Profitability And Sustainability Analysis Of Superstore Industry Marketing Essay

Profitability And Sustainability Analysis Of Superstore Industry Marketing EssayThere are several framework on the financial procedure have been became apparent during last couple of decades and most of them relates to social and financial cognitive operation, which are mainly associated most the corporate social responsibility and exertion concept .Only few of the study emerged to evaluate financial performance and the sustainability of competitive wages. Further more than, most of the work has been associated with assiduity level but not the firm level, which is also more important to consider in the study on micro level. This is one the strong rationalness to investigate the firm level financial performance and the competitive advantage. However, there are some limitation related to data gathering for the industry abbreviation but it seems feasible to gather or access company level data and their availability.World Food Retail OverviewAfter development in engine room and policies in 1990, huge change in food industry has begun. With evolution in business globalisation, activities exchangeable mergers and acquisition has amplified which resulted growth of big players in efficacious and dominant way. Globalisation also resulted an increase in tours and travel activities across the manhood. The expenses incurred on food and drink by a tourist is 30p on each 1.00, as per reexamine conducted by regional tourist bodies of England, UK (IGD Global Retail Outlook Survey, August 2007).Among various sector, sell food sector create more value than that of others. The Organized food sector is such an area where both strong management system and sectorial operational specialization i.e. human and engineering science are mainly affected by large volume, Daily splitting in physical operations and lower margins, food retail in world are acumen and influenced by six basic trendsUncertaintyVariable DemographicsGrowth entrust/necessityLow Price MadnessTechnolo gyglobalizationIt has been forecasted that the speed in retail globalization will further accelerate. In order to success, the competition between retailers and suppliers are more likely to increase in a diversified range of capability. Even though in retail sector, huge opportunities still exist, but success will depend on managing the attempt and challenges at the same time by capturing the opportunities.According to IGD, In order to obtain sustainable growth, Retail Globalization has shifted its focus from flag-planting to targeted expansion. IGD conducted a survey in 12 countries where senior retailers and supplier has been questioned to derive the above statement (IGDs Global Retail Outlook Survey in August 2007),The top louvre super market companies in United Kingdom control a 50 percent share in market where as in Germany it is 60 percent and in France 90 percent (AC Nielsen).Industry OverviewThe top five biggest United Kingdom retailers and food alloting companies influen ce the whole market, which are Tesco, Morrison, Sainsburys, Asda and Co-operative Group. In 2004, the whole market size was 115 billion which includes the retailers from small shops who has store to the biggest supermarkets which have the full-scale operating chains.In 2004, Morrison ranked at 4th position among other 12 supermarkets in UK, which is illustrated below in Table (1). Whereas in 2008 February 79.4% market share captured by top 5 retailers i.e.30.9% by Tesco, 16.4% by Sainsburys, 11.6% by Morrison, 16.9% by Asda and 4.0% by Waitrose. Only 20.6% of market share has been left for others. With the above positioning Morrison give the sack be concluded as upper-medium size food and grocery retailer in United Kingdom.Supermarket2004 (%)2005 (%)Aldin/a2.2Asda16.716.5Co-op4.8n/aIceland2.11.9Somerfieldn/a5.7*Lidl1.8n/aMarks and Spencer3.5n/aMorrison14.6**12.2**Netto0.6n/aSainsburys15.715.9Tesco2929.8Waitrose3.53.7To create portfolio, in same industry, five companies has been sel ected i.e. Tesco, Finsbury Food, Sainsburys, Thottons and Falkaland. In segregation, Sainsburys and Tesco are biggest supermarket, whereas Finsbury Food and Thorttons are the medium ones and Falkaland is small stores in UK. According to total asset, these portfolios near represent the industry. Hence it is tried to increase the sample for closer representation of the population which is illustrated below in Table (2)UK CompaniesSize ()Falkland24.25Finsbury Food102.60Thorntorns106.02Morrison7,370.90Sainbarys9,576.00TESCO24,775.00Table(2) the position of Morrison in the whole UKs industry according to total assets (2008)Business Drivers for sustainability strategiesThere are various internal and external factors which might drives the growth in sustainability strategies in WM Morrisons and study supermarketsEmployeesCommunitiesSustainable Product DevelopmentCompetitorsGreen BuildingsWaste Transportation and Logistics CostsCarbon EfficiencyRising Demand for Certified ProductsExpectat ion for Reporting and writ of execution MeasurementProduct SafetyThe above mentioned drivers are the key to change the retail sectors outlooks and providing competitive benefit to the retailers in terms of sustainability performance. Furthermore, competitive benefit can be drive by working with more innovative solution provider brand owner and supply chain partners, which leads to reduce the cost the increases efficiency.aside from above factors, supermarkets have already implemented a number of growth/sustainability strategies to achieve high growth. These areIncreasing focus into own label products. elaborateness by organic growth and acquisitionConvenience Sector ExpansionFocus into nonfood itemsGraph 1 Profit Margins of UK SupermarketsAbout Wm Morrison SupermarketsWith acquisition of larger rival Safeway plc., Wm Morrison Supermarkets moved up in UK food chain. Founded in 1899, from 125 stores Wm Morrison runs approximately 425 stores in England and Scotland. It has already m ade a history beating UK supermarket giants like Tesco (the UKs No. 1 food retailer) and ASDA (Wal-Mart owned supermarket) in high concentrated acquisition battle. Through its Market Street specialty, Morrisons offer various food and non-food items. Morrison sell gas about 290 locations. With acquisition of Safeway, Wm Morrison enhanced its market presence with more than 12% share of grocery market.Aim of the StudyThe aim of this research is base on two objectives. The first objective is to examine the profitability of the WM Morrison within the superstore industry context in the UK market and secondly to examine the firms sustainability of competitive advantage on retail performance.Preliminary Literature ReviewThe analysis of firm profitability is a bit difficult task because the majority of the performance index models focus on the success of various key financial indicants i.e. return on investment (ROI), return on assets (ROA) or return on great employed (ROCE). These perfo rmance indicator models have been disapproved or criticized due to lack in the multiple dimensional approach of the performance as well as the its competitive advantages to organizations growth (Brignall and Ballantine, 1996).There are number of studies (Dawson,2005 Dess and Robinson,1984 Reynolds et al.,2005 Venkatraman and Ramanujam,1986) have faced challenge to consider right variables as a financial performance indicator. The collar of the correct information and its non-availability to the public are the most common problems (Ailawadi et al., 1995). However, a number of alternative approaches have been implemented to getting trump financial performance indicator in to order to handle above discussed problems. Therefore, subjective financial indicators are designed to measure firms performance i.e managers forecast on financial performance to compare with competitors performance. Although, some financial indictors has been considered in the number of empirical study (Capon et al.,1990 Dawson, 2005 Reynolds et al., 2005), which was significantly positive with the economic models. The most frequently used profitability indicator in the various studies could be return on equity, return on sale and return on investment etc. But still it is unconcluded regarding the best financial indicators to measure retail financial performance ( Ailawadi et al.,1995 Dawson,2005 Reynolds et al., 2005).On the other hand, the most commonly used performance indicators are rates of return, gross margin (Bradley and Taylor, 1992 Dobson, 2005 Reynolds et al., 2005) and sales growth, sales revenue (Doyle and Hooley,1992 Dobson,2005 Greenley,1995 Hooley et al.,1992 Reynolds et al.,2005).The accepted distinction between competitive advantage and sustained competitive advantage is matched by a range of studies which forward and conceive the factors determining the sustainability of a competitive advantage (see Coyne, 1985 Williams, 1992). Whilst many of the studies of advantage su stainability are conducted from a resource based view, Porter (1980, 1990) contributes a number of observations at a more macro level. Briefly, Porter (1980) suggests that competitive advantage can only be sustained over time if consistent strategy is developed and utilise promptly.Research Objective and Data MethodologyAn attempt has been made in this paper to analyze the profitability and examine the sustainability of competitive advantage on retail performance of the WM Morrison during 2005 -2010. Eventually top players will be identifying on the basis of total asset in UK superstore market. To identify competitors, Lexis-Nexis and Hoovers will be used. 5 historic period Balance sheet and other financial data will be extracted from Thomson One banker. The profitability of Morrison will be analyzed through decomposition rule in context to peer group. Statistical analysis may be conducted as a support to the thesis.After performance analysis of Morrison, Industry performance wil l be compared to target company performance to analyze abnormality if any in the behavior pattern and the reason behind the pattern will be scrutinized.Analysis FactorsReturn on Net Operating Assets (RNOA)Net Borrowing Cost (NBC)Operating profit marginOperating Liability leverageFinancial Liability Leverage (FLEV)Asset Turnover (ATO)Return on Common Equity (ROCE)SpreadHowever one of the main aims is to analyze the driving force factors for the performance of the firm and the industry and simultaneously to discuss the sustainability strategies of the firm for the competitive advantage.Conclusion