Maximizing Company Profitability

This assignment focuses on the key strategies for increasing a company's profitability. It delves into various aspects such as analyzing the external environment (using PESTLE analysis), understanding the competitive landscape (Porter's Five Forces model), and evaluating internal factors influencing profitability. The reference list provided includes academic sources and online resources that support the analysis.

BUSINESS ORGANISATION

TABLE OF CONTENTS
1. INTRODUCTION.......................................................................................................................3
2. BACKGROUND OF BUSINESS ORGANIZATION................................................................3
3. BACKGROUND TO BUSINESS ENVIRONMENT ................................................................4
4. ANALYTICAL APPROACHES.................................................................................................5
4.1 Pestle analysis.......................................................................................................................5
Porters five forcer model.............................................................................................................7
5 DATA GRAPHS AND TABLES.................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

Illustration Index
Illustration 1: Pestle analysis...........................................................................................................6
Illustration 2: Porters five forcer model.........................................................................................10
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1. INTRODUCTION
Mark and Spencer can also be referred as M&S is the retailer store based in London. The
company is having their speciality in selling the branded goods mostly clothes for all age group
and gender. Earlier, the company was having very high sales in terms of clothing in Norwegia,
but in recent years the food sales has increased and cloth sales have fallen down significantly.
The main issue of Mark and Spencer in Norway is not having high tech retail stores. The retail
stores are not having high tech quality services and the customers are getting unsatisfied by the
low-quality services. This report consists of the background of the organisation and the business
environment. Further, it includes the porter's five force and PESTEL analysis to understand the
effect of internal and external factors on the performance of the company. Mark and Spencer are
entered into new market. To expand their organisation at new marketing environment, analysis
of business environment is done. It is one of the significant step for effectively implementing the
strategies and planning.
2. BACKGROUND OF BUSINESS ORGANIZATION
Mark and Spencer which was originally known as Penny Bazaars was found in 1884 in
north England as the clothing store. As the company starts growing, they started selling food and
clothes in early 1920's (Alves and Francisco, 2015). The company have started working with
their suppliers more closely to develop new strategies for using the new technologies. This will
be helpful in manufacturing high quality products. As the years passes, the company have taken
the total control over the retailing stores of clothing in Norway. The most important focus of the
company was on their customers. They were very confident that the products manufactured by
them will be of high quality with economic costs, so that they will be able to satisfy the needs of
the consumers. Profit of the Marks and Spencer's in year 2015 was 33 percent of total revenue
generated through sales. Net income of the organisation in the years was 487 GBP (official
currency of UK ). Revenue in this year was 10311 GBP mil. Operating margin percentage in
2015 was 6.8 percent (Boateng and et.al., 2015). According to the report of BBC it is analysed
that M& S are able to make effective profit. They are able to generate high revenue and annual
profit. The capital expenditure of the company is doped by £ 710 m. They have increased their
profitability by £ 3bn in past 5 years. In this process the significant role is played by the
Christmas (Mark and Spencer sees first profit rise for four years. 2017). In the year 2006 to 2016
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they are having growth rate of 3.07%. In order to maintain success of the company they are
developing strategies for next 10 years. In this process all the steps are based on the BREXIT .
Along with this they are considering discount as one of the biggest marketing tool. They are
considering innovative and creative approach for attracting maximum number of customers. For
this they hiring skilled and talented employees. They are providing various opportunities to their
employees in order to explore their talent.
As the trend starts changing, the company found very difficult to keep up with the
changes and develop the products which are as per the marketing trend. Their marketing
strategies started failing and company's sales had decreased drastically. Their financial condition
became very low and their supply chain management was distorted. M&S was the leader in the
textile industry from so many years, but their market was on the downhill (Gjelsvik and Aarstad,
2017). The company took a step and started taking the feedbacks from their customer's more
often. In order to prevent any further loss in finance, the company has made direct contact with
their suppliers. They started making such products which are required by the customers by
changing their strategies. They have adopted global sourcing technologies, so that they can
increase the profitability of the company by increasing their sales rate. The company is currently
operating in India, Turkey, Russia, Greece, Ireland, France, Poland, Hungary, Finland and Spain.
The organisation is having 959 stores throughout United Kingdom.
3. BACKGROUND TO BUSINESS ENVIRONMENT
The environment of Norway is quite mixed in context with the economic condition of the
company. After the growth of industrialisation, the country has seen very robust growth.
Majority of their economic condition is dependent on the natural resources mostly petroleum
production and exploration. At present the trend of the company is more focused towards fashion
trends and healthy food. People want to carry their personality in more attractive way by using
high quality clothes (Jianping and et.al., 2014). The government rules and regulations are very
transparent, as they are more focused on innovation. The employment rates in the country is
currently low, so they want the foreign companies to invest their business so that local people
gets employment (Gjelsvik and Aarstad, 2017). Political environment of Norway is very better
and is quite stable as comparison to other countries. Stability of political conditions makes an
advantage for the M&S. The country has always been monarchy and there is absolute no
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pressure of the oppositions. Unemployment rate in the country in 2015 was 4.3 percent. Interest
rate in the country was 0.75 percent which is lower till now. Majority of country's economy
comes from oil companies in the region. Gross domestic product (GDP) of Norway in 2015 was
74,505.25 USD (M&S. 2017)
As the sales of the company in Norway is approax. 1.2% and their GDP is 69%, which is
considered as poor trading statistics for the company. Therefore, in order to increase purchase
rate necessary measures are required. This will allow the company to export their goods and
services more cheaply and give them slight advantage in enhancing their business profitability
(Jianping and et.al., 2014.). The company is recruiting local people, so the consumer's attraction
can be increased. This will lead to the increase in their sales rates. Overall, the environment of
the country is very stable in terms of the retailing market.
4. ANALYTICAL APPROACHES
4.1 Pestle analysis
(Source: Porter's five forces model . 2017)
Political factors
These factors can have major influence on the efficiency and effectiveness of the Mark
and Spencer. The country has always been monarchy and there is absolute no pressure of the
oppositions. The government want that the company must maintain the health and safety
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Illustration 1: Pestle analysis

standards, so that the employees and the workers remain safe at the work place (Boateng and
et.al., 2015). Economy of the country is very stable, so the company can get benefits from this,
as their will be less fluctuation in the market (Pedersen and Gwozdz, 2014). The country is a
trade free association, so it will be easy for the company to import and export their goods and
services. Norway is member of European free trade association due to which economic era of the
country is very high.
The major opportunities can be identified as there are not facing any pressure, they are
able to expand their market effectively and generate profitability. The stable economy of country
helps in maintaining the trading smoothly.
Economic factors
During the financial crisis, the growth rate or GDP has slipped from 2.5 percent to 0.9
percent. The current is very uncertain, as the economic fluctuation might occur in the country.
This will impact the sales rate of the Mark and Spencer. The company have recently closed many
stores in the country, which left many of local people unemployed. The customer's do not wanted
to buy the products, so the company have started 20% sales on all the shoes, so that they can
improve their economic conditions (Pedersen, Gwozdz and Hvass, 2016). M&S have to work
with their price sensitive products so that they can remain in the market and sustain their sales
rate. Economy of the country is very much stable due to stability in politics and fiscal stability.
Although country is facing some challenges in economic environment and people of the country
are prepared due to continuous economic progress in the past years.
The unstable economy of the company is considered as major threat. As the sales of the company
is not fixed it is creating huge impact the economy. It leads to the closing of various stores,
which creates huge impact on the overall growth of the company.
Social factors
The current industry of clothing is based on cheap selling of the products. The company
wanted to stretch their brand image so they have reduced the price of each products which is on
the basis of social environment of Norway. The purchase of the customers are getting affected by
the social culture, so the company must take all the factors into account, so that they can increase
their sales rate (Vidaver-Cohen and Brønn, 2015). Culture of the country can also affect
expansion of Marks and Spencer's in Norway. Purchasing power of consumers highly affected
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by social and culture values of the particular country. This factor need to be considered by the
company before setting up its business in Norway.
The company is providing service at affordable prices, it helps in attracting maximum
number of customers. On the basis of social factor they are provided with various opportunities,
in order to extent their services. It helps in attracting customers and increasing growth of
company in Norway.
Technological factors
Internet has become very integral part in everyone's life. Every third person in the
country is using internet. The company can take advantages of this and they can increase the
customer's attraction by providing more online offers (Alves and Francisco, 2015). They can
generate more brand awareness among the consumers by using their online app. Technological
development is continuously growing in the country which may be be beneficial for the company
to promote its business in the region . Internet development in the country will be major
distribution channel for the organisation. Technology will help company in selling its product
online thus by making high revenue from sales. Many company in working in clothing sector of
the country are having online business. So Marks and Spencer's by making online website for
selling its products. Technology advantage will support company in increasing its profitability.
This is considered as one of the biggest opportunities for the through which they are able to
promote their services across the world and increase sales of their products.
Environmental factors
The major issues regarding the environment is the production of carbon from the retail
stores and wastages. The company had used all the solar panels to generate more electricity for
their stores, so they can protect the environment (Gjelsvik and Aarstad, 2017). They have also
used LED lights and reduce the wastages from their retail stores. Environmental factors can
influence the business operations of the country as country has strict rules regrading safety of
environment. Business activities of the M&S should be environment friendly and must focus on
generating less carbon footprint. As the organisation is using solar panels for fulfilling
electricity requirement. This will be and aid for organisation to expand its business in Norway.
These environmental factors must be considered by the Marks and Spencer's while expanding it
business in Norway.
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This is considered as one of the biggest threat for the company, due to which company is
getting diminished image. In order to maintain brand value in Norway, effective environment
protection activities should be considered.
Legal factors
Mark and Spencer is updating their rules and regulations every year so that they will keep
up to date with the new rules and legislation of Norway. The company can trust the legal system
of the country (Boateng and et.al., 2015). One rule was based on the packaging of the products
Act, and the company has done all the packaging of their goods in compliance with this law, so
that the goods remain safe until it reaches to the consumer. These legal factors must be
considered by the Marks and Spencer's while expanding it business in Norway.
Porters five forcer model
Porter five forces model is tool used to determine current market competition in the
industry and market. The model supports in identifying the profitability of the business. The
model describes functions of interaction of suppliers power, bargaining power of consumers,
competitive rivalry and threat of substitute in Norway's business industry (Gjelsvik and Aarstad,
2017). By using this model Marks and Spencer's can identify all these factors before starting it
business in the country. Using this tool the organisation can analyse the current market
situation. It will help company in making strategy for doing business in new country.
Threat of new entrants
Threat of new entrants in the clothing industry of Norway is potentially high. The risk on
entering a new company to enter in this sector of the country is high. Demand of product and
services in the country is increasing which help in new companies to enter in the Norwegian
cloth sector. (Vidaver-Cohen and Brønn, 2015.) New competitor in the sector can force the
Marks and Spencer's to be more effective and prompt . New entrants can make burden on the
company to continuously make improvement in product to remain competitive . To enter into
the industry of the country high amount of capital is required which may restrict new entrants.
Additional physical cost and resource requirement prohibits new companies to enter in this
industry. So Marks and Spencer's can take advantage of these barriers and remain the best firm
in the County by making high quality products.
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Bargaining power of suppliers
Bargaining power of suppliers in Norway is very high because of increasing product
prices and reducing quality of goods. Due to this reason supplier in the cloth industry of the
country exert power on M&S which are competing in the country (M&S. 2017). Supplier group
in the country is powerful as they are dominated by some large enterprises and are more focused
on the specific sector (Pedersen, Gwozdz and Hvass, 2016). Power is high due to firms do not
have substitute available for the raw material required. These effectiveness of suppliers is also
due to supplier product are critical to buyers. This effectiveness of suppliers is also creating
switching cost in the country at high level. Threat of supplier is credible because they
incorporates buyers in the sector.
(Source: .Pestle analysis. 2017)
Bargaining power of buyers
Power of consumer is high in Norway as country have many companies providing cloth
products. Customer in the country wants to buy product which are affordable ans also posses
good quality. So Mark and Spencer;s have to set price of product according to the requirements
of consumers. Customers in the country are powerful because they have plenty of options
available to switch form one company to another. If M&S will not produce products according
to the needs and expectations of customer then it may face high power of consumers. In order to
reduce the price buyers of the country bargains for providing high quality.
Threat of product substitute
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Illustration 2: Porters five forcer model

Threat of product substitution is medium in the Norway as the clothing sector of the
country do not posse high number of good firms. Substitution of product arise when there are
number of firm providing same product at lower price from other firms. Mark and Spencer's
have to make its product different fro other to remain competitive (Jianping and et.al., 2014.). It
is required that the organisation has to make products at high quality with affordable prices. This
will support company to remain safe from product substitution. The company can use
differentiation strategy to make its product competitive . Product substitution is strong threat to
the company when customer starts buying other company's god which are of low prices.
Rivalry among competitors
Competition form rivalry firms to Marks and Spencer's is relatively low in the Norway.
Competition from rivalry companies will increase when there will enter new firms in the same
industry. Industry organisation are mutually dependent which increases the competition on single
action taken by company (Alves and Francisco, 2015. ). Thus in many sectors firms are actively
making strategies which can help them in increasing the profitability. There are various factor
which can influence M&S such as equal level clothing companies, slows growth of the sector,
high costs and high cost for storage, lack of differentiation and cost of switching is low.
Competitors diversity and strategic stakes are very high also included in the rivalry competitors.
There are various challenges that are being faced by the company, while entering into the
new market. M& S can face new demands of services that are based on Norwegian culture. For
this they need to understand their culture and social factors. It helps in understanding their needs
and requirements. During the initial process the supplier part of the company may dominate. For
this they should develop effective strategies for handling it. All the prices should be based on
research it helps in attracting maximum number of customers. In order to attract all the
categories of customers, wide range of services should be provided by the company.
5 DATA GRAPHS AND TABLES
For completing the business report for Marks and Spencer's data has been taken from
journals and online articles. The data has been taken form official website of Marks and
Spencer's.
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CONCLUSION
From the above report, it can be concluded that business organisation is important
element in respect to growth of the nation. In this aspect, report is based on M&S which is retail
sector business in UK. With the help of present report, analytical approaches can be implemented
at workplace to develop effective results in successful manner. In this context, report articulated
about PESTLE analysis through organisation can assess impact of macro environmental factors
on the business performances in successful manner. Furthermore, it summarized about porter
five forces model that assists to carry effective results in enterprise to generate more profits and
revenue at workplace. Moreover, time plan has been made through it can be identified that in
which time report will be done in successful manner. In addition to this, it provides legal
framework to provide recommendation for improving business results and profits at workplace.
On the basis of above report it is concluded that company is facing huge customer crowd during
Christmas, due to this system failure and online shopping portals get crashed. It creates huge
impact on the company. Therefore, processing of operating system should be tested. Along with
this cloud services should be also included in order to handle maximum number of clients. It
helps in maximising profitability of company.
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REFERENCES
Books and Journals
Alves, P. and Francisco, P., 2015. The impact of institutional environment on the capital structure
of firms during recent financial crises. The Quarterly Review of Economics and Finance.
57. pp.129-146.
Boateng, A. and et.al., 2015. Examining the determinants of inward FDI: Evidence from Norway.
Economic Modelling. 47. pp.118-127.
Gjelsvik, M. and Aarstad, J., 2017. Entrepreneurial industry structures and financial institutions
as agents for path dependence in Southwest Norway: the role of the macroeconomic
environment. European Planning Studies. 25(3). pp.406-424.
Jianping, L. and et.al., 2014. Report on Global Environment Competitiveness of Norway. In
Report on Global Environmental Competitiveness (2013) (pp. 665-668). Springer Berlin
Heidelberg.
Pedersen, E.R.G. and Gwozdz, W., 2014. From resistance to opportunity-seeking: Strategic
responses to institutional pressures for corporate social responsibility in the Nordic fashion
industry. Journal of business ethics. 119(2). pp.245-264.
Pedersen, E.R.G., Gwozdz, W. and Hvass, K.K., 2016. Exploring the relationship between
business model innovation, corporate sustainability, and organisational values within the
fashion industry. Journal of Business Ethics, pp.1-18.
Vidaver-Cohen, D. and Brønn, P.S., 2015. Reputation, responsibility, and stakeholder support in
Scandinavian firms: A comparative analysis. Journal of Business Ethics. 127(1). pp.49-64.
Online
M&S. 2017. Accessed through<http://www.marksandspencer.com/>[Accessed on 24th July
2017]
Mark and Spencer sees first profit rise for four years. 2017. Accessed
through<http://www.bbc.com/news/business-32800614>[Accessed on 17th August 2017]
Porter's five forces model . 2017. Accessed through<http://www.mba-tutorials.com/strategy/65-
porters-five-forces-model.html>[Accessed on 17th August 2017]
Pestle analysis. 2017. Accessed through<https://www.slideshare.net/CharuPandey1/strategies-
of-marks-and-spencer>[Accessed on 17th August 2017]
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