One of the Biggest Retailers in the United Kingdom - Research Paper Example

Page I. Introduction Marks and Spencer is one of the biggest retailers in the United Kingdom. Over the of the years, the M&S brand has expanded to international markets and has created a strong global presence. This paper aims to assess Marks and Spencer’s business. A few areas such as the company’s strengths and weaknesses, development of new products and services, its competitors, and the marketing strategies that the company employs will be explored. By looking at these factors, the current state of Marks and Spencer’s business will be determined, as well as factors where it can improve on. II. Body A. Business strengths and weaknesses 1. Business description Source: Marks & Spencer Annual Reports 2004-2008 (corporate.marksandspencer.com) Figure 1 shows the overall sales of M&S over the past five years (M&S 2004-2008). The overall sales in 2005 have dropped from 2004 by 95.5 million before the figure continues to increase up to the present, 2008. It is this overall sales figure where the returns on the shareholders’ stake in M&S business will be later derived, as well as the company’s sustainability of operations over the long run. Source: Marks & Spencer Annual Reports 2004-2008 (corporate.marksandspencer.com) Figure 2 highlights the changes in the different sales figures (M&S 2004-2008). By looking at the growth of sales using the previous year as benchmark, the increase or decrease in the company’s efforts to generate more sales can be later probed more deeply; that is, whether this increase or decrease in the growth can be attributable to management’s practices or external factors. Source: Marks & Spencer Annual Reports 2004-2008 (corporate.marksandspencer.com) Figure 3 shows the different areas of M&S, which include: UK general merchandise business; UK food business; International general merchandise business; and the International food business. The company’s overall increase in sales will be determined by the increase in the different business areas of the company, thus it is helpful to learn the contribution of the different areas by looking at the company’s sales breakdown. 2. The PRIMO-F model M&S’s strengths and weaknesses can be determined by using a PRIMO-F model incorporated in the SWOT analysis (Morrison 2008). People. As the change in management results in a more experienced senior management and executive committee, the development of management capability gives the M&S an opportunity to develop its skills. Since these people are new, although experienced, the whole management capability of the company is not yet fully developed. Thus, this is a weakness to the company. Resources. By dividing the total liabilities figure by the M&S total assets figure (M&S 2008, 96), the debt ratio of 86.9% is derived. With this very high debt ratio, there is a possibility that the company will have less access to debt as its credit rating changes as more debt makes it riskier to the eyes of investors. The firm’s only choice can be equity financing for its future expansion. This is a weakness to the company. Innovation and Ideas. The company emphasises innovation as one of the company values. Apart from innovation in product development, this value is also apparent in the development of new services that it offers in its stores and the modernisation of its stores by upgrading information systems as well as the stores’ façade and interior. This is one of the strengths of the company. Marketing. The company’s marketing campaigns has proven to be effective and high impact as it has garnered enough accolades in the advertising industry, making the M&S brand a revered significance in the global market (M&S 2008, 10). As the M&S marketing function continues to provide the M&S brand strong momentum, this is strength to the company. Operations. M&S operations function is comprised of its in-store services and logistical procedures. The company has recently invested in remodeling its supply chain infrastructure (M&S 2008, 22) which aims to promote improved efficiency and effectiveness in catering to customers. This is strength to the company. Finance. According to the company’s 2008 annual report, the return on its equity is at 45.6% (M&S 2008, 98). While this can be a major measure of performance, this can be attributable to the high financial leverage (very high utilisation of debt). Nevertheless, this high return on equity investment is strength to the company. B. Development of new products and services The call for rapid development of new products and services comes from the customers’ rapidly changing expectations of new products to be found from M&S stores (M&S 2008, 13). According to the company’s 2008 annual report, the company responds to this insight from its consumers’ behavior by adopting “a phased approach to introducing new stocks (M&S 2008, 13).” The store aims to adopt a product development strategy (Kotler 2004, 48) by introducing more new products with a life cycle of three weeks in its existing markets. According to its 2008 annual report, this 3-week cycle is being made possible by purchasing eight weeks ahead from their supplier in Turkey, especially for its two major brand collections, Limited Collections and Autograph Weekend (M&S 2008, 13). C. Competitors According to Hoover’s UK, there are three major competitors to Marks & Spencer. These include ASDA Group, which is owned by the US retailer Wal-Mart, NEXT Retail Ltd, and Tesco Plc (Hoover’s UK 2009). According to the article, ASDA’s merchandise is grocery items and apparels. ASDA’s major positioning strategy is its aggressive price roll-back, being backed and owned by Wal-Mart (Hoover’s UK 2009). On the other hand, NEXT “sells moderately priced clothing for men, women, and children; housewares; and furniture through some 500 stores primarily in the UK and Ireland (Hoover’s UK 2009).” Its major target market is described as “customers in their 20s and 30s who are looking for stylish but affordable clothes to take them through the next fashion trend (Hoover’s UK 2009).” Tesco’s positioning is reflected through its midmarket store formats. Its operations are comprised of four areas: convenience stores and gasoline retailing, superstores, and financial services. D. Marketing strategies 1. Segmentation and target markets Marks & Spencer’s markets are segmented in two major categories: geographic segmentation, where its market is divided into its core UK business and international businesses; and according to product categories, i.e. food, clothing, and home improvements (M&S 2008, 1). These major segments constitute the business portfolio of Marks & Spencer. M&S stores cater to a broad market across different demographics. By properly segmenting its broad market according to the major segmentation factors, then segmenting them further by creating sub-brands per category (M&S 2008, 7), the company learns more about the psyche of the different groups that comprise its customers. 2. Positioning strategy Marks & Spencer currently positions itself under the five values that the company holds from the time it is founded. These five values include quality, value, service, innovation and trust. These five values serve as the foundation for the benefits that the Marks & Spencer brand offers. The company puts special emphasis on quality and value as regards it product offers, which is also one of the attributes that M&S consumers put a premium on when they buy at the stores. III. Conclusion According to the PRIMO-F analysis, Marks & Spencer’s strengths lie in its marketing, innovations and ideas, operations and finance functions. This indicates a strong performance in the business. However, the company’s potential for the future will be determined by its ability to address its weaknesses such as people and resources. M&S aims to cater to its market by segmenting the market into major categories, then further segmenting them into smaller groups in order to better cater to their needs. The company utilises its five corporate values as foundation for the benefits that the M&S brand. With the strong M&S brand, the company develops sub-brands in order to better cater to different groups in its total market. The company competes against its three major competitors (Tesco, Next and ASDA) in terms of value in relation to pricing while promoting excellent quality in its products and services. Bibliography Hoover’s UK (2009). “Marks & Spencer Group Plc.” Hoovers.com. Available from http://www.hoovers.com/marks-&-spencer/--ID__41199--/freeuk-co-factsheet.xhtml. [Accessed 1 March, 2009] Kotler, P., & Armstrong, G. 2004. Principles of Marketing. 10th ed. New Jersey: Pearson Education. Marks & Spencer (2004). “2004 Annual Report.” Marks & Spencer Corporate. Available from http://corporate.marksandspencer.com/documents/publications/2004/2004_annual_report.pdf . [Accessed 1 March, 2009] Marks & Spencer (2005). “2005 Annual Report.” Marks & Spencer Corporate. Available from http://corporate.marksandspencer.com/documents/publications/2005/2005_annual_report.pdf . [Accessed 1 March, 2009] Marks & Spencer (2006). “2006 Annual Report.” Marks & Spencer Corporate. Available from http://corporate.marksandspencer.com/documents/publications/2006/2006_annual_report.pdf . [Accessed 1 March, 2009] Marks & Spencer (2007). “2007 Annual Report.” Marks & Spencer Corporate. Available from http://corporate.marksandspencer.com/documents/publications/2007/2007_annual_report.pdf . [Accessed 1 March, 2009] Marks & Spencer (2008). “2008 Annual Report.” Marks & Spencer Corporate. Available from http://corporate.marksandspencer.com/documents/publications/2008/annual_report_2008.pdf . [Accessed 1 March, 2009] Morrison, Mike (2008 March 14). “PRIMO-F - The business growth model.” RapidBI.com. Available from http://www.rapidbi.com/created/PRIMOF_business_growth_model.html. [Accessed 1 March, 2009] Read More