Marks and Spencer Pastel Framework - Case Study Example

Running head: Management report (MARK AND SPENCER) 26th February Word Count - document- 3960 Word Count - document minus the title page, contents page, executive summary, tables/charts, reference list - 3098 Table of Contents Table of Contents 2 Executive summary 4 Introduction 5 An analysis of the industry through Porters Five Forces model 7 Bargaining power of suppliers 7 Threat of new entrants 7 Bargaining power of customers 8 Threats of substitute products 8 Competitive rivalry 8 Strengths and capabilities, 8 Core competency 8 Distinct competency 8 Capabilities 9 Employees 9 Finances 9 Marketing 9 Tax policy 9 Political Instability 10 Economical Factors 10 Inflation 10 Oil Price 10 Economic Growth 10 Social Cultural Factors 10 Lifestyle 10 Media Views 11 Demographic 11 Technological Factors 11 Expansion Potential 11 Research and Development 12 Online systems 12 Environmental factors 12 Ecological issues 12 Legal Factors 12 Mark and Spencer Ansoff and BCG Frameworks 13 Mark and Spencer plc SWOT analysis 15 Mark and Spencer SAFS Framework 17 Suitability 18 Acceptability 18 Feasibility 18 Sustainability 18 Recommendations 19 Conclusions 20 References 21 Executive summary Mark and Spencer Company is a British multinational retailer whose headquarter is located at London. One if the major aspect that makes the company to remain competitive in the retailing industry is the effective management styles that Robert Swannell and Marc Bolland applies. In addition, the employees remain motivated due the positive relationship that exists between them and the management team. Mark and Spencer plc main competitors are Next plc, Asda Group Ltd and Tesco plc. Through the application of Porters Five Forces model, the paper indicates that the bargaining power of suppliers is generally medium; threat of new entrants is high, bargaining power of customers is medium while threats of substitute products and competitive rivalry is high. The major capabilities and strengths of Mark and Spencer include large number of employees, high sales, high technology systems and use of modern airplanes. Political factors that affect Mark and Spencer plc include tax policies, terrorism activities, political instability and elections among others. Economic factors affecting the company include inflation, exchange rates and changing oil prices among others. Social cultural factors include lifestyle, media views, Olympic Games in 2012 and demographics population. Technological factors include expansion potential, online system and research and development. Environmental factors that affect Mark and Spencer plc activities include ecological issues, environmental regulations and society among others. Lastly, legal factors include international law, agreements and international trade. Mark and Spencer strengths include good logistics, employee’s high level of motivation, strong brand identity and good administration among others. Weaknesses include high cases of accidents and rising of fare due to increasing fuel prices. Additionally the company threats include high fuel prices, stiff competition in the industry and terrorists attack. Such challenges are addressed by adopting the available opportunities that include exploring continental markets, expanding the product portfolio, expanding the market share and formation of mergers and acquisition. Major recommendations for Marks and Spencer includes setting of objectives whose aims is to bring appropriate change management within the various business operations, adapting present business environment, adopting proactive and agile ways of dealing with current business environment and making organizational changes for instance in the areas of marketing strategies. In this way, the company will emulate unique and new methods that will ensure it remains competitive. Introduction Mark and Spencer plc is a retailing company that was established in 1884. The London based company is known for its production of quality men ware and lingerie that makes female customers to experience red carpet treatment. Mark and Spencer plc has undergone rapid expansion since its establishment. This has been as the result of the acquisition and merging strategies that the company has adopted during its operations. As the result of strong management team that is focused at attaining its goals, Mark and Spencer plc has continued to enjoy high revenue. For example, in 2014, Mark and Spencer plc total revenue stood at £10.0 3billion while the operating income was £756.0 million. The company revenue net income remained at £450 million. Through the leadership of Robert Swannell and Marc Bolland the chairman and the CEO respectively, Mark and Spencer plc has remained competitive (Hochbaum, Yelland and Catena, 2011). The objective of the company is to provide point-to-point services as well as good value and safe services to its customers (Chisnall, 1985). As an international company with more than 85,000 employees, Mark and Spencer plc ensures that more than 90% of its tickets are sold through online methods. In this way, it is able to reach large number of customers globally. One of the strategies that Mark and Spencer plc adopts in its operations is to provide low cost for its products. The company runs large number of internet shops in UK (Jones, 2007). Marks and Spencer, experiences stiff competition from companies such as next plc, Asda Group Ltd, and Tesco plc. The purpose of this management report is to provide the environmental audit of Marks and Spencer through the use of tools such as Porters Five Forces model, Pestel framework and SWOT. The table below indicates various products that Marks and Spencer has put in the markets. Kinds wear essentials Boys to and T-shirts, Nightwear & Pyjamas, girls tops & T-shirts Kinds wear highlights M&S Baby, comfortable sleepwear Popular products Three Pack Flamingo, Three pack unisex and Five pack girls Nautical Theme among others. Shoes Leather bus appliqué pram, Bunny rattle shoes, Suede driving pram, leather cruiser T-bar shoes, Lion deck shoes, and polar bear claw pram shoes among many others. Lingerie and underwear Bodies, Bridal lingerie, knickers, Slips, Shape wear and Thermals among many others. An analysis of the industry through Porters Five Forces model Mark and Spencer plc environment include suppliers, customers, distributors and competitors. Bargaining power of suppliers Mark and Spencer plc supplier concentration is medium. This is due to the fact that within the industry, there are a high number of competitors undertaking various activities for example exporting modern electronics, supplying materials and modeling among others (Costa, 2003). Similarly, the switching cost of the industry is also medium. It is worth to note that it is difficult for the suppliers in the industry to switch the costs due to stiff competition in the industry. Threat of new entrants As far as government policy is concerned, the level of threats of new entrants is high. This is due to the laws that can be introduced creating a change in the industry (Hunger, 2002). By considering brand position, the level is high. It is worth to note that the company has a strong brand that makes it very competitive. Bargaining power of customers The level of power as far as the number of customers is medium. The company’s amount of revenue depends on the number of customers. Threats of substitute products When the increase in prices is taken into account, the level of power is high. This is based on the fact that if the company increases its prices, customers can move to other firms to look for services (Porter, 1979). Mark and Spencer plc has quality products making the threats of substitute products level to be medium. Competitive rivalry The company has high market growth since the competition is high. When brand identity is considered, the level of power is high. Similarly, the power of the company exit barriers is medium. Strengths and capabilities, Core competency M&S is termed as the lowest cost firm that offers its operation from point to point. Distinct competency Due to the introduction of internet selling, M&S is able to increase its sales through online methods. Capabilities Employees Marks& Spencer has got quite a number of employees which stands at approximately 85,000. The good relation between the management and employees makes them motivated hence performing effectively. Finances Marks and Spencer sales and profit are rising gradually. Marketing In November 2011, Marks and Spencer opened a store in Paris. Later they opened another shop in 2013 at the city Amsterdam. Mark & Spencer on 2013 announced that they are opening more than 70 stores in Canada by the year 2016 this is to ensure that they are the leading multichannel retailer internationally. M&S sales in the Indian market are about a fifth of the total sales made in India. They have plans to open about 100 stores in India by the year 2016. Marks and Spencer Pastel framework Political factors Tax policy If tax regulations are changed they can have impact on the company. Business have rules that they follow and if new tax policy is implemented then it will affect the Marks and Spencer profitability. Political Instability A lot of time is wasted when the company tries to relocate to alternatives markets in case of political instability. It also causes inconvenience since at some point the M&S is forced to cancel deals and agreements. Economical Factors Inflation The fuel prices crisis has led to current 3.3% inflation rate. The high price of fuel forces the company to increase prices for their brands. Oil Price The continuing increase on fuel prices is forcing the company to increase the prices of their brands. Economic Growth The rate at which the economy of a country grows directly effects the growth of the companies in that country. Economic growth in UK, M&S brands will definitely enjoy high demand from the consumers. Social Cultural Factors Lifestyle The lifestyles of the consumers depend with their cultural values. If the customers decide to use other form of clothing the strategy of the company will be directly affected. Media Views Media can influence the decision made by the customers according to their views on a certain company. This can affect M&S Company strategy. M&S since 1950 has been leading on magazines and newspapers ads. Famous stars Twiggy and David Jason being introduced in the several TV ads have raised the image of the company. Steve Sharp was hired by the Chief Executive Stuart Rose in 2004 and came up with a promotional brand which was under the M&S banner. These became Marks and Spencer main brand in advertising. Demographic Due to the large number in United Kingdom, M&S gets is able to make high sales on annual basis. Additionally, the high population in the large cities, who highly demand Mark and Spencer products, makes the company revenue and profits to remain high. Technological Factors Expansion Potential In order for a company to come up with new products and expand their business, they need a high technology. M&S extended its operation to Canada in 1773 where at that time they had around 50 stores. The stores in Canada were small than those in the British outlets and did not contain the same selection. Sales in Canada were not good and lead to closure of about 40 stores. Later they expanded to France and Belgian cities which become popular and profitable. Marks & Spencer later opened stores at 2011 that did not only sell clothing but also food starves. Later the company opened additional food outlets in the French capital. Research and Development In order for M&S to acquire new products and get other new market opportunities, the company needs to invest more in research and development. It is vital to note that Mark and Spencer has not overlooked product improvement despite the cut-throat competition it faces in the market. Online systems While using the system, the number of employees is reduced hence less wages therefore higher profit for M&S. The company has strategies of advertising their products through the internet and they also have customers who order their products online. The online shopping was launched in 1999 following the launch of the same by their main competitor Tesco which launched a service for delivery named Tesco.com. This has enhanced both companies to grow rapidly in the online market. Environmental factors Ecological issues Products that are provided by the suppliers have an impact on the environment. The way the products are disposed by the customers also has an impact on the surrounding. This implies that organizations have a duty to protect the environment from pollution. M&S has come up with a program of using materials that are recyclable. In the year 2011 Marks and Spencer initiated a program the will be recycling clothes. They have also sold breakthrough breast cancer clothes. Legal Factors M&S follows the rules set by the government to avoid losing privileges and benefits. According to the customers’ requirements, product quality matters a lot. Mark and Spencer know the ways of delivering quality brands to the consumers while still maintaining the legal procedure. Mark and Spencer Ansoff and BCG Frameworks Ansoff Matrix A growth strategy where an enterprise decides on selling the products that are already established in the market is referred as market penetration and its aim is to increase and maintain the market share of the products. To implement this, the company has to use different strategies. For example, advertising; the company has to invest in advertising to make its products known by consumers. Sales promotion; offering promotion to customers attracts them to your products hence motivating them to buy even more. Lowering the price of your products could also be a strategy to attract consumers to purchase your products. Marks and Spencer having proved to the consumers that they have the best and high quality brands across Europe and United Kingdom in clothes industries, the company has come up with market strategies to bring down their competitors. It is by introducing promotional campaigns and by market pricing strategy hence making the market unbearable for its rivals. Marks and Spencer also operates a food business which is also demanding. Mark and Spencer in 2007 promised to open the biggest store in outside the United Kingdom that is in Dubai. Later in 2008 the company also opened a new store in China (Shanghai). This is an example of market development strategy where an enterprise introduces existing products to new markets. By exploring new geographic areas you are entitled to new customers of your products and services. (Lynch, 2003) Marks and Spencer has implemented product development strategy by introducing new products in the current markets. They have also introduced financial and banking services. Marks and Spencer currently operates in more than 40 countries, this is by using diversification strategy which is risky because it involves the companies investing in markets they are not so familiar with. Looking for qualified people with appropriate skills is an important factor to consider while implementing any strategy in a company. Improving departments which include, finance, marketing, network business and customer care are the key sectors that Marks and Spencer are focused at. BCG Frameworks According to BCG Frameworks, a matrix that is applied in long term strategic planning, there are 4 quadrants that indicate company’s market growth and market share. These include dogs, question marks, stars and cash cows as indicated below. Star Question Cash Cows Cat Considering that Marks and Spencer has wide range of products that they sell locally and in the international markets, BCG matrix can be applied across their ranges as indicated below. Stars Example is the lingerie. Marks and Spencer is recognized as the outlets for ladies brands. It is important to note that Marks and Spencer lingerie is the market leader with the highest market share as well as high growth. Question Example is food. For quite some time, Marks and Spencer was not considering food. However, the supermarket has over 400 food stores in the world. Even though it is not a major outlet in the UK market, Marks and Spencer simply food indicates low market share but high growth rate. Cash cows Example is classic range. Marks and Spencer enjoys strong supporters thus leading to low growth but high market share Dogs Example is autograph range. This involves a premium placed product for women and men that demonstrate low market share and low growth. Even though autograph range is placed in the dog quadrant, the premium pricing strategy applied by the supermarket makes the products to generate high revenue for the company. Mark and Spencer plc SWOT analysis Strengths Good logistics Level of employee’s motivation is high Strong brand identity Good administration Strong positive reputation Weaknesses Rising of prices due to increasing energy prices Low sales for average income earners Opportunities Exploring continental markets Expanding the product portfolio Expanding the market share Formation of mergers and acquisition Threats Increased fuel prices New services provided by rivals Stiff competition in the industry Terrorist attacks globally Strengths As compared to its competitors, Marks and Spencer has effective logistics thus its products are properly distributed locally and internationally. Additionally, the company profitability is improved due to the high level of workers motivation. Marks and Spencer has strong brand identity that has resulted into strong positive customer-brand relationship. In addition, the company has good administration that maintains effective management policies. Marks and Spencer has strong reputation that results to strong customer awareness. Weaknesses Due to regular increment of energy prices, the company reacts by raising its prices. Additionally, some Marks and Spencer products are of high prices making them not affordable for average income earners. Opportunities As the demand for clothing increases, Marks and Spencer has an opportunity of exploring continental markets and thus expanding its market share. The company should also diversify its product line in order to remain competitive and distribute its risks. As competition becomes stiff in the local markets, the company should adopt the strategy of merging and acquiring other companies as a way of strengthening its capital as well as marketing strategies. Threats High fuel prices may impact on the cost of production for Marks and Spencer resulting to high prices for its brands. Additionally, competitors are embarking on production of new and unique products and services thus creating stiff competition in the industry. As the world fight terrorism, Marks and Spencer utilities and services may be jeopardized by this menace. Mark and Spencer SAFS Framework Marks and Spencer adopts a culture of innovation and product improvement as a major way to satisfy the UK market. Based on the fact that the company operates in an industry that has grown, it is vital for Marks and Spencer to create new brands in order to face off its emerging competitors locally and globally. The section below indicates the SAFS framework for Marks and Spencer. Suitability Marks and Spencer key objective is to come up with brands that are suitable and meets the current demand for its customers. Additionally, the company has strong focuses on its customers thus providing them quality brands at affordable prices. Acceptability Marks and Spencer is aware that it does not have a contingency plan as it face stiff competition from the major competitors including Sainsbury, Tesco, Zara and Gap. Through the research that the supermarket has undertaken, it has also noted that it does not keenly follow the market trend in the clothing industry in addition to lack of effective customers services (Birman, 2014). Thus, there is need for the company to come up with an appropriate contingency plan as a way of facing off its rivals in the industry. Feasibility By combining the Marks and Spencer’s strengths, the company objective is to be feasible as well as to turn threats into opportunities. The supermarket also aims at product diversification as a way of keeping up with the challenges emanating from the competitors. In this way, the company has been able to satisfy their shareholders. Sustainability As a way of meeting the needs of its customers in the UK market, Marks and Spencer aims at becoming sustainable and for them to prosper, they have noted the importance of valuing their customers. Customers on their part feel that they are receiving the value for their money. Marks and Spencer also ensures that their products are readily available and that it is difficult for the competitors to imitate them. Recommendations One of the recommendations is that Marks and Spencer should set objectives whose aim is to foster appropriate change management within the various business operations in the company. This should start by undertaking extensive understanding of the current status of the company and then adopt effective strategies. Key challenges that would be addressed by application of effective change management is the regular staff strikes such as the 2013 staff strike in Ireland where workers took a strike over the company pension scheme. Change operation entails applying new strategies of carrying out tasks within an organization. In order to effectively manage its activities within the complex business environment, it is recommendable for Marks and Spencer to adapt to the present day business context. In this way, it will be in a position to identify not only the opportunities that exist in the emerging economies but also the challenges that exist in its market segments. Additionally, the company should emulate proactive and agile ways of approaching the current business atmosphere for it to maintain its competitive advantage. This is due to the manner in which companies like Tesco, which controls 30% of the market has embarked on product innovation and quality management in order to face off its competitors in the current business environment. Currently, Marks and Spencer does not maximize on its potential due to obstacles such as inappropriate management policies, low customers satisfaction, and high operations costs among others. This implies that there is need for the company to make organizational changes for instance in the areas of marketing strategies, customer relations, management approaches and employee’s management (Johnason, 2009). Conclusions Based on the effective management policies that Mark and Spencer plc has applied in its operations, it is clear that the company has maintained strong positive relationship with its employees. As the result of the large number of customers in the retailing industry, many companies have emerged with various products. As a result, competition has become stiff among the companies making each of them to adopt a policy that aims at facing off the competitors. For its part, Mark and Spencer plc offers low prices as well as wide product portfolio as a means of ensuring its meet the needs of its customers. Mark and Spencer plc quality brands are introduced to face off the competitors including next plc, Asda Group Ltd, and Tesco plc. Additionally, the strong capabilities and resources including skilled work force, financial soundness, expansive market and large number of machines has made the company to main the culture of innovation and product improvement. Despite the weaknesses of rising of prices due to increasing energy prices and low sales for average income earners Mark and Spencer improves its brands and services by exploring new markets, expanding the market segment and acquiring other companies. As the result, the company remains noticeable in the global retailing industry. Through the recommendations that includes adoption of effective organizational change and improving customer relations, Mark and Spencer will be in a position to effectively face off its competitors in the clothing industry. References Birman, D. 2014. Business management. International Journal of Intercultural Relations. Volume 43, Part A Chisnall, P. 1985. Marketing Behavioural Analysis. Berkshire: McGrow Hill. Costa, E. 2003.Strategic Management. Sao Paulo: Saraiva. Coyne, P and Sujit, B. 1996 .Bringing discipline to strategy. The McKinsey Quarterly, No.4. David A. 1996. Marketing Management and Strategies. New York: John Wiley and Sons. David, A. 1988. Developing Business Strategies. London: John Wiley and Sons. Hayes, D. 2004. M&S and teenage frills. Evening Standard. Retrieved 23 February 2015. Hochbaum, E, Yelland, P and Catena, R. 2011. Rating Customers According to Their Promptness to Adopt New Products, Operations Research 59(5): 171-183. Hunger, H. 2002. 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