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Comparison Of Cost Risk And Return In Uk Finance Essay

In the present dissertation’s proposal we are going to start studying about the different conditions of the retail market in the companies like Tesco, Morrison and Sunbury in UK and Carrefour, Casino, and Auchan in France, after it research is going to analyse the relation of long-wage patterns, economy changes as well as social mood, risk-taking behaviour and innovative economic activity to prove that those conditions have some relation with the retail stock market.

To get the necessary information to support the research it is going to use secondary data as a main resource from the financial and economy journals, annual reports from the chosen companies, books and the internet. To get the primary data it research is going to use some questionnaires if it will need it.

The historical information about the chosen companies is going to be useful to get an idea about the activity and the present condition of them. The annual reports from the companies will give the research the information about the historical numerical data that this research need it.

This research is going to use different models to know the cost, risk and return of the retail stock market such as the efficient market theories, portfolio theories, price pattern in the market, analyse trough regression and coefficient relation and other theories related. To analyse the information collected from the companies in necessary to know the interest tax, the dividends of each company and the capital gain from those companies in 2009 as well as the policy of UK and France to applied to them.

Literature review

The stock prices are based upon long-wage patterns, economy changes as well as social mood, risk-taking behaviour and innovative economic activity therefore in the present paper is going to study the different trend of the retail market in the UK and France, those factors have influence in the companies of those countries and it affect the share of the companies and at the same time the bounce in the price of the stock market.

Retail, with total sales of £3.3 trillion, in the world’s largest private industry ahead of financial industries £2.6 trillion. Over 50 of the fortune 500 companies, and around 25% of the Asian top 500 companies, are retailers. The industry accounts for over 8% of the GDP in western economies.

Global retailers have also reached a position of strength that enables their brand to be leveraged across a wide range of services. Many of the them have expanded their offering over the years to include fuel retail, car retail, convenience services and personal finance service. This has put them in a position were they are not only beginning to capture growth from geographic expansion, but are also entering large new areas of business. A large number of retailers are pursuing innovative aggregation an supply chain- streamlining initiatives using new technology

In 2009 the retail market have been impacted by a range of factors, increased pressure on household budgets, unemployment, the banking crisis and the availability of credit continues to impact consumer spending. Despite these challenges, the UK and France food and grocery market remains robust during 2009. While not recession proof, food and grocery is more resilient to current downturn in the economic market than other sectors.

France retail market is dominated due to their vital importance in everyday life. In France, the food and grocery category accounted for around 37% of the total retail market in the year 2009. The market was worth £178.5 billions in 2009.

The UK grocery market was worth £141.7 billions in 2009. Groceries account for 12.8 percent of total household spending in the UK market is the third largest area of expenditure, following housing and transport. food and grocery expenditures account for 49p in every £1.00 of retail spending.

Brief Information about the Companies

United Kingdom Companies

Tesco

Data provide by: Euro stock city

Tesco is the leader of the supermarkets in Britain in the food sector with an eye in the future offer a wide line of products to satisfy a mayor part of customers. It store operate under the name of Tesco Metro in small stores, some supermarket bigger and outside cities as Tesco Extra and 24- hours stores.

Tesco is a global player it has adapted to the technological changes. It makes an astonishing profit from its on-line sales site - Tesco.com. Tesco Express also owns gas [petrol] stations and provides financial services: a joint venture with the Royal Bank of Scotland enables it to offer life insurance and general insurance (home, car, pet, travel), credit cards and advantageous loan and savings schemes. It is well established in Ireland, Central Europe (Poland, Slovakia and the Czech Republic) and Asia (Thailand, South Korea, Japan and China).

According to the company profile the company index is FTSE 100, STOXX50, STOXX60, it has a market place in the countries like London, Frankfurt, Dublin, Virt-x. The Executive team are Chairman of Board of Director; Reid D, the Chief Executive Officer; Leahy Terry, the Chief Financial Officer; Higginson Andrew.

The calendar for the Annual Report is on 15/04/2010, the Shareholder’s meeting is on 26/06/2009, and the Profits first half year meeting is on 02/10/2009. The sales core market is United Kingdom with 74% and abroad the sales are distribute in Europe with 88% and Asia with 12%.

Key Figures

Year

2007

2006

2005

2004

2003

Net Operation Revenues*

42,641

39,454

33,974

30,814

2,337

Net Profit*

1,892

1,570

1,366

1,100

946

* in million(s) of Pound

Earnings per share

Year

2007

2006

2005

2004

2003

Earnings per share *

23.84

20.07

17.72

15.05

13.54

*in pence

Morrison

Data provide by: Euro stock city

Morrison quality and variety before anything else, it is always improving in its quality is owner or more than 500 supermarkets in Great- Britain. The Morrison Supermarkets Group specializes in supermarket distribution, offering only quality products and increasing diversity and most sites have gas stations. It has eight departments/products in all divided in Market Street sells a whole range of fresh products. Then there is Family Butcher, the Family Bake.

According to the company profile the company index is FTSE 100, STOXX600, it has a market place in the countries like London, Frankfurt. The Executive team are Chairman; Gibson Ian, the Chief Executive Officer; Bolland Marc, the Chief Financial Officer; Pennycook Richard, The Corporate Secretary; Burke Jonathan.

The calendar for the Annual Report is on 13/03/2010, the Shareholder’s meeting is on 22/05/2009, and the Profits first half year meeting is on 04/09/2009. The sales core market is United Kingdom with 100% and abroad the sales are distribute in Europe with 100.

Key Figures

Year

2007

2006

2005

2004

2003

Net Operation Revenues*

12,462

12,114.8

12,116.1

4,944.1

4,288.5

Net Profit*

247.6

-250.3

205.7

197.6

179.5

* in million(s) of Pound

Earnings per share

Year

2007

2006

2005

2004

2003

Earnings per share *

9.32

-9.46

8.1

12.59

11.53

*in pence

Sainsbury

Data provide by: Euro stock city

Sainsbury with a wide line of product to satisfy all customers. It is leading company in The Britain group runs 350 Sainsbury’s supermarkets and 300 shops branded Sainsbury's Local and Bells Stores. Customers can also buy online via Internet Sainsbury's to You. The group caters for more than 14 million customers per week, as a result of its number sales outlets, the company owns a significant amount of real estate, which it manages via its Sainsbury's Property division. Finally, in association with the bank HBOS, Sainsbury's Bank offers individual clients a diverse range of banking services (loans, insurance, fund management, credit cards).

According to the company profile the company index is FTSE 100, STOXX600, it has a market place in the countries like London, Frankfurt, Dublin, Virt-x, Amsterdam. The Executive team are Chairman of Board of Director; Hampton Philip, the Chief Executive Officer; Justin King, the Chief Financial Officer; Shapland Darren.

The calendar for the Annual Report is on 13/05/2009, the Shareholder’s meeting is on 15/07/2009, and the Profits first half year meeting is on 17/06/2009. The sales core market is United Kingdom with 100.

Key Figures

Year

2007

2006

2005

2004

2003

Net Operation Revenues*

17,151

16,061

15,409

17,141

17,430

Net Profit*

324

58

61

396

454

* in million(s) of Pound

Earnings per share

Year

2006

2005

2004

2003

Earnings per share *

3.8

3.5

20.7

23.79

*in pence

France companies

Carrefour

Data provide by: Euro stock city

Carrefour is the European leader in distribution the group's long-term aim is to become the supermarket of the future it is constantly innovating adapting to its customers' new consumption patterns, owns a number of other brands such as Shopi, Champion, Norte, Dia and ED, and has 11 000 shops in 32 countries, including China and serve more than 2 millions costumers. The group has also developed a number of other customer services, such as the sale of financial products, theatre and concert tickets, holidays and Internet-selling. where the customer can find everything they need under one roof.

According to the company profile the company index is STOXX600, CAC40, SBF120, SBF250, EURONEXT100, EuroSTOXX50, NextCAC70, it has a market place in the countries like Paris. The Executive team are Chairman of Board of Supervisory; Halley Robert, the Chairman of the Executive Board; Duran Jose Luis, the Chief Financial Officer; Duran Jose Luis, Human Resources; Beauchet Jacques.

The calendar for the Annual Report is on 12/03/2010, the Shareholder’s meeting is on 28/04/2009, and the Profits first half year meeting is on 16/04/2010. The sales core market is France 46, Europe 73%, South America 10%, Asia 7%.

Key Figures

Year

2007

2006

2005

2004

2003

Net Operation Revenues*

82,148

77,901

74,497

72,668

70,486

Net Profit*

2,299

2,299

1,436

1,387

1,629

* in million(s) of Pound

Earnings per share

Year

2007

2006

2005

2004

2003

Earnings per share *

3.28

3.22

2.05

2.29

2.23

*in pence

Casino

Data provide by: Euro stock city

Casino from casino to distribution. The Casino-Guichard-Perrachon story is first and foremost the story of Geoffroy Guichard, a small grocer in Saint-Etienne, who married Adèle Perrachon and in around 1880 took over the family grocer shop housed in an old casino. Today, in spite of its European development, the group remains very much linked to its local roots and the density of its sales network in the South-East of France. The group is represent under the brands of Casino, Géant, Franprix, Leader Price and Monoprix all form the main players in French food distribution. The group is also present on an international scale in countries such as the United States, Poland, the Netherlands, Thailand, Venezuela, Uruguay and Argentina among others

According to the company profile the company index is SBF120, SBF250, EURONEXT100, STOXX600, CAC Next20, it has a market place in the countries like London, Frankfurt, Dublin, Paris, Vienna. The Executive team are Chairman and CEO; Naouri Jean-Charles, the Chief Financial Officer; Favre Michel.

The calendar for the Annual Report is on 05/03/2010, the Shareholder’s meeting is on 19/05/2009, and the Profits first half year meeting is on 22/04/2009. The sales core market is France 71.7,Europe 71.7%, South America 17.8, Asia 6.2%, Rest or the world 4.3%.

Key Figures

Year

2007

2006

2005

2004

2003

Net Operation Revenues*

24,972

22,505

22,806

23,169.5

22,982.9

Net Profit*

814

600

344

488.1

492.3

* in million(s) of Pound

Earnings per share

Year

2006

2005

2004

2003

Earnings per share *

5.1

2.87

4.51

4.54

*in pence

Auchan

Data provide by: Euro stock city

Auchan's France's second-largest food retailer behind Carrefour, Auchan operates about 495 hypermarkets and some 745 supermarkets in about a dozen countries. France is Auchan's largest market, but it has stores throughout Its hypermarkets carry up to 100,000. They also provide travel services. Auchan's other core businesses include banking.

According to the company profile the company has a market place in the countries like Europe and in China, Dubai, Russia, and Taiwan. (Auchan exited the US, Mexico, and Morocco in recent years.) The Executive team are Chairman; Mulliez Vianney, the Director Group Finance; Mezerac Xavier, Media Realtions; Cathalifaud Francois.

Key Figures

Sales: $55.652.7 M

Growth of the year: 3.0%

Net income: $ 1,048.7 M

Income Growth: (6.5%)

Retail Stock Market Classification

According to Lafoy, T. (2006). The classification of stocks is based on the type of company, the value or the return that is expected from the company. In this economy some companies grow faster than others, reaching what they perceive as their peak and thinking they can not handle more growth.

The retail stock market is classified as compound of defensive stocks, income stocks and cyclical stock; the retail stock market is classified in it because the companies studied are companies that provide goods and service used in good as well as in bad economy times, those companies will hold their own market position in the worst of economic times such downturn or recession. According to Lafoy, T. (2006).

The retail stock market are classified as income stocks because the companies studied are stable and gained a large market share, as they can afford to reward their shareholders. Those companies are companies that are usually comfortable and content with their market position and have focused on maintaining their current business. Stock Market Investors (n d).

The retail stock market are classified as cyclical stocks because the stocks of those companies are bounced depending on business cycle or condition of the economy. For example, during bad economic times, cyclical stock prices decline and in good economic times their earnings and stock price increase. The cyclical stocks can be used to maximize profits in recovering and expanding economic times. Stock Market Investors (n.d).

Risk and Return of the Retail Stock Market

Understanding the relationship between risk and return is essential to understand the principle that risk and return are directly related. The greater the risk that an investment may lose money, the greater its potential for providing a substantial return. By the same token, the smaller the risk an investment poses, the smaller the potential return it will provide. Path to Investing (n.d).

The second principle is that if you can get a better-than-average return on an investment with less risk, you may be willing to sacrifice potentially greater return to avoid greater risk. That's sometimes the case when interest rates go up. Investors pull their money out of stocks, which are more risky, and put it in bonds, which are less risky, because they're not giving up much in the way of potential return and they're gaining more safety. Path to Investing (n.d).

The third principle is that you can balance risk and return in your overall portfolio by making investments along the spectrum of risk, from the most to the least. Diversifying your portfolio in this way means that some of your investments have the potential to provide strong returns while others ensure that part of your principal is secure. The principle of diversification can be shown to calculate of the expected return, variance, and standard deviation of a portfolio must be illustrated. Business and finance online (n.d).

Investopedia (n.d). According to the Modern Portfolio Theory(MPT),There are four basic steps involved in portfolio construction: Security valuation, Asset allocation, Portfolio optimization, Performance measurement. This steps help to build the theory of an "efficient frontier" of optimal portfolios offering the maximum possible expected return for a given level of risk.

London stock exchange (n. d). The stock exchange's aim is to provide issuers, intermediaries and investors with attractive, efficient and well-regulated markets requirements for the Financial Services Authority’s [Recognised Investment Exchange (RIE)] and RCH sourcebook.

London stock exchange (n. d). Rulebook: All London Stock Exchange member firms are bound by the Rules of the London Stock Exchange (“the rules”) and must ensure compliance with these rules. The rules were fully updated in 2007 in readiness for the introduction of the Markets in Financial Instruments Directive (“MiFID” or “the Directive”). The revised Rulebook also aligned the rules more closely with the structure of the trading system TradElect and simplified them where possible to make them more user-friendly.

Objectives

Main objectives

The main objective of the research is compare the cost risk and return of invest in the UK or France retail stock market through the study of the companies Tesco, Morrison and Sainsbury in the UK and Carrefour, Casino, and Auchan applying the strategies and analysed the behaviour of the market.

Objective

To understand the behaviour of the retail stocks market according to the different factors that affect to each countries.

To analyse the risk of the UK and France retail stock markets.

To study the best strategies to apply into the retail stock market to reduce the risk.

To analyse the risk and return related to the cost of the retail stock market into the chosen companies.

To compare the price of the retail stock market from the chosen companies.

To decide the best company into the chosen companies to invest in the retail stock market.

Research methodology

In order to get a good information about the cost, risk, return and regulation of the retail stocks market, the research plans depend on the financial journals to start understanding the state of the companies and economy journals to understand the behaviour of the market and the different economy variables. To make the research it is going to use the deductive qualitative research to study the strategies and deductive quantitative research to analyse the graphs of movement of the retail stocks market. The information that is going to be used for the research is mainly from secondary data it is going to be taken from the economy and financial journals, books and the internet that it means the information was being done.

Free Management Library, (n d). The research can use key questions to focus on:

1. For what purposes is the research being done, what do you want to be able to decide as a result of the research?

The research is looking for the cost of the retail stocks market in relation to the risk and return that it will represent. To find it, the research is studying the different strategies to figure out the behaviour of them and review the financial and economy journals to find the best companies to invest in the UK and France.

2. Who are the audiences for the information from the research?

The audience to take the information are finance analysts, manager of stocks, questioner that are already done, economy and financial journals, historical data of retail stock market.

3. What kinds of information are needed to make the decisions you need to make and/or to explain to your intended audiences?

The information that the research will get is about stocks and strategies to make a better analysis and make a decision. It is a secondary data. As a support of the research it is going to use questionnaire as primary data.

4. From what sources should the information be collected?

The information is going to be collected from secondary data such as annual report of the different retail stocks market activities of the chosen companies, financial journals, economic journals, internet and books.

5. How can that information be collected in a reasonable fashion, e.g., questionnaires, interviews, examining documentation, observing, conducting focus groups?

Some questionnaires as a primary data for finance analysts, and manager of stocks, examining financial and economic journal and information from internet, observing information from internet and books as secondary data.

6. When is the information needed (so, by when must it be collected)?

According to the research, it is going to have a calendar to follow. It can show the progress of the dissertation.

7. What resources are available to collect the information?

The resources found available are the annual report of the activity of chosen companies, financial journal an economic journal, internet and books the questionnaires are more difficult and they are going to be doing if the condition to get will be done.

Planning of timetable

The timetable shows how planned the time for every part of the dissertation and how to use effectively the time to get the best results.

Weeks

1

2

3

4

5

6

7

8

9

10

11

12

Introductory

Literature

Definition of

Objectives

Selection of

Data Sources

Interviews and

Questionnaires

Design

Data

Collection

Secondary

Data Analyse

Written Form

of the

Dissertation

First Report

Modification

of the

Dissertation

Final Report

Reference list

Business and finance online (n. d). Portfolio Risk and Return. [ risk and return]. Available from: http://www.zenwealth.com.html. [Accessed 9 December 2009].

Free Management Library, (n d). Research Methods. [ Basic Business Research Methods]. Available from: http://www.managementhelp.org..htm. [ Accessed 10 December 2009]

Investopedia (n. d). Risk and Return Tradeoffs [risk and return]. Available from: http://www.investopedia.com. [ Accessed 9 December 2009].

Kennon, J. (n.d.). Investing Lesson 1 - Introduction to the Stock Market. [stocks]. [Stocks]. Available from: http://beginnersinvest.about.com.htm. [ Accessed 4 December 2009].

Kumar, V. (n d). Basics of Stock Classification and Investing. [ classification of stocks]. Available from: http://ezinearticles.com. [ Accessed 9 December 2009].

Lafoy, T. (2006). Classification of stocks. [classification of stocks]. Available from: http://www.gurufocus.com [ Accessed 9 December 2009]

Little, K. Types of Investing Risks.[ risk invest in stocks]. Available from:

http://stocks.about.com.htm. [ Accessed 4 December 2009].

London stock exchange (n. d). Stocks Rules and Regulations. [ stocks regulation] available from: http://www.londonstockexchange.com.htm. [ Accessed 11 December 2009].

Path to Investing (n. d). Risk and Return. [ stocks risk and return]. Available from: http://www.pathtoinvesting.org.htm. [ Accessed 9 December 2009].

Stock Market Investors (n d). stock market sectors classification [ classification of stocks]. Available from: http://www.stock-market-investors.com.html [ Accessed 9 December 2009].

Yahoo finance (n. d). Companies Profile [ retail stocks market ] available from: http://uk.finance.yahoo.com. [ Accessed 11 December 2009].

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