CHAPTER 1----INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The level of competition in the market economy is quite high therefore, it is imperative for firms to design appropriate promotional strategies to drive sales optimally with the view of achieving high turnover in sales which will lead to high revenue and profit maximization. This however requires significant funding of appropriate promotional strategies. Capital budgeting is the decision to commit major capital, or investment, expenditures so as to increase the value of the firm to its shareholders. O''Sullivan, Arthur; Sheffrin, Steven M. (2003). The value of achieving high sales turnover and profit maximisation requires identifying the target segment of the firms product or service so as to adopt appropriate promotional strategy to serve the market. Promotional strategy involves the determination of an appropriate market for the sale of the firms’ product or service and the effect use of promotion mix to attain optimal sale to achieve profit maximization. The primary aim of promotional mix is to create awareness for the brand and importantly to achieve organizational goals and profits. Promotional mix consist of five components such as advertising, personal selling, direct marketing, sales promotion and public relation. The application of capital budgeting for adoption of promotional strategies will require that each promotion mix is ranked to determine the promotion strategy which best suit the firm’s product and services to achieve high turnover and maximize profit. The study therefore seeks to appraise the impact of capital budgeting for promotional strategies on turnover and profit maximization on consumer products.
1.2 STATEMENT OF THE PROBLEM
Capital Budgeting requires significant long-term investment of funds thereby posing a high level of risk for the firm. Consequently, it is imperative that promotional strategies are ranked and appraised to determine the promotional strategy which best suit the firms product and service and the target customers So as to avoid the risk of loss of investment due to low sales responses and turnover. Most capital budgeting Capital budgeting investments and projects are funded from debt capital, equity capital, or the use of retained earnings. Therefore, significant consideration is required to ensure returns on investment .The study seek to investigate the impact of capital budgeting for promotional strategies on turnover and profit maximization on consumer product.
1.3 OBJECTIVES OF THE STUDY
The main study objective is to investigate the impact of capital budgeting for promotional strategies on turnover and profit maximization on consumer product; while the specific objectives include
1 To appraise the relevance of capital budgeting for promotional strategies.
2 To determine the concept of turnover and profitmaximisation.
3 To determine the impact of capital budgeting for promotional strategies on turnover and profit maximization on consumer product.
1.3 RESEARCH QUESTIONS
1 What is the relevance of capital budgeting for promotional strategies?
2 What is the concept of turnover and profitmaximisation?
3 What is the impact of capital budgeting for promotional strategies on turnover and profit maximization on consumer product?
1.4 STATEMENT OF HYPOTHESIS
The statement of the hypothesis of the study is stated in null
Ho The impact of capital budgeting for promotional strategies on turnover and profit maximization on consumer product?
1.5 SIGNIFICANCE OF THE STUDY
The level of competition in the market economy is high, therefore firms are leveraging on the adoption of appropriate promotional strategy for the attainment of high turnover and profitmaximisation. The study seek to provide an evaluation on the effectiveness of the use of capital budgeting for promotional strategies with the view to making appropriate recommendations.
1.6 SCOPE OF THE STUDY
The study focuses on the impact of capital budgeting for promotional strategies on turnover and profit maximization on consumer product?
1.7 LIMITATION OF THE STUDY
The study was confronted with logistic and geographical constraint
1.8 DEFINITION OF TERMS
CAPITAL BUDGETING DEFINED
Capital budgeting is the decision to commit major capital, or investment, expenditures to a project so as to increase the value of the firm to its shareholders.
TURNOVER DEFINED
This represent the value of the goods or services sold during a particular period of time.
PROFITMAXIMISATION DEFINED
Profit maximization is the attainment of the highiest possible profit with the resources and market share currently at their disposal profit.