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SWOT Analysis of Sports Direct company : Report

   

Added on  2020-07-23

34 Pages8802 Words425 Views
How Are ASOS, JD Sports and SportsDirect Able to Effectively CompeteWithin The UK Apparel Market

TABLE OF CONTENTSINTRODUCTION AND RATIONALE..........................................................................................1Introduction............................................................................................................................1Rationale.................................................................................................................................2PEST ANALYSIS AND CSF..........................................................................................................2PEST Analysis........................................................................................................................2Critical Success Factor (CSF)................................................................................................4INDUSTRY COMPETITION ANALYSIS....................................................................................5COMBINED RATIO ANALYSIS..................................................................................................7Financial Ratio Analysis.........................................................................................................7Non-financial Analysis.........................................................................................................16SWOT ANALYSIS.......................................................................................................................17SWOT Analysis of ASOS company:...................................................................................17SWOT Analysis of JD Sports company:..............................................................................19SWOT Analysis of Sports Direct company:........................................................................20OVERALL RANKING.................................................................................................................20Altman Z-score.....................................................................................................................21Regression Analysis.............................................................................................................22Overall Ranking....................................................................................................................25CRITICAL REFLECTION............................................................................................................26RECOMMENDATIONS...............................................................................................................26CONCLUSION..............................................................................................................................27REFERENCES..............................................................................................................................28

ILLUSTRATION INDEXIllustration 1: Porter's 5 Forces Model.............................................................................................5Illustration 2: Gross Profit Ratio......................................................................................................8Illustration 3: Net Profit Ratio.........................................................................................................8Illustration 4: Current ratio..............................................................................................................9Illustration 5: Quick Ratio.............................................................................................................10Illustration 6: Total assets turnover ratio.......................................................................................11Illustration 7: Inventory or stock turnover ratio.............................................................................12Illustration 8: Debt to equity ratio..................................................................................................13Illustration 9: Interest coverage ratio.............................................................................................14Illustration 10: Earning per share...................................................................................................15Illustration 11: Employee Turnover Ratio.....................................................................................17Illustration 12: Altman Z-Score.....................................................................................................22

INDEX OF TABLESTable 1: Calculation of profitability ratios.......................................................................................7Table 2: Calculation of Liquidity ratios...........................................................................................9Table 3: Calculation of Efficiency ratios.......................................................................................10Table 4: Calculation of Solvency ratios.........................................................................................12Table 5: Calculation of investor ratio............................................................................................14Table 6: Calculation of employee turnover ratio...........................................................................16Table 7: Calculation of Altman Z-Score........................................................................................21

INTRODUCTION AND RATIONALEIntroductionApparel industry is one of the fastest growing sector in UK which contributes in thegrowth rate of UK economy up to the greater extent. Under the respective industry, at themajority level cloth and footwear comes into consideration and sold by its organisations. Thereare huge number of companies operate in the apparel industry and generate higher revenue andprofit. The reason is that, they provide cloths and footwear according to the new and innovativefashions. In the present study, basically three firms undertaken to carry out research on thecompetition level of apparel industry of UK. First company introduced in the present case isASOS which operates in the clothing retail sector where major products offered by it are likeclothes, shoes, beauty and accessories. Second firm is JD Sports Fashion Plc which also operatesunder the retail industry and products of it are clothing and sportswear accessories. At the last,third organisation considers for conducting present study is Sports Direct International Plc whichhas presence in the retailing sector and offer sporting goods only. The present research focuses on the competition level of chosen businesses which areoperating in the Apparel industry of UK economy. In order to make effective analysis that, suchentities compete in the respective industry up to which extent, there are three concepts are usedwhich are like financial, non-financial and statistics. Under the financial perspective, the presentstudy is carried out by taking support of the ratio analysis and Altman Z-Score. With the help ofsuch methods business performance in the competition of UK apparel industry is measured withprofitability and liquidity position. Apart from this, non-financial performance of ASOS, JDSports and Sports Direct is analysed with the help of PEST, and Porter's five forces analysis.Through these techniques, overall business performance can be measured effectively up to thegreater extent. In this, quality of the products like cloths, footwear and sports accessories alongwith the several internal aspects analysed properly. In addition to this, regression analysismethod is focused in the present research which rely under the statistical aspect or perspective. Inthis tool of SPSS, effectual relationships between two depended variables are identified andmeasured.Along with this, study explains the SWOT analysis of cited businesses of apparelindustry. By considering this particular non-financial analysis method, strengths, weaknesses,1

opportunities and threats are identified by the reader which they have in the mentioned marketsegment. Beside these all, ranking is given to all the companies in terms of business performancewithin industry of cloths and footwear. Further, the present report focuses on critical reflectionunder which self learning and benefits of this study in the future are explained. At the last part ofthe project, recommendations to the ASOS, JD Sports and Direct Sports companies are provided.Further, in the suggestion part, strategies provided in order to boost up business performance inthe apparel industry to the cited organisations effectively. RationaleThe rationale behind conducting the present study is to analyse business performance ofthe cited companies like ASOS, JD sports and Soprts Direct in the competition market of UKapparel industry. In this respective sector, several numbers of the firms operating and providingcloths and footwear which create cut throat competition. Further, it is necessary to determineperformance level which supports to make proper strategies for the upcoming years. Along withthis, to analyse competition financial and non-financial analysis methods are considered whichare like as ratio, porter five forces, PEST, regression, Altman Z-Score etc. The reason behindusing these techniques only is that, these help to carry out proper and effectual research anddetermine effective as well as reliable conclusion (Kapoor, 2014). Moreover, ratio analysisprovides clear outline of the business condition and due to which it is considered for analysingfinancial perspectives of the firms.PEST ANALYSIS AND CSFPEST AnalysisIn order to make analysis of business environment and its condition in the respectiveindustry there are different kinds of tools and methods used by the company. One of theimportant technique is PEST analysis where basically four factors considered which are likepolitical, economic, socio-cultural and technological (Shabanova and et.al., 2015). Explanationof such aspects is given as below:Political factors:Various number of elements affect to the company under the political environment whichare like rules and regulations and other laws. When government of the UK make changes in anykind of legal legislations then current business process become change up to the greater level2

(Khosravi and Matikolay, 2015). For instance: minimum wages of the labour increased by thegovernment of UK then it leads to increase employees expenses of cited firms. Therefore, totalcost of cloths and footwear increase which create negative impact on the profitability condition.On the other side, if minimum wage rate declined then such companies will beneficial and ableto earn more profit. Apart from this, European Union create the highest impact on overall apparelindustry. The reason is that, EU provides trade free area to the organisations where any kind oftaxes and tariffs are not needed to pay. Along with this they have freedom in order to export andimport cloths and other apparel items. When EU exit from the British, then such companies notable to easily enter in the international market and generate profit.Economic factors:Another element of PEST analysis is economic which includes financial aspects anddirectly affect to the profit generation capability of the apparel industry's firms. In this, basicallyfactors of the monetary policies are involved which create both negative and positive impact onthe working environment of selected businesses. Under the economic factors, inflation,recession, interest rate, unemployment policies and other monetary aspects are included. Whenany factor among these all gets change then overall apparel industry and its firms affected up tothe higher extent (Ravija, 2016). For example: due to increasing in the inflation rate, prices ofcloths and footwear increase where purchasing power of the local community of UK economyreduce. Therefore, selling and turnover the cited companies affect in the negative ways which issign of profit declining in the industry. Apart from this, if interest rate increases in the UKeconomy then company needs to pay more amount on the debt and loan taken by differentfinancial institutions. It is indication of enhancing indirect expenses and ultimately net income ofthe businesses reduce at the end of financial year.Socio-cultural factors:To the apparel industry socio-cultural elements also influence up to the larger extent.Under this, consumer needs and requirements included at the majority level and necessary for thecited firms to fulfil them. Due to changing in several kinds of the demographic factors, citedfirm's operation and selling department affects up to the greater level. Therefore, revenue andprofitability situations of the selected firms of apparel industry also influenced in adversedirection. For example: If income of the people or customers increase then living standard will3

also improve accordingly. Due to this, they will demand higher quality of the cloths and shoesfrom the chosen business organisations. Therefore, the management needs to make modificationsin the existing manufacturing procedures along with purchasing high quality of raw materials(Igliński and et.al., 2016). When the cited firms adopt such kind of changes then overall smoothfunctioning affects and costing level also increased. Hence, it can be said that due to occurringchange in the socio-cultural aspects, apparel industry affects. Technological factors:In the current era, technology plays a major role in each industry and every company,which come up with innovations within very short period of time. When the management ofcited enterprises use and adopt innovative technologies at the workplace then at the very first andforemost they need to provide training to the employees. The reason is that, new technologiesincluded new and addition features by which workforce not aware. It leads to create expenses orfinancial burden on the companies and affect business performance negatively (Gerwick andSparks, 2014). On the other side, by adopting new technology the firms able to produce higherquality of products and wastage will reduce. Henceforth, sales and revenue influenced in positivedirection up to the higher extent and help to ASOS, JD sports and Soprts Direct firms to raiseexisting financial health. Critical Success Factor (CSF)Those factors which are mandatory to implement at the workplace in order to meet withthe expected objectives and purposes of the firm are called as critical success factors. Further,CSFs for the cited firms are described below:According to political factors, the ASOS, JD sports and Soprts Direct companies arenecessary to use or follow all the available legal rules, laws and legislations in proper andadequate manner at the workplace. The various laws are like, minimum wages act, anti-trust, discrimination, employment etc. When these firms follow in the workingenvironment then able create positive image which is sign of achieve desired goals andobjectives (Ghezzi, Rangone and Balocco, 2013).In the economic aspects, the cited enterprises have to reduce the total cost of productionand charge lower prices from the customers.4

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