Financial Analysis

ENVIRONMENTAL AND INTERNAL ANALYSIS OF PIZZA HUT In our visit to Pizza Hut we conducted research on PEST (Political, Economic, Social and Technological) Analysis. In the internal analysis of Pizza Hut we have considered SWOT of the Company. PEST (Political, Economic, Social & Technological) i. POLITICAL ISSUES: Political issues include regulatory frame work operating in judicial system which may affect the business in different ways. There are not many political factors in Peshawar affecting Pizza Hut as is lack of competition.

Factors such as laws on business employment, pollution and taxation apply on the organization which it has to follow regarding the rules. ii. ECNOMIC FACTORS: If the county’s economy is better so the GDP of the country will be good, this is a green signal for the business as the per capita income of the people will be increased and they will spend more money. In our survey we came to know that most of the people in the beginning of the months spend more and they visit pizza hut very often.

When the inflation rate increases the cost of raw material also increases and this leads towards high prices of the products and vice versa. iii. SOCIAL FACTORS: Pizza hut is a multinational and it is basically originated from America so the organization is overwhelmed by western culture. There are social forms of society which consist of Upper class, middle class, middle upper class, lower class and lower class. Every country has cultural norms, values, beliefs and religion which can affect the organization. iv. TECHNOLOGICAL FACTORS:

Now a day’s technology is improving so as baking and heating ovens will be of new and efficient technology and will provide efficient service. Due to new technology there are new ways of marketing like internet; telemarketing and the organization can advertise their products with much more faster pace. Computer based customer data that is MIS (managing information system) helps in collecting customer data, daily transactions, future forecasting and decision making. New vehicles will make their service more efficient. ?

The pros and cons of Hong Kong political environment In the advantages, Hong Kong government carries out a free economy system which allows enterprises freely expand and also low or no transaction costs. Also, Hong Kong has little involvement on business process such as no legislation of tariff, import quotas and revenue duties.

With such stable framework and little interference, 759 stores can do business easily since it is mainly selling imported rodents from Japan and overseas, they have no need to pay for tariff and other duties, making them can have lower expenses, and giving the favorable prices to attract customers. However, Hong Kong government sets up a minimum wage legislation which would appear to be on the rise annually, which means the operation cost will be increased by the staff salaries, making them hard keeping the prices low. It will be a huge factor to consider of 759 if they are to continue to invest in Hong Kong. PEST Analysis By Jackie-Hang

1. Introduction
This paper seeks to evaluate three companies in the same industry, and make an investment recommendation on which one of them is the best to invest with. The companies to be studied are Costco, Wal-Mart, BJ’s Wholesale Club (or BJ). This paper will include an analysis of the retail industry and the companies’ financial statements which include their balance sheet, income statement and the cash flow statements for the last four to five years for the purpose making a proper comparison of each company. From the analysis financial of the statements, financial rational ratios of each will be extracted to facilitate the evaluation of the companies in relation to industry averages.

      This will also attempt to determine whether the companies’ revenues are tied to one key customer and whether such revenues are tied to one key product including the extent of such, if there is any proof. . Other issues to be addressed include determining the extent of companies’ reliance to single supplier, whether the companies’ revenues are generated overseas, the extent of such generation, if such was a fact and the degree of competition that is happening within the players in the industry.  This will further discuss the company’s future prospects as well as the regulatory and legal environment with which they operate.

2. Analysis and Discussion

2.1 Industry Analysis

     The framework to be used in the industry analysis is the Porter’s Five-forces model to examine the effects of the five forces that could reveal possible industry opportunities and threats (Porter, 1980).  Costco, Wal-Mart and BJ’s are falling under the retail industry which deals on variety of goods from on the manufacturer or wholesalers to the final consumers.

       These retailers actually offer general merchandise that may include domestics, apparel, stationery and books, housewares, shoes, home furnishings, electronics, automotive accessories, home appliances, sporting goods, camera and supplies, health and beauty products, pharmaceuticals, optical, jewelry. They also deal on grocery merchandise and even financial services as a way of increasing their revenues, photo processing services. They do these via discount stores, super centers and neighborhoods markets in the US and internationally for others. Read also Johnson and Johnson financial analysis

      An industry is defined industry as a group of firms serving the same needs and wants of customers and what would keep companies to come in to such group are basically grounded on economic reasons.  Since operating business carries with it cost of doing business, profits are expected if not necessities for survival.

       These companies or players of the industry are hoping more profitability in the industry if they have to remain as such in the industry. Companies failing meet profitability targets would end up folding up or wait till their liquidity to suffer and eventually face bankruptcy or insolvency.  In addition suffering profitability will cause decline in stock price as profitability are based on evidence of things that have happened in the past. If companies have not done well in the past, the future most probably may be believed by investors to behave in the same way for the same company unless management does the better thing. However, companies that may have come in to the industry may not necessarily get out if in so deciding there could be exit cost due to their big investments that have already been made. This part of the paper tries to evaluate what is happening in the industry at a given point and determine which are important or relevant for decision making for these companies.

         If an event or occurrence creates better profitability, then it is an industry opportunity or if it generates less profitability, it is an industry treat.  Porter’s model is useful to study the five forces that may influence the retail industry. These forces include ease or difficulty of entry, size or power of suppliers, size or power of buyers, extent of rivalries among existing firms and availability of substitutes (Porter, 1980).

          In terms of ease or difficulty of entry, there is an industry threat because new entrants can come in to the industry easily because of lack of economies of scale and the lack of need for high investment in the industry. In fact any retail store could actually become big, if willing and an investor would like to do it, because there is not much discouragement of operate such kind of business compared with starting in other industries. Read also Walmart Financial Analysis paper

         In terms power of buyers, there is also an industry threat since there are many buyers which may consist of institutional and personal buyers and they are believed to have strong bargaining power over these retailers by the fact that they can easily switch from one brand or type of goods or services to another without much cost to them and these retail companies could also deal on many products being dealt by their competitors.

     Each of the companies could not be considered to be tied to one key customer if the basis on group of people who would have to keep their purchases constant to be considered as key customer.  Moreover, each of the players is dealing with retail products which presuppose dealing with a broad category of classification of customers.  In terms of the companies’ business being generated overseas, not all of them are doing their international business.

       Among the three only Wal-Mart and Costco have their international operations which they have presented in their business segments report from their annual reports based on geographical location. Wal-Mart’s extend of international business is about 25% or less of its total revenues while that of Costco is about 20% of its total revenues.  BJ is exclusively making it revenues domestically in the US.

        In terms of power of sellers, there is an industry opportunity because suppliers of parts of products were retail are varied and these may cause them not to have a leverage over retailer. Power of suppliers of industry to retailers is therefore weak. It cannot be asserted that they each company is not relying on single a supplier as suppliers are supplying a broad or wise classifications of products as part of variety stores industry.

        There is further industry threat in the strong rivalry in the Industry.   The retail industry although may include the small retailers are actually dominated by few big retailers which include Costco, BJ’s and Walt-Mart.  The competition may still be further affected by the legal and regulatory framework that is demanded as part of the industry. This includes laws on waste materials handling and logistics handling (Supply Chain Digest, 2006). Strong rivalry will reduce industry profitability and these could be disadvantageous to present players.

         Industry opportunity appears to come from the low availability of product substitutes. This is caused by the fact that customers have no much choice but they have to use products available in the market particularly on food product which are part of the groceries needed by mankind to survive in this planet.

2.2. Financial Analysis

       The following table summarizes financial ratios extracted from the financial statements of Costco, Wal-Mart and BJ’s Wholesale Club data to facilitate analysis in terms of profitability, efficiency liquidity and solvency of the company.

Table I – Summary of Financial Ratios

Source: MSN (2008a, 2008b, 2008c,2008d,2008e, 2008f, 2008g, 2008h, 2008i)

2.2.1 Profitability and Efficiency

         Wal-Mart’s profitability is obviously highest among the three companies in terms of their average profitability ratios for the last 4 to five years.  For the purpose of this paper, the period covered for Costco is only for four years from 2004 through 2007 since its 2008 financial statements are not yet available at the time of this writing. For Wal-Mart and BJ is concerned the period covered is for five years or from 2004 through 2008.

      Based on net profit margin for years 2004, 2005, 2006 and 2007 Costco exhibited a uniform 2% for year. See Exhibit A. Its gross margin was almost the same at 12% except in 2004 when 13% was observed. Even return on assets and return on equity were maintained at 6% and 12 % respectively for the four years under review, except the return on equity (ROE) for 2007 at 13%.

        Wal-Mart in comparison has higher rates in terms net profit which was almost maintained from 3 to 4% for the five-year period from 2004 through 2008. The same can be also be said in terms of gross margin of almost more than doubled than that Costco which was maintained at 23% every except in 2004 at 22%. Even Wal-Mart’ return on assets was higher for the five period which ranges from 7% to 9%. Even the company’s return on equity was almost doubled than that of Costco within the range of 18% to 21%. See Exhibit B.

      The net profit margin and gross margin of BJ’s Warehouse Club appeared to be the lowest among three players in the retail industry.  Even in terms of return on assets and returns on equity, BJ may still be considered the lowest, although its return on assets was almost the same at that of Costco.  See Exhibit C and Table 1 above

      It is now very clear that the most profitable among the three is still Wal-Mart. Industry average which is estimated by getting the average financial ratios (Meigs and Meigs, 1995) of three companies would also bear witness to the comparison just made among the three companies. It was only Wal-Mart which had above average profitability among the three if the average their ratios are computed.

       Since Wal-Mart bested the two other using all the profitability ratios using gross margin and net profit margins, could it be safely deduced that it should be also Wal-Mart as the most efficient among the three.

       If the inventory turnover and total asset turnover are used as basis, it would appear that Costco and BJ are better than Wal-Mart. In fact, it was only Costco which has exceeded the industry averages representing the three companies if inventory turnover is used. Both Costco and BJ have exceeded the average if total asset turnover is used.  However, if the return on assets (ROA) of the companies is used as basis, it would still be Wal-Mart that is the best among the three.

      The higher inventory turn over of Costco and BJ compared with Wal-Mart may be explained by the fact that the first two companies have higher cost of sales in relation to revenue than Wal-Mart. This is with the understanding the inventory turnover is computed by dividing cost of goods sold by the inventory.  To resolve the seeming conflict of determining which is most efficient among the three, the return on assets should still be more controlling than the inventory turnover, which is used to measure how past the company replenishes the goods in the store (Meigs and Meigs,1995).

       Even the seeming conflict of better total asset turnover of Costco and BJ over Wal-Mart should give in to better ROA of the latter since although Wal-Mart is keeping longer its goods in the stores or shelves, the fact that it is generating higher gross margin would speak for the company’s better handling of its cost from goods supplied to the company. It could be further noted however that the big advantage in gross margin of Wal-Mart was almost eaten by its high operating expenses in relation to sales. This is evident by the fact that the high difference in gross margin in relation with its competitors was reduced to a minimal difference in net margin of just one percent.

      This seeming doubt on Wal-Mart high operating cost is however assured by its high ROE which bested the three and it is the only company that is above average and this time the difference as against competitors was almost close to being double. ROE speaks well in the eyes of the investors since and ROE of 20% would mean that the company would earning much more what could safely earn in risk free investments like the government treasury bills. It is already about ten times the US base rate of 2% (Housepricecrash, 2008).

2.2.2 Liquidity

         The companies’ liquidity indicates their capacity to meet currently maturing obligations, which are measured by the quick ratios and current ratios.

       BJ’s current ratios are kept at   1.19, 1.25, 1.30, and 1.23 and for the years 2004, 2005, 2005, 2007 and 2008 respectively or an average of 1.21. See Exhibit C. The fact that the company’s current ratio was maintained at above 1.0 for the fast five years may well speak of the company’s continued liquidity. Its quick ratios however are lower in comparison since its highest in the last five years has not reached 0.50 level. This means that what keeps the company liquid will have to consider its inventory and other current assets as part of the numerator in computing for liquidity.

       Quick ratio must be differentiated from current ratio, as the first although believed by some to be a better measure for liquidity, must be interpreted in the relation to the nature of the industry. This if Table 1 is used as basis, it would appear that industry average did also attain a high quick ratio. This means the industry players are not well known to have high quick ratios, but they are liquid enough to keep their suppliers being paid on time.

      Among the three companies, the most liquid is BJ’s Warehouse Club followed by Cost and the least liquid is Wal-Mart.

2.2.3 Solvency

      Among the three companies, Costco and BJ both topped solvency ratios of the three companies since both companies have the same debt to equity ratios. See Table I above.

      Solvency is almost similar to liquidity in measuring the ability of an enterprise to pay its debts but this time the issue is long-term debts of the companies.  As a distinctive characteristic, solvency tells more about long-term heath where a stable company is deemed stronger than an unstable one.  Using debt to equity ratio as an expression of solvency, Costco reflected 0.98, 0.88, 0.91 and 1.27 for the years 2004, 2005, 2006 and 2007 respectively or a four-year average of 1.01.  This obviously is better compared with Wal-Mart which reflected 1.42, 1.43, 1.60, 1.46 and 1.53 for the years 2004, 2005, 2006, 2007 and 2008 respectively or an average of 1.49.  In comparison with BJ, which reflected debt equity ratios of 1.02, 1.01, 0.96, 0.95 and 1.09 for the years 2004, 2005, 2006, 2007 and 2008 respectively or a five-year average of 1.01, Costco may be deemed to be almost as risky.

3. Conclusion

      Based on the foregoing analysis and discussion, this paper concludes that Wal-Mart is profitable although appearing least liquid and riskiest among the three companies in terms of solvency.      In terms of liquidity and solvency, Costco and BJ are definitely better than Wal-Mart but the advantage in liquidity was not that big as against Wal-Mart. between Costco and BJ, the latter is more solvent while both companies have almost the same solvency.

      The seeming conflict of better profitability not amounting or resulting necessarily to better liquidity and solvency may be explained by the fact that Costco, from the start of comparison period, had definitely better financial position than Wal-Mart; Hence, Costco’s lower profitability and efficiency have actually eroded its Costco’ liquidity and solvency in the later two years of 2006 and 2007. In case of Wal-Mart, there was actually a slight improvement in its solvency in 2007 but it declined again in 2008. In addition, Wal-Mart has been giving higher dividend to stockholders compared with Costco and BJ and it has maintained it profitability for the last five years although its liquidity and solvency were not as good as Costco and BJ.

       Although the stocks of Costco and BJ may have performed better compared to

S & P 500 Index, this paper strongly takes the position that for purpose of buying stocks, this paper recommends that of Wal-Mart because of the great potential in terms of profitability which could easily improve the company’s liquidity and solvency if the company’s management wants it. See Exhibits D, E and F. It is easier to believe that liquidity and solvency should be caused more by profitability than the other way around. If liquidity and solvency will come other than profitability, such phenomenon could doubtful if sustainable (Brigham and Houston, 2002). This steady trend of high profitability would be translated into higher stock price in the near future. The future prospects for the industry may still be considered to moderately bright despite the looming financial crisis since part of the industry are basic necessities which cannot be dispense with materially. Thus, investing or buying stocks of Wal-Mart may yet be justifies especially in the light of industry opportunities of low bargaining power of industry suppliers and low availability of product substitutes.

Appendices

Exhibit A- Costco Financial Ratios: Source; MSN 2008a, 2008b, 2008c

Exhibit B- Wal-Mart Financial Ratios: Source; MSN 2008d, 2008e, 2008f

Exhibit C-  BJ Financial Ratios: Source; MSN 2008g, 2008h, 2008i

Exhibit D –Costco Stock Graph; Source: MSN, 2008j

Exhibit E – Wal-Mart Stock Graph; Source: MSN, 2008k

Exhibit F- BJ Stock Graph; Source: MSN, 2008i

References:

Brigham and Houston (2002) Fundamentals of Financial Management, Thomson South-Western, London, UK

Housepricecrash (2008) US base rate, {www document } URL http://www.housepricecrash.co.uk/base-rates.php, Accessed October 14,2008

Meigs and Meigs (1995) Financial Accounting, McGraw-Hill, London, UK

MSN (2008a) Costco Income Statement, {www document } URL http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=COST, Accessed October 14,2008

MSN (2008b) Costco Balance Sheet, {www document } URL http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=COST&lstStatement=Balance&stmtView=Ann, Accessed October 14,2008

MSN (2008c) Costco Cash Flow Statement, {www document } URL http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=COST&lstStatement=CashFlow&stmtView=Ann, Accessed October 14,2008

MSN (2008d) Wal-Mart Income Statement ,  {www document } URL http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=WMT, Accessed October 13,2008

MSN (2008e) Wal-Mart Balance Sheet, {www document } URL http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=WMT&lstStatement=Balance&stmtView=Ann, Accessed October 14,2008

MSN (2008f) Wal-Mart Cash Flow Statement, {www document } URL http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=WMT&lstStatement=CashFlow&stmtView=Ann, Accessed October 14,2008

MSN (2008g) BJ Wholesale Club Income Statement, {www document } URL http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=BJ, Accessed October 14,2008

MSN (2008h) BJ Wholesale, Balance Sheet, {www document } URL http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=BJ&lstStatement=Balance&stmtView=Ann, Accessed October 14,2008

MSN (2008i) BJ Wholesale Cash Flow Statement, {www document } URL http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=BJ&lstStatement=CashFlow&stmtView=Ann, Accessed October 14,2008

MSN (2008j) BJ’s Warehouse Club Stock Graph, {www document } URL http://moneycentral.msn.com/investor/charts/chartdl.aspx?D4=1&ViewType=0&D5=0&&ShowChtBt=Refresh+Chart&DateRangeForm=1&ComparisonsForm=1&PeriodType=7&CP=0&PT=7&CE=0&D3=0&Symbol=BJ&C9=1&DisplayForm=1, Accessed October 14,2008

MSN (2008j) Costco Stock Graph, {www document } URL http://moneycentral.msn.com/investor/charts/chartdl.aspx?D4=1&ViewType=0&D5=0&&ShowChtBt=Refresh+Chart&DateRangeForm=1&ComparisonsForm=1&PeriodType=7&CP=0&PT=7&CE=0&D3=0&Symbol=WMT&C9=1&DisplayForm=1, Accessed October 14,2008

MSN (2008j) Wal-Mart Stock Graph, {www document } URL http://moneycentral.msn.com/investor/charts/chartdl.aspx?D4=1&ViewType=0&D5=0&&ShowChtBt=Refresh+Chart&DateRangeForm=1&ComparisonsForm=1&PeriodType=7&CP=0&PT=7&CE=0&D3=0&Symbol=WMT&C9=1&DisplayForm=1, Accessed October 14,2008

Porter (1980) Competitive  Strategy, Free Press, UK

Supply Chain Digest (2006) Wal-Mart in Trouble for Hazardous Waste Handling, {www document } URL http://www.scdigest.com/assets/newsviews/06-01-05-3.cfm?cid=144&ctype=content, Accessed October 14,2008

Travelogue operates more than 500 hotels with over 37,000 rooms located in major cities and regional centers in the I-J; 11 hotels in Ireland and four hotels in Spain. It operates hotels under the Travelogue brand. The company serves around 17 million customers every year. The hotels also have bar cafe and restaurants which offer breakfast, lunch and dinner with varied cuisines. It serves over two million breakfasts every year. Furthermore, the company provides online and mobile reservation applications services. Travelogue is headquartered in Theme, Exosphere.

With being a budget hotel chain, the rooms and facilities are low priced and most branches are located, in many town and city centers across the United Kingdom and Ireland, with other locations purposely laced near all United Kingdom major tourist attractions, for example many of the major cities have more than one Travelogue within the city, specifically located to suit the customer needs, for example, Birmingham has 10 Travelogue branches with a 10 mile radius of the city centre. According to the ACORN categorization of I-J consumers stated in Dib, S (2012) the main category of customers would be in the ‘Comfortably Off category.

The town and city centre hotels target many demographic variables of the target, with the main customers being families and group holidays on itty/weekend breaks. The low price appeal mainly to these segments as most families in the lower-middle/working class cannot always afford to stay at more premium higher end hotels, while for group bookings it is Just a much easier option due to the central locations and the lower prices, an example of a type of group would be hen/ stag parties with ages varying from 18 to over 60 on a weekend break in one of many of the Auk’s lively nightlife destinations.

The hotel is also good for business groups or individual business partners having an overnight stay. The Behaviorist’s variables of how that the brand loyalty of Travelogue Word count 502 Political Travel lodge created a policy statement in order to demonstrate their commitment to the privacy of their customers.

By using Travelogue hotels, their website, their travelogue analysis and pest analysis By Matt-Whittle dedicated telephone reservations line and any line or any other service to Travelogue Hotels Ltd, the customer is agreeing and giving their consent to the practiced outlined in the statement issued in the privacy policy stating that they will always handle information in compliance with the Data Protection Act (1998). In April 2011, Travelogue launched the Auk’s First budget hotel management apprenticeship programmer for school leavers.

The scheme, JuMP, is a fast track route into management and provides Level students with a real alternative with the chance of going to university. The programmer provides a chance for the school leavers to continue their education, obtain work experience, receive a salary and become a manager by the age of 21 . To date, travelogue has over 80 apprentices participating on the course in hotels across the I-J. The Economical Factors UK tourism has weathered the double dip recession but 18% fewer people are holidaying abroad than before the downturn, a new study shows.

The number of trips taken by Britons overseas has declined by 12. 6 million, from 69. 4 million to 56. 8 million between 2007 and 2011, according to the research by Travelogue. This means that 5. 9 million holidays and trips have come out of the market altogether when the number of domestic holidays and trips are factored in. This is shy of the government’s stated ambition for domestic trips to replace the number of missing overseas trips, the report says. However, the analysis shows that ‘stagnation’ breaks were up by 5. 6% as the recession proved that holidays are an essential rather than a luxury.

UK city breaks account for 23% of domestic tourism but seaside towns are in decline by 5%. Total tourism revenue was up 12. 6% toe billion between 2007-2011 against the general economy up 8%. Employment numbers in tourism have bucked the wider trend, thanks to strong growth in 2011 when 120,000 new Jobs were created. The Auk’s appeal as a tourist destination endured during the double dip, with overall visitor numbers up by 3. 1% to 157. Million, the report shows. Citations form the backbone of the tourism economy, with domestic trips and holidays increasing by 5. 6% to 126. 6 million.

Social Factors Travelogue is seen as a sociably acceptable hotel regarding to trust pilot, although there are many mixed reviews from that site and other sites such as trapdoors. The use of social media can help attract customers but also put some customers off as one negative review can have a bigger effect than 10 positives combined. Travelogue has given its El mm media planning and buying account to Interruptible Initiative I-J s part of its Emma brand investment programmer. Initiative has been tasked with overseeing the media planning and buying ahead of a major campaign which will launch in spring 2014.

The programmer, announced earlier this year, is the biggest marketing push for the company to date and has involved the roll out of a new room design as well as an extensive refurbishment programmer across all of the company’s hotels. Technological Statistics brain stated that in 2012 57% of all hotel reservation bookings where made online, with 65% of same day bookings made on a smartened. With online bookings coming more and more popular as technology, Travelogue have set up a very easy and understandable booking system online and a specially designed mobile compatible page.

When making an online booking, like many other booking websites, Travelogue have tactically placed multiple add-ones in a last attempt to gain more profit from the booking customer, these include breakfast & dinner, Wi-If, early check in and also some hotels offer pet facilities. The six-month, ‘Travelogue Future of Sleep’ study, carried out by award-winning futurologist Ian Pearson, has investigated he impact of new technology on sleep and how the hotel room of the future will respond to helping us sleep better in 2030.

Within the next two decades, the hotel room will be so technologically advanced that it will almost be alive – fulfilling guests’ needs like a personal concierge, lifestyle coach, fitness trainer, psychologist and doctor. Cutting-edge technology will monitor customers’ energy levels, physical well- being, emotions and mood to help ensure they achieve a good night’s sleep. The Sleep Revolution Key findings from the study revealed that by 2030, a good night’s leap will provide recreation, training and medical monitoring, as well as rest and rejuvenation. By 2030 we will be able to manage the contents of our dreams as in the movie ‘Inception’.

Video, audio, smells and tactile experiences produced using our bed or bed linen will play a key role in helping to make our dreams feel real. We will be able to replay our favorite dream from a menu Just like choosing a movie. Also, we will be link into dreams with our partner or family and friends and enjoy a shared dream experience. Word count 940 Strategic analysis of Travelogue & recommendations Of the four sections of the marketing mix: price, product, place and promotion, Travelogue capitalizes on price. Its leadership in putting the price at a low level is its competitive edge.

This is how the hotel chain attracts budgets and practical travelers. For the well-heeled tourist, Travelogue’s service is a disadvantage. Its weakness lies in the cutting frills the well-off tourist looks for in a comfortable hotel stay, but while the hotel chain does away with the Class A and B tourist, it has opened a falsehood of markets from the C and D category. Premier Inn is the main competitor to Travelogue although they offer a price that is El 5 dearer than Travelogue’s EYE. Aside from the price premier in makes it a point that it’s a hotel with a restaurant or pub either attached or in the vicinity of the location.

Considering that the UK has a culture of drinking alcohol, Premier in has an advantage over Travelogue in this field, although most city centre and airport hotels now serve alcohol and food. At the current Travelogue is still behind Premier inn with the latter having a 41% share in 2012 to the 31% of Travelogue. Travelogue with its aggressive price strategy and customer roundly and convenient website the company is gaining upon its rival with claims that the Premier inn are over relying on their unreliable website.

Moreover, President Lee is a strong devotee of free trade agreements (Fats) between foreign countries, and South Korea now has Fats with the European Union, the united States of America, and the SEAN countries. The current president Implemented new legislation to make South Korea more attractive for foreign investors. It will, for example, lower corporate tax rates and reduce administrative restrictions on business operations and investment. Furthermore, South Korea has a number of incentives to make foreign investment more at-attractive. These incentives are: Tax support, Cash grant, Site location support, and other sup-port. A.

Tax support When foreign companies meet certain requirements, Income and corporate tax from earned Income, business Income, dividend Income, technology payments and custom du-titles on capital goods can be either reduced or be subject to dispensation In accordance with the Restriction of Special Taxation Act. B. Cash grant When a foreign investor meets certain criteria, local and/or national government can offer a cash grant when the investor wants to build a new plant for example. These criteria are e. G. The creation of jobs, the location of the new plant, if the investment intervenes with lo-cal investment etc. C. Site location

South Korea provides so called Free Investment Zones (Fizz). These are to attract foreign Investors/companies. There are two types of Fizz: Complex and Individual. The complex type Is for small and medium sized firm wear as the individual type Is for large corpora-tools with large Investments. The requirements are to be found In the appendices. When a foreign company purchases or leases a piece of land or real-estate owned by the gob-ornament of South Korea, the company can apply for reduction or dispensation of the rental payment. However, the company must meet certain criteria. These are also to be found in the appendices.

Income Statement

a) Apple Inc uses a multi-step income statement format. It organizes its operating section by using functional expense classification.

b) There are no unusual items presented in Apple’s income statement. Also, the company did not discontinue any of its operations, neither had any changes in accounting principles. The net income for 2008, 2007, and 200 is $4,834, $3,496, and $1,989 respectively. The net income has increased continually in the past three years. Net income increased 38. 3% in 2008.

Apple’s net income growth for 2007 was 75.7%. The income statement doesn’t need restating. I also believe that Apple is not managing its earnings. The company’s revenue and earnings per share are undervalued and Apple’s financials appear radically weaker than they actually are. It is because in April 2007 they made a bad decision when announced that Apple will be using what is commonly referred to as the “subscription method of accounting” for sales of the iPhone where the sales revenue from the iPhone is deferred and recognized over a 24-month period instead of at the point of sale.

When disregarding the deferred revenue mechanism of subscription accounting, Apple actually earned $7. 48 in EPS on $38. 041 billion in revenue. That compares to the $5. 36 in EPS on $32. 479 billion in revenue that Apple reported on a GAAP-basis. During 2008, the Company adopted the Financial Accounting Standards Board’s (“FASB”) Financial Interpretation No. (“FIN”) 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109.

FIN 48 changes the accounting for uncertainty in income taxes by creating a new framework for how companies should recognize, measure, present, and disclose uncertain tax positions in their financial statements.

Revenue Recognition

Apple Inc recognizes revenue from sales when persuasive evidence of an arrangement exists, the delivery has occurred, the sales price is fixed or determinable, and collection is probable. Revenue from service and support contracts is deferred and recognized over the service coverage periods. Revenue is deferred for the fair value of the specified upgrade rights when offered.

i. A/R turnover=Net Sales/Average A/R(net) A/R turnover2007=24,066/1637=14. 70 times A/R turnover2008=32,479/2422=13. 41 times

ii. Allowance % A/R=Allowance/ Gross A/R Allowance % A/R2007=47/24,066=0. 0195 Allowance % A/R2008=47/32,479=0. 001445

iii. Average collection period= 365/ A/R turnover (or 365*A/R/Net Sales)

Average collection period2007=365/14. 70=24. 82 (every 25 days)

Average collection period2008=365/13. 41=27. 22 (every 22 days)

The total sales revenues increased consistently for the past years. Net sales increased to 43. 86% in 2008 compared with 2007 ($24,006 and $ 32,479 respectively), A/R have increased too by 47. 95% in 2007 compared to 20056 ($1637and $2,422 respectively). The company does not have a looser credit policy, since it does not have credit accounts whatsoever. Apple has an increasing accounts receivable turnover which is a positive sign – showing the company is successfully executing its credit policies and quickly turning its accounts receivables into cash. The ratios calculated above cannot be taken into account because they do not represent the actual A/R for the company for the entire year.

Inventory Costing:

a) The company uses FIFO in costing its inventory. I believe that the company uses this method, because even though tax expense is higher, since the Cost of Goods Sold decreases by using the lower cost items, the net effect on the net income still results in a net increase.

The earnings per share also increase, as well as inventory in the balance sheet. If the cost of the inventories exceeds their market value, provisions are made currently for the difference between the cost and the market value. The Company’s inventories consist primarily of finished goods for all periods presented. If they use LIFO the net income would have been higher, it can benefit from tax savings and improve its cash flow. On the other hand, the average cost achieves a net income somewhere in the middle. b)Looking at the vertical analysis of the Income Statement cost of goods sold has decreased to 0. 34% (from 66. 3 % in 2007to 65. 69% in 2008), and net sales increased by $8475. At the same time, looking at the horizontal analysis, while in 2008 COGS increased by nearly 39. 97% compared to 2007, sales increased only by 43. 86%, and in 2007 while GOGS increased by 15. 56%, sales increased by 24. 29%. This, in my opinion, indicates inventory stock (50 items), and fast-moving inventory (7days). i. Inventory Turnover=(COGS)/(Ave. Inventory) Inventory Turnover2007= 15,852/(270+346)/2=51. 047? 51 items Inventory Turnover2008= 21,334/(509+346)/2=49. 904? 50 items ii. Gross Profit Percentage=Gross Profit/Net Sales

Gross Profit Percentage2007=8,154/24,006=0. 3397? 33. 97% Gross Profit Percentage2008=11,145/32,479=. 3431? 34. 31%

iii. Average Days in Inventory=365/Inventory Turnover Average Days in Inventory2007=365/51=7. 16 days Average Days in Inventory2008=365/50=7. 3 days

c) Apple is doing extremely well in terms of inventory turnover, which is one of the lowest in the industry only 7 days. While a sizable inventory can be important to cope with sudden surges in demand, excessive inventory is wasteful and can exacerbate financial problems if a new product is introduced before old inventory is cleared.

Inventory is increased from 346 million in 2007 to 509 million in 2008. Because the sales are increased too, therefore it is an indication of heavy business activities, rather than the problem with the sale of existing products. The gross profit margin is flat for the year 2007 and 2008 at 34%.

Property, Plant, and Equipment

a) Apple Inc uses the straight-line method of depreciation based upon the asset’s estimated useful life.

b) Asset Turnover=Net Sales/Ave total assets Asset Turnover2007=24,006/[(25,347+17,205)/2)]=1. 1283 Asset Turnover2008=32,479/[(39,572+25,347)/2]=1. 0006

c) PPE has increased in the last year by $632 million.

The company has purchased PPE in 2007 in the amount of $735 million and $1,091 million in 2008. In 2008 Apple declared a loss on disposition of property, plant, and equipment for $22 million, which has increased by $10 million since 2007(12million)

Liabilities

a) Apple’s liabilities are composed of short-term debt, Accounts Payable, Accrued Expenses, Long-term debt, non-current liabilities. The major current and non-current liabilities account for the years of 2007 and 2008 are shown in the table below: September 27, 2008, September 29, 2007_ Current liabilities:

Accounts payable $5,520 $4,970 Accrued expenses 8,572 4,310 Total current liabilities 14,092 9,280 Non-current liabilities 4,450 1,535 Total liabilities 18,542 10,815

b) Ratios:

i. Debt Ratio=Total Liabilities/Total Assets Debt Ratio2008=18,542/39,572=0. 468564 or 46. 86%

ii. Debt to Equity=Total Liabilities/Stockholders Equity Debt to Equity2008=18,542/21,030=0. 8817

iii. Times interest earned=Income before income taxes and interest expense/Interest Expense Times interest earned2008=6,275/ 0

c) Ratios for Microsoft’s for the year ended 06/30/2008

i. Debt Ratio2008=36,507/72,793=0. 015 or 50. 15%

ii. Debt to Equity2008=36,507/ 36,286=1. 0061

iii Times interest earned2006=22,492/0

These ratios are derived from Dillard’s financial statements that can be found on http://www. sec. gov/Archives/edgar/data/789019/000119312508162768/d10k.html. Looking at Apple’s and Microsoft’s debt ratios, I can say that Microsoft’s debt ratio is 3. 29% higher, or it has 3. 29% more debt compared to its total assets. I think that 50. 15% indicates that Apple can be categorized as a company of moderate risk level. Comparing Apple’s debt to equity ratio of 0. 8817% to Microsoft’s ratio of 1. 61%, I can tell that Apple’s are doing well since it uses $. 88 derived from liability in addition to every $1 of equity in its business, taking advantage of the lower cost of debt for financing projects to relatively more expensive equity financing. Microsoft’s ration is only 0. 1793% lower, which indicates a normal debt ratio for Apple Inc. Comparing Apple’s ratio results to Microsoft’s gives me the confidence to say that Apple’s liabilities fall into the industry’s average.

Stock price

a) Yahoo Finance chart

b) In my opinion, there is a strong positive correlation between the two charts. There are several noticeable changes in Apple’s stock price over the last year. In October 2007 Apple’s stocks increases to $189. 95 from $153. 47in Sept. The increase was due to people’s interest to get their hands on Mac OS X Leopard, the newest version of Apple’s operating system. After that since markets in general, and tech stocks, in particular, were hit hard by poor earnings reports posted by Intel, Apple’s stock price dropped in the first weeks of November.

At the begging of January 2007, the stock dropped to $126. 14 after Jobs announced iPhone sales to date of 4 million, and AT&T said that only 3. 9 million were activated, which means 100,000 iPhones still in their Christmas wrapping or more likely unlocked. The company’s stock decline in the first quarter was due to an antitrust suit that has been filed against Apple accusing the company of illegally maintaining a monopoly in the digital music market by failing to support Microsoft’s Windows Media Audio format. In May Stock reached $188. 55 because Apple reported its second-quarter earnings and its revenues of $7. 05 billion and a net profit of $1. 05 billion for the quarter. In the second quarter, Apple had slightly decreased and increases in stock value. On July 22, 2008, Apple reported its third-quarter earnings results. The company earned $7. 46 billion during the quarter, a 37% increase from the same quarter 2007. Last month of the third quarter the company had a downturn to $ 120. 68 per stock.

Final Review

I believe that the company has strong results in the industry that it operates.

Compared to its direct competition, Apple Inc is doing well. I also believe that Apple Inc is trying to grow, and became a leader in the consumer electronics market. Based on my analysis, I agree with the company’s strategy of increasing investment in Research and Development. Specifically, I suggest the sometime down the line after provider contracts are over and equipment and technology costs have gone down Apple should enter the wireless cellular provider arena. This would allow Apple to recoup all profits instead of sharing/splitting profits with the providers.

Customers buy the hardware/phone at cost rather than the current model of wireless provider subsidized phones at the expense of expensive plans. They should offer quality engineered, eco-friendly, workplace computer that is economically practical for corporations and large organizations. However, due to Apple’s unique designing nitch and brand loyalty, we feel they have the ability to capture a portion of the bottom market that has always wished to own an Apple without diluting its luxury product image. Apple Inc would do a lot better if it was not in the declining economic environment as of now.

Increasing questions about Jobs’ health and lack of transparency into a succession plan is decreasing the company’s stability. Contrary to Wall Street’s expectations Apple reports earnings of $1. 61 billion ($1. 78 per share), which was up 2 cents a share from the year-earlier period. Revenue also increased from $9. 6 billion to $10. 17 billion. With a stock price of $102, “Apple Inc. shares have catapulted back atop the century mark today after brokerage firm FTN Equity upgraded the stock from “neutral” to “buy. “We now believe investors are more prepared for the Chief Executive taking a smaller role and we have not seen the multiple compression we expected,” wrote analyst Bill Fearnley, Jr. ” I believe that by looking at the past performance of Apple, one can derive a future prognosis of Apple’s performance, bound to the industry development. I believe that an investor may want to buy Apple’s shares, since it looks like it is a strong company, and take advantage of the current low stock prices. I also would recommend to an investor not to invest all of his money in Apple, because of the uncertainty of the market.

You will hear that we are heading for recession, this isn’t true. Due to global economy run down and raising of inflation that can’t cope with income bevel, Malaysia who is already living on an overstretched budget had to add on more burden to their living expenses. *** Social/ Cultural forces Eating is considered as an obsession for many Malaysian regardless of their races or age. In this multi ethnic country, there a lot traditional food that brought up by different races in Malaysia and the social influence from the global. Malaysian love to Pest Secret Recipe By lazy eat and they spend a lot in eating, that’s the culture to Malaysia.

The expansion of shopping mall, supermarket and supercomputer had brought more opportunities to service industry. Consumer are spending more time in different retail outlets, create opportunities for food service retail industry. Technological forces Consumers especially generation are more likely to enjoy and expecting good service quality from food service retail industry due to the media and internet that keen promote food through advertisement or TV Show, which brought up the contrast effect to them.

Consumer now able to check out the review of the food service retail industry easily through internet and the level of influence of internet had raise mongo the generation Y. Another important aspect to be considered for current technological forces is the availability of WIFE in food service retail industry. Everyone want to get connected, even during meal, consumer often looking for free WIFE service from food service retail industry and it is one of the crucial factor beside foods quality, price and services. Competitive forces The emerging of food service retail industry had increase the competition intensity.

More and more oversea success franchise food service emerging, usually operate ender same roof in a supermarket/ shopping mall or supercomputer. That gave a lot option to consumer to choose when having meal, retailer have to compete with each other by offering quality yet affordable foods to consumer or even gain attraction from advertisement/ promotion. Secret Recipe is running under monopolistic market structure where they sell products that are differentiated from one another. E. G. Marshmallow Cheesecake – which rarely to be found in others competitors outlet. Read R oyal Dutch Shell PESTLE analysis

Secret Recipe is facing integrate competition (Cutbacks, Coffee Bean; Tea Leaf, Gloria Jean’s Coffees) and internet competition (Tests, Cisco, 7-Eleven) which is easy found in Klan Valley area thus create a intensive competition environment for Secret Recipe to compete with. Recently, food service retail industry frequent adopts specific time promotion e. G. Lunch promotion / breakfast meal to attract crowd and target different segment of people. To maximize their profit, the trend for food service retail industry is to offer kids meal, because kids will bring their parents and it is like a bundle / package customer.