Marks and Spencer: Factors Affecting the Supply and Demand - Case Study Example

Marks and Spencer - Factors Affecting the Supply and Demand - Total Number of Words: 2,075 Introduction Marks & Spencer (M&S), a British-owned retail company, was established by Michael Marks and Thomas Spencer back in 1884. (Marks & Spencer, 2008a) Despite the tight competition in the global market, M&S has maintained its reputation as one of the largest high-priced merchandise seller of food, wine and clothing not only in the UK market but also in more than 30 countries around the world. (BBC News, 1998) In general, Marks & Spencer’s food products is not limited to the bottle of wines, chocolates, and candy bars we see at the store counter. The company also offer the public other food items such as personalized cakes for special occasions (Marks & Spencer, 2008b) and other food items like sandwiches, sushi, pasta, pizza, organic fruits and vegetables, and other food packages like gourmet dinner, Sunday lunch, family feast, lunch or finger buffet, and kid’s party among others (Marks & Sencer, 2008c). For this study, the factors that significantly affect the supply and demand for the food products offered by Marks and Spencer will be identified and discussed. Eventually, the economic concepts related to elasticity will be used in analysing the forecasted sales of Marks and Spencer food items over the next couple of years. Upon describing how good management such as effective “value chain” could increase the success and survival rate of the company, a list of recommended strategies which could enable the company survive the tight competition in the food industry including some strategic ways that will empower the company despite the economic recession will be tackled. Factors Affecting the Supply and Demand of Marks and Spencer’s Food Products In general, the supply of Marks & Spencer’s food products should be based on the public demand for each food item. To ensure a good business performance, it is important on the part of the manager to analyze and accurately determine each internal and external factor that can significantly affect the supply and demand of Marks & Spencer’s food products. Since food products have expiration date, the ordered food supply should be based on the specific demand for Marks & Spencer’s food items in order to avoid unnecessary wastage of monetary investment. Demand for Marks & Spencer’s Food Products There are quite a lot of external factors that can significantly affect the demand for Marks & Spencer’s food products. Among the most significant factor includes the country’s economic condition as well as the household income. Given that a country’s economic condition is under recession, there is a strong possibility that more people would simply save their money to buy other cheaper food products as compared to the food items being sold at Marks & Spencer retail store outlets. Likewise, given that the household income has declined, there is also a strong possibility for people not to purchase Marks & Spencer’s food products. Instead of ordering lunch buffet meal during special occasions, some families would simply prepare their own simple meal at home. For this reason, the demand for Marks and Spencer’s food items is more likely to decrease. On the contrary, given that the country’s economic condition is good, there is a bigger possibility that more people would patronize the food products offered by Marks & Spencer. For this reason, demand for Marks & Spencer’s food items is likely to increase. Aside from external factors related with the economic condition in UK, internal factor such as investment on the use of electronic commerce (EC) such as the use of company’s official website also enables Marks & Spencer to significantly increase the demand for its food products since the company website is easily accessible and available to its prospective target consumers who would want to place an order 24/7. Demand for Marks & Spencer’s Food Products When it comes to the supply of Marks & Spencer’s food products, the company has established a standard ordering system to enable the company employees to have sufficient time for the food preparation. Based on the company’s ordering system, at least 2 days notice in advance should be allotted when ordering sandwiches or sushi and at least 5 days for real foods like pizza, pasta, meat & poultry, salads, quiches & tarts, and desserts among others (Marks & Sencer, 2008c). Application of “Elasticity” in Analysing the Forecasted Sales of Marks and Spencer Food Products Over the Next Couple of Years Marks & Spencer‘s Classic Selection Platter which is composed of sandwiches made of five different classic fillings is currently priced at £10.00 per 5 servings. (Marks & Spencer, 2008d) Given that the company decided not to change the market price of this particular food item, there is a tendency that the forecasted sales of Marks & Spencer for this particular food item to gradually decline over the next couple of years due to the fact that UK economy is already showing a gradual economic slowdown (recession) (BBC News, 2008). Given that the company decided to make the price of Marks & Spencer’s Classic Selection Platter elastic by decreasing the price of this particular food item down to £8.00 per 5 servings, there is a tendency that the company will be able to maintain a higher forecasted sales over the next couple of years as compared when the company maintain its original market price at £10.00 per 5 servings. Impact of Good Management Over the Success and Survival Rate of the Company Despite the slow growth in UK economic condition, the company’s decision to apply good management particularly on the practice of an effective “supply chain” could increase the success and survival rate of the company. Basically, the company’s supply chain management can be improved by investing on electronic commerce (EC). Among the types of EC processes that Marks & Spencer adopted includes: (1) consumer-to-business; and (2) business-to-business. (Ong, 2004; McKie, 1997) Consumer-to-business, specifically the ‘selling online’ option, enables the company’s target consumers to purchase their preferred items straight from the company’s website. Upon paying the merchandises online, the purchased product will be delivered straight to the buyers’ stated delivery address on the agreed delivery schedule. (Marks & Sencer, 2008c; Turban et al., 2006) Aside from allowing Marks & Spencer’s customers to view a wide-range of food items online, the use of EC provides the customers the benefit of being able to purchase their preferred items 24/7, 265 days a year. (Norum, 2008) Since the company’s EC processes functions on a real-time basis, the company is able to accurately determine and forecast the demand for each particular food item on a per day basis. Business-to-business is pertaining to the use of the information technology that hastens the business transactions between M&S and its existing pool of food suppliers. Using this type of EC option, the company is empowered to make a real-time forecasted demands which is directly transmitted to its respective suppliers (Turban et al., 2006). Since the company’s qualified suppliers are able to receive the order on a real-time basis, food suppliers are able to have sufficient time to prepare the necessary ingredients needed in the preparation of each ordered food item. As a result, the business processes associated with the selling of Marks & Spencer’s food products becomes more efficient. Considering that most of the business to suppliers transactions are done with the use of information technology, M&S is able to cut down its operational costs related to telecommunications services through the use of landline and cellular phones in making long distance calls. (Korzeniowski, 2008; Fisher, 2000) The benefits derived from implementing the EC processes does not only include the short- and long-term advantages associated with enhancing the efficiency of the company’s supply-chain management. (Epstein, 2004: p. 4) It also widens Marks & Spencer’s business opportunity by extending the purchasing option to individuals who has a very busy lifestyle to go shopping in malls and optimizing its current delivery channel (Epstein, 2004: p. 89). Since the application of EC processes in Marks & Spencer’s website enables the company to take orders 24/7, there is an increased possibility for the company’s total sales, revenue,profitability, and market shares to increase. Likewise, the use of information technology makes it possible for Marks & Spencer to synchronize and integrate the company’s purchasing system into a centralised department that requires lesser manpower. Given the fact the Marks & Spencer is able to integrate the demand for each type of food item, the company is able to enjoy the privilege of having more bargaining power over its qualified food suppliers since the company is capable of ordering each particular food item from its supplier by bulk. Through a minimal cash outlay required in developing the company’s EC processes, Marks & Spencer is able to reach millions of potential customers as well as qualified investors and local food suppliers that are capable of delivering high quality food products on time. (Karavdic and Gregory, 2005; Kleindorfer and Wu, 2003) Basically, having more bargaining power over the unit cost of each item (Epstein, 2004: p. 4) combined with much lower operational cost and the company’s ability to generate sales makes Marks & Spencer capable of maximizing its profitability coming from online sales of food-related products. Recommended Strategies to Promote the Company’s Survival Considering the fact that food items are perishable, Marks & Spencer should be able to establish a more efficient business process through the use of its company website. Basically, Marks and Spencer should continuously improve and upgrade company website since the use of information technology not only enables the company to be able to track down real-time demand for each particular food item but also enables the company to reach out to a larger number of potential customers and qualified local food suppliers. The use of EC option also makes the communication between Marks & Spencer and its contracted food suppliers much easier. As a result, the company is able to maximize the use of its available human resources without the need to hire excessive number of employees. Implementing EC processes does not always guarantee that a company will become successful because of some major technological and non-technological limitations associated with EC processes. (Epstein, 2004: p. 109) Among the technological limitation of EC processes includes the threat of fraudulent activities that occurs in the cyber world. (Muir and Oppenheim, 2002) Despite the fact that there have been cyberlaws that protects the intellectual property rights of each business, it is not a 100% that cyber thieves will be controlled (Malkawi, 2007). Aside from security problems, insufficient telecommunication bandwidth could significantly affect the real-time transfer of electronic information (Sidak, 2006). For this reason, Marks & Spencer should find ways to increase the website security. On the other hand, non-technological limitation of EC processes includes the inability of the manager(s) to develop or formulate as well as execute an effective business strategy related to the company’s business structure and systems. (Epstein, 2004: p. 109) For instance: The company’s ‘selling online’ requires a prompt and friendly customer service who will be assigned in answering the queries of its prospective consumers. By the time a buyer has successfully placed the on-line order, customer service should immediately make a confirmation that the order has been accepted and that the purchased item will be delivered to them on the agreed schedule. In other words, continuously improving the company website is not enough to increase the company’s overall annual sales. Since there are major technological and non-technological limitations association with the use of EC processes, the company should also focus on training its customer service representatives on how to properly deal with customer queries. In general, increasing the quality of customer service will enable Marks & Spencer hold on to its existing customer-based. Being able to maintain a good business relationship with the company’s loyal customers will increase Marks & Spencer’s survival rate despite the recent economic recession throughout the United Kingdom. Conclusion Determining demand of food products is necessary to ensure that the company is able to supply what the customer ordered. Despite the negative economic condition in UK, the use of EC processes enables Marks & Spencer improve its sales and profitability since the company is able to reach the larger markets 24/7 and 365 days a year at a relatively low investment cost. Given that there are technical and non-technical limitations associated with the use of EC processes, the company should focus on rendering a good and prompt customer service to prevent business opportunity loss on the part of the company. References: BBC News. (1998, May 19). Retrieved October 29, 2008, from Marks & Spencer Profits Top Expectations: http://news.bbc.co.uk/2/hi/business/96531.stm BBC News. (2008, January 28). Retrieved October 29, 2008, from UK economy at risk of recession: The UK economy is set to experience its weakest period of growth in 15 years and there is a risk of a recession in the next two years, a report warns : http://news.bbc.co.uk/2/hi/business/7212545.stm Epstein, M. J. (2004). Implementing E-Commerce Strategies: A Guide to Corporate Success after the Dot.Com Bust. Praeger. Fisher, M. (2000). Using e-commerce to Deliver High Productivity. Work Study , Vol. 49, No. 2, pp. 59 - 62. Karavdic, M., & Gregory, G. (2005). 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