Marks and Spencer: Internal and External Environment - Case Study Example

?Marks and Spencer: Internal and External Environment Introduction Marks and Spencer (M&S) is the number one retailer in the United Kingdom and internationally. The company operates in several sectors home products, food and clothing. From reliable data, the number of customers frequenting the M&S on a weekly basis is approximately 21 million (Thompson 15). The company has over 2000 suppliers from all over the world. The company’s success can be attributed to their quality service, value, quality and innovation which that the company has maintained since it was started 125 years ago (Thompson 15). The company has opened branches in over 41 countries other than in United Kingdom and has well defined rules and regulations with regards to product quality, innovation and customer care. The company has employed over 7600 employers in the UK and overseas. M&S ultimate goal is to become a major retailer in the global market. The company has come up with strategic plans to help them achieve this goal. The first plan was launched in 2007 and aimed at achieving at attaining 100 commitments in 5 years but the plan has extended to 180 commitments to be attained by 2015 (Thompson 15). The first section of the paper analyses M&S external environment. The external environment analysis pays attention the factors affecting the company and is often referred to as the macro environment. This entails the study of the how the company deals with change in the market, how it responds to the market demands and any competitive forces in the market. The analysis of the external market is done using the PESTEL analysis and the Porter Five Forces (Baines et al. 33). The second section analyses the company’s internal environment using the SWOT analysis. Analysis of both the internal and external environment affects the strategic analysis of the company. The strategic analysis of a company helps identify the environmental factors that impact on a company (Harris 55). Additionally, it clearly outlines the activities in the organisation and outside the organisation. M&S External Environment The external environment is made up of the forces and conditions that are beyond the company’s control and influence the company’s strategic options. Furthermore, it defines the competitive forces that could have positive and negative effects on the company (Harris 55). The PESTLE model is used to analyse the classes of external factors that can affect M&S ability to expand and survive in the current competitive market. PESTLE Analysis The company’s growth depends on the political stability, business growth and investor growth in the country. The government sets rules and regulations that companies must abide by including risk control and assessment, health and safety and planning for hazard identification. Additionally, the legal and administrative factors in the economy including trade regulations, tax rates, incentives, pricing regulation and employee benefits (Hibbit 1998). The company has been faced by various political factors such as the war in Iraq that led to instability in the UK economy. The company failed to abide by the health and safety regulation established by the British Standards. George Blair who was injured in the line of duty after the company continued to ignore repairs also charged the company (Hibbit 1998). Finally, in 2006 the company was the first giant retailer to be affected by the Fair trade route on its clothing and food sections. This included a regulations relating to animal welfare protection and to cut down on the fat and salt content. Economic Factors The economic environment surrounding the company is highly uncertain and has huge impact on all the company’s segment including food, clothing and furniture. M&S was adversely affected by the global recession and cut down on the number of employees and closed a number of stores. The government’s legislation to increase the VAT led to a drastic decline in the company’s sales (Harris 55). However, in the recent times, the economy has had a positive impact on M&S and this places the company in a better position. Sociological Factors The sociological environment in the UK market has changed immensely over the years. There have been changes in societal values, beliefs, attitudes, opinions and lifestyle that affect consumer behaviour. There has been a shift in the consumer behaviour, as most consumers prefer clothing that is more fashionable to quality. This explains the reason why consumers opt for cheaper brands that are more fashionable. In addition, increased price sensitivity in the market places Marks&Spencer in a less competitive position (Harris 55). The increased popularity in online shopping has resulted to the establishment of an online market section for the company in a move to boost the company’s online trading section. Technological Factors The rapid change in technology affects the market trends and conditions as well as the current trends in the market. The introduction of the internet has led to faster and efficient marketing and sharing of information (Harris 55). M&S strives to keep abreast with the recent changes in technology advancements to improve its competitiveness in the market. The use of modern technology has led to the establishment of new standards concerning product quality and services this means that M&S has to adopt the latest technology in marketing and manufacturing. Environmental Factors Matters relating to the environment have gained increasing importance in the contemporary world. The company’s strategic plan has stipulated environmental commitments to ensure compliance with the set environmental standards and improve environmental conservation. The company has established environmentally friendly practices such as recycling (Harris 55). In addition, the company uses less packaging materials to save natural resources and conserve the environment. Legal Factors The legal environment in the UK stipulates strict rules and regulations with regards to health and safety, environmental conservation and fair business practices. M&S abides by all the legal rules and regulations that have been set by the government (Cunningham and Harney 291). Porter Five Forces Model This framework describes the factors affecting competitive sources in the retail industry. These factors are explained below. Bargaining Power of Suppliers The company’s success can be attributed to the well-established relationships that it has established with its suppliers. Most of its suppliers are based in Britain and this ensures that they have a constant supply of the raw materials used in the production process. From this, it can be argued that the bargaining power of consumers is relatively especially when the buyers are concentrated (Cunningham and Harney 291). When the company’s sales reduce, the company outsources from other parts of the world to reduce the cost of production lowering the bargaining power of the suppliers in the market. Bargaining Power of Buyers Generally speaking, the bargaining power of buyers is high. Customers have diverse needs as there are those looking for a positive image; others are fashion sensitivity while others are prices sensitive. The company’s major competitors that pay more attention to the customers’ needs pose increasing competition (Cunningham and Harney 291). It is clear that consumers are not willing to pay a high price to support locally produced products. The company should change from a product-oriented strategy to a customer-oriented strategy. Barriers to Entry (Threat of New Entrants in the Market) The company faces increasing competition in the clothing sector both in the higher and lower ends of the market. This is competition results from other companies offering high quality and fashionable clothes at low prices including Matalan, George and ASDA. These companies have a classical style that attracts traditional M&S customers. In addition, the company has been facing in the young generation market segment. This is because stores such as Zara, Gap, Oasis, Next BHS offer the latest fashionable clothes that are attractive to the young and hip generation (Cunningham and Harney 291). Furthermore, Sainsbury and Tesco offer a wide range of food that was M&S long-established M& S. Threat of substitutes The threat of alternatives in the food, clothing and furniture sectors is high. Consumers opt to buy products similar to the ones produced by M&S at lower prices (Cunningham and Harney 291). There has been a drastic increase in the number of retailers that outsource from international markets. Competitive Rivalry The company in a highly competitive market and its competitors are more focussed on the customers’ needs than on the products. This poses increasing competition to the company that pays more attention to product and service delivery. For instance, in the food sector Sainsbury and Tesco have come up with a wide range of cooked meals unlike M&S. In the clothing sector, companies such as Gap and Oasis have made the best out of the demand for fashionable clothing by the young generation (Henry 291). In the UK market, there are no barriers to entry or exit for new entrants in the market, however, the market is mature meaning that the emergence of new entrants is minimal. On the other hand, M&S faced exit restrictions in France as the French Law prohibited the company from exiting the French market. M&S External Environment This is commonly referred to as the company’s microenvironment and the SWO analysis is used to analyse its strategies and how they are relevant to the external environment. This analysis is used to benefit the business and prepare it against the threats and weaknesses (Cunningham and Harney 291). The current situation presents a simple analysis of internal environment and this explains why the SWOT analysis is highly applicable. Strengths The company’s major strength is associated with its excellent quality. Customers can buy high quality products such as superior goods and fresh foods and vegetables. This makes it the leading retailers in the UK. The company has excellent customer service that has led to the establishment of good relationships between M&S and their customers (Cunningham and Harney 291). The company has set up a comfortable shopping environment that is convenient and comfortable. The company trains its management and staff to improve product and service delivery. Weaknesses Despite the strengths of the company in the various segments, the company has several weaknesses that should be worked. As earlier explained, the company faces increasing competition from companies that produce cheaper and fashionable clothing that target the younger generation (Cunningham and Harney 291). The company has failed to come up with a marketing strategy that target the young generation over the years since they mainly target on the older shoppers. The company is currently undergoing an expansion plan that targets new markets in the US, Europe and other countries and pays minimal attention to the local market. M&S has a poor clothing segmentation and this makes it hard for clothing shoppers. The company also has waste floor spaces management mainly in the clothing stores and poor stock control. Opportunities The opportunities available to the company are the most important aspects to a company’s growth and development. In order to take advantage of the available opportunities in the market, the company should come up with a flexible business strategy that enables it to keep up with the changes in market trends (Cunningham and Harney 291). The internet has opened up numerous opportunities for better advertising and establishment of online trading section. The company should explore the increased popularity for the fashionable brands that target the younger generation. There has been increased demand for healthy foods; this means that the company has an upper hand since it produces foods that target vegetarians. The company’s competitors are not aware of this. Finally, there are numerous possibilities for M&S to expand its business by working closely with other partners in the world (Cunningham and Harney 291). Threats In the face of increasing competition, threats are omnipresent in the company’s operations. M&S faces some strong competitors in the clothing industry that provide cheaper and fashionable clothing. On the other hand, the company faces increasing competition in the foods sector from Sainsbury and Tesco (Beamish and Ashford 55). The company also faces the threat of changes in consumer behaviour. Finally, the company is under threat of legal action concerning environmental pollution since the company’s production is dependent on pollution. Conclusion In summary, M&S is a giant retailer in the UK that has established a niche in the clothing, food and furniture business in the local and international market. The company ensures strict adherence to the government’s regulations. Besides, the company’s business strategies are influenced by the factors discussed in the PESTLE model. M&S has established healthy relationships with the customers, suppliers and distributors. The SWOT analysis is used discuss the company’s internal environment. In summation, the company should analyse its internal and external environment in coming up with strategies that are suitable for its expansion and survival. References Baines, P., Fill, C. & Page, K. (2013) Essentials of marketing, Oxford University Press. Beamish, K. & Ashford, R., (2007) Marketing planning 2007-2008, Routledge. Cunningham, J. & Harney, B. (2012) Strategy and strategists, Oxford University Press. Harris, N. (2012) Business economics: theory and application, Routledge. Henry, A. (2008) Understanding strategic management, Oxford University Press. Hibbit, H.C. (2004) External environmental disclosure and reporting by large European companies: an economic, social, and political analysis of managerial behavior, Rozenberg Publishers. Pradhan, S. (2006) Retailing management, Tata McGraw-Hill Education. Thompson, A.A., Strickland A.J. & Gambles, J. (2004) Crafting and executing strategy: the quest for competitive advantage: concepts and cases, McGraw-Hill, UK. Read More