Marks & Spencer in the UK - Term Paper Example

Economic and Business Context Introduction. Marks & Spencer is a British based retailer, operating its business activity throughout the world, now itis one of the leading retailer and popular chain stores in the UK. They are operating their business activities in the area of Clothing and Food retailer. Currently the company operating their business in deferent countries. Marks & Spencer is the first British retailer by achieving a marvelous PBT of ₤1 Billion; during the last financial year it attained Revenue of ₤ 7.797 billion. The company founded by Michael Marks who opened his first store in 1894 in Manchester, after wards Marks entered in to partnership with Thomas Spencer, and they established a company known as Marks & Spencer (M & S). In the initial time the company only concentrates in the area of selling of goods they are purchased the goods from wholesalers and other intermediteries after they established a good market base in UK they entered another area of business. Marks & Spencer became a limited company after adopting revolutionary policy of buying directly from manufacturers. In 1926 they stepped in textile industry. It is mainly concentrating on the selling of British produced goods for the purposes of maintaining cordial relation with British manufacturers by maintaining a new brand named ‘St Michael’ mainly they market clothing and Food products. The key factor behind their success is the motto of providing better customer service relation, by accepting unwanted goods from their customer and refunding the cash. The company tries to provide only quality goods by maintaining their reputation for offering fair value for money. In 1988 the company acquired Brooks Brothers an American clothing company and Kings Supermarket a food chain. Currently the company expands and diverse their business activities in the area of Food retail stores and Home ware retailing also. They are mainly marketing the clothing products through their retail outlets. “Marks & Spencer, leading international departmental, has drawn up ambitious expansion plans in India and China starting as early as next year, its chief executive Stuart Rose has said.” (Marks & Spencer plans to expand in India, china, 2007). The company also launched a web site for the purpose of online marketing system associated with Amazon.com. Marks & Spencer’s better customer service and quality products will helps them to improve their business in the area of online marketing also. “For years customer service has been a fundamental part of consumers offline shopping experiences, yet to date, many online retailers have been remiss in recognizing its importance in enhancing consumers shopping experiences online.” (Retail Industry. Online Retailers Take Heed this holiday Season, 2007). Demand Elasticity Analysis and Pricing Strategy. Demand for a product place a significant role in any business. Whenever the demand is getting down the company may need to undertake some sales promotional activities; but if the demand exceeds the firm may reverse its production plan. Both demand and price occupies a direct relation in market avenues. “The law of Supply and Demand predicts that price level will move towards the points equalizes quantities supplied and demanded.” (Economics. Supply and Demand, 2002). As per the law of demand concepts expansion in demand results in fall in price and contraction in demand results in rise in price. The extent of response of demand for a commodity to a given price which may changes, but the other factors relating to demand remains constant it is concept of price elasticity of demand. The pricing strategy is mainly depending with external market condition. The cost pricing is based on various terms relating with cost during the production time. In today’s discount oriented environment, small retailers should have a proper understanding of their niche in the market place. Price optimization policy in a retail industry’s product always should have an impact on demand and subsequent sales of its products. Marks & Spencer’s pricing strategy is mainly depending with the demand and supply of the products in the market and other external market situations. The company mainly purchasing products from manufacturer it helps them to sell the products at minimum price and achieve maximum sales. Economies of Scale- All business firms main aim is maximize the profit at minimize the cost. In this context a firm produce on a large-scale, they derive certain economies, which help in lowering the costs of production and increasing their productive efficiency. Economies of scale are an organization can expand any size its operations. “Economies of scale gives big companies access to a larger market by allowing them to operate with greater geographical reach.” (Economies of Scale, 2007). Eg. Long term contract and bulk purchase is helps to reduce the cost of products. In production function long run production function is more profitable it reduce the unit cost per production. Economies of scale is mainly classified into two Internal economies, External economies. Internal Economies; It is internal to a firm, when production costs are reduced as a result of expansion of output. Internal economies differ from one firm to another. Marks & Spencer economies of scale in the area of their long term contract with UK manufacturers it helps them to provide the products at lower price and achieve good market. Marks & Spencer’s big volume based sales and good management system is the good example of their internal economies. Marks & Spencer strategy in business is mainly they are branding and distributing their products and market it through their retile outlets. Integration: Integration in economics is dealing with all activities of an organization integrates and manage these activities. Marks & Spencer’s integration is the coordination of their activities. Integration. Economic integration is a term describes that how deferent economies integrated. Global economic integration creates lot of opportunity in business. This integrated environment helps the business to grow globally. The meaning of integration is the integration of global economies through trade, technology and factor movement. The growth of economic integration is highly depends on two factors. Firstly growth of technology and communication, growth of Transportation. Changes in technological and transportation helps to simplify the business activity’s in deferent countries. The second factor for the growth of global integration is policies of governments. After the II world war, many countries began to work on ways and means to promote international trade. The signing of GATT at Geneva in 1947, it results many world countries change their economic policies to achieve growth in global trade. The initial time global business is mainly deals only in the area of trading of goods. After the changes of technology the global business changed in other areas also. Service sector industries are growing in present world. “Traditionally, economists tend to focus on trade in goods and, to a lesser extent, services as the key mechanism for integrating economic activities across countries and as a critical channel (but not the only important one) for transmitting disturbances between national economies.” (Michael Mussa). The global integration of economies helps to expand the international trade. Expansion of international trade results in the fully utilization of resources. Integration of economies enhances the global job opportunities and full employment. The integration of global economies creates lot of opportunity in the global business world. Many companies start their production and distribution functions in different parts of the world. The impact of Globalization creates a free global environment for retailers to start their outlets in another country. Marks & Spencer also get opportunity to operate their business in other European and Asian countries. The globalization helps the company to enhance their competency in global business world. Marks & Spencer’s strategic management system and their quality products help them to achieve good market share in international market also. Marks & Spencer operate many retile outlets in deferent parts of the world. Foreign Trade. Foreign Trade is deals with commercial transactions carried out by two countries with varying economic conditions. The variations in the level of incomes, living standards, distribution of incomes, occupational structures, monetary systems, economic resources etc. Foreign Trade decides demand creation, availability of foreign exchange and international price fixation. According to needs and necessities of world economy it is essential to put in to practice some changes towards global business. They are the indicators of economic developments across the countries. The recent globalization has opened up new areas to speed up their activities. WTO occupies a significant position for the overall development of global trade.” The goal is to help producers of goods and services, exporters, and importers conduct their business.” (What is WTO?). Taking the entire world as a common market, adequate flow of technology and investment- The global business is about to achieve new heights. Foreign Trade helps the global exports to expand from US$ 3311 billion in 1990 to US$ 5456 billion in 1997. Technological improvements in communication and information have made the whole world as common place of business burying all the factors of distance, culture, language and climate. Besides traditional avenues, mercantile trade, many new avenues have opened up for both developed and developing countries such as export of software, opening up of service sectors like banking and insurance to international competition. International marketing environment is free from tax and other economic barriers it helps the national manufactures to find a global market for their product and improve their product standard. The activities of WTO helps its member countries to connect with global markets. Global marketing is highly relating with different countries Cultural, political, legal systems. Each countries market is influenced by these elements. And the World Trade Organization helps to provide new markets for products. The free global marketing environment create lot of opportunities for the retailers. Marks & Spencer trade their products in various countries. Marks & Spencer operate their international business in a franchised based manner. The retile stores of Marks & Spencer widely spread allover the world especially in Asian and European continent. Marks & Spencer starts their first international operation in France. Marks & Spencer’s international business activities are mainly in the area of retile and they distribute their clothing and food products through other distributors. Exchange Rates. Trade between countries with different national currencies necessitates clearing off their debts, which is settled through foreign exchanges. Foreign exchanges eighther fluctuating or stable. The government imposes control over purchase and sale of foreign currencies by adopting foreign exchange control regulations. The foreign exchange determination is two cases the case of freely fluctuating exchange rate and the case of stable exchange rate. The free exchange rate is determined like any other freely competitive price, by the market forces of supply and demand. The Equilibrium rate exchange is the equality in the rate of supply and demand. When the demand for foreign exchange is exactly equal to its supply the rate of exchange is said to be at par or there is said to be parity of exchange. The rate of exchange between two countries based on gold standard is determined by the mint par rate of exchange. It is determined that the purchasing powers of their currencies in terms of gold. The fluctuations in exchange rate is affecting the foreign trade. “These fluctuations and other factors make trading foreign exchanges on margin very risky. This risk can be reduces by carefully considering your investment objectives, your level of experience, and the level of risk within your comfort zone.” (Mike Herman). It creates speculation and uncertainty. IMF and other financial institutions working for maintaining flexible exchange stability. The international business is highly depending the changes of exchange rates. These changes are negatively or positively affect the business. Marks & Spencer properly mange the exchange rates their multinational business operations. Mainly the company manufacturing and purchasing products from UK manufactures changes in value of pounds affect their marketing and pricing strategies in other countries. Conclusion. Currently Marks & Spencer occupying a leading role in the UK economy, which is very away from their competitors. In order to survive or retain this prevailing position in a tight manner it is very essential that the company should undertake proper implementation as well as application of the aforesaid relevant economic factors. Works Cited Marks & Spencer plans to expand in India, china. (23 May. 2007). Rediff News. Retrieved May 31, 2007, from http://www.rediff.com/money/2007/may/23mark.htm Retail Industry. Online Retailers Take Heed This holiday Season. (2007). About.com. Retrieved May 31, 2007, from http://retailindustry.about.com/library/holiday/bl_yg1113.htm Economics. Supply and Demand. (2007). Net MBA. Business Knowledge Center. Retrieved May 31, 2007, from http://www.netmba.com/econ/micro/supply-demand/. Economies of Scale. (2007). Investopedia. Retrieved May 31, 2007, from http://www.investopedia.com/terms/e/economiesofscale.asp Mussa, Michael. Factors Driving Global Economic Integration. Trade in Goods and Services. International Monetary Fund. Retrieved May 31, 2007, from http://www.imf.org/external/np/speeches/2000/082500.htm What is WTO? World Trade Organization. Retrieved May 31, 2007, from http://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm Herman, Mike. Currency Trading Pros and Cons – What Every Forex Investor Should Know. GetFreeTips.info. Retrieved May 31, 2007, from http://getfreetips.info/currency_trading/) Read More