship Relationships Many think that performing at a given level will produce the desired results. An organization stimulates this by promising good rewards such as bonuses, pay-rise and promotion Reward-Personal Goals Relationship This relantionship discusses the relationship between rewards and individual objectives. This section explains how much a company's rewards meet a person's unique demands or objectives. The relationship emphasizes how significant such potential rewards are for the workers. Organizations have a responsibility of idenifying what their employees value. Some employees value money while others value day-off. Vroom Motivational Theory- BMW VS Toyota Effort-Performance Relationship • • Effort-Performance Relationship The BMW Group has aggressively promoted youthful talent Under the direction of a supervising ngineer, the Toyota Training Center for many years by providing free vehicles for training facilities holds fully professional and practical courses tailored to the demands of both domestically and internationally. the audience, drawing on the scientific and practical expertise of Around the world, more than 1,700 vehicles are used "in the professors and experienced technicians. service of vocational training" (BMWGROUP, 2023). Performance-Reward Relationship Performance-Reward Relationship • BMW prides itself as the frst manufacturer in Chinnese With regard to employee compensation and benefits, automotive industry to allow employees choose their own Toyota Motor Corporation has never had a problem. benefit package according to their individual need. • BMW -TOYOTA They treat their employees like their greatest asset by To express deep appreciation for the contributions made by their paying them well and giving them autonomy as part of employees, BMW use awards and gifts reward passionate service. their company's concept. Reward-Personal Goals Relationship • BMW is committed to recognizing and appreciating the efforts of the people who work with them so they may advance throughout their careers • Because of this, they work in a culture where acknowledgment and gratitude are ingrained, and the significant contributions employees make to day-to-day operations are acknowledged, taken into account, and recognized through progressive benefit Reward-Personal Goals Relationship • Toyota ues non-monetary awards in formof “tank you” letter from the president in the company publications to recognize employees. • Toyota also uses daily recognition from supervisors to appreciate employees. • A remarkable feature of the Camry plant is the provision of cafeteria, gym Locke and Latham’s Goal Setting Theory The idea behind Locke & Lathan’s goal setting theory is that business can achieve greater success by applying specific and measurable goals for employees. This theory identified five principles that are important in setting of goals to motivate others. These principles are Clarity- challenge, commitment, feedback and task complexity Clarity: Goals need to be clear and concise for people to understand. It goals are well understood it makes them motivate. Locke & Lathan goal setting theory has a lot of advantages/ Benefits including. High rate of performance and productivity. High level of engagement Encourages feedback culture. Helps boost employee confidence. Application of Goal Setting Theory- Toyota Vs BMW The primary object of focus for Toyota is enhancement of lives, not merely building of cars. (Toyota, 2021). Locke and Latham goal setting theory identified five principles that are important in setting of goals to motivate others to achieve the goal. CLARITY COMMITMENT • • • Company goals are clear and well detailed, so it is easy for Toyota has a community of fate ideology, where employee employees to understand. believe that they and the organization share the same fate of The clear goals encourages different strategist to be explored success or failure (Besser, 1995). This helps personal goals of the for example total lead time must be less than customer order employee to align with the organizational goals. to delivery lead time expectation • Toyota allows workers own and take responsibility; each team member is responsible for the success of the team. TASK COMPLEXITY • Toyota’s success is believed to be as a result of contradictions and paradoxes in most aspects of the organization. Employees are expected to deal with challenges and problems and proffer solutions (Harvard Business Review, 2008) CHALLENGE • Managers challenge workers to find solutions to make things cheaper and more efficient. • Making company improvement in accordance with changes in technology. FEDDBACK • Toyota uses a visual management systems to communicate problems so employees can track their progress in production, problem solving. This provides direction towards achieving their goals. Human Resource Strategy- Toyota "In-house grooming" is Toyota's human resources philosophy (Toyota, 2023). The core of this concept is that staff members should develop with the business. Toyota reportedly hires a lot of trainees and gives them the opportunity to advance within the organization. Opportunities for learning and growth are offered for their development Toyota's graduate recruiting campaign is crucial because of this approach. To illustrate Toyota's hiring process, the graduate recruiting program will be used as an example. Engineering, HR, marketing, and IT are the primary job markets. RECRUITMENT HUMAN RIGHTS DIVERSITY & INCLUSION Toyota think that effective partnerships with companies and suppliers that support their inclusive vision may grow and get stronger over time. The organization is honored to be a part of the Billion Dollar Roundtable, an association of businesses that have made at least $1 billion in investments in suppliers that are owned by women and people of color (Toyota 2023). Toyota has been named a Top 50 Business for Diversity for 15 consecutive years and is ranked as the #4 Best Company for Diversity in 2022 (Toyota, 2023). HR Strategies The way people act and think is strongly ingrained in the company's ideas and ideals, making Toyota the first and leading corporation in terms of culture. Fundamentally, it is about treating people with respect and never stopping to get better (Liker, 2004) Toyota has received 15 straight A+ ratings on a nationwide benchmarking assessment for workplace equality for LGBTQ+ The business focuses on education and people (Toyota, 2023). professional development to help employees build the skills necessary to advance within the company. When Toyota invests in its people, the corporation obtains their long-term commitment and CAREER DEVELOPMENT motivation in return, which fits with the psychological contract theory (Davis, 2015). Toyota employs a number of vital procedures to meet its workforce development objectives, including career counseling, leadership development, Toyota is promoting the health and safety of its supervision, evaluation, and feedback. HEALTH & SAFETY employees through the provision and implementation of family and medical leave, medical leave of absence, Disabilities Act, early symptom investigation support, health evaluation, data reporting, and workers’ compensation. Human Resource Strategy- BMW • • BMW has long-term precise requirements and methods that make a very good selecting technique. They assess a candidate's suitability for the position based on whether it offers them the essential advantages. The abilities, knowledge, experience, and personal qualities of the individual that enable him to perform in accordance with the requirements of the job are included in the suitability of the role in the job. All of the recruitment and selection processes are carefully organized and designed with their future demands in mind. RECRUITMENT • One of the key success elements for BMW is diversity, in all its forms. Employeesf are as diverse as the global clients, suppliers, and investors, which allows the organization to consistently put a smile on her customers' faces (BMW, 2023). • With over 110 nations working together at BMW group, BMW boasts of about 120000 colleagues worldwide, 47% proportion of women in training program, 18.8% proportion of women in management position, 6.5% share of employees with severe disabilities in 2021 (BMW, 2023). DIVERSITY & INCLUSION • • • The BMW Group is dedicated to upholding universally acknowledged human rights. In 2005, when its Chairman, the Trade Union and the employee representatives, signed the "Joint Declaration on Human Rights and Working Conditions in the BMW Group," which was later reaffirmed in 2010, it emphasized its stand on the issue (BMWGROUP, 2023). When it comes to its employees, the BMW Group does not accept discrimination. Employees cannot be discriminated against, given preferential treatment, or subjected to harassment because of their gender, sexual orientation, age, nationality,skin color, ethnic origin, political beliefs, disability, or any other characteristic covered by local laws, such as being a member of a national minority, being pregnant, or being a veteran. Human Rights • BMW makes its employees proud to work for the company by first teaching them simple, manageable measures that also address their health and safety concerns. During this training, the line managers must overcome significant obstacles to build their selfassurance, personalities, and abilities to identify and address organizational problems. In order to function at the tactical and strategic levels within the organization, managers want their trainees to be creative, imaginative, productive, and capable.They train their staff on how to create various learning styles, materials, product designs, and also take care of their personality types. Career Development • • • The BMW Group adheres to all applicable employment protection laws around the world and establishes its own additional criteria for raising occupational safety (BMWGROUP, 2023). BMW offers customized retirement plans, health and accident insurance, as well as additional social benefits. The organization helps its employees strike a balance between their work and family obligations while also thinking about how to protect their health standards. The success of the reward techniques implemented by the organization is clear and is reflected in the high level of satisfaction among the employees. Health & Safety Resources Integration Toyota HR Measure: Continuous improvement • Adopts Kaizen approach where staff are empowered to promptly identify areas requiring improvement and recommend solutions (Toyota, 2013) • Standard work is considered as a tool for continuous improvement. From mastery of routine work, employees are expected to prescribe methods of improving their jobs (Meier, 2007) HR Measure: Cross-Functional Teams • Cross-functional Teams are set up to resolve identified problem, empowering them to make decisions that bring about solution) Impact: HR/Finance/Production Effect Waste elimination and results in improved efficiency in production, work procedure and in equipment HR Measure: Budget • Adopted the Lean management technique for eliminating waste • Believes well trained employees are empowered to identify issues and proffer solutions before they degenerate into issues Impact HR Finance More accurate forecasts and better lead times Net improvement in productivity and cost More efficiency in production as expertise required are readily available More prompt feedback avoiding loss of time/delays which is experienced in the traditional team HR Measure: Recruitment Employs a thorough and innovative approach in identification of talents and recruitment exercise Invests in the development and training of employees to match roles Impact on HR Staff grow into roles suited for their capacity and interests The company records less turnover of employees Resources Integration BMW HR Measure: Cross-Functional Teams • Adopts cross functional team approach to advance innovation while balancing creativity and control (Brainmass, n.d.) Innovation • Apprenticeship programmes focused on the future of technology such as Artificial intelligence (AI) are developed Effect Impact: HR/Finance Builds confidence in team members in decision-making process Provides solution to immediate and future recruitment needs Increase in staff retention while reducing staff turnover Renumeration Employees are well remunerated – above average in the industry Impact: HR Staff turnover is low Employees satisfaction and motivation is increased Ranked most attractive employer in 2022 (Universum Communications , 2022) CHANGE MANAGEMENT Change Management Models Lewin’s Change Model     Lewin change model describes change in three (3) stages/phases. Unfreezing: This first phase involves getting ready and willing to make a change. It means jolting out of satisfaction with current situation. Change: this stage involves implementing, moving, working and changing. It is usually very challenging and sometimes uncomfortable. Refreeze: In this final stage people accept the new change and get used to the new phase/ situation. Workers begin to get more comfortable and confident and support is provided to ensure the new change is maintained. ADKAR Model  ADKAR Model: This model involves a person centered approach to encourage change at the individual level this model is people focused. ADKAR is an acronym means:  Awareness: Creating awareness for the need/purpose of change  Desire: Desire to encourage and take part in the change  Knowledge: Knowledge of how to implement the change  Ability: Ability to implement the change  Reinforcement: Reinforcement to sustain the change.  Change is dependent upon its employees for a successful implementation. It is important for them to have clear and concise understanding of the changes occurring why they are and how the change can affect then.  The ADKAR model helps individuals process change so they can understand and accept it.  Awareness- Communication strategy, Training, Desire, event design and support knowledge. HR programs. Changes in Toyota Unfreeze: Management of Toyota prepare towards change identify and analyze the issues affecting quality employees and customers relations and manufacturing process. Change: Toyota management focus on the proposed benefits of the change. Employment, customer relations branding, market share, motivations. Refreeze: The management of Toyota identifies the possible obstacles of the change process. Development of strategies to continue changes. Feedbacks: Training to enhance and continue change. Quality Management: Management uses TPS (Toyota products Site) do improve and maintain quality. Design and Services: Management want to improved designs of cars and series of the company by tech advancemen Supply chain Management: Uses lean manufacture for the supply chain management and the management use automation system for supply chain management. In this process the organization diminishes the building effect in the Supply chain. Inventory: The objective is to lower size of inventory and corresponding costs. CHANGE MANAGEMENT OF TOYOTA AND BMW The impact of Brexit was quite significant to the UK economy. It consequently resulted to change management projects in several companies, considering the number of people affected, the level of change and the worldwide visibility (Ian, 2021). The automobile industry also took a great hit but adapted through implementation of effective change management. Using the LEWIN Change management model, below are some process adopted by Toyota and BMW TOYOTA 1) Unfreeze: • Toyota released an extensive Brexit impact statement in order to get their staff and customers ready for the big change ahead. • Educating the staff on the actions they would need to take to ensure continuous satisfaction of the customers and how to maintain the already existing standards and productivity within the UK and EU. 2) Change: • Toyota reviewed and increased the prices of some of their products. • Additional documentation required in their plants and showrooms due to the new custom requirements. • Provision of support to the EU nationals in the UK in their application process for UK settled status. 3) Refreeze: • Toyota management, staff and customers learn to get used to the change caused by Brexit even if it’s not comfortable for them, they need to accommodate and encourage the change. BMW 1)Unfreeze 1)Unfreeze • • as a result of Brexit, UK importers were warned of changes in the supply chain. BMW informed its staff and customers of the proposed change in an official statement released by Peter Nicolas their Chief financial officer. BMW stockpiled product components and parts they use in production. They were prepared ahead of the changes and the increase in prices/tariffs. (BMW. 2020) 2) Change • • BMW moved some engine production out of its UK plant. The prices of their cars were increased in Europe and United Kingdom. 3)Refreeze BMW management, staff and customers adapt to the change in order to ensure production and continuous sales. Analysis of Financial Ratios …Provides an overview and a relatively quick evaluation of the financial health of an organization (McLaney & Atrill, 2020) Profitability Ratios Outlines the insights into evaluating whether the profit earned by an organization within a fiscal year translates to success (Horner, 2020) Gross Profit Margin: Net Profit Margin: ❖ It shows the margin, as a percentage, the gross profit in relation to sales revenue ❖ It shows the margin, as a percentage, the net profit in relation to sales revenue (Cox, (Cox,-) ❖ An Increase in gross profit margin of a firm indicates it turns more of its sales revenue ❖ An Increase in net profit margin of a firm indicates it turns more of its sales revenue into gross profit (Horner, 2020) into gross profit (Horner, 2020) ❖ Simply put, it is a representation of gross profit as a percentage of revenue ❖ Simply put, it is a representation of gross profit as a percentage of revenue (Gowthorpe, 2018) (Gowthorpe, 2018) x Calculated as : 100 Gross Profit Margin = Gross Profit Sales Revenue Figure 1 : Appendix x 100 Calculated as : Net Profit Margin = Net Profit Sales Revenue Gross Profit Margin Toyota BMW Ind. Ave. Net Profit Margin Ind. Median Toyota 15.00 Ind. Ave. Ind. Median 10.00 5.00 10.00 0.00 5.00 -5.00 2017 2018 2019 2020 2021 -10.00 0.00 -5.00 BMW 2017 2018 2019 2020 2021 Interpretation of Ratio Toyota's GPM had maintained a downward movement throughout the period with it lowest of -0.79 in 2019 when the highest margin of 11.72 was recorded in the industry. Unlike BMW whose GPM maintained a steady upward movement between 2017 and 2020 where it recorded the hightest of 5.66. Although, there was a reduction to 2.47 in 2020, this was overturned in 2021 where it bounced back to upward movement as the same in the industry -15.00 Interpretation of Ratio The Net profit margin of Toyota recorded its lowest of -10.76 in 2018 as it declined sharply from 2017 where it recorded 1.52. However, it picked up between 2019 and 2020 to reach it maximum of 0.27, while there was surprisingly loss in the industry of -4.5 On the other hand, BMW maintained a steady growth of the NPM. Even though the industry recorded loss in 2020, BMW only had a reduction in its NPM in 2020 and moved upward again in 2021 Profitability Ratios (Cont’d) Return on Capital Employed: Return on Shareholder’s Fund: ❖ It illustrates, as a percentage, the company’s profit in relation to the capital invested in the company (Melville, 2019) ❖ It provides shareholders the amount of profit(loss) accrued in relation to their capital (Melville, 2019) ❖ It might indicate that the company share is good investment, when it is higher than the current saving rate (Melville, 2019) ❖ It is noteworthy that the referred herein is the one after deducting all operational expenses (Horner, 2020) Calculated as : ROSF = Profit for the year (less any preference dividend) Share Capital + Reserves (Melville, 2019) ❖ It is a basic evaluation of business performance (McLaney & Atrill, 2020) ❖ It gives the rate of return on shareholders investment in terms of capital employed (Horner, 2020) Calculated as : x ROCE = Profit (Loss) before long-term interest and tax 100 Share Capital + Reserves + Non-current Liabilities (Melville, 2019) Return of Shareholders Funds Return on Capital Employed 50% 100.00% 25% 50.00% 0% 0.00% 2017 2018 2019 2020 2021 -25% 2017 2018 2019 2020 2021 -50% -50.00% Toyota BMW Ind. Ave. Ind. Median BMW Toyota Ind. Ave. Ind. Median Ratio Interpretation: Ratio Interpretation Toyota ROCE was low in the period in review -), though it rallied from the reported losses in 2018 and 2019 to make a relatively small profit in 2020 and 2021; However, its current liabilities (short term) exceeding its Total assets, which was significantly due to the short-term Group Loan was also a contributory factor to the low ROCE. Toyota’s ROSF was low in the period in review -), basically due to the same reason in the previous slide on its ROCE. Shareholder’s equity value depreciated due to the losses experienced within the period. BMW’s ROSF is however encouraging, due to the significant YOY increase in Shareholder’s equity except for 2020 where there was a 45.95% decline from the previous year. N.B: The figures for Toyota’s ROSF was calculated merely for academic purpose as it Liquidity Ratios Current Ratio: Quick (Acid Test) Ratio: Calculated as : Current Ratio = Current Asset Current Liabilities Calculated as : Quick Ratio = Current Assets less Inventory Current Liabilities ❖ It gives an evaluation of a company’s potential to meet its short-term financial ❖ It is similar to current ratio with consideration to current asset less inventory (McLaney, obligation with its current assets (Melville 2019) E. & Atrill, P., 2020) ❖ There is a conjecture that the ideal ratio of the current ratio should be 2:1 (McLaney, ❖ It provides a stronger test of a company’s liquidity by excluding inventories when E. & Atrill, P., 2020) considering its current asset (Melville, 2019) ❖ It gives an indication of the likelihood of a cash flow challenges in the future (Horner, ❖ It is proffered that the ratio barest should 1:1, that is, current asset less inventory should 2020) be equal to the current liabilities (Melville, 2019) (McLaney, E. & Atrill, P., 2020) Current Ratio Toyota BMW Ind. Ave. (Melville, 2019) Quick Ratio Ind.Median Toyota - BMW Ind. Ave. Ind.Median 2019 2020 - 2018 2019 2020 2021 Interpretation of Ratio Toyota's GPM had maintained a downward movement throughout the period with it lowest of -0.79 in 2019 when the highest margin of 11.72 was recorded in the industry. Unlike BMW whose GPM maintained a steady upward movement between 2017 and 2020 where it recorded the hightest of 5.66. Although, there was a reduction to 2.47 in 2020, this was overturned in 2021 where it bounced back to upward movement as the same in the industry 2017 2018 2021 Interpretation of Ratio Similar to the current ratio, Toyota's quick ratio had a maximium of 0.14 which is significantly lower that the industry average in each year. In addition, it continued to move downward in contrast with the industry average which maintained a steady growth over the last 5 years. BMW however registered a steady growth of the its' quick ratio in the same direction as the industry except in 2020 when it dropped by .10 from 2019, but later gained its maximum growth of 0.96 in 2021 Efficiency Ratios Fixed Assets Turnover: Inventory Turnover: ❖ It is a measure of how efficiently the company’s asset are put to use to generate revenue (Melville, 2019) ❖ It is a measure of how frequent a firm converts its inventory to sales (Horner, 2020) ❖ This higher it is, the better the indication that the company’s fixed assets are used effectively (Kenton, 2023) ❖ Simply put, it is the measure of how much £1 pounds of fixed asset generates as revenue (Horner, 2020) Calculated as : FAT = Sales Revenue Fixed Asset ❖ It can also be referred to as the inventory holding period (Melville, 2019) ❖ Generally, high inventory turnover would mean lesser in terms of number of days and high in terms of number of times (Horner, 2020) Calculated as : IT = Sales Turnover Average Inventory (Melville, 2019) (Number of Times) Asset Turnover Toyota BMW Ind. Ave. Average Inventory x Or 365 Sales Turnover (Number of Days) Inventory Turnover Ind. Median Toyota 20 BMW Ind. Ave. Ind. Median 100 80 15 60 10 40 5 20 0 0 2017 Ratio Interpretation: 2018 2019 2020 2021 Toyota’s uses £1 of its fixed asset to generate an average of £10.88 of its revenue, which is higher than the industry average of £1 for every £ 7.87 revenue generated While BMW uses a lesser, with £1 to generate £ 5.38 of its revenue with the period in review. On this, Toyota uses its fixed asset efficiently than both BMW and the industry 2017 2018 Ratio Interpretation: 2019 2020 2021 Toyota averages 18.3 times inventory turnover within the five (5) years in review which is evident from the profit and loss account. While BMW averages a significant eighty (80) times within the same period performing better than the industry average of fourteen Efficiency Ratios Cont’d Creditors Payment (Days): Debtors Payment (Days): ❖ It is average number of days it takes a business to pay its creditors from the date of credit purchase to payment date (Melville, 2019) ❖ The higher it is the better, as it provides businesses access to free capital to run their business (McLaney, E. & Atrill, P., 2020) ❖ It is can also be referred to as Trade Payables days (Horner, 2020) Calculated as : Credit Payment (Days) = Trade Creditors x Turnover 365 ❖ It is average number of days it takes a business to receive payment from its receivables (Horner, 2020, 2019) ❖ The lesser it is the better, as it provides liquidity for the business to run their operations (McLaney, E. & Atrill, P., 2020) ❖ It is can also be referred to as Trade Receivables days (Horner, 2020) Calculated as : Debt Payment (Days) = Trade Debtors x Turnover 365 Creditors Payment Days Toyota BMW Ind. Ave. Debtor Collection Days Ind. Median Toyota 60 50 80 40 60 30 40 20 20 10 BMW Ind. Ave. Ind. Median 0 2017 0 2017 2018 Ratio Interpretation: 2019 2020 2018 2019 2020 2021 2021 Toyota’s CPD for the period is low and below both the Industry average and Median except for 2019 where is higher than industry. This simply means that it takes the company shorter time to pay back its creditors, thereby limiting its working capital. BMW however, averages about 23 days within the same period a little better that Toyota’s but still below the industry average and median of 39 days and 33 days Ratio Interpretation: Both Toyota and BMW averages Debtor collection of less than a Day within the period in review -) which is below the Industry average and median of 22 and 15 days respectively N.B : It is advisable by professionals that both credit and debtor payment days should be compared for proper perspective, and though it their credit days are higher than Gearing Ratios Gearing Ratio: Interest Cover Ratio: ❖ It is an assessment of the effect the long-term lending has on the long-term capital structure of an organization (McLaney, E. & Atrill, P., 2020) ❖ It is a measure how many times the company’s profit can adequately finance its interest (Gowthorpe, 2018) ❖ It is used to determine what fraction of a business capital that consist of debt rather than equity (Horner 2020) ❖ It is adopted by lenders and creditors ascertain the riskiness in borrowing a company (Corporate Finance Institute, 2023) ❖ It is normal practice of business to use debt to finance its operations (Horner 2020) Calculated as : GR = Long-term (Non-current) Liabilities x Share capital + Reserves + Long-term (Non-current) Liabilities 100 ❖ Also referred to as ‘times interest earned’ ratio (Corporate Finance Institute, 2023) Calculated as : ITR = Interest Gearing Ratio Toyota BMW Ind. Ave. Profit before interest and tax Interest Cover Ratio Ind. Median Toyota 400% BMW Ind. Ave. Ind. Median 1000 300% 800 200% 600 400 100% 200 0% 2017 Ratio Interpretation: 2018 2019 2020 2021 Toyota’s averages 121% over the period -), which means that its debt is bigger than its capital within the period, while BMW average 21% in the same period and lower than the industry average industry average and median. 0 -200 2017 2018 Ratio Interpretation: 2019 2020 2021 It is evident from the books that profit can barely finance its interest over the period in review, while BMW’s profit which over the industry average and median can easily its interest (finance cost) from its profit. Financial Decision Making Toyota: Partnership with Kinaxis (Canadian technology company) External Driver The emergence of COVID-19 pandemic which led to the shut down of the globe. (Toyota, 2021) Decision Toyota has made this decision in order to automate it supply chain model by moving it from manual to cloudbased framework. (Toyota, 2021) Impact • It will help in merging supply and demand side functions in order reduce the effects of unexpected changes. • Optimization of companies supply chain processes as well as swift response to customer needs. BMW: implementing new sales strategy with its retail partners External Driver Decision Impact As a result of coronavirus pandemic and customer desire to have contactless delivery. (BMW GROUP,2021) Fulfilling customer desire for sales process to be contactless through virtual tour of cars in stock. Annual investment of triple-digit million euros in digitalized sales as well as marketing. • After sales digitalization significantly contribute to profitability in the future. • Strengthened community relationship with customers Analysis of the performance ratio for Prospective Shareholder’s or Investors: Toyota and BMW vis-à-vis the Industry Average and median TOYOTA: BMW: Toyota’s profitability ratios (Gross Profit Margin, Net Profit Margin, ROCE, and ROSF) which performed below the industry average and median. Its production has dipped due to shortages of components such as chips for the electronics of its cars. In lay man’s term, this means hasn’t been efficient with its cost which implies that s small fraction of its sales revenue makes up its Gross and Net Profit. Subsequently, this has impacted on the company’s ROCE and understandably the ROSF respectively. BMW’s profitability ratios (Gross Profit Margin, Net Profit Margin, ROCE, and ROSF) performed above the industry average and median. Evident from the performance of its Net profit which indicates that a good fraction of its sales revenue is net profit which in turn reflected on both the ROCE and understandably the ROSF respectively. Toyota’s Liquidity ratio (Current and Quick ratio), as stated in the previous slides that the consensus is that ratio should be around 2:1. However, Toyota averages 0.27 over the 5 years, a ratio of 3:11 lower than BMW, the industry average and median within the same period. This suggests that the current assets are only sufficient to cover approximately one-third of its current liabilities, evident from the repayment of recurring short-term loan for the parent company Toyota Group Europe. Toyota’s efficiency ratio, unlike the other performance ratios, the company Fixed Asset Turnover performed relatively better than BMW, the industry average and median. This means it uses its assets efficiently, and worthy of note in their financial book, is the increase or investment in new assets within the period. Also, the Inventory Turnover averages 18 times within the 5-year review period which performed better than the industry average and median but below BMW. The Credit Payment of 12 Days is less than BMW, the industry average and median which means the company has little leverage on its capital commitment to suppliers. The Debtor payment averages a day, which means its receivable is good. Toyota’s Gearing ratio, a significant fraction of the company’s capital is debt, though majorly from the loan from the parent company, Toyota Europe, which is not entirely RECOMMENDATION: negative as it is norm in businesses but in the context of accounting, Toyota UK is treated as an entity which makes it worrying. BMW’s Liquidity ratio (Current and Quick ratio), performed at par with the both the industry average and median averaging 0.88 over the 5 years, which indicates that the company’s current asset is slightly lesser than the current liabilities. This does not suggest that the company is experiencing a liquidity problem. It is of note that there is an upward trend which is a positive. BMW’s efficiency ratio, unlike the other performance ratios, the company Fixed Asset Turnover performed relatively lesser than Toyota, and slightly above the industry average and median. This means it uses its assets efficiently within the period. Also, the Inventory Turnover averages 80 times within the 5-year review period which performed better than the industry average and median above that of Toyota. The Credit Payment of 22 Days which is higher than Toyota, but lesser than the industry average and median this means the company has average of a month leverage on its capital commitment to suppliers. The Debtor payment averages a day, which means its receivable is good. BMW’s Gearing ratio, a gearing of 21% debt to capital ratio performed above Toyota, BMW, Industry average and median. This is evident in the interest cover ratio where the profit earned can conveniently pay its interest. Based on the analysis of the performance ratio stated above for both companies in the context of the industry, investors or prospective shareholder’s choice will be to invest in BMW where there is a reasonable assurance in return on investment and leverage to the lending from borrowers due to the low risk of debt default. NB: It is noteworthy to state that the UK automotive industry has had its share of the aftermath effect of Corona virus, Brexit and economic Ratio Performance Chart 5-year average -) TOYOTA CREDIT SCORE AND LIMIT 5-year Average Ratio Performance -) Performance Ratio Industry Ave. Industry Median Toyota BMW Gross Profit Margin 8.5% 7.5% 0.9% 4.4% Net Profit Margin 0.2% 2.4% -2.2% 3.5% ROCE -3.2% 11.5% -11.7% 20.6% ROSF 0.4% 14.0% -6.0% 21.0% Current Ratio 0.87:1 0.85:1 0.27:1 0.88:1 Quick Ratio 0.66:1 0.67:1 0.12:1 0.79:1 Fixed Asset Turnover Ratio 7.87 4.13 10.88 5.38 Inventory Turnover Ratio 14.34 12.09 18.30 80.07 Credit Payment Days 39 33 12 23 Debtor Payment Days 22 15 1 1 Gearing Ratio 170% 98% 121% 21% Interest Cover Ratio 45.66 21.75 -17.76 280.29 LENGEND: Credit Limit : £ 228,917 CRIF Decision Solutions Ltd (Source: fame.com) BMW CREDIT SCORE AND LIMIT Lower than Industry Median Higher than Industry Median Lower than Industry Average Higher than Industry Average Credit Limit : £18,240,000 CRIF Decision Solutions Ltd (Source: fame.com) TURNOVER FORECAST FOR TOYOTA Fore ca st Ye a r Turnove r (,- 1,433,797.00 2,277,144.00 2,298,486.00 2,604,124.00 2,571,879.00 2,773,783.00 2,027,243.00 1,819,810.00 1,865,189.00 1,782,021.00 1,587,850.00 2,378,751.00 2,119,137.00 2,559,579.00 2,400,912.00 2,177,792.00 2,005,315.00 2,626,072.00 2,114,196.69 N=2 N=4 1,855,470.50 2,287,815.00 2,451,305.00 2,153,387.75 2,588,001.50 2,437,908.25 2,672,831.00 2,562,068.00 2,400,513.00 2,494,257.25 1,923,526.50 2,298,178.75 1,842,499.50 2,121,506.25 1,823,605.00 1,873,565.75 1,684,935.50 1,763,717.50 1,983,300.50 1,903,452.75 2,248,944.00 1,966,939.75 2,339,358.00 2,161,329.25 2,480,245.50 2,364,594.75 2,289,352.00 2,314,355.00 2,091,553.50 2,285,899.50 2,315,693.50 2,370,134.35 2,302,522.75 2,230,843.92 FORECAST SUMMARY: The forecasting technique used in moving average technique using a 2 year and 4-year interval and data trend indicates an upward movement in 2022 TURNOVER FORECAST FOR BMW Forecast No. Year Turnover (,000) 1 2003 2 2004 3 2005 4 2006 5 2007 6 2008 7 2009 8 2010 9 2011 10 2012 11 2013 12 2014 13 2015 14 2016 15 2017 16 2018 17 2019 18 2020 19 20 - 1,611,358.00 1,743,956.00 1,859,189.00 1,841,834.00 2,412,130.00 2,690,768.00 2,436,503.00 2,356,588.00 2,252,439.00 2,400,214.00 2,184,779.00 2,302,814.00 2,390,276.00 2,731,538.00 2,902,692.00 3,080,456.00 2,977,516.00 2,586,378.00 2,884,019.00 N=2 N=4 1,677,657.00 1,801,572.50 1,850,511.50 1,764,084.25 2,126,982.00 1,964,277.25 2,551,449.00 2,200,980.25 2,563,635.50 2,345,308.75 2,396,545.50 2,473,997.25 2,304,513.50 2,434,074.50 2,326,326.50 2,361,436.00 2,292,496.50 2,298,505.00 2,243,796.50 2,285,061.50 2,346,545.00 2,319,520.75 2,560,907.00 2,402,351.75 2,817,115.00 2,581,830.00 2,991,574.00 2,776,240.50 3,028,986.00 2,923,050.50 2,781,947.00 2,735,198.50 2,886,760.50 2,882,092.25 FORECAST SUMMARY: The forecasting technique used is moving average technique using a 2 year and 4-year interval and data trend indicates that BMW turnover will experience an upward movement in 2022. Application of Stochastic Bass Model in Toyota  It's common to describe the initial purchase of a new product in terms of innovators who make the purchase voluntarily and independently of other consumers. Because others have purchased the product, imitators do as well. They add up to the total number of consumers, or the market's saturation point.  Based on sales data, the Bass diffusion model generates an approximation of these metrics. The model entails a differential equation that connects the increase of current sales to total accumulated sales levels in the past. This modeling strategy has gained enormous popularity, not just in terms of new product diffusion patterns (Grasman and Kornelis, 2019)..  The Bass model is represented as a differential equation for the cumulative product sales y(t) over time.  The term with parameter p, known as the coefficient of innovation, indicates customers who make their own purchasing decisions independently of other customers. The consumer who purchases a product because others have done so is represented by the term with q, the imitation coefficient. The parameter m represents the overall number of purchasers over time.  The application of this model will enable Toyota to predict product sales and profitability.