4.

1 Introduction:
The purpose of the chapter is to analyze Marks & Spencer PLC and Tesco PLC by using the
CORE analysis of Moon and bates. This core analysis consists of context, overview, ratios and
evaluation. This chapter will also discuss the business and risk management strategy of the Marks
and Spencer PLC and Tesco PLC
CORE analysis has been used to analyze the Marks and Spencer. Following are the main
components of the CORE analysis used ion the strategic management accounting.
Context
Overview
Ratios
Evaluation
4.2.1 Stage 1: Context
This part of the analysis will discuss the internal and external profile of the Marks and Spencer.
Internal and external profile of the company will help us to understand the basic activities and its
market position in most comprehensive way (Leach, 2010).
4.2.1.1 External profile
Marks and Spencer is one of the top most British retailers. It has more than 450 retail stores and it
is employing more than 85000 employees. The core business of the company is in clothing, food
and home based products.

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Figure 1.1 Marks & Spencer Group Board

According to the latest statistics the Marks and Spencer holds 9% market share of the British
clothing market and Next Corporation holds almost 7 % of the British retail sector. This figure
also shows that the market share of the Marks and Spencer is going gown with the passage of
time as it was 14% in the year 1997 and now it has been reduced to 9% in the year 2013.

This means that competition is getting very intense in the clothing market as retailer like Next
are following very aggressive and growing strategies for their business.

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4.2.1.2 Internal Profile

After analyzing five years record of the Marks and Spencer we can say that revenue of the company
is continuously improving with every passing year. Its UK based revenue has increased from 8733
million pounds from the year 2011 to 9223 million pounds in the year 2014.It is almost 1% per year
growth in the revenue of the company. The international revenue of the company has increased
from 1007 million pounds in the year 2011 to 1088 million pounds in the year 2015.It is almost 1.60
% revenue growth per year which shows the growth potential of the company nationally and
internationally (Gibson, 2010).

4.2.2 Stage 2: Overview

Marks and Spencer has decided to close 9 shops in the UK .It raised a quite a threat in the country,
as it will make lots of people unemployment in the country. Marks and Spencer is trying to improve
its overall financial and administrative performance .To improves the administrative and financial
performance company has to satisfy all the stakeholders of the company. So Marks and spencer has
decided to pay out bonuses to the senior executives after almost two years and it will positively
affect the company performance. The biggest bonus will go to Steve Rowe and He will get a
653,000 bonus for the year 2014-15.
The company has decided to launch a loyalty program for the customers with personalized offers
and benefits, rather than points. The new loyalty card will be highly successful among the shoppers
due to its personal treats.
After analyzing the balance sheet of the company we see that the long term debt of the company has
been decreased from 2291 million in the year 2013 to 1731 million in the year 2014.It shows that

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company has lowered its debt to equity ratio in these two years which is a very good sign from the
company. It will decrease the financial risk and leverage of the company.
In year 2015 Mark and Spencer PLC has decided to make changes in the management as Steve
Rowie will take charge as the director of the company .Other than that company has opened 62 food
outlets in the current year which is a very good for the future growth plans of the company.
It has been noticed that inventory stock of the company has been increased from 682 million in the
year 2012 to 846 million in the year 2014.This shows that company has increased its inventory
stock in these three years and this also shows that company is growing its operations in the retail
market.
4.2.3 Stage 3: Ratios (Financial Analysis with Ratios)
In the ratios part of the Core analysis this report discuss about the financial performance of the
company with the help different types of financial tools. Financial analysis is very important for
the determination of the financial strength and the weaknesses of the Marks and Spencer. Financial
ratios are mostly used to determine the financial strength and weaknesses of the company in most
effective way. These ratios depict the financial performance of the given financial year in a
comprehensive way. These ratios help the major stakeholders of the company to gauge the
financial strength of the company in most effective way. These ratios also help the company
management to devise alternative strategies to prevent the weaknesses of the company in the
future. We have calculated gross profit ratio, net profit ratio, earning per share ratio, return on
assets ratio, return on equity ratio and current ratio for the Marks and Spencer.

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4.2.4. Profitability ratios

I.

Net Profit Ratio

Marks and Spencer PLC

A proportion of profit measured as net return divided by sales. Overall net profit ratio is extremely
helpful when looking at organizations in comparative commercial industries. Higher net revenue
shows a more profitable organization that has better control over its expenses as compared with
its rivals.
This report analyses the net profit ratio of the company last three years report found that the net
profit ratio of the company is not showing any growth in last three years. So company has to
improve its sales revenue and also have to decrease its operating expenses in order to improve its
net profit in future years. The net profit ratio of the company were 8.01%, 6.62%, 5.62% and
5.63%in the years of 2011, 2012, 2013 and 2014

Tesco PLC

This report analyses the net profit ratio of the company last three years this report found that the
net profit of the company is not showing any growth in last three years. Its net profit ratio is going
down by every passing year. So company has to improve its sales revenue and also have to
decrease its operating expenses in order to improve its net profit in future years. The net profit
ratios of the company were 5.80 %, 5.94 %, 3.02 % and 3.55 % for the years 2011, 2012, 2013
and 2014 respectively. (H. Kent Baker, 2009).

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9
8
7
6
5

M&S

Tesco

3
2
1
0
2011

2012

2013

2014

Figure 2.1: Net Profit Ratio Performance

II.

EBIT Margin

Marks and Spencer PLC

EBIT (Earnings before income tax) margin is a very important financial ratio to measure the profit
generating ability of the company. It shows that how well company is managing its operational
activities to generate the profit for the given financial year.
This report analyses the EBIT margin of the marks and spencer we notice that its EBIT margin is
going down in the last four years. The EBIT margin of the company was 8.59%, 7.51%, 7.54 and
6.74 % in the years 2011, 2012, 2013 and 2014.

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Tesco PLC
It is noticed that EBIT margin of the TESCO PLC has shown a decrease in years 2012, 2011 and
2013 but it showed an improvement in the year 2014.The EBIT margin of the company was
6.25%, 6.17%, 3.38% and 4.14% in the years 2011, 2012, 2013 and 2014.This shows that
company has been working hard to control its expenses and also to improve its sales.
10
9
8
7
6
M&S

Tesco

4
3
2
1
0
2011

2012

2013

2014

Figure 2.2: EBIT Performance

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IV.

Gross Profit Margin

Marks and Spencer PLC

Gross profit margin is one of the most important financial ratios in the financial analysis. It
provides information about the margin of the company in the given financial year.
In this report analyses the gross profit of the company in last three years, Report found
that company is showing a consistent performance in last three years which has depiction of good
financial performance of the company. The gross profit ratios were 38.24%, 37.80 %, 37.87 %
and 37.55% in the years 2014, 2013, 2012 and 2011 which shows a consistent performance or the
company.

Tesco Plc.
If we analyses the gross profit of the company in last three years, we see that company is not
showing a good performance in last three years as it is continuously decreasing in last three years.
The gross profit ratios were 8.30 %, 8.15 %, 6.31%, and 6.31 % in the years 2014, 2013, 2012
and 2011.This means that company has to improve performance of its sales and cost department
(Tracy, 2012).

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45
40
35
30
25

M&S
Tesco

20
15
10
5
0
2011

2012

2013

2014

Figure 2.3: Gross Profit Margin Performance

V.

Return on Capital Employed

Marks and Spencer PLC

Return on capital employed is the ratio used to measure the profitability of the company to use its
capital employed to generate earnings. Most of companies desire high rate of the return on capital
employed as it shows that they are perfectly utilizing their assets in most effective way. Low
return on capital employed shows that company is not successful to use its assets in most effective
way. This paints a very bleak and bad picture of the reputation of the company in the eyes of the
shareholders and other major stakeholders. So this indicates say that this is the best ratio to
calculate the utilization of assets in a company. This report analyses the return on capital
employed ratio we see that it is decreasing with the passage of time. It was %, 10.07%, 8.38%,
7.15 and 7.21 % in the years 2011, 2012, 2013 and 2014 respectively.
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Tesco Plc.
This section analyses the return on capital employed ratio is showing a steep decline in year by
year comparison of this ratio. It was 11.99%, 12.05%, 6.29% and 7.85% in the years 2011, 2012,
2013and 2014 respectively. This shows that company is not so successful in utilizing the capital
employed and its return is going down with every passing year.
14
12
10
8
M&S
Tesco

6
4
2
0
2011

2012

2013

2014

Figures: 2.4: ROCE Performance

VI.

Return on total assets:

Marks and Spencer PLC

Return on assets is a very important for the marks and spencer. It shows that how well company is
using its resources to generate revenue for the company. Investors give special importance to this
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ratio as it gives an overview of the managements ability to utilize its resources in most effective
manner. The standard return on assets ratio totally depends upon the industries as different
industries have different return on assets ratios. Return on assets is basically calculated in
percentages as it is measure of the profitability of the company. A low return on assets as
compared to the industry average shows that company failed to use the assets in most efficient
way (Tracy, 2012).Return on assets gives a thought on the matter of how effective administration
is at utilizing its resources for creating profit. Calculate by dividing an organizations yearly
income by its total resources. This report analyses the return on assets ratio of the company,
Report found that the return on assets ratio has been decreased in last three years. This means that
company is losing on efficient utilization of the assets to generate returns for the company and
shareholders. The return on assets of the company was 7.83%, 6.68, 5.58% and 5.58 % in years
2011, 2012, 2013 and 2014 respectively.
Tesco PLC
This report analyses the return on assets ratio of the company, and found that the return on assets
ratio has been decreased in last three years. The returns on assets of the company were 4.50%,
7.49%, 7.55%, 3.91 and 4.50% in the years 2011, 2012, 2013 and 2014 respectively. This means
that company has failed to utilize the assets and company is also facing problems of over capacity
for last few years.

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9
8
7
6
5

M&S

Tesco

3
2
1
0
2011

2012

2013

2014

Figure 2.5: Return on Total Assets Performance

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VII.

Return on Equity:

Marks and Spencer PLC

Return on equity is the measure of net income earned by the company as compared to the
shareholder equity of the company in the given financial year. This ratio helps the company
investors to measure the actual value of their investments in the company.
This report analyses the return on equity measures of the company for the three years, this report
found that Marks and Spencer is showing a positive performance for the last three years. This also
means that company is providing a consistent rate of return for the shareholders and investors for
the last three years. The return on equity was 14.74 %, 12.25%, 11.12% and 11.17% in the years
2011, 2012, 2013 and 2014 respectively. This also shows that company is efficiently and
effectively using the shareholders funds for generating good rate of return for the company (Lee,
2007).
Tesco PLC
This report analyses the return on equity measures of the company for the three years, and found
that Tesco PLC is showing a negative performance for the last four years. This also means that
company has failed provide considerable rate of return to its shareholders and investors in these
years. The return on equity was 21.38%, 21.58%, 11.78% and 15.35% in the year 2011, 2012,
2013 and 2014 respectively. This also shows that company has failed to use the shareholders
funds for generating positive returns for the major shareholders of the company. (Lee, 2007).

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25

20

15
M&S
Tesco

10

0
2011

2012

2013

2014

Figure 2.6: ROE Performance

4.2.5. Efficiency ratios
I.

Inventory Turnover Ratio

Marks and Spencerc PLC

Inventory turnover ratio is one of the most important ratios used by the retail companies. In this
ratio normal stock may be utilized rather than the ending stock level. A low turnover suggests the
company has excessive stock but it failed to convert this stock into revenue. A high turnover
suggests that company is very successful in converting its assets into sales revenue.
This report analyses the inventory turnover ratio of the company and this report found that its
current ratio is consistently going down with every passing year. The inventory turnover ratio of
the company was 14.21%, 14.57%, 13.07% and 12.19 % in the years 2011, 2012, 2013 and 2014
respectively. This is a good sign for the company as this shows that its ability to convert its assets
into sales is improving with the passage of time (Bull, 2007).

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Tesco PLC
This report analyses the inventory turnover ratio of the company and this section found that its
current ratio is consistently going down with every passing year. The inventory turnover ratio of
the company was 19.27%, 17.94%, 17.31% and 17.11% for the years 2014, 2013, 2012 and
2011 respectively. The high inventory turnover ratio shows that company has a very good
working capital management strategy and more cash is hold in the stock. So company has to
improve its working capital management strategy. (Bull, 2007).
25

20

15
M&S
Tesco

10

0
2011

2012

2013

2014

Figure 2.7: Inventory Turnover Performance

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II.

Asset turnover ratio

Marks and Spencer PLC

It has been analyzed that the asset turnover ratio of the Marks and Spencer is going down with
every passing year. The Asset turnover ratio for the company was 1.26, 1.27, 1.27 and 1.28 in the
years 2011, 2012, 2013 and 2014.
Tesco PLC
It has been analyzed that the asset turnover ratio of the TESCO PLC is decreasing with every
passing year. The Asset turnover ratio for the company was 2.07, 2.03, 2.08, and 2.21 in the years
2011, 2012, 2013 and 2014
(Jagadish R. Raiyani, 2011)
2.5

1.5
M&S
Tesco

0.5

0
2011

2012

2013

2014

Figure 2.8: Asset Turnover Performance

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III.

Asset cover ratio

Marks and Spencer PLC

Asset cover ratio provides information about the companys ability to satisfy the long term debt
obligations after fulfilling all the liabilities in the given financial year. It is observed that the asset
cover ratio of Marks and Spencer was 5.18, 4.99, 4.42 and 6 in the years 2011, 2012, 2013 and
2014 respectively. This shows that companys ability to satisfy the long term debt obligations is
improving year after year.
Tesco PLC
It is observed that the asset cover ratio of Tesco PLC was 4.87, 5.12, 4.98 and 5.39 in the years
2011, 2012, 2013 and 2014 respectively. This shows that companys ability to satisfy the long
term debt obligations is not improving year after year.
7
6
5
4

M&S
Tesco

3
2
1
0
2011

2012

2013

2014

Figure 2.9: Asset cover performance

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4.2.6. Liquidity Ratios

I.

Current Ratio

Marks and Spencer PLC

The current ratio is mostly used to calculate the capacity of the companys capacity to payback its
short term obligations in most effective way possible. Actually it is the capacity of the
organization's to pay back its current liabilities with its current assets (money, inventory,
receivables). The higher the current ratio the more proficient the organization is of paying its
commitments. Because it means that company has considerable amount of cash and cash
equivalents to pay off its debts. The current ratio gives a feeling of the effectiveness of an
organization's working cycle or its capacity to transform its assets into money. Organizations that
experience difficulty to recover their receivables or have long stock turnover can keep running
into liquidity issues in light of the fact that they are not able to fulfill their commitments
This report analyses the current ratio of the Marks and spencer and we found that its current ratio
is consistently going down with every passing year. The current ratio of the company was 1.92,
2.00, 1.70 and 1.63 in the years 2011, 2012, 2013 and 2014 respectively. This is not a good sign
for the company has its ability to payout its short term obligations.

Tesco PLC
This report analyses the current ratio of the Tesco PLC we can easily see that its current ratio is
showing a negative slide for the last four years. The current ratio of the company was 0.65, 0.68,
0.69 and 0.61 in the years 2011, 2012, 2013 and 2014 respectively. This means that company is
continuously losing its capacity to payout its short term obligations in last few years. This is not
good thing for multinational retail company like Tesco PLC.

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2.5

1.5
M&S
Tesco
1

0.5

0
2011

2012

2013

2014

Figure: 2.10: Current Ratio Performance

II.

Interest cover Ratio

Marks and Spencer

Interest cover ratio is a very useful and beneficial measure to calculate the ability of the company
to payback its interest costs .Companies always desire to maintain a very high interest cover ratio
as it shows their financial strength to cover their finance costs.
This report analyses the interest coverage ratio of the Marks and Spencer found that its ability to
payout the interest expense is gradually improving with the passing of every year. It was 6.55,
5.81, 3.59 and 5.79 in the years 2011, 2012, 2013 and 2014 respectively.

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Tesco Plc.
Interest cover Ratio
This report analyzed the interest cover ratio of the company and found that its interest cover ratio
is consistently going down with every passing year. The interest cover ratio of the company was
8.32, 7.89, 4.37, and 5.01 for the years 2011, 2012, 2013 and 2014 respectively. The interest
cover ratio was improved in the year 2014 after showing poor performance in the years 2011,
2012 and 2013.
(ProQuest, 2007).
9
8
7
6
5

M&S
Tesco

4
3
2
1
0
2011

2012

2013

2014

Figure: 2.11: Interest Cover Ratio Performance

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4.2.7. Capital Structure Ratios

I.

Gearing ratio

Marks and Spencer plc.

Debt to equity ratio or gearing ratio is one of the most popular and effective ratios to compare the
debt obligations with the equity capital of the company. It is also a very good measure of the
leverage of the company in most successful way.
According to the financial experts companies with high leverage are very vulnerable to the
unpredictable business cycles as they have to finance their debt obligations and liabilities. This
makes them very vulnerable to the downturns and recession cycles. This report analyzed the debt
to equity ratio of the company has showed an improvement till the year 2014 which is a very
good sign for the company. This report shows that debt to equity ratio was 57.84%, 53.35%,
68.40% and 64.46% in the years 2011, 2012, 2013 and 2014.
Tesco Plc.
This report analyzed the debt to equity ratio of the company has showed a considerable
improvement in last four years. The debt to equity ratio was 91.93%, 91.93%, 86.66% and
108.61% in the years 2011, 2012, 2013 and 2014.This shows that company has been successful at
decreasing its ratio of debt as compared to the equity in last four years or so.

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120
100
80
M&S

60

Tesco
40
20
0
2011

2012

2013

2014

Figure: 2.12: Gearing Ratio Performance

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4.3. Stage 4 Evaluation

4.3.1. Profitability
After analyzing the profitability ratios of both companies it can be concluded that TESCO PLC
and Marks and Spencer have not managed to increase their profitability in last four years. This is
a very poor sign for the company as it reduced the ability of the company to increase its market
share.
4.3.2. Liquidity
After analyzed liquidity Ratios it was noticed that the performances of Marks and Spencer and
Tesco were not satisfactory level .They showed a poor performance in the Liquidity Ratios. They
have to improve their working capital management strategy for their future.
4.3.3. Efficiency
After analyzing the Efficiency ratios of Marks and Spencer and Tesco it was noticed that the
performances of the TESCO PLC and Marks and Spencer are not improving with every passing
year. This performance shows that both companies have failed to utilize their assets in effective
way during these last four years.
4.3.4. Capital Structure
After analyzing the Capital structure of TESCO and Marks and Spencer it was noticed that the
performances of the TESCO PLC and Marks and Spencer are satisfactory. This performance
shows that both companies have effectively minimized their reliance on debt during these last
four years.

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4.4.1. Business Strategy of Marks and Spencer

Marks & Spencer have centered their business by growing through offering new products in UK
market .Currently it is planning to offer diverse products and services. This organization is
operating in a market that is developing slowly and market share of the M & S is consistently
contracting. It is trying hard to compete in international market by gaining customer loyalty and
customer confidence. Marks & Spencer rivals in the development stage attempting to pick up
piece of the pie, it is important to put resources into request to recover its piece of the pie and
strength.
Marks and Spencer has very detailed growth plans and it is planning to open 62 retail stores next
year and also planning to grow into Asian market. Marks and Spencer is planning to expand its
market through focusing on styling, designing and innovation in the products of the company.
This will be possible by diminishing the products and services costs lower than competitors and
spend high sums on sales and marketing. Utilizing the hybrid strategy and clock model is the best
choice for Marks & Spencer to accomplish competitive advantage against the competitors.
4.4.2 Business Strategy of Tesco PLC
TESCO is one of the largest retailers of the UK.it is operating more than 568 stores around the
country. Tesco is committed to creating shareholder value through an innovative customer focused
strategy implemented by our people.
The business strategy of the Tesco PLC is based on the following three important points
The continued investment in the UK based business ventures. This improves the growth ability of
the Tesco PLC in the local retail market of the company.
To establish multichannel leadership in all of the business sectors.
To pursue disciplined and focused growth in the international and national growth in the retail
sector.
4.5.1 Risk Management Strategies of Marks and Spencer
The Board has general responsibility for guaranteeing that risk is successfully overseen over the
Group and, for the benefit of the Board, the Audit Committee surveys the adequacy of the Group
Risk Process. Every business range is in charge of recognizing, evaluating and dealing with the
risks in their individual territory. Risks are identified and surveyed by all business territories halfyearly and are measured against a defined set of criteria, considering probability of event and
potential effect to the Group. The Group Risk capacity encourages a risk identification and
evaluation exercise with the Executive Board individuals. This data is joined with a combined
perspective of the business zone risks. To guarantee its risk procedure drives consistent change
over the business, the Executive Board screens the continuous status and advancement of key
activity arranges against every risk quarterly. Risk remains a key thought in all key decision
making by the Board, joining level headed discussion on risk longing.

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4.5.1 Risk Management strategies of Tesco Plc.

A key test for any business is to recognize the important risks it confronts and to create and screen
proper controls. A fruitful risk administration procedure parities risks and compensates and
depends on solid judgment of their probability and effect. Following are the main points of the
risk management strategy of the TESCO PLC.
Important business and strategic issues of the company are regularly reviewed by the board and
executive committee of the company. The review plan of the company spans minimum two days
and includes all the important members of the board.
The business level risk management plan of the company is very clear and focused. It is based on
three priorities namely a strong UK business, multichannel leadership and disciplined
international growth
Financial strategy risks and performance is frequently analyzed by the important members of the
board Financial risks are based on improving the capital discipline and great emphasis on
growth and returns.
The external economic outlook is improved through monitoring external economic risks.
Country developments are continuously monitored through local CEOs
The IT strategy of the company makes sure that all the systems are updated and investments in the
IT department are aligned with the innovations taken place in the technology sector. The
continued investments in the IT helps company to take care of the technology related risks.
The Bank has formed good working relationships with the Prudential Regulation Authority and
Financial Conduct Authority
Forward rate agreements, interest rate swaps, caps and floors may be used to achieve the desired
mix of fixed and floating rate debt
Our policy is to fix interest rates for the year on a minimum of 40% of actual and projected debt
interest costs of the Group excluding Tesco Bank

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Chapter 5

5.1 Conclusions
After analyzing the company financial statements we have found different types of issues in the
company, We have drawn following conclusions from the study of the financial statements of the
company of last four years.After analyzing the profitability ratios of both companies it can be
concluded that TESCO PLC and Marks and Spencer have not managed to increase their
profitability in last four years. While international sales rose 1.2% on a constant currency basis
underlying operating profit was flat as the retailer confronted a range of challenges such as
continued tough trading in the Republic of Ireland and political instability and conflict in markets
such as the Ukraine. It has been analyzed that efficiency ratios of the Marks and Spencer have
shown a steep decline in last four years. This is not a good sign as it shows the decreasing ability
of the company to utilize the assets of the company to generate revenue. These assets include the
cash based and fixed assets of the company. The retailer said it was pleased with consumer
response to Simply Food openings in Hong Kong, Paris and Prague and that a new lingerie and
beauty format had gone down well. However, M&Ss international business clearly remains a
work in progress. The retailer expects the issues which adversely affected it in the first half to
persist in the second. The Marks and spencer is also facing the problem of poor branding as it is
making difficult for the company to keep pace with the other competitors present in the
international and national market. Company has to improve its branding in the market. This poor
branding is hurting the revenue and profit of the company.
After analyzing the Liquidity Ratios it was noticed that the performances of the TESCO PLC and
Marks and Spencer were not satisfactory .They showed a bad performance in the Liquidity Ratios.
They have to improve their working capital management strategy for their future. After analyzing
the Efficiency ratios of TESCO and Marks and Spencer it was noticed that the performances of
the TESCO PLC and Marks and Spencer are not improving with every passing year. This
performance shows that both companies have failed to utilize their assets in effective way during
these last four year
According to a study conducted by Kantar world panel, Marks & Spencer is losing share of the
overall clothing industry quicker than any of its close competitors. This is the quickest decline in
last few years among ten closest rivals of the company. Experts at Bernstein trimmed their figures
for the year to the end of March as they said M&S's offer of the business sector had slipped to
11.18% in the six months to 16 February from 11.36% a year prior. It missed out on womens
wear, menswear and kids wear, as per information from research firm Kantar World panel.
Bringing about more prominent concern, the chain's ubiquity with its center 25-55 age bunch and
more than 55s slid, despite the fact that it showed some growth among 12-to 34-year-olds.marks
and spencer can easily improve its market share by offering more discounts in the sales price and
to bring more variety in its products at the retail counters. After analyzing the Capital structure of
TESCO and Marks and Spencer it was noticed that the performances of the TESCO PLC and
Marks and Spencer are satisfactory. This performance shows that both companies have effectively
minimized their reliance on debt during these last four years.
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5.2 Recommendations
The financial growth and overall business growth of the Marks and Spencer is going down for the
last few years. We have recommended following solutions for the company to improve its
financial performance. Marks and Spencer has really suffered from its sweatshop scandal in
recent years. It has miserably failed to fulfill the labor standards of the India. Marks and Spencer
has to improve its management in the international market as it is really damaging its overall
reputation and financial growth. This was major scandal of the last year and it was a major
setback for the company. Marks and Spencer has to improve its ethical standards to get a very
good feedback from the company.
The sales and profit growth of the company really suffered after the online sales delivery debacle
last year at Christmas. Its delivery center at Leicestershire faced problems in its online delivery.
This problem really created problems for the company as orders were delayed for more than 10
days in some instances. Online delivery system can be improved through introducing online
tracking system, improving communication between seller and buyer and also through employing
qualified online selling professionals.
Company can improve its efficiency ratios by improving its working capital management
strategies. It has to avoid keeping assets idle as this increases costs of the company. Working
capital management of the company can be improved through improving cash management and
debt recovery system of the company. Cash flow budgeting is the most important tool to control
and manage the cash based resources of the company in most effective way possible.
The decline in the liquidity ratios of the Marks and Spencer shows that the ability of the company
to pay off its short term obligations is going down .This also means that company has to improve
its inventory and stock management strategies. Company can improve its liquidity ratios by
eliminating the excessive stock in the slow moving categories. Inventory management can be
improved through implementing different software solutions such as Saas cloud applications.
Company should always try to maintain real time inventory management systems and always try
to analyze that real time inventory data. Company can also improve its stock management through
managing individual supply and demand plans of the products and inventory.
Marks and Spencer needs to improve its market share to compete with its fierce and closest rivals.
Company can improve its market share by entering into booming and emerging markets like
China and India. These markets have very good potential as these both countries are growing at
very healthy rates. These both markets have very good consumer base and extremely good
growing potential. According to the latest data china and India are fourth largest and eleventh
largest consumer markets in the world.
Marks and spencer really needs to change its distribution and retail network within the United
Kingdom. According to the latest data released by the company it has 815 shops in the UK from
which 347 shops are selling clothes .This is a very large number as compared to its competitors
like John Lewis, Debenhams and Next. John Lewis, Debenhams and Next have clothing stores of
43,160 and 500 respectively & S has to decrease its retail clothing shops in the country so that it

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can decrease its operational costs and improve overall profit. It will improve the profit by
decreasing operational and administrative costs of the company in a most effective way.
Marks and Spencer can solve its international market issues through strict financial management
and market expansion in emerging market such as India and China. Strict financial management
will help the company to keep its finance costs in control in upcoming years. Strict financial
management includes employing qualified financial management staff, implementing sound
financial management strategies and also improving the auditing system of the company. Good
financial management strategies include keeping a complete record of the creditors/debtors,
keeping complete cash flow record on daily basis, keep up-to-date accounting records, and get
funding from most appropriate sources and also by tacking the financial problems at the right time
and place.
Marks and Spencer can improve its capital structure through decreasing reliance on the debt as
sometimes it is bad for the company in the long run. As company has to pay continuous interest
costs in the long run. In the year 2014, Tesco Plc. faced one of the biggest accounting scandals of
the British retailer history. In a statements Tesco management disclosed that company
management overstated profit of more than 250 million for the years 2013-14.This scandal sent
shockwaves in the minds of the shareholders as the share prices of their stocks fell very badly.
This accounting scandal is a very good lesson for the retail companies like Marks and Spencer, as
this shows that how lack of financial and internal control can badly damage the reputation of the
company. This scandal also decreased the market price of the shares of the company in last few
years.
The financial growth of the TESCO Plc. is showing a steep fall in last few years as different types
of scandals. The financial growth of the company was 3.4 % in the year 2011 and after three years
its growth fell to -3.7 %. This shows that how can an accounting scandal affect the financial
growth of the company in a very negative way. Marks and Spencer can learn lessons from this
accounting scandal which will improve its financial management.

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