The business strategy of marks and spencer
Marks & Spencer (M&S) is one of the leading retailers in the United Kingdom (UK). The high quality services are being provided to the customers in the areas of clothing, food and home products. Based on reliable statistical data, the number of customers visiting M&S stores every week approaching the figure of 21 million. From all over the world, 2,000 suppliers take the responsibility of outstanding quality products to satisfy the customers. The key factors behind the business such as service, quality, value, trust and innovation are equally important since the beginning of M&S 125 years ago till date .
Business is growing in 41 different countries other than UK by following the well-defined rules and regulations regarding customer care, product quality, innovation and trust. More than 76,000 people work in UK and overseas for M&S. To become the world’s most sustainable major retailer is the ultimate goal of M&S. For the achievement of this goal, Plan A was launched in January 2007 consisting of 100 commitments to attain in 5 years, but Plan A has extended to 180 commitments to reach by 2015 .
The Plan A consists of five pillars to help the M&S customers to lead healthier lifestyles. To combat climate change, reduce waste, use sustainable raw material and trade ethically are the four pillars upon which Plan A stands. All the 180 commitments are under the five pillars of Plan A. M&S is trying best to work through Plan A by involving customers and suppliers to achieve the desired results .
The first section presents the analysis of external environment of organization. Internal environment and identification is the main focus in second section and third section deals with the impact of external environment on the strategic direction of the organization. Identification of the major issues and challenges facing M&S is key discussion in last section, and there is conclusion after that to summarize all the sections.
Political, economic, social and technical (PEST) are the four most important factors to analyze the external environment of M&S. The restrictions or limitations applied by the government in any country are covered under political aspects (import/export duties). But economic aspects indicate the strength and growth of organization based on stock market share value. Social aspects reflect the common people interest in the society and technical issues point to the involvement and utilization of modern emerging technology to advertise and enhance the organization’s business. This external environment with four major factors plays a significant role in determining the organization’s business strategy to achieve the optimal results.
Q.1: Analysis of the organization’s external environment.
Strategic Analysis of Business Environment
External and internal environment influence the organizational operations, therefore strategic direction of business depends on both environments. Strategic analysis helps identifying the environmental factors that can significantly affect the business. On the other hand, environmental analysis indicates the activities both inside and outside the organization. For appropriate business strategy to reflect the organizational environment, environmental analysis must be taken into account. The following discussion considers external and internal organizational environment in detail .
1.1 External Environment
External environment consists of conditions and forces such as (political, economical, social and technological) that are beyond the control and affect the organization’s strategic options. External environment defines the competitive situation of organization and potentially have both positive and negative impact on business. The classical PEST analysis identifies four major categories of external factors that significantly affect organization’s capability to survive and grow. Based on operating region, external environment is divided into three interactive segments having remote, industrial and operating environments. However, changes in the external environment also create new opportunities .
Different external factors have different influences which need to be discussed separately for clear understanding. Some influences inter-linked with each other create a bit of complexity. For instance, information technology completely changed the nature of work, customer behavior and life-style as well. External environmental study helps to decide the business strategy accordingly to gain the competitive advantage. Based on PEST analysis, four major external factors are going to discuss in detail .
1.2 Political Environment
Business growth and investors interest both are strictly relevant to the political stability in a country. The government trade policy is another important factor that affects organization’s business. Organization operates in an administrative and legal framework provided by the political government. The restrictive environment affects all aspects of organization. The legal and administrative framework cover lot of factors including pricing regulation, tax rates and incentives, mandatory employee benefits, wage legislation, trade regulations and tariffs, industrial safety regulations and product labeling requirements. Permissive administrative/legal context favors organization’s business, employees and consumers. The development pace of organization depends on specific laws and regulations to work with. Political activities also affect suppliers, customers and competitors .
1.3 Economic Environment
To discuss the effect of economy on organization’s business, there is a definite need to consider the crucial macro-economic trends. In this regard, the factors that influence business are taxation, interest rates, inflation, disposable income, unemployment, GNP trends, general demand, government spending, money supply, business cycle stage (e.g. prosperity, recession and recovery), economic growth rate and tendency to spend at national and international levels .
1.4 Social Environment
In social environment changes in values, attitudes, beliefs, opinions, different life styles and other trends are taken into consideration. Successful business strategy must have the ability to target different demographics, class structure in the society, various cultures and ethnic conditions of individuals. As a consequence of changing marketplace concepts, customers are compromising the quality over price. Fashionable clothing demand has increased to great extent. The price sensitivity of majority of customers left M&S at less competitive position .
1.5 Technological Environment
Rapid change in technology greatly influences the market conditions and existing trends as well. Electronic media is playing very important role in introducing new fashions in the society. Therefore, organization needs to consider all such factors relevant to modern technology. Utilization of modern technology set the new standards regarding services and product quality. In the technological environment business is affected in terms of investment and consistent application of technology to compete in the market .
Q.2: Analysis’s of the organization’s internal environment and identification.
Analysis of Internal Environment and Identification
SWOT analysis may be used to measure the degree of fit between strategies and environment. Based on this analysis, strengths and opportunities are used for the profit of business and protect organization against weaknesses and threats. There is no great deal of thought in the utilization of SWOT analysis due to simple nature so the results are not very reliable. This analysis has no ability to cope very well with some of the complicated aspects of modern strategic theory. In the current situation simple analysis of internal environment of M&S is concerned, that’s why reasonable results may be achieved based on SWOT analysis .
All internal and external aspects that give strength to the organization are included in the strong points. The strength indicates the current market position of business in terms of customers, competitors and internal resources. Strength is a “resource advantage relative to competitors and the needs of the markets a firm serves or expects to serve”. The distinct advantage that helps the organization to achieve the comparative advantage in the market. The origin of strength is the resources and competencies available in the organization .
Excellent and quality products give the strength to M&S in terms of customers and competitors. Based on better treatment and good salary, the employees are in excellent relationship with M&S. Large number of M&S stores in the UK and overseas represent the strong infrastructure. The financial strength is obvious due to the large market share. M&S is one of the major retailers in the UK, profitable and mature as well .
In spite of good strength in industry, there are weak areas as well that require an improvement. M&S products are more expansive than other competitors on the high street but justifiable based on excellent quality. The main focus is on the customers in between 35-44 years old, neglecting the younger and children. Because of expansion program to Europe, USA and other countries, M&S lost focus on local market. There is no business strategy to capture the potential available in the younger generation market .Most of the times no special offers are available to the customers in the form of sales. Internally, customer services need to be improved including updating the use of technology to manage the merchandise in the store .
The most important factor in the business growth is to avail the new opportunities in the market. To grasp the potential available in the market, there is a definite need to arrange the flexible business strategy that may change according to the trends. Introduce the wider range of colour clothes, variety and different types of collections to target the majority of customers .By utilising suitable effective strategy such as younger more contemporary models to attract the younger generation. Superior resources and capabilities based on modern technology is a key factor to attain the competitor’s advantage level. There is a need to improve the food stores for successful M&S food business .
In the presence of intense competition between different organizations in the industry, threat is ever present force. To avoid the danger of threat the organization always tries to improve the performance in terms of customer services, quality product and lower cost. Business extension to overseas has proven less successful for M&S; there is a need to target the local market. Strong competitors are targeting the youth market; therefore there is a danger that M&S could lose this market .
Organization’s Internal Factors
Q.3: Identification of the major issues and challenges facing the marks & Spencer.
Challenges and Issues Facing Marks & Spencer
M&S is one of the biggest retailers in the UK providing diverse nature services to the customers including clothes, food and home products. They always try their best to emphasize Quality at affordable prices, but this is not always the case. They are losing the trend to capture the younger market and other retailers are taking the advantage of this weak point. To grasp the potential of this area is the big challenge M&S facing. The goods prices are going up and to provide the cheaper product, they have to import the stuff which decreased the image of M&S as “British Goods” seller .
The customer’s trends were changing towards natural and environmentally friendly products so, M&S launched plan A consisting of 180 commitments to overcome the challenges. Many problems are related to changing climate conditions. To combat the climate change is the major challenge that M&S facing. Reduce the waste going into landfill is also the big issue for M&S to deal with. The plan A is launched by considering the fact that great challenges exist and management needs to deal with customers and suppliers to achieve the targets. To attain the carbon neutral level is an important commitment that is trying to be achieved by efficient utilization of fuel. For example, huge vehicles are being used for transportation. Energy saving is also the important part of plan A .
There are a considerable number of clothes going to landfill in the form of waste. Instead of wasting, these cloths may be provided to the non-profit organizations who are working for the needy people of society. The reduction of waste is significant factor in plan A. M&S is trying their best to improve the lives of people in the supply chain. To help the customers and employees live the healthier life-style through plan A .
Q.4: External environment and the impact on the strategic direction of the organization.
Impact of External Environment on Strategic Direction
The strategic direction refers to the action plan that leads to the achievement of ultimate goals of organization’s strategy. The strategic direction of M&S is based on the idea to become the world’s most sustainable retailer by 2015. In spite of the fact that there is no set bench mark exit to compare the world’s most sustainable retailer, this plan is admirable to provide so much services and containing large number of commitments. To achieve this target, the business development department launched plan A based on five pillars. The business is not limited to the physical boundaries of organization. What happens outside does affect the strategic direction and the organization has to act or react accordingly to cope with the situation .
The external forces such as political, economical, social and technological that affect the strategic direction of organization’s business is beyond the control. Therefore, sometimes organization is bound to change the strategic direction of business to cope with the situation and to achieve the ultimate goal .
The political environment contains administrative and legal factors which affect the strategic direction due to some administrative and legal restrictions. The soft conditions support the business to reach the final destination (desired level). But hard conditions bound the organization to change the business strategy to achieve the desired result. The organization has to work within the framework provided by the political government in a country. The change in political setup may also influence the strategic direction because organization needs to follow new legal and administrative instructions by the new government .
In the social environment public trends play a very important role in the strategic direction of organization. Change in values, beliefs, attitudes, opinions and lifestyles influence the organization to change the business strategy to fulfill the demands of customers in a changing atmosphere. The cultural, demographic and religious tendencies create new opportunities in the market for business growth .
The major change in technology set the new standard to compete in the market and this scenario totally change the strategic direction of Organization to stay in the market and to achieve the business objectives. Strengths may be replaced by weaknesses and competencies can become rigidities. Technological change opens new opportunities to grow the business by exploiting new market potential and unmet demands. The cost, rate of change and innovation are the factors related to materials and machines used for manufacturing goods and services .
The existence of strong competitors is an ever present threat to the organization, change in the strategic direction and business plan may affect the organization to reconsider the business strategy to save the customers and business. Sometimes organization’s has to introduce the new better business plan to capture the potential in the market. For example, M&S gave second version of plan A by adding new commitments to achieve the level of world’s most sustainable retailer by 2015 .
The change in strategic direction of an organization is not an easy task as so many associated factors need to change. For instance, reconfiguration of existing resources and capabilities take place by changing the strategy. This action is taken only when no other option is available.
Q.5: What should the organization do to achieve or maintain competitive advantage in its industries?
. Competitive Advantage
Competitive advantage refers to the state of organization when profit level exceeds the average of its industry. To achieve the status of competitive advantage is the ultimate goal of business strategy. Cost advantage and differentiation advantage are the two basic forms of competitive advantage. These two conditions are necessary for the existence of competitive advantage. One of them is to deliver the same benefits as competitors but at minimum cost (cost advantage) and the other one is to provide the competing product with more benefits (differentiation cost). The position of organization in industry as a leader is identified based on cost or differentiation .
5.1 Competitive Advantage Model
The block diagram describes the resource-based concept of competitive advantage by combining the resources and capabilities to provide the superior value creation .
5.2 Resources and Capabilities
Superior resources and capabilities are essential factors to develop the competitive advantage. In the absence of these factors competitors introduce better product with less price and advantage disappears immediately.
Basically, resources indicate the organization-specific assets that are utilized to develop cost or differentiation advantage. The examples of such resources include installed customer base, reputation of company, brand equity, proprietary know-how, patents and trademarks. How efficiently the organization utilizes its resources to achieve the competitive advantage is measured in terms of capabilities. For example, bringing the product into the market quicker than competitors represents capabilities. The combination of resources and capabilities result in distinctive competencies which in turn activate efficiency, quality, innovation and customer awareness. Such attributes act as a catalyst to attain the status of cost or differentiation advantage .
5.3 Achievement of Competitive Advantage Level
Learn Customer Demands To achieve or maintain the competitive advantage in its industry, the organization should follow some necessary points as a routine matter in favor of customers and the business plan as well.
Analysis of Competition
Product Differentiation with
Target Market Analysis
Economic Moat Creation
Business Information Resources
5.3.1 Learn Customer Demands
Customers are the most important entity in the business circle. To understand the demands of customers is a significant factor towards competitor’s advantage. Organization must offer good quality product at minimum price to attract the customers and capture the market .
5.3.2 Analysis of Competition
Another important step to achieve the competitor’s advantage level is fair analysis of competition. For example, who are the major competitors in the industry and what type of different products are they offering. The quality and price of similar goods need to be considered in the analysis. The strength of major competitors in the industry is taken into account .
5.3.3 Product Differentiation with Modern Techniques
Provide good quality products with low cost by utilizing modern fabrication techniques play very important role to maintain competitors advantage level. Modern technology, superior resources and capabilities with better management are the key factors to sustain the position of competitor’s advantage .
5.3.4 Target Market Analysis
The term target market refers to the group of customers and communities at which the organization aims its services and products. Distinction between target markets based on social, demographic and common characteristics make the best target for the organization to focus .
5.3.5 Economic Moat Creation
On the basis of advantage regarding barriers to enter into the market, discourage the competitors from challenging your market share. In some situations the capability of well established company to manipulate barriers to enter and compete in the market acts as an effective method against new competition. To preserve the profit potential and make the business secure for upcoming future is also included in the process to create economic moat.
5.3.6 Business information resources
Information technology is playing a significant role in every field, supplying plenty of relevant information available to business resources. The business information resources may be used to set the suitable business strategy that is superior as compared to the competitors. Business information companies provide such services to become advantage competitors .
M&S is one of the biggest retailers in the UK who has the aim to achieve the position of world’s most sustainable retailer by 2015 based on the completion of 180 commitments. All commitments revolve around five pillars of plan A. Climate change, waste, natural resources, fair partnership and health and wellbeing are the five pillars on which the plan A stands. The organization’s business is affected by internal and external factors. Strengths and weaknesses are the main internal factors that are under the control of management. But external factors such as political, economical, social and technological are beyond the control of the organization. The external factors put on the different restrictions and strategic direction of business depends on such forces. Threats and opportunities are the other two factors which may determine the business strategy. Superior resources and capabilities are utilized to attain the level of competitor advantage. Some necessary actions to maintain the position of competitor advantage such as learn the customer demands, competition analysis, modern technology utilization and product differentiation are names of a few. To meet 180 commitments by the end of 2015 is the biggest challenge. Other major challenges are the efficient utilization of resources to work on plan A for the achievement of main objectives relevant to the five pillars.
M&S launched Plan “A” in 2007 because they were facing tough competition from their rivals. M&S was lacking behind in many sectors of the retail market, so they needed a comprehensive plan to become the world’s most sustainable retailer.
In order to achieve all this, M&S called this Plan, “Plan A” because they believe it’s now the only way to do the business and there is no “Plan B”.
By adopting the Plan “A” M&S has fought back really well and their sales are on the rise which resulted in increased market shares and they are successfully becoming one of the world’s most sustainable major retailers.
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