BUSINESS STRATEGIES FOR MARKS AND SPENCER
It is the world of huge competition where business needs to survive and exist. Actually Marks & Spencer lies within top 10. It is UK's premier clothing, food, financial services retailer having the position of top 6. In recent years, retailers have been confronted with intense competition from their counterparts and, a few of them have somehow lost momentum. Marks & Spencer's market share has dropped in 2004 to 11%, from 0.2% (Annual Report 2004). Mostly affected was their clothing segment. Mostly it is offering high price goods and service. It should reduce the price due to recession customers want to purchase goods in low price. The strategy applied by Marks & Spencer is covering wider market share only among the rich people so it should follow low cost competitive strategy. The development of strategy will help Marks & Spencer to grab market place and move to new market with market segmentation, penetration, development, integration and joint venture with different retailers and whole sellers in the world. It has the capacity to cover wider area with huge capital investment. As it has good position and market in Europe, in coming days it can move to Asian and Arabian countries of the world.
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The organization which I have selected for this assignment project is Marks & Spencer and I have got the information about it from its website (www.marksandspencer.com ). For this assignment, I am going to choose to carry out a PEST or PESTEL analysis on a UK based business and find out its position in the top 10 list of retail grocery chains. Marks & Spencer is the United Kingdom's premier clothing, food, and financial services retailer. The company's commitment to value, service and quality was set up in 1884 by Michael Marks; he opened a small market stall in Leeds. Then in 1894 he formed a partnership with Tom Spencer. They opened a head office in Manchester and turned their stall in Leeds to a covered arcade. Then in 1905 Tom Spencer died and two years later Michael Marks died. In 1884 Michael Marks, a Russian born Polish refugee opened a market stall in Leeds. In 1930, he opened a store in Marble Arch, London with partner Tom Spencer, and M&S was born. A food department was opened a year later. The company soon branched into 'convenience food', selling sandwiches from the ice cream counters in its stores. Its range of ready prepared meals grew ever more exotic over the decades, introducing international dishes like lamb Rogan Josh (in 1974) and chicken Kiev (in 1979). Today, M&S still has one market stall which operates at Grainger Market in Newcastle-upon-Tyne.
In 1916 Simon Marks became chairman and in 1926 Marks & Spencer became a public company. In 1926 the company begun to sell textiles and in 1931 begun to sell produce and canned goods. In 1964 Simon Marks died and Israel Sieff took over as chairman. He introduced wine and continental foods to the company. Then in 1999 the company launched their website, allowing their customer to buy online. As of the present day the chief executive of Marks & Spencer is Stuart Rose. Marks & Spencer has 600 stores throughout the UK and 240 stores worldwide. (http://www.marksandsepencer.com/gp/node/n/45999031/202-8056692-5511835?ie=UTF8&&mnSBrand=core) The Company has annual sales in excess of £8 billion, and in 2005/6 the company had employed around 67,000 with 65,000 within the UK. Marks & Spencer now sells everything from healthy living food to kid clothes designed by David Beckham. It would be described as one of the high streets biggest tertiary businesses. http://www.marksandsepencer.com/gp/browse.html/ref=sc_fe_c_7_1_46004031_10?ie=UTF8&node=43472031&46004031&mnSBrand=core&me=A2BO0OYVBKIOJM
Environment is the broad external and internal condition that may affect an organization. They are also known as PEST, PESTEL or STEEPLE. Through this interaction organizations do things such as acquire raw materials, hire employees, secure capital and obtain knowledge. Specific environment consists of customers, suppliers, competitors and pressure groups. Whereas generic environment consists of broad economic, political/legal, socio-cultural, demographic, technological and global conditions that effect an organisation (Buchanan & Huczynski, 2007). The factors which help to analyze business environment are explained below
Figure: 1 Environment Analysis: www.provenmodels.com/.../PEST_analysis.gif
1.3. INTERNAL ENVIRONMENT
Internal environment consists of those factors which affects the organisation internally. It incorporates man, materials, money, machine, lobbyists, shareholders, employees and partners. It combines organisations mission, vision, objectives and targets to achieve what it can do well for creating well management. It focuses on corporate culture, strategy and plan about how to manage overall work and activities of organisation. Marks & Spencer has well manage corporate environment due which organisation has cover wider market since long time. The factors of internal environment are:-
Marks & Spencer do have written rules, procedures, principles and code of conduct. They govern the organization overall activities Marks & Spencer has standard code of conduct and written rules to run its business.
Mark & Spencer do have various departments in which various department head controlling over business and getting the information from outside environment. They do have separate tasks and roles to perform and getting the things done through lower level managers.
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Marks & Spencer has flattened hierarchical layers of management where each and every level of managers can interact for completion of activities easily and smoothly. The hierarchy shows authority of each and every manager. For example, marketing managers mostly deal with marketing campaigns.
Marks & Spencer do have its own identical norms, values, beliefs and working environment. It follows standardized rules and regulations to cope with cultural obstacles seen in an organization.
Marks & Spencer provides high professional training to the middle and senior level managers and low skilled training to the lower and new comers.
Marks & Spencer has its own written goal with its objectives, missions, visions and targets. What organization is today and will be in future by incorporating environmental scenarios.
Marks & Spencer has covered large area through UK and all over the world with huge number of stores and employed large number of employees.
1.4. EXTERNAL ENVIRONMENT
External environment consists of those factors which affects the organisation externally. It incorporates factors like political, economical, socio-cultural, technological, and ecological. The external factors of PEST OR PESTEL affecting Marks & Spencer are:
Political factors include government's regulations and legal issues. It includes organizational tax policies, employment laws, environmental regulations, political stability, trade restrictions and tariff. European Committee decision to permit free flow of trade among themselves and other countries under foreign trade regulations makes companies to import their products over time easier than before. Marks & Spencer competitors took advantage of its higher cost structure and bit off some its market share.
Marks & Spencer competitors are specialized in niche markets and consumers' focus which make them to provide much better consumers satisfaction. They prefer to import their products from abroad for cost saving, this fact puts Marks & Spencer in a cost disadvantage for a perceived "higher quality".
This social factor includes population size, education level, income level, ethnic origins and legends as well as cultural factor include balance diet and housing condition. For instance as worker has begun seeking more balance lives, organization have had to adjust by offering family leave policies, flexible work hours and even on-site child-care facilities. These kinds of facilities should be provided to the employees in the Marks & Spencer and which is directly or indirectly affecting operation for excellence service. For example, the online shopping introduced by Marks & Spencer can introduce business profitability high in competitive business environment.
The most rapid change has occurred in technology have been introduced by Marks & Spencer since long time. Information gadgets are shrinking yet becoming more powerful. For example, Marks & Spencer has used today's technologies to serve customers in modern era compare to competitors. It consists of on line shopping, introduce own store card and automatic self scan area etc by using modern technology.
Ecological factors directly or indirectly affect the firm production process. It consists of ecological concerns that about customer perception of a company or product as well as customers buying habits. The production level of Marks & Spencer is highly affected by customers buying habits worldwide as people do came from different part of world.
The legal factors consist of wage laws, worker safety laws, union laws, anti monopoly laws, Sunday closing laws, copyrights and patents laws and environmental protection laws which directly or indirectly affect business from outside environment. For example, Sunday employees want to rest, so Marks & Spencer should close down which will affect the profitability or productivity of business.
1.5 SWOT ANALYSIS
It is a kind of tools which could be used to audit an organisation. It highlights the company's strong and weak points and areas they can improve.
All stores have large trading space.
Good interiors, decor and proper signage.
Well experienced retailers.
Decades in operation.
It provides recyclable eco-friendly bags.
Frequent locator and international coverage.
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Weak public relation campaigns and expensive shopping.
Slow to change.
Dependent on suppliers.
Less promotional activity for stores and company.
Clothing: does not really reflect younger women's taste.
More advertisement and promotion.
Uses of good CRM systems that can help them keep track of customers' demands.
Online shopping facility.
Easy entering into new market segments.
Understanding competitors for adding complementary products.
Achieving competitive advantage.
Price competition and expensive.
Likely to enter new competitors.
Changing buyers needs and tastes.
Growing competitive pressures.
Rising sales of substitute products.
Vulnerability to recession and business cycle growing.
Growing bargaining power of customers and suppliers.Figure: 2 SWOT Analysis
2.1. PORTER'S FIVE FORCES ANALYSIS
To determine how business environment is changing the way the Marks & Spencer stands in today's world this assignment is going to use the Michael Porter five forces of competitive position model. The five forces theory of Michael Porter's is a business strategy tool that is used to analyse the attractiveness of an organisation structure.
Figure 3: Five Forces Analysis
Adapted from M.E. Porter, Competitive Strategy, Free Press, 1980
The threat of entry looks out in terms of differentiation for Marks & Spencer to the customers' loyalty that can discourage potential entrants. Marks & Spencer has a long time developed focus that has served as an entry barrier. As such, it is unlikely for Marks & Spencer to have new entrant in its area. Marks & Spencer is an expert in this field.
Existing Competitive Rivalry between Suppliers
Under competitive rivalry, Marks & Spencer really faced threat as other companies entered the industry with the same quality goods but with affordable price and up-to-date fashion. This is the area where Marks & Spencer failed the most. The firm was unable to fight the current of competition.
Bargaining Power of Buyers
Marks & Spencer have the aim to provide value for its buyers. It is looking at the different aspects of buyer's power and tastes. It is delivering services or products to the changing demands of consumers in the market which makes competitors very difficult for competing to change their strategies and meet those demands which giving unique advantage in the market inside industry.
Bargaining Power of Suppliers
More than 90 percent of Marks & Spencer suppliers were British. Marks & Spencer bought directly from a few UK suppliers all their stock that they manufacture which created a situation where the supplier was reliant on Marks & Spencer and vice versa. The problem of this approach is that overseas suppliers produced products on lower cost. The bargaining power of suppliers is quite low when it has concentrated purchasers. When the sales declined rapidly in late 1990s, Marks & Spencer outsourced, globally to reduce its cost similar to its competitors which result a lower bargaining power of its UK suppliers.
Threats of Substitute Products
Substitution can reduce demand for a particular 'class' of products when customers switch to the alternatives. The alternatives came from Tesco and Sainsbury as they acted on providing added value foods. These alternatives provided threat to Marks & Spencer.
A Vision statement focuses on what a company wants to be. It concentrates on future strategy making that summarizes goals and objectives of an organisation. It is a source of inspiration which provides clear decision-making criteria. Marks and Spencer has dream or vision itself to be the leading company in the ever growing competitive global markets forever.
2.3. MISSION STATEMENT
It is a brief statement of the purpose of a company or organization. The mission statement should guide the actions of the organization, spell out its overall goal, provide a sense of direction, and guide decision-making. It provides "the framework or context within which the company's strategies are formulated". Marks & Spencer's mission is 'to be a socially responsible and profitable, by providing new quality products in the area of Cloths, Food, Home and Financial Services'
The company objectives includes building exiting reputation for reliability and service quality, strong customer focus, team spirit, and dedication to transparency. Marks & Spencer is helping for demographic or the border value end of the market for customer. Marks & Spencer offers customer high-quality merchandise at value for money prices, backed by its service promise to customers. Increasing the profit 20% by 2011, reduce the bad debtor, 25% increase in cash flow in 2011 and introduce a new product in 2011 etc are the objectives of Marks & Spencer.
Marks & Spencer is an organisation which has board of director to maintain controls over various activities managed and performed though out all branches of entire countries where there is business at all. It can measure performance by balance score card, by considering sales in a particular period and overall cost of company. Internal process could be evaluated or measure through the number of self serving machine introduced in Marks & Spencer and number of kilogram of food items wasted per year. Through that we could measure the business objectives of the company.
2.6. BUSINESS STRATEGIES FOR MARKS AND SPENCE
M&S Generic strategies
There are three main generic strategies available to all companies including Marks & Spencer, either become the lowest-cost retailer or differentiate products and services in such a way that its valued by customers to the extent that they will pay a premium price. By applying these strengths in either a broad or narrow scope, three generic strategies result: cost leadership, differentiation, and focus. The case of Marks & Spencer's core products (food and clothing), it implements a focus generic strategy as it concentrates on a narrow segment (a particular buyer group (executives), market segment (high-end), product feature (freshness) and within that chosen segment Mark & Spencer attempts to achieve differentiation from Tesco's Asda, BHS, Top Shop etc. The premise is that the needs of the group can be better serviced by focusing entirely on it.
Strategy developments are the future plan of the company, where they want to move. We can analyse the strategy development of Marks & Spencer theoretically by using BCG Matrix and Ansoff's Matrix. As a consequence innovative companies also thrive on change. (Robert, 1995) Marks & Spencer selling own brand products where its motto is to provide quality goods and customer satisfaction. Market penetration has been participating for Marks & Spencer since long time. They have been following a growing path through joint ventures with established suppliers and stores. In this approaches company expand the product into different geographical areas.
Marks & Spencer have focused their business activities into developing new products in UK market in later 1930s' by offerings different goods and services. In this knowledge based BCG matrix is used to conceive the balance of the portfolio of the businesses in terms of relationship between market share and market growth. It is a company in a market that has slow growth and its market share is continuously shrinking. The industry in which Marks & Spencer operate is mature and market is likely to be stable so it is more difficult to gain market share. It's assumed that Marks & Spencer is a decline phase organization (Stockport, 2000). Marks & Spencer competitors in the growth stage trying to gain market share, it is necessary to invest in order to regain its market share and dominance. This can be done by reducing the product and service prices lower than competitors and spend high amounts on advertising and selling. Using the strategy clock model, the hybrid strategy is the best option for Marks & Spencer to achieve differentiation and a price lower than its competitors.
To suggest new strategic developments for Marks and Spencer can also use the Ansoff Matrix.
In the Ansoff matrix, the product and market choices available to an organization. Markets may be defined as customers, and products as items sold to customers (Lynch, 2003).
Figure: 4 Ansoff Matrix
Market penetration is a growth strategy where the business focuses on selling existing products into existing markets (Ansoff, 1957). It seeks to achieve four main objectives: Maintain or increase the market share of current products - this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to personal selling. Marks & Spencer, as for the item "Clothes", the company has shown that they are providing high quality goods to clients across the UK and Europe. Marks & Spencer started acting in single markets in its beginning, increasing this number to 895 yet. Restructure a mature market by driving out competitors; this would require a much more aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitors. The foodservice market is one of the most demanding and sophisticated in which the Marks & Spencer operates. Increase usage by existing customers - for example by introducing loyalty schemes.
Market development is a strategy where the business seeks to sell its existing products into new markets. This may entail exploration of new segments of a market, new uses for the company's products and services, or new geographical areas in order to entice new customers (Lynch, 2003). There are many possible ways of approaching this strategy, including: New geographical markets; for example exporting the product to a new country. In February 2007, Marks & Spencer announced the opening of the world's largest Marks & Spencer store outside the UK at Dubai Festival City. On 2 October 2008, Marks & Spencer opened its first mainland China store in Shanghai, which are some example of market development.
Product development is a strategy where a business aims to introduce new products into existing markets. This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets. Marks and Spencer's financial service and banking are some example of new product development
Diversification is an inherently more risk strategy because the business is moving into markets in which it has little or no experience, which can be dangerous in terms of which strategies to use. (Macmillan & Tampoe, 2000). For a business to adopt a diversification strategy, therefore, it must have a clear idea about what it expects to gain from the strategy and an honest assessment of the risks. As the company has increased its number for 40 countries, the new markets that it reached has been successfully met.
2.7. ACTION PLAN FOR STRATEGY IMPLEMENTATION AT MARKS AND SPENCER.
To implement new strategies for Marks & Spencer, it is necessary to know the position of the organisation which includes analysing about the external environment (PEST factors), internal strength and weaknesses (SWOT), competitors, products, suppliers, financial strength, ratios, processes, system, culture, skills of the staff. Strong brand name and stability could be internal strengths for Marks & Spencer. With the involvement of higher management, it is possible task to evaluate the market opportunities for market development, product development and integration.
Marks & Spencer's innovative and diversified culture can be a positive influential factor for new strategy development. To find out right people with appropriate skills are the important factors for implementations of strategies in an organization. The key functions like marketing, finance, customer-care and network business, their roles and important is one of the inseparable needs of Marks & Spencer. Marks & Spencer can achieve its objective by improving customer focus and management. It can launch new products and services in order to achieve organisation goals. It is understandable, (Robert, 2000) always good strategies will help to anticipate focus on possibilities and learning that its' important to eliminate choice. To achieve the organizational goals, it needs to expand its service and products in different geographical areas. It is hard to formulate corporate strategy for Marks and Spencer as it needs to apply various approaches to the target segments which have been identified and arrive at value suggestions. Marks & Spencer, a leading company is looking to enter into the new markets within the country and abroad. Market attractiveness can be evaluated. After careful evaluation it is understood that there are growth prospects in all the identified areas of strategic development. Marks & Spencer needs to face several critical parameters for success within existing competitors over competition.
Strategy and Activity
Geographical expansion- Asia/Arabia
New Product Development
Introduction of new product
Promotions and offers
Figure 5: Strategy, Activity and Time frame.
2.8. MONITORING AND EVALUTION
It is hard to forecast, monitor and make right decisions at right time on ongoing activities and needs to identify the constraints which we need to have and face for corrective action in order to put right strategy implementation in an organisation. It provides a descriptive picture of what is happening at a given period of time at all. It needs to manage and implementation well to monitor and evaluate within specified time period. It measures the effectiveness and efficiency of the desired outcomes of the strategic plan. The output of this can be maintained and monitored through customer responses, market demand and market share. Evaluation provides greater in-depth analysis on whether implementation programme has achieved its desired goals or not. At the end of financial year, on the basis of customer feedback market share, demand for product and financial profitability performance can be evaluated. Focus group analysis customer interviews etc are the tools which are used to evaluate market responsiveness.
As recession is heating the business and income of people is decreasing day by day all over the world continuously, Marks & Spencer is maintaining its position within top 10. But for making future safe and secure Marks & Spencer needs to improve the business as competitors are well maintaining the business in the global scenario, by using various promotional tools and technologies. Marks & Spencer should provide innovative services to the customers by using latest technologies in the business sector through e-commerce and e-business. It needs to extend its business all over the world, especially Asian countries like Nepal, India or China.
To maintain its position in the top 10 forever, there is a need for Marks & Spencer to improve its procedures on its inbound logistics, operations, suppliers, store designing, layout and many more. Their warehouses should be made clear of old stocks to give way to new up-to-dated stocks. The packaging of their products should also be given due considerations. It is recommended for Marks & Spencer to consider purchasing supplies from overseas to save cost so as to provide customer product at less price. There is also a need for Marks & Spencer to redesign their store in ways that give space, convenience, and comfort to customers while they are browsing, fitting and shopping. Marks & Spencer management should eliminate delays in decision making and use digital manufacturing systems. Marks & Spencer needs to hire perfect, innovative, enthusiastic, punctual, honest, and trustworthy personnel.
Marks & Spencer is a leading grocery store which has covered wider market place. It is the very well recognised organization which is established to flourish the service in terms of clothing, food stuffs, home ware and gifts, and accessories for this survival and growth of business. It is quite expensive but also maintaining the position in the top 10 in UK. Goods are tangible whereas services are intangible which provides satisfaction to the human beings. Marks & Spencer is one of the most renowned glossary retailer store which has understand the modern needs and desires of customers. It has played vital role in the service sector management. Though there are various retailed stores in UK and abroad but Marks & Spencer put them back and move ahead to provide quality goods with standardized products. Marks & Spencer should design fashionable clothes and then try to increase its investment in advertising in order to build its brand image on the values of fashion.
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