You have recently been appointed as an analyst within a large retail organisation (PK Mart) that employs approximately 10,000 individuals. PK Mart is a non-specialist retailer selling items such as clothing, electricals and furniture.

Assignment Question

Read the case notes below and consider the information shown in the appendix.

 

Use this information to determine the likely consequences of the introduction of a profit sharing scheme.

 

Then write a report for the Directors of PK Mart which addresses this issue and makes appropriate recommendations.

 

Profit Sharing

 

You have recently been appointed as an analyst within a large retail organisation (PK Mart) that employs approximately 10,000 individuals. PK Mart is a non-specialist retailer selling items such as clothing, electricals and furniture.

 

The Directors of PK Mart are considering whether the company should introduce a profit sharing scheme for all of its employees. To help with this important decision the Directors want to determine the possible benefits associated with such a scheme.

 

You have therefore been asked to undertake some quantitative analysis looking at this issue. While you are familiar with various different aspects of statistics and a number of statistical packages you have not undertaken a project of this nature before. Hence you start by conducting a literature search.

 

This search proves beneficial and you find that there are a number of existing studies which look at the impact of profit sharing, although none specifically in a retail context.

 

In terms of theoretical work two principle arguments have been put forward to suggest that profit sharing may have positive effects. The first of these postulates that introduction of such a scheme will improve employee satisfaction and organisational commitment. The second that there will be greater alignment of employee and employer interests if such a scheme is introduced. In both cases there is also the suggestion that individual productivity is likely to increase. In contrast, empirical work has tended to focus on the impact which the introduction of a profit sharing scheme is likely to have upon the performance of the company concerned.

 

In this context various measures of company performance have been used including return on capital employed, value added and shareholder wealth. All such studies also contain ‘control variables’ which are likely to impact on company performance. The most frequently used of these are firm size and market power. In addition, many studies have attempted to control for the industry in which the firms are located.

 

From the material you have identified you draw up a list of variables which can be used to identify the impact, if any, of the introduction of a profit sharing scheme. You then obtain numerical data on each of these variables (details of the data can be found in Appendix I).

 

You now need to consider how you will analyse this information. In addition you need to consider how you will explain the approach(es) you have adopted and the implications of your analysis given that the Directors of PK Mart are not experts in quantitative or statistical methods.

 

Appendix I

 

The data related to this assignment can be found in MN7542 Financial Modelling Assignment Aug-Oct 2022.xls. In total there are 280 observations. The first 6 observations are shown below. All data is annual.

 

Variable definitions:

Roce:              Return on capital employed, percent.

Prod:               Productivity, output per employee averaged across the firm.

Commit:         Employee commitment, 3 point scale averaged across the firm.

Scheme:         1 if company has a profit sharing scheme, 0 otherwise.

Assets:            Book value of firm assets, £m. Measure of firm size.

Power:            Market power, proxied by market share (percent).

Industry:         Sector in which company operates:

1 if primary,

2 if manufacturing,

3 if services

 

Roce	Prod	Commit	Scheme	Assets	Power	Industry
16.8	3.62	2.05	1	8782	18	3
22.4	7.42	2.56	1	7795	14	3
-3.5	1.56	1.71	1	12805	15	2
16.8	4.34	1.79	1	7071	12	1
16.1	4.62	1.93	1	13840	14	3
26.6	6.7	2.06	1	4884	21	3

Further Guidance

 

Students are reminded that whilst some questions may very evidently refer to a particular unit they are all designed to span issues across the entire module. A full answer to the question will require reflection on the issues that you have encountered throughout the module. It is important to bear in mind that the content of your answer will depend on the argument that you wish to put forward in answer to the question and not solely on the concepts that the question explicitly identifies.

Remember, the Directors of PK Mart are not experts in statistical analysis. Hence you will need to explain what you are doing and why, as well as the meaning of your results.

 

In structuring your report you may wish to consider the following framework. This does not mean that you simply respond to (a) to (e) below, but rather that you formulate headings and sub-headings for your report using the framework as a starting point.

 

1. A graphical representation of the data and a discussion of any issues or patterns which arise from this exercise. You need to decide upon the exact data to use and appropriate graph(s).

 

1. Descriptive analysis and discussion of the variables shown in the data set.

 

1. Bivariate (two variable) analysis and discussion which considers these variables and the effects of profit sharing.

 

2022. Multivariate (three or more variable) analysis and associated discussion which makes use of the data given in MN7542 Financial Modelling Assignment Aug-Oct 2022.xls.

 

1. Any other issues, problems or additional complications which you feel should be conveyed to the Directors of PK Mart with respect to your analysis.

 

Important points to note:

• You are required to provide explanation and discussion.
• Do not produce graphs if you cannot provide related discussion.
• Do not produce tables if you cannot provide related discussion.
• Do not cut and paste Excel, SPSS, etc. tables into your report. Produce your own summary tables in the main body of your report. If you think appropriate you can provide an appendix with the Excel, SPSS, etc. information.

 

An example of ‘what you are doing, why, and the meaning of results’:

 

“The analysis consists of cross-tabulations and a logistic regression. The cross-tabulations, which make up the brunt of the report, allow one to see the interrelationship between two or more variables. For example, what percentage of whites and African-Americans play lottery games? Or, who spends more per month on lotteries, those younger than fifty or those older than fifty? The investigators use cross-tabulations to illustrate the relationship among demographic characteristics (e.g., age, education, income), attitudes toward lotteries, how frequently residents play lottery games, and how much they spend on them.” (Piliavin and Entner Wright, 1992: 2)

 

“As shown in column four, several demographic characteristics of the 1991 respondents significantly predict lottery play. These include gender, age, marital status, and education. First, men are more likely to play the lottery than women, with an estimated regression coefficient of .3242 (top of column four). Being positive, this coefficient indicates that male respondents (coded as 1) have higher probabilities of lottery play than female respondents (coded as 0).” (Piliavin and Entner Wright, 1992: 58)

 

Source: http://www.irp.wisc.edu/publications/sr/pdfs/sr54.pdf

 

Two more example reports:

 

edu/cgi/viewcontent.cgi?article=1188&context=ktc_researchreports”>http://uknowledge.uky.edu/cgi/viewcontent.cgi?article=1188&context=ktc_researchreports

 

http://www.manhattan-institute.org/html/cr_22.htm

References

Please ensure that you have read the advice on assignment writing and referencing which is available at:

com/sites/academic-skills-online“>https://uniofleicester.sharepoint.com/sites/academic-skills-online