Business Analysis and Valuation Report

Topics: Retailing, Profit margin, Revenue Pages: 12 (3360 words) Published: April 18, 2010

Scheduled Class: Monday 2:00pm to 5:00pm

Harvey Norman is now a public company that is listed on the stock exchange, whose principal activities primarily consist of an integrated franchising, retail and property entity. It is one of Australia’s most successful retail groups, operating more than 150 franchised department stores, which focus on selling computers, home entertainment equipment and home appliances. It offers Australian consumers an extensive product range, cutting edge technology and market leadership in most product categories. In this report, an in depth industry and company analysis will be provided in order to gain an understanding of the qualitative aspects of Harvey Norman’s operation. 2. Industry Analysis

2.1 Main Products
Harvey Norman belongs to the retailing industry. The main products offered by Harvey Norman consist of: electrical, computer, furniture, entertainment and bedding goods. However, being distinctive from its competitors, Harvey Norman is a franchise and the main brand owned by Harvey Norman Holdings Limited. 2.2 Future Prospects

In the next year, the competition in Australian retailing industry is likely to remain strong. Benefited from the Government’s stimulus package during the GFC, Australians’ ability to consume has recovered. Therefore, this boost in consumption has caused a pressure of inflation. In order to mitigate the negative effect of inflation, there has been frequent increase of interest rate by the Reserve Bank. Therefore, with interest rate rising, consumption in retailing goods is likely to reduce in the short term.

In the next five years, the Australian Dollar is going to remain strong. As a result, imported retailing goods are likely to be cheaper for Australian consumers. Retailers in Australia are likely to continue their expansion to the overseas market. It is because retailers demand further improvements to the operational performance.

In the long run, retailers are likely to increase their share in key growth markets combined with the brand strength of their own company, in order to ensure future growth.

These speculations are based on principles of economics, as well as assessments of the changes in Australian’s consumption ability. 2.3 Market Competition Review
Harvey Norman competes in the five main retailing industries including: electrical, computer, furniture, entertainment and bedding goods. Each industry has its own main player. The main players in the electrical and computer goods industry include: Clive Peeters, Dick Smiths and Bing Lee.

1) Clive Peeters’s retail coverage is the most similar to Harvey Norman in Australia. Their main products include: Audio Visual, Kitchen appliances and white goods. Clive Peeters’ stores carry more than 140 brands and over 20,000 individual models. This company can be seen as a major competitor to Harvey Norman because of their similarity in size.

2) Bing Lee specializes in consumer electronics, computer and telecommunication goods. Unlike Harvey Norman, Bing Lee is a privately-held electrical retail business in New South Wales with 41 stores and a turnover of about $490 million. Although it is the largest privately-held business in this industry, Bing Lee remains as a relatively small size retailer comparing to Harvey Norman.

3) Dick Smith (formerly Dick Smith Electronics) is an international electronics retailer. It is a major competitor to Harvey Norman.

Among all retailing industries where Harvey Norman competes in, the company remains dominant in the key product areas of audio, computers and visual products such as notebooks and flat panel televisions. The company holds the number one position in the markets of white goods and technology products.

3Company Analysis
3.1 Company Choice
As one of Australia’s largest and most successful retailers, Harvey Norman has business interests in...

References: Harvey Norman (2010), ‘About Us’, Website,
Harvey Norman Holdings Ltd (2010), ‘Company Profile’, Website,
Palepu, K. G. and P. M. Healy, Business Analysis and Valuation Using Financial Statements: Text and Cases, 4th ed., South-Western College Publishing, 2007.
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