Morrisons Takeover Safeway
Business studies:
Has Morrison's takeover of Safeway's been a success?
In 2004, supermarket chain Morrison's completed the takeover of rivals Safeway for around £3bn, acquiring Safeway's stores, brand and product. (Appendix 2)
In this essay I'm going to discuss the reasons behind the takeover and how successful it has been. I chose this particular takeover because it was the biggest in British retail, hitting headlines and causing a bidding war between Tesco, Asda, Sainsbury's and Morrison's, the top supermarket chains.
Reasons:
The first reason for the takeover was inorganic growth. By acquiring Safeway's stores, Morrison's could expand in size, and also expand geographically. Morrison's was largely based in the midlands, while Safeway was based in Scotland and the south-east, this takeover meant Morrison's could enter into the areas. They now operated nearly 400 stores over the UK. This in turn increases the size of their supply chain, the movement of goods from supplier to the customers. Morrison's suppliers now have to cope with a larger demand over an expanding area.
In March 2006, Morrison's announced that sales were up 3.2%. However, the rate of momentum increased when sales rose 3.7%. (Evidence, see appendix 1, Trading Performance) This shows the growth meant sales increased. Included in the growth is the vertical integration of gaining Safeway customers.
Although the growth has meant an increase in sales, it came at a cost. Morrison's had to pay nearly £3bn and take out a loan of £1.9bn. This is an opportunity cost, as Morrison's could have spent the money improving there current stores, or invested the money, earning interest on it.
Although it cost them a great amount, Morrison's have seen an increase in sales, which is predicted to rise still. (See appendix one, the future) I think that they made the right decision, and have...
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