International Marketing of Marks & Spencer Company - Case Study Example

International Marketing of Marks & Spencer Company The founder member of Marks & Spencer is Michael Marks. In 1884 the business was like a petty bazaar stall but with the thought of expansion Marks & Spencer soon became a wealthy business. It was a partnership business between Michael Spencer and Tom Spencer. The business grew and became a business empire over a period of time. At present Marks & Spencer is one of the leading retailers in UK. The expansion can only be seen in the number of retail outlets it has in UK as well as in other countries. There are 600 stores in UK and over 200 stores in rest of the world. The business is set up in almost 40other countries. Both clothes and food outlets are found in Marks & Spencer. (“The history of Marks & Spencer”). A diagrammatic view of the business model of Marks & Spencer has been shown below. Research Design: The research design is based on the quantitative and qualitative analysis and data obtained from secondary research. This is a case study approach and more appropriately a situational analysis of the company, Marks &Spencer. The research has been undertaken after taking into consideration the business module of the organization. It has been analyzed that the business is mainly dependent on two verticals. Food and fashion are the main components of this retail company. In the research UK was considered as the country on whose basis the overall results have been determined. The reason why UK was chosen is that it is considered to be the country of retail business. While considering the industry analysis the focus has been given to all the industries that function in the retail sectors. The characteristic of this type of industry is highlighted in the research. In case of competitor analysis a research has been done on the brand value of all the companies which have their businesses in the retail industry. In case of consumer analysis the main emphasis is put on the advantages and the disadvantages of the consumer in relation to the retail company. SWOT analysis have been done with the view that how the organization has fared in the last few years and what can be the expected future of the organization in the coming years. Marketing Environment: While speaking about the marketing environment of Marks & Spencer certain analytical views must be shared. The elements which form this environment are country analysis, industry analysis, competitor analysis & consumer analysis. We will be discussing each element with a broader view. Country Analysis: Marks & Spencer’s headquarters have been located at UK. So the first thing that comes into the mind is the reason why UK has been chosen as headquarter of this organization? The answer is that Britain is often referred as the country of shop keepers. Hence Marks & Spencer perfectly fits into this role as it is undoubtedly the leader in the shop keeping business. M&S is the country’s one of the largest retail outlet. It holds around 17 percent of the UK’s clothing market. In London it has a marble arch store which takes into account more revenue per square foot than any other retail shop in the world. M&S has also been successful with all the British clients as it promotes the nationalism of Britain. (“A case study on Marks & Spencer”) Also around 11 percent of the total workforce is employed into the retail sector of the country. The total retail sales in 2005 have contributed around 8 percent to the total UK’s gross domestic product. Also the rise in online shopping in UK has made it possible for the sales to go up for the retail industry. (“The UK Retail Market Research Report”) Industry Analysis: The functioning of the retail industry can be analyzed if we understand the features of retail industry. The discussion is broadly based on the following points: Requirement of diversity in business risks: Business risks are largely dependent on the segment in which a retailer operates. In addition to these the overall competitive environment and the position of the retailer in the industry are both correlated. An example can be viewed in this light which states that food segment which is inelastic in nature have lower business risks than others. On the other hand specific retailers suffer from seasonal and cyclical volatility which provides them with higher business risks. Strong Logistics and rising standards of implementation are key variables: The basic functioning of a retail industry lies in the fact that it provides right product at the right price and at the right time to its consumers. The value chain of a retail industry is the best indicator that if the consumers are not happy with a particular product (in terms of quality and price) then the performance of such will be indicated in its operating and financial statements. It’s a capital intensive industry: Retail industry is highly capital intensive in nature as it requires huge investments in fixed assets. This also includes the retail outlets warehouse and distribution networks. Managing of such assets is of prior importance as it gives the industry with optimal returns. Growth Strategy: The growth strategy plays a pivotal role in building up the base of the retail industry. Retailers look into newer sources of growth (such as Kingfisher and Metro) through which they can expand their business. However the format of the retail industry is a cause for concern as the implementation of retail industry are not accepted well except for hypermarkets and cash and carry. Choice of markets is very integral: Only a few large retailers do have the ability to shift to other geographical regions. For small retailers local and regional businesses are of prior importance hence choosing of the market becomes significant as it directly impacts the earnings and growth of the industry. (“Moody’s Rating Methodology”) Technological Benefits: Radio Frequency Identification also called as the (RFID) technology has been successfully deployed in the retail industry. The basic criterion of such technology is to enhance the consumers’ experience. In addition to that it also focuses on the managing up of inventory, reducing counterfeiting of high ended goods and enhance in store shopping. (“AIM Global Industry Brief Recaps 2008 RFID-Enabled Retail Sector Proficiencies”). Competitor Analysis: The competitor analysis in case of Marks & Spencer’s can be shown with the help of a pie chart. (“Supermarket 'Inevitably' Tops Brand List”) Companies brand value (£bn) Tesco 8.6 Sainsbury's 4.9 Marks & Spencer 3.9 Asda 3.6 Morrisons 2.6 Boots 1.9 Argos 1.4 Co-operative 1.4 Waitrose 1.2 John Lewis 1.1 (“Supermarket 'Inevitably' Tops Brand List”) It can be determined from the chart that the Tesco Company has got the better brand value in comparison to the other retailers. The brand of Tesco generated a whopping £8.6bn as per the year 2008. Marks & Spencer has achieved the third position as it scored around £3.9bn. The report said that Tesco had a sales figure of around £32bn and the figure was almost unbeatable. The sales figure and the brand value that has been determined is based on the public sales figure in the last 5 years. The brand value determines that for each brand how much money can be fetched from the current market situation. The figures also considered the prospective growth, price positioning, consumer service, and brand legacy. (“Supermarket 'Inevitably' Tops Brand List”) In relation to the above said point a report in 2009 stated that Marks & Spencer have fallen to the third place in the fashion retailing business. The fall was mainly in the volume of clothes sold. The retailers which moved ahead of Marks & Spencer’s are Asda and Primark. The sales of Marks & Spencer have suffered because consumers decided to switch to other rivals due to the fall in income. Marks & Spencer’s market share in the fashion retail has also taken a biting. It used to command 10 percent in the fashion retail business but the fall has taken it to 9.8 percent. In case of the other two competitors, Asda is holding now the major share with 10.1 percent while Primark is second best to it commanding around 9.9 percent. (“UK: M&S surrenders supremacy to Asda and Primark”) Consumer Analysis: In today’s world the influence of technology has served mankind the most. Due to the introduction of e-commerce the retail industry has been benefited and also the consumers do have ample opportunities to buy and sale products through the usage of debit and credit cards. Like many other companies Marks & Spencer do provide this opportunity for its consumers to buy products through online trading websites. In addition to this the stores will remain open for 24 hours per day. Also in the UK 125 stores are being modernised so that a more attractive environment is created for consumers to shop. (Karaliopoulos and Amat) However if we have analyzed the consumer benefits now we should also look into some of the distressing factor for the organization. Due to the impact of recession the company has forced to cut off its prices but the worrying fact is the quality is not maintained at its peak level. This has impact on the way people have reduced the usage of merchandize goods as well as food products. Both the categories of products have fallen by 7.5 percent and 6 percent as of the report on 2008. The consumers have also liked the trading strategy of Primark its ‘competitor’ in comparison to Marks & Spencer and have shifted their loyalty to the former. (“M&S under fire amid talk of a sales slump”). Analyzing the SWOT of Marks & Spencer: Strength: A report in 2001 shows that the overall sales in the organization had dipped but the only ray of hope was given by the revenues earned from food. Overall sales of the organization had dipped by 2.6 percent. Clothing, footwear, gifts and furniture sales had all slipped during this period. But in this worst scenario only the food operations gave a positive result as it earned a growth rate of 5.9 percent. A chart has been provided to show the effects of food on the total business of the company. Items Rise/Fall ( percent) Clothing, footwear, gifts -9.1 percent Home -1.5 percent General Merchandise -8.5 percent Food 5.9 percent Total -2.6 percent (“Food shows its strength at M&S”). Marks & Spencer over the years have been successful because it has been able to meet the changing needs of the consumers. However the recent slump in the overall sales does not speak volumes about the core brand values of Marks & Spencer. The organization has always focused on the quality, value, service and innovation. It has opened the store coffee shops which is the third largest branded coffee bar in the country as of report on 2004. In case of fashion outlet the organization is known for its women wear. As of report on 2004 it holds around 11 percent of the women’s wear which is highly a competitive market. The organization has started showing positive trend after the debacle in 2001 and it is strengthening its casual wear rather than the formal wear. Innovation has kept on increasing in the fashion outlet. The launch of platinum plated jewellery in 2003 was the first of its kind and was a runaway hit. In 2003-04 the sales of the menswear got doubled. The biggest sale was observed in the footwear segment. As found in the report of 2004 a brand named ‘Blue Harbour’ became the largest casual brand in UK. The introduction of ‘Blue Harbour’ helped the overall growth of the organization and it rose to 7.5 percent. (“Super brands case studies: Marks & Spencer”). Weakness: The weakness of the organization lies in its image and in its brand name. The reason is attributed to the splitting up of the market into various segments. Now if there is any diversification in the products that are identifiable then that could cost the organization. This is because if there is any diversification then it would mean that the organization does have problems in their economies of scale in production. In addition to these if there is any diversification then it would directly impact the product association of the organization. (Business studies AS & A-Level student work) Opportunities: The opportunities for the organization can be seen in the areas of sport and recreation. Growth of multichannel can be done through the selling opportunities. Another opportunity will be to open up their famous ‘Marble Arch Store’ in the most remote areas. (“Kate Bostock confident of M&S' continued strength”). Reshaping the firm is the biggest aim that the organization must look at. Since new markets have been identified hence a positive step can be taken to capitalize this innovation. Rebranding can also be done at different segments which will help the organization from coming out of this mentality of “one product suits all”. (Business studies AS & A-Level student work). Threats: At the current scenario the organization has been hit by the weakening of the sterling. The problem that has aroused is the cost of overseas outsourcing and this contributes to a high proportion of general merchandise. It has been determined that due to the recession the retailers as well as the consumer both have been hit very badly. Estimation has been made regarding the loss that can be faced by the retailers. It has been determined at £20bn. Price increase is the biggest challenge and it needs to be addressed with utmost tact. It is also a worrying factor that the retailer is planning for price increase. Also in addition to these the rise in value added tax could also prove fatal for the organization. A downfall is expected in the overall sales in UK and it is expected to fall around 1.4 percent. (Donald). Concluding remarks The organization which began with a small business now stands among the top retail business houses in the world. The company has seen the highs as well as the lows. The biggest strength however lies in the innovation that they bring in their products and services that are provided to the general public. The main business model of the organization lies in food outlet and fashion outlet. The food outlet is one of the biggest strength of the organization and in times of declining sales figure food outlet never disappointed Marks & Spencer’s. The fashion outlet is also focusing on the newer innovation in accessories, clothing brands, boots which will appeal more to the general public. In addition to these they are also focusing on the sportswear which is more attractive to the youth. The company should also try to cope with recession in terms of reducing prices instead of increasing prices as that will cause a lower market share for them instead of a high market share. In addition to these newer marketing strategies must be thought of which will help the organization to compete with its rivals. 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Available at: http://www.edinburghacademy.org.uk/curriculum/business/gallery.htm (Accessed on Oct, 20, 2009) 14) Karaliopoulos, Georgios and Oriol Amat, “Marks & Spencer PLC^1”, Department of Economics and Business, Universitat Pompeu Fabra, Available at: www.econ.upf.edu/docs/case_studies/16.doc (Accessed on Oct, 20, 2009). Read More