Marks and Spencer Group Plc the Retail Company - Assignment Example

Marks and Spencer inserts his/her Inserts Table of Contents Introduction 3 Sales concentration 3 Value Chart 3 Market Summary 4 Porter’s five forces 5 TOWS Framework 6 TOWS Strategic Attention Matrix 8 References: 9 Introduction Marks & Spencer has its foothold in the U.K market with 450 stores nationwide along with an international presence with 160 stores across the globe (Marks & Spencer, 2012). The Vision of Marks and Spencer is “The standard against which all others are measured” which is in sync with its mission “Making aspirational quality accessible to all” and values “Quality, Value, service, innovation and trust” (Marks & Spencer, 2012). Sales concentration According to the latest survey conducted by A.C Neilson in 2011, the market share of the company is a mere 3.8% representing the fact that it is still catering to a niche market as opposed to giants such as Tesco, ASDA and Morrisons (Appendix 1). Value Chart According to the survey conducted by Neilson in May, 2009, the U.K grocery sales grew by an average of 5.1%. This was the result of several promotional offers that enhanced the value buyers get from grocery shopping. Marks and Spencer registered a growth of 3.6% which was half that of competitors such as ASDA and Sainsbury (Appendix 2). Market Summary Demographics The 35-55 aged women segment was reinforced when a new transformational leader (Rose) took the office and the company launched the "Per Una" range (Jobber, 2009). Its target market has been the affluent, 30 plus age group, mostly business executives. The European markets suffer from the ageing population syndrome. Facing a skewed population pyramid and an ageing population, the age profile in European markets is expected to shift to the higher scale in next 5 years, with a greater percentage constituting the over 65 age bracket (McNally, D., 2011) Trends The participation rates of women and the older segments (through delayed retirements) are expected to be a dominant trend. There have been growing concerns regarding obesity which has become a cause of concern for majority of consumers in the U.K (Mellentin, 2010). Consumers are now looking for food with less fat content, or one which is sold fresh. The trend is shifting towards consumption of organic (hormonal free poultry). There has been a trend towards ‘going green’ in the advanced economies with the European Commission exercising significant influence to make businesses as environmentally friendly as possible (Mellentin, 2010). Current product It offers a wide and assorted range of products including food, clothing, home accessories, beverages and financial products. There is emphasis on corporate image rather than teenage specific and youth-friendly apparel. Competition Competitors such as Asda are strengthening its customer relationships through its online website, and Tesco is using social networking technology such as facebook for its marketing (Data Monitor, 2011). Also, Tesco has a loyalty card scheme known as the Club card which Tesco uses to track consumer trends and offer lapsing customers discounts (Data Monitor, 2011). Furthermore, Tesco, Asda and Sainsburys, have an internet home shopping business. Clothing retailers such as Next and Gap offer low prices than M&S. It also faces stiff competition from discount outlets such as Matalan and the George line at Asda (Data Monitor, 2011). Porter’s five forces Barriers to Entry Development process of superstores is lengthy and requires heavy capital investments. Currently the top three players have strong backups to prevent their acquisition (Kew & J., 2005). They also determine the threshold level for profits beyond which new entrants would fail to make profits which is quite high. Bargaining Power of Buyers Prices are highly competitive so buyers can easily switch to other brands without any loss (Elearn, 2009). Around 94% of the customers have a choice of at least three supermarkets at their disposal within a time frame of 15 minutes (Kew & J., 2005) Bargaining Power of Suppliers At present, Tesco, ASDA, Sainsbury’s and Morrisons lead the UK markets with suppliers attracted largely to these big four. The company enjoys strong supplier loyalty. The industry is fragmented and retailers find themselves doing the role of middlemen and manage to rack up huge profits (Elearn, 2009). Substitutes Stores in convenience market may be substitutes as are food experts such as butchers may; however, due to the ease of shopping and greater variety of grocery sector, this threat too is diminishing (Randall & Seth, 2011) Rivalry This has intensified in due to two major mergers; that of ASDA and Wal-Mart and that of Carrefour and Promodes in the EU (Randall & Seth, 2011). TOWS Framework Threats: The company faces tough competition from Asda, Next and Gap in the clothing sector who offer roughly the same products albeit at lower prices. It faces strong competition from Tesco in the food sector, which is currently leading the top supermarkets in U.K with a share of 30.5% (Bevan, 2009) It faces stiff competition from discount outlets such as Matalan and the George line at Asda (Data Monitor, 2011). Competition has become even tougher recently, with Tesco’s and Sainsbury’s breakthrough into value-added food items which was formerly under the monopoly of Marks & Spencer. Opportunities: The company at present benefits from limited global presence with a total of only 160 stores internationally (Marks & Spencer, 2012). Further expansion in this area could boost sales. The option of contracting with overseas suppliers is a viable one and could prove to be cost-effective for the company. Use of more sophisticated technology could enable it to expand into new, blooming product lines such as the electronic gadgets market. It faces threat of substitute products from John Lewis, Sainsbury’s and Rackham’s (Data Monitor, 2011). Weaknesses: The company caters to mid-market customers, and often finds itself sandwiched between the up market and down-market competition. It fails to offer a customer specific line of clothing to its customers; clothing at Marks and Spencer is designed with mass appeal (Mathur, 2010). Emphasis on corporate image rather than teenage specific and youth-friendly apparel Outdated clothing; too much emphasis on 35-55 age group of women. Over-dependence on local suppliers thwarts its ability to gain a competitive edge; few rivals are reported to have been using international suppliers, giving them cost advantage. The company has not been able to capture the low-price segments of the market and suffers from a high street image with the perception of high prices (Mathur, 2010). Strengths: Marks & Spencer enjoys significant brand loyalty and a well-established brand name for selling premium quality products. It enjoys great reputation with suppliers in terms of highly efficient supply chain management, supplier control and a convenient store layout. The company has contracted with the most efficient suppliers in industry, who use sophisticated technology (Data Monitor, 2011). It offers a wide and assorted range of products including food, clothing, home accessories, beverages and financial products. TOWS Strategic Attention Matrix The matrix is illustrated and explained in Appendix 3. References: Bevan, J., 2009. From cheap-as-chips to dainty tartlets. [Online] Available at: [Accessed 10 February 2012]. Data Monitor, 2011. Marks and Spencer Group plc: Company Profile. London: Data Monitor. Elearn, 2009. Business Environment. 2nd ed. Burlington: Elsevier Limitied. House of Commons: Environment, Food and Rural Affairs Committee, 2009. Securing Food Supplies Up to 2050: The Challenges Faced by the Uk. London: TSO House of Commons: Environment, Food and Rural Affairs Committee. Jobber, 2009. Foundations Of Marketing. 2nd ed. New Delhi: Tata Mc Graw-Hill. Jovanovic, M.N., 2011. International Handbook on the Economics of Integration. Cheltenham: Edward Elgar Publishing Limited. Kew, J. & J., S., 2005. Business environment: managing in a strategic context. London: Chartered Institute of Personnel and Development. Marks & Spencer, 2012. About Us: Our History. [Online] Available at: http://corporate.marksandspencer.com/aboutus/ourhistory [Accessed 12 February 2012]. Mathur, U.C., 2010. Retail Management: Text and Cases. New Delhi: I.K International Publishing House. McNally, D., 2011. Global Slump: The Economics and Politics of Crisis and Resistance. Wales: The Merlin Press Ltd. Oxford Economics, 2010. The UK long-term growth outlook. London: Oxford University Press Oxford. Randall, G. & Seth, A., 2011. The Grocers: The Rise and Rise of Supermarket Chains. 3rd ed. London: Kogan Page Limited. Schnedlitz, P., Morschett, D. & Rudolph, T., 2009. European Retail Research. Germany: Gabler Verlag. Appendix 1 Top Grocery Retailers U.K Appendix 2 Appendix 3 TOWS Strategic attention matrix Opportunities (O) Threats (T) Strengths (S) SO Strategies The company has capitalized on its strength in the clothing sector to differentiate itself from competitors and expand into other spheres of retailing, thereby realizing the gains from an already established premium brand image and goodwill. It has always been viewed as a trustworthy brand by consumers. This leadership in the market has helped the company progress in the midst of economic downturn facing the EU markets (Data Monitor, 2011). ST Strategies The company faces the threat of rising input prices (including cotton and VAT) (House of Commons: Environment, Food and Rural Affairs Committee, 2009) which shall mean it’ll have to pass on the higher costs as higher prices to consumers. But luckily for Marks and Spencer its biggest strength is its premium price strategy; hence, the company can have a safe bet on its niche market in the event of rising prices. Weaknesses (W) WO Strategies The company has enormous potential untapped in the developing markets such as China and India; however, its major weakness of very high prices is getting in its way of establishing a presence in these markets as cheaper brands give tough competition. For one thing, Marks and Spencer will have to come down from its niche market strategy to a differentiated strategy that allows it to lower prices (Data Monitor, 2011). WT Strategies The company must deal with the issue of low shelf-life of its food products because consumers do not want convenience at a high cost (Mathur, 2010). The company will have to expand its portfolio of product offerings, like Tesco, and adopt a differentiated marketing strategy rather than a bullet approach. Read More