Internal Capabilities of a Company - Case Study Example

Internal capabilities of a company - Strategic Management Contents Contents 2 Executive Summary 3 Introduction 3 Analysis and Findings 4 Internal Environment Analysis 4 SWOT Analysis 4 Value Chain Analysis 7 Discussion 9 Conclusions 11 References 12 Executive Summary The paper herein focuses to conduct an analysis of the internal competency structure of the British retail firm Marks and Spencer through two different sets of models. Based on the analysis of the internal structure of the concern key strategies would be evaluated in regards to the company that had helped it in gaining a key position both in the home and international markets. Both practical and theoretical understanding would be developed to help enhance the ambit of the research conducted. Introduction Marks & Spencer is a globally reputed retailer based in UK. It is one of the many well established retailers in the UK area with over 21 million people visiting the regional stores of Marks and Spencer on a weekly basis. The unique selling proposition or the USP of Marks & Spencer stores are that they offer products which are high on style and also have a high quality. The chain, in an effort to maintain quality, sources the products, mainly foods from a global pool of huge number of suppliers, approximately 2000 in number. As of today’s status, Marks and Spencer has presence all over the globe with an impressive store count of 700. In the UK market, Marks & Spencer is the leading player for women clothing and accessories. The clothing segment sales generally accounts for around 49% of the business handled by Marks and Spencer, while the remaining 51% is generated from the food segment, which comprises of a wide range of products ranging from farm fresh organic produce to partly and fully prepared and packed meals (Marks & Spencer 2012). In an effort to play a leading role in the worldwide green initiative, the chain is focusing on reducing wastage that is generated from handling and packaging of food items (Marks & Spencer-a 2012). Analysis and Findings The analysis and findings would hint on analyzing the internal environment of the business based on two specific models-the SWOT Matrix and the Value Chain Analysis study. Internal Environment Analysis SWOT Analysis Strengths Brand Identity: The most important strength of the retail chain Marks & Spencer is its brand identity. It is the single most supreme asset that the retail chain possesses in the current times. As an effort, to develop the brand further in the UK market, and as an effort to build customer recall for the brand, the brand invested heavily in a branding program in the late 2010. Named as ‘Only At Your M&S’, the branding program highlighted the highly innovative and quality products offered by Marks & Spencer to its customers all the time, by keeping pace with the changing patterns of the retail industry and its related products. As an upshot to this marketing response, the consumers gave a massive positive response, leading to boosting of sales in the year 2011 (Marks & Spencer 2011). Clothing Segment: Marks & Spencer is leading the UK market in the clothing sector and has also successfully increased their market share as compared to the previous year. The increase in market share was attributed to the offering of quality products with respect to the current trend and customer choice. Clothing Segment: In an effort to serve the consumers better, the clothing segment is reorganizing itself by segmenting the stores, with regards to the local demographics. In future, this strategy will generate a positive response among the consumers, as the retail chain is focusing on providing the optimal and exact product mix as desired by consumers of various locations, and thereby increasing customer convenience and customer satisfaction. Food Segment: Better waste management in the food division, has helped the retail chain to reduce the cost of its products, while at the same time providing better margins on its food products (Marks & Spencer-a 2011). Food Segment: Due to the offering of food products which have high quality and innovative in nature, the UK based retail chain has high customer recognition for providing the best quality food and is also ranked high up in promoting innovation among its offered food products range. Housing Segment: The housing segment of this UK based retail chain has reported an increase in business growth. As a matter of fact, this is an area of high growth for the company in the future Weakness Clothing Segment: In the clothing division, there is a possible weakness that can be pointed out. The customers are finding it increasingly difficult to identify the sub labels, as the positioning of the sub labels are very overlapping and appear extremely confusing. Moreover the designs rendered on the clothing are regarded by customers as outdated that have resulted to further downfall in the market share. Food Segment: In the food segment, there is a lot of underutilized space in the food hall, which thereby is resulting in missed out sales opportunities which could have arrived from displaying possible new product items for display to the consumers. Overlapping Business: Marks and Spencer in recent times is found to counter a steady drift from its core retail operations pertaining to food and clothing to other segments especially linked to the financial side pertaining to the issue of credit cards and other insurance solution to its members. This has resulted to a loss of focus of the management on the core business aspects (Yves 2008; Marks and Spencer-b 2011, p.16). Pattern of the Store: Customers also regard the store of Marks and Spencer cluttered in nature with large number of merchandises pertaining to various categories that makes them hard to make relevant choices and purchases. Rising Costs of Products: Incapacity of the management to maintain right margin levels through effective relationship with the supply chain bodies is considered a potential reason for making the costs of merchandises to rise (The Telegraph 2004). Opportunities The business of Marks and Spencer in the retail market of United Kingdom is considering different opportunities to diversify into other related sectors like trading on home furnishing products apart from beauty products. In that the company is gradually gaining a formidable stand in regards to retailing products related to home furnishings and gift merchandises. Marks and Spencer is thereby focusing on enhancing its Beauty concepts segment to gain a larger number of women consumers (Mathur 2010). Threats Policies of the company in not to have fitting rooms and not to refund back money to the consumers in case of complaints pertaining to damage and tear is countering threat to its market from other potential competitors (The Telegraph-a 2004; Seare 2004). With recession in view during 2009 the management of the company had no other option than to go for a dividend cut of its shareholders thus creating a negative relationship (Probst and Raisch 2005, p.98). The company is also facing the threat from other firms, like Ann Summers in regards to the copying its logo and colour for helping in increased promotion of their merchandises (Harvey 2000, p.17; Mellahi, Jackson and Sparks 2002, p.25-26). Value Chain Analysis Analysis conducted in regards to the value chain system of a company focuses on the system of addition of value to the final product and service while passing through the various stages starting from procuring of raw materials, processing stage and finally in regards to the dispatch of the same to the consumer bases. Internal analysis of the value chain framework of companies in regards to primary and support functions helps in understanding the internal strategic capabilities of a concern in effectively meeting the needs of the market. In regards to primary functions the retail company focuses on getting hold of new supplier and product bases, procuring commodities from the marketplace and rightly inspecting its quality standard, controlling the entire set of activities related to logistics to help fetch the right quantity of product from the warehouses, central or regional to the different stores, maintaining proper stocking levels of the product in the shelves of the different stores, working on innovative set of advertisements to attract consumers and finally working on incorporating a point-of-sales system to help meet the needs of automated replenishment or stocking activities while having an eye on the changing need patterns of the consumer bases. In regards to the support activities pertaining to the internal value chain architecture of the retail companies the concerns are required to enhance the infrastructural bases that in turn would help the company in understanding in advance the emerging market threats and thereby in effectively planning to counter such. The company in enhancing the human resource development potencies of the concern should focus on the development of plans that would help in effectively recruiting a global workforce and thereby training such people to meet organisational objectives. Effective designing and locations of stores and warehouses must be conducted to reduce cost related to logistics and thereby in enhancing margins. Finally the company is required to integrate the different stores and business units through information technology systems to enhance the level of monitoring and business productivity (Crain and Abraham 2008, p.29, 31). The same can be reflected through the use of an illustration as follows. Figure 1 (Crain and Abraham 2008, p.29, 31) Marks and Spencer endeavoured to bring about a change in its internal value chain functions focusing on procurement of merchandises from region other than United Kingdom. The company changed its procurement strategies during 2002 to procure merchandises from low cost zones (UNIDC The Global Apparel Value Chain: What Prospects for Upgrading by Developing Countries (2003) V.03-83606).Thereby the company endeavours to gain in business competencies through focusing on effective procurement and supply chain functions (Stonehouse and Campbell 2004). Discussion The discussion that follows from the level of key findings identified above would hint on the strategic business capabilities of Marks and Spencer. Marks and Spencer is found to differentiate from other key competitors in regards to its service parameters where it trends to enhance the quality dimension through incorporating a ‘no question policy’ in regards to customer complaints for changing of damaged merchandises. The company also tends to offer the customers a refund in addition to providing uniqueness to the diversity of clothing rendered (Johnson, Scholes and Whittington 2009). Figure 2 (Grant 2010) Moreover, Marks and Spencer is found to counter an all round strategic change in regards to both its product and services by enhancing the quality dimension of it whereas also incorporating surmountable changes in the displays rendered in the store to attract consumers. The company also worked to link its inventory system to the point-of-sales thereby enhancing the supply chain module of the firm to be responsive to changes in market demands (Thompson and Martin 2010). Based on the theory of strategic architectural capacity of a company to attain business competencies, Marks and Spencer is observed to endeavour to gain business competencies through rightly integrating the strategic business functions of its supplier, design and manufacturing base. Herein the firm governs the supply chain networks to rightly help in achieving the key business objectives based on quality and steadfastness (Thompson 2001). Marks and Spencer in regards to its focus on shifting its procurement base to developing economies focuses on gaining the advantage of economies of scale to help reduce the cost of merchandises sold to the consumers. Thus such can be referred to as value addition rendered in regards to the products rendered to the consumers. Conclusions The company in the initial stage was found to gain a dormant mode where it was not receptive to the external demands. However changes brought about in the policy framework made it more accountable to consumer demands thereby requiring the management to not only enhance the quality of the products and services but also in working to render different strategic interventions. Differentiation in regards to cost and design were brought about through changes in store layout and integrating the different stakeholders like suppliers and manufactures to help meet the key business objectives. Further the company also worked in the direction of enhancing its brand image in the light of other key competitors and also endeavouring to expand to international markets through franchising ventures. References Crain, D.W., and Abraham, S., 2008. Using value-chain analysis to discover customers’ strategic needs. Strategy & Leadership, 36(4), 29-39. Available from: http://s93063416.onlinehome.us/iloveaccounting/614/Crain-and-Abraham-2008.pdf [Accessed May 3, 2012]. Grant, R., 2010. Contemporary Strategy Analysis: Text Only. United Kingdom: John Wiley and Sons. Harvey, M., 2000. Innovation and competition in UK supermarkets. Supply Chain Management: an International Journal, 5(1), 15-21. Available from: http://www.ftsm.ukm.my/aishah/paper%20pdf_1st%20retail/Mark%20Harvey%20innovation%20and%20competiton%20in%20UK%20super%20markets.pdf. [Accessed April 23, 2012] Johnson, G., Scholes, K., and Whittington, R., 2009. Exploring Corporate Strategy: Text & Cases. 7th Ed. New Delhi: Pearson Education India. Marks and Spencer, 2011. Annual report 2011: Our Brand. Available from: http://annualreport.marksandspencer.com/financial-review/brand.aspx [Accessed April 23, 2012] Marks and Spencer, 2012. About Us. Available from: http://corporate.marksandspencer.com/aboutus/company_overview [Accessed April 23, 2012] Marks and Spencer-a, 2011. Annual report 2011: Our Food. Available from: http://annualreport.marksandspencer.com/financial-review/food.aspx [Accessed April 23, 2012] Marks and Spencer-a, 2012. Waste . Available from: http://plana.marksandspencer.com/we-are-doing/waste [Accessed April 23, 2012] Marks and Spencer-b, 2011. M&S: Simply Food. Available from: http://corporate.marksandspencer.com/documents/publications/2011/how_we-do_business_report_2011 [Accessed April 26, 2012]. Mathur, U.C., 2010. Retail Management: Text and Cases. New Delhi: I. K. International Pvt. Ltd. Mellahi, K., Jackson, P., and Sparks, L., 2002. An Exploratory Study into Failure in Successful Organisations: The Case of Marks and Spencer. British Journal of Management, 13, 15-29. Probst, G., and Raisch, S., 2005. Organizational crisis: The logic of failure. Academy of Management Executive, 19(1), 90-105. Available from: http://www.skgroup.ch/page25/page27/assets/SKG_Pub02.pdf [Accessed April 26, 2012]. Seare, N., 2004. The Battle for Marks and Spencer. BBC News. Available from: http://news.bbc.co.uk/2/hi/business/3717252.stm [Accessed April 26, 2012]. Stonehouse, G., and Campbell, D., 2004. Global and Transnational Business: Strategy and Management. England: John Wiley & Sons. The Telegraph, 2004. Changes in store to counter catalogue of weaknesses. United Kingdom: The Telegraph. Available from: http://www.telegraph.co.uk/news/uknews/1466883/Changes-in-store-to-counter-catalogue-of-weaknesses.html [Accessed April 26, 2012]. The Telegraph-a, 2004. Threat to Marks & Spencers no-quibble refund. United Kingdom: The Telegraph. Available from: http://www.telegraph.co.uk/news/1470518/Threat-to-Marks-and-Spencers-no-quibble-refund.html [Accessed April 26, 2012]. Thompson, J., 2001. Understanding Corporate Strategy. United Kingdom: Cengage Learning EMEA. Thompson, J., and Martin, F., 2010. Strategic management. United Kingdom: Cengage Learning EMEA. UNIDC The Global Apparel Value Chain: What Prospects for Upgrading by Developing Countries (2003) V.03-83606. Yves, D., 2008. Fast Strategy. New Delhi: Pearson Education India. Read More