Morrison Takeover Safeway Plc

Morrison Takeoer Safeway PlcThis part of the proposal provides the overview of the study relating to merges and encyclopedism in UK food market place retailers giants. One of the most maligned antitrust decisions in the history in UK involves acquisition of grocery retailer giant, the fourth largest supermarket Safeway takeover by Morrison in 2004. In 1990s, retail markets throughout the world began to be transformed by acquisition and merges. Many of the worlds largest retailers, particularly in the food and grocery arenas involves and this is to reduce the struggling contestation between the leading competitor and positioned themselves to predominate or make ups holders of major market fortune (wrighley, 2000a, lowe, 2002). However such an event still rebriny a non-routine and challenging occurrence within the life quantify of the individual organisation and its members merges and acquisition is still one of the areas of finance which attracted interest from the general public as well as the finance analyst and the managers concord to (Glen 2008) said that expanding the activities of the firms through acquisition involves signifi give the gatet uncertainties (Schweiger and Ivancevich, 1985)Rappaport (1998) stated that, the basic objectives of making acquisition is identical to any early(a) investment associated with a phoners overall outline, i.e. to conduct value. In practise, the motivation for expansion through merges, and the diverse range of national such as action rises by using discounted cash flow technique. first finish up of I would like to define merges and acquisition-MERGES- Is used to mean the combing of two business entities which result in common ownership. Merges could be either level desegregation, vertical integration and conglomerate integration.Horizontal integration, where two companies in the same industry, whose operation are in truth closely related is combined, that of the case of Morrison and Safeway. One of the motives advanced for horizontal merges is that economic of scale can be achieved, but not all merges achieve such gains or enhancement of market power resulting from the decrease in competitionMerges and acquisition can have a profound impact on an organisational member and their family (Hayes,1981) indeed, merges and acquisition can sufficiently transform the organisational organize ,system ,processes and culture of one or both of the firm that people often feel stressed, frustrated and even frightened Schweiger and ivancevich 1985Although, the recent retailing revolution in the early 1990s resulted in a number of very significant developments. The grow in size of retailers not altogether replaced the manufacturers dominance in the provide kitchen range but also eliminated many wholesaler and started the trend towards backward integration of the retailer. in 1990s,there is continued concentration and consolidation in all areas of supermarket sector (Davies and Ward, 2000).Th e industry structure is characterised by a number of common attributes including greater storehouse size increase in retailer concentration and adoption of a range of formats by retailers to reach as wider as their customer catchment areas.Back in January 2003 Morrison, the mostly north of England based supermarket chain, announced that it had been in discussion with Safeway over a proposed takeover.The takeover would give Morrison portal to the market in the south which has been difficult to break into. Morrisons bid to buy 480 stores of Safeway that will put it major competitors for the other big supermarket chains, Tesco, Sainsbury and Asda. The current market share of Morrison as at January 2008 is at 11.4% and make it the smallest of the big four supermarket and behind Tesco (31.5), Asda (16.8) Sainsbury (15.9), but far lead off the fifth place Co-operative Group (4.4%).The merges could put Morrison on a par with Sainsbury.After the takeover of Safeway, the Morrison family c urrently owns around 15.5% of the bon ton. According to Hayes 1981, stated that indeed, merges and acquisition often feel stressed and frustration because of the fear of loosing their job, their family life and the culture that they must have to changes.In light of this economic approach to defining markets and approaches that unit of measurement of ammunition entirely on how customers respond to prices changes.In the u k, pursual the Wal-marts market entry in 1999, popular perception has focused on Alhoids acquisition with Sainsbury.Indeed, Alhold has regularly been obliged to damp down market speculation on the issue .However, given such a merges, not only would it then faced competing head to head in the UK market with the other supermarkets.Although the competition commission found that little evidence of monopolistic behaviour, the findings indicated both the significance of buyer concentration and the deal for voluntary order (Cooper, 2003 Dobson et al, 2003)The takeove r has not yet gone through smoothly due to the involvement of other potential buyer, including the other main supermarket entering the race. As a result of this, the Competition Commission investigated the issue. The commission found that, of the major supermarkets, only Morrison should be allowed to proceed with a potential takeover of Safeway.However this does not rule out another potential buyer. Phillip Green, billionaire owner of Top Shop and British Home Stores (BHS) has also expressed an interest in Safeway. The commission has recommended that if Morrison is achievementful in their bid that they will have to sell off some of the stores to ensure that competition is not compromised.Here in UK regulation which is the issue both the land-use planning regulation which restricts the other supermarket Wal-Marts ability to develop ASDA stores at a sufficiently rapid pace to challenge for market lead and the threats of regulatory action to safeguard competition .UK food retailers makes clear Competition Commission ,2000 Vol. 1 Morrison could safely add significant market share in the southern England, Northern Ireland ,Scotland and Wales without triggering regulatory action. As a result, although Safeway as an operational entity would be unattractive to Wal-Mart, and some of the assets of Safeway certainly would be (Poole et al.,2002) stated that for an attempt to mastermind this issue, similar scenario can be considered in the case of Safeway and Morrison s which has stores with a price-positioning and format ideal for Wal-Mart.Unfortunately Morrisons regional market strength mirror those of ASDA and acquisition of Morrisons operations in west-midlands and Southern would inevitably trigger regulatory action.Morrison with the family-owned regional chain, is likely to want to see that independent harbored or, at least its meat continued, in any link up with larger retailerMorrison has slashed prices on over 800 Safeway products to bring them in line with i ts prices strategy. After the takeover of Safeway in march 2004, of the leading supermarket chain which owned 479 stores, mainly in Scotland and South of England.The acquisition ran into difficulties caused by the outgoing management of Safeway changing their accounting system on the button six weeks before the transaction was completed. This results of series of pro burst warning being issue by Morrison that leads to poor fiscal results and a need to revert to manual(a) system.Morrison currently has 375 superstores in the UK, this including new store opening by the end of 2007. Until 2004, Morrison superstores were largely concentrated in the English midland and the north of England, but grow southward, Most of its stores operates home wares with fewer electronic, clothing than the main supermarket rivals.Morrisons strategy is based on doing the basic efficiently, selling predominantly food at lower prices and doing so only from large stores. This is the unlike approach from th e other tierce big chain, which have moved into service such as banking and insurances, place greater focus on non-foodIn March 2009, after completed takeover of the Somerfield, Morrison purchases 30 stores from the combined group with the commend of the competition commission. This marks the move away from the post-Safeway strategy of concentrating on superstores, to adopt the work in a smaller space of a new smaller store as its aims to have a store within 15 minutes every UK homesAccording to Thomas (2008) in some circumstances, acquiring management seriously underestimate the complexities involved in merges and post-acquisition integration (Robino and Demeuse 1985)The history of Wm MorrisonFirst of all let me give the history back ground of Wm Morrison. Morrison was founded in 1899 by William Morrison, an egg and butter merchant. In 1958, the company overt its first counter service store in a small town of Bradford, UK. Morrison opened its first supermarket in Victoria, in 196 1 and stated trading on London stock exchanges in 1967.The lack of opportunities for the leading UK grocery retailers to increase market share through large-scale organic store development and has make merges and acquisition strategies particular all important(predicate) (Poole et al., 2002)Wm Morrison carryout the expansion programmes and in 1978, the company acquired Whelan Stores and began operating in Lancashire in UK, and opened the distribution centre Wakefield and expanded its operation to involve chilled stores and an ambient storages area for produceIn 2004 march Morrison takeover Safeway supermarket at 3bn, this enables them to become the fourth largest retailers and more than double its store presence. In 2007 January, the company gave access to two new in-store recycling services in over 345 store spread across England, Scotland and WalesThe media have highlighted the fact that Morrison and Safeway are an ideal geographical fit in that there are no areas of overlap. It was clear from the findings of the Competition Commission that these two companies would not imposed local monopoly and the customers interest would served. The debated concerning each of these bids by different companies, have not simply been financial.The distinctly geographical issues have been very much to the force. First the commentators have talked about geographical fit, not a subject matter always prominent where, merges and acquisition are debated (Bikini et al 2002). The ASDA and Morrison bids look more promising in term of geographical fit although Sainsburys fit in Union England and Scotland is also good, but the objective was to creates more level-playing field and although of course this bid may not be acceptable to the shareholders of Safeway, especially taking account of the ASDA /Wal-Mart financial packages said to be on offerSafeway stores and therefore present fewer problem of high local market share, and their acquisition of Safeway would leap-frog them ab ove Sainsbury and leave three major players well ahead of the chasing pack (Poole, Clerk and Clerk 2002)4.1 Empirical reviewsIn the real world the takeover and merges have several motives behind (Glen Arnold 2008.Buono and Bowditch 2003), among which the following could be associated with the Wm Morrisons takeover4.1.1 Synergy= which mean the combine entity will have a valve greater than the sum of its part. This increases in valve comes about because of boost to revenue and the personify base when two firms AB are to be combined or gain may result fro synergistic benefit to provide a valve above that of the present valve of the two independent cash flow -PVAB= pva+ pvb+ gainPVA=discounted cash flow of company APVB=discounted cash flow of company BPV AB=discounted cash flow of the merged firmTherefore synergy is often expressed in the form 2+2=54.1.2 Market share/power==One of the most important forces driving merges is the attempt to increase market power Alderson 2002This is the ability to exercise some curb over the prices of the products, and this can be achieve through either monopoly, oligopoly or dominant producers position. However, Wm Morrison, this is one of the objectives to gain the market share in the South where it was very difficult to break into and the shareholders valve would be maximised .Its the fourth largest company by sales and the second by market capitalisation, The strong market presence enhances the brand images of the company and provides economic of scale4.1.3 Economic of scaleAnother important contributor to synergy is the ability to exploit the economic of scale. The larger size often leads to lower cost per unit of out put. In the case of wm Morrison, this is not the main motive of takeover4.1.5 Financial Performance for six twelvemonths1feburary 2009 turnover 14528m compare to two year after the takeover January 2006 12115m.The profit and loss before tax in 2009 February 655m compare to January 2006 of (312.9)The profit after tax in 2009 January 460m compare to January 2006 (250.3)In 2005 instantly after the takeover, Wm Morrison give the profit warning and the share price drop drastically and the turnover was down to 12116m compare to February2004 and the profit before tax in 2005 was 193m to ( 312.9) loss in 2006.These are due to the pos-acquisition syndromes and the managements reaction to the takeover of Safeway .The accounting system were changes few weeks before the completion of the acquisition4.1.6 The market shareAs of August 2008, according to TNS World panel, Morrison is the smallest of the Big Four supermarkets with a market share of 11.1%. Whilst Tesco, Asda and Sainsburys saw increases in market share from July 2008 of 31.6%, 17.0% and 15.9% respectively. Morrisons saw a smallest coat decrease of 0.2% in the same periodThere has been a significant amount of empirical research into merges and acquisition and the impact4.2 The strength and weakness of Wm Morrison4.2.1 forcefulness well m arket presenceIn examining the strength and the weakness of wm Morrison in its operation as the fourth largest supermarket in the UK ,this is to discover that competition in grocery industry in the southern market is intensified ,but Morrison is able to gain the market shares of strong presence in those areas. It serves over nine millions shoppers every week. Strong market presence enhances the brand images of the companyStrong geographical presencePoole et al 2002 stated that Wm Morrison has strong geographical presence across the UK, both in superstores and petrol filling station .The company spread across Scotland with 50 stores ,Northern UK55 stores , 20 stores in Wales ,62 and 42 stores in midlands East and midland West respectively . Therefore, because of it geographical presence enhances the companys sale penetration opportunities and gives it a competitive advantagesExtensive ranges of food and servicesThe companys fresh food counters offer valve added services including per sonal advice, make clean and preparation of fresh meat and fish according to customer s requirement Troy 2003Morrisons extensive list of specialized food products and services helps the supermarket chain to differentiate itself with competitors and thereby provides it with an exclusive bran identityVertical integrated operationsA study has been performed by Balto (2001) to examine the uniqueness of the services provided by the supermarket chain. Morrison is the only major food retailers to own and operate fresh food manufacturing and processing facilities. The companys operations are vertically integrated in its food category, which allows it to manufacture, distributed and retail the immense majority of its fresh meat and dairy requirement4.2.2 WeaknessLack of presence in the online channelOnline shopping has steadily grown in popularity in the UK. The amount of money spent online by consumers in the UK increased to 14.7billion in 2007 Over the next five years online sales are ex pected to more than triple to44.5billion by 2012 (Datamonitor-Uk Retail issues 2008Time to re-evaluate propositions, BFVT0041,May 2008)With internet shopping rising at a rapid pace, supermarkets are establishing their online sales channel to increase revenues. Asda, Tesco and Sainsbury in the UK have establishing the presence in the internet online shopping, in order to capitalize on this rapidly growing trend towards convenience. However Morrison is yet to capitalize on this trend which limited the companys potential growth opportunities4.2.3OpportunitiesIncreasing use up for organic productsLooking in the real world of the grocery industry, wm Morrison have the opportunities to increase the demand for the organic produces, where the Big Four supermarket chain are real competition , The increasing consumer awareness of health and environmental issue along an increasing vindication towards genetically modified (gm) food products and GM farming. Has led to rapid increase in the dem and for organic food (Andrew 2004)Growth in private tag marketThe private label market in the UK is witnessing a strong growth in sales. The UK private label sector is one of the most highly-developed in the world. The valve of the sector is at 45billon and forecast suggests that this will increase to 52billion by 2011. Morrison has increase its private brand product portfolio over the years (DTI, 2008)5. Research methodological analysisThe way in which research in conducted is not the easy process of transforming the information into reality, but it need cautious planning exercise which follow the procedures and stages originally commencing the study, appropriate selection of the vital research methodology is essential to ensure that the proposal is in the correct steps.Research methodology is divided into two methods of qualitative and quantitative methods. In some circumstances the two methods are combining together as well depending the nature of the study i.e. multiple method (Litter, et al 2003), Tashakkori and Teddlie (2003)Industrial economist argue that market structure is intrinsically linked to firm behaviour and financial performances (Scherer and Ross, 1999 Martin ,1994) ,which look at the financial performances of the company wm Morrison and the market share aboveIn this research proposal, the quantitative method will be use heavily because of the information provided and as the selective information resources are lowly data which considered the extraction of data manually from the statistical reports available on the website.Secondary data are used for research projects that were originally collected for some other purposes. It includes both raw data and published summaries.Most organisations collect and store a variety of data to support their operation. Secondary data could be divided into three parts=1. Documentary secondary data, 2.Multiple source of secondary data and third the survey based secondary data.The reasons for the uses of Quan titative method is that, its objective, systemic and orderly way of gathering and interprets the information for the use of the studyQuantitative approach is predominantly used as a synonym for any data aggregation technique such as perplexitynaire and analysis procedures like graphs or statistic, that generate a numerical data Tashakkori and Teddlie (2003)In contrast, Qualitative is used predominantly as a synonym for any data collection technique such as an interview and analysis procedure like categorising data that generates or use non- numerical data Qualitative therefore can be refer to the data other than words. The qualitative data is very expensive to carryout and dear(p) to undertake. It involve primary data analysis which are gathered from the the interviews, questionnaire, field survey carryout during the research study.The technique of both quantitative and qualitative methods, as maintain earlier, refer to some authors as multiple method (Tashakkori and Teddlie (200 3) Also mixed method is the general term for when both qualitative and quantitative data collection techniques and analysis procedures are used in research design.It was argue that multiple method are useful if they provide better opportunities for the users to answer the research question and where they allowed the user to better evaluate the extent to which your research finding can be trusted and make better references5.1 Empirical questionThe centre issue is the effect of the big firm merges on competitive pricing, which we sum up in the following questionWhat are price cause for clients of Wm Morrison and Safeway following merges?Merges can improve consumer or customer welfare by creating efficiencies or decrease consumer welfare by creating conditions conducive to monopoly pricing (Sullivan, 2002381-3284).Simunic (1980) argues that some segments of the market could be more competitive than others this could have an impact on the effects of the merges. Also test whether the me rges have enabled the brand name firms to pass on any cost scrimping associated with efficiencies to their clients in the form of reduction in competitive price.Therefore the research question is very important and cannot be overemphasised. It is one the unwrap criteria of the research success will be whether you have a set clear conclusion drawn from the data you have collect the research question is one of key question that the research process will address. These are often the precursor of research objectives.5, 2 Research EthicsWhen doing research proposal the ethic should be bear in mind. This is considering the integrity of work as well as to give utmost respect of people and the organisation. In any research undertaken the honest behaviours should be put into consideration not to offended any one in any mannerWhen using other peoples works and materials for any research, their authorization should be obtained or information should be given to them.In some research where t he individual permissions are require, ethics play a very important part ,However in this study the research ethics is not very much applicable because the information used are secondary data which is already available in the website and internetYour research design may need to consider the extent to which you should collect data from a research population that is unaware of the fact that they are the subject of research and so have not consentedIt may be quite a different matter if you are roll up data from individuals, rather than from an organisation. However, there may be a case if you are conducting your research while you are an employee in an organisation and you are stack away data on individual was not disclosed, then this would pose a similar ethical dilemma(Gibb,1995).ConclusionThe competition in UK food retail sector has been intensified in the recent years, and the four big supermarkets are competing among themselves.In these aspects, this study has not concluded tha t there was little evidence of the retailers having adverse effects on the consumer nor was there significant evidence of the price changes at the wholesale level not passing effectively to the consumer.Traditionally, as UK food retailers have become ever more concentrated and consolidated, increasing levels of power have enabled them to exercise substantial control over the supply chain. In this case study analysed the competition commissions report will do little to stop the trend of expansion, as a means of entry into different market.Recently, there is another merges and acquisition of Somerfield by Co-operative Group which was completed in March 2009.From the recent literature on retail competitiveness and observations made regarding current developments within the competitive environment, it is evident that buyer power will definitely concentrate in the hands of the major retail players .The fact that the retailer are expected to grow their market share by acquiring another co mpanies for them to compete with the othersWm Morrison the fourth big supermarket has this opportunity to expand into the Southern England which was very difficult or not impossible without the takeover of Safeway. During the takeover process many speculators were predicting another foreign takeover and were subsequently surprised by Morrisons unexpected interest