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SWOT analysis contains two component activities. There is an internal assessment to determine what strengths and weaknesses the firm possesses. There is also an external assessment to identify opportunities and threats from outside the organization. The standards which translate SWOT into strategies are that a firm should select the strategies that maximize the use of their strengths and minimize reliance on weaknesses to take advantage of environmental opportunities while avoiding threats.
The purpose of SWOT analysis is to provide a realistic appraisal of the firm and the environment in which it operates. SWOT provides a basis for the formulation of realistic goals and objectives and strategies for their implementation. Without a SWOT analysis the firm's planning process is fatally flawed. Planning is an information-based activity and, without information planning, quickly degenerates into a political exercise in selling individual biases and preconceptions. Further complicating matters is that if SWOT is not essentially conducted, there is no basis upon which to assess progress toward the accomplishment of goals and objectives; and the accountability upon which managerial control is based also quickly degenerates.
There are significant benefits to SWOT. By the identification of the strengths and weaknesses of the organization, strategies can be designed to efficiently allocate the organization's resources, hence increasing overall organizational effectiveness. SWOT can identify profitable opportunities and high-risk ventures that enhance the firm's effectiveness. Preventive measures can be designed to avoid major environmental threats that may save large amounts of resources that might otherwise be required to correct damage from those environmental threats.
The identification of organizational strengths provides valuable information concerning what competencies exist within the firm upon which to base strategies. The same activities also result in information that permits avoidance of reliance on weaknesses that may not be capable of fulfilling strategic roles within the organization. The effectiveness with which strengths and weaknesses are assessed will, in large measure, determine the effectiveness of the organization's strategies.
There are several environments in which a firm functions. These environments are the economic environment, the sociopolitical environment, and the technological environment. Each of these environments has important components and implications for the strategic planning process. The economic environment consists of both factor and product markets considerations. The availability of supporting market structures, intermediate goods, labor, and the price levels within these areas will determine the costs of production for the firm. The product market; its relative competitiveness, whether it is expanding or contracting; and its continued viability will determine the ability of the firm to generate revenues from that market.
The case presented here examines the crisis and ongoing problems of Marks & Spencer, one of Britain's best known retail brands that has experienced after many years of unbroken success. The case examines the factors that contributed to perhaps the most serious threat that the company has faced in its over 100-year history and identifies the implications for the company's future public relations strategy.
Marks & Spencer (M&S) is one of the UK's largest, best-known retailers and their brand has been synonymous with reliability, value and quality for generations. Marks & Spencer has been viewed as setting the standards that other retailers have striven to match over the years and, until recently, was recognized as one of Britain's best-managed companies with an enviable track record of successful growth and profits. The company has consistently been rated as Britain's 'most favored company' in surveys among business leaders. The name Marks & Spencer, like Harrods, had become a national icon for British business in terms of honorable trading and, in complex ways, had become a cultural icon representing all that was fairness and just about the British character. However, Marks & Spencer's position as the UK's most successful retailer suffered a serious dent as a result of a media-led crisis that was to shake customers, shareholders and general public confidence in the company which would have seemed impossible a few years ago. This decline in M&S's position was reflected in the market fall of its share price. (Richard M. S. Wilson, Colin Gilligan, 2004).
Marks & Spencer plc considered that its core values were quality, value and service worldwide. Since forming in 1884, Marks & Spencer had progressed from a market stall to being one of the world's most successful retailers and the UK's largest exporter of clothes since 1977. The St Michael brand remained at the heart of its quality reputation throughout this period, maintained by close relationships with suppliers.
M&S, like most world-class companies, separated its mission statements from its values statements. A mission statement indicates the company philosophy to interested parties in terms of vision and how the company plans to achieve its goals. A values statement embodies a philosophical approach to corporate ethics and conduct based on a belief system to which employees and other stakeholders will be expected to adhere. At Marks & Spencer, the importance of keeping corporate mission and corporate values statements as separate operations entities but integrated for a corporate communication strategy became paramount. As profits fell and in no uncertain terms, academic and industrial journalists started to criticize the company's internal management such as its relations with suppliers and store operational policies and its external management in terms of customer and media relations. M&S realized that external perceptions of the organizations had to be brought closer to those perceptions held internally by the organization itself and closer to the way management wished itself to be perceived by others.
Marks & Spencer, like its major competitors, operates in a dynamic retail environment. The rapidly changing consumer trends and marketplace reflect this, particularly in the non-food retail sector which has always tended to be viewed as cyclical, even though Marks & Spencer have not followed this trend. Marks & Spencer had relied for too long on the belief that its reputation for quality and value for money would insulate it from the fluctuations in consumer tastes and demand within the fashion sector and its management appeared to have overlooked the fact that many of its competitors had caught up and even overtaken Marks & Spencer in terms of the quality and value for money. More significantly, Marks & Spencer had failed to 'move with the times' and cater for a new generation of more affluent and fashion-conscious consumers who no longer saw the M&S brand as appropriate to their lifestyles and image. An example of Marks & Spencer's arrogance about its position was its continued refusal to accept payment by credit card (other than its own store card). This resulted in the alienation of, and loss of trade from, many tourists, particularly in its London stores, who after queuing to pay for goods often found that they were unable to pay by credit card and simply abandoned their purchases at the cash desk. It was only when faced with the evidence of sharply falling sales that Marks & Spencer's management belatedly began to introduce new designer merchandise ranges and eventually accepted payment in its stores by credit card. Such changes were introduced cautiously as management were concerned not to alienate the traditional Marks & Spencer shopper.
As Marks & Spencer's performance began to falter, criticisms of its management's failure to move with the times and adapt to a changing retail environment began to gather pace. The company suddenly found itself under attack by the British media on a scale never previously experienced by the company. While M&S felt such a vociferous attack was unjustified and even felt betrayed by a fickle UK media, some felt the attacks were motivated by love not hate, in a perverse attempt to save their beloved national icon. Given the level of brand loyalty felt by customers and the complex links which emerged between corporate and national identity highlighted by press, television and radio journalists, any corporate communication strategy had to address questions relating not only to reputation, but also to self-image which conflicted with images held by other publics, their reactions and responses. The obvious immediate reaction was for management to go on the defensive, but it was clear that M&S management had been stung into action and had recognized that something drastic needed to be done.
The company, like all firms which had gone through a process of 're-engineering' in the 1980s and 1990s, had to address the reconfiguration of all its messages, including its mission and values statements. It had developed a complacent attitude to its internal and external behaviors, including its approach to marketing communication strategy via the long-held position and differentiation it enjoyed throughout that period. If public relations is the eye and ears of the organization, M&S was neither seeing nor hearing.
Like many British retailers, M&S had to retain key elements of its traditions and culture which investors, employees and customers related to and identified with, while redefining corporate strategy to meet the expectations of critics and devotees alike. A public relations priority was identified in which the mission needed to be re-emphasized to clarify the kind of business M&S was now in, reflecting the modern nature of its traditional products and services, while articulating and correcting where necessary conflicting perceptions and misconceptions. Public relations strategy had to be linked coherently to an evolving corporate strategy in such a way as to ensure that communication policy and practice could address the internal and external forces that were limiting growth, arresting change and turning into a 'media circus'. The significance of the changes that had occurred in what has been termed the 'post-technological era' and the impact of competitive forces cannot be underestimated in terms of their impact on corporate public relations. Four basic public relations issues emerged from M&S's realization of the impact of the negative press coverage:
1 The company had an identity crisis which had led to a lack of image credibility.
2 As a result of this identity crisis, the PR strategy it had was undermined. The organization appeared not to be prioritizing the communication channels in any coherent way and messages were not structured carefully either directly or indirectly.
3 With the convergence of corporate communication impacting on its public relations activities M&S could no longer identify its key constituents.
4 Subsequently, constituents were not responding in the way each of its traditional, loyal groups had done in the past.
The SWOT analysis shown in Table below suggests some of the underlying reasons for Marks & Spencer's crisis which it had created by failing to respond to the changing environment in which it operated. Such analysis is essential in order to understand the company's strategic position and the options it faces in terms of the key opportunities and threats as well as the competitive and environmental forces affecting its future direction.Marks & Spencer's falling profits had a detrimental impact on the share price and in the 1999 Annual Report the company suggested four priorities for restoring the value of shares: (Douglas West, John Ford, Essam Ibrahim, 2006).
1 M&S had to create profit centers with simpler management structures, faster decision-making and distinct targets for shareholder value.
2 It had to change the way it bought goods both in the UK and overseas by giving its selling and marketing functions more say in what they had to offer.
3 It had to restore profitability overseas by reorganizing its local business to serve local customers.
4 Finally, M&S had to build on the success of its financial services business.
Table: SWOT analysis for M&S
Reputation for quality
Presentation of food items
Customer refund policy
Loyal customer base
Share price vulnerable
Long supply chain
Expensive in relation to competitors
Designers popular with consumer
Low inflation rate
Sterling value makes UK expensive
Share value: loss of city confidence
Xmas sales vital (40%)
It was almost impossible to define timescales by which changes should take place. To regain competitive advantage and raise the value of the share price, M&S needed to focus more on their customers and less on the organizational facets of the business. It needed to focus on both internal and external environments to constantly evaluate its publics and the influences affecting the perceptions of those publics. The introduction of 'Autograph' and 'Salon Rose' - its new designer clothing ranges - as value-added ranges and enhanced personal service began to make Marks & Spencer more attractive to the consumer, and currently the introduction of a customer loyalty scheme is being considered as it is a popular strategy in the European retail industry. (Philip Kotler, Gary Armstrong, Prof Veronica Wong, Prof John Saunders, 2008).
Public relations practitioners have been arguing the value-added component of effective public relations and communication for half a century, and it is interesting that the issues which may well lead to the survival of this major British retailer will rely on sound symmetrical communication policies and practice. Marks & Spencer are now devoting additional energy and resources to marketing the M&S brand by allocating more appropriate levels of resource towards this area of activity. The company is beginning to use its existing customer database to target customers with a specific type of brand offer and predicting peak selling periods to maximize their staffing levels. Whether or not internal communications and public relations techniques will be applied to individual stores by allowing store managers to be empowered remains to be seen. Although staffing levels have improved to ensure customers are served quickly and effectively, the attitude and behavior of many retail store staff still require modification in terms of improving customer courtesy and responsiveness. Many image consultants have called for a change of logo to modernize the brand image and make Marks & Spencer more fashionable and attractive.
Public relations advice must concern itself with all facets of both the internal and external environment, including the organization itself, but not at the expense of the customer, service delivery in relation to production and customer orientation in relation to sales. The heart of any communications strategy must lie with an improved reputation based on shifting perception from poor image to confident and competent identity. This will involve substantially and substantively shifting high pricing with low perceived added value, which was a strategy destined for ultimate failure, to one of high perceived added value and low pricing.
Marks & Spencer learned the hard way that public relations is no marginal matter in the pursuit of corporate goals. It is a major function and core element of management. The failure to recognize that image, identity and reputation had an important strategic role to play in the organization was a reflection of lack of understanding about the relationship between the company and the society which was vital to its existence. With clearer corporate goals being put into place, it should now be possible to create a realistic programme to communicate the mission and to project the desired image to all stakeholders. Clearly, delivering different messages to different stakeholders requires expert corporate communication skills in delivering a consistent message while dealing with individual group concerns. The challenge is to continue to develop strategic and tactical public relations responses to meet strategic business imperatives and expectations. Marks & Spencer has to retrieve its worldwide reputation and to reaffirm that its core values are a belief in the customer and the good of society. In today's era of communication convergence the company can only do this when it learns that communications are as important as product and service. (Nigel F. Piercy, 2002).
Mission statements are the formal pronouncement of what an organization is and what it does. The strategic planning and implementation processes are supporting activities for the firm's mission statement. It is the firm's mission that provides the glue that keeps everyone headed in the same direction throughout the organization, particularly during the planning phase of operations. In reviewing this case a number of lessons can be identified: Large well-established corporations, no matter how secure their position appears, cannot afford to be complacent about the security of their future, especially in today's increasingly dynamic environments. To contribute fully to the successful strategic management of an organization, public relations should be treated as an integral part of the overall management function, serving, in particular, as the internal and external antennae and keeping management alert and sensitive to environmental change. Public relations can only be effective if it has a credible story to tell. Where there are deep-seated problems with the organizationââ‚¬â„¢s strategy, its products or relationships with customers, these need to be sorted out first before public relations can begin to do an effective job. Media are important external barometers, creating and reflecting an organizationââ‚¬â„¢s image in the eyes of many publics from consumers to stockholders. Failure to monitor this important source of external information can lead to major image and perception problems that have far-reaching impacts.
The strategic planning process consists of four steps. The planning process requires a SWOT analysis, establishing goals and objectives, designing strategies to accomplish the firm's objectives and implementing the strategies. SWOT analysis is the gathering and analyzing of information concerning the strengths and weaknesses of the organization and the opportunities and threats posed by the firm's environment. Goals and objectives may be categorized into several schematics. The goals and objectives of each organization and its subunits are influenced by the nature of the business and internal institutional considerations. Strategies are designs of activities that are necessary to operationalize the firm's goals and objectives. Implementation of strategies are managerial activities necessary to assure the activities contained within the strategy are effectively brought to bear to accomplish the firm's goals and objectives. The strategic planning and management occurs at each level of an organization, and each level supports the total enterprise. The concepts that comprise strategic planning and management are applicable to deciding what businesses should be undertaken. The systematic approach to strategic planning and management presented here are the same activities that are necessary to determine whether activities Marks and Spencer are opportunities or unwarranted risks.