1. Strengths
One of the most important strengths of Homebase is its powerful retail brand or the strong position and image of the brand in the market. This can be seen on the position of the company as the second largest and leading brand in terms of DIY and appliance retailer in the UK. A brand image is a vital aspect of the bundle of products attributes. Thus, a strong brand image can sometimes overshadow the physical product shortcomings and temporarily support market share, while a weak brand image may keep an otherwise competitive product from ever getting its foot in the door with the customers (Barabba & Zaltman 1990, p. 90). Furthermore, the company also has a high reputation for value for money, convenience and wide range of products that are available. Homebase has opened 17 new stores and closed 4, which brings the total number of stores to 310 and most of the new stores were of a smaller store format and in new catchments. Currently, Homebase has 10% of its portfolio in a smaller store format or around 20,000 sq feet internal ground floor sales area, typically with an 8,000 square foot mezzanine and an 8,000 square foot garden centre. These smaller stores are able to provide an authoritative range across the broader home enhancement categories, and are often the only national retailer in smaller catchments such as market towns for categories including core DIY, garden and showroom (Home Retail Group 2008). 50 range reviews have been completed in 2008 which include homewares and furnishing, horticulture and core DIY and decorating categories (Home Retail Group 2008). Furthermore, the company is considered as a very profitable organization with a gross profit of £724,105 in 2008 or 2.20% profit margin in 2008. Another thing is the issue regarding the price competitiveness, this is because of the fact that both of the major players in the industry, B&Q and Homebase focuses on the pricing strategies in order to maintain their competitiveness or customer relationship. In addition, because of the fact, the Homebase had been in the industry for a long time, it had already acquired retail knowledge and experiences and it holds an advantage of an existing infrastructure, at the same time, enables the company to focus on the process of brand development and innovation. In connection to that, because of the different issues and factors that are affecting the external environment of the company, primarily the issue of globalization, the company had been able to apply different Information Technology in their system, at the same time, offer new medium of marketing, which is the Internet or e-Business, where in their customers, anywhere, can order and avail of their products and services anytime they want it at the comfort of their homes. Above all, the company had been able to have their loyal customers.
2. Weaknesses
There is no doubt that the company had been able to hold different advantages or strengths, which can help them to maintain their position in the market, however, it is also important to focus on the different weaknesses which must be given priority by the company in order to come up with the different preventive measures that will help them to use it in their advantage. Although, the company had already exerted all their effort in order to come up with different strategies and plan, still due to the different factors, primarily competition, the company maintains its position as the second best DIY dealers in the UK. This will somewhat affect the image of the company. Thus, it can be attributed to the inefficiency of the company and its lack of vision, primarily on the top management. Another important aspect is the huge size of the company, although there are different technologies and strategies that are being applied by the company, there are still chances that some minor aspects of the company will be taken for granted. Above all, the lack of aggressiveness is considered as the opposite of the characteristics of its major competitor which is the B&Q, that enables the company to come up with the different ideas and product that will be loved by the customers.
3. Opportunities
The growth of the market and industry will be the primarily opportunity for the company. The bigger the number of the possible markets or customers, the greater the chance to expand and grow. Thus, it will help the company to focus on the different areas of the UK, and other important parts of the world, in order to build their stores and introduce their brand and products to the selected market. Furthermore, it will also be important to focus on the development of a product which will be unique or differentiated products will help the company to ensure that their products are different from other competitors, thus it can help to drive up the sales and popularity of the brand. Above all, it will be important to consider the growing popularity of mobile Internet in the world. Thus, it will be important for the company to focus on building a website that can be accessed via mobile phone.
4. Threats
The economy has a major impact on the consumer spending and it focuses on the different aspect of employment, inflation, taxation, consumer debt levels and interests rates (B&Q 2008). However, it is important to consider that the global financial crisis or recession is considered as one of the most important factors that may affect the overall performance of all the players in any business and industry. Primarily, because Europe is one of the major region in the world that is being affected by the said event. Above all, the current growing number and intensity of competition is also another threat, this is because of the fact that the companies have to focus on the different preventive and maintaining strategies which will help them to ensure their position in the industry and in the market.
VI. Future of Homebase
Due to the different economic and financial factors that are going on in the world, primarily the issue of recession, it can lead to more serious problems and trends such as the changes in the buying behavior of the customers. Thus, it will be important for the company to focus on the different strategies which will help them to maintain their good reputations and good relationship with the customers. Thus, it will be important, to first focus on training and educating their staffs and crews regarding proper connection and relationship with the customers. Thus, it will be important for each and every employee to have a complete knowledge regarding the company as well as the different products and services that they are offering, in order to ensure customer relationship. Furthermore, it will be important to focus on the aspect of applying Information Technology in the different aspects of the company, primarily supply chain, which is considered as one of the most important aspects of any company. Thus, it will be important to focus on applying some centralized processing of the financial and other company data, that can help to ensure that all of the in-flow and out-flow will be connected, and at the same time, data will be easily retrieved which can help in the process of decision-making.
In connection, it will be very important for the company to focus on the different aspects that are related to the Internet, due to the growing demand of the customers in online shopping. This can be done by expanding their website, enabling different types and means of payment and delivery. Thus, it will be important to consider the growing demand of the mobile Internet, where in customers can browse the Internet, at the same time transact online anywhere and anytime, without the hassle of wired connection. This can be done by focusing on redesigning a website which can be browse via mobile phones.
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VII. Appendices A. Appendix A: Financial Ratio Analysis: HOMEBASE
Homebase Ratio Analysis (2006 – 2007)
Years
2006 (2005 = 1,488,665)
2007
2008
Sales (£ million)
1,458.1
1,508.5
1,480.9
% Increase (Current Year Sales – Last Year Sales/Last Year Sales)
-2.1%
3.46%
-1.83%
Liquidity Ratio
Current Assets (£ million)
727.5
766.0
835.9
Current Liabilities (£ million)
464.4
478.5
564.5
Current Ratios = CA/CL
1.57
1.60
1.48
Current Assets
727.5
766.0
835.9
Current Liabilities
464.4
478.5
564,5
Working Capital = CA – CL
263.1
287.4
271.4
Fixed Asset
325.8
330.2
397.3
Current Assets
727.5
766.0
835.9
Total Assets
1,053.5
1,096.2
1,233.2
Current Liabilities
464,405
478,549
564,530
Long Term Liabilities
43,281
64,734
78,564
Total Liabilities
507.7
543.3
643.1
Net Worth = Total Assets – Total Liabilities
545.8
552.9
590.1
Leverage Ratio = Total Liabilities / Net Worth
0.93
0.98
1.09
Gross Profit
629.8
701.8
724.1
Sales
1,458.1
1,508.5
1,480.9
Gross Profit Margin (%) = GP/Sales * 100
43.19
46.52
48.90
Revenue
Turnover
1,458.1
1,508.5
1.480.9
Gross Profit
629.8
701.8
724.1
Operating Profit
12.1
33.5
31.7
Other Income
5.2
.525
8.8
Total Revenues
2,105.2
2,244.3
2,245.5
Expenses
Cost of Sales
829.2
806.8
756.8
Administration Expenses
617.6
668.3
724.1
Exceptional Items
5.9
.753
5.9
Profit Loss before Interest
16.1
33.2
34.7
Interest Paid
1.2
2.6
2.1
Taxation
3.1
24.0
4.6
Profit Loss after Tax
21.3
6.6
37.2
Depreciation
58.9
64.9
58.6
Audit Fee
.162
.216
.197
Non Audit Fee
.001
.001
.008
Total Amortization and Impairment
.463
Remuneration
228.2
225.5
228.3
Wages and Salaries
207.4
205.4
206.5
Social Security Costs
15.9
14.8
15.4
Pension Costs
5.2
5.4
6.4
Director’s Remuneration
.819
1.2
1.2
Highest Paid Director
.641
.968
1.0
Total Expenses
2,011.6
2,060.6
2,083.5
Net Profit = (TR – TE)
93.6
183.7
162
Sales
1,458.1
1,508.5
1.480.9
Cost of Sales
829.2
806.8
756.8
Net Sales (S – CoS)
628.9
701.7
724.1
Net Profit Margin = NP/NS (%)
14.9
26.2
22.4
Sales (£ million)
1,458.1
1,508.5
1,480.9
Fixed Asset
325.8
330.2
397.3
Fixed Asset Turnover = S/FA
4.48
4.57
3.73
Net Profit
93.6
183.7
162
Net Worth
545.8
552.9
590.1
Return on Investment = NP/NW
0.17
0.33
0.27
B. Appendix B Financial Analysis: B&Q
B&Q Ratio Analysis (2006 – 2007)
Years
2006
2007
2008
Sales
4,172.0
4,216.5
4,262.0
% Increase (Current Year Sales – Last Year Sales/Last Year Sales)
1.07
1.09
Liquidity Ratio
Current Assets (£ million)
4,182.6
4,123.7
4,409
Current Liabilities (£ million)
1,129.1
1,068.6
1,125
Current Ratios = CA/CL
3.71
3.86
3.92
Current Assets (£ million)
4,182.6
4,123.7
4,409
Current Liabilities (£ million)
1,129.1
1,068.6
1,125
Current Ratios = CA/CL
3,053.5
3,055.1
3,284
Total Assets
4,182.6
4,123.7
4,409
Total Liabilities (£ million)
1,129.1
1,068.6
1,125
Net Worth = Total Assets – Total Liabilities
3,053.5
3,055.1
3,284
Leverage Ratio = Total Liabilities / Net Worth
0.37
0.35
0.34
Gross Profit (million)
2,845.0
3,052.2
3,271.0
Sales
4,172.0
4,216.5
4,262.0
Gross Profit Margin (%) = GP/Sales * 100
68
72.4
76.7
Revenue
External Revenue
4,172.0
4,216.5
4,262.0
Profit
139.0
338.4
272
Total Revenue
4,311.0
4,554.9
4,534
Expenses
Depreciation
90.8
98.8
111
Amortisation
22.8
20.7
14
Impairment Losses
41.8
-
-
Reorganization Costs
205.3
-
-
Financial Services Termination Fee
19.0
-
-
Remuneration
2.7
3.6
3.0
Corporation Tax
9.0
29.9
9
Impairment Tests for Goodwill
1,796.1
1,796.1
1,796
Total Expenses
2,187.5
2,838.3
1,933
Net Profit
2,123.5
1,716.6
2,601
Sales
4,172.0
4,216.5
4,262.0
Net Profit Margin = NP/NS (%)
50.9
40.7
61.0
Sales
4,172.0
4,216.5
4,262.0
Fixed Assets
181.5
170.6
265
Fixed Asset Turnover = S/FA
22.99
24.72
16.08
Net Profit
2,123.5
1,716.6
2,601
Net Worth
3,053.5
3,055.1
3,284
Return on Investment = NP/NW
0.70
0.56
0.79
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