INTRODUCTION
ABOUT DIXONS RETAIL PLC
Dixons Retail Plc is a consumer electronics retailer whose headquarters are based in
the Britain and it’s undoubtedly among the biggest players in the electronics sector
considering that it commands a reasonable market share in the entire world and
particularly Europe where most of its operations are based. The company oversees
the operations of various brands with the main one been Dixons.co.uk, as well as a
handful of other brands that are present in every part of the world (Hall, 2010). The
excellent performance of various products and services brands of Dixons retail Plc is
a clear indication of the business prowess of the company as well as its diverse
business interests throughout the globe.
However, most of its brands are among the most successful in its areas of
operations a factor which has made them to gain an undisputable reputation among
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the consumers thereby making sure the company gains market competitiveness
advantage not only in Europe but also globally (Dixons Retail, 2011). The other well
renowned brands of Dixons retail Plc include Currys.Digital, Dixons Travel, PC
World, Curry’s and Electro World stores. These are among the better performing
brands alongside several others such as Equanet, Lefdal, El Giganten, Advent
Computers, Gigantti, TechGuys, UniEuro, Elkjøp, Kotsovolos, as well as Pixmania
which are found throughout the world (Dixons Retail, 2011).
BACKGROUND OF DIXONS RETAIL PLC COMPANY
The Dixons Retail Plc Company formerly known as Dixons Group Plc before
changing its name to DSG International Plc and then later to its current name is
mostly involved in the operations in selling computers and computing equipment in
addition to high technology consumer electronics products which are of more
advanced and latest versions. Therefore, the company specialises in the selling and
offering services in the field of computing and electronics which has over the recent
past experienced a tremendous growth and Dixons retail Plc is among the better
performing not only in Europe alone but also globally (Hall, 2010).
However, the success of Dixons Retail Plc has not just come overnight but it has a
reasonable amount of time whereby the company trace its roots from early 1930’s
when Michael Mindel and Charles Kalms founded the first outlet known as Dixons
Studios Limited as a photographic studio in the High Street in Southend, which was
later registered in the year 1937 with a share capital of £100 (Dixons Retail, 2011). In
the early years of the 1940’s Dixons managed to set up numerous other studio
outlets around London but its business was significantly affected by the World War II
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which led them to reduce its outlets to only one studio that was located at Edgware
(Hall, 2010).
However, effective planning and management of the business made the company to
pick again quickly after the war. This was in in conjunction with an aggressive
marketing of the company products and services through advertising on the press.
This was followed by a tremendous expansion by opening of other numerous and
auspicious stores combined with stocking of other products such as cameras. This
growth trend continued enabling the company to be listed in the London Stock
Exchange in the year 1962 (Dixons Retail, 2011). The growth of the company
continued through its strategy of acquiring its competitors in conjunction with
consistency in good management and aggressive marketing. Therefore, a
combination of all these strategies and hard work has seen the company grow over
the years from a mere single outlet into a formidable retailer and a specialist in the
field of computing and electronics.
Dixons Retail Plc currently sells products whose categories are diverse including
mobile phones, brown goods and white goods as well as computing products. The
brown goods include vision products, such as DVD players and televisions; audio
products including stereos, MP3 players and iPods; imaging products comprising of
camcorders and cameras; gaming devices such as games consoles; and other
related accessories (Dixons Retail, 2011). However, the white products include
domestic appliances such as refrigerators, freezers, washing machines, dryers,
electric and gas cookers. This is in addition to other small domestic appliances such
as microwave ovens, kettles, coffee makers, vacuum cleaners, irons, toasters, and
bread makers.
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Additionally, the company also specialises in a wide range of computing products
such as laptop computers, desktop computers, netbooks, printers, iPads, and
accessories. Moreover, the company is also involved in selling mobile phone
products and services including mobile broadband modems, the pre-paid as well as
contract mobile phones, and related accessories. Dixons Retail Plc is also involved
in offering of business to business services and sales as well as providing services
on product support to its customers (Hall, 2010).
FINANCIAL POSITION
Despite the presence of unwavering and stiff competition in the market Dixons Retail
Plc has progressed to grow over its main competitors such as Best Buy Europe,
Kesa Electricals Plc and MediaMarkt. Hence Dixons Retail Plc has continued its
dominance in the European market as well as globally. The Dixons Retail Plc
Company is currently listed on the London Stock Exchange contributing to FTSE 250
Index (Dixons Retail, 2011). However, the company has been performing exemplary
in all financial aspects a factor which is greatly attributable to the company’s
tremendous growth.
CAPITAL STRUCTURE OF THE COMPANY
When the most recent financial results of the company are considered it becomes
evident that the posted financial parameters are an indication of better performing
company due to the continued increase in the turnover and profits while at the same
time tremendously reducing the expenses and debts. For instance, the financial
report that was released on October 16, 2011 for 24 weeks, the company posted a
revenue of £3,297.2 million, £2.4 million profit before tax, £23.3 million operating
profit. Additionally, £79.8 million net cash flows on the operating activities were
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recorded as well as a free cash flow of £72.6 million and capital expenditure of £61.0
million (Dixons Retail, 2011). Moreover, the capital expenditure stood at £61.0 million
and the net debt was £143.2 million. This improvement in cash result is mainly
attributable to the disposal of the Jönköping warehouse in Sweden, as well as a
tremendous decrease in the company’s capital expenditure.
FINANCIAL ANALYSIS OF DIXONS RETAIL PLC
The company has been experiencing positive financial trend over the last five years
in almost all the financial performance indexes as well as the other major financial
indicators. For instance, considering the company’s financial results for the last five
years as indicated in the table below (Table 1 and Graph 1) it is evident that the
company has been positively performing in all aspects of financial performance
including the turnover and profits. The financial trend presented by the figures in
Table 1 and Graph 1 are all indicative of a continued positive financial performance.
This implies that the company is likely to continue with its expansion strategy as its
crucial approach to international trade. Moreover, this trend is also clearly observed
when the company turnover is considered since it indicates a continued positive
growth implying a progressive trend of increased sales volume.
Table 1: Dixons Retail Plc Company Financial Results over the last five years
Fiscal Year 2010 2009 2008 2007 2006
Fiscal Year End Date 01/05/10 02/05/09 03/05/08 28/04/07 29/04/06
Turnover £ 000,000 8,531.6 8,227.0 8,545.9 7,929.7 7,072.0
Profit before tax £ 000,000 112.7 (140.4) (192.8) 295.1 302.9
Profit for the period £ 000,000 57.3 (219.3) (259.7) 2.4 211.7
Basic eps ( p ) 1.7 (10.2) (14.5) 10.9 11.7
(Dixons Retail Plc, 2011)
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Graph 1: Graphical representation of Dixons Retail Plc Financial results for the
last five years (As much as it is necessary, graphs, diagrams and tables are to be
provided) (You must provide the source for all the graphs, diagrams or any graphics)
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
20102009200820072006
Turnover
Profit before tax
Profit after tax
Basic eps (p)
(Dixons Retail Plc, 2011) (You must provide the source for all the graphs, diagrams
or any graphics)
DIXONS RETAIL’S STRATEGY OF INTERNATIONAL TRADE
Dixons Retail Plc has for a long period of time been using a variety of strategies
towards its international trade thereby ensuring that the company prospers in all
areas of its operations including local, regional and international. The most crucial
strategy has been aggressive marketing through advertising which has ensured
consistency in customer loyalty and exploration of new markets in addition to
reaching new markets (Hall, 2010). This has also been reinforced by diversification
in the market where the company has involved itself with a variety of products to
ensure that it explores new market and attract new customers. Customer support
has also been an indispensable strategy that the company has been undertaking
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through the internet, phone or visits to the customers. This has greatly contributed to
company’s market competitiveness advantage over its competitors both locally and
internationally.
Acquisition of the company competitors is another strategy that has perfectly worked
well for the continued growth of the company through an aggressive expansion
strategy. This is due the fact that the acquisition strategy started with the acquisition
of Vision Technology Group (VTG) in 1993, DN Computer Services and Harry Moore
Ltd in 1996, Elkjøp ASA in 1999 as well as Genesis Communications and UniEuro in
- Moreover, in the attempts of continued growth the company has also
aggressively pursued a strategy of obtaining franchises from the leading
manufactures including the major one that they obtained to be the sole seller and
distributor of the Apple iPads in the year 2010.
These strategies have been critical in ensuring that the company continues to remain
more competitive in the market (Krugman and Obstfeld, 1997). This has resulted in
the company to continue performing exemplary well when compared to its
competitors despite the stiff competition and it vast geographical coverage of its
operations. These strategies have led to increase in turnover and profitability. A
combination of all these factors has led to the increased growth and expansion. In
addition, aggressive marketing strategy combined with persistent pursue to obtain
franchises has seen the company venture into new markets and continue enjoy
existing customers’ loyalty (Dixit and Norman, 1980).
However, the weaknesses of these strategies include the increased expenses and
labour requirements that are associated with the marketing strategy. In addition, the
logistics involved with the expansion strategies have also posed an added pressure
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on the available personnel and resources. All these factors have led to an increase
in the operating expenses due to the need for acquiring new spaces for the
expansion of its operations (Deardoff and Stern, 1994). Moreover, obtaining of
franchises occurs with it weaknesses too which involves increased regulations from
the manufacturing company as well as government restrictions before allowing the
entry of foreign products into its markets (Dixit and Norman, 1980).
RISKS
The day to day operations of the Dixons Retail Plc in the international trade are
usually faced with numerous risks and more particularly the exchange rate risks as
well as the country and political risks (Hall, 2010). These risks have a detrimental
effect to the company operations since they collaboratively synergize each in
negatively influencing the company’s international operations thereby necessitating
the need to put in place effective mechanisms that are essential in facilitating the
management of these risks which are very dynamic and prone to variations from
time to time.
EXCHANGE-RATE RISKS
The exchange rate risk has been one of the greatest Dixons Retail Plc risks
considering the current economic fluctuations that have been experienced in the
entire world making exchange rates very prone to fluctuations (Brock and Magee,
1978). This situation greatly affects most companies especially those that imports
most of their raw materials. However, Dixons Retail Plc is not greatly exposed to
exchange rate risk because most of its operations are carried out within the
European countries using a common currency which is not prone to drastic
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exchange rate risks attributable to the tremendous changes in the exchanges rates
(Dixit, 1983).
However, considering the expansiveness of exchange rates a well as the great
volume of the exchange rate value the management of the exchange rate risks
becomes more challenging compared to others. Therefore, the foreign currencies
exchange rates undoubtedly cover a vast geographical area ranging from east to
west and north to south. In addition, the operations of exchange rates take places on
daily basis in various stock exchange markets as indicated in the diagram below
(Graph 2) which is showing hourly foreign exchange rates globally.
Graph 2: Hourly global foreign exchange rates
(You must provide the source for all the graphs, diagrams or any graphics)
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Due to the exposure of Dixons Retail Plc to the exchange rate risks a factor
attributable to the nature of the company business as well as its international
operations which make it a both exporting and importing company raises the need
for a strategy to mitigate these risks (Yarbrough and Yarbrough, 1997). Moreover,
the theory of purchasing power parity (PPP) has being the approach used by most
organisations to forecast the possibility of exchange-rate risks. Specifically the
relative purchasing power parity plays a very critical role in explaining the changes in
relative prices between countries likely to result to changes in the exchange rates
over time (Hall, 2010).
COUNTRY AND POLITICAL RISKS
However, the international operations of Dixons Retail Plc are usually faced with
numerous country as well as political risks which greatly affect their business
operations at international level. For instance, presently there is a widening drift
between the ideologies of several countries and the increase in the terrorism threats
worldwide both of which have greatly increased the country and political risks (Brock
and Magee, 1978). Therefore, this requires the company to put in place amicable
measures that will ensure that these risks are effectively managed or mitigated
whenever they occur (Brock and Magee, 1978).
RISKS MANAGEMENT
There are various interventions that can be utilised to manage exchange rate risks
whereby the most obvious is to try as much as possible to minimise buying raw
materials using foreign currency denominations when its domestic currency
depreciates. This is also reinforced with increasing exports at times when the
domestic currency appreciates (Deardoff and Stern, 1994). However, diversification
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in terms of variety of the products and services the company offers and expansion of
its operations in a wide range of countries makes it very easy to manage most of the
exchange rate risks (Yarbrough and Yarbrough, 1997). This is because a decrease
of the demand for one product or services is mostly associated with an increase in
the demand for the other.
However, the management of country and political risks involves conducting
thorough research of the security and political status of the countries in which the
company is interested in starting its operations. This makes ensure the company
starts its operations in countries that seem more secure and politically stable
(Cassing and Hillman, 1985). However, a proper research on the foreign investments
regulations ensures the company makes the correct decisions prior to making
foreign investments (Deardorff, 1980).
RECOMMENDATIONS TO MANAGE RISKS
In order to ensure that the company manages to effectively manage the above
mentioned risks then it will be required to adhere to various recommendations which
are essential in facilitating the company to overcome the challenges posed by these
risks. For instance, the exchange rate risks can be adequately addressed by
continued diversification of the company operations by widening its coverage in
terms of the products it sells and services it offers as well as the countries of its
operations (Yarbrough and Yarbrough, 1997). This is very crucial strategy to hedge
out the risks.
However, a proper financial analysis is likely to forecast the future trend of the
currencies performance thereby helping the company management to be always
making informed financial decisions. However, a proper research on the country and
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political regulations within the countries where the company is interested in starting
its operations is very essential in addressing the risks associated.
(Arial Font size 12 is the most preferred Font)
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REFERENCES (Format is very important)
Brock, W. and Magee, S. (1978) The Economics of Special Interest Politics: The
Case of Tariffs. American Economic Review. 68 (2), 246-250.
Cassing, J. and Hillman, A. (1985) Political Influence Motives and the Choice
between Tariffs and Quotas. Journal of International Economics, 19(4), 279-290.
Deardorff, A. V. (1999) The General Validity of the Law of Comparative Advantage.
Journal of Political Economy. 88 (5), 941-57.
Dixit, A. and Norman, A. (1980) Theory of International Trade: A Dual General
Equilibrium Approach. Cambridge: Cambridge University Press.
Dixit, A. (1983) International Trade Policy for Oligopolistic Industries. Economic
Journal. 94(1), 1-16.
Dixons Retail: Bringing technology to life. (2011) Available from:
Hall, J. (2010) Dixons Retail to launch Black concept store, The Daily Telegraph
(London).
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Helpman, E. (1981) International Trade in the Presence of Product Differentiation,
Economies of Scale, and Monopolistic Competition: A Chamberlin-Heckscher-Ohlin
Approach. Journal of International Economics. 11(3), 305-340.
Helpman, E. and Krugman, P. (1989) Trade Policy and Market Structure.
Cambridge: MIT Press.
Krugman, P.R. and Obstfeld, M. (1997) International Economics: Theory and Policy.
Reading, MA: Addison-Wesley.
Srinivasan, T.N. (1983) International Factor Movements, Commodity Trade and
Commercial Policy in a Specific Factor Model. Journal of International Economics.
14(3/4), 289-312.
Takayama, A. (1972) International Trade: An Approach to the Theory. New York:
Holt, Reinhart and Winston.
Yarbrough, B.V. and Yarbrough, R.M. (1997) The World Economy: Trade and
Finance. New York: Dryden Press.
