Business Strategy

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Assessment of macro environment........................................................................................1
TASK 2............................................................................................................................................3
P2 Analysis of micro environment and capabilities of organisation...........................................3
TASK 3............................................................................................................................................5
P3 Evaluation of competitive forces...........................................................................................5
TASK 4............................................................................................................................................6
P4 Formulation of strategic planning..........................................................................................6
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Business strategy is basically a plan of action which combine all the decisions to
implemented for the purpose of achievement of pre-determined set of objectives. In this
assignment business strategy has been formulated for Marks and Spencer. Marks and Spencer is
a British multinational companies deals in fashion accessories and food. It was founded by
Michael Marks and Thomas Spencer in the late 18th century. The report include the analysis of
macro environment of the country which can affect the growth of the company. Secondly the
report covers the assessment of micro environment and capabilities of the firm. Later the report
comprise the evaluation of competitive by application of Porter's five forces model. Finally the
report apply theory to interpret and devise strategic planning for a given company (Akter, and et.
al., 2016).
TASK 1
P1 Assessment of macro environment
PESTLE Analysis
Every business probability of success is contingent on the factors such as government
policies, economic prosperity, rules and regulations of the country and so on. It is essential to go
through country's political, economical, social, technological, legal and environmental landscape
of the country. PESTLE Analysis is a tool used to analysis the factors of macro environment
which can influence the growth and functioning of the company. PESTLE is an acronym for
political, economical, social, technological, legal and environmental. PESTLE Analysis of UK in
context with Marks and Spencer are given below:-
Political factors: These factors are basically concerned with how government decisions
and actions impact the development and operations of the company. Political factors comprises
of government policies, taxation system, foreign trade policy, stability and corruption. UK
follows Westminster system of governance. Political stability is a key advantage for business
enterprises. However Brexit has created obstacles for the businesses in the country. Sooner
country will recover political stability and business operations will be streamlined. The country
has friendly relations with many developed and powerful countries of the world included USA.
Overall Marks and Spencer have a huge growth potential in the country as government does not
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intervene in the trading activity of the country. Political factors are favourable for the
organisation.
Economical factors: It comprises of cou.ntry's money related affairs and indicators such
as inflation rate, corporate tax, exchange rate, interest rate and so on. UK is a financially strong
country. Per capita income of the citizens is increasing rapidly. It is one of the fastest growing
economies of the world. The nation is enjoying economic prosperity. Recruiters are obliged to
compensate employees with minimum living wage prescribed by the government. Poverty in the
country is somewhat negligible. People are fond of purchasing luxury items. Country has a
perfect inflation rate therefore value of money decreases slowly over time. Moderate inflation
rate encourage many people to start their business. It also in accomplishing financial goals
quickly. Government reduced corporate rate which enable entrepreneur to conduct business
operations smoothly. UK is to be considered as famous platform for foreign direct investment.
No economical factor is hindrance for the growth of the company (Higgins, Omer, and Phillips,
2015).
Social factors: It consist of culture, value, belief and lifestyle of the country. UK has a
large customer marketplace. UK has multicultural population instead of social class. Due to
advancement in medical treatment the death rate of the country is reduced to large extent. Birth
rate is far more than death due which population of the country are increasing rapidly. Average
age of the population is increasing. There is a increase in population of old age people. Many
service sector such as real estate, holiday, insurance and health care took advantage of rise in age
of population. This can be seen as threat for business as majority of company relies upon youth
for their revenue. There is still wide scope for the firm to flourish (Woerner, and Wixom, 2015).
Technological factors: These are the factors which take into considerations the technical
aspect of the country. UK is a hub of highly intellectual and innovative minds. Technological
development is praiseworthy for the growth of the country. Information Technology
infrastructure of the country is highly advance. Many IT specialist contribute to the growth of the
business enterprises. There is cut throat competition among IT expert due to which company
easily get cheap and smart technical staff. Company can take advantage of advancement
technological infrastructure of the country. London is a technological hub continuously work on
advancement in technology. Businesses are continuously improving their technology in order to
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increase customer satisfaction. Enterprises are using end technologies to complete their projects
more fast and accurate.
Legal factors: These factor define the legal framework of the country. Law and order of
UK protect citizens from crime in the country. Government had been imposed many legislation
in order to safeguard the health and safety of the employees. Company have to comply with the
labour law define by the government. Legislation like working time regulations restrict firms to
increase working hours of the labours. Organisation need to adheres with all the employee's
legislation. Company cannot expand business on the cost of employee's health (Leonidou, and
et. al., 2017).
Environmental factors: It comprises of climate, flora and fauna, natural resources and so
on. UK's climate is very good. Country's climate is the main cause of its development.
Government are inclining towards sustainable growth. Government enforce certain rules and
regulations in respect with the environment. Company has to follow environmental law. Firm
have to use clean and ecology friendly process of production. It may increase cost of the product
but as the country is rich price rise would not affect much the growth of the organisation
(Martinez-Simarro, Devece, and Llopis-Albert, 2015).
TASK 2
P2 Analysis of micro environment and capabilities of organisation
SWOT Analysis
As every facet has some merits and demerits likewise every company have some strength
and weaknesses. Successful companies owns more strength than failure one. Moreover quality of
strength matter more than quantity of strength. Identification of strengths and weaknesses is
crucial for the company therefore do SWOT Analysis. SWOT Analysis used to analyse the
competitive placement of the firm. SWOT is an abbreviation for strength, weaknesses,
opportunities and threats. Strength and weaknesses are part of internal environment while
opportunities and threats are part of external environment. SWOT Analysis of Marks and
Spencer are given below:-
Strength: It refers to the capabilities of the company that aid in standing apart from the
competition. Marks and Spencer is a highly popular brand. Brand equity of the firm is very high
therefore are willing to pay more for the product. Customer percept Marks and Spencer as good
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quality and reliable brand. Another strength of the organisation is that it offers wide range of
goods. Customer can choose from broad variety according to their taste and needs. Marks and
Spencer distribution network is very vast. It has large number of sales units which provides easy
accessibility to consumer of every of the country. This ultimately results in large quantity of
sales. Marks and Spencer is expert in making profit in the new marketplace. It enjoys huge
success in international market. Marks and Spencer take out advantage from emerging
economies. Marks and Spencer has expertise in successful implementation of new product
development. It is able to seek out high profit on spending on capital.
Weaknesses: It means all the quality and resources that company lacks. It is the area
where company to do improvement. Weakness of Marks and Spencer is its positioning as a non-
trendy store which cater to the needs of adult men and women. People assume that firm's
products are not being made for teenager and young adult. Wrong word of mouth publicity of the
organisation deteriorates its image. People presume that Mark and Spencer's product are old
fashioned which does not suits to the taste and preferences of youth. Company is required to
change the positioning of the brand by running effective ad campaign. Another weakness of the
company is that production being done using old technology that eventually increases the cost
and time. Company is required to adopt automation instead of manual working and new
technology that can reduce cost and time and increases accuracy (Soltanizadeh, and et. al., 2016).
Opportunities: It is the external and uncontrollable favourable factors of which
companies can take advantage. Government green drive initiative render opportunity to the
Marks and Spencer to sell their goods and services through the state and central government
contractors. Technological advancement enable company to do one to one marketing which will
reduce cost and increase coverage. It also give the facility of analysing the campaign
performance through various analytics software. As cost of shipping commodities is decreasing
therefore company have great opportunity to capture larger market share by reducing price.
Government has been encouraging the opening of new marketplaces by adopting novel
technology standard and liberalising trade agreement. Moderate inflation rate will lower down
the interest on loans so that company can expand its business easily. Internet penetration brings
plenty of opportunities in the fashion accessories market. Firm can do dynamic and interactive
marketing through social media, websites, mobile applications and search engines (Amran, and
et. al., 2016).
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Threats: It is the external uncontrollable factor that companies does not enjoy.
Counterfeiting of Marks and Spencer original products especially in developing and
economically weak consumer market is a serious concern for the company. Raw materials are
becoming more expensive this will adversely affect the firm's profitability. Increment in the
power of distributors is also act as a threat for the company. Rival firms are compensating high
margins to localised distributors. Increasing preferences towards domestic product in USA will
have negative impact on the profitability of Global sales. Rising living wage to the labours can
adversely affect the profitability of the organisation.
TASK 3
P3 Evaluation of competitive forces
Porter Five Forces Model
This model is used to determine the level of probability of a specific industry. It is
competitive forces model build by Michael Porter. This model consist five components that
define the profit potential of the company with respect to the sector. The five components of this
model are threats from competitors, threat from new entrants, bargaining power of suppliers,
bargaining power of customers and threat from close substitutes. Porter five forces of retail
sector are given below:-
Threat from competitors: There is a cut throat competition in retail sector which can
force company to reduce prices in order to retain market share. Reduction in prices will reduce
profit margin of the firm to a large extent. Intense competition can spoil the overall profitability
of the organisation in the long run. To defend profitability from the competition company is
required adopt to create differentiated and unique product so that customer will be willing to pay
higher prices which ultimately consequent in increment of profitability of the company.
Company also tie up with the rival firms as this practice will enlarge the market size of the
industry. Economies of scale will also aid in maintaining profitability even in low price
(Holotiuk, and Beimborn, 2017).
Threat from new entrants: New entrants in retail sector never arrives with old fashioned
and common idea rather it disrupt the market with new idea and innovation. New entrants can
force Marks and Spencer to reduce the prices of the fashion accessories. Company have to be
take effort to overcome the challenges incurred by the new entrants very cautiously. Firm can
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counter the threat arise from the new entrants by create bringing innovation in their new
products. Moreover investing in extensive research and development will also helps in
combating with start-ups.
Bargaining power of suppliers: Marks and Spencer is a renowned brand supplier
competes for the placement of their products in the shelf of the company's retail outlet therefore
bargaining power of suppliers is very low. Firm does not relies heavily on suppliers as company
sell huge number private labels in retail outlets. Company usually purchase raw materials instead
of final product therefore company enjoys high profit margins. If number of suppliers is less than
there will high bargaining power of them. It will put pressure on the organisation to pay high
prices for the raw material (Eaton, and Kilby, 2015).
Bargaining power of customers: Customers expects a lot from the companies. They
want highest quality product in reasonable price. This attitude of customers adversely affect the
profitability of Marks and Spencer in the long run. The profitability of the company is inversely
proportional to bargaining power of customers. Short consumer market forces the organisation to
offer best discounts and schemes. Company can overcome this challenge by creating large
consumer base. This will not only decrease the bargaining power of consumers but also make
sales and manufacturing process smooth. Another tactic to reduce bargaining power is to
continuously bring innovating goods and services. Customer negotiate in the case of standard
product. If the product would be innovative and unique than customer bargaining power will be
reduced.
Threat from substitute goods and services: Company profitability suffer when another
product satisfy the same need in less price. Profitability of the firm also decline when another
goods fulfil the similar need with more efficient manner. However threat arises out of rival
fashion accessories companies. The major competitors of Marks and Spencer are Tesco, Asda,
Aldi UK, Waitrose and partners, John Lewis partnership,Debenhams. Among all Tesco and Alda
posed as a serious threat for the company. Close substitute of food and clothes does not exist
therefore threat from substitute product is negligible (Yuliansyah, Gurd, and Mohamed, 2017).
TASK 4
P4 Formulation of strategic planning
Bowman's strategic clock
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Every brand drive its value from its price and quality. Some brands are of low quality
with lowest price. Whereas some brands are of high quality with premium price. Apart from that
some brands are of good quality with reasonable price. The value and strategic placement of a
brand reflected by its price and quality is define Bowman's strategic clock. It is a framework
which determine the strategic positions of brand on the basis of its price and perceived value.
The detailed description of all the strategic positioning of Bowman strategic clock is given
below:-
Low price and low perceived value(Position 1): In this position, the price of the product
is extremely low and customer perception towards the product is of low quality and expensive in
the long run. These products are usually not differentiated and seems to be not worthy despite of
very less price. This strategy is not at all competitive and the only way to increase sales is to
decrease product price as low as possible. Usually companies are reluctant to positioned their
brand as low price and low added value (Yuliansyah, Rammal, and Rose, 2016).
Low Price(Position 2): In this strategy, company positioned its business as low cost
leader. Company usually search ways to cut down cost of product as low as possible in order to
attract more customers. Proper implementation of this strategy leads in increase in sales as well
as market share. It affect the profitability of the company because firm have to sacrifice profit
margin but economies of scale can still help in increase in overall profit. This strategy can spoil
the quality of product. Marks and Spencer can use this strategy by adopting automation for the
repetitive work. Adoption of low cost leadership should not compromise with quality of the
goods and services.
Hybrid(Position 3): As the name suggests, this strategy combines components of low
cost and features of product differentiation. It is a very competitive strategy. Hybrid positioning
often succeed in attracting customers because of its good quality with reasonable price. The
strategy is effective in convincing customer as product is delivering good added value through
aggregation of low price and distinct features. The implementation of this strategy needs
innovative and cost effective technology. These strategy aid in making customer loyal towards
the product.
Differentiation(Position 4): In this strategy, companies offer unique and advance
features in product that no other companies are delivering.The aim of this strategy is to increase
perceived added value by delivering distinct and unique features to customers. Promotion and
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advertisement to increment brand equity are as important as improving quality of the commodity.
This is a competitive approach to gain customer loyalty towards the brand. Differentiation can be
achieved through advance and innovative technology. This also require spending in extensive
research and development.
Focus Differentiation(Position 5): The strategy is used to increase customer's willing to
pay for a specific product by increasing perceived added value to the highest level. Focus
differentiation is often utilize by luxury brand. Customer buys luxury product for style statement
instead of fulfilling needs. If the strategic plan of focus differentiation is executed successfully
than the profitability of the company will increase to the maximum level. Successful
implementation of this strategy requires utilization of highly advance technology along with
effective branding. Advertisement and promotional activities plays a crucial role in successful
execution of this strategy. Customer pay premium prices only when goods possess distinct and
unique features of highest value (Burlton, 2015).
Risky high margins(Position 6): This is a risk prone strategic positioning which might
give profit in short but cause product failure in long run. In this strategy, the company charges
high prices from the customers in the lure high profit margins without giving extra worth in the
commodity. Firm continue to enjoy high profit margin until other product satisfy the same need
in less price. It is not a competing strategy because selling goods at high price in this competitive
era is a very difficult job. It will affect the affect the profitability of the company adversely as the
customer will not purchase overpriced goods and services without justification of worthiness.
Company has be to answerable towards the increment in price of product.
Monopoly Pricing(Position 7): When there is only one seller of a specific and useful
goods or service in the market and many customers willing to purchase then this situation of
seller is known as monopoly. In monopoly, customers has no alternatives for the specific
product. They just have to pay fixed price that company is demanding. Theoretically, monopoly
owns an exceptional competitive advantage in which price of the product can by be anything
imagined by the monopoly firm. There is no need to be cautious towards the quality of the
product. But in reality, government of many countries strictly regulate the pricing policies of
monopoly. In fact, monopoly are usually government organisations working for the welfare the
society (Anwar, and Hasnu, , 2016).
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Loss of market share(Position 8): This is a extremely non-competing strategy. Charging
high or basic price for low quality product will repel customer have many cheap alternative in
this competitive era. This approach cause high loss of market share in the industry.
From the above mentioned approaches, differentiation will the most appropriate strategy
for Marks and Spencer. This strategy is best because there is intense competition in the market as
company cannot sacrifice profit margin to large extent therefore firm has to create innovate
products with high added value. This strategy will increase sales of Marks and Spencer without
compromising with the profitability. The new differentiated and unique product that company
launch will be three dimensional printed fashion accessories (Johnson, 2016).
Strategic Management Plan
Aim
Aim of the Marks and Spencer is deliver good quality and easily availability to customers
with their wide range of products.
Objectives
To increase sales of fashion accessories by 20% in the tenure of one year.
To enlarge market share by 10% within three years.
To boost the probability of the company within two years by 15%.
Strategy
According to the study of Bowman's strategic clock differentiation seems to be useful for
the company. Company will use product differentiation strategy. The differentiation that
company will create will be three dimension printed fashion accessories.
STP
STP is a process that enables a firm to define target market and set communication
message to be delivered to customers. STP is an acronym of segmentation, targeting and
positioning. STP model of Marks and Spencer new product is given below:-
Segmentation: Marks and Spencer segment its market on the basis of demography and
psychography. Marks and Spencer will consider income and lifestyle of population as the major
factor for targeting.
Target: Company will target individuals with high income and keen interest in trying
new modern fashion accessories.
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Positioning: Firm will drive its image as the premium fashion product with standard
quality that last long (Thompson, Strickland, and Gamble, 2015).
Financial information
 Budget- A budget is formed to illustrate all the disbursement and sum of cost which is
being involved in implementation of new strategic management plan. Marks and Spencer
has developed a budget in which they have identified various areas where company is
required to invest capital. This budget aids to be aware of the limits of expenditure for
various departments and invest money in right proportion. (Mokhber and et. al., 2017).
Particular 31/12/19 31/12/20 31/12/21
Employing technology price 12000 - 5000
Marketing expense 10000 12500 6500
Advertisement disbursement 7000 8500 7000
Catalogues 1600 4500 2500
Training cost 10000 9000 9500
Total Cost 49500 34500 30500
Cash flow statement
Particulars 1st year 2nd year 3re year
Initial investments 9900 15560 20000
Borrowings 11500 8200 10500
Preserved earnings 6500 10500 12000
TOTAL 27900 34260 42500
MARKET OUTLAY
Promotional expense 12800 9000 15500
Distribution
expenditure
5000 6400 10500
Publicity 6500 15500 12500
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TOTAL 24300 30900 38500
CONCLUSION
From the above report it has been concluded that political, economical, social,
technological, legal and environmental factors of UK are favourable for the company. The report
also reason out that company's strength is outnumbering weaknesses however need to change its
positioning and technology being used. Company should take advantage of internet penetration
and there is a need to create differentiated products to beat competitors. The report also conclude
that there is no threat from substitute products as there is no close substitute of food and fashion
accessories. However intense competition and high bargaining power of customers are acting as
a threat for the company. Finally the report conclude that product differentiation strategic
position of the Bowman's strategic clock is best suitable for the company. Firm is required to use
advance technology to create differentiation and uniqueness in the goods and services.
Organisation is suggested create fashion accessories using 3D printing technology. Company
needs to launch unique 3D printed fashion accessories.
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