Business Strategy for Marks & Spencer: PESTLE, SWOT, VRIO and McKinsey's 7s Model

This report analyses the impact of macro environment on Marks & Spencer's strategies, evaluates its internal environment and capabilities using VRIO and McKinsey's 7s Model, and applies PESTLE and SWOT analysis to interpret strategic planning.

Unit 32
Business strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
Organizational overview.............................................................................................................1
Analysing the impact as well as influence of macro environment has on strategies of an
organization.................................................................................................................................2
Evaluating internal environment and capabilities of an organization.........................................5
Evaluation and application of Porter's Five Force model..........................................................8
Applying the theories and concepts and models interpret the strategic planning for the
business organisations.................................................................................................................9
CONCLUSION..............................................................................................................................14
References:.....................................................................................................................................15

INTRODUCTION
Business strategy is defined as the group of plans, actions and objectives which establish
the outlines of the process of performing the business operations within the particular market
with their products. It is necessary for the business organisation to perform their business
operations in a systematic manner which is possible only by developing effective strategies at
work place. While developing the strategies, it is necessary for the management to include some
of factors such as business environment, competition and market (Bayo-Moriones, Galdon-
Sanchez, and Martinez-de-Morentin., 2020). The following report is based on Marks & Spencer
which is a major British multinational retailer with headquarter in London. The following report
will analyse the overall impact and influence of macro environment to f the chosen organization
along with its internal environment through analytical tools such as PESTLE, SWOT, VRIO and
McKinsey's model. Moreover, it will evaluate the use of Porter's Five Force model along with
various theories and concepts that help in the strategic planning of the chosen business.
Organizational overview
The Marks & Spencer Group plc was established in the year of 1884 and is headquarter
in London. The business specializes in selling clothing, home products along with food products
in the market. The organization has over 900 outlets across UK and has the market share of over
3% in the UK's grocery market.
Mission:
The mission at the organization of Marks & Spencer is to provide high quality products
to customers and diversifying the range of its product portfolio. In addition to this, the business
pays emphasis on providing its customers with products that have value for money along with
creation of a harmonious global community.
Vision:
The vision of the organization is based on maintaining high standards in order to beat the
competition in the market. In addition to this, its vision consists of ensuing that its employees are
taken care of through employee benefit polices as well as focusing on sustainable practices in its
business operations in order to have positive impact on its surrounding environment and
community.
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Analysing the impact as well as influence of macro environment has on strategies of an
organization.
PESTLE analysis is defined as a strategic framework which is used by the business
organisation for the purpose of evaluating all those external factors which may affect the
business operations. PESTLE stands for Political, economic, social, technological, legal and
environmental factors of business environment. It plays an important role in the strategic
planning (Alanzi., 2018). In context to Marks & Spencer, the analysis will allow the business to
recognize how various external factors influence its operations. This provides an opportunity to
the management relative to development of business strategies in order to overcome complex
situations. Given below is the PESTLE analysis of Marks & Spencer: Political factors: It involve all those factors which have been developed by the
government of a particular country. Basically, it includes all the government actions,
policies of an economy which may have impact over the businesses such as tax policies,
tariffs, bureaucracy and trade restrictions. In context to Marks & Spencer, the situation of
BREXIT has majorly impact the operations of the business which has resulted in a
disrupted supply chain as well as loss of numerous free trade polices with European
suppliers which results in an increased product cost for the end consumer. On the other
hand, modern-day politics has allowed the business to have free trade which helps the
business to import foreign products for sale at cheaper prices. Economic factors: It comprises all those factors which are related to the economy and
implies an impact on business such as inflation rate, exchange rate, unemployment rate,
interest rate and many more. In context to Marks & Spencer, the consumer in the UK are
attracted towards budget clothing stores especially after the COVID-19 pandemic as it
resulted in reduces purchasing power of customers. These new budget competitors are
stealing the share market share of Marks & Spence which is a premium clothing brand.
This has impacted the operations of the business through decreased sales as well as
profitability. Social factors: It refers to the factors which are related to the demographic and cultural
trends within the society. Basically, it includes the behaviour of customers as it directly
affects the business operations. It involves age distribution, gender, preferences of
customers and many more. In context to Marks & Spencer, the business has a well-
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established image in the market that has allowed the business to attain a large market
share. Although this long-standing reputation of the business is now being associates with
the past as new trendy retail chains enter the market. This social impacts influences the
customer base as well as the profitability of the organization. Technological Factors: It refers to the factors which are related to the innovation of
products or services. Basically it includes the factors which are related to the
advancement of technology. Bringing advancement of technology in the business
organisation may result in the improvement in the performance of organisation. In
context to Marks & Spencer, this factors impacts the operation of the business in a
positive manner as it is able to introduce elements such as self-checkout and online
shopping. This allows the business to improve its organizational operation and save cost
as well (PESTLE analysis). Legal Factors: It refers to all those laws and regulations which are necessary for an
organisation to follow while performing business operations. It involves several laws
such as labour law, licence and permits and many more. It is essential for the business
organisations to follow all the laws to perform all the operations legally. In context to
Marks & Spencer, the organization has to focus on ensuring that all the product that are
source come from ethical practices and aspects such as child labour are not involved in
order to avoid legal hindrance. In addition to this, the business has to abide law relative to
employees' benefits especially in the COVID-19 pandemic in order to negate legal
actions against the business. It needs to ensure that is abided by the Employment Act
2002 to fulfil its legal obligations.
 Environmental Factors: It refers all those factors which may arise due to the change in
climate, weather of the location of organisation. It mainly involves pollution, change in
environmental temperature, climate and many others. In context to Marks & Spencer, the
organization has to pay emphasis on of utilizing new and advance technology relive to
the production of its products in order to achieve sustainability and have a positive impact
on the surrounding environment. This will allow the organization to enhance its brand
image as well as awareness among customers. In addition to this, all its business
operations should be aligned by The Environmental Act 1990 in be ethical in its
organizational processes.
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SWOT Analysis
It is defined as a framework or model which is being used by the business organisations
for the purpose of analysing the strengths, weaknesses, opportunities and threats of organisation.
It is useful in decision making and developing the strategies at work place (Teoli, Sanvictores
and An, J., 2019). Below mentioned is the application of SWOT analyses in the context of New
London Coffee:
Strengths Weaknesses
 Marks & Spencer has been operating in
the market for the past 136 years. This
allows the business and its management
to have extensive experience relative to
customer preference, demand of
products along with development of
business strategy which gives it a
competitive edge.
 The organization has a global presence
across Europe, Asia and the Middle
East. The company has over 1400
outlets across the work which allows
the business to have a larger market
share providing it a competitive
advantage.
 The perspective of its customers have
changed in recent times as they are
focusing on purchasing products form
budget clothing outlets. Although the
business focuses on keeping up with the
current trend in the market, its
established perception has resulted in
decreased sales.
 The organisation relies on manual
process in production of its products.
This results in increased operational
cost. This impacts the overall price of
the finished product which is relatively
high when compared to its market
competitors (Market share of Marks &
Spencer).
Opportunities Threats
 The organization should focus on
market segmentation rather than
opening mega stores as it will allow the
business to fulfil the need of the
customers in a particular region. This
 There is high level of competition in
the market due such as ASDA and
TESCO along with new entry of budget
clothing retail chains. This has
influenced overall market share as well
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will allow the organization to save cost
through effective inventory
management as well as improve
profitability by meeting the needs of
customers.
 The organization can utilize its well
established brand image and uses social
media to revamp its overall image in
the market. This will allow the business
to capture the young customer base in
the market and alter their perception
about their brand as it will lead to
positive aspects such as improved sales
and probability (SWOT analysis).
as customer base of the business in a
negative manner.
 The dynamic aspect of changing
customer prefers is a constant threat as
the business has to adapt to new
changes in relatively less time. This
increase the cost of changing
operational strategy and development
of products.
Evaluating internal environment and capabilities of an organization
VRIO analysis:
This analysis allows a business to identify the advantage along with resource that provide
it completive advantage in the market. In context to Marks & Spencer, the analysis will help the
management to understand which resource of the organization are vital relative to attaining as
well as maintaining competitive advantage in the market. Given below is the VRIO analysis of
Marks & Spencer (Chatzoglou and et. al., 2018):
RESOURCES VALUABLE RARE INIMITABLE ORGANISABLE COMPETITIVE
ADVANTAGE
Brand
Image
Brand
Image - - -
Temporary
Competitive
Advantage
Financial
resource
Financial
resource
Financial
resource - -
Temporary
Competitive
Advantage
Production Production Production Production - Sustainable
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Capabilities Capabilities Capabilities Capabilities Competitive
Advantage
Human
Resources
Human
Resources
Human
Resources
Human
Resources
Human
Resources
Potential
Competitive
Advantage
Valuable: Brand image: This resource is valuable for the organization as it allows the business to
capture a large market share along with customer base in an optimal manner. Financial resources: This particular resource provide assistance to the organization in its
expansion process and results in attaining competitive advantage in the market. Production capacity: The organization is able to produce various products to offer its
customers in an effective manner and meet the market demand. This allow the business to
ensure that it is able to fulfil the needs of customers and makes this resource valuable.
 Human resource: The organization has more than 70,000 employee that provide crucial
support in ensuring all business operation are highly productive which makes human
resource valuable for the business.
Rare: Financial resource: This resource is rare as the organization has been operating in the
market for a long period of time that has helped it attain large financial holding. It is hard
for new competition to possess such finances. Production capacity: The business has reliable and strong relations with its supplier of
products which is rare of other organization to have. This allows the business to gain
competitive advantage in the market.
 Human resources: The organization has highly skilled and talented employees with
years of experience behind them. This makes it rare resource as it is difficult for other
organization to attain the same level of skills relative to their workforce.
Inimitable:
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 Production capacity: The business has built loyal relations with its suppliers which is
hard to attain by both new and existing compensation in the market. This allows the
business to gain an advantage in the market by offering products at competitive rates.
 Human resource: This resource is had to imitate by other organizations as the business
has been operating in the market for years. This helps in attracting capable and talented
employee in an effective manner providing the business with market advantage.
Organisable:
 Human resource: The workforce of the organization is highly skilled and talented. This
allows the business to achieve its set goals and objectives in an optimal way and ensure
that it is able to enhance both its productivity and performance in the market.
McKinsey's 7s Model Strategy: It is defined as the element under which the organisation prepares plans for the
purpose of gaining higher competitive advantage. Strategies plays an important role in
performing the business operations in a market. In context to Marks & Spencer, the
organizational strategy is based on providing high quality products to its customers and
establish a value based aspect in order to attract customers in order to gain market
competitiveness (Mokhtar., 2021). Structure: It is the way in which an organisation is organised. Several companies develop
their structure on the basis of chain of command, departments and many more. It
establishes interrelationship among all the employees in the organisation. In context to
Marks & Spencer, the business has an optimal structure which has been developed
thorough its experience of operating in the market for year. There is proper allocation of
resource within its structure due to flat organizational structure. System: It is defined as the daily processes, work flow and the daily routine of staff
members which describe how the job is done. In context to Marks & Spencer, the system
of the business is enhanced by effective business strategies and optimal management that
help in ensuring its business operations are productive. Skills: It is defined as the abilities and talents of the staff members of an organisation. It
helps the business organisation to perform the operations and achieve their goals and
objectives. In context to Marks & Spencer, its employees are highly skilled and talented
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that allow the business to keep its operation optimal and achieve high level of
performance. Staff: It refers to the manpower of an organisation and their motivational reside as it
involves human resources and talent management related to the business. The respective
focuses on the interpersonal skill, efficiency, effectiveness, work based knowledge and
others to develop their worker. In context to Marks & Spencer, the workforce is highly
efficient with over 75,000 employee performing their tasks that allows the business to
improve upon its overall operation and ensure all goals are met on time. Style: It show that how a business work and managed by the top level managers It
represents what kind of actions company use as their symbolic values. In context to
Marks & Spencer, the style of the management is based on democratic leadership that
allows for optimal collaboration with employee's and enhance the operation of the
business through effective decision making process.
 Shared values: It is core of McKinsey 7s model including standard and norms of the
company that guide company's action and employees' behaviour. In context to Marks &
Spencer, the management of the business pay emphasis on employee engagement in
order to develop positive organization culture. This helps in motivating employees and
enhance their performance to achieve business objectives.
Evaluation and application of Porter's Five Force model
Porters five forces model – This model was developed by Michael E porter of Harvard business
school in 1979. This is used by the business organisations for the competitor analysis and
evaluating the strength and position of the business enterprise in the market. There are five forces
which is explained below (Duke., 2018):
Supplier power (Low):
The overall power of supplier for the organization is low as it has established loyal
relation with various supplier relative to its global business operations for years. This allows the
business to be competitive in the market by having reliable supplies.
Buyer power(High):
The power of customers is high due to the factor of large number of substitute products as
well as market being highly competitive. This negatively influences the market competitiveness
of the business through loss of market share.
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Competitive rivalry(High):
The market is saturated with competition such as TESCO and ASDA which makes it
difficult for the organization to compete in the market due to aspects such as aggressive pricing
strategies and product substitution reducing competitiveness of the business.
Threat of substitution(High):
There are various businesses in the market that offer similar products of the organization.
This increase the power of buyers and reduces aspects of market share and customer base of the
business resulting in loss of competitiveness.
Threat of new entry(High):
The entrance in the retail sectors has become easy as budget clothing retail chain have
reduced the overall competitiveness of the business as it is not able to compete with their prices
as well as quality of products due to the utilization of automated manufacturing processes.
Applying the theories and concepts and models interpret the strategic planning for the business
organisations.
Porters generic Strategies : This model is used by the business organisations in order to
evaluate the best strategies within the organisation (Firoz Suleman, Rashidirad and Firoz
Suleman., 2019):
Cost leadership: This strategy focuses on the keeping the low pricing of the products or services
which has the higher margin with sale at the normal market. This strategy is used to attract
customers.
Focus strategy: The organisations which use the focus strategy concentrates on the niche market
and also by understanding the dynamics of that particular market and the needs of the customers.
The organisations focus on the low cost and as well as well specified products.
Differentiation strategy: The main aim of this strategy is to make the product unique from its
competitors. This differentiation totally depends on the nature of the industry and allows a
business to offer unique products in the market with the purpose of attracting a larger customer
base.
Evaluation:
From the evaluating of above strategies, it can be stated it is crucial for Marks & Spencer
to pay emphasis on cost leadership by utilizing new innovate technology in its production of
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products. This will allow the business to reduce cost of products and compete with budget
clothing retail chains in the market. In addition to this, it will allow the business to capture the
market in an effective manner as well as improve its performance related to sales.
Bowman's Strategy Clock:
This strategy is comprehensive and allows a business to attain options for positioning
within a markets that is based around price and perceived value (Dănălache., 2018) . Given
below is Bowman's Strategy Clock in context to Marks & Spencer:
Low price and low value:
This strategy involves low-value products that are offered at the lowest possible price.
Although customers perceive little value despite low cost leading to decreased brand loyalty.
Low price:
This strategy refers to offering products at lowest cost option in the markets but requires
manufacturing goods at large quantity to be cost effective and efficient.
Hybrid:
This strategy is a combination of low pricing and product differentiation as if the added
value is maintained it can lead to optimal market positioning.
Differentiation:
The particular strategy allows a business to compete in an highly competitive market
through high brand equity and awareness.
Focused differentiation:
This strategy is utilized by luxury brands which has high perceived value and a price to
match which allows the business to enhance its positioning.
Risky high margins:
This strategy is risky as business set the price of their products high without offering
value in return and often rely on brand equity to drive sales.
Monopoly pricing:
This strategy is effective for an organization that has monopoly over its markets which
makes it less concerned about its perceived value or price in order to attain market positioning.
Loss of market share:
This strategy allows a business to offer products with low perceived value with
disproportional high pricing in order to gain better positioning in the market.
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Evaluation:
From the above strategies it is vital for Marks & Spencer to utilizes Low Price and Low
value as it will help the business to reduce the overall cost of its products and attract customers in
an effective manner. In addition to this, it will help the business to gain a larger market share as
well.
Strategic planning
It is crucial for an organization to have effective strategic planning as it allows the
business to overcome complex situation in the market that are related to both internal as well as
external business environment. In addition to this, optimal strategic planning allows a business to
understand the market and develop business plan that will provide assistance in attaining
completive advantage. In context to Marks & Spencer, it is vital for the business to develop a
strategic plan in order to overcome its weakness as well as threat in the existing market. It will
help the business regain its market share and attract a larger customer base relative to its
competitors. Given below is the strategic plan of Marks & Spencer through the utilization of
SOSTAC Model:
SOSTAC Model:
Situational Summary:
From the SWOT analysis of the organization the situation can be perceived that although
the organization has an established brand image in the market, it has not been able to fully
utilizes it due to lack of innovation along with entrance of budget clothing retail chain. In
addition to this, the organization relies heavily on manual production which increases cost and
reduce productivity of the business. Moreover, this increases the competitiveness of the market
further reducing the efficiency of the business.
Objective:
 To increase sales by 8% in one year through utilization of automated technology in
production process.
 To increase market share by 5% in 6 months through the aggressive pricing strategy. To increase customer base by 6% in 8 months by the use of social media promotional
strategy.
Mission:
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Its mission is to offer products at aggressive price points in order to be completive in the
market. In addition to this, to focus on automating production of products in order to save cost
and overcome high level of competition.
Vision:
The vision of the organization is to gain higher market share as well as customer base
relative to is competitors by being aggressive in the market and offering products that will fulfil
the needs of its customers.
Strategy:
Pricing strategy:
It is crucial that the organization focuses on value based pricing strategy that will allow
the business to utilize its established its brand image in order to justify the price of its products.
This will allow the business to become completive in the market.
Promotional strategy:
The organization will have to focus on the utilization of social media for its promotion in
order to attract younger customers and enhance its market share. This will help the business to
improve its brand image and market share.
Budget:
Profit and loss account
Particulars Year 1 Year 2
Sales 250000 350000
Less: cost of goods sold 40000 50000
Gross Profit 210000 300000
Less: Expenses
Administration expenses 50000 55000
Selling and distribution expenses 60000 60000
Fixed Expenses 75000 75000
Operating income 25000 110000
Add: Indirect income 45000 20000
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Net Profit 70000 130000
Cash flow:
Cash flow statement
Particulars Year 1 Year 2
Cash received from sales 150000 200000
Less: payments
Payment to creditors 20000 25000
Rent 1500 1500
Purchases 15000 20000
Net cash after payments 113500 153500
Add: receipts
Received from debtors 23000 34000
Commission received 1000 1800
Net cash 137500 189300
Opening cash balance 150000 287500
Closing cash balance 287500 476800
Action & Control:
Growth in revenue:
This KPI will allow the business to measure the increase and decrease in its sales relative
to the strategic business plan and make suitable modifications.
Inventory Turnover:
This particular KPI will help Marks & Spencer to measure the overall flow of how often
it is able to sell off its entire in-stock inventory through its implementation of strategic business
plan.
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CONCLUSION
From the above report it has been concluded that, it is vital for an organization to pay
emphasis of its overall internal as well as external business environment in order to develop
effective business strategy. In addition to this, it should evaluate its market competitiveness and
gain understanding of resource that provide it assistance in the market. Moreover, it is important
for the business to develop a business plan that is based on aspects that will help in overcoming
its weakens as well as threats.
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References:
Books and Journals:
Alanzi, S., 2018. PESTLE Analysis. Project Management.
Bayo-Moriones, A., Galdon-Sanchez, J.E. and Martinez-de-Morentin, S., 2020. Business
strategy, performance appraisal and organizational results. Personnel Review.
Chatzoglou ande et. al., 2018. The role of firm-specific factors in the strategy-performance
relationship: Revisiting the resource-based view of the firm and the VRIO
framework. Management Research Review.
Dănălache, F., 2018. The Way to Efficiency. FAIMA Business & Management Journal, 6(2),
pp.3-4.
Duke, D., 2018. Porter’s five forces and the coffee industry. Management Teaching
Review, 3(3), pp.241-251.
Firoz Suleman, M., Rashidirad, M. and Firoz Suleman, S., 2019. The applicability of Porter's
generic strategies in pure online firms: A case study approach. Strategic Change, 28(3),
pp.167-176.
Mokhtar, S.H., 2021, March. A framework for sustainable environmental analysis. In IOP
Conference Series: Earth and Environmental Science (Vol. 685, No. 1, p. 012005).
Teoli, D., Sanvictores, T. and An, J., 2019. SWOT analysis.
Online:
Market share of Marks & Spencer,2019.[Online]Available
through<https://www.statista.com/statistics/1135830/grocery-market-share-of-marks-and-
spencer-uk/>
PESTLE analysis.,2021.[Online]Available through<https://pestleanalysis.com/marks-and-
spencer-pestle-analysis/>
SWOT analysis.,2020.[Online]Available Through<https://www.marketingtutor.net/swot-
analysis-of-marks-and-spencer/>
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