Plc Performance in the UK and Europe - Term Paper Example

Next plc Performance and Business Strategies in the UK and Europe Table of Contents Organisational Background 3 Research Topic Rationale 3 Methodology 3 Data Collected 4 Analysis 6 Online Business Segment of Next 7 Recommendations 8 Conclusion 8 Reference List 9 Organisational Background Next plc is a U.K based retailer specializing in clothing, footwear, accessories and home decor. The company has approximately 700 stores located across the continents of Europe, Asia and the Middle East. By sales, Next is the largest clothing retailer in the U.K. The business of Next can be broadly divided into three categories; Next Retail, Next Directory and Next International. Next directory includes the company’s online business that accounts for more than 70,000 transactions each day. Next International consists of the 173 franchise stores of the company located overseas. Next International also takes into account the companies online business located over 70 nations. The products of the company are targeted towards the high end consumers. Premium pricing policy strategies are followed by the firm. As on January 2015, the net turnover of the company was £4.0 billion (Next plc, 2015a). The financial reports of the company depicted consistent growth as a result of increasing market share and brand image. The current paper is an effort dedicated towards strategic evaluation of Next plc. The focus is essentially upon the activities of the company in the U.K and the Europe. The main objective of the current paper is to analyse the profitability and sales related strategies of Next plc in Europe and the U.K regions. The paper also analyses the profitability of the company’s online business segment. Research Topic Rationale Strategic evaluation of Next facilitates understanding how the brand has been successful in maintaining their financial efficiency so as to earn high profits. The current paper briefly analyses the various reasons for Next plc to be financially successful. The retail fashion industry is highly competitive and requires implementation of strong and effective strategies that not only counters competition but also facilitates meeting the needs of the consumers and maintain strong financial stand. Strategic evaluation facilitates understanding the current financial and market standing of Next plc, and the type of strategies it must undertake to improve performance (David, 2007). Methodology The current paper mainly follows the inductive reasoning approach. Inductive approach is based on the technique of gathering data and then developing suitable conclusions on the basis of the collected information (Kothari, 2011). The inductive view seeks to understand the patterns existing in the collected data and accordingly develop suitable conclusions. Considering the nature of the current study and the method of analysis, the Inductive approach is deemed suitable. The project incorporates following the interpretative approach. Under the interpretative approach the researcher assumes that the aspects related to management are wide and may be deviated as and when the circumstances of research environment alter. This provides the researcher with adequate scope to include his own knowledge and access to information so to reach suitable conclusions. The data for the current paper has been largely collected from secondary data sources. The secondary data is procured from various website publications, books and journals. The secondary data collection technique is deemed suitable considering that information regarding the regarding the strategic policies of Next can only be achieved from secondary sources. Collecting data from primary sources would require direct correspondence with the managers of Next, which is deemed difficult. As a result secondary data collection was deemed to be most suitable. However, secondary data is considered to be less reliable than the primary information. Also in order to procure reliable primary data, the research must be able to gain access to high quality journals and publications (Kothari, 2011). Data Collected The efficiency of the strategic policies of a company gets reflected through their financial and performance results. Such information can be acquired from the annual reports of Next plc. Below shown are the results of the performance of Next as a result of the implementation of their strategic policies. Figure 1: Next’s profits for the last five years in the U.K (Source: Next plc, 2015b) Figure 2: Next’s earnings per share (Source: Next plc, 2015b) Figure 3: Sales Data (Source: Next plc, 2015b) Figure 4: Comparative operating profits of Next, Tesco and M&S (Source: Marks & Spencer, 2014; Next Plc, 2014; Tesco Plc, 2014) Figure 5: Comparative returns on equity of Next, Tesco and M&S (Source: Marks & Spencer, 2014; Next Plc, 2014; Tesco Plc, 2014) Analysis From the data collected, it can be stated that the profits of Next in respect of their activities in the U.K have increased substantially over the years, due to efficient policies in respect of costs of operations. The company gives adequate emphasis on reducing costs and maintaining a control over the use of resources. Effective budgeting techniques and financial risk reducing strategies have led to the procurement of enhanced profits (David, 2007). The lowering of costs has facilitated the company to use the additional cash reserves for expansion related activities. In the last few years, Next plc had opened sever new outlets across nations in the U.K and in Europe. The online customer base of the firm had also increased substantially. As a result the net sales revenue enhanced. The company’s main strategy for attaining such high profitability is their customer need centric focus and their frequent up gradation of technology. Next plc considers that listening to the needs of the consumers is the best way to enhance brand loyalty and subsequently the sales revenue. They believe in remaining connected with their consumers and know their needs so that products provided are suitable in meeting the demands of the target consumers. This aids the company to effectively meet and often surpass the expectations of the consumers (Freeman, 2010). Next plc’s strategies associated with expansion and innovation has facilitated the company to maintain rising profits. In the above figures, it can be seen that the operating profits of Next plc is much higher than that of Marks & Spencer and Tesco. This mainly due to the efficient use of resources and intelligent control over the use of resources for meeting production related needs. It is required to be noted here that operating size of Tesco is much higher than that of Next. Nevertheless, the company is able to procure high profits and retain a strong marketing position. Although Next plc caters to mainly the high ends markets, the company has ensured that the quality of their products remains high. One of Next’s most important financial policies is to provide adequate returns to shareholders. While undertaking long term strategies in respect of expansion and diversification the company seeks to incorporate the suggestions and the recommendations of shareholders (Afsar, 2011). Online Business Segment of Next Next Plc’s online business has been witnessing tremendous popularity and growth. In figure 3 shown above it can be seen that Next Directory, which is essentially the firm’s online business segment, is seen to grow at a fast pace. Profits acquired from this sector play an important role in the overall revenue earned by the firm. Next plc was one of the early identifiers of the online retail business and considered that expanding their business into the online category would be suitable for maintaining market position and acquire greater financial strength. Moreover the consumers in the European and the U.K region are seen to rapidly indulge in online purchase activities. Next was seen to suitably take advantage of such characteristics and expand their sales related activities. As compared with the profits of M&S and Tesco, Next plc is seen to be better recognized in terms of quality of their services in the online segment (Next plc, 2015). Recommendations Although Next is seen to considerably grow, the firm mainly relies upon the high end consumers for earning profits. By enhancing the product base and providing more economically prices products, the company might be able to expand their consumer base and widen profitability scope. Consumers in the European and the U.K region are increasingly adopting the savings culture, post economic recession. Next may therefore consider launching a new range of economically priced products for the price conscious consumers. Although Next earns immense profits, they are seen to mainly arise from limited range of consumers. Next must include targeting the younger generation by enhancing the offering made (Pearce and Robinson, 2000). Another strategy for enhancing profitability is through diversification. It may also consider options such as outsourcing production so that cost of operations can be further declined. Such a reduction may facilitate the organization to include low and affordable range of products that may help in targeting the price conscious consumers. Conclusion Next’s effective policies are seen to provide it with a large number of dedicated consumers. This is identified to be the main reason behind their widening profits and sales revenue. The strategic policies of Next have by far been successful at providing the company with adequate returns. The company however has limited focus in respect of meeting the needs of all types of consumers in the U.K and in Europe. It mainly focuses upon the high end retailers and especially the middle aged consumers. Although the current strategies of Next are providing it with decreased costs of operations, the firm must consider altering their production strategies if they include affordable and low priced retail goods. Under such circumstances the company may consider to outsource production so that high operating profits can be continued to be maintained. Reference List Afsar, B., 2011. Strategic management in today’s complex world. Business Intelligence Journal, 4(1), pp. 143-149. http://www.researchgate.net/profile/Bilal_Afsar/publication/266136942_Article_9/links/5425a02e0cf238c6ea7482a9.pdf David, F. R., 2007. Strategic management: Concepts and cases. New Jersey: Pearson Prentice Hall. http://amberton.mylifeblue.com/media/Syllabi/Fall%202014/Graduate/MGT6203_01.pdf Freeman, R. E., 2010. Strategic management: A stakeholder approach. New York: Cambridge University Press. https://books.google.co.in/books?hl=en&lr=&id=NpmA_qEiOpkC&oi=fnd&pg=PR5&dq=Strategic+management:+A+stakeholder+approach&ots=6-eiL2Q9OP&sig=pF-5lIbp9mD-FSRkNYo8Zhq023U#v=onepage&q=Strategic%20management%3A%20A%20stakeholder%20approach&f=false Kothari, C. R., 2011. Research methodology: methods and techniques. New Delhi: New Age International. https://books.google.co.in/books?hl=en&lr=&id=8c6gkbKi-F4C&oi=fnd&pg=PR7&dq=Research+methodology:+methods+and+techniques&ots=iHiBuSSbnM&sig=wCMk_QCem1NfsyEz_rGvApUFTRA#v=onepage&q=Research%20methodology%3A%20methods%20and%20techniques&f=false Marks & Spencer, 2014. Financials. [online] Available at: [Accessed 14 April 2014]. Next Plc, 2014. Financials. [online] Available at: [Accessed 14 April 2014]. Next plc, 2015a. About next. [online] Available at: [Accessed 2 June 2015]. Next plc, 2015b. Annual Report and Accounts. [Online] Available at: [Accessed 2 June 2015]. Pearce, J. A. and Robinson, R. B., 2000. Strategic management: Formulation, implementation, and control. New York: Irwin/McGraw-Hill. http://library.perbanas.ac.id/images/book/PHKI11/strategic%20management%20formulation.pdf Tesco Plc, 2014. Financials. [online] Available at: [Accessed 14 April 2014]. Read More