The Marks And Spencer Case Study Accounting Essay

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According to Kaplan and Norton, financial perspectives are important while non-financial perspectives are also important, since through firms financial performances, effects from other three perspectives can be reflected.

Kaplan and Norton (1996) said that financial goals of the company are profitability, growth and shareholder's value[同return on investment?].

The main financial objectives of M&S are maximizing profit, reducing cost and growing sales.

Profit may be one of the main objectives of a company since every company wants to maximize the profit, M&S is no exception. M&S's main objectives include maximizing their profit, which could be measured through income statement from their annual report. Profit before tax was £780.6m in 2011, with a 15.7% decreased to £658.0m in 2012.

Reducing cost is another important objective of M&S. The company focused on managing their costs tightly in order to keep profitability. This cost management helps the company build a stronger platform and becomes a support to the company's investment in their future plans.

it can be clearly justified by the increasing

When it comes to the sales growth

Marks & Spencer case study

The experience of the major UK retailer, Marks & Spencer, in 1999 illustrates the issues. They were making annual profits of over £1Bn and their share price was close to an all time high. They had an air of indestructibility or even arrogance. But within a year, profits had slumped, their share price had collapsed and takeovers were mooted. Why didn't they see it coming? They were unaware that they were rushing towards a cliff.

The problem was that while revenues and profits were at an all time high, these were the product of past decisions and efforts. They were lagging measures. Over the previous two to three years, M&S had been falling behind in many areas, which over time, finally affected their bottom line. Thus they were changing their clothing ranges twice yearly while their up-and-coming competitors such as Next were changing theirs quarterly or monthly. Relationships with suppliers were poor and logistics inadequate.

Information on customers was also poor, despite being one of the earliest organisations to have their own store card - however, they'd never analysed the data effectively. And staff were demotivated. As their Finance Director Alison Read said at the time; "If we'd had a balanced scorecard, the results quadrant would have been green, but all the other quadrants, [Customer, Process and People], would have been red. It would have given us early warming.

2011

52 weeks 

£m

2010

53 weeks 

£m

2009

52 weeks 

£m

2008

52 weeks 

£m

2007

52 weeks 

£m

Income statement

Revenue - continuing operations

UK

8,733.0

8,567.9

8,164.3

8,309.1

7,977.5

International

1,007.3

968.7

897.8

712.9

610.6

Operating profit - continuing operations

UK

679.0

701.1

755.0

1,095.9

956.7

International

157.9

150.9

115.7

115.4

89.2

Total operating profit

836.9

852.0

870.7

1,211.3

1,045.9

 

Net interest payable

(93.9)

(160.1)

(199.9)

(141.1)

(130.0)

Pension finance income

37.6

10.8

35.4

58.9

20.8

Profit on ordinary activities before taxation - continuing operations

780.6

702.7

706.2

1,129.1

936.7

 

Analysed between:

Underlying profit before tax

714.3

694.6

604.4

1,007.1

965.2

Adjustments to operating profit

66.3

8.1

101.8

122.0

(28.5)

Income tax expense

(182.0)

(179.7)

(199.4)

(308.1)

(277.5)

Profit after taxation

598.6

523.0

506.8

821.0

659.2

2011 

53 weeks

2010 

53 weeks

2009 

52 weeks

2008 

52 weeks

2007 

52 weeks

Net margin1

Operating profit/Revenue

8.6%

8.9%

9.6%

13.4%

12.2%

Net underlying operating margin

8.5%

8.8%

8.5%

12.1%

12.2%

Basic earnings per share1

Basic earnings/Weighted average ordinary shares in issue

38.8p

33.5p

32.3p

49.2p

39.1p

Underlying basic earnings per share

34.8p

33.0p

28.0p

43.6p

40.4p

Dividend per share declared in respect of the year

17.0p

15.0p

17.8p

22.5p

18.3p

Dividend cover

Profit attributable to shareholders/Dividend payable

2.3x

2.2x

1.8x

2.3x

2.1x

Retail fixed charge cover

Operating profit before depreciation and operating lease charges/Fixed charges

4.0x

4.0x

3.5x

5.3x

5.9x

Net debt2(£m)

1900.9

2,068.4

2,490.8

3,077.7

1,949.5

Table 4-4Balanced Scorecard(Garrison, Noreen, & Brewer, 2008)

CSF

Measures of BA

FinancialPerspective

Improved financial performance

- Sales growth

- End of year financial accounts

- Profitability and liquidity ratios

Shareholder value

Share price, Dividends per share

Customer Perspective

Quality of airline service

Quality control, Customer feedback

Customer service

Customer questionnaires and feedback

Increased brand awareness

- Customer feedback

- Increased passenger volumes

Internal Perspective

Security and speed of check-in services

- Positive feedback

- Time efficiency of check-in service

Customer orientated

Increased sales volumes

Expansion into new markets

Profitability of competitors in the new markets

Innovation and learning perspective

Integration of UK and emerging market cultures

Staff motivation

Investment into technological innovation

Increase spending in R&D

Highly skilled staff

Spending on staff training

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