Relationships between Strategic Position and Strategic Choices of Marks and Spencer Plc - Case Study Example

Relationships between strategic position and strategic choices of M&S Plc Name Institutional affiliation Instructor Date Marks and Spencer (M&S) Group Plc is an old British retailer which is one of the largest in the world and the leading in Europe and largest clothing retailer in the United Kingdom (Bevan, 2007). When it started, it only acted as a general merchandising thus dealt with clothing and household goods but it later added fresh foods in 1950s (Nicolson, 1969). In the mid 1950s, all their goods were sold under the brand label of St Michaels and became the synonymous with all the British made goods, customer service, quality and fair value for money (Bevan, 2007). This company has grown and expanded to almost all countries in the world forming partnership with major main suppliers. The Macro Environment PESTLE is the classification of macro environment which in other terms is referred to as external forces into political, economic, social cultural, technological, legal and ecological factors (Fernie, 2007). The main aim of analyzing these external factors is to view their potential impacts they can have in an organization. Some of the relevant lists of PESTLE in M&S are as follows; Political factors Government policy is one of the political factor affecting M&S operations in various parts of the world. A good example in this case is the fear of impact of labour government, witnessed in 1970s, was an impression of Lord Sieff’s underlying principle for M&S’s entry into the global markets (Bevan, 2007). The other factor is the political factors of choice made by Greenbury deciding to chair the remuneration committee because of the knock on performance of M&S leadership effectiveness. International trade policy has also affected the M&S in many ways in that some liberalization of trade in china and EU set some incentives that were previously not there. Instead of setting up some new opportunities, some policies block free trade and develop high tariffs (Nicolson, 1969). Restoration of the consumer confidence to M&S by the government is the other important political factor (Hollender & Breen, 2010). This supported the economic activity in the face of threats of the national and global recession. Still on politics are the international political upheavals, risk of unrest witnessed by M&S while exporting their products to some parts of Asia and the local wars. Economic factors The threats of both national and international recessions have made lowered the consumers’ confidence as well as their spending, and also warn customers’ willingness to pay quality premiums (Hollender & Breen, 2010). The other factor is the constant currency fluctuation for example the rising of the pound in early 1999, which increased the costs of M&S merchandise abroad making M&S to put themselves in the global market other than that of UK with high costs of imports than those of the other competitors from other countries. The fall down of the Asian markets in 1997 damaged a lot of markets which was relied by M&S group The European clothing import quotas from Sri-Lanka and china affected the M&S supply of clothing in Europe at large The amendment of new labour laws in the year 2008 which outlawed poor employment practices also increased the costs The new entrance of new market suppliers like niche retailers also affected the supply of M&S as some customers shifted to buy from them (Drucker, 1999). Socio-cultural factors Some lifestyle factors have constantly shaped the needs of M&S’s main markets for example body shape trends and fashion trends. This has increased the cost of production since fashion changes rapidly There is shortening of products lifecycles for fashion clothing. There is a lot of competition in the market and hence the customers expect a range of turn-round giving a lot of pressure to efficient logistics and needed manufacturing capability by designers and suppliers (Bevan, 2007). Global cultural trends especially with clothing is very sensitive and some cultures have strongly condemn M&S designs Technological factors There is very high use of technology in information sharing within the retail sector e.g. the use rising use of social media like face book to advertise M&S products Distribution methods have been boosted by ICT like home-shopping, internet and in-store ordering Global marketing has also been made easy trough ICT and transport technologies Legal factors Contract and business law has impacted on both consumer protection and buyer-supplier relationships. There is also competition law which has guided mergers and acquisition process There are employment laws guiding on how to operate in various countries of operation like on matters of health and employment protection in the overseas markets (Bevan, 2007). There is also compliance issues Ecological factors There is emerging rampant environmental factors like climate change and carbon footprints Consumer pressure and government policies on global warming as well as sustainability. There must be clear brand differentiation and well organized market leadership The food supply chains have been affected by spreads of diseases in various parts of the world There is also weather impacting demands for the clothing products Porter’s 5 forces model Competitive rivalry: The competitive rivalry is very high in clothing sector especially from next and gap because they also produce high quality clothing materials. In food industry, they also face stiff competition from Tesco (Fernie, 2007). Bargaining power of buyers: is also high in that they have a very big number of retailers which are very close. Bargaining power of suppliers: this is low because there are concentrated purchasers in the market Threat of new entrants: it is medium because it is difficult to beat the already established retailers due to customer’s preference and test as well as culture (Drucker, 1999). Threat of substitutes: this is high in that there are some retailers buying goods especially cloths from some rising competitors like china thus selling them in relatively cheaper price. SWOT analysis Strengths: M&S Group has always produced and supply high quality products both in clothing and food industry. Their employees globally are treated well and are given good pays. It has 718 stores across 34countries and all over high streets in London It is a profitable company which focuses in retail sector. They also have a very long term unbroken relationship with their suppliers It has existed for more than hundred years hence has developed a good history of trade Weakness: Since time immemorial, it has over relied on British suppliers with an expense of adopting new suppliers for low cost products like china They are radical to change due to old history thus has a poor advertisement strategies. For instance they don’t have offers during high seasons unlike their competitors Customer focus is not their priority in that they belief they have their own customers They don’t provide fitting rooms in their stores as well as loyalty cards thus having poor customer service Opportunities They have to enter electronic business just like their main competitors Due to their long time history, they have developed customer trust hence they expand rapidly in growing product areas such as fashion, beauty and food industries Fashion keeps on changing and the business is growing rapidly in developing countries hence there are some clear opportunities for M&S to develop and expand (Bevan, 2007). Teenagers are focused on fashion like never before due to social media and TV shows hence offering a clear opportunity for the company Threats M&S operates in various segments like clothing and food hence have many competitors in the market like Zara, Gap and Tesco companies Technology makes customers to rampantly look for new fashion cloths Internet for instance gives an opportunity the customers to do e-business shopping at home TOWS matrix internal factors This can be used to evaluate the strategic direction of M&A thus gaining an understanding of how it can convert its weaknesses to strengths and their threats to opportunities. Mark and Spencer have a clear goal of providing their customers with high quality products across the world. They encourage a competitive work place and reward its employees (Fernie, 2007). They want trust and high values from its customers thus manage their operations responsively to attract customers and win new entrants. As shown by the table above, M&S should use strengths it possesses to exploit all the opportunities available in the market since it is the oldest and has the customer trust. It should also overcome all the underlying weaknesses to exploit opportunities in the market (Bevan, 2007). As an old retailer company, it should also use its strengths to avoid threats and also minimize its weaknesses to avoid threats. The culture web of M&S Stories The main stories narrated to the new comers are those of high quality maintenance and M&S mission and vision (Fernie, 2007). The old existence of the company in the market is also important stating from how the founder Michael marks sets up the company in 1884 and later own joined by tom Spencer (Bevan, 2007). These stories reflect the core beliefs in that it shows how dedicated the founding fathers was and how the company aims to accomplish its mission. Rituals and routines The routines emphasized are those of high quality as indicated by the founding fathers mark and Spencer. The set up of huge stores in all parts of the world is one of the routines emphasized by the management (Drucker, 1999). For the behaviors, discipline is highly emphasized for the development of trust between the consumers and workers of the company. Payment of some reasonable price for high quality products is one of the core rituals. However, rituals and routines are rigid and cannot easily be changed (Worth, 2007). Control systems The system of management emphasized by M&S is the top down management system whereby decisions are passed from above to grassroots level (Hollender & Breen, 2010). Reward for the employees is highly motivated by the management for higher production rather than punishment which may lower production. The controls are from top management. Symbols The main symbols used by the company to date are those of the founding fathers the St Michael and per union of M&S. the main stores in high streets in London are also emphasized to symbolize high prestige and the status quo of the company. Its head office in London is also used as the main symbol of the company (Bevan, 2007). Power structures The head office situated in London makes all the company’s decisions. However, Simon marks and Granbury are autocratic and their opinions are not challenged. Organization structures They are hierarchical and centralized in that they are all made in head quotas and passed from the decision makers to the managers of various departments and lastly to the workers(Nicolson, 1969). The structures of M&S encourage competition rather than collaboration. Strategic choices M&S strategies are cost leadership in that decision making are made by the main leaders from the head quotas and followed by the junior staff. However, some strategies have been put into place after the economic recession of 1991 and 1999 crash as well as 2004 transition. This has been put in place to intervene in cases of emergencies instead of depending on single central leadership line. Other strategies like cost cutting were also imposed by recession or the financial pressure. The Ansoof matrix This is a grid that attempts to clarify some specific options in an established organization in terms of the direction it takes. It is useful in strategic choices though it was first used as a marketing model (Seth, & Randall, 2011). This matrix model can be useful in analyzing the M&S Company due to various reasons which include: First of all, this model depends more on the safety and exploitation of its older brands even in the current face of recessionary pressures in the market It is posit to develop new markets as well as products for the purpose of maintaining growth The analysis of M&S strategic potentiality in Annoff’s broad categories is as shown below: Build/Protect This strategy must be one of the core strategies in M&S’s as the company relies heavily on the performance of its main products due to the developed trust by the consumers (Worth, 2007). The main agenda should therefore be leveraging the consumer’s loyalty to prevent them from going to the other competitors like Tesco and Zara (Bevan, 2007). Withdrawal is a common strategy to free up capital and give out the organizations of the underperforming assets. For instance, M&S has sold its portions of some businesses merging with other companies throughout the world and this has helped to boost business as one of the key recession recovery plan (Drucker, 1999). The other strategy is the consolidation which protects and strengthens the organizations position in both old and the new markets. This has been achieved through reinforcement of marketing practices across the globe to maintain the customer’s loyalty (Nicolson, 1969). Another important strategy is the market penetration involved with development of larger market share in both existing and new ventures with existing products. For the case of M&S, promotion is the key market penetration due to its creation of new stores in developing countries (Fernie, 2007). This is because the company’s direct sales were growing faster than the expansion of the market. Market development for instance concentrates on development of new markets for the existing products. Marks and Spencer should do some research to reach the markets in the world which are currently unreachable for the extension of the existing market (Seth, & Randall, 2011). However, the company should be highly selective while choosing the markets due to cultural differences. The product development strategies on the other hand involves introduction of newly developed products to the already existing market (Bevan, 2007). It offers an opportunity to the company to utilize existing logistics, the customer’s knowledge and also to exploit current brand strength. This has been done by the M&S Company’s by introduction of per una brands to the market. Lastly is the development of new products for the new markets known as diversification strategy. This is the most risk strategy because the companies learn from products which are also new to them in the market. M&S should consider new products in the market within the same industry to avoid the risk (Fernie, 2007). M&S Company has treated the parliament high street in London as its cash cow in that they have always made huge amounts of profit. This is because the parliamentarians have a lot of cash and they value originality (Hollender & Breen, 2010). They believe M&S has what it takes when it comes to quality as they want to maintain their status quo. On the other hand some stores have been underperforming to extend that some of them were closed long time ago especially those in overseas. The corporate parenting types of M&S International choice International strategy: marks and Spencer have worked with other international companies by partnering with some like Amazon for them to build on e-commerce platform Model drivers: the main model drivers currently in M&S are the women wear which are gaining popularity throughout the world as they follow fashion and the food industry (Seth, & Randall, 2011). The teens wear are also gaining popularity and is one of the model drivers in M&S Company. Cost drivers: M&S has a strong culture of paying their workers nicely to gain their confidence. They usually reward their employees and their drivers globally have always been rewarded. However, they have faced a lot of pressure to cat down their cost of supply. Completive drivers: The cloth and food industry is currently very competitive and hence M&S has laid down its competitive strategies to remain relevant in the market. They have adopted e-business by merging with Amazon so that they market their products online. Advertisement has also been given priority by M&S especially the social media (Seth, & Randall, 2011). They have used David Beckharm to advertise their fashions. Travel, media and ICT have made the global marketing very simple than never before. International expanding: it has 718 stores across 34 countries and is expanding to other countries especially developing countries and parts of Africa. Their products are also sold in various super markets. They have very wide supplier diversity in the overseas -Help international choices Export: M&S exports its products to various parts of the world from its head quotas in London Licensing: the licenses are only given to the retailers and those companies that have been given an authority to sell on behalf of M&S like Amazon Joint venture: M&S has exploited this inter-organizational structure by making some joint venture with Tesco in order for them to develop the main edge of town stores -Evaluating strategic choices Sustainability: the only way M&S can make its strategies sustainable is by making their core competences like high value to customers, inimitability and rarity constant (Hollender & Breen, 2010). This is because the customers they are not being valued as the other competitors offer services at a lower price compared to those of M&S. Accessibility : critical analysis of M&S weaknesses like their failure to follow the market trend in the clothing industry as well as poor customer services posts a lot of threat from the potential competitors like Tesco and Zara as indicated by the trends in UK (Worth, 2007). Feasibility: the current strategies used by M&S can be feasible due to its combinations of the strengths but there is a lot of need to convert their threats to opportunities. Most of the shareholders should be satisfied to make them remain loyal by keeping the challenge from the competitors who have posted a lot of threats in the market. In conclusion SWOT and PESTEL analysis indicates that M&S has some strength in various sectors. However, there are also some weaknesses which should be checked for proper performance of the company. There are also some opportunities in the market though threats are also present but exploring them can lift M&S into the higher heights. The competition is getting tougher than never before due to entrance of new suppliers in the market and hence customer’s loyalty is very important. References Bevan, J. (2007). The Rise and fall of Marks & Spencer: and How It Rose Again. London: Profile Books Ltd. Drucker, P. (1999). Management. Oxford: Butterworth-Heinemann. Fernie, J. (2007). Logistics and Retail Management: Insights into Current Practice and Trends from Leading Experts. London [u.a.: Kogan Page. Hollender, J., & Breen, B. (2010). The Responsibility Revolution: How the next Generation of Businesses will win. San Francisco: Jossey-Bass. Nicolson, London, (1969). Tse, K., Marks and Spencer: Anatomy of Britain’s most Efficiently Managed Company, Pergamon, Oxford, 1985. Seth, A., & Randall, G. (2011). The Grocers: The Rise and Rise of the Supermarket Chains. London: Kogan Page. Tse, K. K. (1985). Marks & Spencer: Anatomy of Britain's most efficiently Managed Company. Oxford u.a: Pergamon Pr. Weil, R. Schipper, K., & Francis, J. (2014). Financial Accounting: An Introduction to Concepts, Methods, and Uses. Mason, OH: South-Western, Cengage Learning. Worth, R. (2007). Fashion for the People: A History of Clothing at Marks & Spencer. Oxford [u.a.: Berg. http://cscmp.org/downloads/public/resources/casestudy/ms.pdf . Read More