How would you be affected, negatively or positively?
Negatively / Positively
If interest rates dropped by 50% would you be likely to spend more money than you are now?
Yes / No
Would Dixons be somewhere you would spend more money one?
Yes / No
Findings
Interest Rates for 1993 – 2001
Graph customized by Kasra Pezeshki
Figures from “http://www.tutor2u.net/economics/”
Interview With Manager
From the interview with the branch manager, these comments were said:
“Currently I would say Dixons debtors are a fraction of their creditors.”
“Naturally we would not benefit financially if there happened to be a fall in interest rates. I mean we would have to repay with less interest but so would our creditors and they are significantly more”
“We were heavy investors in early and mid 90’s. Now the company’s focusing on service and Dixons environmental impacts to communities.”
“Last time I checked, we owed just under £350 million, but that should have changed by now.”
- Words by Dave Williams, who currently works at Dixons in Brighton as an assistant manager. He can be reached on: 01273-326311
19/20 Western Road
BRIGHTON
East Sussex
BN1 2EA
Dixon Group (Financial Statistics)
Interview With Consumers
These are my results:
Conclusion / Evaluation
Referring back my title: “How would a significant decrease in the British rates of interest affect sales for a company like the Dixons Group?” I will need to compare the research that I’ve collected together to clarify how each factor affect another.
I will start by comparing UK Interest Rates directly to Dixons turnover. My graph below shows that as interest rates has fallen from 1996, Dixons turnover has increased. This faintly proves my hypothesis right: “A considerable decrease in interest rates will lead to an immediate increase in sales for Dixons.”
However there could have been other factors affecting the increase in turnover other than the rates of interest. One example is the launch of the very successful Internet service, “freeserve” that was launched in 1997-98 (appendix 1 – Dixons history). The success brought in by of freeserve almost certainly made a good impact on turnover.
My interview ended up being partly against my hypothesis. David Williams said that they’d be better off with higher interest rates. If they could get their creditors to pay them their money back with high interest then they will have more money to expand with. But looking at long term effects, if rates of interest go down, Dixons can borrow more and expand through that method. And what makes it even better is that generally, a cut in UK interest rates mean more borrowing which leads to higher consumer confidence, which leads to higher demand for consumer durables, which finally leads to increase in sales.
This proven clearly by my consumer survey, which showed that if interest rates were decreased they’d be likely to end up borrowing and start spending more on consumer durables. However for obvious reasons if there’s somebody saving money they’d be better off with higher interest rates.
Weighting my results I can effectively state that my hypothesis has been proven to be correct.
My investigation could have been improved in many ways. Some apparent ones are to have searched for data on Dixons from more than 2 sources to ensure my information to be correct, accurate and not biased.
An interview with a director or somebody in a higher status could have been helpful as well. An ideal interview would be with someone involved in Dixon’s national finance and economy management.
Finally I would like to add to my investigation, that all the graphs and tables were produced or reproduce by myself based on my sources found in my appendix
Appendix & Sources Of Data
Appendix 1 – Dixons History – Taken from www.dixon-group-plc.co.uk
1996
The Group regained its position in the FTSE-100. Group Chairman Stanley Kalms was awarded a knighthood in the New Year's Honours List in recognition of his services to electrical retailing. In April, Dixons stores became the first to sell the new Advanced Photographic System cameras. The Group wrote off its investment in Fretter Inc.
In November, the Group acquired DN Computer Services plc (DNCS), the computer reseller business, which formed part of the PC World division. DNCS enabled PC World to establish an even stronger position in the £3 billion business-to-business market. A £20 million expansion plan for the Stevenage Distribution Centre was announced which, when completed in August 1997, doubled its capacity. The Group also opened the first out-of-town Dixons store at Fosse Park retail centre, Leicester. In December, the Group opened its first store in the Republic of Ireland launching a £10 million investment in the Irish market over three years which had created 300 job opportunities by the end of 1998.
1997
he Group acquired the retail assets of Harry Moore Ltd, the Ireland-based electrical retailer which also specialised in TV rental, finance and mobile communications. Meanwhile, a third Dixons store opened in Dublin. Dixons accounted the promotion of three senior executives, David Gilbert, David Hamid and Ian Livingston, to the Board, reflecting the focus on UK retail operations and the growth of the business. Telecom Securicor Cellular Radio Limited (Cellnet) bought a 40 per cent stake in The Link, Dixons' specialist mobile phone and communications retailer. In July, the Group announced record profits of £190.2 million and its intention to create 3,000 jobs over the next financial year. In September, the Group launched PC World Business Direct, a new IT mail order service incorporating the brand strength of PC World and the sector expertise of DNCS. http://www.dixons.co.uk/shops .The nation's £8 billion a year obsession with electronic gadgetry was marked in October with the official launch of 'Dixons Online' - the first electrical goods internet home-shopping service. Buying is made easy for customers who are offered guaranteed next-day delivery on mainland UK of over 2,000 products. Dixons' 'virtual store' can be found at
The Group strengthened its presence in Ireland in November, opening the first PC World store (and largest computer superstore) in the Republic. .
1998
Dixons Online was given a facelift, taking web customers further into the future of customer technology. New e-commerce sites were launched including PC World Business Direct and PC World Software. The Group acquired Byte Computer Superstores Ltd with 16 retail outlets. The Group also continued its commitment to New Deal, announcing plans to take on a further 100 employees from the scheme. In July, the Group took on its first New Deal trainee in Scotland. During the same month, the Group also announced pre-tax profits of £217.6 million and plans to open more than 100 new stores in 1998/99 creating around 2,000 additional jobs. Currys became the first electrical retailer to stock Plasma Flat TVs in widescreen format. Later in the year, Currys and Dixons were among the first retailers to sell Integrated Digital TVs. In September, the Group launched Freeserve, the UK's first fully featured Internet service available free with no registration or subscription fees.
It also announced the trial of a new retail/e-tail concept called @Jakarta, dedicated to selling software and games.
1999
In January, Chief Executive John Clare announced changes to the Group's corporate structure to build on its success and create a new framework for growth. Dixons Group Retail Properties Limited was established to manage and develop the Group's retail portfolio.
The Link sold its millionth mobile phone after just four years of trading. Freeserve also announced a milestone - its millionth subscriber. PC World launched a range of furniture for use with PCs and a new online software site with more than 2,000 gaming, business and family titles. The lowest-priced PC ever offered by a UK retailer - at just £399 - went on sale at PC World, Dixons and Currys. In June, the Group announced its intention to float 20% of Freeserve, and did so successfully two months later. In July, the Group announced record pre-tax profits of £237.1 million and plans to create more jobs in the coming year. Continuing to lead the way in bringing new technology to customers, Dixons Select was launched in October. This shopping channel was launched on Open, the first integrated digital television shopping service. In November, the 200th branch of the Link was opened in Argyll Street, Glasgow. In December the group made an offer for leading Nordic electrical retailer, Elkjop ASA. Within six weeks the deal was complete.
Appendix 2 – from Hemscott.co.uk - company profiles and Profit and Loss accounts
Dixons Group PLC
Five Year Summary P&L with Balance Sheet
year ended 30 April 1996 1997 1998 1999 2000
turnover £m 1920 2443 2792 3156 3890
pre tax profit £m 102 200 213 231 472
norm earn per share p 6.18 7.57 9.05 9.94 9.29
FRS3 earn per share p 3.93 8.03 8.65 9.55 21.1
div per share p 2.19 2.63 3.18 3.83 4.60
intangibles £m - - - - 443
fixed assets £m 208 269 327 364 501
fixed investments £m 16.7 15.4 1.40 1.90 85.8
stocks £m 411 425 435 427 513
debtors £m 117 214 275 288 358
cash, securities £m 550 550 654 757 893
creditors short £m 493 599 655 663 947
creditors long £m 450 357 396 411 827
prefs, minorities £m 9.30 14.9 15.7 18.7 42.2
ord cap, reserves £m 352 502 626 746 977
mkt capitalisation £m 1986 2196 2488 5763 5004
Appendix 3 – Other Sources
- http://www.dixons-group-plc.co.uk/
Dixon’s Store
19/20 Western Road
BRIGHTON
East Sussex
BN1 2EA
01273-326311 – Dixons Brighton (Store Manager: David Williams)
- Riley’s UK economy 1990 – 2000
Advanced Level Economics - 1996
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