ACC4003 Accounting & Finance Project: UK Supermarket Analysis

This ACC4003 project provides an in-depth analysis of the UK supermarket retail industry, focusing on Tesco, Sainsbury's, and Morrisons. It examines external and internal environmental factors influencing the industry's performance using tools like PESTLE, Porter's Five Forces, and SWOT analysis. The project identifies key success factors, including political, economic, sociological, and technological elements. It also selects and justifies financial and non-financial ratios to assess the performance of the companies. The study aims to determine the best and worst performing companies in the sector, considering both financial and non-financial aspects, and includes a timetable for project completion. The project explores the competitive landscape, the threat of new entrants and substitutes, and the bargaining power of buyers and suppliers. The ultimate goal is to provide a comprehensive understanding of the factors that drive success in the UK supermarket retail market.

Acc 4003 Interim Project

THE ACCOUNTING AND
FINANCE PROJECT
2017/18
Common Academic Framework
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Accounting & Finance Front Project Sheet
NB. This sheet must be attached to any submission of Accounting & Finance field
module coursework. No assignment will be accepted without it.
Student Name:
Student ID:
Title of Module: Accounting and Finance Project 2017-8
Module Code: ACC4003 STD/IL
Title of Coursework:
Module Leader: Tambu Mangezi
Dissertation Supervisor:
Hand In Date:
Checklist before submission
1. Have you read, understood and acted in accordance with the referencing guidelines set
out in the appropriate Accounting & Finance Module Guide.
2. Where you have quoted directly from or where you have paraphrased the work of others,
have you acknowledged and appropriately referenced the source of your quotation in the
body of the text?
3. Have you placed all direct quotations in inverted commas?
4. Have you listed and correctly cited all your sources in your reference list and
bibliography?
Declaration by the candidate named above
1. I confirm that this is my own work (or, in the case of a group assignment, the work of my
group) and that, although I may have consulted others in the course of assembling
material for the work, the finished article has been completed without help or
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participation of any other person (other than, in group assignments, other members of
the same group).
2. The work contains no material drawn from unattributed sources.
Student Signature (Type in) ________________________
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Table of Contents
Checklist before submission................................................................................................................2
Declaration by the candidate named above......................................................................................3
1.1 Introduction and rationale..................................................................................................................5
2.1 Research question, aim, and objectives.........................................................................................5
3.1 PESTE Analysis.................................................................................................................................6
3.2 Political factor..................................................................................................................................6
3.2 Economic factor..............................................................................................................................6
3.3 Sociological factor..........................................................................................................................7
3.4Technological factor........................................................................................................................7
4.1 Porter’s Five Forces...........................................................................................................................8
4.2 Rivalry between competitors.........................................................................................................8
4.3 Threat of entry................................................................................................................................8
4.4 Threat of substitutes......................................................................................................................9
4.5 Bargaining power of buyers..........................................................................................................9
4.6 Bargaining power of suppliers....................................................................................................10
5.1 SWOT analysis.................................................................................................................................10
5.2 Tesco SWOT................................................................................................................................10
5.3 Sainsbury’s SWOT.......................................................................................................................11
5.4 Morrison SWOT............................................................................................................................12
6.1 Selection and Justification of financial ratios................................................................................12
6.2 Selection and Justification of non- financial ratios.......................................................................13
7.1 Timetable to complete the work.....................................................................................................14
8.1 Conclusion.........................................................................................................................................15
References..............................................................................................................................................16
Appendix 1-Financial ratio.....................................................................................................................18
Appendix 2 - Non financial ratios..........................................................................................................19
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1.1 Introduction and rationale
Three companies named as Tesco, Sainsbury’s and Morrisons dominate the supermarket retail
chain in UK. After the economic recession, there was increase in food prices as well as
tightened belts where the supermarket retail industry was shaken by the British consumers
search for value. According to sources, these three supermarket retail giants have lost market
share in the first three months for the year 2016 August.
The retail industry in UK recently is having global presence as they now have proper knowledge
about the demand that is needed in this competitive market and how to bring regulatory
changes at the time of explaining the level of transparency. The retail industry in UK is now
been incorporating new and improved services in the market and able to provide services that
meet the need of the customers. The feature of retail sector in UK has the ability to render
different types of retail products and services to their consumers and developing supermarket
chains.
For this study, supermarket retail chain in UK has been selected because these three
companies are giving stiff competition to one other and making strategy to retain their position in
this competitive world.
Justification for selecting retail sector for this study
In this study, retail sector had been selected because it is noted that the consumers are facing
difficulty as there is rapid transition and frequent changes in tastes and preferences with
passage of time. It is even noted that different products and services had been evolved and this
is the reason why tastes and preferences of consumers are changing at a rapid pace. Because
of these factors, retail sector is selected for understanding the kind of products needed by the
customers and what is this business look like with the help of business model that are
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implemented by different retail chains for retaining their customers as well as enhancing the
competitive edge. In addition, companies operating in retail sector in UK face stiff competition
with one another and they had to deal with tough challenges with respect to maintain their
customer base along with innovation in services so that there is improvement in return to
investment.
Tesco Plc
Tesco Plc is one of the British multinational retail corporation and grocery merchandise retailer
that is headquartered in United Kingdom. This retail company occupies the third position in the
retail industry in terms of profits and ninth position in terms of revenues generated globally. This
supermarket chain has their presence in more than 12 countries and leads the grocery market
in the UK.
Morrison’s Plc
Morrison’s Plc occupies fourth position after Tesco in terms of profits earned during a year and
headquartered in United Kingdom. This supermarket retail company was established in the year
1899 and still been working efficiently in countries such as UK, Wales and Scotland.
Sainsbury’s Plc
Sainsbury’s occupies the second position in the supermarket retail industry and enjoys a market
share of 16.9%. This retail company was headquartered in UK and established in the year 1869.
2.1 Research question, aim, and objectives
Research Questions
1. How external and internal environmental factors influence the performance in the industry.
Research Aim
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The main aim of this study is to highlight the external as well as internal environmental factors that
influence the performance in the food retail industry.
Research Objectives
1. To identify internal and external factors that affect supermarket retail industry in the United
Kingdom
2. To highlight how supermarket retail chain industry perform in recent years and which company
performs best or worst by using financial tools
3. To find out how far non-financial factors can be helpful in understanding the best performing
and worst performing company by using tools
4. To highlight financial factors by using ratio analysis tool and then justify on which retail
company perform best or worst based on the results
3.1 PESTE Analysis
The PEST analysis is a technique, used to define the political, economic, sociological and
technological factors that influence the performance of the specific industry (Wall, 2015).
3.2 Political factor
The political element of the framework mainly deals with the fact on how political regimes work
within Australian economy and how far it affect the performance of supermarket retail chain
industry. In addition, the legislations are one of the vital political success factors that widely
influence the supermarket industry in the UK. Recently, government had come up with new
legislation that has impact on supermarket retail in UK. One of such legislation is known as
Grocery Codes Adjudicator 2013 that had been established by the government to control the
interaction between supermarkets as well as suppliers in the UK. It is noted that large
supermarkets do not involve in misusing their power over suppliers. Therefore, the UK
government is planning for introducing legislation by curbing price to retain in the competitive
global marketplace.
The political environment widely affects supermarkets and this further influences the social as
well as economic environment. In addition, the political environment has important influence on
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some of the economic policies like government spending as well as taxation within the
Australian economy. Political factors influence social as well as economic factors that affect
supermarkets.
3.2 Economic factor
Critical success factors
 Unemployment
Figure: Unemployment rate
(Source: Ons.gov.uk 2017)
Figure: Decade of pay and prices
(Source: BBC News 2017)
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The above diagram shows earnings figures from 2007 to 2017. The employment picture remains strong
with a new record of high employment rate as well as another fall in the rate of unemployment. Real
earnings continue to decline. It is noted that pay rise improved by 2.1% as compared with consensus
prediction of 2%.
 Inflation
Figure: Sales at food stores rose by 1.5% (2017)
(Source: Partington 2017)
Clothing and footwear retailers badly hit in the month of July amid volatile trends as stated by Office
for National Statistics. The consumers are taking approach that is more cautious at the time of
shopping when there was higher inflation rate above the level of earnings eats into their spending
power.
3.3 Sociological factor
Critical success factor
UK population
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Figure: Grocery sales hit more than three year high as consumer demand proves robust
(Source: Josie Cox 2017)
The overall grocery market increases by 3.7% for initial 12 weeks that is worth 1 billion Euros for getting
access to additional sales to the sector. In addition, the grocery sales in the UK at faster pace for the
beginning year 2017 despite indications showed in higher inflation rates. The data is based upon
spending habits of 30,000 demographically representative households in and across Britain.
Figure: UK Grocery market share (2013)
(Source: Gov.uk 2017)
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Figure: UK trend in food prices in real terms (1996 to 2015)
(Source: Gov.uk 2017)
3.4Technological factor
Critical success factor
Online shopping
Figure: Online sales grew by 19% in April and e-grocery sales by 17%
(Source: Rigby 2017)
It is noted that e-commerce sales increases by 19% and online grocery increases 17.6%. In addition,
ecommerce sales growth of 13.9%
4.1 Porter’ Five Forces
Porter’s five forces do the analyses of the industry’s competitor’s review.
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