Marks & Spencer Analysis - Case Study Example

 Table of Contents Question 1 – M&S Analysis 2 Value for money 2 Resources and Core Competencies 3 Strategic Vision 4 SWOT and PESTEL 5 Question 2 – M&S Before 1990s 7 Success of M&S Strategy 7 Porter 5 forces 8 Question 3 – M&S After 1990s 9 Weak Management Strategies 9 Two new strategic approaches 9 References 11 Question 1 – M&S Analysis Value for money Theoretically ‘value for money’ in the context of a particular product or service is referred to the usefulness of that product or service against the money that is paid for purchasing that product or service. In the present business environment organizations are focusing on delivering more ‘value’ against the money that is being paid by the consumers (Clements-Croome, 2006). Consumers are also seeking more value for the money that they are paying. Value is usually measured in terms of the effectiveness, usefulness and longevity of the product or service. As far as Marks & Spencer (M&S) is concerned, the company has been giving significant attention in creating as well as delivering value to its customers. Earlier the company’s strategy was to provide broadest range of products while charging minimum amount and to attract its slogan was ‘don’t ask the price – it’s a penny’. In the present competitive business environment consumers are extremely conscious about both the value that they are receiving while using the product or service as well as the money that they are paying for enjoying this value. With the increasing spending capacity, most of the consumers throughout the world, especially in the developing countries, today, do not look for the products or services that are available at the lowest price. Rather, they look for products that are innovative, effective and worth spending money. Organizations that are able to offer more value added products and services at decent prices are likely to stay ahead of their rivals. Hence, it can be said that the slogan (‘don’t ask the price – it’s a penny’) that M&S used to promote its products is not any more applicable today. At present M&S creates and delivers value to the customers through the quality and price of its products and services. The retailer is known for offering quality products and services at a decent price (Seth & Randall, 2001). ‘Innovation’ and ‘trust’ are the two other mediums through which the company delivers value. Resources and Core Competencies Strategic resources are those resources that help an organization in the process of offering the best possible products and services to its customers and gaining and retaining the competitive advantage for a significant period of time. Core competencies, on the other side, are the basis of sustainable competitive advantage of an organization. According to Prahalad and Hamel, core competency is the inimitable combination of abilities and skills that are the key behind the core product or service of an organization. If Michael Porter is to be believed then the competitive advantage is mainly dependent on two aspects – cost and differentiation. Core competencies ensure that the organization can properly differentiate its products and control its costs (Silber & Kearny, 2009). Like other retail giants, M&S is also remarkably dependent on its strategic resources. Important strategic resources of M&S include ‘physical resources’, ‘intangible assets’ and ‘capabilities’. Physical resources include the products and brands that are found in the stores. Physical stores and displays are also included in the list of physical resources. Intangible resources include the brand image and the knowledge that the employees possess. The third strategic resource is the ‘capabilities’ which refers to the company’s skills in managing various processes and supply chains. All these strategic resources help the company in attracting and retaining customers and in gaining competitive advantage through cost leadership. One of most important core competencies of Marks and Spencer is its ability of identifying, designing and developing products for its customers (Drucker, 2006). Initially Marks and Spencer used to buy products from other manufacturers, but later it realized its own potential and decided to both produce and sell merchandise on its own. Another core competency of the company is its skill of managing the supply chains. M&S has been delivering superior value through its unique supply chain management system. The company is capable of not only controlling its own quality and costs but it is also capable of controlling the quality and costs of the firms that manufacture and distribute raw materials to it (Egan, 1998). Strategic Vision Identifying and defining a strategic vision is one of most crucial tasks for any organization that wants to stay ahead of competition in the long run. Strategic vision should be developed on the basis of possible future of the organization, its core capabilities and competitiveness (Sage & Rouse, 2009). As far as organization structure is concerned it defines the way in which jobs and tasks are formally grouped, divided and coordinated. Organization culture is the system that consists of shared value and meaning which are held by the employees of the organization. One organization can be distinguished from another on the basis of its culture (Robbins & Judge, 2007). As far as M&S is concerned, its holistic strategic vision is to create a more streamlined, dynamic, customer service oriented and efficient organization. At present, M&S has a flatter structure as it has adopted the strategy of removing various layers from it. As far as culture is concerned, M&S has a customer oriented culture as each and every employee is working with the objective of satisfying the customers’ needs. Overall the company is driven by a positive culture. SWOT and PESTEL SWOT is the abbreviation of Strength, Weakness, Opportunity and Threat. It is one of the most popular strategic models that are used for assessing a business (Pahl & Richter, 2009). M&S can also be analyzed by using this model. Strengths of M&S include its brand image, experience in the retail industry, capability of managing supply chain partners, excellent customer service and its market reach. Marks and Spencer is one of the most renowned retail brands in UK. Furthermore, the company has unique supply chain management system that allows it to control the quality and costs properly. Major weaknesses of M&S include too much fragmentation, lack of up-gradation in the product line and too much dependency on the UK market and UK based suppliers. As far as the opportunities are concerned the most important one is the growing markets of South Asia, Africa and South America. In addition to it Marks and Spencer also has the opportunity of investing in new business model as the company has enough financial capacity. Intense competition, powerful competitors and recession affected economy of UK are the three most significant threats to the business of Marks and Spencer. PESTEL stands for Political, Economic, Social, Technological, Environmental and Legal. PESTEL model is widely used in order to identify and analyze the macroeconomic situation in the context of a particular organization (Allen, 2001). Since Marks and Spencer is a UK based organization it is likely to be more influenced by the political situation of UK. UK is a politically stable country and is likely to be so in the coming year. Economy of UK has received a big blow from the last global economic slowdown during the period of 2008-2009. It was deeply in recession as the growth rate was in negative figure. However the situation has already started to change, although the process of recovery is still continuing. Retailers like M&S is affected by this recession as the sales went down significantly. However with the improving economic condition it is expected that consumers will spend more in the coming years. Society in UK is dominated by middle aged individuals. Most of them are Christians. English is the principle language that is spoken by the people. As per official figure, almost 99% people in the country are educated and they make their decisions on their own. UK is such a country where advanced technologies are heavily used by both general consumers as well as organizations and such trend is likely to be found in the coming years as well. As the entire world is suffering from the disease named global warming, all the developed and developing countries are gradually becoming more and more conscious regarding protection of their environment. UK is not an exception. The government is taking several measures in order to ensure that both organizations as well as individuals cannot affect the environment. UK has strong legal system which is dominated by traditional English laws. A company like Marks & Spencer that is operating for a long period of time is well aware of all the important rules and regulations. Question 2 – M&S Before 1990s Success of M&S Strategy Marks & Spencer saw great success prior to the period of 1990 and this success is actually the result of the company’s effective strategies. Initially M&S was focusing on the value aspect. The company’s slogan was “don’t ask the price – it’s a penny”. The company was offering a wide range of merchandises at the minimum possible price. Consumers were attracted as they were getting value for their money. After the success of this strategy M&S started to focus on another aspect i.e. ‘diversification’. The company decided to bring diversification in their product range so that wider range of customers can be attracted. The innovation aspect was also given enough significance. Moreover, M&S identified that some of its stores are too small in size to survive in the long run. In overcome the situation a massive expansion program was started. As a part of this program existing stores were expanded depending on availability of the land and new large stores were built. Some major strategic changes were also made. M&S gave significant attention towards regular improvements in the product displays in order to meet the ultimate objective of increasing the sales. Furthermore, the company began to use the information technology in the best possible way. With the passage of time it realized that it would be very difficult to gain sustainable competitive advantage if it remains confined in the UK market only. It opened stores in other developed markets like France, US, Hong Kong and Canada. In addition to retail services, the company also started to provide financial services in the form of unit trusts, credit card etc. With these strategies M&S was able to retain growth till 1990. Porter 5 forces According to Michael Porter, any industry is greatly influenced by the five forces which are bargaining power of buyers, bargaining power of suppliers, threats of new entrants, threats of substitutes and rivalry among the competitors (Henry, 2008). The retail industry can also be analyzed in the context of these forces. Buyers who have strong reputation in the market are likely to have strong bargaining power over the suppliers. General consumers can change their choice of brand if they are unhappy with the quality, service or price. As a result they are also having strong bargaining power. Suppliers have moderate to low bargaining power when they are supplying to big players like Marks & Spencer. However when they supply to small retailers they can show strong bargaining power. In the retail industry threat of new entrants is found to be moderate. Entry barriers for small retailers are not as strong as they are for the big retailers. Threat of substitute in terms of products and merchandises is strong as any new brand can replace any of the existing one. As far as substitute of retail industry is concerned threat is very low. As there is no such new format till now that can substitute the present format of retail business. Retail industry in UK is intensely competitive. There are several big as well as small players who compete among themselves. Competition is mainly concentrated on the service, price and quality of the product. Question 3 – M&S After 1990s Weak Management Strategies Till 1990 M&S saw great success, but afterwards the company’s sales started go down sharply. There are several reasons behind such massive decline. Too many product ranges were introduced and only few of them were really successful. Moreover, the management in the company was not as strong as it should have been. Being a retailer one never should be over-confident about its reputation and image and this is the mistake that M&S made. They took off their eyes from their customers. Furthermore they were too much dependent on their UK based suppliers. Clothing is an important part of M&S’s merchandise range and for the success of clothing products there must be some fashion elements into it. After 1990 most product ranges that were launched by M&S lacked fashion elements and this is another reason behind the company’s declining sales. Two new strategic approaches Marks and Spencer should focus on the developing economies throughout the world for expanding its business and gaining sustainable competitive advantage. The company should improve its presence in the countries like India, China, Brazil and South Africa. Moreover M&S should give more importance to the aspect of internet and online sales. The company should improve its online storefront. It can even open separate online storefront for separate market segments. Two strategic models that can be adopted are Ansoff’s growth matrix and Porter’s value chain model. In Ansoff’s growth matrix there are four quadrants that represent four strategic choices that can be adopted by a firm. These are market penetration, market development, new product development and diversification (Jones, 2006). On the other hand Porter’s value chain model can be used analyzing the chain activities that are crucial in the process of creating and delivering value to the customers. Ansoff’s Growth Matrix [Source: CIM Revision Cards Marketing Fundamentals] References Allen, M. 2001, Analysing the Organisational Environment, Select Knowledge Limited Clements-Croome, D. 2006. Creating the productive workplace, Taylor & Francis Drucker, P. F. 2006, Classic Drucker: essential wisdom of Peter Drucker from the pages of Harvard Business Review, Harvard Business Press Egan, C. 1998, The CIM handbook of strategic marketing, Butterworth-Heinemann Henry, A. 2008, Understanding Strategic Management, Oxford University Press Jones, M. 2006, CIM Revision Cards Marketing Fundamentals, Butterworth-Heinemann Pahl, N & Richter, A. 2009, SWOT Analysis - Idea, Methodology And A Practical Approach, GRIN Verlag Robbins, S. & Judge, T. 2007, Organizational Behavior, Pearson Education Silber, K & Kearny, L. 2009, Organizational Intelligence: A Guide to Understanding the Business of Your Organization for HR, Training, and Performance Consulting, John Wiley and Sons Seth, A. & Randall, G. 2001, The grocers: the rise and rise of the supermarket chains, Kogan Page Publishers Sage, A. P. & Rouse, W. B. 2009, Handbook of Systems Engineering and Management, John Wiley and Sons Read More