Marks and Spencer plc Brand Analysis - Essay Example

Running Head: BUSINESS ANALYSIS Inserts His/Her Inserts Grade Inserts Business Analysis In the era of advancements, technological innovations, and fast-paced changes, the business organizations are constantly moving towards resilience. They have no other option than shaping their internal and external environments to adopt the constantly occurring changes in the businesses. For this purpose, it has become essential for the organizations to analyses their businesses with respect to activities, nature of function, processes, and environments that affect them. Marks and Spencer Marks and Spencer plc, commonly known as M&S has originated from Britain and has its headquarters in London, the City of Westminster. The company owns more than 700 stores which are operating in United Kingdom and more than 300 of these stores are spread in around 40 countries. The company possesses expertise and specialists in the production and selling of luxury, food, and clothing products. Marks and Spencer was initiated by Thomas Spencer and Michael Marks in the year 1884 in Leeds (M&S, 2012). Later, during the late 1990s, the company gained the status of being the first British retailer to earn a pre-tax profit of more than £1 billion. Afterwards, within a period of two years, it was caught in the economic and financial crises which took many years for the company to recover. At the moment, the company is the leading retailer of UK and, every week, over 21 million people visit the stores of M&S. The company offers high quality, creative and great value products for home and clothing along with the food of an outstanding quality. The products of the company are responsibly sourced from over 20,000 suppliers from all over the world (M&S, 2012). Moreover, an M&D employee 78,000 people from and outside UK, and possesses an international business which is expanding on an enormous rate. Business Environment The concept of business environment pertains to the environment in which a business organization performs its activities and functions. It may be defined as an environment which comprises of the economic, political, social, and legal factors which impact the functions and operations of business either directly or indirectly. These factors have a direct bearing on the activities of business processes (Richard Pelly, 2011). A business environment of an organization is of two types: Internal Environment This environment is related to the internal aspects of the organization and affects the functions and activities directly. It includes the elements such as man, machinery, material, management, and marketing (Francisco, 2011). These factors are controllable and can change the other components of the business activities like physical facilities and personnel. External Environment The external environment of a business pertains to the uncontrollable factors which affects the business activities in either a direct or an indirect manner. This includes microenvironment and macro environment of the business. M&S: Business Environment and Strategic Capabilities Marks and Spencer has a strong business environment which has potential forces which affect the organizational activities and operations in both, positive and adverse manner. Internal Environment The company has formed an organizational culture which is specific to the scale and size of business undertaken by M&S. Marks and Spencer hires more than 80,000 employees from all across the world. The company possesses a diverse employee culture and offers equal opportunities in written commitment to the workforce with regards to age, gender, color, marital and political status, and other factors related to the professional and non-professional standards. The company gives its employees flexible times of working which also includes the adoption of IVF treatment, paternity leave, and the career and child breaks which assist the organization in encouraging the diversity of workforce. The Business Involvement Groups (BIGS) are the employee representation forums which are operated by the M&S network of stores. Considering the benefits and remuneration of the employees, the company possesses the packages of rewards which consist of the elements of predetermined pay, a broad range of benefits, and the variable pay related to the employee’s performance. The company also offers the training and development opportunities to the employees, which are designed to develop the skills, and enhance capability and talents of the entire workforce. The company operates in such an environment which guarantees its health and safety standards and provides the special healthcare services to its employees. A consolidated Code of Ethics has been developed by the organization which has fixed the responsibilities and values that it owes to its customers, suppliers, and other stakeholders. The various departments in the company are set out to fulfill their individual responsibilities and roles in order to contribute to the growth of the entire organization. M&S works effectively and in close association with its external partners in order to ensure that the internal environment of the company operates at its optimum levels and is capable of giving high performance and productivity in order to build it into a harmonious working place. Each unit within the organization formulates it own corporate social responsibility on the foundation of trust and brand value. A blend of the customer research, meetings with stakeholders, governments and NGOs determine the issues that have to be tackled while formulating the organizational strategies. The corporate culture and the internal environment of the organization determine the corporate social responsibility, organizational culture and employee performance policies. External Environment The organizations perform in an environment outside the company which affects its direct and strategic capabilities. The external environment of M&S is linked with the competitors, social factors, economic, and the environmental factors which affect its operations. The primary competitors of M&S include the department store industry. Since, the company also operates in the sector of grocery retail, apparels and accessories retails, and the house wares and furnishing sector, the major threatening rivals to the company includes, Sainsbury, Associated Dairies Group Limited, Tesco, Arcadia, and Next. The social system in any environment refers to the patterns, preferences, attitudes, ideas and behaviours of the people living in that society. The businesses are influenced by the social systems and societal shifts which depend upon the demographic and other factors. Following such shifts and changes, Marks and Spencer operates in different environments where the stores operate in order to meet the changing needs of the customers living all across the world. The company has a customer service team which operates on the centre and researches into the factors that the customers want it to follow and apply permanently into its corporate social responsibility code. The company has discovered that they need to satisfy their customer with the high quality products and easy access to the location factors. Regarding the environmental factors of the company, an environmental policy is established which considers the climatic issue and the ways in which they are affected through the activities of M&S. The term ‘strategic capabilities, pertains to the capacity and the abilities of a business organization to survive, grow and deliver the future values in as high quality as is possible. The concept constitutes of the various components including clear action and thinking in the strategies and objectives. It involves the evidence of a sophisticated strategic process in the operational achievement of the organization (George, Philip, 2000). The strategic capability also engages the uncontrollable and controllable trends of the organization along with the factors which impact its future performance. It takes into account the strengths, resources and the tangible and intangible several of the organization which is the essential components of its strategy formulation. Marks and Specer is always enthusiastic in developing itself into a more customer-focused organization. For the management of the organization, it is essential that it views itself through the eyes of the customers and therefore, the company has restructured its operations into seven business units. These units include children’s wear, lingerie, men’s wear, women’s wear, food, home and beauty. After this categorization, the company has become further responsive towards the changing needs of markets and customers. Later, M&S has formulated and implemented a strategy which focuses upon the priorities which gets the company closer to its customers (William, n.d.). These include the following: Creating clear profit centers Creating a customer facing organization Restoring overseas profitability Building the financial services sector According to the Porter’s Five Force Analysis, Marks and Spencer is analyzed for its business environment as follows: Bargaining Powers of Suppliers The company experiences a relatively low bargaining power of suppliers in most of its clothing segment. However, when it purchases the fabric from any designer firms, the bargaining power tends to elevate. The company had a British supplier in the past and thus, it had a claim of having a high quality garments. However, it soon lost its quality claims when it outsourced it products for having attained lower costs. Bargaining Powers of Buyers The company possesses a high bargaining power of buyers. The segment 1 of M&S bears a relatively low buying power, while it is higher in segments 2 and 3. This is because segment 1 comprises of people who are non-price sensitive and prefers fashion and quality. While, those in segments 2 and 3 are more price sensitive and usually select from various other companies too. Thus, this creates a high bargaining power. Threats from Substitutes Generally considering this factor, the threats from substitutes is lower in the company’s environment. The customers can get only product substitutes from the products from different segments in the company. Threats from new entrants Marks and Spencer poses high threats for the newly entering rivals in segment 1 and a low threat in segment 2 and 3. This is due to the reason that segment 1 requires high capital and brand name in order of the competitor to enter and survive. Thus, the firm can be protected from the severe competition in an efficient manner. Competitors By looking at the functioning of Marks and Spencer, it seems that the company in the clothing industry is not in as intense competition as other industries normally are. There is more competition in the segment 3 of M&S as compared to segment 1 & 2. This is due to the reason that the price sensitivity features occurring in the segment 3 leads to a potential price battle which squeezes the profits out. M&S Performance since 2008 Marks and Spencer has depicted a gloomy figure of the business performance since the year 2008. The company had cut back its plan of spending in order to tackle the recent slump in the sales of its products and services. The company, during the year 2008 experienced a fall of 5 percent in its sales than other years. However, to the relief of the investors, the shares of company were able to gain more than 10 percent when they were expected to have the worst slide in the markets. The company had also almost halted its program for store refurbishment later. Later, some profit margins were sacrificed within the food business of the company in order to help out the customers without compromising on the product quality and availability (Business News, 2008). As far as the general merchandise of the company was concerned, the management experienced a declining sale in the clothing segment. Even though the products offered were stylish and of quality in every way and met the seasonal requirements, however, the customers did not seem much satisfied. The management of the company looked into the matter and discovered to gain back the neglected segment of the female customers aged between the range of 35 and 55 years with lower prices and more fashionable products. Through the advertisement campaigns of high profile, which featured boy band Take That and Myleene Klass, and Sixties model Twiggy, Marks and Spencer was able to get back the lost market share (M&S, 2012). On contrary to this, the online sales of the company rose to good heights. During the year 2010, the company performed relatively better and planned to invest an additional amount of £850m to £900min the next three years. In this way, Marks and Spencer could enhance in business in the United Kingdom and develop international and multi-channel capabilities. Ultimately, the management has projected its targets for the growth of the Group revenue to between the amounts £11.5bn and £12.5bn by the coming years of 2013/14. During the year 2009 and 2010, Marks and Spencer was able to expand its market share across all the segments of its clothing unit and offered greater choices and varieties to its customers at superior quality and non-compromising value. The visits of customers to the M&S stores were comparatively stable in the years 2010 and 2011. However, the inflating petrol prices slowed the footfall in the company during the second half of the year. Still, the company stayed ahead of the overall market figure of -1.4% (M&S, 2012). Regarding the total profitability of the company, Marks and Spencer depicted an underlying group profit before tax of £714.3m and group profit before tax amounting to £780.6m. The direct sales of the company for the year 2010 amounted to £543m and the multi channel business continued to grow with the introduction of convenient and newer ways to shop with Marks and Spencer. In the same year, the company faced a good profitability context due to which it announced its plans to make a huge investment of £150m in its multi channel capabilities in future. Moreover, M&S has also projected the growth of its sales to be £300m to £500m by the years 2012 and 2014. Future Strategy for Marks and Spencer The company, Marks and Spencer, possesses strong strategic capabilities and the core competencies. The threshold resource includes its stores with expert staff and serves various countries. The company owns long-term suppliers, which are the utter need to assure the products and services of high quality. M&S owns a unique brand image as its major reputed resource. It facilitates the customers by providing them financial and retailing services. After facing the intense competition, the company has adopted global sourcing and adjusted its systems to attain lower costs. After such crucial times of the company’s success, Marks and Spencer needs to reposition it by reformulating its strategies. This strategy should also be helpful for the company to enhance its position on local and global levels. The strategic recommendations for the company are as follows: Micro and Macro Environment The business environments, both internal and external, influence the business activities greatly. Instead of sticking to the stubborn strategies in a rigid manner, the company needs to look for the rapidly occurring changes in the environment and responding to them in the timely manner. For this purpose, M&S need to own and train a flexible and open-minded management which possesses the capability of reaching to the environment and their demands swiftly and tackling the competing strategies in an effective manner. The strategic development in M&S is influenced by the powers of stakeholders at different levels of the business activities in the organization. The management of the organization paid little attention to the stakeholder segment while developing strategies and thus, countered problems in form of falling revenues. The future strategy of the company needs to include a proper stakeholder mapping which would ultimately lead to a clearer picture of the possible influences of publics, suppliers, investors and other stakeholders. In the development of sophisticated strategy for the organization, the culture needs to be paid attention and significance in order to restructure and respond to the increasingly changing environment. The top management has to play an important role of maintaining a fit between the forces of the strategy being implemented. This will be the long-term part of the organization’s strategy since these brisk changes might lead to the inclination of resistance amongst the company’s employees. The competencies and resources of the ‘organization primarily determine the strategy formulation of the company. Marks and Spencer holds unique competencies and threshold resources to establish their competitive advantage and a firm footing in the industry. In accordance with this, the company is required to build its core competencies further in order to maintain and sustain its reputation. One of the major assistance can be provided to organization in the form of customer closeness and a flatter organizational structure. This would aide M&S to respond quickly and effectively to the demands of its customers. Suggestions The company can add the following suggestions to its future strategy formulation: The scientific segmentation of the company’s markets would prove to be more beneficial. Each store should be understood and operated as an individual SBU. A better strategy should divide the food and clothing units into separate stores. This would enable a quick diversification and a better application of the marketing management concepts. The company should look for the cheaper suppliers of the clothing range instead of expensive designers. The company can opt to merge its several business units and aim upon the diversification and expansion of its product lines and departments. As a part of customer incentives and brand loyalty schemes, Marks and Spencer should introduce loyalty cards and make its provision to the customers. The top management should have expert staff and employees who are better able to understand and research upon the needs of the customers. The product differentiation concepts can implement its strategies better in terms of customer needs fulfillment in the markets. REFERENCES Business News, 2008, Marks and Spencer reveals worst performance for three years, Yorkshire Post, Retrieved on April 16, 2012 Francisco J. Martínez-López, 2011, Business Environment, International Journal of Business Environment, Inderscience Publishers George Stalk, Philip Evans, 2000, Competing on Capabilities: The New Rules of Corporate Strategy, Harvard Business Review M&S, 2012, About Us, Web, Retrieved on April 16, 2012 M&S, 2012, Products, Web, Retrieved on April 16, 2012 M&S, Our performance, Web, Retrieved on April 16, 2012 Richard Pelly, 2011, Creating a better business environment of financing business, innovation and green growth, OECD Journals, Financial Market Trends, Issue 1 William Scott‐Jackson, n.d., Building strategic capabilities for competitive advantage, Web, Retrieved on April 16, 2012 Read More