Business Plan Bob’s Fish & Chips

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Bob’s Fish and Chips will be operating as a fast-food restaurant in Cambridge UK, providing a combination of great food at competitive prices, served in a cozy atmosphere. The restaurant will meet the demand for snack-type of fast food, which will be consumed when the tourists visiting Cambridge do window-shopping and walk around the shopping district. The restaurant will also cater to the needs of the student population in the city. In the present day competitive environment, it is becoming an increasingly complex task to differentiate the product offering and the food outlet from the competitors. However, Bob’s Fish & Chips will adopt the strategy of penetrating into the market by low prices and offering great quality food to capture a sizable market share in the future. The interior of the restaurant will be made in such a way that it will attract both young and old customers alike for repeated visits with their families. The products offered will include Belgian fries and a choice of unique signature dipping sauces. This plan outlines the marketing, people, and financial aspects of the proposed business.


Bob’s Fish & Chips is poised for the strong competition from a number of similar firms operating in Cambridge. The restaurant will formulate its marketing strategies in such a way that it meets the following needs of the target market. The needs identified are:

  1. to have some dishes with flavor preferably fried items,
  2. looking for faster service,
  3. interested in a comfortable and warm atmosphere,
  4. clean and healthy food,
  5. meeting the status needs.

The marketing analysis involves both an internal and external environmental analysis of the proposed market. While the plan uses SWOT analysis for observing the internal environment, the PEST analysis is used for analyzing the external environment.

Marketing Analysis

SWOT Analysis

The SWOT analysis facilitates in linking the strengths of the organization to the opportunities available in the market apart from providing a chance to analyze whether these strengths can be converted into critical success factors for the firms. It also allows an organization to prepare strategies to convert weaknesses and threats to strengths & opportunities respectively.


The product offerings of the restaurant shall be its foremost strength, because of the location and the target customers. The offer of clean and healthy foods as being done by larger food retail chain stores like KFC and McDonald’s will be one of the key strengths of the company. The current trend in the UK is to look for healthy food outlets (Marshall, 2007). The nutritional value of the food items will add to the strength (Garber, 2005). Reasonable prices and the value for money concept as compared to competitors in the market is another factor that adds strength to the company. The innovative interior and layout of the restaurant will add to customer satisfaction. Skilled, experienced, and customer-focused staff (over 5 years experience) with training plans, and competitive reward policies in place to ensure staff commitment, and minimize the risk of staff turnover will be added strength.


Difficulty in differentiating the product offerings is the most important weakness of the restaurant. Under health considerations, the tourists may not consume fried items in an unknown location. Lack of current brand awareness will affect the sales growth in the initial years. There is no variety of foods offered by the company. This will make the customers go to other restaurants where they have a choice. Competition in this sector is on the rise, which will affect the business Bob’s.


An increasing number of tourists is likely to have a positive influence on the business of the restaurant (Cambridge City Council, 2009). There has been an increase in the number of foreign students residing and studying in the UK (Higher Education Statistics Agency, 2004) and this has resulted in an increase in the student population in Cambridge, which offers an opportunity for the restaurant. With the aid of IT tools, and advertising on the World Wide Web the company can attract more tourists as its customers. Economic downturn makes people prefer to spend money on food at a reasonable price. The UK consumer is more discerning and at the same time, more open to new tastes and culture. There is an opportunity to provide more to the consumer


The saturation of the market with newer, slicker fast-food restaurants sprouting up, and possibly restaurant chains from oriental offering other exotic food varieties expanding in the UK is a real threat. The competition from multinational fast-food restaurants like McDonald’s and Burger King poses a serious threat to the business of Bob’s Fish & Chips (Anon., n. d.). The health consciousness and obesity problem among the people also threaten the future of the business Bob’s. The restaurant has to consider market maturity, where customers have real choices and switching costs are low. Fast food restaurant is a highly fragmented sector, which leads to a high level of competition. The ban on smoking is another threat, as the customers may not visit for short breaks. With new government regulations including the national minimum wage and a new business tax, fixed costs will be added. In spite of the growth of the catering market, the rate of failure of the catering business increases. With the emphasis on the government’s hygiene issue, it has an influence on Bob’s hygiene management.

PEST Analysis

The external environment of Bob’s Fish & Chips is analyzed by political, economic, social, and technological factors (PEST) affecting the industry.

Political Factors

Cambridge being one of the important cities of the UK, with policies changing from the positive to negative side for relevant business has presented serious threats. Therefore, it becomes necessary to analyze the policies relating to the food, trading, and health industry. The relevant issues affecting the industry are: (i) The nutrition standards for schools, (Wallis, 2007) (ii) the national minimum wages, (iii) business taxes.

Economic Factors

The forecast for the fast-food industry is positive especially after the recent economic crisis (Paskin, 2009). There is around increase in the growth rate of the fast-food industry showing a positive sign for the business. However, a higher failure rate of the catering business in the past is a serious matter of concern. UHY Hacker Young, (2007) claimed that restaurants and bars are three times more likely to go bankrupt than other UK businesses.

Social Factors

Population growth, growth in household income, changing lifestyles, and growing consumer support are some of the positive influences of social factors on the industry. Children’s obesity and other health concerns and hygiene issues are some of the negative influences of social factors.

Technological Factors

The major technical factor affecting the business is the proliferation of the Internet and eCommerce. Customer reach can be improved tremendously using the Internet and other IT tools.

SMART Objectives

A specific plan of the business is to enlarge the operations of the restaurant to become a full-fledged restaurant in the future. The measurable aim is to achieve a sales growth of at least 15% in the second year of operation. The achievable objective is to enhance the brand equity of the company in the fish and chips sector. The realistic aim is to have a net after-tax margin of 18% on total revenues by the third year of operation. The time-bound objective is to expand the business in five more cities of the UK in the next three years time.

Identification of Target Markets

The target market for Bob’s Fish & Chips consists of students staying in the city and tourists visiting the city for sightseeing and on pleasure trips. According to a survey by Local Research Company, fast-food restaurants in the UK’s top ten cities have risen by 8.2% to more than 1450 outlets during 2009 (Financial, 2009). This underpins the potential for the proposed venture. While Bob’s will target customers in all age groups, the focus will be more on students and tourists. The following table provides information on the customer segmentation in Cambridge. Four segments and seven variables, which include psychographic (Lifestyle), behavioral (Spending occasions, Benefit sought), and profile aspects (age, income, and occupation cycle), are divided into the market in table 3. The market for Bob’s will be among the customers in ‘Potential’ and ‘High-Value’ segments.

Table: Customer Segmentation in Cambridge

Potential Segment Developed Segment Mature Segment High-value Segment
Priority ★★☆☆☆☆ ★★★★☆ ★★★☆☆ ★☆☆☆☆
Age Under 20 25-35 35-64 35-64
Annual Income/£ Under 15,000 15,000-35,000 35,000-50,000 Above 50,000
Occupation Cycle Unemployed, Part-time Job Young Sophisticates Middle-aged Worker Aged Sophisticates
Lifestyle Busy Busy Busy Relax
Personality Sensitive Insightful Insightful
Spending Light Medium Heavy Heavy
Spending Occasion Shopping and eating out Shopping and eating out Shopping Tourism
Lifestyle Students Graduate or Blue-Collar Blue-Collar or White-Collar White-Collar
Purchase Behavior Social Belonging Brand Switching Brand Loyalty Brand Loyalty
Considered factors Price
Price and quality Price and quality Healthy image

Marketing Objective and Marketing Plan

The marketing objective of Bob’s will follow the four P’s of marketing as developed by McCarthy (1960).


According to Kotler & Armstrong, (2004) pricing refers to the amount of money that the customers would be willing to part for acquiring a product or service. The pricing strategy of the company will be ‘generic’ implying average spending of £ 5 per person visiting the restaurant for a snack or light lunch.


The restaurant will focus on selling fries as the main product. The company will offer unique dipping sauces of more than 20 varieties along with the fries. The selection of product offerings is an important aspect of marketing. Based on an assessment of the existing fast food outlets in the locality and their product offerings, the company has decided to offer fries and sauces.


Bob’s will fit itself in a location of 80 -100 square meters with a seating capacity for 30-40 guests at a time. “The location will feature its originality in merchandise display and other brand-building attributes.” The restaurant will equip the outlet with trendy and modern furniture and the ambiance will promote a clean and fresh feeling. The restaurant will be located in a shopping mall to attract the target customer group.


Promotion includes the creation of a strong brand and building equity around the brand. Bob’s will create awareness among the target customers by using effective marketing communication. The company will develop a database of the potential customers who are likely to return.

Marketing Plan

The company will use three different marketing plans. First is the in-store marketing with printed brochures, posters, standing signage inside the shopping mall, grand opening promotion, and party catering. Secondly, the promotion will be undertaken through the local store marketing through brochures and free occasional t-shirts and caps. The third will be the use of local media involving direct mail, web pages, advertisements in local magazines, and newspaper campaign. The total estimated cost for these marketing plans is estimated at £ 12,000, which will be amortized over 5 years.

Key Note: Market penetration through competitive pricing with quality foods


Anon., n. d. The UK fast industry. 2010. Web.

Cambridge City Council, 2009. Business and employment in statistics. Web.

Financial, 2009. Recession fuels 8% growth in UK fast-food industry. Web.

Garber, A., 2005. Fast feeders work to offset high energy costs with new promotions, strategies. Web.

Higher Education Statistics Agency, 2004. UK’s student population rises by 4.3%. Web.

Kotler, P. & Armstrong, G., 2004. Principles of Marketing Tenth Edition. New Jersey: Pearson Education Inc.

Marshall, D., 2007. Families, food and pester power: beyond the blame game? Journal of Consumer Behaviour, [Online] 6 (4), pp. 164- 181. Web.

McCarthy, E.J., 1960. Basic Marketing: A Managerial Approach Illinois: Irwin Paskin, B., 2009. Recession causes fearful diners to avoid restaurants. Web.

UHY Hacker Young, 2007 Time to Sell. Web.

Wallis, C., 2007. Hyper kids? Cut out preservatives. Web.


The market penetration plan requires the appointment of the following personnel. Since the operations are currently small, it needs only a simple organizational structure. It is assumed that Bob will take care of the general management including sales and Lloyd will look after purchases and overview of food preparation. Apart from the brothers, there is the need for two cooks, two kitchen helpers, and two cashiers with one each per shift during the hours when the restaurant is open. The information on personnel is provided in the following table.

Personnel Number Remuneration per year
Cashiers 2 36,000
Cook 2 36,000
Busboys 2 24,000
Total 6 96,000

Leadership, Motivation and Team Working

The concepts of leadership, motivation and team working have a close interconnection, the understanding of which is very vital for running a business organization successfully. Bob and Lloyd should understand the application of these concepts in the context of the business of Bob’s Fish & Chips. These concepts are discussed in the following sections.


According to Kotler & Westman (2006), none of the traditional ways of improving the profitability of the company like product differentiation, reducing prices, rising prices, or cost-cutting works. This is because such actions of the company are countered by an equivalent or better action of the competitors leaving no result for the organization. Hence, the alternative available for the business leader is to find out an effective leadership model that is more customer-centered in order to gain the advantage of the change in the market conditions.

In meeting such a customer-centered business model scenario, the business leader should strive to bring about changes in the functioning of the organization that:

  • Makes the organization a fully market-based and customer-centered one
  • Strengthens the marketing planning strategies and the resultant effective marketing plans
  • Provides adequate marketing budgets and
  • Most important of all develops the marketing and sales staff to understand and coordinate their efforts towards achieving the marketing goals.

It is in the function of developing the marketing and sales staff that an effective leadership style is chosen and followed. For acquiring the required leadership quality, the business leader must fully understand the concept of marketing and it is potential. The next step is that the leader has to educate the senior management team. Each of the functional executives of the organization would be having their perception of marketing and their own contribution to the success of the marketing. It is the duty of the leader to make the people understand that all of their goals are congruent with the goal of attracting and sustaining the customer. In the words of Kotler & Westman (2006), the leader should make the followers understand that “It is the customer, not marketing, who is more important”. It is also important that the business leader should work closely with the followers. Management is separate and distinct from leadership. Although some theorists maintain that leadership is part of the entire managerial function. Koontz and Weihrich (1998) stated that the managerial function of leading deals with the schemes of influencing the employees to work productively to achieve the goals of the organization. On other hand, Byars (1987) considers leadership as a higher form of management. A leader has the capacity to affect the manner in which the employees act and provide opinions; whereas, managers only affect the actions and decisions of the employees.

Leaders highlight the effectiveness of the processes; managers prioritize efficiency. Bjerke (1999) maintains that it is dangerous for the company to be led and managed by incapable individuals. Also, too much leadership and management have some adverse effects. Organizations must ensure that the leaders and managers work in moderation. Successful firms have illustrated the ideal combination of solid management and clever leadership.


Locke (1976), for instance, defined job satisfaction as “a pleasurable or positive emotional state resulting from the appraisal of one’s job or job experiences”, while Spector, (1997) look at it as a psychological variable that is related to the feeling of an employee about his or her job, including different variables of the job. The reward systems followed by the Company have to be rooted to the expectancy model of motivation. This will serve as a basis for the managers in deciding what reward system is suitable for the employees of the Company. The managers should keenly observe employees with their reactions in different situations or ask them of the rewards they desire. In this way, the Company will be able to find out what type of reward is being valued by the staff. Simultaneously, the managers also settle on what performance they desire so that the managers can tell them what they must do in order to be rewarded. However, the Company should ensure that the desired performance level is within the reach of the employees. This is because if employees feel that what is being asked of them is too hard, the system will not be useful at all. Motivation will still be below regardless of the organization’s proposition (Stoner et al, 1987). “A widely used HRD practice is the reward system. It is said that if an organization wants the workforce to participate in its goal-achievement, reward systems can make this happen. Reward systems should be in accordance with the oareanization’s vision and mission. Reward systems is said to be more than or beyond monetary recognition. While this system may include bonuses other material things, other non-monetary incentives may also be a better option—promotions, reassignment, verbal compliments or remarks.” (Murphy, 2003) Making the reward system a combined one as an individual based as well as team based has worked to the advantage of the Company (Gallagher et al, 2000). Larger companies provide monetary incentives and financial incentives such as pension plans with early vesting, company shareholding, and company contributions to further education, car, or home loans. The non-monetary incentives would include extra vacation days, leaves, flextime management, written commendations, and others. These incentives will enable the company to maintain a higher level of employee motivation.

Team Working

The organizational and individual culture of the employees has a large influence in shaping the attitudes and behavior of the employees. This will also affect the overall organizational performance greatly. The employees will be guided by their individual goals unless the leader can guide them to align their personal goals with the organizational goals. This calls for the formation of effective working teams by the leader. The effectiveness of the contribution by the teams will depend on the efficiency of the leader in identifying the individuals who will fit into a team properly. In addition, the leader should have the ability to motivate the team members. The success and the ability to sustain the growth in the sales and profitability of any organization depend on the ability to elicit good teamwork. Effective team building is therefore at the root of the success of any organization. Selection of good team members will ensure efficient team working. Katzenbach & Smith (1993) define a team as “A small number of people with complementary skills who are committed to a common purpose, performance goals and approach for which they hold themselves mutually accountable.” Hackman (2002) defines a team to incorporate the features of a specific task, well-defined boundaries, clear authority-responsibility demarcations, and stability of membership at least for a reasonable period. There are some distinct advantages, which accrue to the organization from effective team working. First team working enhances the motivation level of the employees because team working empowers the employees to involve themselves in the decision-making process. This enhances the self-confidence of the team members. The collective strength of skills and experience of a team is found to surpass the boundaries of individual skills and expertise. By entrusting major operational tasks to a team consisting of chosen members, the leaders would be able to concentrate on other strategic issues of the organization. This improves the quality of the contribution from the leaders. Teams promote effective two-way communication between the leaders and individual team members; because it enables the team, members to lose their inhibitions. The development of clear goals and approaches is facilitated by the team working. For the successful functioning of the team, it is important that the team members should have increased self-confidence and at the same time, they should have confidence in the ability of the team to perform as a whole. This calls for the development of mutual trust and confidence among the team members. The leader should allow the team to “perform and learn together over time to develop real trust and confidence in each other,” (Bono & Heller, 2008).

Bob and Lloyd should understand the implications of leadership, employee motivation, and team working on the success of the proposed venture. The owners must adopt the required leadership styles and motivate employees through enabling better team working.


Bjerke, B., 1999. Business Leadership and Culture: National Management Styles in the Global Economy. Cheltenham: Edward Elgar.

Bono, E.d. & Heller, R., 2008. Team Leadership: the Art of Communication. Web.

Byars, L., 1987. Strategic Management. New York: Harper & Row.

Gallagher et al, S., 2000. Individual Motivation through Reward and Punishment. Web.

Hackman, J., 2002. Leading Teams. Boston MA: Harvard Business School Press.

Katzenbach, J. & Smith, D., 1993. The Wisdom of Teams: Creating the High-Performance Organisation. New York, NY: McGraw-Hill.

Koontz & Weihrich 1988 Management New York: Harper & Row Kotler, P. & Westman, J.c., 2006 What CEOS need to know and about marketing. Leader to Leader, 42, pp.20-28

Locke, E., 1976. The Nature and Cause of Job Satisfaction, Handbok of Industrail and Organizational Psychology ed M D Dunnette. Chicago IL: Rand McNally.

Murphy, C.E., 2003. Leading on the Edge of Chaos. Web.

Spector, P.E., 1997. Job Satisfaction: Application, Assessment, Causes and Consequences London: Sage Publications

Stoner et al, J., 1987 Management New Delhi India: Prentice Hall of India Private Limited


Bob and Lloyd will currently own the company with an initial capital contribution of £ 100,000. The company will start the venture with its owned funds. The initial contribution will be sufficient for start-up expenses and reasonable working capital. All the sales will be on a cash basis, which will enable the company to pay for the material purchases on a cash basis. Since the owners will take care of the management, sales, and purchase functions, the restaurant will not have any executive with a high salary level. This will reduce the administrative costs significantly. However, the company has to pay rental advance and buy other capital equipments necessary to start the venture. The start-up expenses for the company are:

  • Kitchen and Interior £ 22,000
  • Furniture £ 18,000
  • Rent Advance £ 30,000
  • Sales Promotion £12,000
  • Initial cash £18,000
  • Total £100,000
Forecast Income Statement of Bob’s Fish & Chips
for the year ending 30thJune 2011
Expenses £ Income £
Sales 997,500.00
Less: Cost of Sales
Cost of food materials 578,550.00
Cost of sales 578,550.00
Gross Profit 418,950.00
Worker wages 96,000.00
Restaurant rent 54,000.00
Electricity charges 18,000.00
Other expenses 3,000.00
Sales Promotion 33,500.00
Insurance 2,200.00
Legal and local taxes 3,000.00
Vehicle maintenance 15,350.00
Amortization 2,400.00
Depreciation 4,000.00
Total Expenses 231,450.00
Profit for the year before tax 187,500.00
Less: Taxation (30%) 56,250.00
Net Profit carried over 131,250.00
Forecast Balance Sheet of Bob’s Fish & Chips
As at 30thJune 2011
Description £ £
Fixed Assets
Kitchen and Interior 22,000.00
Less: Depreciation 2,200.00 19,800.00
Furniture 18,000.00
Less: Depreciation 1,800.00 16,200.00
Intangible Assets
Sales Promotion Expenses 12,000.00
Less: Amortisation 2,400.00 9,600.00
Total Fixed Assets: 45,600.00
Current Assets:
Cash balance 155,650.00
Rent Advance 30,000.00
Total Current Assets 185,650.00
Current Liabilities: 0
Net working capital 185,650.00
Total Assets 231,250.00
Source of Fund:
Capital 100,000.00
Net Profit for the year 131,250.00
Total Equity 231,250.00
Forecast Monthly Cash Flow Statement for the Year 2010-11
Sales /customer 5 5 5 5 5 5
Expected No.s 12000 14000 17000 18500 19000 21000
Sales Revenue 60,000 70,000 85,000 92,500 95,000 105,000
Cash Inflow
Sales Revenue 60,000 70,000 85,000 92,500 95,000 105,000
Initial capital 100,000
Total (A) 100,000 60,000 70,000 85,000 92,500 95,000 105,000
Cash outflow
food materials 34,800 40,600 49,300 53,650 55,100 60,900
Worker wages 8,000 8,000 8,000 8,000 8,000 8,000
Restaurant rent 4,500 4,500 4,500 4,500 4,500 4,500
Electricity 1,500 1,500 1,500 1,500 1,500 1,500
Other expenses 250 250 250 250 250 250
Sales Promotion 8,000 10,000
Insurance 2,200
Legal, local taxes 3000
Fuel 1250 1400 1500 1500 1200 1000
Kitchen and Interior 22,000
Furniture 18,000
Sales Promotion 12,000
Rent advance 30,000
Total (B) 82,000 53,300 56,250 73,050 69,400 72,750 86,150
Net cash (A) – (B) 18,000 6,700 13,750 11,950 23,100 22,250 18,850
Opening balance 18,000 24,700 38,450 50,400 73,500 95,750
Closing Cash 18,000 24,700 38,450 50,400 73,500 95,750 114,600
Jan Feb Mar Apr May June TOTAL
5 5 5 5 5 5
22000 22000 16000 14000 14000 10000
110,000 110,000 80,000 70,000 70,000 50,000 997,500
110,000 110,000 80,000 70,000 70,000 50,000 997,500
110,000 110,000 80,000 70,000 70,000 50,000 1,097,500
63800 63800 46400 40600 40600 29000 578,550
8,000 8,000 8,000 8,000 8,000 8,000 96,000
4,500 4,500 4,500 4,500 4,500 4,500 54,000
1,500 1,500 1,500 1,500 1,500 1,500 18,000
250 250 250 250 250 250 3,000
7,500 8,000 33,500
1400 1300 1200 1400 1200 1000 15,350
56,250 56,250
79,450 79,350 69,350 56,250 56,050 108,500 941,850
30,550 30,650 10,650 13,750 13,950 -58,500 155,650
114,600 145,150 175,800 186,450 200,200 214,150
145,150 175,800 186,450 200,200 214,150 155,650

Report on the Financial Information

The business plan projects sales turnover of £ 997,500 for the first year of operations of the company Bob’s Fish & chips. During the first year, the company will make a gross profit of £ 418,950, which is 42% of the sales turnover. After the wages and other administrative expenses, the company is expected to make a net profit of £ 131,250 after a tax provision of £ 56,250 at an estimated 30%. The net margin to sales for the first year is arrived at 13.16% of sales. The business plan forecast a cash generation of £ 155,650 at the end of the first year operations, which implies the payback period for the project is less than one year. The company could achieve this profitability because it is proposed that both Bob and Lloyd will take senior positions in the company. Otherwise, the company may have to pay at least £ 36,000 per year for a general manager and £ 30,000 for a sales manager, which would have reduced the profitability and cash generation to the extent of £ 66,000 leaving a profit of £ 65,250 only. Another area where the company has saved is that the company has not borrowed any additional funds from the bank. The company proposes to operate with the initial capital contribution of £ 100,000 from the owners and therefore the business saves the interest payable on bank loans.

Accounting Concepts

Accounting is not a static system but a dynamic process that incorporates the generally accepted accounting principles (GAAP) that is evolved to suit the needs of the people who read the financial statements of any business (Business Directory, 2010). GAAP is based on the conceptual framework introduced by Financial Accounting Standards Board (FASB), an international accounting standard setting body (Horngren et al., 2005). “Accounting concept refers to the basic assumptions and rules and principles, which work as the basis of recording of business transactions and preparing accounts,” (Sridhar, 2009)

This section provides some basic details on the principles and concepts like business entity, monetary unit, going concern, cost principle, time, consistency, materiality, full disclosure, objectivity, revenue recognition and matching principle, which form the basis for applying the GAAP (Walther, 2010). “Accounting concepts are the universally accepted rules which guide the actual recording of transactions.” (NOS, 2000)

Business Entity Principle

Under this principle, from an accounting point of view the transactions of a business entity operating in any form of organisation are considered separate and distinct from that of the personal transactions. It is necessary to maintain the personal transactions separate even if the owners work in the business entity.

Monetary Unit Principle

The assumption behind this principle is that the recording of the accounting transactions would be done in the primary national monetary unit. It is the responsibility of the accounting function to record all the inflows of sales revenue and the expense outflows in the dollar terms.

Going Concern Principle

In general, it is assumed that a business entity will remain in operation for an indefinite period (Philipo, 2009). This is the principle behind the going concern concept. The continuity of business assumes that the cost of the assets engaged in the business will be recovered over their useful life by way of profits from the business.

Cost Principle

This principle is closely associated with the monetary unit principle and it requires that the value of business transactions need to be recorded at the actual or equivalent cash cost (Gordon, 2010). This principle is also related to stable dollar assumption (Accounting Coach, 2004). When the economy of any country suffers from continued periods of inflation or deflation comparing the revenues and earnings for different years would be meaningless if it is assumed that the dollar will have a stable value. However, it would make sense to express the value of the inventories for resale as well as some items of income and some other balance sheet items in terms of current dollar value rather than on historic dollar value.

Time Period Principle

This principle requires that the accounting transactions be recorded and analyzed for reporting the financial status and profitability of the business operations over a specific period of operation.

Conservatism Principle

This principle requires that the balance sheet items like assets should not be overstated and the value of liabilities should not be understated.

Consistency Principle

Under consistency principle, the financial statements should be prepared applying the same accounting principles from one period to another so that the statements become comparable over different periods.

Materiality Concept

The materiality concept implies that all items having value, which are important and material should be reported in a correct way so that the readers of the financial statements can take proper decisions.

Full Disclosure Principle

This principle states that any future event, which is likely to have a major economic impact on the financial position of the company, should be disclosed fully to the potential readers of the financial statements.

Objectivity Principle

This principle implies that all the accounting transactions must have some basic evidence or documentation as a support for the transaction in question.

Matching Principle

Based on the accrual basis of accounting, the matching principle requires that for each accounting period, it is necessary that all the sales revenue received be recognised irrespective of the fact that whether the payment is received or not (Van Horne, 2004).

Revenue Recognition

This is a basic accounting principle in which a distinction is made between the cash basis accounting and accrual basis. Under cash, basis revenues of the business are accounted when cash is received irrespective of when the goods are delivered or services performed (Ross et al., 2003). Under accrual system, revenues are accounted only when they become due or realized irrespective of the time at which cash is received.


AccountingCoach, 2004. Accounting Principles. Web.

BusinessDirectory, 2010. Accounting Concepts. Web.

Gordon, A., 2010. All You Need to Know about GAAP Accounting Standards: A Guide to Accounting Principles. Web.

Horngren, C.T., Harrison, W.T. & Bamber, L.S., 2005. Accounting. New York: Irwin-MsGraw Hill.

NOS, 2000. Accounitng Concepts. Web.

Philipo, 2009. 19 Signs That A Company Will Soon Wind Up – Going Concern Concept. Web.

Ross, Westerfileld & Jordan, 2003. Essentials of Corporate Finance. New York: McGraw Hill.

Sridhar, 2009. Accounting Concepts. Web.

Van Horne, J.C., 2004. Financial Management Policy XII Edition. New Delhi India: Prentice-Hall of India Private Limited.

Walther, L., 2010. Principles of Accounting Chapter 1. Web.

Relationships between People, Finance and Marketing

Roles and Functions of HR

Human Resources department assumes a significant role in the growth of any organization including not-for profit organizations. HR function becomes significant in because the success of any business organization depends on the performance of its human capital. According to Lawler & Mohrman (2003), HR plays a strategic role in sustaining the competitive advantage by any organization. Traditionally HR was known as personnel department, which was involved in the individual employee relationships. Now there has been a complete change in the concept, and HR department undertakes a variety of functions. These include (i) recruitment and selection, (ii) training and orientation of the new employees, (iii) performance evaluation of the employees, (iv) fixing employee compensation and (v) maintaining a harmonious relationship with the employees. Pietersen & Engelbrecht (2005) identify the strategic involvement of HR in promoting the business-related competencies of the organization. HR contributes to the development and growth of the firm by identifying the training needs of the employees and arranging for the necessary training. This function helps the organization in two ways. First by enabling the employees to gain new skills, the employees can perform better towards achievement of the organizational objectives. On the personal front, the employees, when provided with the training feel motivated as the training increases his/her personal professional skills. This in turn increases employee commitment towards the organization and reduces employee turnover. This function of HR therefore assumes a strategic importance. Ulrich (1997) points out four areas where HR can help organization improve its performance. HR becomes a part of the management of the company assuming the important role of formulating and implementing strategies in the area of staffing function. By identifying training needs and arranging for professional training HR contributes to the improved efficiency and productivity of the employees, which would result in cost reduction and profit maximization by the company. HR does another important function of identifying employee grievances and redresses them immediately in the best possible ways so that there is perfect understanding and relationship between the employees and the organization. HR becomes an important change agent whenever the organization wishes to introduce changes in the process or procedures. Always, HR will be given the responsibility to educate the organizational members on the advantages and necessity of proposed changes.

Role and Functions of Finance

In the competitive business environment of the present day, the finance function has been of greater value to an organization. The enlarged role of the function has shifted the focus of the finance function from the traditional bookkeeping to a number of other areas including the provision of timely and accurate information to the senior management to take well-informed business decisions affecting the growth of the organization. The finance function traditionally has been more concerned with the monitoring of the utilization of tangible assets of the organization such as cash, real estate and machinery and equipments. Later on with the advent of globalization and increased cross-border transaction, finance department assumed the responsibility for the treasury functions including foreign exchange management, which emerged as an important function.

Growing need to comply with various legislative requirements, which are mandatory on the part of the companies enhanced the role of finance function in the working of the modern day corporations. With the continuous evolution of the economies and the proliferation of information and communication technology, the role of finance function within an organization has undergone complete change. Now the finance function is expected to look after the Enterprise Resource Planning (ERP) implementations and take other reporting roles. The finance function has become more efficient with the facilities for transaction processing. This has enabled the finance professionals to expand their role and spend time in taking part in the decision-making process of the organization. It is no more just processing, reconciling and preparing the financial statements of the organization. With the availability of advanced technological tools, the finance function has evolved into a coaching role. Under this role, the finance personnel have been made responsible for transferring the knowledge and skills to decision-makers (Schroeck, 2001). According to Altius Directory (2006), finance function controls the assets of an organization against business risks; creates a strategic framework for monitoring the efficiency of finance process; acts as a strategic advisor for aligning the organizational goals by evaluating the organizational performance in terms of financial gains, and acts as a change agent in the process of achieving the overall organizational objectives.

Role and Functions of Marketing

In any business organization, marketing assumes an important role as the business would be able to generate cash and grow only by increasing its sales through sound marketing strategies. In order that the firm is able to assess the time and methods of introducing the new product, a marketing strategy defining the marketing structure should be evolved. This strategy need to be arrived at after a careful analysis of the existing conditions of the market vis-à-vis the available products and their strengths and weaknesses in comparison to the company’s products. Marketing strategy is most effective when it is made an integral part of the overall corporate strategy detailing how the organization will engage customers, prospects and the competition in the market arena for success. Achieving a sustainable competitive advantage is quite possible by suitably evolving a marketing strategy. Either the firm may decide on a direct market concept or it may decide to engage an indirect marketing technique depending on the product capabilities. The marketing function varies enormously according to the nature of the business and organization and the market, which it serves. The marketing function is responsible for the four Ps of marketing – product, price, place and promotion. McCarthy, (1960) introduced the 4ps into the marketing mix with the thinking that these four groups of elements will influence the demand for the product (Baker, 2003). Although essential for the success of any business, the marketing function need not be seen as the largest or most important function. “In fact, in a truly marketing-oriented organization the need for a specialized marketing is far less than it is in a sales or production dominated company.” (Baker, 2003, p 10)

Consumer behaviour is one of the important determinants of marketing strategies. Blackwell et al., (2001) define consumer behaviour as activities undertaken by people, when obtaining, consuming and disposing of products or services (p 6). Consumer behaviour with respect to certain product or service is analyzed to ascertain the response of the potential customers to different advertising strategies of an organization. Analysis of consumer behaviour is undertaken to enable the organization to create and promote unique selling point to its target audience so that the company can achieve its marketing and advertising goals. The company must have a thorough understanding of the consumer behaviour in order to maximize the return on its investment on marketing and advertising.

Interaction among HR, Finance and Marketing

When the relative importance of the three functions of HR, finance and marketing, is considered, it can be said that HR assumes a significant role in the functioning of an organization. This is because, it is the primary responsibility of HR to identify and appoint the right talents, so that the organization can function efficiently and effectively.

Furthermore, it is the responsibility of HR to ensure that the personnel appointed are motivated and remain committed to the organization (Caudron, 1996).

In the process of ensuring the motivation of employees by proper rewards and recognition, finance function comes to the assistance of HR, by providing the necessary information on productivity, earnings and consumer satisfaction. The information provided by finance function helps HR to evaluate the performance of the employees precisely and suggest suitable rewards in the form of pay rises and promotions. Such information also helps the marketing department to assess the performance of the marketing staff from the perspective of customer satisfaction and improve on areas where deficiencies are found. This flow of information among the different functions underlines the interrelationship among these functions. Such a close coordination will help the organization improve its overall performance. However, in some of the organization a close harmony and relationship does not exist between the finance and HR functions. Perhaps this is due to the nature of finance people questioning the actions of every other department to meet their responsibility of safeguarding the tangible assets of the company and ensuring their proper utilization.

According to Boudreau & Ramstad (2002), while finance and marketing functions are able to produce information, which brings out the overall organizational efficiency and performance, HR function currently does not possess decision science standards as possessed by finance and marketing functions. This places HR function at a level lower than the other two. However, a proper integration between all the three functions is vitally important for the success of an organization. “The HR function creates tangible value in organizations by focusing primarily on delivery of HR practices (staffing, development, compensation, labor relations, etc.), based on professional and often research-based principles” (Bourdreau, 2005).


AltiusDirectory, 2006. Role of Finance in Business. Web.

Baker, M.J., 2003. The Marketing Book. London: Butterworth-Heinemann.

Blackwell, R., Minard, P. & Engel, J., 2001. Consumer Behaviour, 9th Edition. London: Prentice Hall.

Boudreau, J.W. & Ramstad, P.M., 2002. Strategic HRM Measurement in the 21st Century: From Justifying HR to Strategic Talent Leadership. CAHRS Working Paper Series,Working Paper 02-15. Cornell University.

Bourdreau, J.W., 2005. Talentship and the new paradigm for Human Resource Management: from professional practices to strategic talent decision science. Human Resource Planning, June.

Caudron, S., 1996. Forging a Link Between Finance and HR. Web.

Lawler, E.E. & Mohrman, A.M., 2003. Creating a strategic human resource organization: An assessment of trends and new directions. Stanford, CA: Stanford University Press.

Pietersen, F.L. & Engelbrecht, A.S., 2005. The strategic partnership role of senior human resource managers in South African organisations. Management Dynamics, 14(4), pp.47-58.

Schroeck, M.J., 2001. Financial Analytics: The New Role of Finance. Web.

Ulrich, D., 1997. Human Resource Champions: The Next Agenda for Adding Value and Delivery Results. Web.

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