Mark and Spencer Strategy - Essay Example

Introduction and Corporate Overview International retailer Marks & Spencer is a proficient player in the clothing, food and financial service sectors. The company began its commitment to value, quality and customer service in 1884 when Michael Marks and Tom Spencer entered into a business partnership. The company has evolved to one of the largest retailers globally. The entity ventured into the food business in 1931 and later moved into financial services in 1985 (Marks and Spencer Plc., 2012). Being one of the leading retailers, the company is visited by approximately 21 million people on a weekly basis. This can be attributed to the quality home products, stylish clothing and outstanding quality foods got from over 2, 000 suppliers worldwide (Marks and Spencer Plc., 2012). The company employs over 78, 000 people in the UK and global market and has over 700 stores in the UK and a growing international market (Marks and Spencer Plc., 2012). The entity is the best provider of lingerie and women wear and are increasingly expanding their business men’s clothes and kid wear owing to their developing online business. In general, sales and home ware sales account for close to 49 percent of the revenue. On the other hand, their food business contributes for 51% of the revenue. The food business deals in fresh produce, ready meals and partly cooked meals. This paper gives a detailed analysis of Marks & Spencer strategy by using some of the widely used business models including PESTLE, SWOT analysis, VRIN and Porter Five Force Model. The Macro Environment In order to get deeper understandings of the external factors affecting the company’s operations including trends and environmental issues. The PESTLE analysis is used to analyse the business market and establish the potential external issues affecting the business in the political, economic, social, technological, legal and environmental circles. Political factors The political set up in the business environment affects the consumers’ buying power and the regulations governing the entity. It is therefore important for Marks Spencer to take into account certain political issues before introducing a give business strategy (Left, 2001). The company is based in the UK whose political environment is relatively stable. In addition to, the tax and labor systems in the country have been regarded as the most attractive in the developed world.  Economic Factors The UK economy is ranked as being the fourth largest in the world and it is viewed to be an open economy. It is further characterised by well managed fiscal and monetary policies with full financial government support and low inflation rates. The company should consider any short- term and long- term issues affecting its operations before implementing any strategy (Left, 2001). The company is advised to invest more in the clothing industry as the young people are more likely to spend their disposable income on clothing. Social Factors The socio- cultural factors affecting entities differ across countries. Being an international company, Marks & Spencer has spread its operations across the globe (Rayner, 2008). The management needs to address this issue by looking at some of the factors affecting the consumers’ attitudes, tastes and preferences in local and foreign markets. Taking these aspects into consideration ensures that they meet the needs of the organisation. Technological Factors Technology is an important factor since it gives a company competitive advantage over its competitors in the global market. Marks & Spencer competitors are argued to be more developed in the application of technology (Rayner, 2008). This can be observed from the fact that the company introduced online shopping and loyalty cards after their major competitors. This can have an adverse impact on the entity’s competitive position and it’s a high time the company started using the latest technology in their sales and production process. Legal Factors The legal environment in the UK is favourable and the entity has not been involved in any major legal problems in the past. The company ensures that all its operations are in line with the stipulated rules and regulations (Marks and Spencer Plc., 2012). Environmental Factors Environmental issues have become increasingly controversial over the years and the management needs to that its activities do not violate any environmental policies (Marks and Spencer Plc., 2012). The company participates in environmental conservation activities and ensures environmental friendly practices such as recycling and tree planting activities. Industries, Value Networks and Strategic Suppliers Porter Five Analysis The market in the United Kingdom is currently going through recession with unemployment hitting the highest levels ever recorded and the confidence of the consumers is weak thus people are not spending as much as usual at checkouts. Consequently, most retailers in the UK have to adapt to the situation as quickly as they can so as to survive the current economic crisis. The uncertainty in the job market combined with high inflation is some of the factors that have led to people’s disposable incomes reducing drastically. Inevitably, this has greatly contributed to people’s spending reducing now more than ever before (Porter, 2006: 23). M&S suffers the possible consequence of losing customers when they look for cheaper alternatives because M&S products are very expensive by virtue of their quality. Threat of Entry Although the recession has ensured there are no new traditional high street retailers enter the market, M&S is still at a disadvantage because of the upcoming online retails. Additionally, the product lines found in the supermarkets is also a major threat to the company (Porter, 2006: 27). In recent times, M&S has responded to the fact that they too must embrace the developing online market or otherwise they could lose market share. Online trading is a great advantage because it reduces cost of overheads such as staff and premises. It is for this reason therefore that more retailers fine online trading more attractive and hence increasing competition for M&S. Supermarkets on the other hand have the added benefit of having an established customer base as well as s firm distribution system. Threat of Substitutes The high number of competitors results in a high number of possible substitutes (Porter, 2006: 23). M&S considers John Lewis and Waitrose as direct competition for them, the difficult economic times presently dictate that customers seek alternative retailers for example Next. Nevertheless, history has shown that the company is slow to react to the dynamic changes in the fashion world. On the other hand competitors are much quicker to adapt to change. Power of Buyers The numerous retailers in the market have resulted in consumer freedom to shop in other areas. M&S must ensure it maintains the trust of their customers by continuing to supply garments that are of the highest quality to make sure they retain their customers (Porter, 2006: 23). M&S needs to realise that the buyer can easily switch to other suppliers and hence M&S must continue to provide the buyer with the best money for their value. Power of Suppliers M&S has the advantage that it does not depend on any supplier because it sells products that are own branded. This is advantageous to profit margins because it buys raw materials and not finished products (Porter, 2006: 23). In addition to this, their long time relationships with suppliers have enabled them to negotiate discounts. Competitive Rivalry AS already mentioned M&S faces stiff competition from clothes retailers for example Next and John Lewis as well as from supermarkets for example Asda, Tesco and Sainsbury’s due to their nature of clientele (Porter, 2006: 23). Although M&S is renowned for being a higher quality brand that gives its customers value for their money, they need to reconsider their prices to escape loss of customers. However, the recent slashing of prices as well as rebranding may cost the retailer many customers because of devaluing the brand. Markets, Customers and Competitive Conditions Although M&S faces numerous external challenges, its internal environment also experiences challenges (Barett, 2011). The SWOT analysis will give a detailed analysis regarding the company and how it can grow. Strengths The M&S brand is known for its quality as opposed to quantity and hence customers buy less quantity but high quality. 72% of the M&S clothing range within great prices and hence are able to maintain their loyal customers (BBC, 2009). Additionally, the customer loyalty that the company enjoys is great for its market share as well as its profit margins. Additionally, their aggressive market strategy has yielded fruit and expanded the customer base. Using names that are well known for instance Myleen, Twiggy, Take That and Klass has led to memorable advertising that catches the customers attention particularly during season festivities like Christmas (BBC, 2009). Weaknesses Ordinarily, this brand is for the older generation and that where their customer base lies. However in their efforts to increase their number of consumers, M&S may have sidelined the older generation leading to running the risk of losing their original customers to their rivals including Primark and Matalan (Burdett, 2011). Opportunities M&S now has the chance to import cheaper fabric from developing markets for example China. This will eventually lead to increased profit margins (Felsted, 2011). The new website that has greatly been improved is very attractive to new customers particularly those who are overseas. Their ‘plan A’ initiative is also creating greater opportunities because of the new culture of healthy living and sustainability. Threats Ever increasing competition from the likes of John Lewis that have a demographic that is similar. Customers are often tempted to go to other options hence M&S has to find a way to retain its customers and at the same time increase its customer base (Barrett, 2011). Strategic Resources, Capabilities and Internal Value Chain: Resource Based View This approach is used to study the firma and the strategy it applies. It assumes that the entity is a bundle of resources and it is the combination of the resources that makes a particular firm to stand out. This approach takes a look at the internal environment of the business by evaluating its assets, information, knowledge and their major attributes. M&S is an international retailer in the food, clothing and home ware business and boasts of having a competitive advantage over it rivals (Barett). The company has an adequate number of staff that is properly trained to deliver quality customer service. Some of the attributes that enable the company to stay at the top of its game are summarised in the VRIN characteristics explained below. Valuable The company’s resources are able to add value to the company and therefore a source of competitive advantage (BBC, 2009). These include innovation, online growth, loyal customer, excellent customer service and high class consumers. Rare Resources offer unique strategies that provide a competitive edge over its rivals. The company has diversified products and markets and this ensured that it retains a top position in the global retail market (Burdett, 2011). Inimitable Resources that can be easily copied by other competitors are not of great use to the company and they cannot be sources of competitive advantage to the business (Evans, 2011). Such resources include application of a give recipe in the food sector or quality customer service. Non- substitutability Resources should not be easily be easily replaced by other strategic resources. The best example of this scenario is the quality customer service offered to their customers (Evans, 2011). There can be no substitute for quality customer service. Synopsis of the Overall Strategic Situation In order to get an understanding of the overall strategic situation in the company, it is important to look at the past, present and future strategies applied by the company. Initially, the company mainly focused on establishing its brand name (Left, 2001). Some of the company’s resources included the St Michael trademark the policy of using good customer relations and British suppliers. Quality control was enhanced through the close relationship with the suppliers. In addition to, the management used the top- down management in all stores. Customer satisfaction and loyalty was enhanced and there was a constant growth in the market share until the 1990s. However, there was increased competition at the top and bottom and this rendered this strategy useless. The current strategy applied by the company focused on widening its appeal, introducing new products in the food and finance departments and responding to customer needs. These strategies have helped the company towards recovery. The development of an outstanding food market is considered to be a successful new resource. The company has undertaken the use of designers in the creation of exceptional food outlets. The company also plans to continue making investments in premises and facilitate their e- commerce operations (Evans, 2011). The CEO states that the future growth can be attributed to the reinvention of the company’s website and future and international expansion of the company’s activities. Conclusion In summary, the company’s success is dependent on market competition and the strategic management in the company. The company’s strategy has evolved overtime and the company has to stop using its original strategy as it could not cope with the changing market forces. There is need to retain the strategies that are practical and come up with new innovations in future. It is important to analyse the expansion business in global markets. There are several areas where future changes can be implemented. The company should improve the food resource to respond to the increasing competition in the market. They should discontinue the use of charge cards and encourage use of M&S in other sectors. Additionally, they should develop the e- commerce department. Finally, they should halt the sale of home wares are they are widely sold by retailers hence this business is faced by excess competition. References Barrett, C. (2011) ‘M&S sets course to combat dull high street’ Financial Times, viewed 18 May 2013 from . BBC (2009) ‘BUSINESS | Marks & Spencer profits top expectations’ BBC News, viewed 18 May 2013 from . Burdett, C. (2011) ‘Complementors’, viewed 18 May 2013 from . Evans, M. (2011) ‘Excellence in Financial Management’, Competitive Intelligence, viewed 18 May 2013 from . Felsted, A. (2011) ‘Marks and Spencer plans overhaul of stores’, viewed 18 May 2013 from . Felsted, A. (2011). ‘M&S targets foodies with delicatessen counters’ Financial Times, viewed 18 May 2013 from . Left, S. (2001) ‘The highs and lows of Marks & Spencer: M&S results ‘not good enough’ The Guardian. Marks and Spencer Plc. (2012) ‘History of Marks and Spencer’, viewed 18 May 2013 from . Porter, M. (2006) ‘The five competitive forces that shape strategy’, Harvard Business Review, pp 23-41. Rayner, G. (2008) ‘Financial crisis: Marks & Spencer to announce drop in sales as slump fears grow’ The Telegraph, viewed 18 May 2013 from . Read More