Impact of Pricing and Corporate Goals on Marks and Spencer's Business

This report analyzes the impact of pricing and corporate goals on the behavior of Marks and Spencer's business. It discusses the different market structures and their influence on pricing decisions. The report also highlights the importance of supply and demand in achieving market equilibrium.

Business
Economics

Executive summary
In spite of the fact that the UK economy has performed very well since the last twenty years,
current research proves that it has progressively based upon the unsustainable model with
improper and imbalanced growth ratio which had a negative impact globally. During comparison
of the earlier economy with current one, we fond that-
 Growth in public sector – Expenses have been increased by 29%, faster than the rest of
the economical sectors of government that has grown by 24%.
 Household activities went under debt – Being an integral part of UK's GDP, the
household debts grew from 66% to 88%.
 Lack in investment in trade – The investment ratio in the country's trade with GDP,
reduced to 10.5% from 11.7%.
ontradiction to the present disturbances, the UK has many elemental factors that can be
mobilised to its advantage. This factors include UK's powerful rule of law, mostly competing
products and services markets, adjustable labour markets, the well known university system and
positive growth in various sectors, with businesses operational in both production and services.
These factors will help to recover the UK’s relative decrease in economic stability over the
century, before 1980's.

Table of Contents
Executive summary..........................................................................................................................2
INTRODUCTION...........................................................................................................................4
TASK 1 ...........................................................................................................................................4
1.1. Describing the economic problem of scarcity and demand of resource allocation .............4
1.2 Role of supply and demand within an economy and achievement of market equilibrium.. .4
1.3 Importance of differing market systems...............................................................................5
1.4 Elasticity of demand and Its importance within the market interactions..............................6
TASK 2............................................................................................................................................7
2.1 The implications
of pricing and corporate objectives within the Marks and Spencer's business operations.........7
2.2 Setting up prices in different market structures and analysing the impact of market
structure and operational decisions on the behaviour within the Marks and Spencer................7
2.3 Regulations within the UK affecting the market power of the Marks and Spencer.............8
Task 3 ..............................................................................................................................................8
3.1 Changed in the structure of the UK economy in the 21st century and its impact on the
Marks and Spencer .....................................................................................................................8
3.2 Evaluation of tools available to meet changes represented by macroeconomic policies and
its effect on Marks and Spencer .................................................................................................9
3.3 Evaluation of economic performance of the UK economy in global market on the basis of
specific key elements..................................................................................................................9
TASK 4 .........................................................................................................................................10
4.1 Presentation of comparative advantage theory along with the advantages and disadvantage
of free trade...............................................................................................................................10
4.2 The impact of emerging economies on the developed economies .....................................11
CONCLUSION .............................................................................................................................11
REFERENCES..............................................................................................................................13
Books and Journals...................................................................................................................13

INTRODUCTION
In today's world the business economics has appeared to be one of the most significant
and critical aspects of an organisation or firm. Business economics is known to be a part of a
company or business that manages different types of challenges and problems which are
connected to the organisation., their strategies, expansion, growth and
management(Buckley,2016). The Business economics also helps in assisting the process of
decision making and effective development of strategies through which a business organisation
can achieve and increase their growth. In this report the economic structure and concept in Marks
and Spencer is analysed. The Marks and Spencer is a UK based international retail company on
which the study is conducted.
TASK 1
1.1. Describing the problem of scarcity and increase in demand of resource allocation that will
affect the economy
Scarcity and demand of resources is the most basic problem faced by regulatory
authorities in managing an economy. It is because there are limited resources in comparison to
the unlimited wants. The current scenario depicts the most common issues countered by the UK
and its other regulative firm is to manage demand and lacking of various resources. The motive
behind this is to consider the fact that country's have limited resources and the demand is very
high. It enables the economist of the UK to perform the trade off task. The economist needs to
allocate the resources in most effective manner by minimising the improper expenditures. It has
been identified that economics study is mainly a concern of factors like ingesting, manufacture
and delivery of goods and facilities. By having a proper evaluation of such values the economic
expert can have effective decisions for sustainable development. The main objective of these
peoples are to analyse the manufacturing process, distribution and utilisation of the goods and
services. The trade economics plays a crucial role in determining the 3 major factors such as
what to produce, how to do it and who will consume it. This positively affect the business
operations and activities(Biondi and Zambon,2013).
The Marks and Spencer may be able to gain higher profits and sales by considering the
above three factors. These factors regarding the production can help in achieving cost benefit
which is the best way that can be used to resolve an issue of demand and scarcity of resources.
The decisions and plans of an organisation are generally based on the cost and benefits with

regards to the same. On the other hand, the economic theories clearly determines the fact that
various consumption methods of the resources should be analysed to find the best one
considering the marginal cost. It is necessary for management of M&S to have concern of market
equilibrium so that supply and demand valuation can be well maintained. In order to meet the
equilibrium point the firm need to have quality supply in relation with demand of market.
Transformation in pricing factor can lead to effective supply. It also indicates that if company
increases the price of products then it will impact the demand factor in negative manner. It
means to meet the equilibrium point the cost and other factors need to be balanced as per market
demand.
Figure 1Market Equilibrium
(Source: The Basic Economic Problem: Scarcity and Choice, 2011)
1.2 Importance of supply and demand for an economy to achieve market balance
Market equilibrium are commonly defined as a market situation where the demand is
equals to the supply(Blair and Sokol,2014). It is a positive market condition for an organisation.
The demand of a product should be high within an economy for its success. The price plays a
main role in creating or decreasing the demand of a product in the market, low price products
will create a high demand in the market, when demand is high the organisations should make
sure that supply of the products also increases. The supply means the availability of a product in
the market, supply must meet the demand to generate profit. And that situation will be market
equilibrium.
Therefore, Marks and Spencer need to ensure that their products supply is meeting the
demand. The production of products should not be waste, it should be equal to the requirement or
demand it has in the market. Market equilibrium can be defined as a situation in which demand
of consumer is equivalent to the supply. There is different or inverse reaction of producer and

consumer in situation of alteration in price. By having an effective analysis of such values the
M&S can have better balance in terms of supply and demand.
Illustration 1: Illustration 1: Market equilibrium
1.3 Importance of differing market systems.
For each business organisation, this is essential to realize various types of market's, to
make effective decisions. We can state that, operations and activities of companies are directly
affected by the type of market system in which they operate. Besides this, each market has its
own set of rules and regulations related to supply and demand. For decision making process
related to production, businesses are required to meet the demand of customers in the
market(Bubb and Pildes,2013). We can say that heavy losses can be caused to the organization,
if they are manufacturing and distributing those goods, which don't have any demand in the
market. The operational period of a particular market system, organisations also need to take care
of constant change in market trends and level of competition in the market.
In order to have better success the in terms of economy the management of M&S need to
focus on quantitative measures. It will allow to have sustainable development. By having an
effective concern in regard to supply management the issues can be overcome. Proper
understanding of market system is also essential because it allows to have prompt decisions.
Different trends in terms of demand and supply also need to be evaluated so that decisions
regarding production units can be taken into account properly. Consideration of competitor’s

policies also essential because it allows to set out better objectives on the basis of competitors
pricing.
Role of Opportunity cost in the Marks and Spencer's decision making process.
Opportunity cost is a loss of the alternative while choosing another alternative. The
production process should be effective in minimising the cost of the operations. Cost of
production or other organisational operations can differ with various methods or techniques used.
Identifying the opportunity cost helps an organisation like Marks and Spencer to choose the best
way or method to perform the business operations which can minimise the cost and generate
profit for the company. Therefore, it is necessary to consider the opportunity cost in the decision
making process.
Opportunity cost is essential to consider because it helps in decision making of M&S. It
provides effective alternatives regarding comparative analysis, computation of cost, etc. On the
basis of such values the budgets need to be framed so that financial outcome can be advanced.
1.4 importance of elasticity of demand within the market interactions.
It refers to the level by which, the demands of specific product changes because of the
price change(Lee,Chong and Jin,2014). It can be calculated using following formula -
Elasticity of Demand = Percetage Change in Quantity Demand / Percentage of Price Change
It is easy to understand that if product price offered by Marks and Spencer increase, the
demand of the products will decrease. In contradiction, low prices of products will instantly
increase the demand of commodity in market. Demands can be termed as highly flexible in
position where small change in prices make big impact on items demand. This is necessary for
firms such as Marks and Spencer's to become aware about the elasticity in market interactions.
Its major benefits is that it help an organization to easily determine whether to increase or
decrease the prices of its products and services. This also supports a business firm in understand
the fact, that how total sales can be affected by changes in the prices of products. The elasticity
in market communications also helps the businesses to develop effective marketing strategies
and plans.
It has been noticed that elasticity can be accomplished by focusing in influence of changes
in price. If there are few changes in pricing factor then elasticity can be well maintained. But if
changes made by company in pricing are high then it might create a situation of inelasticity.

M&S can use approach of price elasticity of demand in measurement of responsiveness of
demand to changes made in the price. It means by having an effective consideration of such
practice the equilibrium point can be meet for sustainable economic development.
TASK 2
2.1 The effect of pricing and corporate goals within Marks and Spencer's business
The operations and performance of every business organisation has a direct impact on the
corporate and pricing objectives. The Marks and Spencer's is a multinational retail company
dealing in the clothing and food sector. The company is operating within a mixed economy that
includes both private and public sector organisations. The corporate target of the Marks and
Spencer is to emerge as a leading retail enterprise in the global market. It also focuses on
improving the overall development and abilities within their food segment(Granger,2014). The
company needs to focus on its corporate goals and identify the changes required in the operations
to achieve the goals. Pricing of the products has a great impact on the objectives. The objectives
can only be achieved if the brand increases the sale of its product in the market. If the cost
structure is properly managed the firm can offer effective prices for their commodities which
leads to the sale generation and later help the company to achieve the organisational objective.
In addition to this, pricing and business objectives affects the overall business in diverse
manner. As M&S has captured its major share in mixed economy so company is mainly focused
towards profitability of shareholders. It is also one of key point that business firm is focused
towards productivity advancement. Cost structure must be framed according to key objectives so
that application can be taken into account more effectively. In elastic situation the M&S must
have operation and supply in accordance with demand. To maintain the high elasticity the
changes in pricing can affect business positively.
2.2 Deciding prices in different market structures and analysing its impact on market structure
and functional decisions on the behaviour within the Marks and Spencer's.
The various kinds of market structures like perfect competition, marketplace etc. Every
market has its own set of rules and regulation on pricing policies. Comparing of prices in
different market structure that can affect Marks and Spencer are as followes:
 Monopoly- It consists of a market structure in which there is only one seller in the whole
market. During trades in this market structure, Marks and Spencer's can adopt prices as
per the needs and requirements. Even if the brand adopts high price strategy, demand of

products should not be affect the customers as they do not have any other alternatives
available. Being a single seller in entire market, Marks and Spencer's can change prices
of its products as per its requirements. In this, business firm can have changes in its
products and pricing in their own way to have maximum profit as there is no competition
treat in the market.
 Perfect competition- In this, there are large number of buyers and sellers. This means
that at the time of operations in perfect competition market, Marks and Spencer's will
need to decide prices as per market trends and competition. Modifying prices cannot be
done by the organization in this market structure(Kneese,Ayres and d'Arge,2015). To
have better opportunities in such market the M&S must have changes in pricing and other
factors according to analysis of market system. In this, competition concern is also major
so that objectives can be accomplished.
 Monopolist competition- In this type of market structure there are many sellers which
sells different types of products and services to customers. Thus, by providing a variety
of products in terms of brand and quality, Marks and Spencer's can use high price
strategy in this market. In this, each market player have major changes in pricing as
compared to overall market. It allows company to have better consistency in the market.
 Oligopolistic market- This market structure has few sellers, selling different or
homogeneous products. Therefore, while carrying out its trade in this market, Marks and
Spencer's will require adopting a pricing strategy which helps them to meet competition
in market.
2.3 Regulations within the UK affecting the market power of the Marks and Spencer.
To enable and motivate effective pricing and fair competition, the Government of UK has
developed different types of laws, regulations and other legal bodies, every organisation or
business needs to follow these laws strictly to perform its business operations effectively. The
UK introduced Consumer protection under the Unfare trading regulations act 2008, the Marks
and Spencer needs to provide the best quality goods at a reasonable price in the UK. The brand
has to follow various other regulations such as the Price indications law, Consumer credit Act
1974 and the Price making order Act 2004. The Marks and Spencer needs to operate its business
with consideration to the business and social environment. The company can improve and hold

the market power if its legally operating its functions and businesses with developing customer
satisfaction and creating a positive brand image within the market. By not practising any illegal
activity or harm to the society and environment the Marks and Spencer can create a market share
in the UK. It is necessary for M&S to have major changes in its policies according to review of
different legal values. It means consumer needs and economic values must be evaluated in
ethical manner to have advancement in the practice. Misleading marketing regulation 2008 also
need to be reflected so that improvements can be taken into account. Fair information must be
shared with all respective.
Task 3
3.1 Changed in the structure of the UK economy in the 21st century and its impact on the Marks
and Spencer
There are many dynamic changes occurred within the economy of the UK in the 21st
century. These changes have affected the performance and operations of the Marks and Spencer
in a direct as well as significant manner(Eichholtz,Kok and Quigley,2013). In the present
scenario, every business or organisation needs to strictly follow the business laws and regulation
which are imposed by the government in UK. The study in the early 19th century, UK was
considered as one of the largest and potential economies in the world. It was a result of the
industrial revolution which occurred within the period of 19th century. The UK was the most
influential and largest economy in world. Key reason behind the success of UK economy was to
have large scale technological developments. It allows to have better opportunities in terms of
manufacturing advancement using technological development. The current economy includes the
free flow of goods and services, whereas the rate of interest and taxes is high. The aim of the
high taxes and rate of interest was to generate income that can be used to improve the services
provided to people in the UK. Other modification in economy structure was that to give more
focus on financial sector rather than giving value to the manufacturers. All these changes made
positive as well as negative effect on the Marks and Spencer. Free flow of goods render the
brand with more opportunities related to growth and development. On the other hand, increase in
tax and interest rates resulted in lowering down its profit margin. In the year 2008, UK faced
recession and profitably of Marks and Spencer were affected to a great level. In present era the
companies like M&S are focused towards activities that helps in balanced scarcity. Economic

policies are being transformed to promote fair trade policies. Better control over cost and
expense is major concern of M&S so that economic results can be advanced.
3.2 Evaluation of tools available to meet changes represented by macroeconomic policies and its
effect on Marks and Spencer
For meeting the various microeconomic changes and satisfying the objectives of the UK
government, fiscal and monetary policies are the two main tools that can be implied. It is easy to
state that with the implication of monetary policy, interest rates can be modified in order to
manage the money supply within the country's economy (Dostál,2013). But then the fiscal policy
is an essential approach through which the government makes various alterations in the expenses
and tax rate to attain the macroeconomic goals. It can be determined that the fiscal and monetary
policy are very essential tools for the management o02f money supply and economic growth
within the UK. Both the policies has a direct effect on the operations of the Marks and Spencer.
Increase in rate of interest limit the growth and development of the organization whereas
decrease in interest rates give opportunities for enlargement. In addition to this, it can be said that
by having an effective consideration of fiscal and monetary policies the business firm can easily
have developments in terms of sustainability. It has been noticed that proper evaluation of factors
like inflation and other employment is essential. It allows to have effective decision making
process in order to maintain the economic values. On the other side of this, increase in tax rates
means business organizations and people in market are compulsory to pay more tax. This
decreases the demand of Marks and Spencer's products due to decrement in purchasing power of
people. Also, when rates interfere are reduced then it becomes easy for M&S to obtain funds
from bank and in turn is favourable. The objective of government's macroeconomic policy is
high employment, enhance the standard of living economic growth etc. Therefore, the
organization is needed to change its operations according to government policies.
3.3 Evaluation of economic performance of the UK economy in global market on the basis of
specific key elements.
It can be declared that UK economy is developing with a very good rate and it is one of
the major economies of the world. The service sector of country is growing remarkably but its
structure and manufacturing sectors are slightly struggling. Economic activity of UK refers
production, distribution and consumption of products and services. Another fascinating
information about its economy is that it witnessed consistency from the year 2000 to 2008. In the

year 2014, its economy grew by 2.6% which can be termed as outstanding. In the first quarter of
2016, inflation rate of UK was 1.6% and rate of unemployment is 4.90% (UK Economic Outlet.
2016). Therefore, it has been evaluated that the economic performance of UK economy in the
global market is quite well and it is contributing a lot in the development of world's economy.
All the factors has helped Marks and Spencer to carry out its operations in more
effectively(Ghaffour,Missimer and Amy,2013). Low rate of unemployment has provided the
organization with highly productive and skilled workforce. On the other side of this, as compared
to GDP rate in 2014 (2.9%), the growth rate was low in the year 2015 which was 2.2% (UK
economic forecast, 2016). This has resulted in creating obstacles in expansion and growth of
Marks and Spencer(Gillespie,2013). In addition to this, it can be said that by having an effective
development of economic values the issues in terms of sustainability can be overcome. Also,
new policies are being framed in order to have better control over inflation. By having a
continuous development of equilibrium standards the UK government and businesses are having
improvement in policies. Customer demand and supply norms are also being redefined so that
better opportunities can be identified in competitive market.
TASK 4
4.1 Presentation of comparative advantage theory along with the advantages and disadvantage of
free trade
The theory of comparative advantage is one of the most crucial element in the
global trade theory. In easy terms, it is characterised as an ability of a country or organisation to
manufacture products and services at lower opportunities cost as compared to other country or
organization. Moreover, it can be argued that it is not necessary that the commodity produce is
the best among all(Summers,2014). Organisation gets a comparative advantage when they
produce products which has very reduced opportunity cost. This can be well understand with the
illustration of Switzerland. Say the country has two alternatives available that either it can
produce three pounds of chocolates or can manufacture one pound of cheese in one hour. In case
when Switzerland prefers for manufacturing cheese than it looses the opportunities cost of
producing chocolates. The country can easily gain comparative advantage over other with the
help of manufacturing chocolates. This is one of the main reason why rising economies such as
India, China, Russia are looking for developing product which can supports in acquiring
comparative advantage.

In addition to this, it can be said that comparative advantage is considered as one of the
most important aspect of the international trade theory. By having an improved focus on such
factors the issues in regard to comparative advantage can be resolved. Also, cost advantage is
also a factor which has been promoted in recent years. It allows the businesses to have effective
balancing in demand and supply. Moreover, M&S also need to have concern about emerging
economies trends so that better decisions can be taken into account.
Free trade can be considered a policy which encourages free movement of products and
services from one country to another. Moreover, all restriction and obstacles affiliated to trade
are restricted in such kind of trade. One of the main advantage of free trade is that it assist
countries in getting comparative cost advantage. Along with this, importing of products and
services also gets cheaper with free trade. The disadvantage of free trade is that it discourages
self reliance and self sufficiency among countries. Other than this, gains resulted with trade are
not equally distributed among developed and developing nations. The theory of comparative
advantage affects Marks and Spencer by encouraging the brand to carry out production of goods
which has low opportunities cost(Lee,2014).
4.2 The impact of emerging economies on the developed economies
The emerging economies such as BRICS may affect the developed economies some or
the other way. In the last few years, BRICS countries have been obtaining rapid economic
development and industrialisation. This leads to a barrier in the further growth and development
of the developed economies or countries. The nations in BRICS are successfully acquiring the
opportunities in the global market which is resulting as a loss to the other countries. These
countries are also focusing on the investments in the foreign countries. Nations like China has
also evolved as one of the leading investors in the foreign market. The main elements or features
such as easy availability of resources and low labour cost enable BRICS nations to attract
various multinational companies to grow and develop business in their country. In past years,
domestic and global economic shock has negative impact on the UK. Low cost of labour and raw
material has helped BRICS countries to attract large multinationals to carry out their operation in
these countries. By having a proper consideration of such values the M&S can have
improvement in degree of competition. It will allow to have better understanding about market
values so that issues can be resolved. It has lower down purchasing power of people, enhanced
the rate of products and services. Furthermore, it has also resulted in decreased GDP and growth

rate of UK. Unemployment rate started to increase and the standard of living along with income
level got negatively affected. M&S in past years experienced a succession of adversities, inside
the country as well as abroad. The sales of the company have gone down. The industry
capitalization and stock prices decreased considerably and the overseas profits have enormously
declined(Galliers and Leidner,2014). The Marks and Spencer have the opportunities to grow in
more countries and increase the market share which can help them to develop and grow their
economy. Entering into various new countries can enable them to create a new market segment
and attract more customers as well as growth in the market power.
CONCLUSION
The Marks and Spencer needs to focus on the effective utilisation of the resources and
minimize the cost of production in order to create an attractive pricing of their products both
within the food and clothing segment. It can help the brand to create a demand of their products
as well as meeting the supply in the market with effective production methods. The report
describes the various market structure and their effect on organisational behaviour. Furthermore,
the study describes various tools to macroeconomic policy such as fiscal policy and monetary
policy and its effects on the Marks and Spencer.

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Granger, C.W.J., 2014. Forecasting in business and economics. Academic Press.
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balance approach. Routledge.
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