Business Strategy: Impact and Influence of Macro Environment, Internal Environment and Capabilities, Porter’s Five Forces

This report discusses the impact and influence of macro environment on business strategy, analyzes the internal environment and capabilities of the organization, and examines Porter’s Five Forces in the context of M&S, a British multinational retailer. It also includes a strategic plan for M&S.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
LO1..................................................................................................................................................3
Impact and Influence of Macro Environment..............................................................................3
LO2..................................................................................................................................................6
Internal Environment and Capabilities........................................................................................6
LO3..................................................................................................................................................9
Porter’s Five Forces.....................................................................................................................9
LO4................................................................................................................................................12
Strategic Plan for M&S.............................................................................................................12
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Business strategy can be defined as set of actions through which business enables it to
achieve its objectives and vision. Strategies that are developed are intended to achieve all the
objectives are required to be effective and effectiveness of the strategy depends on the factors of
environment that has been analysed regarding their impact on the business. Business
environment refers to collective factors that affect operations and functioning of the business and
the environment in which business organisations functions. This business and its environment
have been divided in two types this is internal analysis and external analysis of the business.
External environment has further been divided in two parts that are Micro and Macro
environment. This report will discuss about business strategy in context of M&S, British
multinational retailer founded in 1884 and headquartered at London, England. M&S specializes
in selling clothing, home products and food products. M&S operates at around 1463 locations
worldwide. Number of employees employed at 20000 employees and is mainly dependant on
UK market for its revenue having around 959 stores across UK. This report will include analysis
of M&S and its internal and external environmental factors and this will be followed by
developing strategic plan for M&S.
LO1
Impact and Influence of Macro Environment
Pestle analysis of Marks and Spencer
In this report to analysis the better understanding of the external factors Pestle analysis
will does not so that there is a better understanding of the existing and Future market of the
Marks and Spencer.
Political factors
There are the two political factors that impact Marks and Spencer such as Free trade and Brexit.
Free trade- Firms operates widely in the United Kingdom but also at the same time it has
locations all over the world. Free trade enables Marks and Spencer to import several foreign
goods sales within their stores at low prices and at the same time maintains a healthy profit
margin.

Brexit- Due to the Brexit, there is a major impact within the operations of Marks and Spencer. It
was resulted in the loss of several free trade polices. Factors such as Political instability,tax
policy ,corruption also impacted within the firm negatively.
Economic Factors
One of the biggest factor within a retail industry is price as it is seen from last few years that
budget retailers are come with best discounts within United Kingdom. From the budget
supermarkets to the budget clothing some of these brands copy the products and provides
consumers at lower prices (Perera,2017).
Socio cultural Factor
Due to its longstanding existence it is household name as it is not only youth oriented brand.
Most consumers of the firm are interlinked with the brand with past and for that it loses the
majority of the consumers from the current generation. The firm has also capable of the factor
through the ready meals as it has been a rapid rise of ready meals across the UK and world as
well. Firm is also one of top current provider of ready meals in the United Kingdom.
Technological factors
Nowadays Technology are changing continuously as within the introduction of the food joints
and self checkout based is current technology ,firms has also introduced several self checked
stores as well as plan to enhance the use of Artificial intelligence
within future. These are the stores that help the firms to save money and time that is spent during
the cashier counts (Perera,2017). Along this side Marks and Spencer also established a store that
is eCommerce store , an effective store in the United Kingdom. All the products can be found on
the online websites and also with such stores most of the people can save their time by shopping
online at Marks and Spencer. It is a type of the acceptance of the new technology may aids the
brand to makes the stronger presence among al the generations of the people especially the
young ones. Online shopping is one of the major trends followed by all over the world. People
are busy in their life that they don't have time for traditional shopping and prefer home delivery
or online shopping. With the help of online shopping people gets each and everything from their
home such as grocery items to clothing items.
Legal Factor
This factor of the macro environment includes all those legislations and regulations that
govern functioning of the M&S in a given market sector. There are several legislations and

regulations that are required to be followed by M&S but these are of nature that they canchange
any time affecting all the operations of the company. some of the important legislations that are
covered in this factor of the environment are consumer safety, employment regulations, food
safety regulations and regulations of fair trade practices.
Environmental Factor
This factor presently has become important factor like any other factor that can affect
functioning of the business in environment (Fozer and et.al., 2017). M&S in this factor is
required to adopt to all those matters that ensure that its practices and operations are environment
friendly. This means that no practice of the M&S should be such that harm environmental safety
and sustainability. This includes adequate measures of waste management, sustainable supply
chain, reduced carbon emission. This has become very important for companies to pay attention
on this factor and remain aware about possible variations in this factor. This is because concern
of people is increasing towards environmental sustainability and regarding this regulations have
also been forces in case on non-compliance company might have to deal with legal issues.
Along with PESTLE analysis factors that inform about opportunities and threats that exist in
macro environment and that company can utilize and requires being aware of. Another important
element of macro environment is competition. There are several firms that M&S is competing
with among all of them Tesco is one of the top competitors of M&S.
Overall Sales and Profit of Tesco are £63.911 billion and £1.32 billion respectively as compared
to £10,377.3 million and £37.3 million respectively of M&S.
In terms of market share Tesco has the highest market share in retail industry of UK.
Advertising Strategy of Tesco is comprehensive and includes promotion of the brand and
product through all the channels of the marketing. These channels are online channels and digital
media channels and offline print and traditional channels of marketing (Pakes, 2017). Company
enables it to take advantage through all types of promotional channels in its marketing. This is
because traditional channel of performance has their own benefits and modern and digital
channels have their own benefits in form of increased reach to international audience at low cost.

LO2
Internal Environment and Capabilities
Internal environment of the firm refers to environment that exists within the firm. This is
in form of its employees, strategies and resources. Capabilities of the firm and its internal
environment enable organization to do utilize opportunities that exist in external environment of
the company. Along with this capabilities of the firm and its environment also enable firm to
deal with challenges that exist in external environment. SWOT Analysis is a framework that
contributes in analysing what are the strength and weaknesses of the internal analysis and how it
enables to utilize opportunities as well as overcome threats.
SWOT Analysis
Strengths
International Presence- This is first strength of M&S that it has international presence which
contributes in increasing its customers from different geographical presence (Gallego-Posada and
Puerta-Yepes, 2018). Even with its limited presence this enables to increase knowledge of the
customers at international level about existence of the brand.
Brand recognition- High quality of the products and premium supermarket M&S is highly
recognised brand and also has a positive and favourable recognition in the market.
Market experience- M&S is one of the leading retail organisations to operate in UK with its
presence for more than a century. M&S has worked with several partners and have significant
experience of the market and its various aspects.
Innovation- This is strength of M&S as innovation enables company to survive in changing
trends of the market and competition of the industry.
Online presence- This strength of the M&S is regarding its strategy of the fulfilling customer
requirements through different channels. This is an important strength in present business
environment as this enables company to attract customers from different channels of sales.
Weaknesses

Sales decline- M&S is facing reduction and decline in its sales in clothing because of improper
supply chain and inadequate availability of the clothing in stores of M&S. This became a
weakness of the M&S.
Dependant on UK market- Instead of its international presence and operations M&S is
significantly dependant on the UK market. Out of 1463 more than 900 stores of M&S are
operating in UK (Bull and et.al., 2016). This suggests its high dependence on the market of UK.
This also restrains it from attracting customers from international market.
Customer Satisfaction- Customer satisfaction is important element of successful business
functioning and customer satisfaction of M&S is low. This is because customers of M&S have a
perception that products of M&S are not for teenagers and young people and more suitable for
elder people.
Opportunities
Online Opportunities- Online platforms and channels have several opportunities for M&S. they
can increase their customer base from online channels. Online opportunities also include
opportunities of promotion and marketing of the company in which it can increase its visibility at
international level and through its online sales channel can increase its international customers.
Expansion- M&S has a international existence but its international presence is limited because
of its strong dependence on UK market. Expansion can provide several new opportunities to
M&S and will increase its international customers.
Threats
Competition- M&S has one of the biggest threat and this lies in form of competition.
Competitors of M&S includes Tesco, Asda and many other organisations and all have strong
presence in market and this is one of the threat to M&S.
Frequently changing customer trends- This is another threat to sustainability and growth of
M&S. Consumer trends are frequently changing and requiring that M&S is able to cope up with
those changes. In case M&S is not able to do so this will affect it in all negative manners
possible.

This discussion was based on identification and analysis of strength and weakness of the
internal environment of M&S (Sarsby, 2016). To analyse capabilities of M&S VRIO model can
be used. This model analyses four elements of resources of the organization and that determines
whether the resources are capability of the company or not in order to provide competitive
advantage to M&S.
These elements are
Valuable- This means whether resources are able to add value in functioning of the organization
or whether resources possess any value.
Rare- This means rarity of the resources, that resources cannot be easily acquired by the
competitors of the company and are not available everywhere.
Inimitable- This is the element that resources that are available to M&S are not possible to
imitate and in case they can be imitated it is costly to imitate that resources.
Organized- This is another element of the capability which means that resources are properly
organized in order to take complete advantage of their potential (Seo, Park and Choi, 2016).
VRIO Analysis of M&S will inform whether resources are able to sustain in long term and
allows company to gain competitive advantage.
Resources Valuable Rare Inimitable Organised Competitive
Advantage
Human
resources
Yes No No Yes Partially
Financial
Resources
Yes No No Yes Partially
Supply chain Yes No No No Partially
Brand Image Yes Yes Yes Yes Sustained
Management Yes No No Yes Partially

Operational
Effectiveness
Yes No No Yes Partially
Innovation Yes Yes Yes Yes Sustained
International
Presence
Yes No No Yes Partially
Inventory
Management
Yes Yes Yes Yes Sustained
E-commerce
Operations
Yes Yes Yes Yes Sustained
Among above resources that have all the four qualities and elements in them are able to provide
sustained competitive advantage to the company and on the other hand resources that have two
or three elements are able to provide partial competitive advantage. This means that they provide
competitive advantage top ensuring their capability in long term competitive advantage they are
required to provide more attention so that they provide competitive advantage in long term
(Miethlich and Oldenburg, 2019). For example, supply chain of M&S is presently not have all
the elements in it but with extra attention and increasing quality of the supply chain it will be
able to provide sustainable competitive advantage to the company.
LO3
Porter’s Five Forces
Porter’s Five Forces is a model which is used to evaluate and analyse micro
environmental forces and competitive forces of the industry. M&S is a retail organization and
operates in retail industry. Competitive forces that affect M&S exist in retail industry. Porter’s
five forces analyses five forces that are;
Threat of new entry

This is threat which is concerned with possibilities of new firms entering into the
industry. This force requires having strong entry barriers so that firm cannot enter into the
industry. Entry barriers refer to factors and elements that create barrier for the firm while they
intend to enter into the industry. These barriers are resources required for the firm, capital and
expertise required for enter into the industry. M&S is a retailer and resources required to enter
into the industry are limited and firms can easily enter into the industry but they can only enter at
small level and having limited scope (Moreno-Izquierdo, Ramón-Rodríguez and Perles-Ribes,
2016). For M&S its position in this force is strong because it is not possible and easy for a firm
to enter into the industry of retailing at the level M&S operates. This requires high amount of
investment and resources which is not possible for a new firm to invest. This suggests that
position of M&S in this is strong but there are several variables associated with it. These are sub
industries are clothing, food industry and home products.
Threat of substitute
Substitute product is the product that has capabilities to give the value that is provided by
a given product. Organization and firms in a industry possess significant threat of their substitute
products as they can be used in place of the products being sold by them. M&S operates in retail
industry and its products are important and do not have any substitute. This means that food,
home accessories and clothing does not have any substitute but still there is choice for customer
to choose among existing brands and products. M&S operates in retail industry and there are
many substitute of its brand (Varelas and Georgopoulos, 2017). This is because retail industry
operates several firms under it. This is why this force has strong competition for this. Important
elements to consider in this force are number of substitutes and value provided by them along
with cost of switching. M&S also needs to consider substitute brands in each of the sub industry
it operates in such as clothing, food etc.
Bargaining power of buyer
Buyers are those who buy products of the company. In present business environment all
the activities of the business firms are revolving around buyers. This is the reason that their
power and position both are strong. On the other hand in terms of power of buyers in analysing
their force factors to analyse are number of buyers and number of sellers, cost of switching. In

this an ideal situation and attractiveness of the industry is based on less number of sellers, high
cost of switching and high number of buyers. In context of M&S number of buyers are high as
well as number of sellers are also high. This is the reason that position of M&S in this power is
at moderate level. This is added by another factor that is cost of switching and this is not
significant in terms of retail industry and products.
Bargaining power of suppliers
Suppliers are important stakeholders of the company because of the role they play in
operations of the company (Huang, 2019). This is also an important competitive force and ideal
situation for firm and attractiveness of the industry is when suppliers are high, cost of switching
is low, insignificant and firms are less in number. In context of M&S there are high numbers of
suppliers and this weakens power of suppliers. One of the important affecting factor in this is
resources being supplied by the suppliers and M&S is a retail organisations and this is why its
resources can be availed by other suppliers. All these suggests that power and position of M&S
in this force of the model is strong.
Industry Rivalry
This is concerned with rivalry that exists in the industry among existing firms. M&S
operates in retail industry and firms operating in the industry are high in numbers. Their
competition is also intense and firms of competing on the basis of their online presence and
customer services (Nurlansa and Jati, 2016). Some of the organizations that M&S compete with
are Tesco, John Lewis Partnership, Waitrose and Debenhams.
This discussion suggests that overall presence and position of M&S in retail industry is
strong but as its competition is strong it can take advantage of its strong position in suppliers
force in reducing its overall cost and compete on the basis of price. Though its position is
moderate in buyers it can take advantage through marketing and promotion tactics and increase
its overall customers.
M&S can also take advantage of strong position of in force of suppliers in its Innovation. This is
because they will enable M&S to possess all the required resources at fair price and also ensure
their availability.

In order to deal with threat of substitute M&S will require developing strategies and one of the
opportunities lies in its external forces that is environmental factor (Kibria, Al Amin and Rifat,
2017). M&S can take advantage of present environmental concern and this means that M&S can
take advantage in form of increased goodwill and enhanced reputation of the company by
practicing environment friendly practices and significantly highlighting them in its promotions.
LO4
Strategic Plan for M&S
Strategic plan of company discusses and outlines what strategic direction company can
follow to ensure its survival in competition as well as its sustainability. The strategic directions
are based on analysis of environment. this plan for M&S is based on the above analysis of
internal and external analysis and opportunities and threats and how strength and weaknesses can
be utilized for that.
Vision- To be the best company in the world to offer highest value at most affordable prices
Mission- Providing high quality of goods and services in both offline and online channels at
affordable pricing ensuring customer satisfaction
Objectives-
 To increase market share by 5% in current financial year
 To reduce cost of operations by 7% before completion of current financial year
 To increase online customers by 10% in current financial year
These are objectives of M&S and strategic directions that are available and suitable for the
company can be identified through the model of Porter’s Generic Strategies. On the basis of this
model strategic directions available for M&S are;
Cost leadership- This means that company has lowest cost in the industry. This gives the benefit
of lowest cost and allows selling products at comparatively less price (Islami, Mustafa and
Latkovikj, 2020). M&S can achieve this through its strength in innovation as well as its strong

position in suppliers. Innovation will contribute in developing product and less cost and suppliers
will provide resources at low and affordable cost. One of the important influence in this is
perception of customer as low cost products are usually associated with low quality of the
products.
Differentiation- This means developing products that are clearly distinct from other competitors.
Company can also employ differentiation in its services. This also requires innovation.
Differentiation creates difficulty in maintaining affordable prices of the product.
Cost Focus- This means that company adopt to cost leadership strategy but leadership in cost is
limited to either particular segment of customers or particular type of products. This requires
innovation along with competent decision making about what segment and product should be
included in cost leadership strategy. Selection of customer segment and product segment is
difficult in this strategy.
Differentiation Focus- This means that under this category particular customer segment and
product is included (Omsa, Abdullah and Jamali, 2017). Company can take advantage of
opportunities that lies in social market in form of rapidly changing consumer trends. M&S will
also be able to deal with this threat.
Along with this strategic direction for M&S also lies in form of growth of the firm. External
growth of the firm can be based on some of the strategies that are;
Merger and Acquisition- This means two or more companies merge and function together in
their respective industry. M&S will require identifying its similar company and most probably a
company which might be its one of the competitors. M&S can merge with Walmart in its
international expansion and can merge with Asda for its expansion in UK. There are several
benefits of this as firms can utilise competency and resources of each other. This also reduces
possibility of risk and its impact also gets reduced.
Acquisition on the other hand refers to acquiring ownership of the other firm. This means
that M&S will have to buy higher stake in the company’s ownership to become its owner. This
gives benefit that all the profits resources and advantages of the company that is acquired retains
with the buyer firm. Acquisition can be of two types one is known as friendly takeover and other

is hostile takeover. Though both these function similarly but friendly takeover is more
appropriate as this includes consent of Target Company.
Strategic Alliance- This is another strategy for external expansion and this is based on the
principle that companies can use resources and capabilities of each other for a particular time but
companies part of the alliances remain independent (Yang, Gao and Huang, 2018). Joint venture
is a form of strategic alliance in this two companies become partners in a new venture which is
known as joint venture. These are also known as equity alliances and other type of alliance is
known as non-equity alliances and this type of alliances are created through contracts, licensing
and franchising are some of the examples of strategic non-equity alliances.
M&S is a retail company and for it both the forms as equity and non-equity alliances are
suitable. M&S can create alliances in form of joint venture to take advantage of shared risk and
increased expertise and reach to international market. Non-equity alliances are also beneficial for
M&S because of their capacity to ensure easy expansion in international market. In doing so
brand image of the M&S can play a significant role.
Internal alliances and growth strategies are also there and these exist in form of vertical and
horizontal integration of M&S.
Horizontal Integration means M&S includes similar firm in its operations. this means that M&S
integrate with Asda or Waitrose (Atalay, Hortaçs and Syverson, 2019).
Vertical Integration on the other hand refers to integration in which companies buy either their
dealer company, this is known as forward integration. Backward integration on the other hand
refers to buying the firm which is included in providing services that are required for carrying
out production or core business activities, M&S buying its suppliers firm is an example of
backward integration (Pellinen, Teittinen and Järvenpää, 2016).
These are some of the strategic directions are available that M&S can take in order to
achieve its objectives.

CONCLUSION
On the basis of above discussion it can be concluded that strategies play important role in
achieving objectives and goals of the company. Strategies are more effective and successful
when they are based on extensive analysis of environment in which business operate. This is
important because environment analysis allows company to understand the factors that are
affecting and can affect its functions and its success. Analysis also allows to know and
understand the factors that are useful for the company means opportunities that are available for
the company to utilize to ensure its sustained growth. Threats are also there in environment and
timely identification and analysis of this will allow developing strategies and measures to deal
with threats and what can be done to reduce impact of the threats on the operations of the
company.

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