Impact of Economic and Non-Economic Environment on 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.