Relationship between the Strategic Position and Strategic Choices of Marks & Spencer Plc - Essay Example

Critically Discuss the Relationship between the Strategic Position and Strategic Choices of Marks & Spencer Plc Table of Contents Introduction 2 Defining Strategic Position 3 Environment Analysis of M&S 3 External Environment 3 Internal Environment 5 Analysis of the Strategic Position of M&S 7 Defining Strategic Choices 8 Strategic Choices in Relation to M&S Plc 9 The Relationship between the Strategic Position and Strategic Choices of M&S Plc 12 Conclusion 15 References 16 Introduction Marks and Spencer (M&S) had occupied a leading position in the UK retail industry and had been able to sustain success for several years. However, its performance over the last two decades has not been much influential which has resulted in decline in customer base and market share as compared to its competitors. Historically, Michael Marks, during the late 1880s established a penny bazaar wherein he offered a majority of products costing one penny. This business of Marks accorded significant success and inspired by this success Marks rapidly expanded his business. With the growing size of the business, Marks was joined by a partner Tom Spencer, this partnership led to the establishment of M&S. The partnership business steadily grew and by the beginning of 21st century, M&S growth began to roll out unprecedentedly. Later, Simon Marks took the management of M&S. He made numerous changes in the operational strategy of M&S. He transformed that penny bazaar into stores and adopted simple pricing strategy. He also introduced ‘St Michael’ logo as a quality sign. However, since 1998, M&S had confronted with numerous challenges as well as it had adopted several strategies to deal with the emerging challenges. However, the most of measures undertaken by M&S to cope up with the problems encountered by it had not been fruitful (Collier, 2004). In the backdrop of this, the essay intends to critically discuss the relationship between the strategic position and strategic choices of Marks & Spencer plc. In order to meet this objective, the essay further intends to conduct external and internal environmental analysis. Defining Strategic Position Strategic positioning is an attempt to realise sustainable competitive advantage by identifying and preserving the distinct resources and capabilities. It involves the execution of different activities from competitors or executing similar activities in a different manner than the rivals at the marketplace. Moreover, strategic positioning is ascertained to be closely bounded by the environment in which the business operates. Thus, strategic positioning can be precisely defined as devising future position of the business based on the analysis of the industry or environmental conditions in which it operates. Besides, strategic positioning involves positioning a business based on its strengths and weaknesses that enables it to outperform its competitors at the marketplace (Crown, 2013; Lee, 2008). Environment Analysis of M&S External Environment External environment in which the business operates can be identified to play a significant role in M&S plc. It is worth mentioning that no business can escape from the external environment. External environment has a radical influence on the overall performance of the business. External environment usually involves six major factors including political, economic, social, technological, legal and environment (Arab British Academy for Higher Education, 2014; Dransfield, 2001). Collectively, these factors are known as PESTLE. Thus, PESTLE analysis in relation to M&S is conducted hereunder: Political Factor In the contemporary business environment, the role of government can be recognised to be crucial. Every business organisation is required to abide by the rules and regulations in order to ensure smooth functioning of the business. It can be identified from the case study that the stable political environment in the UK had provided M&S a conducive environment to operate and expand its business operations (Collier, 2004). Economic Factor The management of M&S was occupied with belief that they did not have to reduce the prices of their products either during the seasonal period such as Christmas or in usual time. Although this strategy initially worked for M&S but later its customers began to purchase items from other competitors who offered the same products at lower prices as well as they received discounts from these stores (Collier, 2004). Social Factor Observably, it was apparent that M&S made considerable investment in order to make its stores more customer friendly and hired more shop floor staff as well as engaged in offering new well-received fashion range. However, significant concerns were reported by its customer regarding the clothing range. Customers claimed that M&S did not pay attention in segregation of its clothing item. It resulted in considerable dissatisfaction amid the customers (Collier, 2004). Technological Factor Technological factor can be ascertained to be a crucial aspect in the present business environment for attaining sustainable growth and profit. It can be identified from the case that M&S was unable to keep up with the changing technology which negatively influenced its performance. Correspondingly, it is further determined that while most of the retailers were using loyalty cards to attract customers, M&S had no such strategy in place (Collier, 2004). Legal Factor It is apparent from the case study that M&S had to suffer problems related to legal factor as well. The problem was associated with its retrenchment policy executed in Europe. During the execution of its retrenchment policy in France, 1700 employees were laid off. As a result, French unions revealed their protest by organising strikes, such demonstration of employees against M&S had unfavourably influenced its reputations amid its customers. Later, the action of M&S was alleged as a breach of French employment law by the French Government (Collier, 2004). Environmental Factor With respect to the market environment, M&S can be ascertained to reveal their failure in keeping pace with the changing retail market. Besides, the top level management of M&S demonstrated a lack of focus, direction and foresightedness in dealing with the challenges associated with the prevailing environment (Collier, 2004). Internal Environment In order to conduct internal environment analysis of M&S, SWOT analysis has been used. SWOT stands for strengths, weaknesses, opportunities and threats (Spender, 2014). The SWOT analysis of the M&S is conducted hereunder: Strengths It can be observed from the case study that M&S possesses strong brand name which is linked with the aspect of high quality. Again, the rich history of M&S serves as a major strength for the corporation. Adequate and better stock control and cooperation with suppliers can also be recognised as a strength factor for M&S (Collier, 2004). Weaknesses Certain major weaknesses can be viewed in terms of inefficiency of M&S’s management process. According to the case study, M&S lacks in terms of appropriate management style. Besides, a lack of concentration on customer centric strategy can be identified as another weakness of M&S. Reluctance to changed pricing strategy and the perception of customers towards M&S as a provider of high priced offerings can be ascertained to be the other weaknesses of M&S (Collier, 2004). Opportunities Growing number of fashion conscious customers can be considered to provide greater opportunity for M&S to increase its revenue generation capability. A large scale promotional campaign can also be identified to offer considerable opportunity for M&S to attract a considerable amount of customer base towards its products (Collier, 2004). Threats With respect to the case study, the most severe threats to the business performance of M&S can be viewed in terms of increasing competition. In relation to this, increasing competition from other retailers such as Tesco and Asda can be deliberated to reduce market share for M&S. Besides, the increasing competition has served as a threat for M&S which reduces its customer base as well as its overall profitability (Collier, 2004). Analysis of the Strategic Position of M&S It has been determined from the case that until 1990s, M&S was able to acquire substantial profit and market share. However, it can be observed from the case study that the problem for M&S started during the late 1990s. During this period, considerable shift in the preferences of customers was experienced within the retail industry. M&S was undergoing a change. However, in order to execute its operations successfully, it is crucial to have a pertinent understanding regarding the prevailing trends to make adjustment in strategies in order to accommodate the changing customer preferences. However, M&S did not conduct market analysis and failed to recognise the changing preferences which resulted in its struggles in terms of retaining its customers. It has been observed from the case study that M&S experienced continuous decline in its customer base. M&S had enough time to analyse market trends and react accordingly to the changing trends so that it could not find its position losing its sales and customers to its competitors. However, M&S failed to pay attention to the warning and at the same time M&S was extremely slow to make changes in order to remain competitive at the marketplace. In this respect, it was ascertained from the case study that M&S during the restructuring process strong resistance to change was revealed and they were also involved in offering clothes that were out of fashion while its competitors were engaged in offering more stylish products to customers. Besides, greater reliance on traditional strategy also resulted in reducing its customer base to its competitors. M&S also positioned itself in the middle of the ground and failed to take the advantage of the segmentation. At the same time, rigid management practice also resulted in positioning itself behind its key competitors. Nonetheless, with the restructuring process adopted by Luc Vandevelde the CEO of M&S, there were certain wholesome changes which facilitated in reducing the declining profit of the company to a certain extent but other challenges were still prevalent within M&S (Collier, 2004). Defining Strategic Choices Strategic choice is considered as the core of strategic management which deals with decisions related to the future of an organisation along with the manner of responding to the prevailing pressures and challenges identified from the analysis of the strategic positioning (ICSA, 2009). Choosing appropriate strategy is considered as an essence for the success of the business in the contemporary business environment. It has been argued that making strategic choices is often not easy. It has further been argued that the choice of strategy by a company is far from arbitrary. In this regard, it has been stated that strategic choice depends on several factors involving customers served by a company, the economics of the business and the people hired within the company among others. Besides, it has been claimed that choosing a wrong or inappropriate strategy often leads to the failure of company to accord sustainable growth and profit. Thus, it has been argued that business organisations are required to make the choice of strategy prudently that would not only benefit it in a short run but it should have the capability to ensure long-term benefit for the concerned business organisation as well (Executive Consultancy Service, 2014; Lindsay Wright, 2005; Hales, 2001). The area of strategic choice is illustrated below: Figure 1: Area of Strategic Choice Source: (Executive Consultancy Service, 2014) Strategic Choices in Relation to M&S Plc Based on the case study, several strategic options can be identified with respect to the future of M&S. It can be observed from the case study that M&S was successful in attaining considerable profit and market share until 1990s. The core principles which are mentioned below facilitated towards its realising sustained success. These core principles included: To provide customers with selective range of superior-quality, well designed and attractive products at reasonable prices under the brand name of St Michael To inspire suppliers to utilise the most contemporary and proficient production techniques To work in a collaborative manner with suppliers to ensure the highest standards of quality control To offer friendly service and greater shopping comfort and expediency to customers To enhance the efficiency of the business, by streamlining operating procedures To encourage good human relations with customers, suppliers and staff and in the communities in which it operated Moreover, it can be observed from the case study that M&S followed certain structured formulas in all its business operations. M&S also insisted on using UK based suppliers only. It can be argued that relying only on British suppliers was not a wise decision on the part of M&S particularly at a time when it was involved in the business expansion process in Europe and America. M&S’s decision to use UK based suppliers was based on the notion that customers’ would think that they would receive improved quality of products from these suppliers. Subsequently, it can also be identified that one of the major mistakes that M&S had made was the application of the same strategy embraced by it in the UK to other overseas markets of Europe and America. Correspondingly, the implementation of such formula in overseas markets adversely influenced its profit and market share. Unaware of the major factor affecting the performance of M&S, Richard Greenbury CEO of M&S during that time claimed that loss in the profit was primarily due to the competitive environment. However, M&S revealed its failure to understand the customers’ needs and had misread the target customers. M&S continued to recognise the changes occurring in the marketplace and placed greater focus on competition rather than improving its brand image. At the same time, it can be identified from the case study that internationalisation of M&S was not able to provide fruitful outcome. Various factors contributed towards this failure. The CEO, Richard Greenbury was predominately occupied with the day-to-day operations while less focus was provided on the alternation of long-term strategies. The crisis situation in the home country and a lack of clear retail positioning had radically hampered its global operation. When Peter Salsbury was appointed as the CEO of M&S, he started implementing restructuring strategy. As a part of restructuring strategy, he divided M&S into three units namely UK retail business, overseas business and financial services. Based on the SWOT analysis, it can be stated that M&S failed to perceive the opportunities within the industry and were not able to exploit its core competencies which ultimately contributed towards the failure of restructuring process accompanied with declining profit (Collier, 2004). With the restructuring process, Salsbury intended to adopt a customer-centric approach. Despite the implementation of restructuring strategy, M&S still experienced decline in its profit. During the year 2000, Luc Vandevelde succeeded Peter Salsbury as the new CEO of M&S. He began to develop a new corporate image by changing supply chain and implementing drastic changes in the board of structure. However, the changes brought by Vandevelde also failed to deliver impressive results. During the year 2004, Vandevelde resigned from the post of CEO but M&S during his leadership was able to improve its sales and profit (Collier, 2004). The Relationship between the Strategic Position and Strategic Choices of M&S Plc M&S was successful in acquiring considerable profit and market share until 1990s. However, during the era of late 1990s, problems began to surface out for M&S. The changing customer preferences and a lack of understanding regarding the changed preferences had resulted in continuous fall in the customer satisfaction level. M&S adopted extensive expansion strategy during the 1990s but it was halted in the year 1998. The M&S in the overseas market had adopted a similar strategy as adopted in the home country which led to unfavourable outcome for it, the major reason behind this was the application of a similar set of strategies in the overseas markets having different cultures from the home market i.e. UK. The implication of this was adverse resulting in declining profit and market share. However, then CEO Greenbury widely considered such position of M&S as a result of turbulent competitive environment and went on devising strategies that were closely attributed to prevailing competition. However, the aspects of changes in the customer preferences were still ignored. Failure of M&S to read the customers’ needs and framing strategy solely on the basis of competition was a major set-back that eventually caused it to lose customers to its rivals. The situation can be associated with the failure of M&S to make appropriate strategic choices. At the same time, other retailers such as The Gap, Oasis and Next were involved in offering more stylish products at a similar price but M&S failed to undertake strategies that would have benefitted it with attracting customers towards its products. Responsively, there was no clearly defined strategy due to the failure of M&S to recognise it strengths and weaknesses. Correspondingly, the failure of the company to identify its strengths and weakness resulted in it losing a considerable share of customers to its rivals. Also, its competitors such as Asda, Tesco and Sainsburys were able to position themselves as lower priced retailers and were predominantly focused on customers’ needs and expectations. These companies were able to reap the benefit of cost leadership within the retail industry but M&S placed no heed either on cost leadership or differentiation. However, it is apparent from the case that M&S was more concerned with competitive position and had made strategic choices directed towards defeating competitors by restructuring process. Changes in the leadership of the company were followed by the restructuring process. Despite the constant restructuring, the company was not able to improve its declining profit earning capacity. Nevertheless, it can be identified that M&S had neglected that aspect of customer needs while making strategic choices which resulted in it to face numerous challenges and difficulties. It is worth mentioning that strategic choices of M&S were based on the generalised view of market rather than engaging in offering products based on market segmentation. Thus, it can be stated based on the above discussion that relationship between the strategic position and strategic choices of M&S plc was loosely tied which resulted in the emergence of myriad of problems contributing towards the dismal performance of M&S plc. At the same time, the competitors such as Tesco was engaged in making extensive use of technology in the form of loyalty cards to attract the customers for seeking customer loyalty but M&S had no perfect idea about attracting the customers towards its products. When the competitors were engaged in offering discounts on the customer purchase, M&S failed to allocate adequate attention on the sentiments of its customers which cost it in terms of reducing its customer base over its competitors. It can therefore be affirmed that in the present day business environment especially for a retailer the need to focus on its competitors’ strategies as well as the customer preferences has gained paramount importance. This kind of prudent approach to stay abreast with the competitors could have helped M&S to maintain its exclusive position as the best retailer in especially the UK market (Collier, 2004). Conclusion M&S plc was the most prominent retailer until 1990s in the UK. The structured formula and core principles followed by it had significantly facilitated in its success. However, M&S was not able to sustain its success and growth particularly due to its failure to make appropriate strategic choices and strategic positioning. M&S had made several mistakes pertaining to its strategic positioning and strategic choices which cost it with reducing customer base as well as market share. Failure to identify the changing customer preferences as well as poor management practices had contributed towards its docile performance. It has been ascertained that the strategic position and strategic choices of M&S plc were indifferent that enabled its competitors to attain greater competitive advantage over the organisation. References Arab British Academy for Higher Education, 2014. Marketing, Strategy, and Competitive Analysis. Chapter 8, pp. 145-169. Collier, N., 2004. Marks and Spencer. Exploring Corporate Strategy, pp. 1-15. Crown, 2013. A Strategy for Future Retail. Industry and Government delivering in partnership, pp. 2-39. Dransfield, R., 2001. Corporate Strategy. Heinemann. Executive Consultancy Service, 2014. Strategic Choice Is Central to Strategy Making. The Ultimate Strategic Choice. [Online] available at: http://www.simply-strategic-planning.com/strategic-choice.html [Accessed April 20, 2014]. Hales, C., 2001. Does It Matter What Managers Do. Business Strategy Review, Vol. 12, Iss. 2, pp. 50-58. ICSA, 2009. Strategic Analysis and Choice. Chapter 3, pp. 66-108. Lees, G., 2008. Strategic Position. CIMA, pp. 1-11. Lindsay Wright, 2005. Understanding Strategic Management. Strategic Choice. [Online] available at: http://www.lindsaywright.co.uk/MS125%20-%20Understanding%20Strategic%20Management.pdf [Accessed April 20, 2014]. Spender, J.C., 2014. Business Strategy: Managing Uncertainty, Opportunity, and Enterprise. Oxford University Press. Read More