Analysis of Homebase Retail Companys Performance for the year 2014 - Coursework Example

Finance and Accounting Home Base Executives Summary This report is an analysis of Homebase Retail Company’s performance for the year 2014 prepared by the Board of Directors. It summarises the analysis of performance with respect to the financial and strategic indicators for the year 2014, in comparison to the previous year 2013. It thus explores the background information of Homebase Retail Company to establish the organizations present position of the organization in alignment with its future objectives. The analysis presents the balanced scorecard of Homebase Retail Company in four distinct sections to balance all the drivers of performance in Homebase Retail Company. The drivers include financials, customer service, internal business, learning, and development. The analysis aims to make the coming results for 2015 better according to the vision as well as the strategies of Homebase Retail Company. The report also presents the strategy map for the company to show the connection between the four drivers (perspectives) of the scores and the company’s strategy (Kaplan & Norton 2004, p. 7). It maps all the objectives to the major performance indicators to produce a complete outcome. The board of directors also gets the recommended actions from the scorecard and the strategy maps ensure that Homebase Retail Company operates according to the analysis. Additionally, the board will be able to set smart and realistic goals so that it can make systematic decisions to improve the key financial and strategic indicators of performance. 1. INTRODUCTION Homebase Retail Company operates as one of the biggest and the leading home improvement company, retailer and a gardening centre in the UK. Its close competitors in the industry include Argos and Financial Services. Home Retail Group made revenues amounting to £18.9 Million in the year that ended in March 2014, which is a slight improvement from the previous year 2013 by approximately 3.6% in revenue (Bourne & Bourne 2002, p. 54). Home Retail Group started operating in the business began in the UK in 1979, under the name Sainsbury Homebase. As one of the largest retail companies in the UK, Homebase Retail Company has a value of between £2.7 billion and £3 billion (Kennerley & Neely 2000, p. 47). Homebase Retail Company is currently running its business in a number of subsidiaries in about the UK and the US, such as Bell’s Stores Homebase and Texas Homecare. It has employed more than 17000 workers in all the stores and subsidiaries. Its slogan “Make a house a home” draws many customers to its business, which has grown its client base to tens of millions. Additionally, it has a loyalty service referred to as Nectar Loyalty Card. The service is provided on the online platform as well as in the retail stores. The third contributing factor to the success of Homebase Retail Company’s retail activities is the strategy to go globalization, and the diversification of Home Business. This makes the Homebase Retail organization to connect to the Home retail market in the diaspora. From the analysis of the financial performance of Homebase Retail Company, it intends to embark on the business expansion of commercial activities with the goal to increase its net profit by 17 % in 2015. This follows the Board’s realization the potential in the previous year’s increase by 13%. Its expansion strategy is to open at least one store every year in every country that it has occupied to increase its presence. 2. VISION AND STRATEGY 2.1. Vision Homebase Retail Company operates with a vision to be the leading UK retail company in the area of home improvement. It aims to be the best decorating company in the UK and in Ireland. The strategy that it uses to achieve this is the introduction of more than 38,000 products in the market for home improvement and gardening. In the community, Homebase targets the loyalty of customers by rewarding customers with nectar points (Voelpel et al 2006, p. 45). It also provides employment through its career link on the web based platform, to make it the preferred employer many. The Homebase Retail Company’s vision consists of five essential values as follows: 2.2. Values 2.2.1. Putting the customers in the first priority The staff members are always enthusiastic in serving customers, taking care of the store, ready to offer extra assistance to customers, and understanding the problems to customers. They give customer service experience by inspiring and exciting customers. 2.2.2. Making a Difference Workers in the Homebase Company are committed to the best practices of customer service by doing acceptable things for customers. Secondly, their attitude is a demonstration of great integrity. 2.2.3. Making it Easy The company avails the required products and services to customers to make it easy for them to shop. The company empowers staff to make constructive contribution by airing their sentiments and suggestions. They also minimise mistakes to minimize the need for supervision. Additionally, they communicate in simple language to be understood easily (Lawrie & Cobbold 2004, p. 62). 2.2.4. Success through Team Spirit Homebase Company has a culture of recognizing each staff as important. They consult and support each other towards the strategic plans of the company. 2.3. Strategy The company aims to increase the performance of its business by improving its main performance perspectives. The Board of Directors established a moving slogan ‘Make a house a home’. This guides the Homebase Retail Group community in plans to expand its presence in the UK, in Ireland and in the US. In its global expansion strategy, the board focuses on increasing the sales volume and subsequently, the trading and net profits both in the UK and in the Diaspora subsidiaries (Mulcaster 2009, p. 75). This is achieved by increasing the volumes and varieties of its services and products to satisfy the needs of the clients. The principal occupation of Homebase in the market is the home improvement, from which it diversifies to the business of gardening. Additionally, the board of directors focuses on the expansion of the Homebase Retail Company services by intensifying its advertisement. It also partners with financial service providers to make easy payment services such as electronic money payment and credit cards. This enhances business operation both in the UK and in the far countries. Homebase Retail Company focuses on the community improvement through its Corporate Social Responsibilities (CSR) program. It thus returns value directly to the community to maintain a legacy of mutual coexistence. The Homebase Retail Company senior management give emphasis to the relevance of diversification in the workforce (Irwin 2002, p. 67). It develops staff through training, development and learning strategy. 2.4. Implementation of the Strategy Home Retail Group functions amidst a wide range of advantages, because of a strong business structure that has existed for a long time. The strategy was designed with an objective to create permanent values for the organization’s stake holders such as the suppliers and customers. This has been achieved partly because of the sustainable business growth in retail brands. Secondly, the achievement of the values is because of the vision of Homebase Retail Group to build prosperous businesses, which brings recommendable value and convenient to services to customers, including home shopping and online payments alternatives (Kennerley & Neely 2000, p. 34). Each retail brand uses distinct and clear strategy for the achievement of the vision. In a five year transformation plan, Homebase retail group redesigned the position of the business to make a clear difference between its operations as a retail business to a multichannel home improvement organization. 2.5. Pillars of Business Strategy Homebase Group strategy focuses its efforts on six strong pillars to support its vision and the strategies for operating businesses. The pillars are discussed below: 2.5.1. Compelling Client Offer Homebase Business has a commitment to the utilization of the customer scale of advantages to produce a collection of product varieties for its customers. It offers a wide range of products at reasonable prices. The logistical network of the Homebase fraternity is based on a well-designed infrastructure, which enables it to continue focusing on enhancing the rate at which it sources products for clients. Homebase group also has various channels for delivering products to customers (Lawrie & Cobbold 2004, p. 42). The customer focus leverages on the current network of stores and the routes for replenishing products. \Secondly, the group introduces the options for fulfilling options of the leading market to complement the closeness of the collection stores. It also ensures that the products are highly available to the customers. 2.5.2. Exclusive Product brands Homebase Group uses the strength of its retail brands in the effort to drive product leadership in its main markets. This is achieved through the expansion of the range of its products. Having more than 80000 product brands, the group continuously looks for new opportunities to provide its services and products (Lawrie & Cobbold 2004, p. 42). The Homebase Group enhances its products and brands through the creation of competitive advantage and customer differentiation. It also develops and extends the availability of exclusive brands. Thirdly, it showcases its product displays to give the clients new inspiratory ideas. Finally, the group offers professional advice and service for the online and in-store solutions. 2.5.3. Digital Leadership Homebase Group takes advantage of the technologies and solutions obtained through a robust permanent shift in the methods of customer shopping. Because of the multichannel experience of the customers, most of the customers prefer to shop online and through mobile channels. As argued per the argument of Voelpel et al (2006, p62), this enables them to obtain home delivery services apart from the pickup services from the local branches. There is a continuous campaign and focus on the development of mobile and internet services in order to sustain the customer demands. The organization does not restrict the customers to a limited option of shopping methods. Instead, the group’s priority is to invest in the multichannel features to increase the customer satisfaction index for its customers. 2.5.4. Financial Services The Homebase Retail group enjoys the support of an in-house financial service. The financial Services business provides to it a wide spectrum of credit facilities to simplify the methods through which its customers can access the products they require and at the right time. 2.5.5. Cost Management The Homebase Business has a strong legacy of delivering important changes in the infrastructure of the organization. The changes improve through flexibility of its businesses and at low costs. This goes along with the maintenance and improvement of its standards of operations. 2.5.6. Financial Strength The Homebase Group works on a strong cash flow, with a net cash of £331m net by the end of 2014. Additionally, it has a borrowing facility of up to £165m. The stronger financial position enables the company to provide investment plans integrated in the renewal plan for the Homebase. 3. BALANCED SCORECARD 3.1 Financial perspective Goal Key Performance Indicators Initiative/Action plan Target Actual Rating Weighting (%) Score 1 2 3 4 5 25 Increasing sales The Annual sales volume Increase the variety of product and optimize sales through massive advertisement Acquire more global markets and business opportunities Increase sales by 7% in 2015 Open 2 stores in 2015 in the UK and Ireland 5 5 Increasing Return on investment and Capital Invested Rate of Capital Improving investment portfolio. Improving the global Trade and increasing the profits percentages Increase the Return on investment and Capital in 2015 by 15 % 5 Reducing Capital Expenses Minimizing the ratio of expenses of Capital employed to Sales Introducing Investments methods that consume little Capital and gives more return Retain the amount of capital Expense at 2% of sales in 2015 5 Increase on the Online marketing in the UK, US and Ireland Motivate Online advertisement and Sales Investing $900 Million in the program ‘Make a house a Home To maximize the amount of online sales by 15% in 2015 5 Total Score 25 Table1: Balanced Score Card - Financials With time, the Homebase Retail Company increased the home business while acquiring external markets and asset base in the USA and Irelands. 3.2 Customer perspective Goal Key Performance Indicators Initiative/Action plan Target Actual Rating Weighting (%) Score 1 2 3 4 5 25 Enhance Customer Satisfaction Assess customer satisfaction from customer opinions. Increase the rate of customer satisfaction by collecting customer opinions Increase employees from 17000 to 25,000 to attend to customer needs and queries+17% from 60% in 2014 to 77% in 2015 5 Increasing the rate of Customer retention through Loyalty % of returning customers and the quantity of nectar points accumulated Retaining at least 80% of the walk - in customers in all outlets Increase customers to 1,000,000 by 2015. Increase Nectar points to 1 billion collective for all customers by 2015 5 5 Customize the product Prices Get positive Customer comments on prices Maintain the automatic product pricing system from 2015 Increase positive comments to 80% from 67% on product prices 5 Minimize the time spent on serving customers Obtain customer opinions on TAT every day To spend the shortest time possible on the counter TAT from 8 minutes to 2 minute per customer 5 Total Score 25 Table2: Balances Score Card - Customer Focus Homebase Retail Company has a special emphasis on enhancing customer experiences. It collects customer opinions to improve their shopping experience. 3.3 Internal Business Performance Aspect Goal Key Performance Indicators Initiative/Action plan Target Actual Rating Weighting (%) Score 1 2 3 4 5 25 Create Strong product Brands Assess the sales per Department instead of the whole company Increase brand by 40% from 2014 Increase the customers awareness of the brands to 77% from 56 % 2014 10 Enhance the relationship with suppliers Supplier opinions, and feedback To increase satisfaction of suppliers by 85% in 2015 Hold 4 Seminars yearly to recognize suppliers 5 Encourage Green Agenda Environmental sustainability Plant trees per year to reduce carbon dioxide and global warming Plant 3000 trees in 2015 5 Profitability and cash flow Implement an cost reduction strategy Increase overall profit by through global Online selling Increase profit by £500 million in 2015 5 Total Score 25 Table 3: BSC of Internal Business Perspective Homebase Retail Company has an aim to increase the internal portfolio by raising the core business engagement. It focuses on increasing the product awareness among all employees to activate their selling potentials. 3.4 Learning and Growth Perspective Goal Key Performance Indicators Initiative/Action plan Target Actual Rating Weighting (%) Score 1 2 3 4 5 25 Improve on Employee Retention Rate Number of Employees Retained annually Organize reasonable rewards and welfare programs for employees Improve employee retention to 85% in 2015 10 Training of staff through internal and external courses The number percentage of workers trained annually To implement online studies and sponsor external training programs. To increase the number trained to 95% in 2015 5 Leave management among Employees Number of Leave day balance at the end of the year To ensure all employees go on leave to reduce the leave day balances Each employee to have zero balance at the end of 2015 5 launch New products Number of new products sold To increase the presence of new products to satisfy the required fashion Introduce at least 2 products in 2015 5 Total Score 25 Table 4: BSC of Learning and Growth Perspective Homebase Retail Company emphasizes on the increasing the training among employees. It also focuses on better terms of engagement to retain employees at the highest rate. 5. STRATEGY MAP OF HOMEBASE RETAIL COMPANY The strategy map drawn below maps the scores of each perspective to the recommended action for the next year. Strategy Map Figure 6: The Strategy map for Homebase Retail Company for 2015 The map shows the interconnection between the performance perspectives and the measures. It essentially demonstrates the mapping of the objectives of the organization to the performance scorecard. The map sets Homebase Company into four segments and the recommended actions. 6. RECOMMENDATIONS From the strategy map and Balanced Score card, this study provides four areas of improvement for Homebase Retail Company. Combining the two tools gives reliable direction for the company. 6.1. Financial Perspective Homebase Company ought to minimize its expenditures and operational losses and maximize the return on the invested capital. It also needs to reward the employees through payment of annual bonus at a reasonable rate agreed by the Board of directors. 6.2. Customer Focus Homebase Retail group ought to do a regular customer focus week on a monthly basis to appreciate its customers, by giving simple gifts. This will mean a lot to customers and improve their loyalty. 6.3. Learning, Growth and Development Homebase Retail Company should sponsor many value adding study programs to improve the leadership skills of its employees. This will improve the quality of management at all levels of operation. 6.4. Internal Business Perspective The company should employ relationship managers to have closer connections with the clients and the suppliers being the major stakeholders to the organization. 7. CRITICAL DISCUSSION AND EVALUATION The balanced scorecard of Homebase Retail Company shows that the company took into account the all important performance factors. The score of 4.5 shows that the employees have great potential to take Homebase company to greater heights. This growth can easily be achieved with the integration of strategy map to the balanced score card. This integration is not easy. It is one of the daily challenges of the business because of poor timing of events and shortage of resources. The second challenge is the rate of production of new products. The competitors are quick to produce competing products and may capture the market equally faster. 7.1. Homebase Strategy The strategy of the company was developed with an aim to create lasting value for the organization’s stakeholders such as the clients and suppliers through the delivery of sustainable expansion in its retail brands. Home Retail Group runs its operations from clear scale leverages, resulting from a sustainable infrastructure. This has been developed in a period of years. Through the strategy, Home Retail Group operates successful in two major retail chains, Homebase and Argos. Unlike their competitors, they move away from the traditional methods of reporting performance on an annual basis. Rather, they actually practice in interaction with the major stakeholders: its clients, suppliers and staff members on the issues of common interest. 7.1.1. Success of the Strategy Through the strategy, Homebase group reports to have redefined a plan for lasting and sustainable communication on sustainable measures of the success factor of the communication efforts. Ultimately, it succeeds to run tests on the changes of paradigm of the stakeholder as reflected in their actions. The company applies qualitative and quantitative strategies to and concepts to develop other modes of communication. This in essence ensures that there is a long term success in the stakeholder behavioural transformation. The strategy succeeds in the achievement of client retention by developing ideas for long term contracts with them, whether business based or community based. Other key events in the current year’s performance strategy are the redesigning easily accessible and sustainable summary. As declared by the Homebase Company, its work is to engage in the development of its stakeholders for a better return. Secondly, it engages on the sustainability of its internal business, the community and the environment. 7.2. Vision The vision of the Homebase organization is to develop successful business to produce remarkable value and satisfaction of the client’s needs. Each of the retail brands has clear strategies for the achievement of the vision. In the last year’s strategic plan meeting, Homebase group of five-year strategic plan for transformation plan. The Homebase vision designed its business to differentiate its channel as a home improvement retailer. The vision drives Homebase Group into commitment to its scale advantage for its source products for its customers. The vision enables them to offer a wide range of products at reasonable prices. Its logistic network is built on a strong infrastructure to permit its continued to focus on the improvement. 7.3. Balanced Score Card The balanced score card has acted as a tool for enforcing the strategy and vision. Through the Balanced Score Card, the Home base Group splits the strategy into four pillars, the financial perspective, the Customer Focus, the Internal Business and Learning and development. In conjunction with the strategy map, the scorecard effectively consolidates the potential of the vision and strategy of the organization. 8. CONCLUSION The strategy map and the balanced score card are the two supportive tools for the implementation of the strategic plan of the Homebase Retail Company. However, for the tools to generate the optimal results, they should not be used separately at any time. Separation may mislead the implementing team to focus on specific areas and neglect the perspectives they perceive to be less important. The strategy map is present to act as the guideline for implementing the balanced score card to realize the desired core outcome. References Bourne M & Bourne P 2002, Balanced Scorecard in a Week. London: Hodder & Stoughton, p. 54. 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