Sainsbury's analysis and valuation Essay Example | Topics and Well Written Essays - 3000 words

Sainsburys digest and valuation - Essay ExampleIt gene sum upd ?131 million PBT in 2010. 4- Sainsburys banking which is the result of a joint stake with Lloyds bank. It created such services as insurances, credit cards and loans and gene treadd ?7 million PBT in 2010(j.Sainsbury our business 2011). gibe to J.Sainsbury RAQs (2011), there atomic number 18 different competitors of Sainsbury for each of its areas. For example, for supermarket, which is the biggest activity in the company, competitors are Tesco, Marks & Spencer and Morrison. However, the competitors for banking service are the traditional high street banks, Tesco and M&S financial services, Egg, MNA, Capital one, Direct Line and Cahoot. This musical composition will analyze the Sainsbury Company through a look into its macroeconomic environment, industry, five forces model, business model, and financial conditions. Business investors may use the recommendation made in this paper to see whether to buy, sell or hold S ainsburys share. Macroeconomic Environment Interest Rate and Inflation Rate UK interest ordinate in March 2011 had been registered at 0.5% which is a record low (BBC, 2011). In February 2011, inflation rate of UK rosiness to 4.4% (BBC, 2011). Interest rate has a major impact on time value of money. Changes in the rate of inflation generally result in alterations in the interest rate. These two factors are the key factors busy in the decision making for investment since they maintain a direct impact upon the investment military issue. In case of UK, the record low interest rate will support the investment on shares. Rising interest rates retard the growth of inflation. Lower rate of interest increases the borrowing from businesses, which push aside have an impact on Sainsburys. This can make investment in durable consumer goods products such as automobiles, capital equipments and buildings appealing. The lower rate of interest can also affect the value of currency by making the currency weak. This can in turn enhance the market value of Sainsburys for the foreign purchasers. This will also help to increase the profitability of the company (Economy Watch, 2009). Rise in inflation rate coincides with the increase in cost of fuel, food and clothing items. Rise in inflation generally takes mooring due to increase in wholesale price index, which can have an effect on sell spending of a consumer and can weaken the consumer demand. Inflation rise also increases prices of products and VAT (value added tax) on a product that generally affects the sales volume. Factors like high level of inflation, subdued growth of wage and hesitant economic viewpoint generally reflect in terms of consumer spending. Therefore, the inflationary scenario in the UK can have a big impact of the sales and profitability of Sainsbury (RTE News, 2001). 1-PEST analysis Political According to Lawrence (2010a), the government intends to correct the role of the Food Standards Agency (FSA ) and remove the traffic light food labeling system, which has long been opposed by leading supermarkets like Tesco. As a result, the food industry will face little to no regulation for self and voluntary regulation (Lawrence 2010b). Leading supermarkets will have a strong aim as far as accompanying the government on the forming of new