The Retail Industry of the UK - Dissertation Example

?BACKGROUND OF THE STUDY Retail industry of UK has been one of the most growing industries over the years, specifically the food retail industry. Because of recession, the overall world economy was not growing despite of that, food retail industry has been one of the industries which reported considerable amount of growth. The food retail industry of UK has a long and solid history. It was during fifties and sixties that the concept of supermarkets and self service shops became popular which has been marked as the starting of retail industry in the United Kingdom (Hamlett, Alexander, Bailey, & Shaw, 2008). Despite of the fact that the UK economy was going through recession, but the overall sales of the industry had increased in 2009 as it reached a figure of over ?285billion. It has been estimated that this figure would further increase in the years to come. Also with the world economy and UK economy recovers itself from recession, retail industry would be one of the most beneficial industries as this would further increase the total revenue of the firms in the industry (The Scottish Government, 2010). By the end of 2010, the total retail units in the kingdom were approximately 286,000 (Arch, 2010). The food retail industry is an important industry for the UK economy as over the years it has been able to contribute a lot to GDP of the country. In addition to this, food retail industry is a significant one for United Kingdom economy as it has been able to consume considerable portion of the employment. According to a report, there are more than half a million people working in the industry representing almost 13% of the total workforce of United Kingdom. Food retail industry consumed more than 12,750 permanent jobs throughout 2010 which represents an annual growth of 2.1% in the jobs of food retail industry from the year 2009 (The Scottish Government, 2010). There has been an increasing trend of online shopping for people of UK and this has attracted more people to start online business. There are more than 150,000 online retail businesses in United Kingdom and more than 600,000 people are employed because of e-retail industry either directly or indirectly. At present, the online retail business contributes only 7% of the total retail industry revenues, however it has been predicted that the contribution from online business would further improve with the passage of time. The total sales of online retail industry equalled ?2.8 billion from Christmas 2009 to Christmas 2010 and they also found that there has been a growth of 44% in terms of time spent by respondents shopping online (Internet Retailer, 2011). Tesco is the market leader in the UK food retail industry for years and it has been dominating the market with market share of almost 31%. Tesco is also considered as the third largest retailer of the world in terms of revenue, after Wal-Mart and Carrefour. Tesco recorded total revenues in the year 2010 – 2011 were more than ?60 billion with a net profit of ?2.67 billion (Tesco, 2011) PROBLEM FORMULATION There are several firms in the food retail industry competing against each other on the basis of Price, Products, Promotions and Placement. However, among these four factors, price is the most dominant one. Consumers in the food retail industry are very much attracted and targeted by firms in the industry on the basis of cost and this is the reason why, most firms in the industry including Tesco and Asda have used Cost leadership strategy. This strategy has allowed firms to keep their overall costs low and thus offer the products at a lower price than the competing firms to the customers. With improvements in technology, the industry has been able to improve its sales because of e-retailing and the e-retailing has provided several opportunities for the firms in the industry to grow and expand their business as well as improve their market share. Also the response of consumers have been very positive towards e-retailing as shopping online is far more convenient, saves time and energy. Because online shopping allows consumers to easily compare prices of a product offered by different retailers therefore online shopping is more convenient for them in comparison to traditional shopping (Internet Retailer, 2010). With the improvements in technology and growth of e-retailing, the firms in the food retail industry face different challenges and problems like the ability to make the most of online shopping, implementing secure eCommerce on their website so that customers are ready to give their information, ensuring delivery of products within the time and products are sold at lower prices than the competing firms as consumers are very price conscious in the industry and still managing better financial performance and profitability to ensure growth in the long run. Firms that are able to manage and tackle these problems and challenges would be able to improve their market share and achieve success. RATIONALE OF THE STUDY: This project will be carried out to examine and identify the financial performance of three important players of the UK retail industry; Tesco, Asda and Sommerfield. Financial ratios of each company will be used to compare and analyse the financial performance of each of these companies. Also it will be analysed how these firms in the industry are able to keep themselves stable in the market despite of so many factors influencing the sales of the industry and tough competition they are facing. This project will also help in analysing different strategies that these three firms in the retail industry have adopted and how these strategies have been helpful to their financial performance. RESEARCH QUESTIONS: This research report will investigate the following research questions: 1. Have there been improvement in the Financial performance of Tesco, Asda and Sommerfiled in the last five years? 2. How these firms are able to keep themselves stable in the industry? AIMS AND OBJECTIVES OF THE STUDY: The main aims and objectives of this report would be: 1. To examine the financial performance of three major firms in the food retail industry; Tesco, Asda and Sommerfield. 2. To compare the financial performance of these firms by using financial ratios and which ratios have contributed towards the success of these firms. 3. To investigate how these firms are able to keep themselves stable in the retail industry. SIGNIFICANCE OF THE STUDY: This research report will be very important for investors and other players in the food retail industry as it will be helpful in analysing the strategies adopted by firms in the food retail industry which have been helpful for their growth and success. The strategies adopted by firms are reflected by the financial statement and financial performance of the companies and this study will be helpful in identify different strategies adopted by Tesco, Asda and Sommerfield and their impact on their financial performance. Therefore, by analysing three important players in the industry, the report will be able to explore and identify strategies which can be helpful for other firms in the industry to make them successful. In addition to this, this report will be of high significance for other players in the food retail industry as well as it will identify how these firms are able to keep themselves stable in an ever-changing industry. BRIEF EXPLANATION OF THE STRUCTURE OF DISSERTATION Chapter 1: Introduction The first chapter of the research report will introduce the main topic of the research and related concepts. The first chapter would give an introduction, background, rationale and significance of the research topic and study. The main aims and objectives of the research report will also be presented in the first chapter. Chapter 2: Literature Review Theories and concepts that are important in explaining the research study will be presented in the second chapter. Chapter 3: Research Methodology The research methodology chapter will present the methods used by the research to examine the research questions. Chapter 4: Background of the Company This chapter would introduce the three companies under study. Chapter 5: Data and Analysis This chapter would analyse the data gathered through secondary research. Chapter 6: Conclusion and Recommendations Last chapter of the research report will present the conclusions and findings of the project and provide recommendations as well. References Arch, Z 2010. Retail Overview. Available from [Accessed 13 November 2011] Hamlett, J, Alexander, A, Bailey, A, & Shaw, G 2008, Regulating UK Supermarkets: an oral history perspective. Available from [Accessed 13 November 2011] Internet Retailer 2010, 40% of U.K. shoppers will do at least half their shopping online this holiday season. Available at http://www.internetretailer.com/2010/12/16/40-uk-shoppers-will-do-least-half-their-shopping-online [Accessed 9 December 2011] Internet Retailer, 2011, U.K. holiday e-retail sales grow 12% for smaller merchants. Available at http://www.internetretailer.com/2011/01/10/uk-holiday-e-retail-sales-grow-12-smaller-merchants [Accessed 9 December 2011] Tesco 2011, Financial Statements. Available at http://ar2011.tescoplc.com/pdfs/financial/five_year_record.pdf [Accessed 9 December 2011] The Scottish Government 2010, Food and Drinks in Scotland: Key Facts 2009. Available from [Accessed 27 November 2011] Read More