Illustrate the use of budget control in my chosen organisation which is Tesco.

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P6 and M4:

Illustrate the use of budgets as a means of exercising financial control of a selected company.


In this task I have been asked to illustrate the use of budgets controlled my chosen organisation which is Tesco.

Tesco is one of the biggest retailers which are internally budgeting for sales growth by 2% in the UK, compared to its usual guidance of 3-4%. This is due to recession. The decision was made after the meeting between Tesco’s senior management and city analysis’s, shore capitals Clive Black said “such budgeting is a significant change and indicates the seriousness of the economic slowdown and its likely duration”.  The financial downside over the past month has seen various retailers cut back on expectations as consumer confidence takes a fresh drive. “It would be no surprise to us if the recent financial turmoil has materially impacted consumer sentiment and sales for a short period at least, “explained Mr Black. Recently towards the end of September, Tesco chief executive Sir Terry Leahy was saying it was “perfectly possible” to deliver UK sales growth in its 3-4% range. Tesco is comfortable with city earnings for the current year but is “cutting its cloth” to adapt to tougher trading conditions, which Mr Black added. The supermarket, which was unavailable for comment, is reportedly driving harder bargains with the supply chain and is looking to cut wages and distribution costs. The inflation pressures of previous months are cooling down, prompting the company to re-address terms with suppliers. “Market conditions are toughening, we sense, for the supply chain,” Mr Black states. Tesco dominates the UK’s landscape with businesses all over but is under pressure from cheaper rivals which include Aldi and Lidl. In the previous month Tesco began to campaign to establish themselves as “Britain biggest discounter,” reducing product prices to compete with other competitors. Despite “Powerful economic headwinds” Tesco made a 10% increase in the first half of sales which made Tesco’s £1.45billion this year, also with UK like-for-like sales increasing by 4% which was excluding fuel during the second quarter. Tesco has 440,000 staff worldwide, with 280,000 in the UK; also more than 2,100 stores in the UK and over 3,700 in totals worldwide.

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M4: Analyse the reasons why costs need to be controlled to budget.

All businesses need to know their budget available to run the business and the costs they have to run that business. The costs in a business cannot exceed the budget otherwise the business will have a negative balance, and the business won’t be making no money at all.

The costs need to be controlled to budget because if they are not controlled to the budget the banks will not lend any sort of loan to the business. The businesses would think that this business is not making ...

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