Retail Landscape of South Africa

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  • Topic: Debt, Ratio
  • Pages : 74 (2987 words )
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  • Published : June 15, 2012
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A
 Comparative
 Financial
 Analysis
 of
 Pick
 n
 Pay
  with
 Shoprite
 –
 Changing
 Retail
 landscape
 in
  South
 Africa
 
 
 
  By
 Sirsendu
 Sen


 
  Executive
 Summary
 
  Following
 the
 takeover
 of
 Safeway
 in
 2004
 and
 successful
 completion
 of
 the
 restructuring
 work,
  WM
 Morrison
 is
 now
 ranked
 at
 4th
 position
 in
 the
 UK
 (Global
 Rank
 32nd),
 according
 to
 the
 Global
  Powers
 of
 Retailing
 Report
 (Deloitte
 LLP,
 2012).
 To
 maintain
 the
 growth
 momentum,
 the
 Policy
 and
  Development
 department
 are
 currently
 exploring
 a
 number
 of
 expansion
 strategies.
 In
 particular,
 a
  couple
 of
 potential
 candidates
 for
 acquisition
 in
 the
 South
 African
 retail
 market
 have
 been
  identified
 as
 below:
 
 
  1)
 PicknPay
 Stores
 Ltd
 (Global
 Rank
 133rd)
 and
  2)
 Shoprite
 Holdings
 Ltd
 (Global
 Rank
 92nd)
 
  The
 purpose
 of
 this
 report
 is
 to
 carry
 out
 a
 broad
 level
 comparative
 financial
 analysis
 of
 both
 of
  these
 companies
 in
 order
 to
 evaluate
 if
 any
 of
 them
 can
 potentially
 be
 a
 right
 fit
 for
 our
 growth
  strategy.
 
  Approach
 
  To
 carry
 out
 the
 comparative
 financial
 analysis,
 “CORE”
 framework
 (Moon
 &
 Bates,
 1993)
 has
 been
  utilised
 which
 focuses
 on
 the
 analysis
 of
 the
 key
 financial
 ratios
 in
 the
 context
 of
 external
  environment
 in
 which
 the
 company
 operates
 and
 internal
 context
 of
 the
 company
 e.g.
 how
 the
  company
 is
 organised.
 This
 approach
 ensures
 the
 performance
 trends
 are
 analysed
 in
 the
 context
 of
  the
 “big
 picture”.
 CORE
 stands
 for:
 
 
  C-­‐
 Context
 (Both
 internal
 and
 external)
  O-­‐
 Overview
 
  R-­‐
 Ratio
 (Financial
 Ratios)
  E-­‐
 Evaluation
 
  For
 the
 purpose
 of
 analysis,
 the
 data
 has
 been
 taken
 from
 the
 financial
 reports
 of
 2011
 and
 2010
 for
  both
 the
 companies.
 
  Analysis
 
  External
 Context
 –
 Retail
 Landscape
 of
 South
 Africa
 
  Current
 Competition
 
  South
 Africa
 represents
 the
 largest
 retail
 industry
 in
 the
 Sub
 Saharan
 region.
 Retail
 market
 in
 South
  Africa
 is
 primarily
 dominated
 by
 the
 5
 companies
 –
 Shoprite,
 Massmart,
 PicknPay,
 Woolworths
 and
  Spar.
 
 For
 most
 part,
 they
 offer
 much
 of
 the
 same
 range
 of
 Products,
 as
 a
 result,
 they
 strive
 hard
 to
  gain
 competitive
 advantage
 through
 image
 and
 service
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