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Boston Consulting Group Matrix

3692 words (15 pages) Essay in Marketing

19/05/17 Marketing Reference this

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Marketing planning process is the planned application of marketing resources to achieve marketing objectives. It is generally a logical sequence and series of activities leading to the setting of marketing objectives and formulation of plans for achieving them. Marketing planning is essential in today’s economic scenario because of increasingly hostile and complex environment in which companies operates. There could be various external or the internal factors which can impact the ability of organisation to achieve its goals.

2.1 Assessment of marketing planning

There are numerous advantages of adopting a marketing planning process by organisation. The various stages to achieve the desired objectives but it also devises a proper strategy to achieve it. By setting a mission in the marketing planning process, the organisation not only sets its long terms goal, but it also gives a direction to the management for the future. A Well defined and accepted mission always becomes a tool of motivation for the employees. While, marketing audits helps organisation to find its current position, strengths and weakness, the external factors and the organisations preparedness to achieve the set the objectives. Marketing assumptions has its importance, as it defines those factors which are not in control but needs to be considered while doing planning. Forecasting expected results helps organisation to understand the result it should set target at and it can achieve. While in the alternative plans helps organisation to have contingency plans in case of any failure or deviation from expected outcomes. While the budgeting process helps organisation to plan its finances in advance to start the process. Some of the advantages of following marketing planning by Malcolm McDonald are;

PESTLE Analysis of M&S

Political factors

Mark & Spencer Case Study

Operated in food industry, M&S has to update regulation from government for Health & Safety British Standards. In some cases, the regulation could be obstacle for M&S operation when it could affect on profits or current process of manufacturing.

Economic factors

The world economic is still in downturn, having considerable influence on consumers’ decision making for purchase. They will restrict to purchase luxury items as food and clothes luxuries and consider carefully about the price based on their budget. This affects dramatically to profit of M&S when they seem to have to give many discount programs for customers to ensure good provisions and stock. It could be big challenge for Mark Bolland to recover M&S from declining net profit and sales revenue.

Social factors

The trend of clothing is always changing fast. Therefore, M&S needs to update the trend frequently to satisfy customers and compete to competitors in this industry. What is more, focusing on customers over 30 year olds, M&S must concentrate on providing clothes made from good fabric, smart cut and other high qualified materials (Modernwomenworld 2011).

Technology

At this modern age, advertisement is the most effective means to get loyalty of existing customers and attract new customers. As a result, the content of adverts should be invested and M&S must use innovative means to bring the brand name to customers and maintain relationship with existing customers by offering vouchers, promotion campaigns, updating their point in their loyal card. Furthermore, convenience is the most consideration to shoppers. Therefore, self service machine maintenance and effective distribution channel could satisfy customers.

Legal factors

Most of legislation affecting M&S operation relates to taxation, new regulation relating to Health and Safety for consumers because M&S provide foods product. For example, M&S must follow with the regulation for standard packaging to ensure to use safe containers for foods. Environment Similar to other companies, M&S is under pressure for eco-friendly materials and process of manufacturing which are promoted daily on television, newspaper with protecting environment purpose. Therefore, they must be careful with every action in production.

Portfolio Matrices

BCG Matrix

Source: Vectorstudy

In BCG Matrix, M&S could be positioned as “Question Marks” when their market growth rate is high with large cash usage for many projects and campaigns but they could not achieve large market share as they want. In the objectives to achieve the clothing market of mid-age range, M&S must face with the direct competitors from Asda and Waitrose who are quite successful with this segment, especially give brand name of saviour George Davies. Moreover, the international operation seems to not get large market share as expected. As a result, M&S is in Question Mark stage and aim for Star position.

Ansoff Matrix

Examining the Ansoff Matrix, M&S seems to apply all matrices with market penetration, product development, market development to satisfy both existing customers and new customers by enhancing quality of products and services and bring new products. In term of diversification, new products could be launched for new geographic market.

Porter’s Generic Strategy

Source: Vitalsix.co.uk

Mark & Spencer Case Study

Although M&S’s rivals changes to low-cost strategy because of economic downturn effect, M&S still keeps their strategy which creating their brand recognition and values for brand name. This strategy could help M&S maintain their strong brand name and brand recognition with high quality products and services.

Pest analysis ;

Pest analysis stands for Political, Social, Economic and Technological analysis and provides a framework of external enviormental factors influencing the organisations strategies;

Political; In 2010 coalitin of conservative and liberal democrat party under the leadership of david Cameron came into power. To fight the recession, government has undertaken massive job cuts in public sectors and various cuts in funds given to different sectors of economy. EU is negoating free trade agreement inth india. Chinese and Indian economies have performed much better and had less impact of recession. Policies of increase in tution fees of students and proposals to cut down the immigration of students from non Europe countries will impact the young consumer segment.

Economy; Uk suffered its worst ression in 2009 in over 60 years. Consumer expenditure declined by 4.4% in 2009. The economy of the uk is alomg least dependent in Europe of exorts of goods, thus less vulnerable to the risk of external shocks from failing global demands. Devaluation of the uk in 2008-2009 has given competitive edge to the exporters. Between july 2008 and January 2009 the pound lost 32.0% of its value against the us dollar and 19.7% of its value against the euro. Youth employment has risen from 17.2% in 2009 compared to 12.5% in the same period of 2008. Rising fuel and food prizes are squeezing disposable income.

Social; Uk has a multicultural model containing different races, ethnics and religions. Uk is among one of the most popular countries for immigration. Between 1998 and 2008, 1.5million people were added to the population, two third of them are from Asia and Africa. Due to ongoing recession and government policies of job cuts in public sector unemployment has increased. People prefer cheaper clothing’s now. Due to decrease in the income sources, Due to recession, the adults have cut down their expenses and the maximum in on the clothing.

Technological ; retailing methods are becoming more dependent on online shopping through internet. Online market for fashion is extremely dynamic and so various companies are setting up online shops, for e.g. Tesco (clothinggattesco.com) Asda (George). There are different modes of payment now; online banking, direct debit cards, credit cards. The management and services of the company are undertaken on IT systems, which are maintained on secured servers at distant location.

The companies like Primark have been able to increase their momentum in the enconomy by strategically planning their pricing. The economic recession has not only made the clothing market more competitive but has also exerted pressure through various other factors to change the market trends and social factors affecting the economy. Because of recession, the government policies are resulting into more job losses. There’s a sharp increase in unemployment and the inflation is steadily moving up. All these factors have resulted in cut down of expenses by the consumers and clothing is hit maximum. As discussed under the PEST analysis, the Political, Social and Economical factors have made the clothing business very challenging. Like Primark has been able to increase their momentum of sales because of their pricing, which in turn making the market more competitive in terms of pricing.

Internal markting auit is a process of evaluationg and assessing the internal factors of the organisation. It not only helps to identiys the strengths and weaknesses of the organisation but also determines its competitive advantages. Internal audits foucus on some of the key areas which includes; current state of new product development, evaluation of profitability of product portfolio, effectiveness and efficiency of distribution and finances are to name a few.

Product Life Cycle Model;

Product life cycle model helps to analyze the maturity stages of products and industries. This term was used for the first time by Theodore Levitt in 1965. Product life cycle model has significant impact on the organisation stratragies and performances. It identifies the different stages affecting the sales of product from the time of introduction till retirement. Applying the product life cycle analysis model to the marks and Spencer’s clothing business, we can conclude that the clothing business is still in the growth stage. The clothing business is further segregated in different sub-sectors; men’s outwear, women’s, children’s outwear, clothing accessories, underwear, nightwear and socks, stockings and tights. Though many of these subsectors are leading in the marketing but they still have lots of scope to grow. For example men’s outwear was no1, in the market but still had market share of only 8.34% while if we see other subsectors, they are still competiting with other companies to gain the number one position like children’s wear and clothing accessories which has market share of less than 5% for the former and less than 3% for the later.

Boston consulting group matrix;

Boston consulting group matrix was created by bruce Henderson for the boston consulting group in 1968 to help organisations to analyse their product line. It helps the cpmpany to allocate resources and is used as an analytical tool in product management and portfolio analysis. Boston consulting group maratix has two dimensions; market share and market growth. This method tells that bigger the market share is or the fastest the market growth of product is the better it is for the organisation.

Underwear and nightwear products have a high market share of 19.9% and confortable enjoys number one slot in its segments. The profits and cash generationsfrom this product is quite high and it does not need high investment. While mens outwear, womens outerwear and socks, stocking and tights have around 9% of market share but they are leading the segment and have shown good market growth. But the products childrens wear and clothing accessories have very low market share and they are at fourth spot

Placing these products into BCG matrix, the marks and spencers product portfolio is as fallows;

Cash cows; underwear and nightwear products, as these enjoy high market share and is bringing high revenues to the organisation without any requirements of extra investment. Starts mens outwear, womens outerwear and socks, stocking and tights are the star products of the company, as they are leading the segment with promising market growth rate. Dogs children wera and clothing accessories have low market share and have been poor performers with respect to other products of M&S portfolio.

Swoth analysis;

SWOT analysis is a tool for auditing an organisation and its environment. It helps to determine the core strengths of the organisation and the weakness it has which need to be focused upon. It is the first stage of planning and helps the management to focus on the key areas. The SWOT stands for strength, weakness, opportunities and threats. The strength and weakness of the organisations are determined by the internal audit while threats and opportunities are related with the external environment.

Strengths;

Marks and Spencer’s date back to 1984. It is a brand name in UK. They provide excellent and quality products. 2 marks & Spencer’s continue to be a leading retailer of clothing and footwear in the UK. 3 M&S has a diversified business ranging from clothing merchandise to food retail. 4 M&S has maintained growth in the new online business of cloth is and is one of the fastest growing businesses. 5 M&S has employee strengths of around 76,000 and has around 700 stores in the uk and 300 stores worldwide at 40 different locations giving it an international brand name. M&S has healthy relationship with its employees and its pays competitive salaries as per market. 6 M&S regularly updates and upgrades its technologies to keep sync with the current technologies. 7 M&S is highly environment friendly and has heavily invested in achieving zero carbon emission. 8 M&S has presences in almost every part of UK and they have strong supply chain management services.

Weakness;

M&S has failed to compete with the companies providing goods at lower rates. 2 M&S has not been able to re-engineer its policies in the economic turmoil, leading to loss in market share. 3 they have failed to keep up with the fashion trends of the market. 4 company has failed to attract young customers. 5 marketing strategy has not done to change the image of M&S, which is perceived as brand for mature customers between the age group of 35-40.

Opportunities;

The online marketing business has a great potential of growth and M&S need to tap this opportunity. 2 current recessions has presented M&S’s management a situation to rethink on its marketing and sales strategy and formulate new strategies to cope up with the future economic issues. 3 M&S should venture into alliances and collaborations with the companies of developing markets to tap the opportunities available there. 4 India, china and Brazil had not serious impact of recession, so M&S should start focusing on these countries as these growing economies and also account for biggest customer base, where company has less presence.

Threats

Companies like Primark and Asda, who are providing goods at cheaper rate, are eating the market share of M&S. 2 being a big retail company; it will be very difficult to done strategic changes at organisational levels in terms of pricing, which can further reduce the profit margin. 3 the increasing inflation in the developing countries and the improvement in the living standards have led to possibility of increase in wages of workers working for suppliers. 4 increase in fuel cost may further lead to decrease in the operating costs. 5 expansion into international has not been very successful for M&S. 6 clothing industry is mature and market is still not saturated, while the customers are continuously looking for new fashionable trends.

The clothing industry is mature but not yet saturated. And so in the PLC analysis, the product has been put in growth stage. The Marks and Spencer is a leading retailer and because of its brand name and established infrastructure. The area where they need to focus more on is to follow the fashion trends in more aggressive manner and devise strategic marketing and sales techniques to achieve the set objectives.

Strategy development model (Ansoff matrix)

Igor Ansoff created the product/market diagram in 1957 as a technique to classify the options for business expansion. Ansoff matrix helps organisations in analysing and planning the marketing strategies to meet the customer needs and expectations. It allows management to consider strategies to expand the business via current and/or new products, in current and/ or new markets- there are for possible product/ market combinations. This matrix helps organisations decide what course of action should be taken in given current performance.

Following the current economic scenario, the strategies which should be undertaken by M&S management to outline the alternative methods to achieve the growth, are;

Marketing penetration; focusing on the exciting products in the exciting market and consolidating its sales and growth within the present market. The various penetration strategies which should be considered are; attract the new customers who are occasional buyers and are just ‘testing water’. These customers should be targeted. Attacking competitor’s sales, as clothing market is mature and highly completive. To increase the sales, company will have to target the competitors customers. This strategy can be achieved by adjustment of marketing mix, by altering one or more elements like, price or promotion techniques. Increasing the consumption by current customers, this strategy can be achieved by devising some policy to give special benefits and discounts to the regular customers. Market development; M&S is already present in the global market. It has around 300 stores in 40 different locations. By locating new markets where the customers can have chose from the existing products of the company. M&S cannot focus only on one market to survive in the business. It will have to look for new regions and markets where it can sell its existing products to further consolidate its positions in the market. Diversification; M&S needs to diversify its business strategies by entering into new markets with new products. The new products should be as per the local market is has entered to do the business. Company cannot survive in new market by focusing only on its existing products. It needs to customize and develop new products as per the requirements of the new customers. For example when McDonalds entered into developing countries it customized its burgers as per the local taste. It was not the burger which it sold in western countries.

Product development; by new range of clothing targeting the existing customers, profitability can surely be increased. The one area where M&S really needs to work upon this step. It needs to have clothing ranges and should be with current fashion trends.

Porter’s Generic strategies;

Porter explained a category scheme which consists of three general types of strategies that are often used by business to achieve and maintain completive advantage. These three generic strategies are defined along two dimensions; strategic scope and strategic strength. Strategic scope is a demand side dimension and looks at the size and composition of the market organisation intend to focus. While, strategic strength is a supply side dimension and look at the strength or core compentency of the organisation. Porter identified two competencies that he felt were most important; product differentiation and product cost.

Consider porter’s generic strategies in M&S case, the following options are concluded;

Differentiation strategy; M&S needs to focus on sustaining its edge completive edge over other competitors by maintaining its quality and improving the services. Company should focus on providing the best services its customers. For example having enough change rooms and fitting sections, having different ranges and variety of products with the best quality to meet the need of all the customers. By having fashion stylist and specialist for different sections of merchandise, who can suggest and guide the customers who in turn will make the customers experience better. By having enough number of well trained and motivated staffs at the store, M&S will be able to serve customers in better way and will maintain its edge over other competitors. Uniqueness competency should not only be maintained in product quality but should also be maintained in the services and store infrastructure and the overall experience which customers get at companies stores.

Segmentation strategy; M&S needs to formulate segmentation strategy to target on specific group of customers, based on culture and age group. Company has been seen more as stores for mature and people in the age group of 35-54, with its prominent grey and black shades to target youths. With globalisation and because of free society in UK, the non British populations forms a major par of customers, which is still being untapped by the company. M&S should target this segment based on different cultures and countries.

Cost leadership; having cost competency is always fruitful in increasing the market share of the company, but it can’t be taken as a long term strategy. It may reap fruits in short term but it will further decrease either profit margin or the competitive edge of the organisation. M&S should not fail because of cost of its products as it does play a role, but it should also maintain the quality and completive edge its competitors.

Conclusion

By analysing external factors and M&S’s capability and capacity, M&S totally has all factors to be a leading retailer in UK. With 800 stores in UK with high qualified products and service, M&S could completely satisfy customers in food and clothes with five cores which are quality, value, service, innovation and trust. The main issues for M&S is working culture and market segmentation focusing on customers choosing differentiation not cheap products and failure in achieving clothing for 30+ year-old market. M&S has taken many strategies and their profit has been fluctuated during many years. However, with new CEO, Mark Bolland, there is a hope that M&S’s profit could be increased. There are some strategies recommended for M&S with analyzing pros and cons of each strategy to get along with their objectives. It is found that takeover seems to be good strategy and suitable for capacity and capability of M&S which assists M&S could get highest achievement in both domestic and international market. Based on this, there is hope for brighter future for M&S next years.

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