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The financial performance of an organization can be explained as a subjective measure that, how efficiently a business organization can use its primary assets from the primary mode of business and general revenues. The financial performance also can be considered as the financial health of the organization in a particular period.Different aspects can be considered to analyse the performance of the organization in the marketplace(Brannen, Mughan, and Moore, 2020). Financial analysis can help stakeholders and investors to develop a plan for the future. This report will be analysing the financial performance of Tesco PLC on basis of different authentic financial reports. Tesco PLC is the largest retail store chain in the United Kingdom. The company was established in the year 1919 by Jack Cohen in Hackney, London, United Kingdom. On basis of the financial performance of the organization, various other aspects related to the external and internal business environment will be evaluated in the study. Information collected in the financial analysis will be used in the report to reflect the performance in the marketplace.
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The revenue of an organization can be explained as the total amount of income that is generated by a company by selling goods or services which are related to the primary operations of the organization. This is one of the most effective factors that must be analysed to evaluate the performance of the organization in the market place. Revenue generated by the organization can be used to analyse the financial performance of the organization in the target market. As Tesco PLC is a leading retail sector organization in the United Kingdom, this is most important for investors to analyse the financial performance of the organization. This can help them to develop their future investments. Revenue of organization can be analysed for the last five years to effectively analyse the future business potential of and design marketing strategy for the company to improve performance in the market place.
Revenue in USD
This is how total revenue of the organization is continuously varying since 2015. In 2016, revenue of the organization was 82.443B. After 2016, in 2017revenue of company falls to 74.012B due to poor performance in market place. This was a major fall in the revenue of company. Later in 2018, revenue was slightly better than last year (Tesco, 2020). In 2018, total revenue of organization was 75.491B. After 2018, performance of Tesco PLC was back on track and, total revenue generated by organization was 84.331B. Due to global pandemic situation in 2020, revenue of organization was slightly decreased to 82.776B. This is how total business revenue of company is consistent but organization have faced major failure to achieve business goal. From the below chart, revenue information of Tesco PLC can be effectively analysed.
Figure 1Revenue of Organization from 2016 to 2020
Financial Overview of Tesco in 2020
Figure 2Financial Overview of Tesco PLC
(Source: Tesco, 2020)
According to the above information, assessment of financial performance of Tesco PLC can be effectively analysed. Group sales of organization fall by 0.7% and total group sales obtained by company were £ 56.5bn which is less than the group sales of company in year 2019 which was £ 56.9bn. Retail cash flow of organization was £ 2,063m,with the improvement of 132.1%. Inyear, 2019 retail cash flow of Tesco PLC was £ 889m. Statutory revenue of company increased by 1.3% and reached £ 64.8 bn. statutory revenue of company was £ 63.9bn in 2019. Operation profit before exceptional and other items was increased to £ 2959m with 13.5% increment which was £ 2607m in 2019. Dividend per share of the Company was 5.77p in 2019 and 2020, it reaches 9.15 with a 58.6% improvement. Total operating profit of Tesco PLC was £ 2649m in 2019 and in year 2020 operating profit of organization was £ 2518m. In this area, organization has faced a fall of 4.9%. This is how in certain criterion, performance of Tesco PLC was improved but in the year 2020, operational profit of organization was 4.9% less than the previous year performance of company. This is major operational issue for organization. Tesco PLC is facing issue in operating profit for last few years.
This is also important for the organization to analyse the net finance cost. This assessment can help to evaluate the financial performance of organization. As per the financial data of last year, net finance cost of company was £ 1064, and in year 2020, financial cost of organization was £ 1221m.
Retail operating profit for continuing operation before expectation item and amortisation of acquired intangibles was £ 2408m and in year, it was increased to £ 2812m. Retail cash generated from operations before exceptional items were £ 3793m and in year 2020, it was £ 4471m. IN year 2019, retail operating cash flow was £ 3637m and retail free cash flow was £ 889m, and in 2020 retail operation cash flow was £4241m and retail free cash flow was £ 1886m. Retail cash flow of organization was increasing by £ 1174m year by year to £ 2063. It also reflects strong increment in the cash profitability of organization. Organization has generated a net capital inflow of £ 163m but this increment was less than the initial plan of the company. This difference was result of late implementation of new ledger system of organization (Tesco, 2020). Cash capital expenditure was £ 142m lower year by year because of disciplined approach towards the capital investment of company. Capital expenditure of company in the year 2019 was £ 1105m and it has fallen of more than £ 100m in year 2020.
As per the group income statement of the organization. Continuing operations revenue of Tesco PLC was £ 63911min year 2019 and in 2020, continuing operation revenue of company was £ 64760m. Gross profit of organization in year 2019, was £ 4696m and in year 2020, it increased to £ 4889m. It can be considered as small rise in the gross profit of company. Operational profit has huge difference from the last year. In year operation profit of company was £ 2649m in 2019, and in 2020, operation profit of organization was £ 3005m. In year 2019, profit of year was £ 1270m and profit of year in 2020 was £ 1528m. The year profit of organization has effective improvement.
There are also some changes in the financial performance of organization year by year. Noncurrent assets of organization were £ 39077min 2018, in 2019 non-current assets of company was £ 44320m. After 2019, there is huge fall in the noncurrent assets of organization. After this fall, total noncurrent assets of organization after fall in 2020 was £39138m. This is also important to evaluate the equity of organization to analyse their market performance in the target market. Year by year total equity of organization is increasing. In year, 2019 total equity of company was £ 9138m and in year 2019 total equity of Tesco PLC was £ 13432m (Tesco, 2020). There is a small decrease in the total equity of company in 2020. Total equity of company was £ 13253m in year 2020 which is less than the total equity of company. Some external factors has affected the performance of company in year 2020. From the above data, it can be said that financial performance of Tesco PLC was consistent from last few years but in year 2020, different external factors have affected the financial performance of company. Major reason for decreased financial performance was related to the international transportation bane due to coronavirus pandemic.
As per the financial performance of organization, this is most important to analyse various potential risk factors in target market and collect critical information about external market to get better overview of the future operations of company in target market. Tesco PLC is considered in FTSE100 because it is one of the largest retail store chains in the UK. HSBC is also considered in FTSE100 list. As per the current global scenario, different organizations are facing critical conditions in business operations. This is difficult for the most of business organization to survive in such business conditions. HSBC is considered as leading financial service provider in United Kingdom. According to current business scenario, earning per share of HSBC is dynamic and organization is effectively performing in market place. As HSBC, Tesco PLC is also one of the most famous organizations on global level. Tesco PLC is possessing leading market share in the retail sector. It is also leading retail market industry from the front. Both organizations have some internal aspects that are helping these organizations to perform effectively in market place.
SWOT analysis of Tesco PLC and HSBC
Tesco PLC is a leading organization in retail sector industry. The customer base if also strength for the organization and management of organization is effective to control business operations on global level(Camilleri, 2018). Tesco PLC also has strong financial background and it is helping organization to grow globally. Technology used by Tesco PLC is of advanced level and it is helping top management to control and manage business operations effectively.
In case of HSBC, Effective organization and effective capitalisation of funds has helped the organization to maintain financial stability in market place. Organisation has huge experience and it is helping to maintain stability in business operations in difficult market situations. Organization is effectively performing in global market and it has helped the organization to score effectively in FTSE100 list. HSBC also have strong in the emerging market on global level and it is good for the performance of organization. Geographical diversity is also helping the organization to spread risk and maintain stability in the financial performance on global level.
There are some weaknesses of Tesco PLC in business operations and this is important for the organization to consider all these elements to develop effective marketing strategy for company. Low control and monitoring over stock losses and employee turnover is major weakness of Tesco PLC. It is also affecting the operational profit of company. In the international market, involvement of Tesco PLC is very low and it is affecting the global image of company on global level. This must be considered y management of organization to develop further business policy for company. High labour turnover is also major weakness for company(Nghiêm-Phú, 2017). It is affecting the consistency in the performance of company. Local businesses in the operating area of company are also affecting the business operation and direct profit of company in target market.
In case of HSBC, organization is providing financial services to its client and profitability of organization is also based on the economic conditions on local and global level. Due to Coronavirus pandemic, organization is facing critical conditions that can affect the performance of organization in target market. Due to increment in the interest rate, organization has increased the mortgage rates. This change in the mortgage rate of company has affected the customer perception of the company. It is affecting the reputation of company in global market. Lack of personalization and homogenization also can affect the brand equity of company.
This is mostimportant for Tesco PLC to perform different business activity which is based on effective business planning. Tesco PLC can perform business expansion in expandable market to improve profitability. Organization also can target for opening small retail stores in different countries to increase their reach to the target customers. Management of Tesco PLC also can focus on developing positive workplace conditions to retain their employees for longer time to increase the operating profit for company(Sharp, 2017). These are major opportunities that can be considered by the company to perform effectively in target market.
HSBC can acquire new assets to improve financial stability and reflect strong attitude in target market. Organization can take advantage of present trading and economic condition which is low cost. Effective and strong position of HSBC can help to affect the positioning of other financial service providers in target market. These aspects can be used by the organization to improve performance in target market.
For Tesco PLC, major factors that can affect the business operations are related to the regulations that are defined by the government.Aggressive business strategy of competitors is also major challenge for Tesco PLC. It can affect the global performance of Tesco. Economic reforming is also major challenge for the financial performance of company.
Major threats that are faced by HSBC in global business scenario are related to understate losses of organization and it can affect the business strategy of company(Gbadamosi, 2020). Due to current market scenario, trust of people has been decreased in banking organizations and it can affect the financial performance of HSBC.
As Tesco PLC is operating as public sector so they have to keep their buying and selling operations out of stocks. It obligates to comply with the regimes of competitors in market if European Union and government of the United Kingdom. This is also important for the organization to focus on current decisions regarding business operations in local and global operations to maintain stability in business operations.
In case of HSBC, strong and effectively structured organization so this is much easier for organization to follow all the rules, regulations, and legislations of different country in which they are currently operating. This can help them to improve their performance in target market.
In United Kingdom, retail industry is much secure as compared to other business organizations. Economic factor is not that stable in current business scenario and this challenging for organization to maintain stability in business conditions(Ghosh, 2017). Current economic crisis and unemployment can affect the performance of organization in target market. This scenario is completely different in case of HSBC.
HSBC is one of the largest organization and competitor in financial service sector. Business operations of organization are also of global level. High geographical diversity can help HSBC to maintain stability in business operation and develop strong financial background.
Social factors are highly in favour of Tesco PLC. High social diversity, high per capita income and effective education level in local place is providing more opportunities to Tesco in current market scenario and it can provide more opportunities to the company to develop innovative practices in operations(Agwu and Onwuegbuzie, 2018). Social conditions can help organization to maintain profitability in target market.
All the business operations of banking organization are highly dependent on the social conditions in which they are currently operating. This is highly important for the organization to focus on the current social factors to develop business opportunities.Major objective of an organization to developpositive reputation in target market to perform effectively.
In terms of technological factor, the technology that is used by Tesco PLC is advance in its category. Tesco PLC is innovatively using different techniques to maintain higher performance in target market(Rekettye, 2017). It can be considered as positive factor for the performance of company in target market. Tesco PLC is having edge in terms of technology.
In case of HSBC, HSBC also hasan effective information technology system to run its global business operations. With effective technology, HSBC is performing all its business and financial activities. All the activities related to the customers ofthe company are also managed by organization with its current IT system.
For a retail sector organization, product is major factor that can help the organization to satisfy customer. This is important for the organization to penetrate existing market by providing better quality products to the customers and offer better services to the customers(Camilleri, 2019). Tesco PLC can improve business performance by leading secure cost in target market. It can help to improve productivity in target market.
As per the current business scenario, this is most important for the business operations to focus on the customer services to get better response from customers. HSBC can market their new products in global market to attract new customer base.
Price is also major factor in terms of marketing process. Customers are willing to get better quality product at effective low cost(Patil and Bach, 2017). This is highly challenging for Tesco PLC to reduce the price of products. Organization is facing issue with low operational profit for a long time. In this case, company can improve their contacts to get low-cost supplier for raw material. This can help the company to reduce the cost of products. Organization can also focus on quality of product to attract more customers.
HSBC can offer better services to the customers to encourage them to save more money in their bank account. This can help the organization to gain more benefits from the business operations. Various other services as if prepaid cards schemes can help the organization to achieve profit objectives.
Promotion is most important aspect that must be considered by the organization to make reach the larger market. Different promotion strategies can be used by the company to improve their performance on global level(Saura, 2020). Tesco PLC is working on long term promotional activities to develop positive impact on customers. Main objective of organization is to develop loyal customer base to maintain stability in business of company. Positioning factor in retailing service must be considered by company to develop effective customer base.
HSBC is currently focusing on traditional approach of marketing to get new customers. Digital media marketing is also used by the company to promote its products and services. Company also can improve their marketing operations by performing effective marketing campaign after the launch of their new product or service. This is how promotional campaign can be improved.
To offer better services to the customers this is most important for Tesco PLC to develop effective channel to analyse the basic needs of small level customer(Kusumadewi, 2019). This type of business approach can help the company to satisfy the needs of company effectively. By maintaining supply chain as per the needs of customers, Tesco can effectively maintain effectiveness of the supply chain.
In the delivery channel, different modes are used by HSBC to get access to more customer. In the business operations, both physical and electronic mode of delivery is considered by company. Organization also can improve their branch network by improving their business produces on internet. This can help the company to reach more customers and offer better services to them
This report was providing brief overview of the financial performance of Tesco PLC in market place. Various financial aspects related to the performance of organization has been considered in report to analyse the financial performance of organization as compared to previous year performance of company. Financial data of company has been compared and contrasted from previous year performance to get better overview of business growth and profitability. Different business factors that are related to marketing and performance of organization in market place also has been considered in report to analyse the strategies that are used by company as compared to other organizations in target market.
Books and Journals
Agwu, M.E. and Onwuegbuzie, H.N., 2018. Effects of international marketing environments on entrepreneurship development. Journal of Innovation and Entrepreneurship. 7(1). pp.1-14.
Brannen, M.Y., Mughan, T. and Moore, F., 2020. The creative use of insider ethnography as a means for organizational self investigation: The “Essence of Tesco” project. In The Routledge companion to anthropology and business (pp. 132-154). Routledge.
Camilleri, M.A., 2018. The Marketing Environment of Tourist Destinations. In The Branding of Tourist Destinations: Theoretical and Empirical Insights. Emerald Publishing Limited.
Camilleri, M.A., 2019. Higher education marketing: opportunities and challenges in the digital era. Camilleri, MA (2019). Higher Education Marketing: Opportunities and Challenges in the Digital Era. Academia.0 (16-17). pp.4-28.
Gbadamosi, A., 2020. The entrepreneurship marketing environment. In Entrepreneurship Marketing (pp. 46-71). Routledge.
Ghosh, C., 2017. A study on-evaluating marketing strategies adopted by home appliance for economic development in India. International Journal of Social Sciences and Humanities (IJSSH). 1(1). pp.9-15.
Kusumadewi, R., 2019. The Role of Marketing and Individual Environment Association in Elevating the Customer Value. Budapest International Research and Critics Institute (BIRCI-Journal), pp.451-460.
Nghiêm-Phú, B., 2017. Sensory marketing in an outdoor out-store shopping environment–an exploratory study in Japan. Asia Pacific Journal of Marketing and Logistics.
Patil, D.D. and Bach, C., 2017. Marketing-Mix for Strategy Building. Marketing. 4(4). pp.7146-7149.
Rekettye Jr, G., 2017. The future performance of marketing communication-a comparative study. International Journal of Business Performance Management. 18(3). pp.293-306.
Saura, J.R., 2020. Using Data Sciences in Digital Marketing: Framework, methods, and performance metrics. Journal of Innovation & Knowledge.
Sharp, B., 2017. Marketing: theory, evidence, practice. Oxford University Press,.
Tesco, 2020. [Online]. Available Through.< https://www.tescoplc.com/media/755761/tes006_ar2020_web_updated_200505.pdf>.
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