Business Analysis of Morrisons

Business Analysis of Morrisons administrator SummaryIn this competitive era e really(prenominal) organization is liner monetary ups and downs from last hardly a(prenominal) classs delinquent to ceding back. UK has a exclusively-encompassing variety of retailers all with big infrastructure and chains that include pabulum, attire and takes of separate products. This assignment foc affairs on the fiscal harvest-tide of Morrison PLC and ii otherwise competitors of Morrison i.e. Sainsbury and Tesco. The report leave behind shed light on the severalise indicators make a motioning the writ of execution of Morrison and its two competitors Sainsbury and Tesco.Both Sainsbury and Tesco have a bun in the oven a grade name in the sell sector and give give out con try on to Morrison.To gamble verboten accurate result we collect both numeric and qualitative entropy. Recession effects the whole military personnel akin as UK. Every caller applies lots of strategies to overcome this. Some ordain prospering and some unable of overcome the impact of recession. Morrison is wizard of the companies from retail sector, which is successfully recovering from the recession, and giving tough competition to its competitors.In this assignment we go forth also discuss about the strategies adopted by the Morrison to overcome from recession and how it maintain it self in competitive market. And also try to find out what other methods Morrison social functiond to increase its growth as equate to its competitors Sainsbury and TescoIntroductionRetailing manufacture is one of the biggest increase industries in UK. It stands on weigh 3rd in the world economy. Initially retailing industry intentd to restrain only when small scale shops. But outright retailers argon to a greater extent than(prenominal) center on customer redevelopments and run their moving in at very large scale. In UK in that respect be several supermarkets that have their farsig hted chains give care Morrison, Sainsbury, Tesco and ASDA. From last fin courses UK retailing industry admit more than 190,000 employments and this figure is growing continuously (British Retail Consortium 2004b). It is estimated as 11% of the total UKS workforce.UK retailing industry domiciliates part time jobs more thence other sectors. UK retailing sector generates revenue of nigh 265bn per year which is the 8% of total flagrant domestic product of UK economy.70% of UK supermarket is dominated by Morrison, Sainsbury, Tesco, and Asda.MorrisonMorrison was founded by William Morrison in1899.In 1961 he opened his first stock certificate in Bradford. Very soon Morrison took over the Sa feweray and in early 2005 Morrison became the fourth largest Supermarket of UK retail industry. It has 403 stores all over the UK. Main business of Morrison is food and grocery. In 2005 Morrison generated 150,000 employments all over the UK. to a greater extent then 9 million customers chaffer Morrison everyday. Morrison had its own warehouses and industries to maintain the demand and supply and has sufficient staff to provide weaken customer service. Morrison has more than 100yr experience in retailing sector. In 2008 Morrison awarded for the outstanding contribution in the retailing sector. In 2007 Sir Lan Gibson (64) linked Morrison as a non executive deputy chairmen. In 2010, 29 march Mr. Dalton Philips (43) Joined the convention as Chief Executive. Mr. Mark Gunter (52) Joined Morrison as a Group retail withdrawor in the year 1993 and In 2005 Richard Pennycook was appointed as a Group finance Director. Morrison has salubrious and undergo influencement hierarchy, which provides sustainability in the market and helped Morrison to recover from the Recession. In 210/11 Morrison gross sales increased 7% from the previous year. Overall growth of Morrison for this year is 12.8%. With this growth Morrison is giving tough competition to the competitors uniform Tesco , Asda and Sainsbury. Contribution of these ternion supermarkets is only 3.5%, whereas only Morrison contributes with the growth of 4.5% in 2010/11 to the market. This is one of the approximately dear years for the Morrison. USP of Morrison or reason of the growth is Morrison is use of unique manufacturing and promotion techniques and most of the food is prepared everyday to provide fresh food to the customers. Morrison continuously updated itself with use of revolutionaryfangled technologies and new innovative tools in supermarket. right away days Morrison is working on incorporating digital technology in its ope balancens. Morrison provides all proficient facilities to the customers like online shopping, self checkouts, card payments etc.Subsidiaries of Morrison plc-Farmers boy modifiedNeerock limitedSafeway limitedRathbone kear limitedOptimization developments limitedBos brothers harvest-time and vegetablesFarock insurance phoner limitedOptimization developments limit edThese are the few subsidiaries of Morrison from where Morrison purchase their food for the customers.Sainsbury-Sainsbury was established in the year 1869. Today Sainsbury has 890 stores out of which 547 are supermarkets and 343 are convince stores. It has joint venture with land securities group PLC and The British Land Company PLC. It also has Sainsburys bank in collabo ration with Lloyds bank. Sainsbury serves fresh, vigorous and tasty food. It entertains around 19 million consumers a calendar week and has over 16 % share in market. It has a workforce of 15000 concourse.Tesco -Tesco is one of the biggest retailers in UK. Tesco has expanded its business almost all over the world like USA, Europe, Asia etc. In UK, Tesco started in 1924. It has 2482 stores and 287669 numbers of employees. Tesco was formed by Sir Jack Cohen. It was the first self service store. Tesco introduced the concept of superstores in 1967.Tesco focused on the strategy of serving unsloped products at pat hetic constitute. In 2002-03 Tesco introduced more then fiver thousand food products to grab the anxiety of customers. Tesco use many technical innovative tools to provide better service to customers like online shopping, self checkouts etc. Tesco deals in food, clothing and all other daily use products. Tesco is one the biggest competitor for Morrison.Quantitative Data data which we ordure quantify and verify and that bottom be manipulated statistically is called valued data. The data which is in the form of numbers and figures is quantitative data.Quantitative data compend plays an important role in analyzing the business surgical procedure of a familiarity. Both quantitative and qualitative data are necessary to give out the business performance of a attach to in a better way.Financial ratio epitome is a type of quantitative analysis to dismantle the performance of a business.Financial analysis- we so-and-so define monetary analysis as the analysis of the fiscal condition of the community. It involves investigating if the upper slip of paper is expeditiously invested, efficiency of oprations, serviceability of the beau monde and the security of the debtors gold . there are two types of monetary analysis techniques- fund flow analysis and pecuniary ratio analysis.Company requires these techniques to analyse if it is woo-effectively investing and employ its pecuniary resources.Tools and techniques of financial statement analysis-Horizontal and vertical analysis ratio analysisHorizontal analysis- analyzing and comparing the financial data of a caller-out of 2 or more years is called horizontal analysisupright analysis- this analysis is conducted on profit and loss account or on balance sheet and the result calculated is in percentage of a total follow.Ratio analysis- it is the most excepted and widely used technique. The result is calculated as one number render in b aligns of other.In this assignment we will be employ this technique to quantitatively see the performance of Morrison with respect to its competitors Sainsbury and Tesco.Some of the ratios analyzed for Morrison, Sainsbury and Tesco are stated below- favorableness RATIOS- it can be defined as evaluation of the total performance and the effectiveness of the company.Some of the profitability ratios are discussed below-ROCE- This ratio stands for return on seat of government employed. We know that the main aim of the company for investing its financial resources is the profit it is reaping out of it. Therefore we can say that it is the success of a business in meeting its goals.Formula for return on jacket employed-Profit before intimacy and tax/capital employed x100Significance- It is one of the widely excepted methods to analyze the profitability and the overall performance of the company. It gives us information if the investment of the capital is optimal or not and funds are efficiently allocated and employ by the company or not.Cal culations-ROCE computing of Morrison for the financial year 2008-2010-In 2008- (612/4378) x100=13.97In 2009- (655/4520) x100=14.49In 2010- (858/4949) x100=17.33ROCE calculation of Sainsbury for the financial year 2008-2010-In 2008- (479/4935) x100=9.7In 2009- (466/4376) x100=10.64In 2010- (733/4966) x100=14.76ROCE calculation of Tesco for the financial year 2008-2010-In 2008- (1402/12099) x100=11.58In 2009- (1419/12942) x100=10.96In 2010- (1596/14681) x100=10.87 crystallize Profit moulding- it is the ratio of total net profit a company gains after eliminating all the taxes divided by the net sales. It is articulated in percentage.Formula Net Profit allowance= profit before interest and tax/sales or upset x100Significance- to examine the overall profit of the company this ratio is used and is significantly used by proprietors. The return on investment depends upon the net profit.Calculations-Net Profit Margin calculation of Morrison for the financial year 2008-2010-In 2008- (612 /12151) x100=5.03In 2009- (655/13615) x100=4.81In 2010- (858/14348) x100=5.97Net Profit Margin calculation of Sainsbury for the financial year 2008-2010-In 2008- (479/16835) x100=2.84In 2009- (466/17875) x100=2.60In 2010- (733/18882) x100=3.88Net Profit Margin calculation of Tesco for the financial year 2008-2010-In 2008- (1402/23684) x100=5.91In 2009- (1419/25734) x100=5.51In 2010- (1596/27485) x100=5.80Net summation turnover- it can be defined as the round of capability of the firm to generate turnover by an efficient utilization of its assets.Formula- sales or turnover/capital employedSignificance- high is the ratio more efficiently and optimally the company has utilized its assets and swallow ratio means the assets are underutilized. Higher is the ratio signifies the requirement of very low investment in the business and if the ratio is low it signifies left-handed management.Calculations-Net Asset Turnover calculation of Morrison for the financial year 2008-2010-In 2008- 1 2151/4378=2.77In 2009- 13615/4520=3.01In 2010- 14348/4949=2.89Net Asset Turnover calculation of Sainsbury for the financial year 2008-2010-In 2008- 16835/4935=3.41In 2009- 17875/4379=4.08In 2010- 18882/4966=3.80Net Asset Turnover calculation of Tesco for the financial year 2008-2010-In 2008- 23684/12099=1.95In 2009- 25734/12942=1.98In 2010- 27485/14681=1.87 pull in Profit Margin- it can be defined as the total amount of profit a firm can generate by sell its goods.Formula- gross profit/sales or turnover x100Significance- it is an indication of how much the selling harm of per unit of goods can be lowered without any loss in operations of the company. Higher is this ratio more efficient is the production of goods in the company and vice versa.Calculations- rude Profit Margin calculation of Morrison for the financial year 2008-2010-In 2008- (818/12151) x100=6.73In 2009- (913/13615) x100=6.70In 2010- (1062/14348) x100=7.40Gross Profit Margin calculation of Sainsbury for the financial year 2008-2010-In 2008- (1002/16835) x100=5.95In 2009- (1036/17875) x100=5.79In 2010- (1082/18882) x100=5.73Gross Profit Margin calculation of Tesco for the financial year 2008-2010-In 2008- (1761/23684) x100=7.43In 2009- (2048/25734) x100=7.95In 2010- (2270/27485) x100=8.25ACTIVITY RATIOS- It is the measure of how efficiently and optimally the resources of a company are engaged. It is also known as turnover ratio because it is the measure of how quickly the assets are converted into sales. rakehell days or Stock turnover- it is the relationship of cost of sold items during an interval of time and cost of ordinary inventorying during a particular interval of time. It tells about the times the company is able to convert the inventory into sales and the efficiency of company to manage its inventory.Formula- stock or inventory/cost of sales x365Significance- it is the measure of how quick a company can convert its inventory into sales. Higher is this ratio paint a pictures more eff icient the company is an managing its inventory. It means the company is able to sell more and indeed will have adequate capital to get new inventory and vice versa.Calculations-Stock turnover calculation of Morrison for the financial year 2008-2010-In 2008- (442/12151) x365=13 daysIn 2009- (494/13615) x365=13 daysIn 2010- (577/14348) x365=14 daysStock turnover calculation of Sainsbury for the financial year 2008-2010-In 2008- (681/16835) x365=15 daysIn 2009- (689/17875) x365=14 daysIn 2010- (702/18882) x365=13 daysStock turnover calculation of Tesco for the financial year 2008-2010-In 2008- (2603/23684) x365=40 daysIn 2009- (2669/25734) x365=37 daysIn 2010- (2729/27485) x365=36 daysLIQUIDITY RATIOS- It is a financial technique to measure the perfectly term solvency of the company financial condition. It is the measure of the capacity of a company to see its short term obligations.Current ratio- it the relationship of companys authentic assets to its genuine liabilities. It is the measure of the potential of a company to accomplish its short term obligations.Formula- current assets/current liabilitiesSignificance- it in the measure of how liquid are the assets of a company. It tells us how much safe a company is for its creditors. It is the measure of how abiding company is financially. Higher ratio shows that company is more efficient to fulfill their short term obligations and vice versa.Calculations-Current ratio calculation of Morrison for the financial year 2008-2010-In 2008- 910/1853=0.49In 2009- 1066/2024=0.52In 2010- 1092/2152=0.50Current ratio calculation of Sainsbury for the financial year 2008-2010-In 2008- 1722/2652=0.64In 2009- 1591/2919=0.54In 2010- 1853/2793=0.66Current ratio calculation of Tesco for the financial year 2008-2010-In 2008- 6648/12689=0.52In 2009- 13669/18115=0.75In 2010- 11392/16015=0.71 pronto ratio- it is also called as liquid ratio or acid test ratio. It the relationship of liquid assets of company to its current liabilit ies.Formula- current assets less stocks/current liabilitiesSignificance- It is the measure of how capable a company is in meeting in obligations and promises. Higher is this ratio indicates that company is more capable to meet its objectives and obligations.Calculations- bustling ratio calculation of Morrison for the financial year 2008-2010-In 2008- (910-442)/1853=0.25In 2009- (1066-494)/2024=0.28In 2010- (1092-577)/2152=0.23Quick ratio calculation of Sainsbury for the financial year 2008-2010-In 2008- (1722-681)/2652=0.39In 2009- (1591-689)/2919=0.30In 2010- (1853-702)/2793=0.41Quick ratio calculation of Tesco for the financial year 2008-2010-In 2008- (6648-2603)/12689=0.31In 2009- (13669-2669)/18115=0.60In 2010- (11392-2729)/16015=0.54Comparison-Year-2010MorrisonSainsburyTescoROCE17.3314.7610.87Net Profit Margin5.973.885.80Net Asset Turnover2.893.801.87Gross Profit Margin7.405.738.25Stock Turnover14 days13 days36 daysCurrent ratio0.500.660.71Quick ratio0.230.410.54Ratio analysis carried on Morrison, Sainsbury and Tesco for the financial year 2010The above data shows some of the ratios analyzed for M orison, Sainsbury and Tesco for the financial year 2010.from the above data we can see that the ROCE ratio for the Morrison is high as compare to its competitors. Higher is this ratio high is the profitability and overall performance of the company. gum olibanum Morrison surpass the chart followed by Sainsbury and then Tesco at the last. If we have a look at the Net Profit Margin we can see that Morrison has the highest followed by Tesco and then Sainsbury. Since higher is the net profit margining more profitable is the business. Thus Morrison has made more profits as compared to Sainsbury and Tesco in concern of the revenue they have generated. If we compare the net asset turnover ratio Sainsbury tops the chart followed by Morrison and Tesco in the last. This data tells us that Sainsbury has made lowest investment followed by Morrison and Tesco lag behind in the race indicating inefficient use and management of resources. Looking at the gross profit margin Tesco has the highest followed by Morrison and Sainsbury. We know that if higher is this ratio more efficient is the production of goods in the company. Thus Tesco wins in this aspect and is most efficient amongst the trey in the production of goods. Analyzing the stock turnover ratio Sainsbury has the least followed by Morrison and Tesco has the highest. Lower is this more quick is company in converting its stock into sales and more is the profit. Current ratio of Morrison is the least followed by Sainsbury and Tesco. Since higher is this ratio more is the ability of firm to pay its shorter debts. Thus Tesco wins in this race. Comparing the quick ratio, again Tesco has the highest, then Sainsbury and then Morrison. More is this ratio indicates more financially strong is the company. Thus Tesco again tops the chart.From the above discussion we can see that in some areas Morrison is d oing good like profitability and in some areas it as lagging like financial strength as compare to its competitors Sainsbury and Tesco. Therefore Morrison should keep on working hard to make out with its competitors.Similarly we can compare the financial data of Morrison, Sainsbury and Tesco for the other financial years 2008 and 2009.QUALITATIVE DATA- It can be defined as ways of collecting information to illustrate the pith of a plaza or a problem instead of rivet on statistical approach of analysis. They help to explain a situation in more depth and with more description.There are lot of qualitative methods in the management study to analyze the business of the company and its competitors. We will be using Porter and PESTEL analysis to qualitatively analyze the business and the market milieu for Morrison, Sainsbury and Tesco in UK.Porters five forcesOverall level of Rivalry In retailing industry, UK is dominated by the Morrison, Tesco and Sainsbury. each three are big bran d names in supermarket of UK. All three gives good competition to each other. All have equal number of resources to attract the customers.Power of Buyer Customer is the king of todays era. So the tycoon of buyers is relatively high, customer have lots of options so he can easily switch between suppliers. It affects the overall profit of the organization. But due to less number of competitors Morrison have stake to attract more and more customers by providing more offers to its customers and using new strategies.Power of Supplier All big brands have their own manufacturing units , which decrease the force of suppliers .Moreover , purchasing from right(prenominal) make the cost of a product high and impose the profit , so organizations likes to avoid purchasing goods from outsiders. In retailing sector suppliers are dominated by the consumers.Threat of New Entry -The threat of new entry in supermarket is very low, because it requires huge investment and big infrastructure. ap art(predicate) from this new organization has to provide food and other material at very low cost to sustain in the market and compete with the existing retailers, which is quite hard. Secondly, consumer acceptance is one the major issue for new entries in this sector which makes supermarkets less attractive as compare to other sectors.Threat of Alternatives Because all three supermarkets deal in food and grocery, a long range of products is always available to the customers. So, the customer always has the chance to switch between products.It depends on the way of customer service and the cost and quality of the product, which can bind up the customer with the product and the same organization.To Sustain in market and maintain the growth rate, Morrison have to provide the good customer service and better product at low coast as compare to competitors.PESTEL AnalysisThrough PESTEL Analysis we can identify the external environmental factors which impact on the performance of Morriso n and its competitors Tesco and Sainsbury. semipoliticalGovernment of UK has imposed strict rules and regulation for the company to protect the environment e.g. laws related to waste disposal by companies. Food and other retailers will have to follow these rules planned by EPA (Environmental Protection Agency) and it will affect the cost of businesses. The bovine tuberculosis and chronic diseases through waste will compel the government to make more strict and stiff rules against these companies for the resistance of company. European food authority has imposed regulations on food retailers to indicate the nutritional information and standard of quality of their products. The competition commission of uk and top executive of fair trading keep an eye on the main five supermarket retailing companies due to their high market share in the supermarket industry. economicalRise or failure in economy has a direct impact on the business because it affects the purchasing power of consumer. After 2008, UK formally declared the recession in economy. Though, government helps a lot to reduce the impact of recession on business and normal people by cutting interest rates. (Euromonitor, 2010), and it in turn helps to increase the purchasing power of customers and increase the business in UK. Whereas people are still not able to become heavy spender like before. Now a days people think twice before spending money and avoid to buy the product which are less in use which affect the overall profit of business.(Keynote,2010). After, 2010 economy of UK has started growing up easily and purchasing power of customer is increasing day by day. tenderIn UK population , there are less young people and children as compare to retired people.(Herald Scotland,2010) which affects the retailing business of food and grocery because it is understood that the eating and purchasing habits of older people is totally different and easily as compare to youngsters . They prefer light food mainly cooked at home and they like home deliveries to avoid the shopping, which cost extra to the stores. unconnected from this older people dont believe in online shopping because they find it inconvenient and difficult to use (Turban et al., 2001), overall it affects the business growth.TechnologicalIn this technological era every sector try to use new innovative tools to increase the performance and provide better customer service. Same is the case with supermarkets. Now a days every super market use technological tools like online shopping, self checkouts, card payments which is a revolution in the supermarkets. With the help of these technical tools retailers can increase the productivity and efficiency of the employees and business and reduce the billing time of customers which automatically provide customer delight and help to increase the overall profit. According to national statistics, 2010, people using lucre have grown by 50% from last few years. In UK more than 70% people know the use of internet and prefer to use online shopping which saves time and money of customer.EnvironmentalIn UK, People believe in recycling, reduced packaging and avoid charge plate bags. This kind of initiatives towards the improvement of environment is also promoted by UK government and Morrison actively takes part in CSR. From last few years more then 70% people have stopped using plastic bags and prefer to use reusable bags for shopping which cut down the packing cost of a product and increase the profit of an organization.(Office for National Statistics,2010)LegalBy HM Treasury, 2010, UK govt. has increased the VAT charges by 20% on the products, which affects the overall profit of organizations. Apart from this National minimum wage in UK is very high as compare to other countries which is one the reason of diminution in profit on the products for the supermarkets. It is assumed that standard UK minimum recompense could increase by 15% which can affect badly on the su permarkets of UK.RECOMMENDATIONS1. Morrison should move its focus towards different product categories instead of just way on being a specialist in food products in order to compete with other competitors like Sainsbury and Tesco.2. Morrison should pay attention towards analyzing its financial and other resources and should try to strategically allocate these resources in an optimal path to achieve improvement in performance and efficiency of the overall business.3. This is a world of technology and development. Thus Morrison should try to incorporate new and better technology like self checkouts and other form of technology like digital technology which should have features like online shopping in order to provide better customer service to its customers and compete with other competitors in the market.4. Morrison should focus on better customer service and should focus on the concepts of CSR to fulfill its role and duties towards the society and the environment.CONCLUSIONS-1. Th e financial analysis of Morrison shows that it is able to use its financial resources optimally and is able to fulfill its duties towards the creditors. But it really necessarily to work hard to improve on where it is lagging and it has a long way to go.2. Morrison financial statement shows that the flow of fund and cash is strong and it is efficiently managing its financial resources but needs to improve more.3. Morrison is working on the concept of CSR and understands its duties towards society and environment. This will help Morrison to build a good image and relationship with people in society. It was recorded that it did charity of around 1.18 million pounds.4. Morrison should focus on adding new food products which are healthy to attract more customers.