Market Development Strategy Implementation For M&S

Marks & Spencer is the UK’s top retailer and is listed in the FTSE 100 of London Stock Exchange. The company has expanded its business in many different global markets. The organization has its products and services in the food, clothing, hosing, and financial service businesses. The assignment is based on the business strategies used by the firm to grow its business in the current global and domestic market. The assignment is based on how the author analyzes individual product line (Strategic Business Units) and their overall business by using business tools like Stakeholder Analysis, Porter’s 5 Forces Analysis, Value Chain Analysis, BCG Matrix and Ansoff Matrix. After collecting the necessary date from the respective business tools the date is processed and used to draw new Business Strategies for M&S’s businesses. Once the business strategies are drawn then the author can make plans on how to apply them in M&S’s businesses. The new business strategies will help M&S to improve their business processes and help them to expand their businesses in new markets.

Marks & Spencer’s has many strategic intends to achieve its Vision. They are the number one retailers in UK so the management has adopted new milestones on how to conduct business by causing less damage to the environment. They have started their project ‘Plan A’ in which the firm will try to minimize the damage to the environment as less as possible by their business processes. One of the most important milestones is to maintain existing customers and gain new customers for their products, for which they have special offers and schemes in form of membership cards, free shipping charges in domestic market and discounts during special occasions for their loyal and new customers. They have started conducting their business online with help of new ICT systems which has helped them increase their sales and serve their customers more effectively and efficiently. They also have many quality controls and strategies to improve their business processes and maintain their position in domestic and international markets.

Marks & Spencer has six main objectives which are Profit Maximization, Increase Sales, Market Leadership, Offering High Quality Services, Growth and Reward Shareholders. Profit Maximization is the most important objective of M&S. The management has made plans to maximize their profits by increasing their revenues from all different business ventures and by cutting their cost by avoiding wastage of resources (raw material, labor, etc). Marks & Spencer’s profit in last two years was in 2009 it was 506.8 £m and in 2010 it was 523.0 £m. Increasing Sales is also one of the most important business objective of M&S. In order to increase sales they have expanded their business ventures globally by entering new markets and by upgrading their products with quality controls and tests they are able to satisfy their existing customers and attract new customers for their different business ventures. M&S is able to increase its turnover from 8,164.3 £m in the year 2009 to 8,567.9 £m in the year 2010. Market Leadership is one of the business objectives of M&S, M&S is the largest retailer in UK and so one of its business objectives is to maintain market leadership by constant reviewing of their previous performance and of their competitors. They have drawn plans on how to become the leaders of international markets by diversifying and improving their products according to the taste of the local customers. M&S has made constant efforts to compete with the local competitors in international markets and their international turnover has increased from 897.8 £m in the year 2009 to 968.7 £m in the year 2010. High Quality Services is one the business objectives of M&S, they have always maintained a high standards in quality of goods and services which has kept them on top of the UK retailers for many decades. The management is making new plans on how to evaluate and improve their services and goods to maintain their high standards to which other companies can compare and improve their performances. Growth is one the important business objectives of M&S as the management understands the importance of growth that is if the firm doesn’t grow it will not survive in today’s competitive markets. Marks & Spencer has made maximum expansions from the year 2001 after a new board was setup. M&S has expanded its business by giving franchise to local people in different countries and has successfully expanded its business in more than 35 countries globally. Reward Shareholders is also an important business objective since it’s a listed public company in London Stock Exchange. It is in FTSE 100 list and like all the other companies M&S has declare dividends every year based on their profits in order to keep a healthy relationship with their shareholders. The shareholders are the backbone as they have invested huge amount of liquid wealth through IPO’s in M&S to allow the firm to carry out its business with calculated risks.

The Threat of Entry is one of the key areas in which the firm requires unique strategies on how to stop the new firms from entering their market segment. The firm either has slash down their prices to an extend that new firms cannot enter their market or have such a strong brand value that the customers stay loyal to their products. M&S is able to maintain its brand loyalty and maintain itself as UK’s number one retailer giant. M&S has planned a long term strategy for growth which hinders new firms to enter in its market segment. The firm is thus successfully in this area of business. The Power of Buyers is the area of business that deals with how the firm satisfies its customers with products which are of better quality and are at lower price range. The customers have the bargaining power as there are large retail giants like Tesco, Sainsbury, Asda (Wal-Mart), etc to cater their needs. The quality and price range of M&S’s goods and services is still better than the rest retail giants so they are able to keep customers loyal to their products. The Power of Suppliers is the area in which the firm deals with its suppliers for its raw material. M&S has supplies only from local suppliers and since they are few in number M&S has less negotiation power. The suppliers of M&S enjoy the power of controlling price of the raw materials. This is one area where the firm can really improve its business process by shifting their manufacturing units to places where the number of suppliers is more and they can have a better chance of bargaining with their suppliers. The Threat of Substitute is area of business that deals in planning on how to avoid customers from switching into new products. M&S’s management and R&D department are responsible in upgrading their products so that the customers remain satisfied and not switch over to an alternative product made by its rivals. The R&D department is so efficient in its work that not only they are able to satisfy their existing customers but also attract new customers to their product line. Competitive Rivalry is the area of business in which the firm keeps a close check on its rival firms and plans on how to compete with them in a competitive market in a profitable manner. M&S is able to maintain high standards of goods and services which allowed them to stay as the largest retail giant till date in UK.

M&S has used the BCG matrix from time to time and have used the data wisely. The matrix has helped them to penetrate in new and old markets with various new products and services. The products of M&S are able to capture huge markets in high growing industries. M&S has a diverse range of products and services so they have allocated their resources in the star products. They have opened many new outlets in prime areas for retail and helped their question mark products in becoming star products. M&S has expanded their business globally so their star products are able to capture new markets easily. M&S management has minimized their dog SBUs and has diversified those funds towards star products. This has helped the firm to be at the top of the retailers in UK and a major competitor in other international markets. Currently M&S has only cash cow and star SBUs in market. The cash cows are not giving much return due to the recession and slow growth of global market but the star products are doing exceptional well because of their high reputation.

The BCG matrix helps the firm understand their products life cycle and allocation of resources in the SBUs. BCG matrix has been one of the most important business tool for M&S in analyzing their performance from time to time

http://www.scribd.com/doc/24329524/Introduction

3.2 Ansoff Matrix

Igor Ansoff had invented the Ansoff Matrix in 1941 and was first published in 1957 in Harvard business review. The Ansoff Matrix is a strategic marketing tool that links a firms marketing strategy with its general strategy and outlines the options open to the firm if they wish to grow, improve profitability and revenue. These options indicate to how to manage the development of the product range. It mainly presents four alternative growth strategies in a table (matrix) which are market penetration, market development, product development and diversification.

Market Penetration is a growth strategy for existing products in existing market. The company tries to increase its market share by increasing the sale of its existing product in its current market by using new marketing strategies. Market Development is a growth strategy for developing new markets for existing products. The main objective is to find new markets domestic or international for the firms existing product. Product Development is a growth strategy for new product in existing markets. The firm has to develop new products and launch them in their current market to capture market share. Diversification is a growth strategy for new products for new markets. The firm has to launch new products for new markets in order to expand their business in different markets. This is one of the most important growth strategy as the company has to study the taste of new customers and design their products in order to capture market share of a new market.

Marks & Spencer uses Ansoff Matrix to analyze their overall business portfolio. Since M&S is one of the largest retailers in global market they use all the four growth strategies of Ansoff Matrix in their business. Market Penetration is used by M&S to attract customers and make them loyal to their brand by offering good quality and services. They have special offers and customer loyalty programs during special occasion which helps them to attract new customers. The firm has opened many outlets in their captured markets in order to increase sales of their existing products. Product Development is one of the main growth strategies used by M&S, the firm develops it new products according to the change in fashion. This has helped the firm to grow rapidly over the years. Market Development is also a growth strategy practiced by M&S as they are expanding their business globally. The firm has opened many new outlets in many other countries over the world. Their products have such high demand that they are able to expand their business in many countries. M&S is a cash rich company therefore it can easily capture new emerging markets by opening new outlets at prime areas in different counties. Diversification as a growth strategy is also used by M&S as they develop new products for new customers to cater their needs. The R&D department of M&S is highly efficient in developing new products for new targeted markets of the firm. M&S when enters new market they modify or make their products according to the taste of their new customers.

M&S uses both Ansoff & BCG Matrix to analyze their business processes and to draw up business strategies for growth in existing and new markets. The analyzed data is used effectively by the management and M&S is growing its business over the years successfully.

Develop & evaluate possible alternative strategies for the organisation you have chosen.

4. Alternative Strategies – Growth

Growth strategies are adopted by companies when they try to win large market share, even at the expense of short-term earnings. The growth strategies can be classified into four types and they are market penetration, product development, diversification and market development.

Marks & Spencer also has to use alternative strategies to grow their business in this competitive world market. The management has to use all of their resources to plan new strategies on how to utilize their current products, current markets, new products and new markets, in order to ensure there is maximum business growth.

4.1 Alternative Strategies used by Marks & Spencer

Marks & Spencer uses a mixture of many strategies to draw up plans for growth. M&S having a diverse business can use many strategies to expand their business in domestic and in international markets. The strategies used are market development strategies, market penetration strategies, product development strategies, and diversification strategies.

4.1.1 Market Development Strategies

Marks & Spencer’s management can grow their business by using market development strategies in which they can expand their business in new countries. The products of M&S are of high quality therefore their reputation can help the firm easily grow into new markets. The brand value of M&S can even help the firm to venture into new market segment and attract new customers as the products are of good quality and are placed at competitive prices. The food, clothing and house ware businesses of M&S can use this strategy to grow and reap huge benefits for the company.

4.1.2 Product Development Strategies

M&S uses Product Development Strategy for its house ware, food and clothing business. In food business M&S has changed the packaging to cater the needs of customers who buy in bulk and in small quantity. In clothing line they introduce a new collection according to the change in fashion to attract customers to their clothing business. House ware being the largest business the firm is launching new products frequently to remain at the top of other retailer in UK.

4.1.3 Market Penetration Strategies

M&S uses Market Penetration strategies for all of existing businesses. This strategy has helped M&S to remain at the top of all the retailers in UK. The clothing and food business use strategies like customer loyalty and value improvement strategies whereas the hose ware and financial service businesses use market share growth strategies to grow business.

4.1.4 Unrelated & Related Diversification Strategies

Relative diversification is the development of a new product line for the new market. Related diversification is of two types horizontal and vertical. Horizontal diversification is development of a product which is an alternative to your current product and Vertical diversification is when the company becomes its own supplier or distributor.

Unrelated diversification is the development of a new product which has no relation to the market or the industry in which the firm conducts its current business.

M&S uses relative diversification strategies for its food and clothing business. For both businesses it uses horizontal diversification strategy by which it develops new food and clothing products as per the change in taste and trend of the people. Recently M&S has started its business in Financial Service area this is a complete new business therefore the growth of these services are planned by unrelated diversification strategies. Therefore the firm has used many strategies to diversify and expand its business in order to sustain in the competitive market.

The selection of strategies by the management has helped the firm to reap exceptional benefits and has helped the firm to maintain its position at the top of all the retailer giants in UK. The strategies used in global markets have also been successful and the growth rate of the firm is tremendous in foreign markets. The products and services are of high net worth therefore the firm can easily use the planned strategies to grow their business in local and international markets.

Outline an implementation plan for the chosen strategies in question 4.

5. Growth Strategies Implementation for Marks & Spencer

Many of the plans for the strategic growth discussed before are already implemented by the firm. New plan for expansion in new markets (market development) is to be drawn and implemented to ensure strategic growth for clothing business.

5.1 Market Development Strategy Implementation for M&S

M&S has to develop and implement strategic plans for capturing markets in different countries. M&S has already expanded its business in many countries and their products are capturing huge market shares. Seeing tremendous international growth M&S should capture new markets as their products are of good quality. The new markets will help the clothes business grow internationally and M&S brand image will further appreciate. The steps for planning market development strategies are planning, organization structure, human resources, annual business plan, monitoring and control and linkage.

Planning is the first step for developing a market developing strategies. The firm has to first decide which new market they should capture and what product line they should launch for their new market segment. A detailed research on the taste of their new customers needs to be conducted and then accordingly the firm needs to launch their existing or new product line. Organizational Structure needs to be decided by the firm before they layout their business foundation in the new market. Usually the firm gives franchise to the local people to open new store in new countries, this step helps in minimizing risk and the management is in the hands of the franchise holder. The firm still has control over the layout of the store and pricing of the products. Human Resources of every new store is taken care by the franchise holder but M&S organizes workshops to train and help the workers to develop new skills. This helps M&S to have employees which can cater the need of their customers effectively. Annual Business Plan helps the firm to estimate or forecast their sales in the new market. The firm and the franchise holder have to allocate resources according to the annual business plan in order to ensure business growth. Monitoring & Control is a crucial step in making the new business successful. M&S has to monitor how the employees are trained to serve their new customers. The firm has to check if the products are properly displayed in their new stores. They have to carry out regular surveys to check the preference of the people and develop new products based on the analysis of the data collected. The firm has to give franchise to the people who will conduct business ethical or else their brand value will decline in that market segment. Linkage is when the firm keeps a close check on all the activities and makes sure that all the processes are conducted in the decided sequence regularly to ensure business growth.

Linkage

M&S can use this growth strategy to develop a new market and by implementing this strategy it can grow its business in many part of the world. One of the business objective of M&S is to grow therefore growing in international market is really profitable as M&S has made constant efforts to compete with the local competitors in international markets and their international turnover has increased from 897.8 £m in the year 2009 to 968.7 £m in the year 2010. The international market of M&S has shown a tremendous growth and so M&S should make full use of this plan and grow its business in new markets. This plan also gives the firm the advantage of developing new products for their new market segments. The brand image has helped the firm to grow in many new markets therefore M&S should utilize this growth strategy to develop new markets.

Conclusion

Quinn (1980, pg. 3) defines Business Strategy as the pattern that integrates an organization’s major goal, policies and action sequences into a cohesive whole. A well formulated strategy helps to marshal and allocate an organization’s resources into unique and viable posture based on its relative internal competencies and shortcomings, anticipated changes in the environment and contingent moves by intelligent opponents.

The author has used many business measuring tools (BCG Matrix, Ansoff Matrix, Porter’s 5 Forces Analysis, Value Chain Analysis, Stake holder analysis, etc) appropriately to collect relevant data on each of the SBU’s and on overall business. The data was processed and used to form new alternative growth strategies for M&S. The growth strategy if used by the firm can help them expand their business and also to develop new product lines for new markets. Therefore the business strategies suggested by the author in the assignment are relevant for the firm if they want to grow their business in current global market and retain their position at the top of UK’s retailer list.

Reference List

Books Referred

Mooij, M, 2009. Global Marketing and Advertising, 3rd Edition. SAGE

John, R, Gillies, G, 1996. Global Business Strategy. Cengage Learning EMEA.

Johnson, 2008. Exploring Corporate Strategy. Pearson Education India.

Johnson, G, Scholes, K, Whittington, R, 2006. Exploring Corporate Strategy, 7th Edition. Financial Times.

Websites Referred

History & Introduction of M&S taken (online), Available at: http://corporate.marksandspencer.com/aboutus/company_overview (Accessed 15th April, 2011)

Mission & Vision taken (online), Available at: http://www2.marksandspencer.com/thecompany/our_stores/world.shtml (Accessed 15th April, 2011)

Definition of Strategic Intent taken (online), Available at: http://dilipnaidu.wordpress.com/2010/05/06/strategic-intent/ (Accessed 15th April, 2011)

Objectives of M&S taken (online), Available at: http://bizcovering.com/major-companies/a-case-study-on-marks-and-spencer/2/ (Accessed 15th April, 2011)

M&S 5 Years Records taken (online), Available at: http://corporate.marksandspencer.com/investors/fin_highlights/five_year_record (Accessed 16th April, 2011)

Stakeholder Analysis taken (online), Available at: http://www.businessdictionary.com/definition/stakeholder.html (Accessed 16th April, 2011)

Porter’s 5 Forces Analysis (online), Available at: http://www.1stessays.com/samples/businessanalysis.pdf (Accessed 16th April, 2011)

BCG’s Matrix taken (online), Available at: http://www.managementstudyguide.com/bcg-matrix.htm http://www.scribd.com/doc/24329524/Introduction (Accessed 17th April, 2011)

Ansoff Matrix taken (online), Available at: http://www.ngfl-cymru.org.uk/ansoff_matrix-2.pdf http://www.businessdictionary.com/definition/Ansoff-matrix.html (Accessed 17th April, 2011)

Alternative Growth Strategies taken (online), Available at: http://www.businessdictionary.com/definition/growth-strategy.html http://paulcurtis.files.wordpress.com/2011/03/growthstrategymatrix.jpg?w=500&h=446

(Accessed 17th April, 2011)