A Comprehensive Analysis of the Food and Retail Sector and Oil and Gas Sector in the UK - Dissertation Example

The analysis of the two sectors has revealed that there are mixed trends with respect to the performance of selected companies in this study. However, within the retail sector of the UK, Morrison’s and Sainsbury are better performers as compared to Tesco. On the other hand, BG and Shell have superseded BP as per the financial analysis. The SWOT analysis of the retail companies and analysis through Porter’s Five Forces Model has revealed that there are significant opportunities for the companies to expand their businesses; whereas, at the same time, the competition in the market is also at a peak.

Similarly, for oil and gas companies, the analysis showed that there are no significant threats for the companies, but for BP the oil spill incident is still showing its after-effects. The grocery market alone in 2011 was worth 156.8 billion and in 2011-2012 the UK oil and gas industry paid a production tax of 11.2 billion, almost a quarter of the exchequers corporation tax (IGN, 2012; Oil & Gas UK, 2012).

In times of austerity and economic recession such as the UK is currently experiencing, it is insightful to assess the financial health of each of these organizations using ratio analysis in order to understand how they are achieving their level of success. According to Jones (2006) ratios are an extremely effective means of achieving this because if suitable ratios are selected and applied it can reveal interesting facts about how the company is managed and run, and where there may be areas of potential risk and weakness such as excessive borrowing.

Rationale The rationale for this study is to understand how different ratios are employed in different industries and to evaluate the challenges that can be encountered if the same ratio is used in different industries. There is an inherent risk in taking the output of financial ratio analysis at face value without fully appreciating the context of the output. Therefore, by examining two highly successful industries it is hoped to identify areas of best practice using financial ratios as guides.

The industries selected for research are the UK food retail sector and UK oil and gas. These two industries have been chosen for particular reasons. Firstly, the UK food retail sector is one of the most competitive marketplaces in the UK, characterized by high output volumes, fast turnover and tight profit margins. It is an industry where any mistakes are quickly reflected in the financial data and stakeholders are unforgiving (Palmer, 2004; Retail Week, 2012). It is this level of competition and volatility which makes the industry an interesting study because food is essential to every household and so the performance of food retail giants such as Tesco, Sainsbury’s and Morrison’s can be regarded as a sensitive barometer of the current economic situation in the UK.

Furthermore, the success of Tesco at the international level undoubtedly points to the value being created in this industry in the UK. This alone makes it an interesting area to conduct research in. The second industry, UK oil and gas plays a major part in the UK economy in terms of exports, technology, and tax revenue as well as supporting 440, 000 jobs across the UK (Oil & Gas UK 2012). This is also an industry that is facing significant change as a result of the environmental pressures on the industry as a whole. Oil and gas are one of the major sources of carbon emissions, have been viewed as sub-optimal sources of energy.