MANAGEMENT REPORT

ENVIRONMENTAL AUDIT
TRANG NGUYEN - 5298059

MORRISON SUPERMAKETS PLC.

EXECUTIVE SUMMARY Morrison Supermakets Plc. Is the UK largest grocery retailer which provides good quality products and services. External environment analysis which includes PESTEL and Porters Five forces framework defines key drivers of Morrisons which are technological and economic factors, as well as provides information to identify advantages and disadvantages of the company. According to the internal environment analysis including SWOT and Strategic Capabilities frameworks, technology is also a weakness of Morrisons. Besides, the company needs to improve its competitive advantage to continue being one of leading companies in food retail industry.

I. INTRODUCTION AND COMPANYS OVERVIEW To develop sustainably in long term, the company needs to have a proper strategy. This report will study and analysis both external and internal environment factors as well as consider how they influence operations and strategy of Morrison Supermakets Plc., one of the largest supermarket chains in the UK, at the moment and in the future. PESTEL, Porters Five Forces, SWOT, Strategic Capability Analysis have been used to accomplish the aim of this report. Morrison Supermarkets Plc. (as known as Morrisons) is the British fourth largest food retailer with annual turnover in more than 18 billion with 500 stores throughout the UK. There are over 11 million customers visiting Morrisons stores each week and being served by 129,000 friendly staffs. Morrison Supermakets Plc.s vision is providing great service with best value fresh foods, prepared in store with the experts (Morrisons Annual Report 2013). II. EXTERNAL AND INTERNAL ENVIRONMENT ANALYSIS A. EXTERNAL ENVIRONMENT 1. PESTEL Analysis - Political: Change in Government may cause indirect impacts on taxation policies and reduce the net profit of Morrisons. Besides, Government has cut several benefits for customers so people tend to spending less money in supermarket and this affects to Morrison sales. - Economical factor is one of the key factors for Morrisons because it affects directly to customers buying behaviour. There are figures showing a slowdown in grocery market growth because of the Budget Announcement 2014 (Barry, 2013). - Social: The UK had its biggest baby boom since 1972 as 813,200 births were born in the last year (William, 2013). There are more elderly people who tend to eat less than younger generation; also they are less likely to visit the supermarkets. Besides of this, there is an creasing demand for organic foods because people have become more health-conscious.

- Technology is also a key macro-environmental factor for the development of Morrisons. Technology directly influenced the operations and processes of grocery and food retailers in general and Morrisons in particular. Online shopping is increasing steadily. In 2013, there are 36 million people (73%) in Great Britain accessed the Internet every day, in which, 72% of people who bought goods or services online compared to 53% in 2008. (Office for National Statistics, 2013). - Environmental: Since the report Building a low-carbon economy the UKs Contribution to tackling climate change was established in 2008 (Committee of Climate Change, 2008), there has been an increasing in footprint awareness of the customers. Morrisons has contributed to the reduction in environmental damage by encouraging shareholders to view companys reports on the website, as well as printing documents on recycled paper (Morrisons Annual Report, 2013:113). - Legal: According to Low Pay Commission Report 2013, there is an increase in minimum wage for adults from 6.19 in 2012 to 6.31 in 2013 (National Minimum Wage, 2013). This will result in an increase of the costs for supermarkets operation. 2. Porters Five Forces: - The threat of entry: It is quite difficult for a new entrant to enter in food retail industry because it needs a large capital investment to build a strong brand name and be competitive in the market. Moreover, besides of Morrisons, there are three giants in food retail market which are Tesco, Asda, Sainsburys which controlled for about 80% of the UK grocery market (Mintel, 2013). However, there still are opportunities for potential entrants because they may be supported by a relatively low entry and exit cost. Also, there has been a dramatic increasing in health awareness, more and more people tend to use organic foods. This form a path for new entrants entering in an appropriate area and being more competitive in food retail market. Therefore, threat of entry can be seen as moderate. - The threat of substitutes: A main alternative to food retail is food service. Fast-food companies, take-away or eat-in restaurants which are very convenient always have strong marketing campaigns to attract customers who do not have time to buy and cook food at home. However, for the large majority of people, these are just temporary solutions which cannot replace food retail. Another substitute is subsistence agriculture. People and families have farms to provide

food for their own personal needs. Nevertheless, this cannot affect significantly to the food retail industry. So, threat of substitutes can be assessed as low. - The power of buyers: The bargaining power of customers is considered as relatively high. It is obvious that most customers are attracted by low prices and there are only slight different between the products of retail companies, the customers are likely to switch to the company which offers a lower price. Moreover, with online shopping nowadays, it is easier for customers to compare the prices and selected the retail brand. - The power of suppliers: The suppliers for food retailers include food manufactures, farmers which have a strong relationship with food retail industry. However, Morrison Supermarkets Plc. tends to provide fresh foods prepared in store; moreover, with the current position, Morrisons is absolutely able to negotiate with the suppliers to have the lowest price for the products sold in their stores. The power of suppliers can be assessed as low. - Competitive Rivalry: is considered as extremely strong. There are many large competitors in food and grocery retail industry such as Asda, Tesco, Sainsburys, Lidl and so on. There is more and more pressure for Morrisons to secure customers loyalty by reducing price because there are a wide range of product s supplying by many retailers for customers to select. B. INTERNAL ENVIRONMENT 1. SWOT Analysis An analysis of strengths, weaknesses, opportunities, threats of Morrisons has been detailed as below: - Strengths: Morrisons is one of four largest food retailers which have about 500 stores across the UK with employee strength of nearly 130,000 and efficient supply chain and distribution network as well. Also, the company offers a wide range of branded and private label products and large product portfolio (Morrisons Annual Report, 2013). Offering good quality products at low prices is the positive point which plays a vital role for achieving customer loyalty. - Weakness: Although Morrisons has about 500 stores in the UK but it still has limited geographic reach compared to other big brands such as Tesco,

Sainsburys and so on. In addition, technological applicants are not really efficient in Morrisons stores. - Opportunities: There is a significant increase for organic products, which is the main target of Morrisons, in despite of the downturn trend of current economic climate (Soil Association, 2013). Moreover, Morrisons can expand abroad to other countries and start to build an international brand. - Threats: There may be a growth of market share of competitors. Besides, the Government may change policy in tax and increase manpower cost. 2. Strategic Capability Analysis: According to Morrisons Annual Report 2013, strategic capabilities have been analysed as the below table: Resources - 500 stores across the UK with nearly 130,000 employees, 600 lorries and 150,000 trolleys - An efficient supply chain and distribution network - Product range from 30,000 35,000 items. - The transparency of Morrisonss supply chain and theirs focus on traditional crafts. - A distinctive offer to customers which has been focused around fresh food, craft skills and vertical integration through Morrisonss manufacturing business; - Honest and affordable price for everyone. Competences There are over 5,000 skilled and trained butchers, bakers and fishmongers who prepare foods and deliver exactly customers requirements.

Threshold capabilities

Distinctive capabilities

More of what matters service: - Morrisons M local stores have Market Street where customers can see and taste the foods in store. - Friendly staffs who provide most appropriate advice and services and HOT (Hello, Offer, Thank) service.

According to the external and internal environment analyses, it is obvious that there is a link between external factors and internal factors; the increase in awareness of organic and fresh food in society has created more opportunities for Morrions to develop and sustain their strategy as well as improve their competitive advantages in food and grocery retail market. However, distinctive

capabilities of Morrisons are not really specific. Products and services which Morrisons has been providing are not very difficult to be imitated and replaced by their competitors. III. CONCLUSION AND RECOMMENDATION Today, food and grocery retail is an extremely competitive market. Although Morrison Supermarkets Plc. is in the list of leading companies in this industry, the company still needs to invest more in its service, to attract more customers and provide a greater value which can make customers feel more satisfied. Firstly, Morrisons should improve theirs network in term of information technology which has not been well-developed since the concept of Market Street was promoted to the customers; investing in technology can help to provide convenient service to the customers as well. Secondly, Morrisons also should invest in employee training to maintain their strategy by improving services and after sale services. Finally, Morrisons should invest more in Research & Development which is very important for the company to define and analyse the environment factors properly in each period; therefore, the company can have necessary and appropriate adjustments in target and strategy which help company operating more and more efficiently. REFRENCES: 1. Barry, A. (2013) People spent less on groceries in run-up to Budget announcement [online]. Thejournal.ie. 29th Oct. Available at: http://www.thejournal.ie/groceries-ireland-budget-1151599Oct2013/#comments. Last accessed: 17/11/2013 2. Committee on Climate Changle (2008) Building a low-carbon economy the UKs contribution to tackling climate change [online] Available at: http://image.guardian.co.uk/sysfiles/Environment/documents/2008/12/01/BuildingALowCarbonEconomy.pdf . Last accessed: 17/11/2013 3. Jeavans, C. (2013) Recession hits family spending on fresh food [online]. BBC. 04th Nov. Available at: http://www.bbc.co.uk/news/health-24773201. Last accessed: 17/11/2013 4. Johnson, G. & Whittington, R. & Scholes, K. (2011) The strategic position. Exploring Strategy. 9th Ed. London: Pearson

5. Mintel (2013) Food Retail Industry Profile: United Kingdom. Mar2013, p1-33. 33p [online] Available at: http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=acd5a5dc-1cc840e7-84e4-d6b7cc80a0ef%40sessionmgr198&vid=6&hid=117 . Last accessed: 17/11/2013 6. Morrisons Annual Report (2013) Annual report and financial statements 2012/13 [online] Available at: http://www.morrisonscorporate.com/2013/annualreport/downloads/Morrisons_Annual_Report_201 3.pdf. Last accessed: 17/11/2013. 7. National Minimum Wage (2013) Low Pay Commission Report 2013 [online] Available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file /226822/National_minimum_wage_Low_Pay_Commission_report_2013.pdf. Last accessed: 17/11/2013 8. Office for National Statistics (2013) Internet Access - Households and Individuals, 2013 [online] Available at:http://www.ons.gov.uk/ons/rel/rdit2/internet-access---households-andindividuals/2013/stb-ia-2013.html. Last accessed: 17/11/2013 9. Soil Association (2013) Organic market report 2013 [online] Available at: http://www.soilassociation.org/LinkClick.aspx?fileticket=whbpEnZUd7A%3d&t abid=1984. Last accessed: 17/11/2013 10. William, H. (2013) Now we are 63.7m: UK had biggest population growth in Europe over past year [online]. The Independent. 08th Aug. Available at: http://www.independent.co.uk/news/uk/home-news/now-we-are-637m-ukhad-biggest-population-growth-in-europe-over-past-year-8751929.html. Last accessed: 17/11/2013