EBUS601: BUSINESS ANALYSIS AND ASSESSMENT

Benchmarking
Sainsbury’s and Morrisons

200441707 12/16/2009

EBUS601: Benchmarking 200441707

Contents INTRODUCTION SECTION 1: COMPANY DETAILS Names, addresses and logos of companies Brief History Sainsbury’s Morrisons SECTION 2: BUSINESS ACTIVITIES Company Product Tree: Sainsburys Company Product Tree: Morrisons SECTION 3: FINANCIAL ANALYSIS Horizontal Analysis Trend Analysis Vertical Analysis Income Statement Balance Sheet Ratio Analysis Profitability: Gross Profit Margin Liquidity: Current Ratio Efficiency: Asset Turnover Investment: Price/Earnings Ratio SECTION 4: NON-FINANCIAL ANALYSIS Number of Stores Supply Chain Efficiency Success of Branding and Advertising Strength of CSR Policies

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EBUS601: Benchmarking 200441707

SECTION 5: COMPANY POTENTIAL Sainsbury’s SWOT Analysis Morrisons SWOT Analysis SECTION 6: INVESTOR POTENTIAL Sainsbury’s Share Price Morrisons Share Price Current considerations SECTION 7: EMPLOYEE POTENTIAL SECTION 8: LIMITATIONS OF THE ANALYSIS SECTION 9: CONCLUSIONS References

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Supermarkets currently dominate around 80% of the UK grocery market. Non financial performance measures which are appropriate to the industry will also be used. and what they can do to improve their position in the market. These are two of the ‘big four’ supermarkets that dominate the UK supermarket sector (Hilary. In 1950. A SWOT analysis will then be done for each company in order to give the reader a concise picture about where both companies are now. J Sainsbury PLC 33 Holborn London. Therefore their financial data is relatively comparable. These companies were chosen as they are of interest to the author. Both companies hold alcohol licences and are classified as very large companies (FAME. neither of them operates overseas. vertical and ratio analysis. who has some previous experience of research into this industry. WM Morrison Supermarkets PLC Hilmore House Gain Lane Bradford West Yorkshire. UK EN1N 2HT 2. It was popular as it offered high quality goods at cheap prices. as they offer a convenient place to buy cheaply priced goods (Blythman. Sainsbury’s started opening . 2007). UK BD3 7DL Both companies’ principle activities are grocery and related retailing through the medium of supermarkets. The two supermarkets are similar in nature as although they both have a substantial share of the UK grocery market. The companies chosen for this report are Sainsbury’s and Morrisons. SECTION 1: COMPANY DETAILS Names. The companies will be assessed using a range of financial methods such as horizontal. 2009) Company History Sainsbury’s The first Sainsbury’s store opened in a poor area of London in 1869. 2009). Each company will then be assessed to see how attractive it is to both investors and employees. This will be done based on the company’s financial statements for the last three years.EBUS601: Benchmarking 200441707 INTRODUCTION This report aims to compare the performance of two companies in the same industry. addresses and logos of companies: 1.

fresh fish counters. they had completed the process of converting Safeway stores so that they fit the Morrisons format. 2009). By November 2005.3% (Berwin. some superstores will be larger than others and are therefore likely to have more facilities and a wider range of products. SECTION 2: BUSINESS ACTIVITIES Below is a general breakdown of the products that the two companies’ sell. In March 2004. the supermarket registered as a public company and began to grow. opening its 100th store in 1999. Morrisons took over Safeway and became the fourth largest supermarket group in the UK. April 2009). In 1961. The company have since been focusing their attention on locally sourced food in order to gain a competitive edge (Morrisons. This is a generalisation as stores differ. March 2009). The company now has a market share of 16. Company Product Tree: Sainsbury’s I n S tore Prod ucts F ood a nd Dri nk •F re s h fo od c oun te rs N e w s.3% market share in the grocery market (Britt. the first Morrisons supermarket was opened in Bradford boasting 5000 sq feet of retail space and free car parking.EBUS601: Benchmarking 200441707 a number of self service stores. for example. In 2005. setting the template for modern supermarkets today. They also expanded their range to include non-food products. they launched their ‘Try something new today’ advertising campaign which they argue marked the end of a difficult period for the company (Sainsbury’s. 2009). In the 1970’s they introduced bakeries. Morrisons Morrisons started as a small market stall in 1899. The introduction of Sainsbury’s TU fashion range in 2004 expanded the company’s product range further still. Some local stores are city centre based and so do not have free parking facilities. Six years later. They now have a 12. petrol stations and coffee shops into their stores. M a g a zin e s a nd G re e tin gs Ca rds CD ’s an d D VD ’s an d Bo o k s T V ’s a nd Di gi ta l H e a lth a nd Be a uty Ba by H ou s e hold i te m s Pe t Pho ne s S m al l D om e sti c A ppli a nce s H om e wa re a nd C ook wa re H om e Te x til e s F lora l Com pu te r Ga m e s T U Cl othin g Ra ng e Cus tom e r Fa c il itie s •T oil e ts •Pa rk in g •Re s ta uran t •AT M •S e l f Che c kou t O nli ne P roduc ts Fo od a nd Dri nk H o m e a n d G ard e n T e ch nolo gy •S o und a n d Vi sio n •Co m puti ng a nd Ga m in g •Ca m e ra s •M o bi le p h one s •S at Na v a nd Ca r E nte rta inm e nt A p pl ia nc e s T oy s a nd Ga m e s S po rts a n d Le i su re •H o m e F itne s s •S p orts E q uipm e nt •Tra v e l a n d Ca m ping T U c lo thing ra ng e s E l e ctri ci ty an d G a s F i n a nci a l Prod u cts H o m e I ns ula tio n Re c ip e s S to re i nf o rm ati o n C h ris tma s Ide a s F ina n ci a l Pr oduc ts Lo an s •S m a ll loa n •M e d iu m loa n •L a rge l oa n •H om e o wne r loa n In sura nc e •Ca r i nsu ra nc e •L if e in sura nce •T rav e l insu ra n c e •H om e i nsura nc e Cre di t Ca rds Tra v e l •M o ne y e x cha ng e S av i ng s •Ch ild Trus t F u nd •E a sy S a ve r O th e r Pro duc ts Pe tro l sta tio n • Pe tro l • Di e se l • Su pe r unl e ad e d • Ca r W a sh • Je t W a sh Ph arm a c y D ry Cle a ni n g se rv i ce N a tio n al L o tte ry Re c y cl ing F ac il iti e s Pro p e rty .

2009). all in one space.DVD’s and Books Homeware and Co okware Heal th and Beauty Baby Househ old i tems Pet Cus tomer Facili ties •Toil ets •Parking •Res tau rant •ATM Online Reci pes Sto re information Product information Chris tmas ideas Get invol ved s ch emes •Lets Grow scheme Other P roducts Petrol s tati on •Petrol •Diesel •Super un leaded •Car Was h •Jet Wash •Ai r pu mp for tyres Pharmacy Dry Cl eaning s ervice Nati onal Lottery Recyclin gServices Morrisons have a traditional approach in their business activities. where customers can buy products online and have them delivered to their doors. Their reports are also . Magaz ines and Greetings Cards CD’s. they use their website only to provide information on their product ranges and their stores.EBUS601: Benchmarking 200441707 From this we can see that Sainsbury’s offer an online ordering service. The number of product ranges varies between stores due to these different store formats. Sainsbury’s have expanded their product range into the financial market. allowing trends to be noted. They have also began exploring the property market. Company Product Tree: Morrisons In Store Fresh Food Coun ters Fish mo nger Greengrocer Famil y Butcher The Bakery The Delicatess en The cake s hop Fresh to go Oven Fresh Other foods Drink News. They have attempted to recreate their original ‘market store’ feel by offering customers a wide range of food counters. As well as supermarkets. They have not branched out into other product ranges such as financial products. Sainsbury’s have a number of smaller. They do not sell their products online. local stores which are often based in city centres. in a joint venture with HBOS (Wikipedia. SECTION 3: FINANCIAL ANALYSIS The financial analysis section of this report will examine the two company’s financial performance over a period of three years. A three year period provides a sufficient amount of data so that we can see the changes in the company. which details both Sainsbury’s and Morrisons financial reports. focusing their efforts on large supermarkets which sell the traditional range of products. This financial information was accessed using the FAME database.

71% 51. In order to make the financial comparison simple.172 -£669 £17 £520 £64 £584 -£107 £477 -£153 £324 4.9% -37.7% 18. Therefore it is a useful tool for comparing the performance of two companies.54% 2007-08 £17.2% -17.0% 6.2% 2008-09 £18.07% 2. As an example. Horizontal Analysis Conducting a horizontal analysis allows us to compare different items in each company’s financial statements.0% -172.96% 76.911 -£17.969 -£12.00% 5.33% 44.07% 123.47% 1.00% 65. the company’s financial years have been generalised under one heading. Income Statements Sainsbury’s Million Turnover Cost of sales Gross Profits Administration Expenses Other Operating Income pre OP Operating Profit Other income and Interest received Profit before interest & tax Interest payable Profit before tax Tax Net Profit 2006-07 £17.1% 9.875 £1.826 £636 -£272 £60 £423 £21 £444 -£75 £369 -£121 £248 4. This can be done over a period of time so that any changes that have taken place can be noted.62% -1.62% 23.85% -52.6% 4.7% 6.31st January 2009 for Morrisons as these are the company’s reported financial years.837 -£16.151 -£15.35% -20.42% -1. Gross Profits: This is worked out by taking the cost of sales figure away from turnover.36% 0.92% 26. throughout this report the term ‘2008-09’ represents the 1st April 2008.56% 4.96% 1.8% 0.EBUS601: Benchmarking 200441707 available on their company websites. Below are Sainsbury’s and Morrisons income statements for the last 3 years.979 £1. Comments have been made on relevant parts of the data.002 -£502 £30 £530 £81 £611 -£132 £479 -£150 £329 6.68% 185.39% Morrisons 2007-08 £12.835 £1.31st March 2009 for Sainsbury’s and 1st February 2008 .51% -24. .75% 28.47% 3. Cost of sales: These are the costs directly associated with selling the goods such as manufacturing costs and purchasing raw materials.4% -16.6% -26.036 -£420 £57 £673 -£59 £614 -£148 £466 -£177 £289 2006-07 £12.528 -£13.0% 236.0% 12.2% 3.0% 2008-09 £14.1% -2.0% 27.5% 12.3% 90.0% 11.615 £913 -£281 £39 £671 £44 £715 -£60 £655 -£195 £460 Turnover: This represents the total sales revenue of each company in millions.151 £818 -£268 £62 £612 £60 £672 -£60 £612 -£58 £554 12.0% 7. It is unlikely that this will make the figures incomparable as they are only a couple of months apart and so trends can still be noted.462 -£11.0% -12. Each company’s performance will be analysed and compared and any notable differences will be discussed below.36% -14.4% 0.

Overhead costs such as warehousing and transportation will fall under this heading. from its total revenue. leading to a drop in gross profits in 2007-08. marketing or production operations (Business Dictionary. This could also be due to the company selling off property assets that have little development potential (Sainsbury’s Report. Administration Expenses: These are the costs involved in directing and controlling an organisation that are not directly identifiable with financing. financing fair value movements. the rise in turnover is partly down to the high price of fuel. Net Profit: The net profit it known as the ‘bottom line’ and it is calculated by subtracting a company’s total expenses. credits earned from recycling and other one off items (Morrisons and Sainsbury’s financial statements. Sainsbury’s sees a significant rise in other operating income during both periods which. It is also significantly lower than Sainsbury’s. As this item in the income statement represents so many different types of income. there could be a number of reasons for this. Therefore their growth in gross profits could be attributed to the completion of this takeover as more Morrisons stores were open for business after November 2005. . This could be due to the introduction of their ‘Making Sainsbury’s Great Again’ recovery plan which aimed to increase efficiency and reduce waste throughout the company’s operations (Sainsbury’s Annual Report. thus allowing them greater control over their costs. again could be attributed to their recovery plan leading to them rethinking their warehousing structure. 2008-09) However. 2009). Other operating income pre op: For both companies. 2008). including interest and tax. This is despite the economies financial difficulties during 2008. Morrisons growth in turnover exceeds their growth in cost of sales. 2007-2008). The administration expenses reported by Morrisons remained relatively consistent throughout the three year period. It is likely that during 2008-09.EBUS601: Benchmarking 200441707 Both companies are experiencing a small rate of organic growth in their sales revenue. leading to a healthy increase in gross profits throughout the three year period. This could be due to problems caused by the implementation of the company’s supply chain improvement programme (Sainsburys Annual Report. with the slight raise in 2008-09 reflecting the rise in turnover during this period. for Sainsbury’s the raise in cost of sales has been higher than their raise in turnover. 2009). this is likely to reflect income from renting or selling off stores and other property. caused by high oil prices (Morrisons Financial Statement. Morrisons acquired Safeway in 2004 however they did not finish the conversion of the stores to the Morrisons format until November 2005. 2009). Sainsbury’s experienced a significant drop in their administration expenses in both 2007-08 and 2008-09. partly because Morrisons is a smaller company but also possibly due to the fact that they manage all commercial operations in house. Morrisons experienced a significant decrease during 2008-09.

0% 100.4% 62.6% 103.9% 88.9% 47.911 -£17.036 -£420 £57 £673 -£59 £614 -£148 £466 -£177 £289 110.0% 100.0% 105.7% 151.0% 80.4% 85.3% 129.462 -£11.7% 128.0% 100.4% 2008-09 £14.5% 161.3% 97.0% 100.5% 161.6% 209.9% 126. The year 2006-07 is taken as the base year and set at 100%.0% 100.0% 100. Each following year is then expressed as a percentage of the base year using this equation: Trend %= Any Year (£ million) Base Year (£ million) This has been done on the income statement for both Morrisons and Sainsbury’s in order to show how each company has changed over the last three years.002 -£502 £30 £530 £81 £611 -£132 £479 -£150 £329 104. Their tax and interest payable also significantly reduced during this period which led to this rise in profit.151 £818 -£268 £62 £612 £60 £672 -£60 £612 -£58 £554 104.835 £1.0% 100.6% 104.0% 100.0% 100.5% 2008-09 £18.0% Morrisons 2007-08 £12.7% 89.5% .7% 285.6% 98.8% 335.2% 2006-07 £12.0% 100.6% 115. Income Statements Sainsbury’s Million Turnover Cost of sales Gross Profits Administration Expenses Other Operating Income pre OP Operating Profit Other income and Interest received Profit before interest & tax Interest payable Profit before tax Tax Net Profit 2006-07 £17.0% 100.528 -£13.0% 2007-08 £17.3% 144.969 -£12.1% 102.0% 158.0% 100.0% 100.5% 103.0% 101.0% 100. It is possible that the increase in their store portfolio after taking over Safeway enabled the company to take advantage of more economies of scale.EBUS601: Benchmarking 200441707 Both companies experienced a decrease in net profit during 2008-09.0% 100.979 £1. This could be due to the current economic climate leaving many households with less money to spend on the weekly shop.2% 105.9% 223.0% 176.0% 100.875 £1.0% 100.0% 177.7% 115.4% -92.39% increase in their net profits between 2006-07 and 2007-08.6% 123.826 £636 -£272 £60 £423 £21 £444 -£75 £369 -£121 £248 100.4% 100.5% 101.4% 98.0% 100. Trend Analysis By conducting a trend analysis we can see the ways in which the companies have changed over the last three years. Morrisons experienced a 123.172 -£669 £17 £520 £64 £584 -£107 £477 -£153 £324 100.4% 80.3% 111.1% 138.3% 65. The increase in their operating profit suggests that this is due to them improving their efficiency.0% 165.1% 143.615 £913 -£281 £39 £671 £44 £715 -£60 £655 -£195 £460 116.0% 100.0% 100.837 -£16.151 -£15.0% 100.2% 185.5% 75.0% 100.

Morrisons.0% 50.0% 0.6% increase by 2008-09.0% 20. however. Due to the way the chains are marketed. showing a 43. which led to people trying to spend less money. Sainsbury’s has also implemented a plan to improve their efficiency called ‘Making Sainsbury’s great again (Sainsbury’s Annual Report.0% 2006-07 2007-08 2008-09 Sainsburys Morrisons Operating Profit: Both companies experienced increases in their operating profit. Sainsbury’s growth in their cost of sales is more substantial and so they experience a decrease in gross profits in both 2007-08 and 2008-09. particularly during 2008.0% 40. experienced a huge increase in profits during 2007-08. Morrisons do not have this problem and so they experience a healthy growth in gross profits over the three year period.0% 60.0% 140. Percentage Change in Gross Profit 160.0% 120. 2008). 2008-09).0% 100.0% 150. the company has significantly reduced its administration expenses over the three year period.0% 80.0% 200. This plan is leading to the company becoming more efficient which is reflected by this increase.EBUS601: Benchmarking 200441707 Gross Profits: Whilst both companies experience similar growth in their turnover. Through this. As part of Morrisons ‘Optimisation Plan’ to recover profits after the takeover of Safeway. therefore regular Sainsbury’s shoppers may have chosen to shop elsewhere during this period.0% 2006-07 2007-08 2008-09 Sainsburys Morrisons Net Profit: Sainsbury’s net profit remains consistent for the first two years and then drops during the year 2008-09. They have also experienced a rise in ‘other operating income pre operating profit’ which has led to the rise in operating profit.0% 100. This pattern is to be expected due to the economic climate in the UK. Percentage Change in Operating Profit 250. Sainsbury’s is seen as a more expensive supermarket than Tesco or Asda.0% 0. the company began rationalising their distribution infrastructure in 2006 (Morrisons Annual Review. despite the fall in gross profit. The company suffered huge .

6% 3.615 £913 -£281 £39 £671 £44 £715 -£60 £655 -£195 £460 100.4% 3.7% 0.3% 4.0% -94.0% -94.0% 2.5% 2006-07 £12.0% -1.0% 0.EBUS601: Benchmarking 200441707 debts after the takeover of Safeway in 2004 and so the large jump between 2006-07 and 2007-08 is likely to represent the company getting back on its feet after this setback.1% 0.4% -0.5% 5.2% -0.0% -93.9% 0.3% 3.4% 4.6% -2.3% 4.2% 3.6% 2.1% -2.3% -2.3% 3.528 -£13.0% -94.7% 6.837 -£16.875 £1. The following equation can be used in order to work this out: Vertical Analysis %= Each income Item Turnover Income statement: Sainsbury’s Million Turnover Cost of sales Gross Profits Administration Expenses Other Operating Income pre OP Operating Profit Other income and Interest received Profit before interest & tax Interest payable Profit before tax Tax Net Profit 2006-07 £17.8% 2.0% 100.4% 0.969 -£12.979 £1.7% -0.3% 2008-09 £14.5% -1.0% Morrisons 2007-08 £12.1% 3.8% 2008-09 £18.5% 3.5% 5.036 -£420 £57 £673 -£59 £614 -£148 £466 -£177 £289 100.826 £636 -£272 £60 £423 £21 £444 -£75 £369 -£121 £248 100. In other words.4% 5.3% 3. This could be due to the success of their profit recovery programme.9% 0.5% 4.3% -1.4% 4.2% -0.002 -£502 £30 £530 £81 £611 -£132 £479 -£150 £329 100.2% 0.5% 4.0% -93.7% 6.0% 0.8% 1.4% -0.7% -0.6% -0.2% .8% -0.2% 0.911 -£17.172 -£669 £17 £520 £64 £584 -£107 £477 -£153 £324 100.5% -2.0% 150. suggesting that Morrisons has earned its right to be the fourth largest supermarket in the UK.462 -£11.9% 2007-08 £17.151 -£15.835 £1.2% 6.6% 0.8% 0.151 £818 -£268 £62 £612 £60 £672 -£60 £612 -£58 £554 100.0% 2006-07 2007-08 2008-09 Sainsburys Morrisons Percentage Change in Net Profit Vertical Analysis A vertical analysis shows us the relationship between each income statement item to the turnover.8% -3.0% 50.5% -0. 250.2% 3.9% 1.5% 3.0% 0.0% 200. it shows all other figures as a percentage of the turnover or net sales which is set at 100%.0% -93.9% -0.9% 1.7% 2.9% 5.6% -0.

Morrisons experience a 1. They also experienced ‘a large release of deferred tax following the change in rate of UK Corporation tax from 30% to 28%’ (Morrisons Financial Report. Morrisons experienced a large rise in net profits as a percentage of turnover.EBUS601: Benchmarking 200441707 Cost of Sales: For both companies. Administration Expenses: Both companies see a decrease in their administration expenses throughout the three year period. Tax: Sainsbury’s tax as a percentage of turnover remains relatively consistent. although this decrease is considerably more noticeable for Sainsbury’s. leading to steady prices that reflect market conditions. This could be due to the current UK economy. making operations more efficient. which suggests that they have strong relationships with their suppliers. 2007-08). particularly during the last two years. . as you would expect. meaning that they own a lot of their suppliers so they are less susceptible to changes in the market. This is reflective of the fact that both companies have improvement programmes in place. forcing the company to focus its efforts elsewhere (Wikipedia. However.2% rise in cost of sales. due to a combination of the factors discussed above. Sainsbury’s suffered a 1. It could also be due to the threat of a takeover at Sainsbury’s. 2009). the cost of sales constitutes a large proportion of the turnover. During 2007-08. leading customers to shop at supermarkets that they perceive to be cheaper. This is normal for companies of this nature as they sell low priced goods at competitive prices and so mark ups are low. Morrisons experienced a large drop in their tax rate during 2007-08. Net Profit: Sainsbury’s experienced a decrease in their net profit percentage over the three year period. despite difficult market conditions during the last couple of years. There is very little variation in the percentage cost of sales for either company. reflective of the market. According to their financial report this was due to a HM Revenue & Customs enquiry reaching a close and resulting in the company being able to recover a large amount of tax during this period. Morrisons avoided this extra cost as they manage almost all commercial aspects of their business in house.2% decrease in their costs during 2007-08.

0% 200607 £6.721 £2.2% 45.8% 84. Both Sainsbury’s and Morrisons have a high percentage of their capital tied up in fixed assets.2% 54. This reflects the growth strategies of both companies.6% 48.4% 6. Tangible fixed assets refer to physical assets such as buildings.0% 6. They also both are experiencing growth in the percentage of assets that are fixed.4% 42.6% 53.1% 0.5% 1.4% 1.2% 82. In simple terms.2% 10.EBUS601: Benchmarking 200441707 Balance Sheet: A vertical analysis can also be conducted on the company’s balance sheet.370 79.2% 2.3% 18. representing all items as a percentage of the total assets.945 £1.6% 100.0% Morrisons 200708 £5.445 25.4% 100.636 £590 £30 £1.1% 27.722 £9.6% 5.590 £3.066 £8.1% 5.2% 17.0% 1.080 £4.0% Sainsbury’s 200708 £5.1% 0.620 61.935 £9.6% 49.0% 7.6% 100.033 62.5% 1.682 £3.376 £10.9% 0.4% £2.605 £368 £78 £231 £72 £16 £765 £7. leading to them buying new stores. this allows us to see where a business spends and receives its money.9% 100.520 £8.3% 100.2% 51.8% 57.3% 20.506 £5.0% 100.3% 0.1% 51.109 £4.257 £4. Current Assets: Current assets are those which are held for less than a year and can be realised quickly.3% 100. which impacts on this percentage.248 £1.258 24.3% 11.1% 1.9% 100.8% 88.517 £175 £285 £7. 2009).0% 6.659 £1.226 3.4% 26.875 £4.128 £167 £25 £1.136 £451 £0 £573 £7.372 3.1% £1.7% £2.5% 0.3% 15.8% 3. They are also both buying new warehouses to enable them to improve their efficiency.0% £268 £3.0% 11.0% 0.0% £263 £4.2% 0.657 29. They act as a source of funds for day-to-day activities (Investor Words.436 £4.0% Fixed Assets: Fixed assets are those with a remaining useful life of over one year.854 £4.349 £9.033 5.0% 4.576 5.1% 15.5% 53.0% £2.576 59.4% 100.2% 1.5% 6.6% 43.636 77.7% £1.2% 46.4% 1.0% 6.706 24.226 74.659 £3.0% 87.6% 20.3% 56.6% £2.0% 79. The total current assets percentage has reduced for the two companies over the three years.463 £689 £49 £627 £146 £59 £1.879 £326 £0 £521 £6.1% 7.605 £2.685 27.7% 3.2% 4.0% 1.3% 100.479 £165 £309 £7.726 £442 £92 £191 £107 £78 £910 £7.738 £5.8% 15.2% 21.7% 6.0% 200809 £6. suggesting that they are both currently committed to investing in long .6% 46.891 £226 £0 £488 £6.7% 0.160 £494 £102 £327 £143 £0 £1.7% 1.0% 200809 £5.0% £499 £4.9% 3.378 £7.405 £3.3% 100.573 £160 £482 £8.8% 1.0% 38.8% 1.853 £1.898 £681 £32 £719 £174 £116 £1.6% 4.2% 40.6% 15.919 £2. land etc and intangible assets refer to items such as goodwill and trademarks.1% 3.6% 5.8% 1.855 £1.8% 1.940 £9.6% 89.927 £7.0% 1.3% 7.5% 0.0% £501 £3.7% 200607 £5.4% 45.227 28.0% £269 £4.570 £10.7% 0.636 3.9% 100.620 5.0% 13.024 £1. Millions Assets Land & Buildings Fixtures and Fittings Intangible Assets Investments Total Fixed Assets Stock & WIP Trade Debtors Bank & Deposits Other current Assets Investments Total Current Assets Total Assets Liabilities Current Liabilities Long Term Liabilities Total Liabilities Shareholders Funds Issued Capital Total Reserves Total Equity Total Liabilities & Equity £495 £3.1% 21.8% 54.

Conducting a ratio analysis from each of the four classifications should give a good overall picture of each company’s performance. Current liabilities are the debts to creditors and suppliers which the company are expected to pay within a year.28% Although Sainsbury’s starts out with the highest gross profit margin.7%) than Sainsbury’s does (48. Liquidity.10% 6. Morrisons has a lower share of long term liabilities (42. it declines over the three year period. interest and tax. Sainsbury’s holds a much higher percentage of money in the bank than Morrisons does. often in cash. Morrisons. Long term liabilities are debts that do not need to be repaid within a year.48% Morrisons 5.7%-56. Ratio Analysis Conducting a ratio analysis allows us to compare the specific items in each company’s financial statements over the three year period. This suggests that Morrisons are managing . This is a particularly relevant measure for this industry as the vertical analysis showed that the cost of sales takes up a huge percentage of the total turnover. The amount held in stock and WIP for Morrisons falls over the three year period due to the company’s optimisation programme approving their efficiency. administration expenses. and thus leading to a reduction in the stock held. There are four classifications of ratio analysis: Profitability. before accounting for other income.83% 5. Generally. Profitability: Gross Profit Margin Gross Profit Margin = Gross Profit x 100 Turnover Gross profit margin allows us to see the proportion of sales that is left over once the costs of sales have been accounted for.7%-46. as the majority of their capital comes from Shareholders funds instead of loans. This gives us an idea about how much money the company is making on their sales alone. the higher the gross profit margin is the better a company is performing.4%). Efficiency and Investment. however see an increase in their gross profit margin after the first year. Gross Profit Margin 2006-07 2007-08 2008-09 Sainsbury’s 6.EBUS601: Benchmarking 200441707 term growth strategies. which means that they will be able to respond to any cash flow problems more quickly and easily. Total Liabilities: This figure is made up of both current liabilities and long term liabilities. This is due to an increase in cost of sales which is disproportionate to the rise in turnover.62% 5. This suggests that Morrisons is in a better financial position when it comes to repaying debt.31% 6.

thus giving them more control.54 Morrisons 0.66 0.51 1. putting them in a good financial position. It is also likely to be partly due to the fact that Morrisons control most of their supply chain inhouse. However. Asset Turnover 2006-07 2007-08 2008-09 Sainsbury's 1.85 1.97 For the first two periods. Sainsbury’s is using its assets more efficiently than Morrisons. Liquidity: Current Ratio Current Ratio = Current Assets Current Liabilities The current ratio is used to test the liquidity of company.88 Morrisons 1.53 0.49 0.41 Neither company has a current ratio over one in any period which suggests that neither one of them would be able to pay off their current liabilities using their current assets.71 0. There could be a number of reasons for this.EBUS601: Benchmarking 200441707 their cost of sales more efficiently than Sainsbury’s.70 1. Morrisons is a smaller supermarket chain which may mean that it is easier to manage distribution as they have fewer stores. A high ratio indicates that a company is making good use of its assets. Both companies experience improvement in their asset efficiency . A high current ratio of over 2 to 1 suggests that a company would easily be able to pay off its debts using its current assets. due to the industry these companies are in.79 1. for example. their liabilities are high due to the funding necessary to expand. Current Ratio 2006-07 2007-08 2008-09 Sainsbury's 0. Efficiency: Asset Turnover Asset Turnover = Sales (Turnover) Total Assets This ratio measures how efficient a company is at utilising their assets in order to generate sales. especially as a lot of the goods that they sell are perishable items. Current assets are low in comparison as holding too much stock would make the companies inefficient.

82 16. SECTION 4: NON-FINANCIAL ANALYSIS It is also important to factor in a variety of non-financial measures of performance in order to help us to assess the position of these companies. many people will choose to shop at the store .84 271.19 14. This may help to explain why one company is experiencing success over another. making them arguably a sounder investment during this year. Number of Stores One of the major factors considered when a customer decides where to shop is the convenience of the store. The supermarket industry in the UK is extremely competitive and so a number of different performance measures which are thought to be relative to the industry have been used.15 493. Morrisons experiences both an increase in share price and a decrease in P/E ratio. Therefore.26 Both companies started in a similar position. taken from their historical data off their websites.98 20. The price per share has been worked out based on each company’s average closing share price for the year.88 25.93 299. This gave the following average share prices for each year: Average share price (p) 2006-07 2007-08 2008-09 Sainsbury's 395.46 The market earnings per share is taken from the underlying basic earnings per share on each company’s financial statements. The P/E ratio’s are tabulate below: P/E Ratio 2006-07 2007-08 2008-09 Sainsbury's 26.EBUS601: Benchmarking 200441707 throughout the two year period which could again be attributed to the improvement programmes that they are both currently running.65 322. However. however Sainsbury’s share price was considerably higher in 2006-07 and so Sainsbury’s shares would have been preferable at this time. as an investor would get a higher return in slightly less times. This is also true of 2008-09.62 Morrisons 223. The end figure tells us how many times more than its earnings a share is selling for.60 Morrisons 26. Investment: Price/Earnings Ratio P/E Ratio = Market Earnings per Share Price per Share This ratio tells a prospective investor how long they can expect it to be before they recover their investment in shares through the share earnings. during 2007-08.

thus improving their customer service (Ballou. the smallest when compared to their top three competitors (Wikipedia. Therefore. This makes the number of stores owned by the company an important factor as it is unlikely that a customer will travel a long distance to get to a store when there are numerous other choices nearby. it is estimated that one-third of the UK’s households are more than 15 minutes away from a Morrisons store. 2009). reliability and responsiveness. resulting in the company isolating themselves from a lot of potential customers. It is also important to note in this section that Sainsbury’s also sell their products online whereas Morrisons do not. They also sell their products online whereas Morrisons do not. In March this year. and vice versa. having expanded into a local store format years ago. Morrisons decided not to opt for smaller convenience stores after they took over Safeway as they wanted to retain their ‘market store’ image and felt this was only possible in large stores (The Guardian. Morrisons has 403 stores and Sainsbury’s have 828 stores. According to CACI. However. Therefore Sainsbury’s has the competitive edge in this category. 2009). Sainsbury’s large supermarkets are. Sainsbury’s is generally more accessible to consumers than Morrisons. This gives us an idea about how much choice the average UK consumer has when choosing their supermarket and so in order to qualify to be considered. 2009). company’s such as supermarkets are . IDG stated that there are 55. This suggests that Morrisons is dominating a few of the areas where both companies have supermarkets.EBUS601: Benchmarking 200441707 closest to their home or at a store that they pass regularly. This resulted in them selling off a large percentage of the Safeway stores they acquired during the takeover. in 2006 Sainsbury’s has market dominance in eight postcode areas. 2009).854 supermarkets and convenience stores in the UK (The Telegraph. Supply Chain Efficiency An efficient supply chain can lead to a competitive advantage by increasing a company’s flexibility. the new chief executive of Morrisons has now decided to branch out into smaller edge of town and city centre stores (The Guardian. As a result of this. 2004). Sainsbury’s holds a more dominant position in this category as they have over double the number of stores that Morrisons do. supermarkets must have a store within the reach of every customer. This will depend on local people’s perceptions of both stores. Morrisons is traditionally a Northern company and Sainsbury’s is traditionally a southern company and this is reflected by the postcode areas that each company dominates. on average. 2009). Therefore. 303 of which are smaller. as they must have stores in areas that Morrisons do not. This means that Sainsbury’s products are more reachable. However. perhaps on their way to work. According to each company’s website. In conclusion. whilst Morrisons has market dominance in ten postcode areas (Wikipedia. convenience stores.

sent to suppliers via the web in order to improve communication (Supply Chain Management Review. taking a vertically integrated approach to supply chain management. 2009) In conclusion. 2009). so avoiding stockouts is important.62% (IGD. It was restructured from 2000-04 and four fully automated depots were added. Both Morrisons and Sainsbury’s manage their supply chains very differently: Morrisons: Morrisons manages almost every aspect of their commercial operations in house. they still have to manage their supply chain network for branded products in the traditional way. with Morrisons using a lot of vertical integration and Sainsbury’s taking a more traditional approach. Sainsbury’s and Morrison manage their supply chains completely differently. Wm. leading to problems with on-shelf availability. Morrisons approach seems to be more effective. Morrison Produce Limited buys. however a survey done by IDG across a number of supermarkets states that the average level of on shelf availability in supermarkets throughout 2009 so far is 96. The improvement of the company’s IT infrastructure was completed this year and the company have also introduced a new transport management system in a bid to improve supply chain efficiency (Sainsbury’s Annual Report. However. Morrisons owns the warehouses and packing plants. With so many different supermarkets to choose from. However. Both companies do come across problems with their systems. 2009). They have meat processing facilities as well as their own purpose built factory which produces pies. 2009). This suggests that supermarkets supply chains are generally efficient. packs and distributes all the fruit and vegetables sold in Morrison’s stores. the chain has experienced a number of problems with their supply chain management systems. cheese and bacon (Morrisons.EBUS601: Benchmarking 200441707 increasingly competing through their supply chains by improving their efficiency. it is unlikely that a customer will continue to return to a store that is frequently sold out of the products they are looking for. as well as all transport that it uses. 2004). with reports and articles suggesting they experience fewer problems than Sainsbury’s. They were removed in 2007. Over the last decade. The success of their streamlined methods of supply chain management meant that the company switched all of Safeway’s supply chain systems to their own when they took the company over in 2004 (Knights. leading to fewer stockouts in their own brand products of this type. these systems were not properly tested and suffered frequent breakdowns. 2005) Sainsbury’s: Sainsbury’s have a more traditional approach to supply chain management. with little vertical integration. . cooked meats. With regards to supermarkets. this improved customer service comes in the form of better on-shelf availability. pizza. The new system replaced traditional electronic data interchanges with electronic automated stock notices. during an investment programme into the company’s supply chain (Wikipedia. sausages. This gives them total control over the fresh food side of their supply chain.

making each supermarket chain feel more accessible to the consumer. 2009). which has led to customers trying to spend less on their weekly shop. Their branding and advertising aims to reflect this. The message is that it is feasible to do this when shopping at Sainsbury’s. Morrisons: Morrisons replaced their traditional tagline with ‘food specialist for everyone’ during 2007 (Annual Report). the wellloved chef encourages consumers to use a wider variety of ingredients in order to cook high quality meals at no extra cost. which seeks to make the company feel more accessible to customer. During the adverts. Both companies have created a strong brand image through their advertising activities. by sending out the message that Morrisons is both high quality and affordable. This rebranding also included an updated logo and so all external signage was replaced. This is done using the new slogan ‘Fresh choice for you’. which has led to some hugely successful advertising campaigns. Both try to offer good quality products at reasonable prices. Celebrity chef Jamie Oliver has been the face of Sainsbury’s since 2000. Morrisons recent rebranding has clearly been a success and this is reflected by the company’s increase in turnover over the last three years. These campaigns show how the company aims to make a variety of fresh food from around the world available all under one roof. The company uses celebrity endorsement throughout their current advertising campaigns. the company have run a ‘feed your family for a fiver’ campaign which aims to attract customers who previously felt that Sainsbury’s is more expensive than its main competitors. suggesting that they have the competitive edge when it comes to branding and advertising. More recently. whilst highlighting the high quality and freshness of the goods on offer. Their campaigns seem to be slightly more specific to today’s consumer. Morrison new message to customers is seen throughout their advertising. 2009). This is reflective of the current economic climate. This reflects the company’s growth strategy of targeting new customers. 2009). Sainsbury’s use of celebrity endorsed advertising is relevant to the food products that they sell and is argued to have also led to a substantial increase in sales (Wikipedia. He has also created recipe cards that customers can take for free when they are in store (Wikipedia. This image is reflective of the current economic climate. Sainsburys: Sainsburys currently use the tagline ‘try something new today’ which encourages customers to consider the wide range of products available in store. giving the company an up-to-date feel (Wikipedia.EBUS601: Benchmarking 200441707 Success of Branding and Advertising Morrisons and Sainsbury’s both sell a wide range of goods including both branded and own branded products. .

this level of control made it easy for the company to reduce packaging on certain products. giving out vouchers for every £10 spent in store so that schools can get free planting and gardening equipment. goods must be transported causing pollution. Since 2006. The supermarkets themselves require a lot of power to run. This has been done on 200 stores so far. Supermarkets in their very nature tend not to be environmentally friendly. and regular plastic carrier bags are not biodegradable. This was in order to teach children how to live a healthier lifestyle. or is on target to achieve. They have reduced total packaging weight by 13. In existing stores. Morrisons were the first supermarket to gain the ‘Carbon Trust Standard’. 1978). 2009) Morrisons have introduced a ‘let’s grow’ scheme.EBUS601: Benchmarking 200441707 Strength of CSR Policies There has been ‘a relative shift from government to companies as a source of social improvement’ (Beesley and Evans. So it is important that the ‘big four’ supermarkets are seen to be making an effort in minimising their environmental impact. They aim to reduce water usage throughout their supply chain by 50% by 2012. They also aim to raise at least £1million for their charity of the year in order to be neighbourly. These examples barely even touch on the environmental impacts that supermarkets cause.32% (relative to sales). with a 15% reduction in each of these stores. all (except one) of the CSR targets that they set out in their 3 year programme in 2007. such as helping the community and sourcing food responsibly. certifying that they have significantly reduced their carbon emissions by a cumulative amount of 36%. they have saved the equivalent of 505 million carrier bags by encouraging customers to reuse bags (Morrisons CSR Report. improving refrigeration units. The company has either already achieved. customers more frequently judge company’s based on their CSR policy when considering where to shop. They did this by increasing efficiency. so a good CSR policy can be a source of competitive advantage. They have opened a flagship ‘green store’ in Devon where they are trailing methods of improving efficiency. Morrisons: In 2008. including the supermarket industry. Therefore. they began ‘Project RESET’ in 2007 which audits energy use in each supermarket and implements methods to reduce the figure. . A strong CSR policy is now considered to be an order qualifier for many industries. reducing energy use. They issued 312 million fewer carrier bags in 2008-09 than they did in 200708. introducing cleaner fleet engines and converting waste for fuel. Sainsbury’s: Sainsbury’s have begun to improve their energy efficiency in new stores. The company now recycle 73% of their waste. Other social responsibility factors are also important. They argue that operating their own supply chain allows the company to significantly reduce waste and gives them greater control over quality. For example.

Morrisons benefits from control over their supply chain due to the structure of the company and this has allowed them to get ahead of Sainsbury’s when it comes to implementing environmental policies. including financial and technological products High number of stores. Sainsburys SWOT Analysis Strengths: • • • • • 16. as they have so many different community related policies. as well as their charity of the year. offering customers an extra place to buy Sainsbury’s products Strong. making them easily accessible to most consumers Good online presence which includes selling both food and non-food products. both companies do a lot with regards to corporate social responsibility.3% share of the grocery market. Both companies are looking towards stocking only sustainable foods and support those suppliers who are socially responsible. They were given the ‘Community Mark’ by Business in the Community as recognition for the support that the company gives to local communities.EBUS601: Benchmarking 200441707 Sainsbury’s aim to support socially responsible suppliers and have already banned the sale of eggs from caged hens in their stores. SECTION 5: COMPANY POTENTIAL A SWOT analysis has been conducted on each company in order to assess their potential. 2009) In conclusion. which means that they can claim up to £700 through the company’s matched funding scheme (Sainsbury’s CSR Report. A SWOT analysis based on the findings of this report is a useful tool as it provides a summary of previous information. leading to increased sales and improved brand identity Better information sharing techniques with suppliers have led to improved supply chain efficiency • • • . Both companies get involved with the communities that they are a part of. allowing us to easily compare the performance of Sainsbury’s and Morrisons. although Sainsbury’s possibly have the edge here. ethical brand image throughout the UK due to involvement in community projects and a commitment to selling products that have been responsibly sourced. making them the third largest supermarket chain in the UK Wide range of products. They also encourage staff to volunteer through their ‘local heroes’ scheme. such as Fairtrade products. High reputation for fresh food and high quality own brand products Strong advertising using celebrity endorsement.

Lower disposable income will cause a push towards lower priced goods which are likely to have smaller profit margins Morrisons SWOT Analysis Strengths: • • Following the takeover of Safeway in 2004. despite the current economic climate which has slowed the growth of many businesses.3% market share Currently experiencing a steady rise in turnover. This could be attributed to the success of the company’s recent rebranding They manage the majority of the commercial aspects of their business in house. suggesting they are a good employer with committed staff Own brand. Morrisons is now the fourth largest supermarket chain in the UK with a 12. which is currently experiencing a downturn Rising cost of sales disproportionate to their turnover suggesting inefficiencies within the companies supply chain Opportunities: • • • New Chief Executive Justin King has a strong retailing background and is actively seeking to improve problems within the company Accelerating growth through focusing on non-food products and expanding store floor space by extending stores Selling off property assets with little development potential provides the company with extra income to spend in other areas Threats: • • • • High oil prices raise the cost of transporting goods from warehouses to stores A high level of investment is required if the company is to improve their carbon footprint through low emission fleets and store improvements Competition Commission may stem the growth of the company.EBUS601: Benchmarking 200441707 Weaknesses: • • • Their environmental policies have not yet led to a significant reduction in their carbon footprint when compared to other supermarket chains The company do not operate overseas meaning that they completely rely upon the UK market. The current economic crisis is leading to a rise in consumer debt and a decline in confidence. fresh products are produced by the company enabling them to ensure quality. as the ‘big four’ now dominate over three-quarters of the grocery market. which is further encouraged by their market store layout • • • . This gives the company a good reputation for fresh foods. leading to greater control A high level of staff retention.

. They have started adopting this growth strategy by acquiring a number of Co-operative/Somerfield stores. market store format that has led them to success High oil prices raise the cost of transporting goods from warehouses to stores • In conclusion. There is also an opportunity for the company to extend current stores A high level of control over their supply chain allows the company to improve their value line more easily than others. they are subject to fewer constraints concerning the growth of the company • • Threats: • Opening smaller stores and diversifying product ranges may lead the company away from the traditional.EBUS601: Benchmarking 200441707 • • They have made strong headway concerning the reduction of their carbon footprint and thus have been rewarded with carbon standard certification Celebrity endorsement on adverts. which has led to them both rebranding and has brought a fresh outlook to each company. despite the fact that they are in the same industry. with an emphasis on freshness. each company has very different opportunities available to them. This is due to the differences in the current market position of the two companies. Both companies have experienced changes in their management in recent years. local stores. This gives them a competitive edge in today’s economy As the smallest of the ‘big four’ supermarkets. which is currently experiencing a downturn Product range is limited when compared to other supermarkets as they have not moved into the clothes or financial product market Do not sell their products online meaning that customers without a local Morrisons store do not have the opportunity to buy products • • • Opportunities: • A change in management has led the company start looking into opening smaller. as well as the variations in their strengths. which highlight the freshness of the company’s products Weaknesses: • • A small number of stores relative to other supermarket chains The takeover of Safeway led to a large amount of debt and the company had to deal with the problems associated with a takeover such as integrating their systems with the stores they acquired The company do not operate overseas meaning that they completely rely upon the UK market.

due to the laws of supply and demand. However. Both companies are listed on the London Stock Exchange. Sainsburys do have quite a strong growth strategy and the lower share price has improved the company’s P/E ratio. but these graphs are taken from Yahoo! Finance as this website showed the fluctuations during the three years that the financial analysis was conducted. Share prices vary depending on how a company is performing. . Sainsburys Share Prices Sainsbury’s have seen a steady drop in their share price relative to their drop in net profit. Success leads share prices to rise. suggesting a quicker return on investment than Morrisons (See Section 3). allowing the share price to be compared to the businesses financial success. The following two graphs show the variations in each company’s share price over the three financial periods looked at throughout this reports. which could lead investors to become less attracted to the company. reflective of the fact that they are a larger company with a higher market share.EBUS601: Benchmarking 200441707 SECTION 6: INVESTOR POTENTIAL This section will examine the attractiveness of investment into Sainsbury’s and Morrisons. with more investors buying shares when they think the company is about to experience success. Sainsbury’s share price is consistently higher than Morrisons.

16 3. It is compiled from information taken from the London Stock Exchange and listed on the Reuters Investment website (2009).88 12.54 8. This could be due to the success of the Safeway takeover.28 0.47 0.24 0.73 Gross Margin(TTM) % Operating Margin(TTM) % Profit Margin(TTM) % Valuation Ratios Price/Earnings(TTM) Price/Sales(TTM) Price/Book(TTM) Price/Cash Flow(TTM) Management Effectiveness: Return on Equity shows how much money the company is generating from shareholders investments.44 3.49 1.91 15.7 13. Return on Assets gives investors an inclination into how efficiently a company utilises its assets. Current Considerations This next table highlights a number of factors that investors would consider if they were looking to invest in the company at the moment.31 1.09 6.63 3.57 1. Important factors will be explained below.45 21.69 5.13 64.63 26.22 0.EBUS601: Benchmarking 200441707 Morrisons Share Prices This graph shows that Morrisons experienced an overall increase in share price during 2006 to 2007.34 Quick Ratio 5. suggesting that the company has adopted a successful growth strategy and encouraging people to invest.37 7.31 0.64 54.58 4.06 29. Return on Investment .96 0.52 56.06 Current Ratio LT Debt/Equity Total Debt/Equity 0.69 9. Sainsbury's Morrisons Management Effectiveness Dividend Information Sainsbury's Morrisons Annual Dividend (£ GBP) Payout Ratio(TTM) % Financial Strength Return on Equity(TTM) % Return on Assets(TTM) % Return on Investment(TTM) % Profitability Ratios 8.04 6.58 0.

However. Therefore Morrisons has the edge over Sainsbury’s in this category. A potential investor would look for a company with high percentages on all of these measures. This suggests that they are better at converting their sales into profits. which will be an attractive point to investors. this is also relative to difference in size of the two companies. SECTION 7: EMPLOYEE POTENTIAL This section of the report aims to assess the attractiveness being employed by Morrisons and Sainsbury’s. Sainsbury’s payout ratio is considerably higher than Morrisons. putting Morrisons in a more desirable position. suggesting that Sainsburys payout a higher percentage of earnings in dividends than Morrisons. This is partially reflected by Morrisons lower average share price.EBUS601: Benchmarking 200441707 shows the rate of return on capital invested into the company. Staff are highly important in this industry as there is a focus on customer service and staff throughout the company play a major part in providing this. The price/earnings ratio was calculated during the financial analysis in Section 3 of this report. discussing the benefits of working for the each company. However. Financial Strength: These ratios relate a company’s assets and equity to their level of debt. we can conclude that Morrisons shares seem to be the more attractive investment at the moment. The valuation ratios give an inconclusive picture about which company is better to invest in. Valuation Ratios: These ratios relate different items in each company’s financial statements to the price of stock. However. this calculation is more up-todate as the previous ones were for the three years before Spring 2009. net and operating profit as a percentage of the total turnover for the year. The price/sales ratio is calculated by taking the earnings per share from the last 12 months and dividing it by the current share price. Dividend Information: Dividends are payments made by companies to their shareholders. . making them more attractive to investors. suggesting that Morrisons shares are less in demand that Sainsbury’s. This ratio puts Sainsbury’s in a better position because a low ratio means that the stock value is higher. A high percentage indicates a high level of debt in comparison to assets and equity. their dividend payout ratio is very low and this could put investors off. with Morrisons also doing better in the Price/Book ratio and the Price/Cash flow ratio putting Sainsburys being in a better position. It shows that there has once again been a shift. as Sainsbury’s is a larger company with a bigger turnover and a higher market share. From the table. Profitability Ratios: These ratios tell us the gross. This section suggests that Morrisons is performing considerably better than Sainsbury’s. Morrisons is performing better with regards to all three of these ratios.

Many people who work part time do so due to family commitments or may see the job as an earner during their studies. discounts. awards for long service. Sainsbury’s and Morrisons seem fairly traditional in the benefits that they offer staff.502 50.804 117. Following this logic.800 Part time 146.302 67. this suggests that both companies are fairly similar in the benefits that they offer their employees.800 49. these figures were not available amongst Sainsbury’s report for comparison. Sainsbury’s have a higher total number of staff which is to be expected as they run a lot more stores. both companies offer a wide range of employee benefits after a qualifying period of employment. Sainsbury’s have also started offering apprenticeship schemes to those who wish to train. suggesting that the company encourages staff development. As a percentage of total staff.400 48.934 66. however these are only available to people without qualifications.100 99. Overall.596 117. we must first look at the number of employees working at each company: Sainsbury's Number of Employees Full time Part time Total Number of 2006-07 2007-08 2008-09 Employees 48. Morrisons have much more full time employees.900 147. Employee Benefits: According to their websites. In 2009. Working full time for a company suggests a commitment that part time staff may not necessarily have. These include competitive pay. Morrisons filled over 70% of management jobs internally.018 50. so that it can be improved for future generations of employers. Both companies use a profit share scheme to encourage employees to feel involved with the success of the business. based on the success of their ‘you can’ training programme which allows employees to develop skills and gain recognised qualifications (Personnel Today. employees are encouraged to give feedback on the training they receive.700 Full time 98. They also both have schemes in place to make it easier for their employees to buy shares.454 124. Unfortunately.530 Employee Numbers: This gives a breakdown of full time and part time staff. . 2009).900 148. Training and Development: At Morrisons.100 98. Morrisons has quite a high rate of staff retention which suggests that they are a good company to work for. we can assume that Morrisons is a better employer as more of their employees have chosen to be full time. Being full time suggests a career choice. Sainsbury’s appears to be more innovative in the training schemes that they offer. Sainsbury’s won an award for innovation in recruitment and retention this year. pension schemes and paid holiday. The percentage of staff working for the company for over a year has steadily risen over the last three years and is now 78%.436 73.500 Total Morrisons 2007-08 2008-09 2006-07 51.EBUS601: Benchmarking 200441707 To get a sense of how attractive the company is as an employer.

The average share price had to be worked out based on the end value of the share price each day throughout the year. however there is no way to be certain that this is the case. This makes it necessary to read between the lines. however this was only possible for certain areas of the report and it often lacked the necessary detail.EBUS601: Benchmarking 200441707 SECTION 8: LIMITATIONS OF THE ANALYSIS One of the major limitations of this analysis is that there is a distinct lack of information available on the two companies from independent. a University database. This ensures that the same measures were used for each section of the financial statements. it would have been more accurate to use the average share price for each day when working out the figure for the annual average share price. Although law dictates that the published financial statements must be correct. One example of this lack of information being a problem was in Section 7: Employee Potential. The average share price was worked out in the same way for Sainsburys. Information printed in Sainsbury’s and Morrisons Financial Statements and Reports aims to show each company in a positive light in order to attract investors. particularly for the investment ratio. areas where the company is not performing well are usually written about in the context of improvement. Financial data on the two companies was taken from FAME. This was because this was the only share price information that Morrisons made available. most of the information that this report is based on is not objective. there may be ways of publishing the statements that provide a better picture for the company. As a result. or left out completely. it was not available in any of Sainsbury’s document. This means that the majority of information throughout this report comes from the two companies statements and websites. Therefore the conclusions drawn in these sections may not be wholly accurate. Some of the information required for the ratio analysis was difficult to get hold of. However. . The author was able to get some subjective information from newspaper articles and websites. so that the data was comparable. However no firm conclusion can be made by doing this as there will be a lack of evidence to support that conclusion. Therefore. Although information about staff retention levels and internal promotions was available in Morrisons Annual Review. neutral sources. Therefore the database was seen as a more reliable and comparable source. External sources tend to only focus on the major success and failures of these companies supply chains or advertising campaigns and the companies themselves do not wish to give too much away for competitive reasons. It was very difficult to get an overall picture for each section of the non-financial analysis based on the information available. It is possible that these figures are not printed because they are below the industry average.

Sainsbury’s would benefit from seeking to achieve more vertical integration throughout their supply chain as it would lead to greater control. Throughout the report. This is despite the implementation of superior. Morrisons have been able to capitalise on the changes in the economy by improving the quality of their low cost ranges. which is not unrealistic and will open them up to new markets. local stores throughout the UK. For example.31st January. Sainsbury’s also seem to have a competitive edge with regards to relevant. Sainsbury’s growth strategy focuses on extending current stores. as currently it is a lack representation in certain areas that is holding the company back. SECTION 9: CONCLUSIONS Both companies have been assessed using a wide range of performance measures in order to provide a clear picture of each company’s competitive position. Morrisons could learn from Sainsbury’s success and diversify their product range further however there are fears that this would lead to dilution of the company’s image as a ‘market store’. Their growth strategy involves them acquiring a number of new stores. it is the author’s belief that Morrisons is currently the better performer out of these two supermarket chains. which suggests high costs with fewer benefits. Morrisons has been experiencing higher net profits over the last couple of years. making them less vulnerable to the changes in the market conditions of their suppliers. A rise in fuel prices during February or March would then be represented in one year by Morrisons and the following year by Sainsbury’s. it is clear that Sainsbury’s have the edge with regards to size. But despite Sainsbury’s higher turnover and superior size. fluctuations in fuel prices on a monthly basis are likely to have an impact on both the company’s turnover (as they sell fuel) and their costs (as they use fuel to transport goods). which is shown by their better results for all profitability ratios conducted. . making them more desirable to customers. high cost investment programmes which have significantly reduced the company’s carbon footprint. higher market share and more expensive share prices. They are however seeking to follow Sainsbury’s example by opening smaller.31st March whereas Morrisons spans from the 1st February . Their superior number of stores and wider product range lead the company to have a higher turnover. Overall.EBUS601: Benchmarking 200441707 Sainsbury’s financial year spans from the 1st April . This means that each year’s financial information is out by two months. up-to-date advertising. It is possible that this will have an impact on the financial analysis if there is something that leads to a lot of variation during these two months. This report attributes this to Morrisons high level of vertical integration throughout their supply chain.

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