WM Morrison

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    Michael Porter

    An industry's proftpotential is largelydetermined by the intensity

    o competitive rivalrywithin that industry,

    (Porter, M.E., 1979)

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    ABOUTWM Morrison Supermarkets Plc

    WM Morrison is one of the big superstores in the UK whohas ore than 1!" ar#et share.

    $ foun%e% in 1&99 an% hea%'uartere% in ra%for%,

    $ it is the th *argest superar#et in the UK

    $ ta#eo+er afewa- in !!.

    $ fo/us on foo% an% gro/er- pro%u/ts (Morrison0s pro*e,

    !12).$ o3er the high 'ua*it- of /ustoer ser+i/e b- we**traine% sta3 to attra/t ore /ustoers

    $ 456 ser+i/e has intro%u/e% to /o**eagues in a** stores

    $ oti+ate sta3 wor# as a tea an% a/hie+e goa*s.

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    6heir /urrent strateg-

    ri+ing the top*ine8

    strengthening the bran% iage,

    /reate *ea%ing range an% o3er high 'ua*it- pro%u/e

    o3er /ustoers the best fresh foo% in the UK

    pro+i%e great +a*ue an% e:perientia* engage shoppingen+ironent

    bui*% new stores he*p /ustoers eas- to a//ess.

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    6heir /urrent strateg-

    Increasing ecienc8

    intro%u/e new so*ution for Morrisons0 +e anufa/turing pro%u/e sites

    to ipro+e e;/ien/-.

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    Market s#are o$ grocer storesin %reat Britain& 'ovem(er )*+,

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    Porters =i+e =or/es >-6hreat of Entr-Entr-

    -argaining Power of upp*iersupp*iers -argaining Power of u-ersu-ers

    -e+e*opent of ubstituteubstitute

    Pro%u/tsPro%u/ts -?i+a*r-?i+a*r-aong @opetitors

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    6hreat of Entr-Entr-

    6hreat of new entrants is e%iu8

    Aarge e/onoies of s/a*e

    4uge bu-ing power of the estab*ishe% superar#ets, whi/ha#e it a/tua**- ipossib*e for a new p*a-er or for thesa**er /on+enien/e stores to u/h their *ow /osts.

    Bn- new entrant suppose% to /oe in on a *arge s/a*e inor%er to a/hie+e *ow /ost *e+e*.

    @apita* re'uireent is high as entr- to ar#et in+o*+eshuge in+estent in %istribution, ser+i/e an% te/hno*og-.

    =our big superar#ets a*rea%- ha+e big share in ar#etnew entrants

    @onsuer e:pe/tations growing nowa%a-s.

    Co+ernent po*i/-.

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    argaining Power of u-ersu-ers

    6he bargaining power of the bu-ers is +er- high %ue tothe a+ai*abi*it- of se+era* a*ternati+es.

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    -e+e*opent of ubstituteubstitutePro%u/tsPro%u/tsor er+i/es

    6hreat of substitutes is high as against Morrison a *ot of /on+enien/estores, fore/ourts supp*-ing pro%u/ts to shoppers.

    E:isten/e of /*ose substitutes a#es /onsuers being +er-sensiti+e on pri/e that the- wi** swit/h easi*- to anothersuperar#et or on*ine shopping.

    Morrison is the on*- superar#et whi/h %oes not o3er on*ineshopping -et to /ustoers.

    4owe+er, Morrison /an re%u/e its gro/er- /ost as the resu*t of goo%

    +erti/a* integration of supp*- /hain. Ear*ier entione% 1!!" beef, por#, *ab an% /hi/#en so*% are

    ritish.

    Morrison owns its pa/#ing fa/tories an% ba#eries it gi+es orea%+antage o+er other superar#et ri+a*s.

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    ?i+a*r-?i+a*r-aong @opetitors

    Increased rivalr aong gro/er- retai* shops a- o//ur when /opetitorsare rough*- the e'ua* sie an% one /opetitor %e/i%es to gain share o+er theothers (A-n/h, !!F). =a/tors that /on%u/t to in/rease% ri+a*r-8 marketgrowth, cost structure, barriers to exit, switching cost and diversity:

    this in%ustr- has high /opetition, big ha+e a*rea%- o//upie% ostar#ets a/ross the /ountr-, in/*u%ing8 6es/o, ainsbur-0s, BB(Beri/a owner Wa*$Mart), ainsbur-0s an% Morrisons.

    6es/o is ar#et *ea%er, whi/h has 2!.7" ar#et share, fo**owe% b-BB with 17.F", ainsbur-0s he*% share at 1F.F", Morrisons at the thposition with 11.9" ar#et share (6he Cuar%ian, !1).

    6es/o an% BB ha+e a*ost G!" ar#et share %ue to their sies both

    of the are internationa* /opanies who ha+e business wor*%wi%e. 6hethreat of ri+a*ries is high.

    6he- are8 ar#et growth, /ost stru/ture, barriers to e:it, swit/hing /ostan% %i+ersit-

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    W56

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    a*ue /hain ana*-sis(@B) Ji%entif- potentia* sour/es of e/onoi/a%+antage4ow the r0s interna* /ore /opeten/ies /an be

    integrate% with the e:terna* /opetiti+e en+ironent to%ire/t optia* resour/e a**o/ation8

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    =inan/ia* ratios are /ategorie%a//or%ing to the nan/ia* aspe/t of the

    business whi/h the ratio easures8

    .i/uidit ratiose:aine the a+ai*abi*it- of /opan-Ls/ash to pa- %ebt.

    Pro0ta(ilit ratioseasure the /opan-Ls use of itsassets an% /ontro* of its e:penses to generate ana//eptab*e rate of return.

    .everage ratiose:aine the /opan-Ls etho%s ofnan/ing an% easure its abi*it- to eet nan/ia*ob*igations.

    1cienc ratioseasure how 'ui/#*- a r /on+ertsnon$/ash assets to /ash assets.

    Market ratioseasure in+estor response to owning a/opan-Ls sto/# an% a*so the /ost of issuing sto/#.

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    Pro0ta(ilit ratios

    !1 !12

    3eturn on s#are#olders4 $unds

    $!,!G! !,1

    3eturn on capital emploed $,G2 11,GG!

    'et pro0t margin $1,2F 2,G71

    %ross pro0t margin F,!7 F,FG7

    e/ause of /apita* in+estent in on$*ine business the return onshareho*%ers0 fun%s an% /apita* ep*o-e% an% net prot argin arewa- *ower in !1 than in !12. 5n*- gross prot argin is near the+a*ue in !12. 6here is a negati+e per/entage on /apita* ep*o-e%whi/h in%i/ates ine;/ient an% ine3e/ti+e use of resour/es b-anageent.

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    1cienc ratios

    !1 !12

    Average inventories turnover period 17,97 1F,F!

    Average settlement period $or receiva(les F,G G,&F2

    Average settlement period $or paa(les 9,929 G,97G

    Sales revenue $or non5current assets 1,9!1 1,97

    Sales revenue per emploee !,11 !,1!

    E;/ien/- ratios are a bit better be/ause the ratio between perio%

    for re/ei+ab*es an% pa-ab*es is better in !1 than in !12. a*es

    re+enue per ep*o-ee is 'uite sii*ar. 5+era** the best wa- is to

    ha+e *onger perio% to pa- -our /re%itors an% shorter perio% to

    re/ei+e one- fro -our %ebtors as we ha+e here.

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    Investment ratios

    !1 !12

    :ividend paout ratio 17,721 2,1

    :ividend ield ,&!! ,1GG

    1arnings per s#are 1!,2! F,FG!

    Price earnings 2,212 9,2&!

    6he earnings per share ha+e %e/rease% ore than ties forone -ear.

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    @on/*usion

    5ur essage to Warren>

    on0t bu- their shares, be/ause their prots go %own, their

    gearing ratio in/rease% (so the- ha+e ore %ebt an%%epen%abi*it- on %ebt), their anageent boar% has /oe upwith ba% %e/isions through the *ast se+era* -ears (on*ine shops),an% it %oesn0t o3er enough /on%en/e.

    6heir @E5 was %isisse% se+era* onths ago, but we sti** nee%to see the new %ire/tion in whi/h Morissons wi** go.

    Warren, with that one- bu- Uber0s an% A-ft0s sto/#sN