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Supermarket Industry in the UK

The development of the supermarket industry in the UK is vulnerable to the impact of both external and internal factors but, in spite of this impact, the supermarket industry still plays an important part in the UK economy. In this regard, it is worth mentioning the fact that the largest supermarkets operating in the UK are multinational corporations, operating in different parts of the world and holding a strong position not only in the domestic market but also in the international one. In actuality, British supermarkets such as Tesco or ABF, and others face the growing competition from the part of large foreign supermarket chains, such as Asda. In fact, Asda conducts the aggressive strategy of the international market expansion and today this supermarket chain represents a threat to British supermarkets and increases the competition in the UK supermarket industry. Nevertheless, the current business and political environment are favourable for the development of the supermarket industry in the UK, which is one of the most developed economies in the world with the high level of consumption.

Industry sector

On analyzing the current situation in the supermarket industry of the UK, it is possible to use the PEST analysis, which helps to reveal the current environment in which supermarkets in the UK have to operate. However, first of all, it is worth mentioning the fact that the key players currently operating in the UK retail industry including Tesco Plc, ABF, Asda/Asda, Sainsbury, Morrisons, Waitrose, and Fresh & Wild (Whole Foods Market). At the same time, specialists (Wokutch and Spencer 1987) point out the growing impact of the online retail for the online retail will emerge as an important mode of selling in the nearest future, according to their forecasts. At the same time, each Supermarket in UK has its own consumer class. Top four Supermarkets hold major market share (almost 75%) in UK. Increasing buying power of retailer remains the major driver for the industry (Harrison and Freeman, 1999).

At this point, it is important to place emphasis on the fact that it is possible to distinguish several types of supermarkets in the UK. First, Traditional Supermarket are stores offering a full line of groceries, meat, and produce with at least $2 million in annual sales and up to 15% of their sales in GM/HBC. These stores typically carry anywhere from 15,000 to 60,000 SKUs (depending on the size of the store), and may offer a service deli, a service bakery, and/or a pharmacy (Moore, 1997). Second, Fresh Format stores are different from traditional supermarkets and traditional natural food stores, fresh stores emphasize perishables and offer centre-store assortments that differ from those of traditional retailers—especially in the areas of ethnic, natural, and organic, e.g., Whole Foods, Publix GreenWise, The Fresh Market, and some independents (Harrison and Freeman, 1999). Furthermore, Superstore is a supermarket with at least 30,000 sq. ft., generating $12 million or more annually and offering an expanded selection of non-food items. Specialty departments and extensive services are offered.

Warehouse Store – Grocery store with limited service that eliminates frills and concentrates on price appeal; items may be displayed in their original shipping cartons rather than placed individually on shelves. Stores may also sell bulk food and large size items (Harrison and Freeman, 1999). This type of supermarkets growing to be more and more popular in the UK, especially as the competition from the part of Asda and other large supermarket chains grows. In addition, there are Super Warehouse stores. A Super Warehouse store is a high-volume hybrid of a large Traditional Supermarket and a Warehouse store. Super Warehouse stores typically offer a full range of service departments, quality perishables, and reduced prices, e.g., Cub Foods, Food 4 Less, and Smart & Final (Collier, 1998). Also, it is worth mentioning a Limited-Assortment Store, which is a low-priced grocery store that offers a limited assortment of centre-store and perishable items (fewer than 2,000), e.g., Aldi, Trader Joe’s, and Save-A-Lot (Collier, 1998). Finally, there are other stores, which are normally small corner grocery stores that carry a limited selection of staples and other convenience goods. These stores generate approximately 1 million UKP in business annually (Harrison and Freeman, 1999). In additions, some specialists distinguish Non-Traditional Grocery

Wholesale Club, which is a membership retail/wholesale hybrid with a varied selection and limited variety of products presented in a warehouse-type environment (Herremans, Akathaporn and Mclnnes 1993). These 120,000 square-foot stores have 60% to 70% GM/HBC and a grocery line dedicated to large sizes and bulk sales. Memberships include both business accounts and consumer groups, e.g., Sam’s Club, Costco, and BJ’s (Moore, 1999). Today, a new type of supermarkets emerges, which are Supercentres. A Supercentre is a hybrid of a large Traditional Supermarket and a Mass Merchandiser. Supercenters offer a wide variety of food, as well as non-food merchandise (Bowman Haire and 1975). These stores average more than 170,000 square feet and typically devote as much as 40% of the space to grocery items, e.g., Walmart Supercenters, Super Target, Meijer, and Fred Meyer (Trevor, 2009). In addition, following the lead of the US, the UK supermarket industry develops Dollar Stores. A Dollar Store is a small store format that traditionally sold staples and knickknacks, but now sales of food and consumable items at aggressive price points account for at least 20%, and up to 66%, of their volume, e.g., Dollar General, Dollar Tree, and Family Dollar (Moore, 1999). Also, there are Drug Stores, such a store is a prescription-based drug store that generates 20% or more of its total sales from consumables, general merchandise, and seasonal items. This channel includes major chain drug stores such as Walgreens and CVS but does not include stores/chains, e.g., The Medicine Shoppe, that sell prescriptions almost exclusively (Moore, 1997). Also, specialists distinguish Mass Merchandiser, which is a large store selling primarily hardlines, clothing, electronics, and sporting goods but also carries grocery and non-edible grocery items. This channel includes traditional Walmart, Kmart, and Target stores, etc. (Trevor, 2009). Finally, Military Commissary is a format that looks like a Conventional grocery store carrying groceries and consumables but is restricted to use by active or retired military personnel. Civilians may not shop at these stores which are referred to as commissaries (Trevor, 2009).

In actuality, the supermarket industry is very attractive for investors and this industry keeps growing, in spite of the recent economic recession (See App. Table 1-3; Graph 1-2). Specialists (Preston and O’Bannon, 1997) argue that 11% of all VAT-registered businesses in the UK are retailers, with the total number currently at 180,875. Moreover, the UK retail sales were £265 billion in 2007, larger than the combined economies of Denmark and Portugal (Trevor, 2009). Retail sales account for one-fifth of the UK economy. The retail sector generates almost 8% of the Gross Domestic Product of the UK. More than a third of consumer spending goes through shops (Trevor, 2009).

On the other hand, online retail keeps progressing and emerges to the extent that it can threaten to conventional supermarkets. Specialists point out that sales over the internet account for less than 4% of total retail sales, despite strong growth in recent years (Trevor, 2009). In 2006 there were 320,733 retail outlets in the UK. The retail industry employed over 3.0 million people as at the end of March 2008. This equates to 11% of the total UK workforce (Preston and O’Bannon, 1997). Over the last five years, employment in retailing has grown by 85,087. The BRC-Nielsen Shop Price Index shows the price of shop goods are 3.8% higher than a year ago. This is less than the 5.1% increase in the ONS CPI All-Goods Index (Trevor, 2009). The UK grocery market grew by about 4.8% from £139.6bn to £146.3bn in 2009, accounting for 52.4% of all UK retail sales (Trevor, 2009). 12.4% of Consumer Household Spending is now on Food, Drink & Tobacco; this compares to 14.3% ten years ago (1998) and 17.3% twenty years ago (1988) (Trevor, 2009). Non-food now accounts for £11.6bn of supermarket sales (+6.4% yr on yr growth) strongly outperforming the non-food retail market as a whole, where sales have fallen by 0.8% (Trevor, 2009).

At this point, it is worth mentioning the fact that the 1980s-1990s were particularly successful time for supermarkets and that was the time of the fast development of the supermarket industry in the UK. Specialists point out that concentrated industry structure in the U.K. emerged in the 1980s and 1990s when the largest four firms opened most of the new stores, increasing their market share from under 20% to over 60% (Berman, 1999).

In actuality, UK supermarkets use different management models to meet social and cultural needs of the target customer group. In this regard, it is worth mentioning different strategic stakeholder management models used by the UK’s supermarkets, including the following:

  • The Direct Effects Model – stakeholder relationships and firm strategy are assumed to have direct and separate impacts on firm financial (Preston and O’Bannon, 1997)
  • The Moderation Model – firm strategy is assumed to have a direct impact on firm financial performance but moderated by the impact of stakeholder relationships (Preston and O’Bannon, 1997)
  • The Intrinsic Stakeholder Commitment Model – the firm is assumed to have an intrinsic commitment to its various stakeholders which puts their interests at the heart of strategic decision making (Preston and O’Bannon, 1997)

In actuality, the UK supermarkets tend to conduct socially responsible policies in relation to their employees and local communities. They attempt to create a positive public image through social responsibility (Marston and Shrives 1991). They cannot ignore the public opinion and the attitude of customers to their brand because the deterioration of the public attitude or negative image of the brand leads to the deterioration of the position of supermarkets in the industry (Arlow & Gannon 1982). Therefore, the UK supermarkets spend considerable funds on socially responsible policies and interaction with local communities. Social performance of the UK’s supermarkets becomes extremely important for their marketing position. The U.K. supermarket industry is relatively concentrated with eleven main firms. Of these, eight were included in this study. The three that were excluded were Waitrose (part of the John Lewis Partnership), Co-operative Retail Services, and ASDA. In each case the lack of EIRIS data, crucial to the overall richness of the data being collected, was the deciding factor. In the case of Waitrose and Co-operative, EIRIS simply does not include these non-listed companies in their database. ASDA’s takeover by Asda meant that the factsheet was no longer up-to-date (Berman, 1999).

The fact that the strong positive association between firm size and social performance is statistically significant, given the small sample size, is both surprising and confirms previous studies which have also found such a relationship (Preston and O’Bannon, 1997). Again, further empirical work which confirms this over time, and case study research with the firms, might reveal more about this relationship. The finding seems to suggest that size equates with visibility and hence with the likelihood of greater external scrutiny. Larger firms, therefore, are more likely to find their reputation suffering if they do not perform well on social measures, and will act accordingly (Preston and O’Bannon, 1997).

The political situation is favourable for the development of supermarket industry in the UK because the government is interested in the development of trade and consumption, which stimulate business activities and economic growth of the UK. The economic growth, in its turn, provides high revenues of the state budget and steady economic development of the country that contributes to the social stability in the UK.

At the same time, technological innovations can change the UK supermarket industry consistently. As it has been already mentioned above, the UK supermarket industry tends to develop online retail fast and online retailers gain a larger share of the market in the course of time due to the wider use of technologies, especially internet and modern telecommunication systems. In such a way, conventional supermarkets may fail to maintain their current position and start losing their competitive position to online retailers.

Evaluation of the UK’s supermarket industry

In order to understand the current competitive situation in the UK supermarket industry, it is possible to refer to the experience of the major players in the market. First of all, it is possible to dwell upon Sainsbury’s (Moskowitz, 1974). Sainsbury’s should stick with food heritage and high guality, but look at how the communication is working. Has the Jamie Oliver effect gone out of date? Sainsbury’s has always had great advertising (Berman, 1999). Expanding the brand into more areas of food, such as sandwich shops, seems a pretty smart move (Berman, 1999). Continue the guest to make non-food a strong part of the mix. It has never felt a natural part of such a strong food brand, but it is an essential element of any big supermarket (Preston and O’Bannon, 1997). For Sainsbury’s, the once-groundbreaking call to ‘Try something new today’ is fading into the background and is now challenged by shifting shopping behaviour as customers put ‘one less item’ into their weekly baskets (Berman, 1999). Sainsbury’s fantastic performance in the run-up to Christmas only serves to highlight that its focus on guality is disconnecting with everyday consumer needs (Cooke, 1989). The ‘feed your family for a fiver’ initiative has been a successful cosmetic exercise, but is no longer making a difference to the customer’s bottom line against the strong value/price messages of Tesco, Morrisons and even Waitrose (Trevor, 2009).

In actuality, Sainsbury’s has found a good remedy to its current problems. To put it more precisely, the company attempts to delve deeper into the recent ‘value where it matters’ proposition to further highlight Sainsbury’s fair-priced offering (Berman, 1999). Furthermore, against the backdrop of rising food inflation, review the pricing strategy and how it can be refocused to reflect Sainsbury’s value proposition of ‘good food costs less’ (Berman, 1999). Focus on own-brand clothes and electrical goods ranges to capture Sainsbury’s broader role in delivering on the consumer’s search for value (Berman, 1999).

Other major players are ABF and Tesco are leading chains of supermarkets in the UK (See App. Table 4-6). Today, they are characterized by the positive marketing performance, although they face some problems caused by the recent economic recession (Maclntyre, 1985). In this regard, it is possible to dwell upon the financial analysis of these companies. In actuality, the profitability ratio is an important ratio which provides the information on profitability of a company and it can be viewed as a marker of the financial position and attractiveness of a company for investors (Berman, 1999). At the same time, the profitability ratio cannot be viewed as the absolute data which can allow making a definite conclusion on the financial situation within a company since a high profitability does not always mean good financial prospects of the company and vice versa.

In regard to ABF the profitability ratio it is possible to refer to the table 1, which shows that the profitability of the company steadily grow within the last couple of years since all basic financial ratios defining profitability of the company, but equity ratio, grew. For instance, net profit margin increased from 0,05 to 0,06 by 0,01 from 2006 to 2007, the same growth could be observed in relation to net assets of the company (Trevor, 2009).

The most substantial growth can be observed in regard to the return on equity, which has increased from approximately 0,073 to 0,09 within a year, while all the other ratios also demonstrate a positive trend to the growth though not such a substantial one as the return on equity and at average the growth constitutes 0,01 per issue within a year (Trevor, 2009).

The horizontal size statement of ABF is presented in table 2 which shows that the financial position of the company steadily improves. For instance, it is possible to trace the decrease of the company’s liabilities and decrease of the financial pressure (Cottrill, 1990). The latter was supposed to improve the market performance of ABF and increase its revenues and profits, but in actuality, the financial benefits are not proportional to decrease of the fiscal pressure on the company by 2,70% (Trevor, 2009). Nevertheless, the decrease of the current liabilities by 13,75% is apparently a positive trend, but this may be a short-run benefit because the total liabilities of the company increased by 8,92% (Trevor, 2009).

The common size analysis is presented in table 3, which is also quite positive , though the decrease of cash flows of the company are quite disturbing because they can indicate to the possible lack of liquidity of the company (Moskowitz, 1975). Furthermore, it is important to underline that the assets of the company grow more significantly compared to the growth of the company’s liabilities. For instance, the increased from 155,24% in 2006 to 156,36% in 2007, while its total liabilities constituted 55,24% in 2006 and 56,,36% in 2007 (Trevor, 2009).

Today both ABF and Tesco have a stable financial position in the market, but it is possible to estimate that ABF is in a better position because of the higher profitability at the moment. To put it more precisely, Tesco profits constituted 2,300 mln. p. in 2007, while profits of ABF constituted 6,800 mln. p. (Trevor, 2009). However, such a trend may be a short-run trend since the decrease of equity ratio and cash flow are quite disturbing while Tesco does not have such problems and keeps growing steadily.

In addition, it is worth mentioning Asda as one of the strongest players in the UK supermarket industry (Moskowitz, 1974). Asda is one of the largest chains of discount stores in the world. The company occupies the leading position in the American market and it has already started an aggressive international market expansion. At the same time, it is worth mentioning the fact that the company has made a tremendous progressing half of a century, especially since the 1980s, when the company has strengthened its position consistently (Harrison and Freeman, 1998). On the other hand, the position of Asda is far from perfect because the competition in the market persists, while policies conducted by Asda are severely criticized in regard to ethical issues and protection of rights of employees. In such a context, the future development and prospects of Asda depend on the efficiency of the management of the company and its ability to cope with current challenges as well as the outcome of its international market expansion.

On analyzing the development of Asda/Wal-Mart, it is primarily necessary to dwell upon the history of the company, which dates back to the mid-20th century, when the company was founded by Sam Walton (Moskowitz, 1972). However, Sam Walton made just first steps in the development of the company which opened its first discount city store in 1962 (Wilkins, 1999). In fact, it is in 1960s, when the development of Asda as the national chain of discount stores got started. Nevertheless, the company did not achieve a tremendous success until the 1980s, when the market expansion had reached the unparalleled level (Pava and J. Krausz, 1996). In the 1980s the company kept growing rapidly and, by the late 1980s, Asda had over 1,000 stores nationwide, while in 1988, the first Asda Supercenter was opened in Washington, Missouri (Trevor, 2005). This was a new type of store, which, to a significant extent, revolutionized the retail in the USA. In the 1990s the company kept growing and started its international market expansion entering European markets and markets of Latin American countries. The recent success of Asda within the last decade is closely intertwined with the work of Asda’s CEO, H. Lee Scott. Under his presidency, the company has reached a particularly significant progress and in 2002 it was listed for the first time as America’s largest corporation on the Fortune 500 list with revenues of USD 219,8 billion (Trevor, 2005). Today, the company continues its strategy of international market expansion and attempts to take the leading position in the global market.

Nevertheless, the company still faces a strong opposition from its major competitors not only in the USA but also in other countries of the world and global market such as the UK. In this respect, it is worth mentioning the largest competitors of Asda, such as Target, Tesco, Costco, Carrefour, and others. In fact, Asda as well as its competitors tends to increase the volume of sales and the size of stores, which have already outgrown into huge supercenters. In such a way, companies attempt to maximize their profits through gaining the larger share of the market. The latter is achieved by means of replacement of minor retailers who cannot afford the competition with such giants as Asda (Collier, 1998). At the same time, such a strategy is a subject of criticism because the development of the chin of Asda stores threatens to the survival of small business and minor retailers, who have to give in to the company because customers prefer buying at discount stores of Asda. In this respect, it should be said that the company takes the advantageous position mainly due to the pricing policy because Asda uses its discount stores and low prices to gain the larger of the market at the expense of smaller competitors (Griffin and Mahon 1997). In fact, Asda can sell goods at lower prices than smaller retailers due to its size and volume of sales which is incomparably higher than in small stores.

However, the negative impact of Asda on small business and small retailers is not the only subject of criticism. In fact, Asda is severely criticized for its anti-union stance. The company prevents its employees from joining unions that naturally creates favorable conditions for violation of employees’ rights and their inability to resist to executives of Asda. In addition, Asda is criticized for its environmental policies because the company is considered to have a negative impact on the environment. In this regard, it is worth mentioning the fact that the company has already started to introduce energy efficient technologies to minimize its negative impact on the environment and to demonstrate its concerns with environmental problems.

Thus, it is obvious that Asda is one of the world’s largest retailers. The company operates internationally and keeps its international market expansion. At the same time, the company is criticized for its environmental and labor policies. In addition, the company undermines the development of small business and affects negatively local taxation and revenues. Nevertheless, the company keeps growing and its position in the national and international market is very strong.

The problem of employees’ discrimination was traditionally one of the major problems that affected consistently the position of employees and their work. In actuality, the problem of employees’ discrimination persists, in spite of numerous efforts of legislators to prevent discrimination and to provide employees with equal opportunities. In this respect, it is possible to refer to the experience of Asda, which faces the problem of payment and promotion discrimination of female employees (Trevor, 2005). In actuality, the discrimination of female employees tends to disappear but, nonetheless, the problem of discrimination persists, including such large companies as Asda. The existing legislation protects employees from violation of their basic human rights and liberties. In such a situation, the legislative protection of employees forces employers to change their discriminatory practices. The anti-discriminatory legislation focuses on the improvement of the workplace environment to minimize the risk of discrimination. However, Asda still discriminates its employees but, due to the existing anti-discriminatory legislation, female employees, who suffer from discrimination, can and do file lawsuits against the company to gain compensations and to get equal opportunities compared to men.

In actuality, Asda is one of the largest employers in the US and the world. However, today, female employees suffer from the discrimination in terms of payment and promotion. What is meant here is the fact that female employees have lower wages and suffer from poor career opportunities compared to men.
As the matter of fact, the problem of female discrimination is not new and has persisted for decades. Females were in an inferior position compared to males and, today, the problem of female employees’ discrimination persists because the modern society still suffers from glass ceiling. The domination of men in the top management of Asda is one of the major reasons for the discrimination of female employees because men attempt to protect their position at the top management of the company. In such a situation, Asda has to maintain its positive organizational performance, in spite of the growing conflicts between employees and discrimination of female employees. In actuality, Asda treats female employees as being inferior to male employees (Low and Villegas, 1987). As a result, female employees suffer from discrimination and have already filed lawsuits against the company. The lawsuits aim at the elimination of the discrimination of female employees and gaining compensations from the company. However, the main point of the lawsuits is to put the end to discriminatory practices in Asda and to provide female employees with equal wages and equal career opportunities compared to male employees.

In such a situation, the company carries on its discriminatory practices. However, as the company has faced several lawsuits from the part of female employees, Asda has started to change its human resource strategy. To put it more precisely, the company has started to introduce part-time jobs instead of full-time ones. In such a way, the company attempted to reduce the personnel employed full-time that would decrease the dissatisfaction of employees with their job. At the same time, this strategy allowed the company to get rid of employees, which did not match interests and policies of the company.

At first glance, this strategy has proved to be quite effective because employees doing part-time jobs do not feel discrimination as much as full-time employees. In addition, employees doing part-time jobs are not interested in career opportunities because they have little career opportunities a priori and, what is more, the job in Asda is provisional for them and they do not view this job as number one priority for them. As a result, employees doing part-time job are not concerned with their career development that decreases the risk of their dissatisfaction or filing lawsuits because of their discrimination in terms of promotion. As for payment, employees doing part-time jobs receive lower wages compared to full-time employees because they spent less time at work.

However, such policies are not effective in a long-run perspective because the company cannot afford maintaining a large number of part-time jobs instead of full-time ones. In a long-run perspective, the company will lose the ground because well-qualified professionals will change the workplace, if they cannot see prospects for their professional development in Asda. If they do part-time jobs, they naturally suffer from poor employees’ performance and low career opportunities. In such a way, the company will suffer from the lack of well-qualified professionals.

At the same time, the use of part-time jobs cannot prevent the problem of employees’ discrimination. What is meant here is the fact that female employees will suffer from their discrimination from the part of the employer (Reuter, 2006). Asda carries on discrimination of female employees. In such a way, Asda postpones the solution of the problem of female discrimination, instead of resolving it. This means that female employees still have opportunities filing lawsuits against the company. Therefore, the company is likely to suffer from the ongoing deterioration of the situation.

In such a situation, Asda should focus on the solution of the problem of discriminatory practices. In such a way, the company can avoid possible lawsuits its female employees can file at the moment (Reuter, 2006). What is meant here is the fact that Asda should establish equal wages for its female and male employees and to provide female and male employees with equal career opportunities. Obviously, the elimination of discrimination is the only way to the resolution of existing problems in Asda. Therefore, the company should put the end to the discrimination through the elimination of inequality between employees. At the same time, employees should use the full potential of unions to protect their rights and liberties and prevent the risk of further discrimination from the part of the employer.

At the same time, it is important to remember that the bargain power of buyers in the UK has dropped recently because of the impact of the economic recession. However, the UK supermarket industry did not suffer considerable losses because the UK buyers keep buying essential products in supermarkets, where they are of the good quality and sold at affordable prices. Nevertheless, the drop of the bargain power of buyers put under a threat the further growth of the industry. At this point, it is worth mentioning the fact that the UK economy starts to recover that may lead to the increase in the bargain power of buyers.
The same trend can be traced in regard to the bargaining power of suppliers because the UK supermarkets are dependent on local suppliers, who also have faced substantial problems caused by the economic recession. In such a situation, many UK supermarkets used available resources and outsourcing to change suppliers and close gaps that could have appeared in the course of the economic recession.

Today, the competition in the UK supermarket industry keeps growing. The economic recession increases the impact of competition on the position of many companies operating in the UK supermarket industry because the economic recession urges them to introduce changes. In this regard, many companies operating in the market may consider the possibility of mergers and acquisitions as possible solution to their current problems because mergers and acquisitions can enhance their competitive position and bring additional financial resources. In addition, mergers and acquisitions can expand the market share of companies involved in mergers and acquisitions that naturally put them into an advantageous competitive position in the market compared to their major rivals. At the same time, the competition from the part of foreign companies operating in the supermarket industry grows too because they expand their markets internationally, whereas the UK market is one of the desirable target markets for many companies operating in the supermarket industry worldwide.

Conclusion

Thus, taking into account all above mentioned, it is important to place emphasis on the fact that the development o the UK supermarket industry is vulnerable to consistent changes under the impact of economic and technological factors. To put it more precisely, new players enter the market, for instance, Asda, that naturally increases the competition in the UK supermarket industry. The progress of new technologies, internet and telecommunication systems stimulate the development of online retailers, which may challenge the position of conventional supermarkets in the future. In spite of the economic recession, the UK supermarket industry keeps progressing and develops successfully.
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Appendices:
Convenience store numbers

Convenience sector value

Source: IGD Research, June 2010
Table 1.
Profitability 2007 2006

Gross Profit Margin Gross Profit 6 800 1,00 5 996 1,00
Sales 6 800 5 996

Operating Profit Margin PBIT 556 0,081765 433 0,07
Sales 6 800 5 996

Op Profit Margin after Tax NOPAT 539 0,08 420 0,07
Sales 6 800 5 996

Net Profit Margin Profit for Ordinary S/holders 400 0,06 308 0,05
Sales 6 800 5 996

Return on Cap Employed PBIT 556 0,10 433 0,09
Capital Employed 5 537 4 820

Return on Assets Profit for Ordinary S/holders 400 0,06 308 0,05
Total Assets 6 890 6 492

Return on Equity Profit for Ordinary S/holders 400 0,09 308 0,073649
Equity 4 464 4 182

Equity Multiplier Total Assets 6 890 1,54 6 492 1,55
Equity 4 464 4 182

Table 2
Associated British Foods PLC

Horizontal Analysis

Consolidated Income Statement
for the year ended 15 September 2007
2007 2006 Change
£M £M %

Revenue 6 800 5 996 13,41%

Operating Costs (6 262) (5 486) 14,15%
Exceptional Items – (97)
Other Income 18 20 -10,00%

Profit from operations 556 433 28,41%

Profits less losses on Sale of Business (39) (4) 875,00%
Provision on loss on termination of operation – (8)
Profit before interest 517 421 22,80%

Net Finance Expense (9) (2) 350,00%
Profit before taxation 508 419 21,24%

Taxation (108) (111) -2,70%

Profit after taxation 400 308 29,87%

Consolidated Balance Sheet
as at 15 September 2007
2007 2006 Change
£M £M %

Current assets 2 261 2 100 7,67%

Non current assets 4 719 4 392 7,45%

Total assets 6 980 6 492 7,52%

Current liabilities 1 443 1 673 -13,75%

Non current liabilities 1 073 637 68,45%

Total liabilities 2 516 2 310 8,92%

Net assets 4 464 4 182 6,74%

Equity 4 464 4 182 6,74%

Consolidated Cash Flow Statement
for the year ended 15 September 2007
2007 2006 Change
£M £M %

Net operating cash flows 696 419 66,11%

Net investing cash flows (466) (720) -35,28%

Net financing cash flows (81) (391) -79,28%

Net increase / decrease in cash 149 (692) -121,53%

Cash, net of overdrafts at beginning of year 198 894 -77,85%
Foreign exchange effect 2 (4) -150,00%

Cash, net of overdrafts at end of year 349 198 76,26%

Table 3
Associated British Foods PLC

Consolidated Income Statement
for the year ended 15 September 2007
2007 2006
£M £M

Revenue 100,00% 100,00%

Operating Costs 92,09% 91,49%
Exceptional Items – 1,62%
Other Income 0,26% 0,33%

Profit from operations 8,18% 7,22%

Profits less losses on Sale of Business 0,57% 0,07%
Provision on loss on termination of operation – 0,13%
Profit before interest 7,60% 7,02%

Net Finance Expense 0,13% 0,03%
Profit before taxation 7,47% 6,99%

Taxation 1,59% 1,85%

Profit after taxation 5,88% 5,14%

Consolidated Balance Sheet
as at 15 September 2007
2007 2006
£M £M

Current assets 50,65% 50,22%

Non current assets 105,71% 105,02%

Total assets 156,36% 155,24%

Current liabilities 32,33% 40,00%

Non current liabilities 24,04% 15,23%

Total liabilities 56,36% 55,24%

Net assets 100,00% 100,00%

Equity 100,00% 100,00%

Tale 4. Tesco. Income statement
Period Ending Dec 31, 2010 Dec 31, 2009 Dec 31, 2008
Total Revenue 378,665 356,848 534,942
Cost of Revenue 307,156 320,111 399,197

Gross Profit 71,509 36,737 135,745

Operating Expenses
Research Development 9,075 7,431 11,049
Selling General and Administrative 47,117 43,735 49,005
Non Recurring – – –
Others – – –

Total Operating Expenses – – –

Operating Income or Loss 15,317 (14,429) 75,691

Income from Continuing Operations
Total Other Income/Expenses Net (737) (1,285) 988
Earnings Before Interest And Taxes 14,580 (15,714) 76,679
Interest Expense 758 1,891 4,503
Income Before Tax 13,822 (17,605) 72,176
Income Tax Expense 6,777 (12,340) 19,270
Minority Interest – – –

Net Income From Continuing Ops 7,045 (5,265) 52,906

Non-recurring Events
Discontinued Operations – – –
Extraordinary Items – – –
Effect Of Accounting Changes – – –
Other Items – – –

Net Income 7,045 (5,265) 52,906
Preferred Stock And Other Adjustments – – –

Net Income Applicable To Common Shares 7,045 (5,265) 52,906

Currency in USD.

Table 5. Tesco balance sheet
Period Ending Dec 31, 2010 Dec 31, 2009 Dec 31, 2008

Assets
Current Assets
Cash And Cash Equivalents 60,603 39,930 20,619
Short Term Investments – – –
Net Receivables 83,424 78,751 108,743
Inventory 59,190 74,339 96,013
Other Current Assets 22,768 18,680 13,533

Total Current Assets 225,985 211,700 238,908
Long Term Investments – – –
Property Plant and Equipment 182,686 183,025 208,968
Goodwill 29,394 29,394 28,746
Intangible Assets 4,153 5,450 7,545
Accumulated Amortization – – –
Other Assets – – –
Deferred Long Term Asset Charges 12,690 12,986 9,066

Total Assets 454,908 442,555 493,233

Liabilities
Current Liabilities
Accounts Payable 61,205 45,318 63,471
Short/Current Long Term Debt – – 10,171
Other Current Liabilities 11,987 14,007 19,964

Total Current Liabilities 73,192 59,325 93,606
Long Term Debt – 8,600 39,400
Other Liabilities 1,168 – –
Deferred Long Term Liability Charges 4,879 12,471 8,197
Minority Interest – – –
Negative Goodwill – – –

Total Liabilities 79,239 80,396 141,203

Stockholders’ Equity
Misc Stocks Options Warrants – – –
Redeemable Preferred Stock – – –
Preferred Stock – – –
Common Stock 179,270 175,087 171,384
Retained Earnings 143,737 136,692 142,752
Treasury Stock – – –
Capital Surplus 17,161 14,879 15,708
Other Stockholder Equity 35,501 35,501 22,186

Total Stockholder Equity 375,669 362,159 352,030

Net Tangible Assets 342,122 327,315 315,739

Currency in USD.

Table 6. Tesco. Cash flow.
Period Ending Dec 31, 2010 Dec 31, 2009 Dec 31, 2008
Net Income 7,045 (5,265) 52,906

Operating Activities, Cash Flows Provided By or Used In
Depreciation 36,264 37,334 33,967
Adjustments To Net Income (145) 18,008 (10,799)
Changes In Accounts Receivables (18,486) 44,046 (11,866)
Changes In Liabilities 22,584 (49,048) 8,451
Changes In Inventories 12,460 14,093 6,488
Changes In Other Operating Activities (4,634) 4,127 (2,400)

Total Cash Flow From Operating Activities 55,088 63,295 76,747

Investing Activities, Cash Flows Provided By or Used In
Capital Expenditures (37,073) (17,282) (79,325)
Investments – – –
Other Cash flows from Investing Activities 11,309 13,486 21,149

Total Cash Flows From Investing Activities (25,764) (3,796) (58,176)

Financing Activities, Cash Flows Provided By or Used In
Dividends Paid – – –
Sale Purchase of Stock 188 544 8,436
Net Borrowings (8,600) (40,969) (28,992)
Other Cash Flows from Financing Activities – – 1,036

Total Cash Flows From Financing Activities (8,651) (40,733) (19,520)
Effect Of Exchange Rate Changes – 545 (1,504)

Change In Cash and Cash Equivalents 20,673 19,311 (2,453)

Currency in USD.