Introduction to Morrisons:

Our business is mainly food & grocery and, uniquely, we source & process most of the fresh
food that we sell through our own manufacturing facilities. It gives us close control over
provenance & quality as do the number of committed and trained professionals in our stores
who prepare our food for our customers. We have more skilled colleagues preparing food in
store than any other retailer.

Every week, 11 million customers pass through our doors and over 110,000 colleagues across
the business work hard each day to deliver great service to them. We cover more than 11
million households with our Morrisons.com service. With competitive, permanently low prices
we are committed to helping our customers save money every day.

Morrisons’ Business Strategy:

Porter‟s generic strategies very important in order to evaluate company’s strategy (Lynch,2006).
Porter (2004) claims that any business could undertake one of the three fundamental strategies:
cost leadership, differentiation, and focus. According to it company supposed to choose one of
these strategies to gain competitive advantage. Low cost leadership in food retail sector
obviously gained by LIDL and ALD Iover the last 5years, Tesco was trying to get in that position
but Morrison was known for its differentiation strategy by offering fresh food and in house
prepared food and according survey prices was higher than average(Promice,2013). But last two
years company is competing pricewise as well with its major rivals Tesco and Sainsbury’s and
ASDA, and Morrison created an Mkitchen range and M savers basic brand of the company.
Morrison wants to offer affordable price in all ranges for customers.

As Professor Porter mentioned on his works there real dangers for the firm that engages each
generic strategy but fails to achieve any of them- it is stuck in the middle” (Lynch,2012 and
Porter, 2004). Morrison now in a situation stuck in the middle. Porter states that the firm stuck
in the middle is almost guaranteed low profitability (Porter, 1980). As the result profit margin
get down for year ending 2012.

Morrisons SWOT Analysis, Competitors & USP:

 The UK’s retail market is oligopoly; this industry has high competition, “big 4” have already
occupied most markets across the country, including Tesco, Sainsbury’s, ASDA (America owner
Wal-Mart), Sainsbury’s and Morrisons. Tesco is market leader, which has 30.7% market share,
followed by ASDA with 17.6%, Sainsbury’s held share at 16.6%, Morrisons at the 4th position
with 11.9% market share (The Guardian, 2012). Tesco and ASDA have almost 50% market share
due to their sizes; both of them are international companies who have business worldwide. The
threat of rivalries is high.
Morrisons’ ability to compete successfully with other super markets will be affected by the
company’s strengths and weaknesses. SWOT analysis of Morrisons analyses the brand/company
with its strengths, weaknesses, opportunities & threats. Morrisons is one of the leading brands
in the lifestyle and retail sector. The table below also lists the top Morrisons competitors and
elaborates Morrisons segmentation, targeting, positioning & USP.
SWOT analysis of Morrisons analyses the brand/company with its strengths, weaknesses,
opportunities & threats. Morrisons is one of the leading brands in the lifestyle and retail sector.
The table below also lists the top Morrisons competitors and elaborates Morrisons
segmentation, targeting, positioning & USP.

Morrisons

Parent Company Wm Morrison Supermarkets plc

Category Retail industry

Sector Lifestyle and Retail

Tagline/ Slogan Fresh for you every day; Fresh choice for you

USP Morrisons is known for selling quality fresh food across UK

Morrisons STP

Segment Those who look for price, convenience and freshness.

Target Group Households

Positioning Having a food offering with broad appeal from Aldi to Waitrose.
 Morrisons SWOT Analysis

Below is the Strengths, Weaknesses, Opportunities & Threats (SWOT)

Analysis of Morrisons. Strengths are:
1. Morrisons has an efficient supply chain and distribution network
2. It offers a large product portfolio to its customers like food, beverages,
music, clothes etc
3. Morrisons is one of the big supermarket companies in UK
4. It has over 500 stores in UK with an employee strength of over 130,000
5. The company has its listing on London Stock Exchange & FTSE Index
6. Morrisons has established itself with prominent acquisitions in the past
Strengths 7. Online retailing & shopping has increased the business for the company

Here are the weaknesses in the Morrisons SWOT Analysis:

1. Morrisons has limited geographical reach as compared to some other big
brands
2. Alleged past issues pertaining to farmer rights has affected the brand
Weakness image of the company

Following are the Opportunities in Morrisons SWOT Analysis:

1. Growing market for organic products can be tapped by the company
2.International expansion of Morrisons stores can boost the overall business
3.Rising demand for private labels can be catered by the company
4. Acquisition of smaller companies & strategic partnerships can help the
Opportunities business grow

The threats in the SWOT Analysis of Morrisons are as mentioned:

1. Increasing market share of competitors can affect the margins
for Morrisons
2. Increase in taxes and change of Govt policies
3. More business by ecommerce companies can hurt the business of physical
Threats retail stores
Increased rivalry among grocery retail shops may occur when competitors are roughly the equal
size and one competitor decides to gain share over the others (Lynch, 2006).Competition within
an industry determined by several factors (Fleisher and Bensaussan, 2003). They are: market
growth, cost structure, barriers to exit, switching cost and diversity. If market is growing slowly
and company wants to be dominant in the market in this case it need to take sales from
competitors – increasing rivalry. According to Lynch(2006), where fixed costs and the costs of
finished products in an industry high, then companies may attempt to gain market share in
order to achieve break even or higher levels of profitability. Barriers to exit are very high for
retail grocery industry.
Competitive rivalry=very high

How does the company compete?

 Morrisons’ pricing, trade plan and promotional and marketing campaigns are actively
managed;
 Morrisons’ strong balance sheet and strong cash flow will allow us to continue to invest
in our proposition;
 Long-term agreements are established with suppliers, ensuring a competitive customer
offer to help maintain security of supply;
 Morrisons continue to work closely with British growers and farmers; and
 Morrisons continually review our range, category plan, and quality and respond to
customer feedback. The ‘Best’ premium own-brand range has continued to grow to
meet customer demand and we launched our low-price ‘Naturally Wonky’ and re-
launched the ‘Savers’ brands.

Core sources of Revenue and Expenditures:

Revenue Total revenue during the period was £17.7bn, up 2.7% year-on-year. Revenue excluding
fuel was £14.0bn, up 3.2%. Adjusting for the 53rd week in 2017/18, total revenue including fuel
was up 4.7%. Group like-for-like (LFL) sales excluding fuel was up 4.8% over the year, including
contributions from supermarkets of 1.2% and online through central fulfilment of 0.3%. It was
an important year for wholesale, which contributed 3.3% to LFL growth as we accelerated
supply to McColl’s and made good progress with our other wholesale partners, which enabled
us to achieve our target of £700m of annualised wholesale sales ahead of our initial end-2018
guidance.
Morrisons’ Capital Expenditure:
Cash capital expenditure was £461m, (2017/18: £500m). In the year a further 59 stores went
through our Fresh Look programme, meaning, the company has now refitted over half the
estate. They also invested in improving distribution, both to support our growing business, and
as part of Morrisons’ longer term network planning.
Morrisons’ Changes in Strategy:
From their generic business strategy of cost leadership and consequently declining revenues,
Morrisons took shift to the following strategies in order to have embellishment in business and
their customer satisfaction;
Driving the topline:
Strengthening the brand image, crate leading range and offer high quality produce. Offer
customers the best fresh food in the UK; provide great value and experiential engage shopping
environment. Build new stores help customers easy to access.
Increasing efficiency:
Introduce new solution for Morrisons’ five manufacturing produce sites to improve efficiency.
Increasing network efficiency by reducing costs throughout supply chain.
Capturing growth:
“Create different things by leveraging its vertical integration and fresh, also value credentials to
develop a really distinctive and compelling fresh food experience, offering customers great food
at affordable prices at a location which is convenient for them”.

Morrisons’ Changes in Activity:

Introducing paper carrier bags:
They are giving customers the option of using large paper carrier bags in eight stores. The trial is
a response to customers who told us reducing plastic is their number one environmental
concern. At 20p each the paper grocery bags, which can be reused and ultimately recycled, are
labelled 'Reusable Paper Bag'.
Too good to waste box launched:
Morrisons is launching a one kilogram Too Good to Waste box to sell fruit and veg that are at
the end of their shelf life, but are perfectly good to eat. The boxes will be on sale for £1 in every
Morrisons nationwide. They are designed to offer customers more of their five-a-day intake on a
budget.
Quieter hour launched in stores:
Morrisons is to introduce a quieter hour in all of its stores for customers who would benefit
from a calmer shopping trip. Designed to help customers who currently struggle with music and
the other noise associated with supermarket shopping, it will take place every Saturday in all
493 of its stores nationwide from 9-10am.

Size of the Company and Growth in Morrisons:

Morrisons have once again made good progress in becoming a broader, stronger business.
2018/19 sales growth was the strongest for nine years, profit was again up, cash flow was
strong, debt remained low and return on capital employed (ROCE) improved. They continue to
invest for growth, and remain focused on that growth being cash generative, capital light and
returns accretive. The company has a sustainable ordinary dividend policy and a capital
allocation framework, against which we assess the uses of free cash flow. Once again, adhering
to the principles of this capital allocation framework, the Board is recommending a return of
surplus capital to our shareholders through another special dividend in addition to the special
dividend paid at the half year.

Morrisons’ Profit and Shareholders’ Value:

Our policy is for the ordinary annual dividend to be sustainable and covered around two times
by basic earnings per share before exceptionals. The final ordinary dividend will be 4.75p,
bringing the ordinary dividend for the full year to 6.60p. In addition to the final ordinary
dividend, the Board is proposing a final special dividend of 4.00p per share (in addition to the
2.00p special dividend paid at the half year). This takes the total dividend for the year to 12.60p,
an increase of 24.9%. The principles of our capital allocation framework have guided us in
building a track record of capital discipline, and sustained improved total returns for
shareholders. That framework has served us and our stakeholders very well for the last five
years and remains unchanged. We still have significant opportunities ahead. These
opportunities span sales, costs, productivity and every aspect of improving the shopping trip.
We are confident that the meaningful and sustainable turnaround remains in our own hands.

Change to Main Sources of Revenue Having an Effect on Revenue:

This chart is clearly showing the upward shift in sales, other sales and all other sources of
revenue as compared to the last economic year. So, there is positive effect in all sources of
revenue when comparing with former one.

Change in Assets:

Under the accounting rules, which came into force for reporting periods after January, retailers
have to include leasing obligations in annual statements of assets and liabilities. The aim is to
improve the accuracy of accounts.
Ahead of its interims, Morrisons has restated its 2018 results to incorporate IFRS 16.
Pre-tax profit before exceptional was revised down £10mln to £396mln due £103mln less in
rent, an extra £58mln in depreciation and a further £55mln in finance costs that weren't
reported previously.
Net assets were adjusted down by £304mln to £4.3bn after recognizing lease liabilities of
£1.4bn and corresponding right-of-use assets of £745mln.
Operating profit before exceptionals was revised up £45mln to £510mln and the operating
margin was raised 25 basis points to 2.9%.
Changes in Liabilities:

There is an upward shift can be seen in current liabilities during the year 2019 so far whereas
non-current liabilities have downward shift.
Morrison’s Profitable Area according to Segmental Analysis:
According to marketing segmental analysis, Morrisons is successfully capturing customers to
their fresh food items area as compared to others offerings and services. No doubt, people have
a great move shown to their clothing brand “Nutmeg”; still people are showing inclination
towards Morrisons’ fresh food offerings.

Adoption of New Accounting Standards:

From 5 February 2018 the following standards, amendments and interpretations were adopted
by the Group:

IFRS 9 'Financial Instruments' replaces IAS 39 'Financial Instruments: Recognition and

Measurement' and is applicable to financial assets and financial liabilities. During the 53 weeks
ended 4 February 2018, the Group assessed in detail the impact of the new standard on the
consolidated financial statements and concluded the impact on transition was immaterial.
Accordingly, in the condensed consolidated interim financial statements the Group has not
restated prior year comparatives and no adjustment to the opening balance sheet at 5 February
2018 has been recognised. Whilst the impact of the new standard is immaterial, the Group has
updated its accounting policy for the establishment of provisions against trade receivables to
reflect the lifetime expected loss model (consistent with the simplified approach under IFRS 9).

IFRS 15 'Revenue from Contracts with Customers' replaces IAS 18 'Revenue', IAS
11 'Construction contracts' and related interpretations. The standard requires that revenue
should only be recognised when a customer obtains control of goods or services and has the
ability to direct the use and obtain the benefits from the goods or services. During the 53 weeks
ended 4 February 2018, the Group assessed in detail the impact of the new standard and
concluded that the adoption of IFRS 15 had an immaterial impact on the consolidated financial
statements as the majority of transactions (volume and value) are for sale of goods in stores,
online or to wholesale customers where the transfer of control is clear (either at the till or on
delivery of goods). Accordingly, in the condensed consolidated interim financial statements the
Group has not restated prior year comparatives and no adjustment to the opening balance
sheet at 5 February 2018 has been recognised. As part of the exercise of assessing the impact of
IFRS 15, the Group reviewed its accounting policies and disclosures around each of its income
streams. Following the exercise, the Group reclassified £9m of commission income to other
operating income in the period, which in the 53 weeks ended 4 February 2018 and the 26
weeks ended 30 July 2017 was included within other sales in revenue (30 July 2017: £9m, 4
February 2018: £18m). There has been no reclassification for the 53 weeks ended 4 February
2018 and for the 26 weeks ended 30 July 2017 as the adjustment is immaterial and
presentational only.

Audit Report:
Board composition and membership
  The Board comprises of seven independent Non-Executive Directors and two Executive
Directors
 There is an appropriate mixture of skills and experience on the Board
 There is a clear division of responsibilities between the roles of Chairman and the Chief
Executive
 All Directors stand for re-election annually at the AGM
 Senior Independent Director is Rooney Anand
 Tony van Kralingen is the Non-Executive Director designated to engage with colleagues
on behalf of the Board

Board effectiveness

 An internal review of the Board’s effectiveness found that the Board has a well-balanced
set of capabilities, and that governance and compliance is strong
 The Directors have all attended an appropriate number of Board and Committee
meetings, and commit sufficient time to the Group

External Auditor

 The Audit Committee is satisfied that the Group’s statutory auditor, PwC, who were
appointed in 2014/15, are independent and performing effectively
 The Board has a policy on the engagement of the external auditor to supply non-audit
services

Accountability

 The Board is satisfied with the effectiveness of internal control and that risk is being
managed effectively across the Group

Conclusion:
WM Morrison secures a strong position in the UK food retail sector. Its business model and
mission objectives are clear and transparent for the stakeholders. Although the superstore has a
sound financial position in the market but the market share compared to other superstores i.e.
TESCO, ASDA, and Sainsbury is not good. The environmental analyses of Morrison reveal some
key issues such as lack of using latest technology i.e. online retailing, no convenience stores, UK
dependency, or tight rivalry on the basis of food prices. After evaluating different market
options, it is found that „organic growth‟ or growth by acquisition could be appropriate market
options for Morrison. The segmentation criteria for targeting customers in the UK market are
defined on the basis of four parameters: price, location, quality, and product availability.
Morrison can target segmented market by communicating its key strengths to the customers. In
this way, the market share could be increased up to 5% after three years.