Strategic managent of Marks and Spencer - Essay Example

? STRATEGIC MANAGEMENT …………………. and Number …………….. …………. Words: 3215 Table of Contents Table of Contents 2 Introduction 3 Marks and Spencer: Company Overview 3 Environmental Analysis of Marks and Spencer 4 SWOT analysis of Marks and Spencer 5 Strengths 6 Weaknesses 6 Opportunities 7 Threats 7 PESTEL analysis of Marks and Spencer 8 Political Environment 8 Economic Environment 8 Social Environment 9 Technological Environment 10 Ecological Environment 10 Legal Environment 10 Porter’s five forces analysis of Marks and Spencer 11 Analysis 11 Organizational Culture of Marks and Spencer 12 Theoretical perspectives of organizational culture 12 CSR as the Organizational Culture of Marks and Spencer 13 Conclusion 14 References 15 Introduction The terms ‘strategy’ is perhaps one of the most important buzzwords in business literatures today. The world wide business environments have become highly critical in very recent years since the challenges of globalization, technology and competition influence the business environments at large, and the impact is that all the businesses, no matter how small or large, are required to concentrate on any particular business strategy. Business strategies have thus emerged to be success pathways for an organization to lead it to achieve its business goals, mainly to accomplish competitive advantage. This paper presents brief report on the management strategy of Marks and Spencer and gives detailed analysis of both the internal as well as external environments. In order to analyze the business environments, various business analysis tools such as SWOT, PESTEL, porter’s Five Force analysis etc will be included in the paper. Marks and Spencer: Company Overview Marks and Spencer is a leading UK based grocery retailer selling primarily clothing and food. The company has grown to be a successful large scale grocery being able to attract more than 21 million people each week. The company offers stylish, outstanding quality and greater value clothing and home products as well as supreme quality foods that are supplied from around 2000 different suppliers worldwide (Marks and Spencer, 2011a). The company is employing around 78,000 people throughout 700 UK stores and other international stores too. Clothing represents around 49 percent of its total sales and food and other items represent 51 % of the total sales. Food sales, especially as it was supplied from more than 2000 different suppliers, are highly crucial to the overall business strategy of the company. The food sales alone amounted to $ 7.90 billion in 2007- 2008, showing an increase of 1.4 percent over the figure of previous year. As the company is proud of the current business opportunities, Marks and Spencer remains to be the most favorite clothing retailer, and has delivered a better performance in the 2010-11. The market share of the company in terms of the value has been increased to 11.7 percent and it experienced a growth across all of its major areas because customers around the UKL sought the quality propositions of Marks and Spencer (Marks and Spencer, 2011b). According to the latest reports about the market share, Marks and Spencer’s share has been improved on year on year from 4 percent to 4.1 percent within a time of three months, ending in December 2010 (Milnes, 2010). With a mission to deliver quality greater valued food and clothing, Marks and Spencer could increase its potential market role and opportunities in the market and thus has achieved far better results than that of previous years. Environmental Analysis of Marks and Spencer The business environment of a firm consists of all the internal and external influences that impact the business at large, its performance, productivity, revenues, competitiveness etc in particular. A large number of factors like employees, workplace situations, organizational culture, management etc influence the business internally where as other factors like competition, politics, economy, and technology impact the business externally (Grant, 2005, p. 68). Analyzing the environment of the business is the most important critical aspect in formulating and implementing the business strategy, because, the strategic management looks at what strategy can lead the organization in to success by considering what strategies are considered by its competitors within the industry. Westcott (2005) argued that environmental analysis, both internal and external, is an ongoing program that should occur regularly and is therefore critical to strategy formulation. The management is therefore required to continually monitor factors that are determinant or can influence the business performance. According to Hitt, Ireland and Hoskisson (2010, p. 39), a comprehensive and detailed environmental analysis of a business firm should comprise of four parts, they are scanning, monitoring, forecasting and assessing. With the help of environmental analysis, the strategic management will be able to find and recognize the major areas of opportunities, threats, challenges and strengths that organization may face in both internal and external environments. SWOT analysis of Marks and Spencer SWOT analysis is one of the very commonly used tools to analyze business environment. SWOT, acronym for Strength, Weaknesses, Opportunities and Threats, provides an observation in to both the internal and external environment of the firm. Stahl and Grigsby (1995, p. 30) stated that SWOT analysis will help a business identify what are the potential strengths, weaknesses, opportunities and threats that the company faces from internal and external environments. Marks and Spencer is a top leading retailer in clothing, food and home ware within the UK and is now attracting increased numbers of customers from around the world. Range of quality clothes and food available in Marks and Spencer’s show rooms contributes additional advantages to the company. The strengths and weakness of the company from its internal environment and the opportunities and threats from its external environment are illustrated below; Strengths Weaknesses Leadership in clothing Geographically expanded to increase the addressable market, Effective Corporate Social Responsibility Declining sales in UK High debt and pension deficits Legacy stores and systems are competitively disadvantageous Opportunities Threats Booming online channels Focus on India and China High quality perception Rising prices of clothing and VAT hike, Shoplifting losses, Weak consumer spending in the UK Strengths Marks and Spencer has emerged to be the leader in clothing and this leadership has converted the company becoming a leader in department stores. This has brought significant market position to the company. It was reported that Marks and Spencer’s main users’ share was 17.4 percent in 2010, with .5% increase from previous year and this has brought a significant competitive edge. It enjoyed highest conversion rate of 51.1% as it was successful in converting its visitors to loyal customers, and this made the company stronger even when its competitors failed due to economic downturn. Increased numbers of stores and wider areas of markets has contributed to its marketing advantages and the CSR strategy it implemented also added greater values to potential strengths (Datamonitor, 2011, p. 5-6). Weaknesses The company witnessed declining sales in the UK in 2009 and 2010. For the first period of 2009, the sales of the company has declined 1.1 percent and has recorded the decrease of 5.7 percent in sales. The company has also been suffering from huge debt and pension fund deficits. The debt balance has been accounted as ?2.1 and the pension deficit as ? 1.3 billion. The company is suffering from the competitive disadvantages as compared to its competitor Tesco, as Tesco has been able to drive earning before interest and tax growth in the mature UK market (Datamonitor, 2011, p. 6- 7). Opportunities Online channels continued to boom and helped Marks and Spencer boost revenues. According to the market statistics, online retail sales reached to an mount of ?23,091 million in 2010, showing an increase of 16.8 percent from the previous year’s record. More consumers are found to approach online as they buy from online shoppers and this shows an increasing opportunity for Marks and Spencer because the company has facilitated online shopping for its customers. Since India and China are the two emerging economies, Marks and Spencer’s move to these two markets was a better strategy. Both China and India recorded highest records in retail and grocery businesses and are expected to grow in retail as well as other sectors (Datamonitor, 2011, p. 10). Threats Prices of clothing were increasing in recent years. This price and VAT hike pressurized discretionary spending. Increase of cotton prices forced retailers to absorb these increases. Most retailers are suffering from the losses incurred due to shoplifting, and to avoid or eliminate this risk, the retailers had to launch newer camera or other systems, but that too are costly. Apart from these threats, Marks and Spencer faced troubles of weak consumer spending. The volume and value of retail sales were decreased by 0.8 percent in 2010 (Datamonitor, 2011, p. 11). PESTEL analysis of Marks and Spencer PESTEL analysis is an effective tool for analyzing the factors that influence the external environment of a firm. PESTEL analysis is an immensely valuable technique for analyzing the external environment of a firm, by dividing the overall environment in to political, economic, social, technological, ecologic and legal environments. These environmental factors in relation to the environment of Marks and Spencer are detailed below: Political Environment Government normally imposes rules and regulations that businesses are to abide, such as health, safety, controlling natural hazards, risk assessment and environmental protection measures etc. Marks and Spencer has assigned special team, called Fire, Health and Safety Committee with the leadership of Steve Robe, for the promotion of safety and well being of its employees, customers and visitors with a view to ensure minimizing the risks that legal and government regulations may cause (Annual Report, 2011b, p. 40). Food safety measures taken by the company include a dedicated team in responsibility for ensuring that all the food and related stuffs marketed by the company are safe and are in accordance with government regulations. The maintained a robust food supply base through the food supplier audit program (Annual Report, 2011b, p. 49) Economic Environment Consumers have increasingly become aware of the economic conditions and they consider the implications of new governments spending cuts, VAT increases and fluctuations in the fuel price (Annual Report, 2011b, p. 14). But, Marks and Spencer’s strategic marketing activities mainly by increasing marketing areas and numbers of stores throughout the UK have helped the company stay stronger. The company began to work its stores more convenient to shop and thus it segmented all of its stores according to the customers’ demographics. In October of 2011 itself, the company launched 15 pilot stores in the UK (Marks and Spencer, 2011c, p. 7). This has in turn helped the company ensure delivering of the most-fit marketing mix to the segmented customers. In order to attract more customers even when they are concerned of economic conditions and general spending, Marks and Spencer has thought to target around 95% of the UK population to be within a 30 minute driving of a full-line M&S store by 2015, and for this purpose, the company started space growth program (Annual Report, 2011b, p. 8). Social Environment Convenient shopping has become one of the most fascinating elements to the general customers in recent years and therefore most retailers have taken measures to ensure convenient shopping. The convenient shopping facilitated by the company has made bigger changes in the way its customers perceive the value of the services. The fashion and consumers trend has been changing tremendously. In order to grab better slice of the market opportunities, Marks and Spencer gave its customers better fashions, variety of choices and excellent values (Annual Report, 2011b, p. 18). Recently, the company has given good deal with ‘life style’ approach to its hope offer mainly by segmenting the market in to classic, contemporary and design. The classic and other designs as well as the new program called ‘Conran Exclusive Design’ (Annual Report, 2011c, p. 10) have spread a zeal of attraction among the general customers because customers are found to be highly fascinating any change that is valuable in regard to the fashion and design. Technological Environment The company has been highly successful in making greater progress in restructuring the supply chain and implementing new information system aligned with recent technology with a view to improve the retail operation. With help of the latest technology available, Marks and Spencer has implemented new stock management system. The new system it implemented was able to produce accurate real-time stick level information and that also has contributed to knowing food or other items availability in its stocks. Retail and other business fields are experiencing greater changes by implementing SAP, EPOS, live cameras etc. Marks and Spencer has implemented both EPOS and SAP (Annual Report, 2011c, p. 15) Ecological Environment Environmental issues like pollution, green house gas emission, etc always raise issues to the business and therefore businesses are taking sincere actions to overcome such issues. Marks and Spencer was successful in reducing the total carbon emissions by more than 90,000 tonnes since 2006. This has also recorded an increase of 25% per sq ft of sales areas (Annual Report, 2011b, p. 30). By investing on the technology, the company has put efforts in effective waste management system and increased the warehouse energy efficiency too. The other interesting fact was that the company distributed 38,000 energy monitors free of charge to its staff. At Marks and Spencer, the environmental, ethical and social commitments have been put in to the part of its behaviour (Annual Report, 2011b, p. 42) Legal Environment Marks and Spencer has taken measures such as food safety and effective way to waste reduction in order to adhere strictly to the legal and government regulations. Porter’s five forces analysis of Marks and Spencer Porter’s Five Forces Analysis is an effective tool for analyzing the business environment in terms of its competitive rivalry within its industry. As Stahl and Grigsby (1995, p. 145) noted, porter’s five force analysis is most useful strategic analysis tool that can be used for assessing the forces that drive to competition and evaluate the environment. Competition, potential entrants, substitutes, bargaining power of buyers and bargaining power of suppliers are the major five forces in the industry. Analysis From the Five Force Analysis depicted above, the competition rivalry of Marks and Spencer can be observed. The firm is experiencing fierce competition from big market player like Tesco and other major players like Sainsbury etc. The following factors also determine the competitive factors of the company. New entrants can easily enter the market, but it is not easy to dominate in the grocery industry of UK since it is highly competitive market, and most of the big players have more than hundreds of stores throughout the UK. The market share of the company is relatively good. Suppliers have relatively less bargaining power, since the company is supplying foods from around 2000 different suppliers. For clothes also, the company depends on many suppliers. The threats of substitutes seem to be relatively less, because, people usually have less options for dressing and hunger other than normal and hygienic food and causal clothing. But still, UK customers are becoming interested in small treats like chocolates and they often depend on fast food or ready-made packaged foods. Customers have more bargaining power, since there are many brands of retailers, clothes and foods too. A more important issue is that customers perceive quality for food items and fashion for clothing. This increases the bargaining power of customers. Organizational Culture of Marks and Spencer Theoretical perspectives of organizational culture Organizational culture is a system of shared values, actions and beliefs established in the organization to influence its members to guide and structure their behaviour (Schermerhorn, Hunt and Osborn, 2005, p. 436). It refers to a basic pattern of shared values and assumptions that can be considered as right way to thinking and acting on problems in the organization (McShane and Von Glinow (2004, p. 476) and hence it is the DNA of the organization. according to the view of Smircich (1983, p. 344), the organizational culture is a social instrument that produces goods and services and thus it makes cultural artifacts like rituals, legends and ceremonies. Culture is one of the most precious things that an organization can possess and the manager requires to work harder on it than on any other thing. The organizational performance is closely linked to the organizational value and culture (Ogbonna and Harris (1998, p. 274). Culture and performance are closely related (Barney, 1986, p. 656) and this shows why culture is a strategic way to ensure better results. An organizational culture may consist of sub-cultures and they often are found to be more directly related to greater effectiveness and productivity than others (Hellriegel and Slocum, 2007, p. 432). As Daft (2009, p. 387) argued, organizational culture plays vital roles in creating the organizational climate that enables learning and innovative responses to various challenges, issues and threats form competitive view points. According to Willmott (1993, p. 515), culture and performance relationship is evident from the ‘strengthening’ capacity of the culture because it strengthens organizational performance. CSR as the Organizational Culture of Marks and Spencer The Annual Report of Marks Spencer (2005, p. 16) declared that the approach of the company to the corporate social responsibility underpins the company’s commitment to quality, values, services, innovation and trust. This perception allowed the company manage its operations in efficiently, identify the risks and make the most of opportunities to distinguish it from its competitors. This shows that Marks and Spencer has long been focusing on Corporate Social Responsibility and this commitment is certainly a good part of the organizational culture of the company. In recent years, the importance of CSR has been increasing as almost all the fortune 500 companies have explicitly proclaimed its corporate social responsibility strategy (Bueble, 2009, p. 1). The CSR strategy consists of responsibilities that are inherent in the relation of the business and its society (Werther and Chandler, 2006, p. 6). As Kotler and Lee (2005, p. 3) argued, corporate social responsibility is an organizational commitment to improve community well-being by practicing of any discretionary business actions. The social responsibility of a business should encompass the economic, legal, ethical and discretionary expectations of the society and community that the organization is in reach of it (Sims, 2003, p. 43) When it comes to the case of the Corporate Social Responsibility of Marks and Spencer, the company has taken major measures to ensure greater well-being of the society that it is concerned with. As the annual report (2005) described, the company’s 100 percentage assurance of food quality is an illuminating example for its social commitment. The company set aside at least 1 percent of the pre-tax profit for supporting community programs and for the donations. In 2004, it donated a total of ?9.8m. Conclusion This piece of paper presented a brief report on the environmental analysis of Marks and Spencer. This paper presented brief analysis of both internal and external environments of the company through SWOT, PESTEL and Porter’s five force analysis. This paper has also detailed about the organizational culture and explained how the corporate social responsibility of Marks and Spencer related to the organizational culture of the firm. The paper concluded that CSR has been a major strategy Marks and Spencer has implemented to succeed in its market and to achieve competitive advantage. References Barney, J (1986) ‘Organizational Culture: Can it be a source of sustained competitive advantage?’ Academy of Management Review 11 (3): 656-665 Bueble, E 2009, Corporate Social Responsibility: CSR Communication as an Instrument to Consumer-Relationship Marketing, GRIN Verlag Datamonitor, 2011, Marks and Spencer Group Plc, Company Profile, Datamonitor.com, Retrieved from http://www.ebscohost.com/ Grant, R.M, 2005, Contemporary strategy analysis, Illustrated edition, Wiley-Blackwell Hellriegel, D and Slocum, JW, 2007, Organizational behavior, Eleventh Edition, Cengage Learning Hitt, M.A, Ireland, R.D and Hoskisson, R.E, 2010, Strategic Management: Competitiveness & Globalization, Concepts, Ninth edition, Cengage Learning. Kotler, P & Lee, N 2005, Corporate social responsibility: doing the most good for your company and your cause, Illustrated edition, John Wiley and Sons Marks and Spencer, 2011a, Company Overview, Corporate.marksandspencer.com, Retrieved from http://corporate.marksandspencer.com/aboutus/company_overview Marks and Spencer, 2011b, Annual Report and Financial Statement 2011, Marks and Spencer, Retrieved from http://corporate.marksandspencer.com/documents/publications/2011/annual%20report%202011 Marks and Spencer, 2011c, Press Release, Half Year Results, Retrieved from http://corporate.marksandspencer.com/documents/press_releases/2011/half_year_results_201112 Marks and Spencer, 2005, Annual Review and Summary Financial Statement, 2005, Marks and Spencer McShane, SL and Von Glinow, MA, 2005, Organizational behavior: Emerging realities for the workplace revolution, The McGraw Hill Companies Inc Milnes, J, 2010, M & S and Waitrose gain food market share, racplus.com, Retrieved from http://www.racplus.com/news/m-and-s-and-waitrose-gain-food-market-share/8608976.article Ogbonna, E (1992) ‘Managing Organizational Culture: Fantasy or Reality?’ Human Resource Management Journal 3 (2): 42-54 Schermerhorn, JR, Hunt, JG and Osborn, RN, 2005, Organizational Behavior, Ninth edition, John Wiley and Sons Smircich, L (1983) ‘Concepts of Culture and Organizational Analysis’ Administrative Science Quarterly, 28 (3): 339-358 Sims, RR, 2003, Ethics and corporate social responsibility: why giants fall, Greenwood Publishing Group Stahl M.H and Grigsby D.W (1997), Strategic management: total quality and global competition, Illustrated edition, Wiley-Blackwell, UK Werther, WB & Chandler, D 2006, Strategic corporate social responsibility: stakeholders in a global environment, Illustrated edition, SAGE Westcott, R, 2005, The certified manager of quality/organizational excellence handbook, Illustrated third edition, ASQ Quality Press, Willmott, H (1993) ‘Strength is ignorance; Slavery is freedom: Managing culture in modern organizations, Journal of Management Studies 30 (4): 515-552 Read More