Assesment 1 – BSBFIM501A Woolworths

BSBFIM501 Assessment 1 Manage Budgets and Financial Plans

The company I Choose to do is Woolworths.

Provide an overview of the organisation and your business unit

Woolworths Supermarkets is a supermarket/grocery store chain in Australia, owned by Woolworths Limited. Along with Coles, Woolworths form a near duopoly of Australian supermarkets, together accounting for about 80% of the Australian market, however the Australian expansion of discount supermarket chain Aldi has challenged this duopoly in recent years.

Woolworths mostly specialises in selling food (vegetables, fruit, meat, packaged foods, etc.), but they also sell magazines, DVDs and stationery items among other things.

Woolworths currently operates 872 stores across Australia

Identify the internal strategic goals for this organisation and the external stakeholders, and discuss their influence on the financial decisions in to your organisation

Woolworths’ current business growth plan is built on four key strategic priorities.

Extend leadership in food and liquor

2. Act on our portfolio to maximise shareholder value

3. Maintain our track record of building new growth businesses

4. Put in place the enablers for a new era of growth

A Changing Business

Retailing never stands still – that’s what makes it so exciting and dynamic. Right now we’re in a period of substantial change as customers seek greater value and have more choices at their fingertips than ever before. Customers are now firmly in the driving seat of our business and their decisions and shopping behaviour are changing the way we operate.

Woolworths is responding to this new era by laying the foundations for a new phase of growth and opportunity. We put the customer at the heart of our business, listening to what they want and creating new and innovative ways for them to shop with us.

The future of shopping

Customers now have the ability to shop when, how and where they want and that ability is literally in the palm of their hand. Mobile technology is rapidly changing how we view our world and giving us access to products and prices from around the world. We’ve recognised we need to keep up and understand that customers want to move seamlessly and effortlessly between physical and virtual stores to shop in a way that suits them.

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re they want and that ability is literally in the palm of their hand. Mobile technology is rapidly changing how we view our world and giving us access to products and prices from around the world. We’ve recognised we need to keep up and understand that customers want to move seamlessly and effortlessly between physical and virtual stores to shop in a way that suits them.

Every Woolworths business is becoming multi-option by using websites, mobile apps, virtual stores and new delivery options to complement our stores.

Working harder for customers

Woolworths serves around 18 million customers every week. We know they have a lot of choices about where to shop, so we have to work hard to earn their custom and reward their loyalty.

Discuss the different types of budgets your organisation is required to prepare and provide an explanation on how each budget is developed

Static budgeting. This is the classic form of budgeting, where a business creates a model of its expected results and financial position for the next year, and then attempts to force actual results during that period to align with the budget model as closely as possible. This budget format is typically based on a single expected outcome, which can be extremely difficult to achieve. It also tends to introduce a great deal of rigidity into an organization, rather than allowing it to react quickly to ongoing changes in its environment.

Zero-base budgeting. A zero-base budget involves determining what outcomes management wants, and developing a package of expenditures that will support each outcome. By combining the various outcome-expenditure packages, a budget is derived that should result in a specific set of outcomes for the entire business. This approach is most useful in service-level entities, such as governments, where the provision of services is paramount. However, it also takes a considerable amount of time to develop, in comparison to the static budget.

Flexible budgeting. A flexible budget model allows you to enter different sales levels in the model, whch will then adjust planned expense levels to match the sales levels that have been entered. This approach is useful when sales levels are difficult to estimate, and a significant proportion of expenses vary with sales. This type of model is more difficult to prepare than a static budget model, but tends to yield a budget that is reasonably comparable to actual results.

Incremental budgeting. Incremental budgeting is an easy way to update a budget model, since it assumes that what has happened in the past can be rolled forward into the future. Though this approach results in simplified budget updates, it does not provoke a detailed examination of company efficiencies and expenditures, and so does not assist in the creation of a lean and efficient enterprise.

The rolling budget. A rolling budget requires that a new budget period be added as soon as the most recent period has been completed. By doing so, the budget always extends a uniform distance into the future. However, it also requires a considerable amount of budgeting work in every accounting period to formulate the next incremental update. Thus, it is the least efficient budgeting alternative, though it does focus ongoing attention on the budget.

The rolling forecast. A rolling forecast is not really a budget, but rather a regular update to the sales forecast, frequently on a monthly basis. The organization then…

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