External and internal environment of Marks and Spencer

Marks and Spencer (M&S) is one of the top retailers chain in UK which claims to be the top women’s wear and lingerie seller as well as better quality food seller. M&S is also famous for high quality and great value for men’s garments with unique classic styles.

Noticeably, M&S is competing in the tough market of home-use products, and also in the food selling in comparison to others food companies, where they are selling products from freshly produced groceries items and meals both partly and ready meal. However, the company is vitally investing in online business marketing to boost the sales of home-use products. M&S is the first company in UK that introduced self customer service. M&S is growing in menswear and kids wear market rapidly.

Whereas, it is estimated that each week, the number of people who visit M&S is more than 21 million all around the UK (Company Overview | MarksandSpencer.com). To serve such a high number of valued customers visiting 600 stores in the UK the company employs more than 75,000 staff worldwide (Company Overview | MarksandSpencer.com) .

The basic business pillars of M&S are Trust, Values, Quality, Service and Innovation. A Russian guy ‘Michael Marks’ started M&S in 1884 after initially starting business at a small stall called ‘Marks – penny bazaar’ in Leeds. Within 10 years Michael Marks had at least 12 premises, his business skills took him to his friends in the search of potential business partner, he approached one of his friends “Isaac Dewhirst”, whose money had loaned towards his original costs at start up, refused his offer but referred Mark to “Thomas Spencer” who was working for Isaac as a senior cashier. In 1894, Thomas invested £300 at that time and Marks and Spencer Ltd. was born (Our History | MarksandSpencer.com).

Analysis of the Organisation’s External Environment.

Pƒ  PoliticalExternal environment scanning is concerned with the forces and factors that impact on M&S’s business. These forces and factors are very vital for M&S survival and growth in the competitive market. The analysis of external environment enables M&S to understand the changes in business environment and brings ahead of its competitors. It also helps in adopting the new environment and response to market demands. External environment in which M&S operates can be identified through PESTEL analysis that shows what is exactly happening outside the organization.

Eƒ  EconomicPESTEL ANALYSIS:

Sƒ  Social

PESTEL ANALYSIS

Lƒ  Legal

Eƒ  Environmental

Tƒ  Technological

POLITICAL:

Political decisions and circumstances are very important for the M&S. Iraq war was one of the biggest cause of slowing down the UK economy. M&S faced very critical situation due to the political changes. Change in government brings new business policies which play their part in the business growth. Public spending cut is another political decision that is a big hurdle in the business growth too.

ECONOMIC:

Economic situation of the country is the factor that can pressurise the M&S business. The new government has increased the VAT from 17.5% to 20% that has cause the fall in sale in M&S business. Last year recession has played vital role in M&S downfall. However first Quarter of this year show some positive attitude in economy. Currently M&S is regaining its better position as economic conditions are moving positively.

SOCIAL:

Consumer concept in the market place has been changed. Now M&S has to figure out the new fashion and customer taste. The price sensitivity of the customer has produced more competitive environment. As M&S products are older fashioned and expensive, they have to make a strategy that deliver more customer oriented product on less prices. M&S is lacking the ability to understand the changes in social trends.

TECHNOLOGICAL:

Media has played a big role in communicating new Fashion and price comparison to the customer. M&s needs to use the advanced technology to introduce its products more widely in the market like online shopping and fast delivery. New technology can also be used to identify the new fashion in and trend change in different parts of the world. Conducting surveys on website is very good technique to get the customers feedback and understanding their demands.

ENVIRONMENTAL:

Global warming is a hot topic in the world. M&S Plan A is very environment friendly. M&S is selling product and making sure how these products are being used and disposed by consumer. M&S is using less packaging and less bags to save environment and natural resources. Recycling is the most important part in Plan A.

LEGAL:

M&S sells the products of high standards to its customers. They always take in to account of the legal issues of the business like customer and staff safety, selling alcohol and tobacco to young people.

FINDINGS:

PESTEL analysis gives us an idea about the external environment of M&S. We think entry of new rivals is the big factor in external environment. M&S operates in highly competitive environment and its competitors are more customer oriented and in tune of the customer needs and market demands. In clothing market other retailers are performing aggressively with their brands to compete M&S. Big brands like NEXT, Gap, BHS and Burton are attacking M&S in clothing business.

As external environment is one of the most important factors for businesses, it cannot be ignored. Keeping in mind PESTEL analysis and competitors, it is being summarized that M&S has to make the strategies taking into considers its weakness. Changes like VAT increase and spending cuts should be taken seriously. M&S has to make plans for future recession and how to cope with recession if it happens again. M&S has to change its behaviour of slow response to consumer’s changing needs and preferences.

Internal Environment Analysis

Organisational Structure

In order to understand how M&S still keeping its trust on people hearts and growing in tough market environment, it is important that we first go through with how the company is structured and how the flow of information passes from customers to policy makers.

Retail Director (Head Office Role)

Department Management

Section management

Customer Assistant (Customer Interaction)

Recruitment Process of M&S

To join M&S workforce, company offers the

Retail Store roles

Head office roles

Graduates scheme

Trainee management scheme

Customer Service

Customer service staff members are the representative of any company, Marks and Spencer Customer Assistance is the face of corporate staff that provides high quality services with their commitment and enthusiasm to make sure they deliver the service according to the customer’s expectations.

Marketing & Promotions

In Store

Introduction of products is only possible with best marketing and advertising approaches. M&S attracts its customers by promoting its products on every occasion and event by hanging promotional offers posters, sign boards and confetti.

On-Line

M&S’s website, Marksandspencer.com is another vital source of promoting its products and different offers. It is remarkable that M&S promotes its website ‘in-store’ to the people that are not aiming to shop initially but later they might wish to browse the website and become valuable customers.

Customer Service/Assistance

Customers assistance and satisfaction is the major concern for M&S. Without satisfying customers businesses cannot run their operations for long time. M&S is providing good customer services at the stores. Customers at M&S stores can leave their feedbacks freely. M&S is making investment in customer services and assistance section.

Products

At M&S you can shop around many things for your daily life use and life-style i.e. home products for example, electronics, electrical, furniture, clothing and shoes.

External Environment and the Impact on the Strategy of M&S

Marks and Spencer (M&S) has a tough and competitive external environment. M&S trades in clothing, ready meals, bakery, and households. In each part of the business M&S has a lot of competitors like BHS, NEXT, Burton and Gap. The core strategy of M&S is quality, value, better service, innovation and trust. In November 2010 Marc Boland new chief Executive announced the next five years plans. He expressed “M&S will begin by focusing on the core UK business. For the customers it means that clothing products will improve core M&S ranges, so that the unique quality, style and fashion of the M&S brand stands out. M&S will also clarify the position of its sub-brands, moving them from labels to real brands”

According to him “In Food, M&S will gain a clear market position as a specialist high-quality retailer, inspiring customers with unrivalled quality and innovation. M&S focus will be on fresh, speciality and convenience, bringing the best of British and flavours of the world to the customers.” [i] 

This is the strategy for the next three years. The first priority is UK business. The main reason for not to attract the new customer is high price and old fashioned clothes. If we compare the prices with BHS or top shop we will find that BHS has lower prices than M&S. Although M&S has very good quality of the clothes but on the other hand their clothes are very expensive and old fashioned. M&S targeting the customers of middle to upper class. Most of them are pensioners and upper class people would like to pay a lot for their clothes and food. And the second target of M&S is the well paid job holders. Primark has captured a big market in United Kingdom. As the students are the most valued customers due to frequent money spenders, Primark attracting them by officering cheap and fashionable clothes. Out of fashion and high prices of clothes are two of main reasons of reduction in number of M&S’s customers. In food industry Tesco, Iceland are the main competitors of M&S. Iceland is offering wide and best range of food products. Iceland is the big player in food market and captured the big market in UK and emerging as a main rival for M&S. Iceland sell very cheap food as compare to M&S.

Findings:

After analysing M&S business environment we come know that M&S should have to make some changes in its operations and research and development department. M&S should add one more thing to their strategy and that is “modern”. This is the age of fashion and modernisation. In clothing each business has to modernise the clothes according to the latest fashion. The second most important thing is price control. M&S has to control the prices of their products to compete in the market.

Important Steps to Achieve Competitive Advantage

A little competition can be a healthy thing. It can also be both costly and disastrous if you aren’t up to par with others in your particular business or industry. Handling competition in business can be a directly linked to the success or the failure of the company. Every organization tries to gain best position in market. But sustainability of that position is very hard challenge for every organization. M&S is also facing a high competitive environment. For Mark & Spencer that is offering multiple product range with its quality, approachable range for customers, it is not always easy to maintain a competitive advantage at all the time. M&S can gain competitive advantage through producing different products and services from those of its competitors.

In order to achieve competitive advantage M&S needs to focus on the following steps:

Competitive advantage through products

M&S is offering different kinds of products like food, clothing and furniture. These products actually attract the customers and helpful in gaining competitive advantage. Some of the M&S’s products need to be redesigned according to customers demand.

M&S needs to show its innovation and create the fashion style in clothing. Changing store environment, design, fashion, food and change in lay out can attract more customers. M&S needs to focus on the top end of the clothing market but deliver stylish cloths, beautifully made with fantastic value. M&S clothes are mostly for the people of 35-55 ages and ignoring the younger ages. M&S should enter this market segment either by starting new business or by acquiring another company such as Next who is well known for stylish clothes for children and younger aged consumers. M&S needs to return its clothing sub-brands into real brand.

There is a big opportunity for M&S to gain competitive advantage in home products. M&S can increase its growth through offering new kitchenware and bedding products. New M&S home stores should open to capture more furniture market. M&S should operate home furniture business separate from food and clothing.

In food, M&S needs to build a clear position as a specialist of food retailer. M&S should introduce new non-M&S food brands without increasing cost. Increase in number of food stores is required with British and world flavours.

Development of Employees Skills:

Human resources can be source of competitive advantage. Human resource cannot be imitated and helpful to firm’s value. M&S can achieve better competitive advantage through managing the people at work in other words utilising human resources.

To have a skilful workforce, M&S could begin training programs. For example, a centralized training centre could be used to train store supervisors and section managers on sales. As well as that, M&S can hire trained staff from its competitors in order to gain business knowledge from a different perspective. Especially in the home furniture department, well trained staff is required. Furthermore, hiring young motivated staff in addition to experienced staff would increase M&S competences in terms of innovation.

M&S markets products for both sexes. However, the management of the company is predominantly male, and so, a balance of male and female management would help meet the needs of its customers and product consumers.

Advantage through Supply Chain Efficiencies

M&S needs to change the technology in its stores by introducing hand held communicators ‘PDA’ to track the clothes from the distribution onto the sales floor that enables to know the exact amount of inventory and ensure the right items will be delivered on next day similar to Next.

M&S should introduce e-commerce, the use of web-based ordering system. This system reduces the cost of business transactions and brings the business more close to the customers.

New media technologies can be used for efficient delivery of new taste and fashion trends from factory to store displays, better communication with designers, producers and suppliers is very important for the company, Zara is one of the fast market changing competitors of M&S, it is important that M&S be ahead of any of its competitors while keeping its classic touch of style in some range of products.

We think M&S should work on three years plan to regain the dominance of the market.

First year to refocus on the business by changing its corporate culture to be customer oriented. They have to consider the bottom up planning.

In second year they have to maintain the market shear and bring something new to business such as Indian, Chinese and Italian food.

Third year should be for the growth, they have to expand the business in every field. Opening more store and bringing in more variety in the products.

Cost Leadership Strategy:

The primary focus of a cost leadership strategy is to achieve low costs relative to competitors. Lowering costs lead to lowering prices, which can increase demand for products or services, but if the product or services cannot be produced at a lower cost it also reduces profit margins. To compete based on cost, the company must address labour, materials, overheads, and other costs, and to design a system that lowers the cost per unit of the product or service. Often, lowering costs requires additional investment in automated facilities, equipment and employee’s skill.