Analyzing Business Environment with Porter's Five Forces

This assignment requires you to apply Porter's Five Forces model to analyze a specific business environment. You will examine the five forces – threat of new entrants, bargaining power of buyers and suppliers, threat of substitute products, and rivalry among existing competitors – and assess their influence on firm strategies and competitive priorities. The assignment emphasizes understanding how these forces shape industry dynamics and impact businesses.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Impact of macro environmental factors on organisation and its strategies ......................1
M1...........................................................................................................................................3
TASK 2............................................................................................................................................3
P2 Analyse internal environmental capabilities.....................................................................3
M2...........................................................................................................................................6
TASK 3............................................................................................................................................7
P3 Applying Porter's 5 forces model......................................................................................7
M3...........................................................................................................................................9
TASK 4............................................................................................................................................9
P4 Concept and theories for strategic planning .....................................................................9
D1.........................................................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Evolution of business strategies and policies is the most imperative part of every business
organisation. It helps management to achieve its goals and objectives in an effective manner.
Business strategies provides a guidance to employees as they can work accordingly. It seeks to
coordinate and integrate all activities of functional areas within a business in order achieve long
term outcomes. It is responsibility of the top management of the company to develop proper
strategies which can affect the decision making process of business organisation (Schaltegger
and Wagner, 2011). Mark and Spencer is the chosen organisation in this present assignment; it is
one of the famous retailer of grocery products. The main objective of the company is to deliver
qualitative and value added products to customers in order to gain high competitive advantage.
The report will be described the impact of macro environment of business entity. Furthermore,
Porter's 5 forces model will be used in order to compete with external market.
TASK 1
P1 Impact of macro environmental factors on organisation and its strategies
Mark and Spencer is a British retailer by having 800 stores within 30 countries over the
world. It is one of the largest clothing as well as food retailer in United Kingdom. In Mark and
Spencer, there are several factors which can affect company's performance and its productivity in
direct and indirect manner. These elements can be micro and macro. Here we will studying about
the impact of macro environmental factor. Business owners have less control on these factors. It
can also effect the decision making process of the company and its all of its functional areas.
Below mentioned several key aspects which are involved in macro environment: - Political factors – There is a variety of political factors which can affect retail industries
in future. British Government has taken certain strict political decisions that is related
with tax rate levied by the government. This can influence bottom line in terms of
corporation tax as well as customers' purchasing power that is linked with income tax
(Schrader, Freimann and Seuring, 2012). Due to continuing deficit in an economy, there
is no guarantee that government will maintain the corporation tax rate in future. Apart
from this, British government also sets certain rules and regulations which must be
followed by all companies, i.e. health and safety; it involves hazard identification, risk
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assessment and risk control. If Mark and Spencer does not abided with these regulations
that in can affect the decision making process and sales of the firm in negative manner. Economical factors – In UK, the economic position of the country is unstable or
uncertain. It is highly affected the sales of the retail industries as customers would not
prefer to spend huge amount of money on luxurious products, i.e. food and clothing. In
addition, economic factors involves interest rates, monetary policies, government
spending, exchange rates, unemployment policy, economic growth etc. Mark and Spencer
has already been hit by these factors. Recently, the firm has closed numerous stores and
cut 2% jobs of its staff members. Apart from this, in 2008 UK was faced economic
recession; in order to deal with this situation the firm had taken decision to give 20%
discount to its customers. This was highly hit the sales and profitability of the company in
an adverse manner. Social factors – There are several social and cultural factors that has taken account into
consideration of the performance level of food and clothing retailer, such as – Mark and
Spencer. There are several changes are being occurred in needs and wants of customers;
now people are preferred to purchase qualitative and value added products. In this over
dynamic environment, it is very tough for organisations to meet customers need and
wants in the best possible manner (Hall and Wagner, 2012). Along with this, numerous
modifications in customers purchasing power or their shopping decisions are also being
affected due to socio cultural level. The demographic nature of global population has
been totally changed in last few years. Therefore, in order to meet customers needs and
wants, retailing companies like Mark and Spencer is trying to improving its quality and
using new tools for making effective production. Technological factors – In 21st century, the growth and development of retail industries
can be attributed towards technological developments. IT, globalisation, internet and
rapid use of mobile devices for shopping purpose; it also being affected marketing, sales
and customers' choices. In this competitive era, it is very essential for every business
organisation to adopt certain effective tools and techniques in order to compete with
target market. Along with this, technologies also helps in improving the effectiveness of
working activities and tasks. Mark and Spencer is using strong communication channels
in order to communicate with customers and recognising their needs and wants. New
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technology, has hit several things, i.e. production to selling process. For example- if Mark
and Spencer will not use new tools then it is not able to compete with external market in
an effective manner. Legal factors – Several legal aspects are abided within retain industry. It is essential for
business owners to focuses on ethics and compliances so as to work effectively in right
direction (Firnkorn and Müller, 2012). Mark and Spencer has large number of workforce
therefore, firm needs to follow all employment laws as per the appropriateness of
working environment. Mark and Spencer needs to confirm all legal standards that are
enforceable in jurisdiction.
 Environmental factors - With this assistance, of macro environmental analyse Mark and
Spencer will easily examined all the external factors which can affect its future
performance and productivity. Therefore, managers always have to prepare such kind of
business strategies and policies which are able to compete with external market. It helps a
company to achieve its goals and objectives in certain time period. Macro analysis also
affect the decision making process of corporate association as it would grab future
opportunities in an effective manner.
M1
There are several factors which are involved in macro environment of the company, such
as- political, economical, social, technological, legal and environmental factors. All these can
affect highly the decision making process of the firm (Cuervo‐Cazurra, 2011). If Mark and
Spencer is not able to follow all these factors then it can reduces the sales and profitability of the
firm. In terms of technological aspects, business organisations have to uses new and innovative
tools of production, so as to gain high market growth and success. Apart from this, political
changes are also affected the working activities and operations of business organisations.
TASK 2
P2 Analyse internal environmental capabilities
In a multinational business entity, these are several internal factors which can affect its
growth and vitality. Thus, in order to gain high market share business owners have to analyse all
internal factors. It can be done through SWOT analysis which is an imperative part of business
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growth. Along with this, SWOT analysis is a simple framework which use for creating strategic
alternatives. It involves four aspects strength, weaknesses, opportunities and threats.
Internal environmental analysis is a fruitful which will aids Mark and Spencer to handle
complex situations in future in a minimum time period. Below mentioned is the SWOT analysis
of the company: -
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STRENGTH
 Mark and Spencer is known for its
1382 stores over the world. The firm
has widely expand in international
market; it also has various franchise
agreements which are liable to give
high competitive edge to company
rather than other industries.
 Another major strength of Mark and
Spencer is, it has 50 dominions in Asia,
Europe and Middle East. The firm has
owned retail business, franchise
operations, joint ventures or websites
only in territories (Auzair, 2011). Its
food and cloth market is also
developed in growing regions, i.e.
India and Hong Kong.
 It is a most old and an iconic brand.
Mark and Spencer is operating since
1884 and still counted in UK's top ten
clothing brand.
 The firm is using new and effective
promotional channels, i.e. social media,
web portals in order to interact with
large group of persons.
 Mark and Spencer has healthy and
positive public relations which
generate loyal customers for the
company. These persons are liable to
future growth and development of the
company. In 2015, the firm was
WEAKNESSES
 Due to vulnerable fluctuation in UK's
domestic market, sales and profitability
of retail industries also decreases.
Continuous product recalls in 2016 was
affected market reputation and buyers'
confidence towards company.
 In last few years, Mark and Spencer has
lost several key employees, such as-
product developers, general
merchandise, food technologists etc. to
its rivals. It can affect the risk taking
capabilities of the company and
increases employee turnover (Belás and
et. al., 2015).
 Mark and Spencer has large number of
competitors which can affect their
global presence.
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severed 33 million customers. Mark and Spencer is also involved in
CSR activities that increase customers'
trust faith towards company.
OPPORTUNITIES
 Internalisation will increases the global
presence of retail industries; it results
enhancement in annual sales and
profitability of the company in an
effective manner. Mark and Spencer has strong command
on food and clothing brands; for this
firm is using a specialised strategy that
helps in achieving goals and objectives.
THREATS
 Economic recession is one of the
biggest threat for the company; it has
seen in 2009 – a big slump in sales.
With this, the retail market is affected
for 3 to 4 years.
 ASDA, Primark, Tesco are the major
competitors; all of them has high
market growth and position.
M2
It must for all multinational business organisations to analyse internal factors which will
affect working activities and operations. Therefore, while developing any business strategy, it is
essential for managers to examine all internal factors; it can be done through SWOT analysis of
the company. In Mark and Spencer management conduct situational analysis so as to determine
future growth and expansion. There is given internal environmental analysis of Mark and
Spencer; it is described as under: -
Strength Financial maturity and strong human capital
Higher level of customers' loyalty as Mark and Spencer provides
qualitative clothes.
Organised business structure
Weaknesses Poor working conditions and dis-valuing workers' rights.
High prices
Unfocused segmentation of clothing ranges.
Opportunities Expansion of e-commerce market
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Changing customers' interest and choices
Focusing on customers' segmentation
Threats Conflicts within executives and shareholders
ineffective implementation of proposed strategy.
TASK 3
P3 Applying Porter's 5 forces model
Name:
Address:
Date: November 27, 2017
The Elder manager
Mark and Spencer
Respected Sir
Our company Mark and Spencer is now become the leading retail industries and an
enduring brand. Although, firm has good market reputation but in this competitive era it is very
tough for a company remain its current market position. In relation to this, Mark and Spencer
is conducted Porter's 5 force model in order to monitor the competitor forces at market.
Porter's 5 forces model analysis: -
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 Threat of new entrants – In retail industry, due to its cost efficiencies and economics of
scale business owners can easily enter into it. The barrier of new entrants is highly
affected sales and proficiency of the company. Furthermore, the existing competitors of
Mark and Spencer, like Tesco, Asda etc. also provides qualitative products to
customers. In this perspective, it is hard for companies to achieve maximum
competitive edge, as new entrants also gives discounts and offer products at premium
prices in order to gain interest of potential customers (Jensen and Berg, 2012). Threat of new substitute products – The retail industry is consent on product or product
line. Therefore, the threat of substitutes products are increased- imitating product
designs is now become so easier. There are several foreign retailer who copied existing
products of Mark and Spencer. It results, premium position of the company will get
decreases by reducing customers' preferences. Beside this, in food business Tesco,
Asda, Morrisons etc. are previously developed companies; they also have wide range of
similar food products as per Mark and Spencer. Bargaining power of customers – Mark and Spencer operates in that market where
bargaining power of buyers is always remain high. The needs and wants of customers
are changing rapidly due to enhancement in price sensitivity. Now these days, people
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Illustration 1: Porter's 5 forces model

are seeking classical designs with this context they are moved towards other brands. In
order to attain and retain buyers for long term period Mark and Spencer needs to offer
low rate products to customers. The primary products strategy is not beneficial when
rivals are employing customer oriented approach. Competitors are also building strong
customer relationship approach which can affect sales growth. Bargaining power of suppliers – 90% suppliers of Mark and Spencer are belongs from
Europe, as their bargaining power is also high. In 2010, the firm had experience in
declining in sales; it was forced to distribute globally and work with international
suppliers (Chow and et. al., 2011). They were offered their services on high competitive
pricing. It results, low bargaining power of British suppliers.
 Competitive rivalry – There is a strong competition in retial sector. Mark and Spencer is
facing intense rivalry from other supermarket chains. The food market of the company
is rivalled by Tesco and Asda whereas clothing business is competing with Zara and
Topshop. Along with this, competition is also raising in online market where the firm
has great presence. M&S has high online popularity, where it has linked with a wide
range of customers.
Sincerely
Name
M3
The nature of business environment is changing day by day. Now these days, these are
several new rivals has entered in markets, thus it is too tough for companies to remain its market
growth and share for long term period. In order to deal with competitors and gaining high
competitive advantage it is essential for business organisations to conduct competitors analysis.
This can be done through Porter's five forces model (Sena Ferreira and et. al., 2012). It was
designed and developed in 1980s for demonstrating the attractiveness and competitive intensity.
There are five elements of Porter's 5 forces model, such as- threats of new entrants, threat of
substitute products, bargaining power of buyers, bargaining power of suppliers, competitors
rivalry.
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TASK 4
P4 Concept and theories for strategic planning
Strategic planning is an effective organisational management activity which is commonly
used by managers in order to set priorities. It helps management to strengthen their business
operations and practices by adopting imperative resources. Strategic plan also states that
employees as well as further stakeholders of the company will be worked for common goals and
objectives of the firm (Aterido, Hallward-Driemeier and Pagés, 2011). Therefore, it is
fundamental for Mark and Spencer to develop a strategic plan in order to gain high competitive
advantage.
Analysis of marketing mix – In order to gain high market growth and success, the firm is
following marketing mix as a business model. It helps managers to put right product on right
place on an average price. Marketing mix also used a competitive in order to compete with
external forces in target market by improving the quality of products and services of the
company.
STP approach – Mark and Spencer is segmenting, targeting and positioning approaches
so as to deal with target market. In this relation, the firm highly focused on women garments. It
has a variety of different designs of clothes. In addition, the firm also has unique collection of
kids and men which helps it in covering high market growth and share.
There are described certain key concepts which are used in strategic planning process,
such are defined as under: -
Determine position – While developing any business strategy managers have to analyse
the current market position of the company. It can be done through a situational analysis or an
organisational audit. It helps in rendering information about firm and its weak areas. For
example- Mark and Spencer is the leading supermarket chain in UK market; it has been captured
43% share within the retail sector. The financial position of the company is very strong as it is
spread in over 800 countries.
Define goals and objectives of the company – afterwards, managers have to decide the
strategic goal and objectives which they wan to achieve. It should be related with vision and
mission statement of the company. For example- the vision statement of Mark and Spencer to be
the standard against which all others are measure. In this perspective, the major goal of the
company is to improving quality of products.
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Situational analysis- Managers need to conduct a situational analysis in order to examine
all those factors which can affect a firm in future. It can done through SWOT and PESTLE
analysis by determining all internal and external factors (Chavis, Klapper and Love, 2011).
Hence, a proper strategy can be adopted and company can serve in better manner at marketplace.
Allocation of resources – There are different types of resources, such as- human,
financial, technical and physical. All these resources are able to develop an effective strategic
planning. For example- if Mark and Spencer does not have proper human resources then it needs
to hire some specialist and provide training and development assistance to employees as they can
work in a systematic manner.
Develop strategy –Formulation of effective and efficient strategy helps a business
organisation to gain high competitive advantage and achieve its goals and objectives in a certain
time period. Due to the high growth in capital market, the firm can adopt new product
development strategy (Cai and Yang, 2014). It aids a company to provide something new and
unique to buyers so as to attain and retain them for long time of span.
Implementation and monitor – At last, the overall plan is communicated within
organisation; it should be adaptable by all these employees. After implementation, management
need to monitor the overall plan so as to know its effectiveness whether it is beneficial for
company or not.
M4
Strategic planning considered as roadmap for every business entity, it provides direction
to working operations as they can be done in an effective manner. It is essential for managers to
develop as well as improve their strategies in order to achieve company's goals and objectives.
Mark and Spencer plans innovative strategies and policies so as to compete with external
environment and reduces future risks. There are given certain steps which must involves in
strategic planning process, such as-
 Establish strategic foundation
 Identification of strategic position of the company
 Goals, initiatives and metric formulation
 Evolution of strategic plan and review
 Execution of the plan
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D1
Business environment involves two aspects, i.e. internal and external factors. In which
are known as- strength, weaknesses, opportunities and threats of the company whereas external
factors are seemed as political, environmental, social, economical etc. All these factors can
hamper business growth and vitality in direct and indirect manner. Therefore, while creating
strategies and policies managers have to analyse all these factors (Moutinho, 2011). Apart from
this, a competitors analysis should also be regulated in order examine who are the future rivals
and how to deal with them. In relation to this, Mark and Spencer needs to prepare a strategic plan
and use effective tools and techniques in order to achieve high market growth and share. It aids
in providing right direction to all working activities and improve the decision making process of
the company.
CONCLUSION
From the above mentioned it has been summarised that business strategies plays an
imperative role in growth and advancement of every organisation. It helps in improving the
effectiveness of working activities or tasks. It is essential for Mark and Spencer to examine all
macro environmental factors which are involved in business growth and affect its performance
level in future. Apart from this, management also have to examine internal environment and take
proper decision. Porter's 5 forces model is used in order to evaluate competitive forces in target
market. In order to achieve high goals and objectives, a strategic planning should be conducted.
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REFERENCES
Books and Journal
Aterido, R., Hallward-Driemeier, M. and Pagés, C., 2011. Big constraints to small firms’
growth? Business environment and employment growth across firms. Economic
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Auzair, S., 2011. The effect of business strategy and external environment on management
control systems: a study of Malaysian hotels. International Journal of Business and
Social Science. 2(13).
Belás, J. and et. al., 2015. The business environment of small and medium-sized enterprises in
selected regions of the Czech Republic and Slovakia. E+ M Ekonomie a Management.
(1). p.95.
Cai, S. and Yang, Z., 2014. On the relationship between business environment and competitive
priorities: The role of performance frontiers. International Journal of Production
Economics. 151. pp.131-145.
Chavis, L. W., Klapper, L. F. and Love, I., 2011. The impact of the business environment on
young firm financing. The world bank economic review. 25(3). pp.486-507.
Chow, A. T. and et. al., 2011. Broadband network with enterprise wireless communication
system for residential and business environment. U.S. Patent 7,944,948.
Cuervo‐Cazurra, A., 2011. Global strategy and global business environment: the direct and
indirect influences of the home country on a firm's global strategy. Global Strategy
Journal. 1(3‐4). pp.382-386.
Firnkorn, J. and Müller, M., 2012. Selling mobility instead of cars: new business strategies of
automakers and the impact on private vehicle holding. Business Strategy and the
environment. 21(4). pp.264-280.
Hall, J. and Wagner, M., 2012. Integrating sustainability into firms' processes: Performance
effects and the moderating role of business models and innovation. Business Strategy
and the Environment. 21(3). pp.183-196.
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