Impact of Economic and Non-Economic Environment on Marks and Spencer

This report assesses the impact of economic and non-economic business environments on the business organisation Marks and Spencer. It discusses the economic systems, policies, and conditions, as well as demographic, natural, and cultural factors that influence the company's operations and performance. The report also includes a SWOT analysis of Marks and Spencer.

Business Environment

Table of Contents
1 INTRODUCTION........................................................................................................................3
1.1 Company Background...........................................................................................................3
2 LITERATURE REVIEW.............................................................................................................4
2.1 Economic Environment’s Impact on a Business Organisational Behaviour.........................4
2.1.1 Economic Systems..............................................................................................................4
2.1.2 Economic Policies..............................................................................................................5
2.1.3 Economic Conditions..........................................................................................................5
2.2 Non-Economic Environment’s Impact on a Business’s Organisational Behaviour..............6
2.2.1 Demographic Factors..........................................................................................................6
2.2.2 Natural Factors....................................................................................................................6
2.2.3 Cultural Factors..................................................................................................................7
3 DISCUSSION AND ANALYSIS................................................................................................8
3.1 SWOT ANALYSIS OF MARKS AND SPENCER..............................................................8
3.2 PESTLE ANALYSIS OF MARKS AND SPENCER...........................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

1 INTRODUCTION
The internal and external environment in which a business organisation operates
comprises of multiple factors, all of which influence the business’s operational performance,
efficiency, productivity and profitability in the consumer markets. Some of these factors have a
direct influence on the business’s functions and operations, while other factors end up
influencing indirectly on the business’s performance and productivity (Hamilton and Webster,
2018). The traditional business environment is a multi dimensional, highly convoluted landscape
which is significantly dependent on various economic and non economic factors that have an
effect on a business’s operations, functions and ultimately success within the consumer markets.
1.1 Company Background
This report assesses the impact of economic and non-economic business environments on
the business organisation Marks and Spencer, which is a multinational British retail business
operating from its headquarters in London, UK. Marks and Spencer was founded in 1884, an
astonishing 136 years ago by Michael Marks and Thomas Spencer. Through the years of its
operations in the retail markets, Marks and Spencer has had many opportunities to grow and
expand their business to global markets in order to diversify their operations and to increase their
total market share, productivity and profitability. Currently, Marks and Spencer operate around
959 distinct establishments in the UK itself and a total of 1463 establishments all around the
world (M&S International, 2020). Having been in the retail industries for quite a long time,
Marks and Spencer has cultivated large customer base, especially in the UK where it was
founded and specialises in selling premium high-quality home products, clothing apparels and
food products to their customers. Marks and Spencer have seen numerous highs and lows
through their extensively long operations, but have maintained profits for most of their
operational years. Marks and Spencer were the first British retail business organisation to
generate over 1 billion sterling pounds in profits during their operations in 1998, after which the
organisation saw a decrease in its operational performance, productivity and profitability in the
consumer markets which surprised its stockholders and stakeholders. As of 2019, Marks and
Spencer have been able to generate revenues close to 10.4 billion sterling pounds with around 1
billion of these revenues being generated from Marks and Spencer’s international outlets alone

(KEY FACTS, 2020). Marks and Spencer also provide employment to a large section of UK’s
populations along with their global establishments also providing employment opportunities to
many individuals. As of 2020, Marks and Spencer provide employment to around 80,000
individuals around the globe and depend on them for their operations and functions.
2 LITERATURE REVIEW
2.1 Economic Environment’s Impact on a Business Organisational Behaviour
The economic environment of a business organisation comprises of various economic
policies, systems and conditions all which have a major impact on its operational performance,
productivity and profitability in the consumer markets. These factors result out of a country’s
economic stability, situation and progress.
2.1.1 Economic Systems
Economic systems have a major impact on a business organisation’s performance,
productivity and profitability in the consumer markets and constitute of a country’s existing
taxing rates, market growth, consumer bargaining and purchasing power, inflation rate, rate at
which goods and services are manufactured by the country and its trading policies and
restrictions (Canhoto and Dibb, 2016). The UK’s economy is ranked as the sixth largest amongst
all of the world on the basis of its Gross Domestic Product (GDP). The UK’s economy is highly
market oriented which means that the demand, supply and price of goods and services determine
the economy’s decisions about production, investment and distribution operations. Inflation in
the UK’s economy has major influence on its business organisations, as it refers to a general
increase in the prices of goods and services available in the consumer markets due to which
consumer’s purchasing power directly decreases. This has a negative impact on business’s
productivity and profitability as organisations are forced to decrease their manufacturing rate in
order to reduce losses and in an attempt to move their stored inventory to the consumer markets
(Njoku and et.al., 2017). According to government estimates the current inflation rate of UK
stands at 1.7% as of February 2020 which is a marginal decrease from its economy’s inflation
rate of 1.8% in 2019.

2.1.2 Economic Policies
A country’s economic policies also have an affect on the performance, productivity and
profitability of business organisations operating in the country’s consumer markets. These
economic policies comprise of various government mandated legal laws, rules and regulations
and consumer right laws such as UK’s Health and Safety at Work Act of 1974 which states that
all business organisations are legally mandated to provide their employees with a safe, secure
and healthy working environment and ensures all operational equipment is checked and
maintained according to industry standards, with the intention to safeguard health and safety of
UK’s working citizens (Aastveit, Ravazzolo and Van Dijk, 2018). Another consumer right
regulation which is legally mandated in the UK is General Data Protection Regulation (GDPR)
which is implemented with the intention to provide EU’s citizens with addition control and
access over how their personal data is used by businesses and organisations digitally. According
to GDPR, businesses in UK are legally mandated to gather consumer data legally adhering to
strict conditions and policies and ensure its safety and protection form external or internal data
breaches and leaks. Failure to do so can result in financial penalties for the business organisation
or cancellation of license (Akhmetova, 2017). Another economic policy in the UK is the
Employee Protection Act of 1978 which legally mandates businesses to sign a physical contract
of employment with their employees in order to discourage biased and undeserved termination of
employees from the business.
2.1.3 Economic Conditions
Economic conditions within a country constitute of all external factors that have an
impact on the country’s economic state and the operations and functions of business
organisations that operate within the country’s borders. These factors include political instability
in the region, outbreak of potentially lethal diseases and viruses etc. Brexit is a major economic
condition within the UK that can have major implications on any of UK business’s productivity,
performance and profitability in the consumer markets (Crescenzi, Luca and Milio, 2016). The
exact changes and updates to laws and regulations post Brexit aren’t still clear to the public and
are highly debated upon by analysts and economists, which poses threat to business operations of
UK. Another major economic condition to surface in the last month is that of the outbreak of
Coronavirus COVID-19, which has sent the entire country of UK into a lockdown and
effectively halted its entire economy. The virus outbreak has far reaching consequences on the

UK’s economy, its business’s operations, its travelling and tourism industries and the safety and
security of all of UK’s citizens. With both the health minister and Prime Minister of UK
confirmed to be infected by the coronavirus, it has effectively put a stop to all business
operations within the UK for the coming weeks.
2.2 Non-Economic Environment’s Impact on a Business’s Organisational Behaviour
Non economic factors within a country also have an effect on the business organisation’s
performance productivity and profitability in the consumer markets. These non-economic factors
comprise of various demographic, natural and cultural factors all of which determine a business
organisation’s operations and functions.
2.2.1 Demographic Factors
There are multiple consumer demographic factors present in the external business
environment in which business organisations operate in. These factors comprise of distinct
genders, age groups, languages, social classes, educational level, income within the consumers
that business organisation have to factor into their operations in order to service successfully in
the consumer markets. One of the most significant demographic factors that influences the
operations and functions of a business organisations is that of the income of their target
consumers. Business organisations have to identify, select and prioritise consumers with a range
of financial incomes in order to service their target market effectively (Ahmed and ALAMM,
2017). It is unproductive for business organisation to try and service consumers from all income
ranges and hence businesses categorise consumers based on their income demographic in order
to better service their targeted demographic. Business organisations also have to factor in the
gender of their target market in order to increase their product’s appeal, attractiveness,
performance and profitability in the consumer markets. Selling ladies perfume or clothing in a
market comprising mostly of males isn’t highly profitable for the business organisation and vice
versa (Chaudhary, 2017). This is why businesses need to identify and select the demographic
gender of their targeted customers in an effort to increase their operational performance,
productivity and profitability in the consumer markets.
2.2.2 Natural Factors
Natural factors also have a significant impact on a business organisation’s operational
performance, productivity and profitability in the consumer markets. These factors include the

natural resources that are available to business for their operations in the region, the geographical
factors business needs to account for during operations such as varied mountain ranges, valleys,
rivers etc, the climatic conditions of the region in which operations are conducted and how they
affect the productivity and efficiency of the business and the food resources available in the
operating country. One of the most prominent non-economic natural factor is the availability and
quality of raw materials present in the region where business organisations operate as most
businesses are highly dependent on resourcing these natural resources for their operations and
functions. Business organisation also have to account for the geographical restrictions their
operational region presents them in the form of mountain ranges, rivers valleys. Businesses need
to figure out the most cost-effective way to procure and distribute their input materials and
manufactured goods through these geographical regions (Jang and Kim, 2018). Another major
natural factor that governs a business organisation’s productivity and performance is the climate
conditions of the region in which they operate. Business organisations need to align their
products and services to the climatic conditions of the region in which they operate. For
example, businesses specialising in selling winter clothing apparels to the consumers cannot
operate successfully in markets where climate conditions are warm and sunny. Business
organisations need to factor in the climatic conditions into their product and business strategy in
order to operate successfully in the consumer markets.
2.2.3 Cultural Factors
Various cultural factors also tend to affect an organisation’s performance, productivity
and profitability within the consumer markets. Consumers from different cultures possess
distinct religion beliefs, cultural upbringing and customs, clothing apparels, culinary preferences
etc. all of which have to be accounted for by the business organisation in order to successfully
perform in different consumer markets (González-Rodríguez, Díaz-Fernández and Biagio, 2019).
Businesses have to manufacture products and services that cater to the cultural values and
customs of their targeted customers in order to have a positive productivity and profitability in
the markets. A culinary business specialising in providing food products to consumers cannot
operate successfully if it doesn’t factor in the cultural dietary preferences of their target audience.
For example a fast food chain opening its establishments in the Gulf region has to factor in their
culture of the region and omit pork dishes from its menu in order to effectively service in the
Gulf markets without hurting the local’s religious and cultural sentiments, or a clothing business

specialising in traditional Japanese attires and apparels has to account for the cultural differences
in the UK if it wants to expand its operations and operate within the UK’s consumer markets
successfully (Anggadwita and et.al., 2017). Business organisations also have to be extra vigilant
so as to not hurt the cultural or religious sentiments of their target consumers, by offering them
products or services which are prohibited in their culture or religion in order to be productive and
profitable in the consumer markets.
3 DISCUSSION AND ANALYSIS
3.1 SWOT ANALYSIS OF MARKS AND SPENCER
Strengths
 Brand: Marks and Spencer’s brand value and reputation in the retail markets is quite high
amongst their competitors, owing to their long history of operating in the retail markets. International operations: Marks and Spencer has been able to grow and expand its
business operation to international markets in an attempt to diversify their operations and
to increase their overall productivity and profitability (Gürel and Tat, 2017). Innovation: Marks and Spencer are amongst the industry leaders in terms of innovating
and developing new products and services for the consumers.
Weaknesses
 Mergers and Acquisitions: Marks and Spencer has been unsuccessful in their past
attempts at horizontal and vertical integration of other business organisations into their
own as compared to their competitors in the market. Investment: Marks and Spencer need to enhance their investment into new and innovative
technologies and operational equipment when compared to their industry rivals within the
market (Phadermrod, Crowder and Wills, 2019). Financial Strategy: Marks and Spencer can create better financial strategies for their
operations in order to decrease their operational losses and increase cash flows present.
Opportunities

 Online Stores: Marks and Spencer should expand their business operations to include
digital online stores as these provide the business with immense opportunities to increase
their market share, productivity and profitability in the market.
 Technology: Marks and Spencer should install modern technological solutions such as
the self-checkout counters into their operations as these provide Marks and Spencer with
immense cost cutting opportunities in the long run (Blockeel and et.al., 2016).
 Social Media: Marks and Spencer should make use of digital channels of marketing such
as social media platforms to aid them in their marketing efforts.
Threats
 Brexit: The political instability within UK due to Brexit and the changes in rules and
regulations post Brexit pose as a threat to Marks and Spencer’s operations.
 Supplier’s Power: Increased suppliers power raises the operational costs for Marks and
Spencer which is also a threat to its operations and functions.
 Substitutes: Alternative and substitute products by Marks and Spencer’s competitors
within the retail markets also poses a threat.
3.2 PESTLE ANALYSIS OF MARKS AND SPENCER
Political Factors: The political instability in UK due to Brexit can have significant impact on
Marks and Spencer’s operations. Changes to government rules and regulations pertaining to
international trading policies, trading restrictions and updates to standards set by regulating
bodies post Brexit can have a massive influence on Marks and Spencer’s operations and
functions within UK (Perera, 2017). Marks and Spencer’s administration needs to be wary of
changes to these political factors in order to continue operating successfully.
Economic Factors: Raising the taxes and interests levied on goods and services within the UK
can negatively impact Marks and Spencer’s operations. Increase in inflation and minimum wages
mandated by UK’s government directly influence consumer’s purchasing power and income,
which also have a negative impact on Marks and Spencer’s productivity and profitability within
UK’s consumer markets. Marks and Spencer’s leadership is recommended to account for these
economic factors in their business strategy to not let these affect its operations and functions.

Social Factors: Social trends such as an increase in the popularity of digital online stores within
UK’s retail industry can also have an impact on Marks and Spencer’s physical operations.
Changes in the local population’s preferences and lifestyles such as the increasing trend to switch
towards healthy and vegetarian culinary alternatives and substitutes can also negatively impact
Marks and Spencer’s food operations (Christodoulou and Cullinane, 2019). Marks and Spencer’s
management needs to take advantage of these changing consumer social trends in order to
increase their profitability.
Technological Factors: Technological advancements and innovations can have an immensely
positive impact on Marks and Spencer’s operations and communications. Through digital
channels of marketing, Marks and Spencer can advertise, promote to mass audience at little costs
incurred (Policy, 2016). Innovative equipment can increase scale of production of Marks and
Spencer’s products and help reduce operational costs. Installing self-checkout counters at Marks
and Spencer can also help reduce staffing costs significantly.
Legal Factors: Changes to legally mandated regulations and laws pertaining to health and safety
of employees such as the Health and Safety at Work Act of 1974 and Employee Protection Act
of 1978, consumer rights such as GDPR, legal regulation related to testing of products on animal,
banning of plastics used in operations can all have significant impact on Marks and Spencer’s
operations, profitability and productivity in retail markets (SHTAL and et.al., 2018).
Environmental Factors: New laws and regulations relating to curbing environmental pollution,
legally mandated by UK’s government can prove costly for Marks and Spencer’s operations.
Different environmental rules and regulations for Marks and Spencer’s distinct international
operations can also prove problematic for the organisation. Rise in climate change and growing
public concern can also be costly for Marks and Spencer as these would require the business to
change or update its operational processes.
CONCLUSION
Based on this report, it can be concluded that there are present various economic and non-
economic factors which have a significant impact on Marks and Spencer’s operational
performance, productivity and profitability in the consumer markets. This report evaluates the

various economic and non-economic factors that have an influence on Marks and Spencer’s
operational productivity, profitability and performance. Economic factors include UK’s
economic systems, policies and conditions, while non-economic factors comprise of the
demographic, cultural and natural factors all of which have to accounted for by Marks and
Spencer’s administration and management in order to continue operating successfully within
UK’s retail markets. Then the report analyses the internal and external environment in which
Marks and Spencer operates in with the intention to figure out their effect on the business
organisation’s productivity, performance and profitability by conducting necessary SWOT and
PESTLE analyses for Marks and Spencer. SWOT analysis highlights the strengths and
weaknesses of Marks and Spencer’s current operations, the potential opportunities that are
currently present for Marks and Spencer’s administration can take advantage of in the retail
markets in order to expand and grow their operations, productivity and profitability and the
threats present in the market, of which Marks and Spencer’s administration and leadership needs
to be aware of or avoid in order to continue operating successfully within the UK’s retail
markets. The PESTLE analysis for Marks and Spencer showcases the various political,
economical, social, technological, legal and environmental factors in the UK, which can have a
positive or negative impact on the operations and functions of Marks and Spencer for the coming
years and the multiple internal factors within these categories of which Marks and Spencer’s
leadership and administration need to be wary of or take advantage of in order to continue
operating within UK’s retail markets as they have done for more than a decade.

REFERENCES
Books and Journals
Aastveit, K.A., Ravazzolo, F. and Van Dijk, H.K., 2018. Combined density nowcasting in an
uncertain economic environment. Journal of Business & Economic Statistics. 36(1).
pp.131-145.
Ahmed, F. and ALAMM, M.A., 2017. Business Environment: Indian and Global Perspective.
PHI Learning Pvt. Ltd..
Akhmetova, M., 2017. Socio-economic environment as the basis for innovation
economy. Montenegrin Journal of Economics. 13(2). pp.175-183.
Anggadwita, G. and et.al., 2017. Socio-cultural environments and emerging economy
entrepreneurship. Journal of Entrepreneurship in Emerging Economies.
Blockeel, C. and et.al., 2016. A fresh look at the freeze-all protocol: a SWOT analysis. Human
reproduction. 31(3). pp.491-497.
Canhoto, A.I. and Dibb, S., 2016. Unpacking the interplay between organisational factors and the
economic environment in the creation of consumer vulnerability. Journal of Marketing
Management. 32(3-4). pp.335-356.
Chaudhary, R., 2017. Demographic factors, personality and entrepreneurial
inclination. Education+ Training.
Christodoulou, A. and Cullinane, K., 2019. Identifying the Main Opportunities and Challenges
from the Implementation of a Port Energy Management System: A SWOT/PESTLE
Analysis. Sustainability. 11(21). p.6046.
Crescenzi, R., Luca, D. and Milio, S., 2016. The geography of the economic crisis in Europe:
national macroeconomic conditions, regional structural factors and short-term economic
performance. Cambridge Journal of Regions, Economy and Society. 9(1). pp.13-32.
González-Rodríguez, M.R., Díaz-Fernández, M.C. and Biagio, S., 2019. The perception of
socially and environmentally responsible practices based on values and cultural
environment from a customer perspective. Journal of cleaner production. 216. pp.88-98.
Gürel, E. and Tat, M., 2017. SWOT analysis: a theoretical review. Journal of International
Social Research. 10(51).
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Jang, S.M. and Kim, K.I., 2018. The Effects of the Environmental Factors for ICT adoption on
Globalization capabilities and business performance of SMEs. Journal of Convergence
for Information Technology. 8(4). pp.219-224.

Njoku, C. and et.al., 2017. Risk factors and management outcome of intrauterine adhesion in a
constrained socio-economic environment: a 10-year review in the University of Calabar
Teaching Hospital, Calabar. European Journal of Pharmaceutical and Medical
Research. 4. pp.25-30.
Perera, R., 2017. The PESTLE analysis. Nerdynaut.
Phadermrod, B., Crowder, R.M. and Wills, G.B., 2019. Importance-performance analysis based
SWOT analysis. International Journal of Information Management. 44. pp.194-203.
Policy, P., 2016. What is pestle analysis.
SHTAL, T.V. and et.al., 2018. Methods of analysis of the external environment of business
activities. Revista ESPACIOS. 39(12).
Online
KEY FACTS, 2020. [Online] Available Through:<
https://corporate.marksandspencer.com/investors/key-facts >
M&S International, 2020. [Online] Available
Through:<https://corporate.marksandspencer.com/aboutus/mands-international>