What Are the Main Strategic and Operational Causes for Ica Norway's Situation?

Question 1: What are the main strategic and operational causes for ICA Norway's situation?

Answer:

• In 2007, they sold their stores which were not profitable. However, they could not use this money efficiently. They became strong in short run in that term but reflect it to long term.
• Consumer habit changed in Norway. They tend to buy groceries more often(over 4 times a week). They started to spend less money on purchase and spend less time aswell. Because of this habit change, ICA maxi hypermarket was closed. Costumer also started to prefer soft discount stores so ICA Nær was closed aswell. In the begining of 2012 just Rimi and ICA supermarket have remained.
• Competitors bought the stores and made them profitable. This might incline to an increase in competitors' market share.
• ICA group had not done any research about Norways' costumer habit before entering this market. They were succeeded in other Nordic countries but it did not work in Norway.
• ICA sweden buys some of the products jointly for the whole group. However, because of Norwegian protection policy of national agricultural products, ICA Norway had to pay for importing these products. Other option was to buy local products. Due to ICA Norway's low bargaining power, ICA Norway had the worst contract terms compared to its competitors. This situation leads to higher cost of goods and lower margins.
• The best locations for groceries are already in use by competitors, this correlated with the losses in the market share and negotiation power put ICA Norway in a difficult position.

Question 2:

Answer: In 2007, Former CEO of ICA Norway had sold unprofitable stores due to achieve short term goals, this resulted in misleading positive interpretation of 2007. In the long run this effected the company in a negative way due to scarcity of profitable locations.

Question 3:

Answer:

Analyzing profit & loss account:

Operating revenue increases over the years. However, the company kept going to have losses.

Possible reasons for this:

• Employee salary increased in 2009 two times. Employee salary was expected to decrease but there is a significant increase in 2009. It could be explained by increase of management salary.
• Depreciation increased significantly, in 2009 six times bigger than 2008. It is because of huge increase in assets. 127010.61 in 2008, 328909.62 in 2009.
• Other operating expenses had been increased every year
• Depreciation decreased in 2010 and then increased again. There is a question mark because fixed assets value was nearly same for 2010 and 2011 however depreciations for these years are different.

Analyzing balance sheet:

• Before 2009, equity was 69% but it decreased significantly in year 2009 to 33%
• Current assets decreased throughout the years. On the other hand current liabilities increased. Red signal here (WC<0)
• There is a huge increase in current liabilities from 2008 to 2009.

Ratios: