Business Strategy of Marks and Spencer - Case Study Example

Business Introduction Marks & Spencer is one of the largest retailers in the global market and it has now become fifth largest retailer of the UnitedKingdom (U.K.) in terms of annual sales. Marks & Spencer was founded in 1884 and has evolved with time. Marks & Spencer started as a single market stand and transformed into a global multi-channel retailer. Marks & Spencer specializes in products ranging from clothing to home products. Marks & Spencer also caters to the food industry by providing exceptional quality food and the products are sourced from global suppliers. The company operates not only in UK but also in other countries. Marks & Spencer has faced severe competition in the UK retailing market as in the UK market customers are very specific about their needs. The customers are also certain about their requirements that would enhance the shopping experience. This has made survival in the retail industry challenging (Marks & Spencer plc, 2014). Purpose of Business Marks & Spenser designed a business model that would help them to face challenges in the retail market and also mitigate risk. The company has remained true to their objectives and has not compromised with product value or quality. It has continuously engaged itself to innovating products that are relevant to customer needs. Diversification has been an integral part of its business (Jackson and Sparks, 2005). This has helped the company to have a global outlook and helped them widen their business all over the world. With the booming e-commerce business in the UK, the company has focused to sell exception quality food and has made a marked progress in the clothing division. Marks & Spenser has always aimed to provide its customers with finest shopping experience by offering exceptional service. The company has kept on modifying its business strategies and have kept pace with modern developments. The company has developed Plan A, which is an ethical program and explains its business process. Since the start of Plan A, it has been directed to create a link between consumers, suppliers and employees. Plan A would ensure sustainable growth for Marks & Spenser. It would increase business integrity and help in product innovation keeping in mind the ethical needs. Vision & Mission of the organization Mission: Marks & Spenser developed its business strategy recently and focused mainly on basics of business. The company’s business values comprises of three components. Maintenance of quality is an integral part of their mission. The company ensured development of products and service according to customer requirements. Company value was an imperative factor. Connecting customers with the business heritage was a part of company’s promotional campaign. This campaign aimed at associating customers with the business. Marks & Spenser also invested large funds in creating stores with exceptional environment. Vision: Modernisation of business strategies have been one of the most important visions of the company. The business has evolved and gone through transformational changes. The merchandising sector has improved and this in turn has accelerated direct sourcing. Food business has also experienced innovation over the years. Margins have been improved through efficiencies in supply chain. Capturing overseas growth prospects has been an important objective of the company. Expanding franchise operations is emphasised on as this is a cost effective way of expanding. Web infrastructure at Marks & Spencer is updated with time and is very flexible (Marks & Spencer plc, 2014). Organizational Structure An effective organizational structure is an indispensable means as this will result in increased profitability of the enterprise. Marks and Spencer has a flat organizational structure. Direct communication can be carried out smoothly among the members of the head office and other subordinates as the organization structure is less layered. As a result of which the individual responsibility of the employees throughout the business and their departments has increased. This enables the employees to take quick decisions whenever required. It helps in increasing managerial and operational efficiency as the employees have to be prepared for explaining and justifying the decisions taken by them. Thus the employees have more accountability and this result in increased profit. Around 3000 people are employed at Marks and Spencer Head Office in London (Marks & Spencer plc, 2014). These employees have specialist roles within the organization which promotes efficiency in utilization of manpower. They manage stocks and their layout within the stores and work in marketing, managing and accounts. Marks and Spencer stores employs more than 60,000 employees and many work in management roles where their main objective is to lead and motivate their team and people (Marks & Spencer plc, 2014). Marks and Spencer has started developing existing staff from within the organization as the new flatter organization has created the demand for more training. A-level trainee managers need to undertake 2 years training. Graduates undergo 1 year training and managers who are already experienced and have significant experience undergo training for 3 months. This illustrates the operations of Marks & Spencer. The organizational change is a part of Marks and Spencer’s continuous effort to strengthen the core characteristics that make Marks and Spencer unique and will Spencer to continue to be a company that society wants to exist (Chapman, 2006) (Refer to Appendix for organizational chart). Market Position Marks & Spencer have evolved with change in time and have transformed themselves significantly to a global multi-channel retailer. It has modified its business strategies which has enabled it to perform well in the market. The company is listed on the London Stock Exchange. In the UK, it has 33.6 million customers (Marks & Spencer plc, 2014). With the help of the booming e-commerce business and 798 stores in UK, Marks & Spenser offers products of premium quality (Marks & Spencer plc, 2014). Its business in the UK is segregated between food and merchandise. Marks & Spencer has their largest market share and serves as market leader in Lingerie, clothing for women and men. The company has a widespread global reach and carries its operations in 54 territories. These territories fall in Europe, Asia and Middle East. However, Marks & Spencer faced various hurdles due to the exigent economic situation. A mixed performance was noted and capital expenditure was recorded to be high indeed. This capital expenditure was used for serving strategic priorities of the company. While catering to the market needs, the company does not undermine the values which have acted as pillars of success for the company in the past. During the phase of restrained spending by customers, Marks & Spencer offered various promotional schemes to the customers. This helped customers to understand the product quality. The clothing division of Marks & Spencer saw a unique trend. Customers preferred spending more money to get the best quality. It was noticed that quality of the product was the main concern for customers. They were ready to spend more money in return of high quality products. Customers also wanted innovative products and were ready to experiment to serve their luxurious needs. Therefore, it can be seen that potential and target customers of Marks & Spencer are those who are ready to spend extravagantly to satiate their needs and obtain best quality product. The company mainly caters to affluent customers. Internet has also played a vital role in the development of customer base. Customers can assess the products online and get details about product specifications before purchasing them. It has also been noticed that not only affluent customers, but also middle class segment of the population have become the target customers. This is mainly seen in markets of India, Middle East and China were shopping malls are significantly growing (Burt, Jackson and Sparks, 2002). PESTLE Analysis In the current scenario, companies should focus on both external and internal factors of the environment to survive in the global market. Internal factors comprises of employees and resources. External factors consist of political, economical, social, technological, legal, and environmental factors (Grant, 2005) Political: Global Political factors have a great impact on the growth of Marks & Spencer. It can be explained by the level of government’s control over the economy and its activities. The political factors help to identify the way of business operation. Free trade policies have been implemented in Europe. This has opened up markets for the company. The company can now carry on with its investment proceedings in Eastern Europe (Jones, et al., 2005). Economical: Factors that are influenced by the economical conditions also play a great role in the company’s growth. The increased standard of living during the booming stage of the economy can lead to organizational growth over the time. The economic factors are an important part of the process of decision making. These factors comprises of inflation rate, exchange rate, interest rate and economic growth. Exchange rate has an impact on the costs related to exports and also on supply and import price. Demand and supply conditions affect economic growth. Interest rate affects the cost of capital (Mellahi, Jackson and Sparks, 2002). Social: Business operations related to human resource management and marketing are greatly influenced by social factors. This factor also affects demand and supply of goods. The potential and targeted population can be identified by the social factors. Marks & Spencer uses these social factors effectively to enhance demand for their products. The social factors also help Marks & Spencer to understand the needs of the customers (Williams and Green, 1997). Technological: Technology plays an imperative role in fostering business efficiently. Technological factors have a great influence on the marketing operations of the company. In this era of globalisation, survival without technological factors becomes impossible. Market entry barriers are removed with such factors. Production of the company is enhanced and efficiency increases. Innovation of new products by the company is the result of technological advancement globally. It has also been seen that the use of internet has resulted in a marked growth of the company (Williamson, 2003). Environmental: Environmental factors comprises of aspects that are specific to some divisions or sectors of the company. Change in weather and climate can be considered under environmental factors (Babette and Fleisher, 2008). Legal: Legal factors have been designed in order to ensure proper health of the consumers,. The company must be well informed of the consumer rights. Safety of the consumers must be looked into. Clothes should be produced using natural resources that can be renewed. Thus the company requires an effective strategy to maintain its market share globally. Conclusion The comprehensive analysis of Marks & Spencer suggests that to maintain the vision and mission of the company, it has to follow a dynamic business approach. The product line needs to be continuously updated to meet consumer needs. To maintain its market position, the company can never compromise with the quality of product. Reference List Babette, E. and Fleisher, C. 2008. Analysis without paralysis: 10 tools to make better strategic decisions. New York: FT Press. Burt, S. L., Jackson, T. P. and Sparks, L. 2002. Retail internationalization and retail failure: issues from the case of Marks and Spencer. The International Review of Retail, Distribution and Consumer Research, 12(2), pp. 191-219. Chapman, R. 2006. Simple tools and techniques of enterprise risk management. New York: John Wiley and Sons. Grant, R. 2005. Contemporary strategy analysis. New York: Wiley-Blackwell. Jackson, P. and Sparks, L. 2005. Retail internationalisation: Marks and Spencer in Hong Kong. International Journal of Retail & Distribution Management, 33(10), pp. 766-783. Jones, P., Comfort, D., Hillier, D., and Eastwood, I. 2005. Retailers and sustainable development in the UK. International Journal of Retail & Distribution Management, 33(3), pp. 207-214. Marks & Spencer plc, 2014. Your M&S. [online] Available at: < http://www.marksandspencer.com/ > [Accessed 31 August 2014]. Mellahi, K., Jackson, P., and Sparks, L. 2002. An exploratory study into failure in successful organizations: The case of Marks & Spencer. British Journal of Management, 13(1), pp. 15-29. Williams, T., and Green, A. 1997. The business approach to training. New York: Gower Publishing Ltd. Williamson, D. 2003. Strategic management and business analysis. New York: Butterworth Heinemann. Appendix Marks & Spencer Organization Chart: Flat Organizational Structure Read More