Financial Report Waitrose

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Financial Report of Waitrose Ltd
• Future Market Opportunities
• Past Performance

Report

Executive Summary:

1. Analysis of overall 5 year market performance (Performance) 2. Moving Average model (Trend and Seasonal variation)
3. Forecasts (Regression analysis of trend and actual/trend forecast) 4. Explanation of multiplicative model & Reliability of trends (Comments) 5. External factors affecting trends (Inflation, Demand/Supply) 6. Market potential (Niche Market)

7. Conclusion

Introduction

1.This is a report on Waitrose Ltd. The first outlet was opened in 1955. Over the years Waitrose has become one of the country’s leading food retailers. Today there are more than 165 branches, dedicated to offering quality, value and customer service. The overall position of Waitrose in the food retail sector compared to its mains competitors varies slightly. We will now look into this in more detail. Below we have a pie chart illustrating the market share of Waitrose along side with 9 other top food retailers. Waitrose has a very low 3% of the top 10 retailer’s market share.

Waitrose had a 3 % share of the food retailer market in UK in 2004/05. This reflects the performance of a business in relation to its competitors - Tesco is the most dominant competitor and is reaching/targeting a monopoly status with a market share of 31 %.

By comparing both figures, we realized that Tesco has a 10x higher market share than Waitrose Ltd. Other competitors such as Sainsbury (17 %) and ASDA (16 %) are still ahead of Waitrose' market share. It might be concluded that Waitrose carries out differentiated marketing which means that a certain group of people is targeted which is the upper class of income who are more likely to purchase "quality goods" – that is what Waitrose is specialized in. On the other hand, competitors such as Tesco and ASDA are trying to sell to anyone which is known as mass marketing/undifferentiated marketing.

Therefore, Waitrose' market share is less important because they might want to be seen in a niche market instead of a mass market and in this case market share is not an appropriate tool to judge the success of the firm. However, the main advantage of using market share is that it abstracts from industry wide macro-environmental variables such as the state of the economy, inflation or changes in tax policy.

When we look at this graph, we clearly see Waitroses' position in the food retailer market in terms of profit margin.

In year 2005, the profit margin of Waitrose Ltd. is 2.38 % which is not a lot as compared to Tesco's profit margin in 2005 which is 5.78 % - that is the double.

This figure clearly shows the dominance of Tesco's. in the food retailer industry. However, it also shows that Waitrose sells its products with a low profit margin. Their products are seen as Cash-cows which keep giving returns and this fact might be more important because loyalty is created. Currently, prices are set slightly above manufacturing costs and therefore the profit margin is not as high as it could be.

Due to competition Waitrose is forced to sell at an affordable price; therefore they cannot reach a high profit margin in future if the price for manufacturing the products remains the same. Waitrose needs to maintain their quality they are known for but cut manufacturing costs in order to increase their profit margin.

Moving Average Model

2. The below forecast shows the figures for the household consumption for food and non-alcoholic drinks up till 2005 June. For the rest of the remaining year and for 2006 we have to illustrate these figures using a trend line.

[pic]

Forecast

3. A continued gradual slowing of spending is expected, although Christmas shopping will undoubtedly will boost sales in certain sub-sectors. With the slowdown in spending, strong price cuts and sale promotions are expected in the run-up to Christmas to boot sales; the latest sales...
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