Business Environment Analysis For Marks And Spencer Economics Essay
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Published: Mon, 5 Dec 2016
My chosen organisation is Marks and Spencer. Marks and Spencer has six main objectives.
The main goal of any business is to increase profit. This is done by working out the total revenue that the business has made from selling and costs of its product. For any business to survive, profit must be earned.
Like any other business Marks and Spencer needs to increase its sales. To do this they must fulfill what the customer needs and desires. To increase their sales Marks and Spencer needs to attract new customers by for instance aiming for the younger market whilst at the same time ensure that its loyal customers are kept satisfied with a supply of products which cater for their needs.
Marks and Spencer also have the objective of earning market leadership. In order to do this, they must become more competitive. By meeting the wants and needs of more customers as well as by attracting more potential customers and offering better quality for affordable prices, Marks and Spencer can oust the competition and achieve a high standing status in the market.
Offering a high quality service is also one of Marks and Spencer’s objectives. In their annual report they claimed that no one cares more about ‘quality’ than they do and in fact Marks and Spencer are well known for this.
Like other businesses another objective for Marks and Spencer is growth. For Marks and Spencer to survive and to be competitive, the issue of growth must be attended to. By growing, the business is expanding globally and thus achieves recognition in different countries attracting different pools of clientele.
The last objective of Marks and Spencer is rewarding shareholders. It is important for a business to keep the shareholders content since they are a fundamental source of investment. Marks and Spencer needs to make profit in order to maintain share holders as well as attract further investment.
Each of these objectives has its own importance, neglecting either one of them would surely bring the organisation to a halt. Marks and Spencer has created a set of six priorities in order to better meet the objectives it has set out. The organization aims to retain their leading position in the market whilst improving their performance in certain sectors which do not make as much profit as other areas, such as for instance the food sector. In this way they can continue to satisfy the current customers they hold whilst attracting potential customers by focusing on better promoting one of the branches of their business. Through the optimization of margins, controlling costs and expenditure and maintaining a strong balance sheet, Marks and Spencer can ensure a better calculation of its profits and losses and thus have a better chance of securing its place in the market through the composition of a well-planned market strategy. Finally and by no means as a last priority, Marks and Spencer deems it necessary to enforce high ethical standards.
Essentially the organization has to increase its sales since this is the only way in which it will be able to make a profit. It therefore has to invest in its products and ensure that these are marketed well as its ultimate goal is to attract customers and keep them from going to their competitor. It is of no surprise that driving their international business is not a first priority since ultimately I think they would be better off ensuring that the organization is functioning with utmost profitability before seeking to expand to other areas.
External stakeholders play an important part in the achievement of the business, this is because they sell to and purchase from the company, but they are not employed by the company. They are considered stakeholders as they stand to gain from the company.
Some external stakeholders of Marks and Spencer are customers, suppliers and the general public.
One of the most essential stakeholders of a business is the customer. The customers of Marks and Spencer purchase the products marketed by the company resulting in a profit for the organization. Without customers the business would not survive.
Suppliers are external stakeholders as they sell their products to Marks and Spencer in exchange for a price; thus both parties benefit from this relationship. Marks and Spencer need to take care of their suppliers to ensure that the suppliers continue to provide them with good quality products for a reasonable price, so that in turn Marks and Spencer provides its customers with the same good quality products at competitive prices.
Another important stakeholder is the general public. The organization must take into consideration various factors when developing products as well as their production processes. The reason for this is the impact and influence which such process or product may have on potential and actual customers. Marks and Spencer have to ensure that their goods are environmentally friendly and are produced in an environmentally friendly way. Having a means of production which creates high health or environment hazards will result in a decline of people purchasing the product, or potentially purchasing from that organization, therefore, a lower amount of sales and consequently a reduction in profits.
There are several conditions that affect demand in an organization.
A change in a customer’s income is one such condition. If the purchaser does not have a good income to maintain himself or his family, then he will definitely not have enough money to treat himself to something that he wants, conversely, if the buyer earns a good income, he would be more likely to spend. Thus the rise in income is directly proportionate to the demand and affects it in such a way that with an increase in income, the consumer will tend to purchase more products than he would if he earned a lesser amount. Marks and Spencer’s offers high quality products with good value, thus people earning an average wage would definitely afford their products.
A second condition is when a substitute product changes its price. The increase in the price of one good will direct to an increase in demand for the competing product.
Another condition is when a price of a complementary product changes. Here one considers supplies that are in complementary demand, such as the demand for video players and video films. If Marks and Spencer sells DVD players at a cheaper price, the likelihood is that more DVD players will be bought. This will lead to a growth in market demand for DVD films.
The changes in weather also condition demand. The price of a product fluctuates when either demand or supply changes. For example in good weather the supply of grains and oil normally increases. Customers will tend to purchase more when products are more readily available and are at a lower price. One can also consider the scenario where the change in climate or weather increases the demand as is the case in the sale of umbrellas when rain is expected.
Another condition is the changes in taxation on the product. The implementation of a tax by the government affects product prices in such a way that the organization will have to raise its price in order to be able to meet the tax requirement, cater for the expenditure incurred for the purchase of the product as well as keep a percentage of profit from the sale. Thus one must assess whether the business can pass some or all of the tax onto the customer through a higher price without negatively affecting the demand.
Clothes and accessories are essential products in today’s world and affect all levels of society indiscriminately. A condition that relates to their demand is changes to tastes and fashions. Companies try to influence the varying tastes and preferences of households in favor of their products with the help of a good marketing and advertising strategy. The influence which these advertisements have on the public brings about an increase in demand for their products. Marks and Spencer offers a wide range of variety in clothes. They offer a selection of inexpensive to extravagant and luxurious products that cater for every pocket.
Another condition is a change in the population, such as growth. Due to the inelasticity of demand of a product such as food; which will continue to sell despite any increase in price; as the population grows so does the demand. Consequently this leads to growth in agriculture and the expansion of cultivated land. I think in this type of situation the only thing that Marks and Spencer can do is generate more products so as to cater for a bigger demand by the growing population.
Marketing in itself is a condition which affects demand. Marketers must pursue constant research and should not rely solely on their own judgment to determine whether marketing decisions need to be adjusted. When considering price adjustment, the marketer must investigate the effects which a change in price is likely to have on target market demand for a product. Understanding how changes in price affect the market requires the marketer have a firm understanding of the concept of elasticity of demand. This entails an evaluation of the price and how it alone affects the overall demand. This assessment necessarily requires one to consider the manner in which competitors may react to the marketer’s price change by changing the price of their product. Thus one here anticipates the market reaction and how this will affect company revenue.
Marks and Spencer continue to strive to meet customer demand; the expansion of their websites offering free delivery and online deals clearly illustrates this. Marks and Spencer have continued to endeavor to provide a better service by increasing the number of people in their trading teams in order to focus on bringing the right products to the right stores, to meet the ever-growing demands of the customer.
A mixed economy is when both the private and the public sector take part in the production, distribution and all other economic activities within a state. The mixed economy permits the inclusion of private contribution in the field of production in a situation of competition with an aim of achieving profit. This mixture of free enterprise and government control has been looked upon from varying perceptions; some claim it is beneficial whilst others believe it has no impact or is detrimental to the economy of that state.
An advantage of a mixed economy is that it assists in increasing over-all production in the nation. Private and public segments work hard in order to bring about more production. People can take the initiative to start companies on their own, whilst deciding what to produce and the prices they will charge for the goods or services that they offer. Another advantage is the use of government revenue – through the payment of taxes, these organisations obtain benefits such as those provided by government services like social programs, subsidies and other government incentive programs. The benefits of mixed economies have been witnessed by the growth of some states into some of the leading markets in the world such as those of the United States, the United Kingdom and Canada.
Some disadvantages of a mixed economy are that businesses have to find their own niche in the marketplace for products, and that they have no control over the taxes they pay. Companies often complain of tax rates being too high for the services and products they offer. Certain economists opine that in fact, mixed economies hardly ever accomplish the growth at which they are aimed. They also criticize the fact that the mixed economies do not make proper use of national resources.
The current economic climate of the USA is a recession, as seen in the figure below.
A recession is a phase of general economic turn down. This comes with a fall in the stock market, an increase in unemployment and a turn down in the property market. If a recession persists long enough it is often then classified as a depression.
The last two depressions of the USA occurred in 1990-1991 and 2001, lasting eight months each and only two of the ten previous post-depression downturns lasted as long as a full year according to the National Bureau of Economic Research.
Tony Fratto, the Deputy Press Secretary for the White House emphasized on the need for the American Government to take the necessary steps to bring the economy back to its full force. He propounded on the importance of returning the financial and credit markets back to their normal state, and to try to re-establish the housing market. Mr. Fratto also held that in order to reach stability the states must necessarily take cognizance of the current unemployment situation.
Although there is no singular cause, one of the principal reasons given to explain the current economic recession was the housing downturn that resulted in losses of multibillion dollars for one of the nation’s leading banks as early as 2006.
Furthermore, June 2007 was recorded as a period with the lowest rate of home sales and in December of the same year, the recession was deemed to have started. In 2008 due to a reduction in the labour market, the costs of living rose along with the unemployment rate, leading to a reduction in the peoples’ savings.
In 2009/2010 the global markets continued to shift, unemployment increased whilst profits, interest rates, expenditure and investment continued to descend rapidly. Various commentators have stated that the present recession is one of the extended downturns since the Great Depression of the 1930’s.
What is President Obama doing to try to get out of the recession?
President Obama requested Congress to provide him with an economic package the value of which amounted to more than 800 Billion Dollars in order to be able to cope with the current economic crisis.
As part of his economic policy the President engaged in a series of talks with the banking sector to introduce new banking policies for the benefit of its customers.
Monetary and fiscal policies are being updated, special care being taken so as to reduce the present economic crisis. Many US economic policies are being promulgated by government to stabilize the financial sector.
A motion was put forward for the modification of health insurance in order to ensure better health for residents and counteract the repercussions that poverty might bring upon the American citizens. The introduction of new inventions and ideas would help in the economic development of the continent and generate a new source of investment and income. Currently, one can see an immense expansion being demonstrated in the area of computing, aerospace, medical and military equipment.
Price intervention in the context of the European Community refers to a point when the world market price falls below the EU price, the EU interferes to buy the surplus product, in order to keep the price high.
Fifty years ago, the importance of the EU agricultural policy was to supply enough food to a Europe coming from a time of shortages, due to war. The EU policy seeks to facilitate the route for producers of all forms of food; such as crops, fruit and vegetables; in order to enable them to compete with other producers on both a European and a global scale. The EU nowadays helps farmers by giving them payments to keep their lands in good condition and to meet the environmental and animal welfare standards, as an alternative to paying famers to produce more. The Common Agricultural Policy with the help of the Community, purchases farm products after the market price falls below the agreed level so as keep itself from the accumulation of “Butter Mountains” and ‘Wine Lakes’.
The advantages of price intervention in the EU through the Common Agricultural Policy are that it provides incentives and measures to raise productivity and ensure reasonable living standards for the agricultural society. It also promotes the stabilization of the market whilst ensuring availability of food products at reasonable and realistic prices.
The disadvantages are that due to an increase in productivity leading to a surplus which can result in ‘Butter Mountains’. These cause an increase in the tax load on EU Member States due to a rise in the contributions each must make to the budget.
I think that the European Union’s Agricultural policy is a necessary tool which allows farmers to maintain their jobs whilst keeping agricultural produce at a stable price for everyone to afford and thus minimalising waste and expenditure.
Introduced in 1999, the European Economic and Monetary policy aimed to facilitate the free movement of goods, services, capital and labour. Full integration necessitates the harmonization of member states in certain sectors in order to achieve greater unity and symmetry. EMU in conjunction with other policies implemented by the European Community seeks to achieve this objective.
Having the euro as a common currency has proved particularly useful during the recession because it provided more stability for countries within the Union by allowing them to deal with the economic crises in a strategic and co-ordinated manner.
The benefits of being in the Euro-Zone are that goods, services and profits are easily moved across the national borders of the Union’s member states. The Euro has gained strength over the years and now competes with strong-standing currencies such as the American Dollar.
An additional benefit of the adoption of the EMU is that it is now becoming far easier to trade, travel and invest within the Union itself.
However, in order to join the EMU, EU member states need to meet certain criteria. Every government’s debt must be not exceed 60% of a country’s gross domestic product, the deficit must not be greater than 3% of the nation’s gross domestic product and the inflation rate must be reduced to below 3.2% and conversely government bonds producing 7.7%.
Member States encounter certain additional problems when considering full integration with the European Union; these include dealing with tax, the application and transposition of different regulations affecting financial intermediaries along with security trading systems.
In conclusion I would like to speak from my own personal experience as the citizen of one of the smallest member states in the Union. Malta adopted the Euro in 2008; the process of adjusting our economic and financial institutions to meet the established criteria was no easy one. The strive towards full integration is no easy task but so far has reaped many benefits, the only hope for the future is that it will continue to do so.
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