Financial Analysis for Kroger Co Research Paper

Financial Analysis for Kroger Co - Research Paper Example For an industry like Kroger’s, the most important factor for consumers is price. The products available in supermarkets are not differentiated and therefore they cannot be advertised heavily. Much of the advertisement that is done is carried out on the basis of attracting families to shop at Kroger because it is cost effective to do so. Apart from being cost effective Kroger also has products of high quality which makes it popular among American consumers. Kroger Co. has 42 manufacturing plants and including dairies, beverages and meat plants and all of these plants are of the highest standards. In the recent years there has been a tremendous increase in the fuel prices and the recent financial meltdown has made things worse for many industries including Kroger. The rise in fuel prices caused an increase in costs of the products sold by Kroger. Kroger is both a manufacturing company and a retail outlet and was therefore heavily affected by the increase in cost of fuel and othe r raw materials. According to Porter, there are 3 strategies a company can adopt to become competitive and Kroger has undertaken the â€Å"cost leadership† strategy which helps to differentiate it from the rest of the supermarket chains. The continuing increase in fuel prices will prevent Kroger from increasing costs and the strategy and it would be difficult to achieve goals. Kroger can shift to alternative sources of energy and reduce its costs that way. The recent financial meltdown meant that the demand for grocery products decreased to a large extent. In the past consumers would buy gourmet foods and other items from supermarkets but due to the credit crises that has decreased. Consumers have become more price conscious and buy only items that are necessary. Such a decrease in spending has affected the entire industry at large and profit margins have gone down since the past. In 2009 there was a 60.5% drop in consumer confidence index. (Zahorsky) Kroger has been taking a dvantage of the opportunities and developed its own brand called â€Å"Private Selection† and manufactures its own products under this brand name. Consumers often prefer branded products in place of national and Kroger has been successful in understanding this need. In 2009 Kroger earned around $1 billion in sales from this brand alone and the sales continue to grow today (Zahorsky). Such a step by Kroger would not only help the company but the industry as a whole. Liquidity Ratio Current ratio of Kroger Co. for the financial year 2012: = = 0.804 Current ratio for the year 2012= 0.804:1. The current ratio for the industry is around 0.8 which is the same as Kroger (Kroger Co. Ratios, 2012). The