Financial Analysis and Strategic Planning for Tesco PLC Assignment Sample

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Financial Analysis and Strategic Planning for Tesco PLC

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Financial Performance Analysis and Strategic Planning for Tesco PLC: Assessing Competitive Advantage in the Retail Sector

Financial performance can be explained as a subjective measure that is used by the business organization to analyse how well the organization is using its assets for the primary business model and how effective the organization is generating revenue. This is most important for the business organization to evaluate their financial performance to get a better overview of the firm’s financial health (Kim and Im, 2017). This process can help the organization to increase the financial performance of the company. This report will be providing an analysis of the financial performance of the organization and its close competitor in the target market. This report is providing a brief analysis of the financial performance of Tesco PLC in the global market. For the comparison of organization in the market place, the financial performance of Sainsbury’s is compared to the financial performance of Sainsbury PLC in the global market. This report will provide a brief analysis of the financial performance of Tesco PLC as compared to the close competitor in the market. In this report, the financial performance of Tesco PLC will be compared to the financial performance of Sainsbury.The balanced scorecard of the Tesco PLC will be explained in the report to develop strategic planning for Tesco to stay top among the retail sector organization in the market. Is also the objective of preparing a balanced scorecard is to develop effective business strategies to improve the financial performance and business operations of the organization in the target market. Later in this report, the integrated report will be developed for Tesco PLC to analyse the overall business efficiency of Tesco PLC in the target market. Various performance aspects related to the business strategy of Tesco PLC will be evaluated in the report to analyse the overall financial performance of the organization in the market place.

Ratio Analysis

Different type of ratios must be analysed in the process to analyse the financial performance of the organization in the target market. This ratio can be compared to other company to perform a comparative analysis of companies of the same industry (Wood, Wrigley, and Coe, 2017). Tesco PLC is considered as a leading market brand in the UK market and Sainsbury’s major competitor. This is important for the organization to perform competitive financial performance analysis in the market place to evaluate the aspects that are needed to be considered by the organization effectively. The financial performance analysis of two different companies can be performed by comparing different ratios. For example Profitability Ratio, efficiency ratio and liquidity ratio can be analysed to analyse the financial performance of Tesco PLC and Sainsbury in the market place.

Liquidity Ratios

The liquidity ratio of the organization can be considered as a sign that is used to analyse that, whether an organization can pay off all these short-term obligations. This is the most important aspect of a business organization. In the liquidity ratios, a higher value can be used to indicate that, the organization have a higher capability to pay off their debts in the market place which are for the short term. In the short-termobligations organizations have to pay the debts within the one financial performance (Ismail, 2017). This is a way to analyse the financial performance of the company. If an organization is not able to pay off its debts and obligations inthe short term within the time then it can be said that the financial performance of the organization is weaker as compared to other organization. This situation can be explained as a condition where shareholders have to buy shares of an organization. Shareholders will prefer an organization that has more capability to pay off their obligations within the time. If an organization cannot pay the obligations then it can be considered that they are performing less in the market place. Here the current ratio of organization will be reflected in the report is important to measure the capability of the organization by the availability of financial resources to repay the short term obligations or it also can be considered as capability of repaying obligations if there is any possibility of cash flow problem in the future (Awadari and Kanwal, 2019).The benchmark performance of the organization can be explained as a ratio of 2:1. This is the usual benchmark that can be considered as the benchmark for the financial performance of the organization in the target market. Higher the current ratio can be considered as high capability of the organization to pay their obligation in the target market. In the financial performance analyse, the current ratio which is calculated in the report can be reflected as-

Year 1	Year 2
Current - Ratio
Sainsbury PLC	0.65	0.61
Tesco PLC	0.64	0.66

As reflected in the current ratio of the organization, both organization have a lower current ratio as compared to the benchmark that is explained as the 2:1 benchmark ratio. Within the comparison of both organization Tesco PLC, have higher current ratios to repay their obligations of the short term.

Profitability Ratio

The profitability ratio can be used to analyse the profitability of the organization in the target market. Profits are used to Pay Dividends and fund capital expenditure. These measures are most important while profitability analysis is performed within two organizations. In terms of shareholders, they need to analyse the profitability of the company. This is important for the shareholders to analyse the earning per share to measure the earning possible with each share, this is the process that can be used by the individual shareholder to analyse the earning available with each share. This ability can be compared with the actual dividend to analyse the pay-out ratio. The other ratio that is considered in the profitability ratio can be explained as a method to analyse the profitability of the organization in the target market (Utami, 2018). The gross profit of the organization can be explained as revenue after cutting the cost of goods that is sold. Gross profit margin can be considered as the ability of the organization for production. This is the production ability of the organization. If the company have a higher gross margin then it can be considered that they have a higher capability to meet the production demand. At last, net profit margin also can be considered to analyse the overall profit of the organization in the target market. Net gross profit can be analysed as absolute profit that is evaluated after removing all the costs from it. As per the calculations, all the data that have been found for both company is-

Year 1	Year 2
Earning – Per – Share
Sainsbury PLC	0.32	0.32
Tesco PLC	0.35	0.15
Gross-Profit - Margin
Tesco PLC	8.44%	6.31%
Sainsbury PLC	5.43%	4.70%
Net-Profit – Margin
Tesco PLC	4.39%	0.01 %
Sainsbury PLC	2.68%	2.58%

As per the data of the earning per share, gross profit and Net profit Margin it can be considered as financial performance is Tesco PLC is more effective in the market place. But in some aspects,the performance of Sainsbury is also effective. Several factors have affected the net gross profit and gross profit of the company I target market.

Efficiency Ratio

The efficiency ratio of an organization can be considered to analyse the efficiency of the organization to utilise its liabilities and assets for revenue generation. Ratio such as sales to inventory could be used to determine the efficiency of the business as compared to the peers. The efficiency ratio of both organizations is-

Year 1	Year 2
Sales – to - Inventory
Sainsbury PLC	21 Days	21 Days
Tesco PLC	15 Days	15 Days

As per the data calculated in the report, it can be explained that Sainsbury is more capable and able to control its stock levels as compared to Tesco PLC. This is most important for the organization of the retail sector to maintain the inventory with high speed. This is related to their efficiency to meet the customer demands within time.

As per the ratio analysis of both organization, it can be explained that Tesco PLC is performing better than Sainsbury in the market but in the case of gross profit, Sainsbury is performing lose to the company and in terms of efficiency ratio, Sainsbury is more effective than Tesco PLC. Sainsbury PLC has more control over inventory management (Naidoo and Gasparatos, 2018). From the analysis, it can be said that Tesco is currently leading the financial performance in the UK and in few years, Sainsbury PLC will be able to meet the aspect performance as compared to the Tesco PLC.

Balance Score Card

A balanced scorecard can be considered as a planning tool that can be used by the business organization to develop an effective strategic plan for the company to improve their overall performance in the target market. There isa range of perspectives considered in the balanced scorecard of the business organization to develop an effective plan for the business of the company. All these perspectives are considered by the business organization within the balanced scorecard to improve the performance of the organization target market by developing an effective business strategy or strategy (Hanaysha, 2018).

Financial Perspective

Financial perspective can cover all the finance-related objectives of the organization. In this process, managers are allowed to track the financial success of the organization. For example, this tracking can be related to the wealth creation for the shareholders of the organization. According to the current situation of the organization, this is important to develop a balanced approach for performance management and measurement. The organization is working with the traditional approach to performing the financial measurements and tracking. Most of the time intangible factors are avoided by the organization (Grosso, Castaldo and Grewal, 2018).All the financial aspects that are related to the organization are important for the organization in the financial perspective of the balanced scorecard.

Tesco PLC is one of the most famous supermarket chains in the global market. In some years,the organization has developed a business strategy in which they have planned to increase the price of the goods to meet the profit target within the timeline. Later the organization have reduced the prices of goods to perform better than the competitors in the target market have.. In this business plan, some strategic actions are considered by the organization to fulfil the business goals effectively. For the completion of business goals, this is important to follow some strategic objective to improve the financial performance of the company (Kativhu, Mwale and Francis, 2018). The strategic objectives that will be followed by the organization in the next few years are based on the financial growth of the company. The major objective of the organization is to improve the sales of the company all over the world by 10%.

Internal Business Process Perspective

This is also important for the organization to focus on the internal operations and process of the organization to increase the performance of the organization. In this process business,the balanced scorecard focuses on the internal operations of the organization and track the internal performance of the organization to keep the operations of the organization profitable. For future operations, some goals and targets are developed by the organization to meet the business objective (Cesar de Moraes, Cunha, and Terlizzi, 2017). The strategic goals that are developed by the organization are- Improve the health and safety considerations in the organization to keep all the operations of the organization safe for the employees and provide them better working conditions. This is also one of the strategic objective of the organization to improve the internal processes and develop control measures to reduce errors in internal operations (Pabalkar and Nimbalkar, 2021). Along with the internal operation management, this also focuses onthe organization to work on an innovative approach to improve the internal processes of the company. Innovative approaches can be used by the organization to address the current issues that are faced by the organization in the target market. This is also a major objective of the organization to work on advanced level inventory management processes to increase the efficiency of inventory management processes. Along with this some developments also have been proposed by the organization to improve the supplier and process management in the internal operations of the organization.

Customer Perspective

Customers of the organization are most important for the organization. This is important for the company to develop effective plans and operations to meet the customer needs effectively. As per the balanced scorecard business strategy, there are some strategic objectives are developed by the organization to improve customer satisfaction and engagement (Ur Rehman and Ishaq, 2017). The Strategic Objectives that are developed by the organization are- The main objective of the Tesco PLC to perform business in the UK is related to customer benefits. This is the objective of the organization to reduce customer spending to develop a loyal and long-term relationship with them. Customer choices can be improved to improve and the range of products also need to be improved as per the current trends and customers’ needs to engage customers effectively. This is also the objective of the organization to improve the quality and range of merchandise within the stores of the company. All these objectives are considered by the organization to meet the profitability objectives in the market place.

Learning and Growth Perspective

Role learning is most important for the business organization. The growth and profitability of an organization are dependent on the learning capability of the organization. This is most important for the company to focus on the learning and growth aspects in the workplace to improve the internal operations of the organization. The main thing that is needed to be focused on by the organization is related to employee learning, skill development and performance management. To maintain the profitability of an organization this is important to develop effective training and development plan to improve the performance of employees within the workplace. Strategies that are developed by the management of the organization to improve organizational learning in the workplace. The processes that are planned by the organization are- Create new jobs for skilled employees in the organization (T?NASE, 2021). Develop reward management processes in the organization to develop support and team working in the company. Improve the leadership of an organization can be useful to improve the intensity of the organization. Whistleblowing policy can be improved to improve the effectiveness of the internal process of the organization. Workplace diversity can be improved by the organization to improve the workforce of the company.

This is how various strategies and processes can be used by the organization to improve its overall performance in the target market. These strategies can be used by the organization to meet business objectives effectively. All the strategies that are developed by the organization are based on current situations, internal and external factors related to the organization.

Integration Report

Integration report is considered as concise report about the organization. Integrated report can be used to analyse the current business strategy of the company. In the integrated report, detailed information regarding organization is used to analyse the business strategy of the company. Performance perspective is considered in the integrated report to analyse the brief overview about the organization. Main purpose of the integration report is to analyse the business strategy of organization in related business environment.

Company Overview Business Environment Analysis

Tesco PLC is the largest retail and grocery store in the UK. It was founded in the year 1919 by Jack Cohen in the London United Kingdom. Headquarter of Tesco PLC is located in Welwyn Garden City England, United Kingdom. There is a total of 7005 retail stores are currently working on a global level. Tesco PLC is holding the largest market share as a retail sector organization in the United Kingdom. Tesco PLC is the most capable organization in the UK and global market. Company is working with effective governance system to maintain performance on global level. Main objective of the organization is to grow on global level and enter in emerging market to improve their reach to the customers.

Political factors are mainly related to the actions and decisions that are taken by the government of the organization. All the policies and actions that are taken by the organization are designed in a way to provide maximum opportunities to the business organization in the global market. UK government is highly supportive for the organizations to make a maximum profit as per the terms and conditions. In the current time, Brexit is the only negative factor that is related to the actions of the government (Tennent and Mollan, 2021). This situation has created an uncertain situation for the organization. Investors of the organization are also having confusion to invest in the organization that are majorly operating in the European market.

This is how it is challenging for the business organization to deal with the issue of Brexit in the local and European market.Tesco is one of the largest retail sector organization in the UK but it also has faced the major impact of the financial crisis in the Covid-19 pandemic. Due to the transportation ban on an international level, the supply chain of Tesco PLC was majorly affected and it also has affected the availability of goods and services in the global market. It was the major economic factor that has affected the economic stability of an organization (Jin and Shin, 2020). The other factors like Taxation rate and other economic decisions of government are effectively handled by the organization.Social factors for Tesco PLC are highly positive. The UK is an effective market for the retail sector organization.

Social conditions like diversity and population are helping the organization to include a range of products in their stores to improve profitability (Awadari and Kanwal, 2019). Other social factors like education and per capita income is also a positive aspect for Tesco PLC in the market.Technical factors are highly positive for Tesco PLC. Currently, Tesco PLC is using the best efficient technology in its operations. It is using the most advanced technical system among all the retail sector organization (Adamyk, 2019). Due to superior technology, Tesco PLC is taking advantage of technical lead in the business operations.In the earlier business operations, Tesco PLC has faced some troubles because a sustainable approach was not used in the business operations. Differences between the local and international business laws also affecting the business strategy of the company (Solutions and Belt, 2017). Due to these laws, Tesco is not able to serve some of its products in the global market.

Governance Structure of Company

The business structure of Tesco PLC is designed to have more control over the performance and operations of the front line employees of the organization. In the Tesco stores, the hierarchical structure is used to maintain high-quality work in operations (Ismail, 2017). It is a publically shared organization so, the structure that is used in the company is clearer and well defined. It is helping the organization to perform business operations more effectively.There is a specific governance system is used by Tesco PLC to maintain effective system in company. The board of directors incorporates the chairman, chief executive and non executive directors who are responsible to design appraisal to improve the vision and mission of organization in global business operations. The insight of the organization lies at the governance system of the company.

Business Model

The business model that is used by Tesco PLC is based on the low-cost strategy. This strategy is used by the organization to attract more customers to buy their products and services. Along with this, the company is also maintaining premium services in the operations to target the upper economic class in the global market. In some cases, this is difficult for organization to stick to the business model. Sometimes low cost business model can affect the profitability of organization in target market.

Opportunities and Risk

Tesco is operating on the global level and it is providing more opportunities to the company to perform business and earn profit. The company is also targeting a range of new emerging markets on the global level to get more opportunities but along with targeting a new market, they are also facing a range of challenges in the business operations (Jonah, 2018). Due to legal and social factors, Tesco PLC is facing challenges in the business operations.

This is how overall Tesco PLC is performing effectively in the global market. The business strategy of the company is also based on the business targets of the organization. All the actions and operations that are performed by the organization are supporting the company to perform business in the global market.

conclusion

This report is concluding critical information about the financial performance of Tesco PLC in the global market. For the effective analysis, comparative financial performance analysis has been performed between Tesco PLC and Sainsbury for continuous two years. Ratio analysis methods have been using to analyse the financial performance of both companies. After the ratio analysis, the balanced scorecard for Tesco PLC has been developed in the report to improve the overall strategically performance of the company in the global market. Various strategic approaches have been suggested in the business model to maintain higher productivity in the target market.The complete integrated report also has been analysed in the report to get an overview of the current operations and business approach of the company

References

Books and Journals

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Hanaysha, J.R., 2018. An examination of the factors affecting consumer’s purchase decision in the Malaysian retail market.PSU Research Review.
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