Marks & Spencer's Business Strategy: Macro Environment, Internal Capabilities, and Competitive Challenges

This report analyzes the impact of the macro environment on Marks & Spencer's business strategy, focusing on the PESTLE analysis of the UK market. It further assesses the organization's internal environment and capabilities through a SWOT analysis, highlighting strengths, weaknesses, opportunities, and threats. The report concludes by discussing the challenges posed by the competitive landscape and the need for strategic adjustments to address these issues.

Business Strategy

Table of Contents
Introduction......................................................................................................................................3
Analyse the impact and influence which the macro environment has on an organisation and its
business strategies............................................................................................................................4
Assess an organisation’s internal environment and capabilities......................................................8
Conclusion.....................................................................................................................................11
References......................................................................................................................................12
2 | P a g e

Introduction
In this highly competitive business environment, every organisation constantly struggles to stable
their market position at all level. With the intense growth of competition, organisations are
facing several consequences from external as well as internal business context. In this landscape,
business strategies are important for achieving the business objectives but it can be conducted
through addressing competitive position along with business growth. Therefore, strong financial
performance is also related with such strategic outline. However, political, legal and economic
factors often create issue on business process. These factors are also major issue for the Marks &
Spencer to foster standard business performances. The current report enlightens the impact and
influence of macro environment, microenvironment and competitive stability of Marks &
Spencer’s.
3 | P a g e

Analyse the impact and influence which the macro environment has on an organisation and
its business strategies.
Impact and influence of the marketing can be understood through analysing the external
environmental components of UK. It can be processed through PESTLE analysis of UK market,
where Marks and Spencer currently operating their business.
External Marketing Environment or Micro Environment
Political  Risk from inflation
 Impact of Brexit
 Rise in price
 Huge tax amount
Economic  15.2% of total employment growth
 1.8% annual growth has been
visualised in GDP rate
Social  Changed lifestyle
 Change in income level
Legal  Companies Act 2006
 Employment Act 2002
Technological  online retailing services
 supply chain management activity
Environmental  ISO standard
 use of carbon footprint
Table 1: Pestle analysis
(Source: parliament.uk, 2018)
Political
In the current period, M&S has favoured through positive EC’s free trade agreement. In addition,
it is also supportive to maintain decreased sourcing cost, which supports them to operate
sustainable inventory management, production as well as supply. In the current period retail
sector,involve spending through online and other platform. As per the report of 2017, UK
4 | P a g e

consumers spent around £406 billion in retail purchase. However, retail organisations such as
Marks and Spencers are facing several consequences due to several issues in growth as well as
evolution of supermarkets. In case of online retailing, the organisation also faced various issues.
In 2016, Brexit has created negative impact on all industrial growth, where retail business has
been affected at all level. The vote for leaving the European Union has effect on inflation, where
contextual impact has been visualised in pricing. The current market is not monopolistic.
Therefore, M&S have high rival threats, where consumer confidence remained high.
Government has taken various policies on the growth plan (Cubas‐Díaz and MartínezSedano,
2018). However, after Brexit, business rates for various companies were reduced while they take
initiative on retaining growth (parliament.uk, 2018). In case of cross boundary business,
organisation has also faced issue on trading functions. Due to increased rate of taxes from
economic and environmental pattern, M&S is in now some trouble to maintain market stability.
They are still improving to resolve such operational consequences.
Economic
As per the report of 2017, whole retail sector has contributed £194 billion to UK’s economic
output. This leads to 11% of totals. This report is measured by the Gross value added, where
increase of £190 billion was in 2016. From the period of 2007, retail sector grew faster, where
Marks &Spencers has gained positive marketing effort. However, organisations are facing the
downturn, which began in late 2007. As a result, retail sector declined and created adverse
impact on whole economy. A 1.8percent annual growth has been visualised in GDP rate, which
foster stand performance but this scenario is not positive for all business process. In case of
employment, retail sector employed a total 4.6 million people in Great Britain in 2016. 15.2% of
total employment growth (parliament.uk, 2018). Therefore, M&S gained positive market
environment within this positive economic sector. However, Brexit has created adverse impact
on market growth. As commented by Akteret al., (2016), absence of inflation is supportive to
maintain long-term growth but current transformed rate of inflation has created negative impact
to maintain committed sales revenue.
Social
In the current period, business process is entirely dependent on the consumer perception as well
as trend. Consumer consumption matters are dependent on this changed nature of product choice.
5 | P a g e

Changed lifestyle has gradually transformed their purchasing decision. In this case, both political
and economic factors are also included, where consumer taste not only changed due to taste but
also changed due to change in income level. Due to high inflation rate, customers cannot afford
their kind of brands while price range is high. On the other hand, M&S also cannot modify their
pricing strategy as per consumer need due to increased operation expenditure after Brexit. In
addition, due to high competitive market, every organisation is giving primitive priority on target
position as a task of market segmentation. However, M&S cannot modify such changed due to
lower level Attention on sociological factors, which is solo dependent on consumer need. Due to
increase pricing rate, consumption rate of retail sector has been reduced and creating downfall
status of the M&S business situation (parliament.uk, 2018). It has been reported that, M&S has
already faced business issue due to low-level attention on consumer need in China market.
Therefore, certain gap in business strategy of M&S is emerging from social standpoint.
Legal
Legal terms of business are related with the employment, consumer relation as well as trading.
As per the regulatory outline of Companies Act 2006, Marks & Spencer’s have to maintain
business ethics on partnership, sole trading and other business policies. It is also important to
make sustainable relation with the business shareholders. As per the Employment Act 2002,
organisations have to maintain the rights of employees. As per the Employment Rights Act 1996,
employees are eligible for getting leave in regards to childcare. An occupational pension, need to
be provided as per the regulations the Pensions Act 2008 (Companies Act, 2006). In addition,
Marks and Spencer have to maintain the labour standards in minimum, where a standard wage
needs to be provided. On the other hand, fair workplace need to be maintained. In this case,
discrimination is not to be applied. Therefore, M&S has to maintain equity and equality at all
level. In business contract, promotion, organisation also has to abide by proper legislations.
Technological
Proper priority on technology is required strengthen the compliance, risks as well as strength. In
online, business often retail organisations like M&S facing issue to maintain huge traffic. In this
case, consumers are also having low level of trust by means of transaction. In this case,
technological innovation is required to maintain standard online retailing services. In addition,
more effort is required in inventory tracking and supply chain management activity.
6 | P a g e

Technological innovation is required here to lower the overall expenditure in production as well
as deliverance. M&S has QR billing service and online business process, which is effective to
maintain consumer time on purchasing. However, more initiative on this dimension is required to
foster standard operational performances (Leonidouet al., 2017). On the other hand, competitive
factors are the significant field, where M&S is facing struggle. Tesco and Sainsbury also trying
to create modification on business process for fostering improvement on technological
performances.
Environmental
In the current period, environmental factors are creating impact on overall business a standard.
Due to increased greenhouse gas issue, government has strengthened the organisational policies
on production as well as supply. In case of transport, M&S have to pay huge amount of charges
on each supply. In this case, organisation rapidly tries to increase the amount of supply in each
journey. In this context, organisation also has to maintain proper ISO standard to provide Eco-
friendly goods as well as services. M&S is constantly trying to reduce the use of carbon footprint
for maintain the governmental code on environmental standards (Klettneret al., 2014).
Analysis of Macro Environment
Therefore, the above discussion reflects the external business barrier and its impact on the M&S
business strategy. Currently economic consequences are the primary factor, where organization
is facing adverse impact to maintain overall service standard as well as quality. On the other
hand, they also have to focus on the consumer need. However, M&S attention not focused on the
internal business process due to long-term commitment on business expansion rather than the
sustainability. In this landscape, organization fails to secure their market revenue ion other
countries like China. Therefore, in UK they have to take sincere vision on external business
environment.
7 | P a g e

Assess an organisation’s internal environment and capabilities.
Internal environmental analysis is very important for effective management of the business
activities. Analysing the internal environment of the business, management can understand
whether the strategies of the business are effective or they need to improve the business
strategies(McDonald, 2016). Considering the particular case of Marks and Spencer, it can be
stated that as the company is operating in a highly competitive market, it is very important to
analyse the internal scenario in every financial year(Santos & Laczniak, 2015). The internal
environment analysis can be better performed with the help of SWOT analysis tool. Here, the
SWOT analysis of Marks and Spencer is shown in the following table:
Strengths
 The brand value of the company is
very high
 The company has strong market
position and large market share of
29.1%.
 The quality of products of the
company is high and its products are
known as “value for money”.
 The company has wide market
coverage with wide customer base.
 The company has more than 1000
stores in 40 countries.
 The company has large employee
base of 80000.
Weaknesses
 The major weakness of Marks and
Spencer is the high cost structure of
the company. The annual report of the
company shows that the cost level of
the business is continuously growing
in every financial year.
 Another weakness of the company is
the high wastage level. The level of
resource misuse is high in this
company.
 Sometimes, employee-management
conflicts create barriers in the internal
business processes of the firm.
Opportunities
 Marks and Spencer has wide business
scope in the developing countries
like, India, China and Bangladesh. It
is because the demand for Marks and
Spencer’s product is very high in
Threats
The major threat to the business of Marks and
Spencer is the high market competition. There are
large organizations like, Tesco and Sainsbury,
which are major competitors of Marks and
Spencer.
After the vote for Brexit, the UK government has
8 | P a g e

these countries.
 The technological infrastructure is
highly advanced in the countries
where the company already has
established its business. This has
created large business opportunities
for the company.
 Marks and Spencer has business
opportunities in the new market
segments that the management has
identified in the recent past.
 Marks and Spencer has high online
business opportunities because the
online purchasing rate is increasing
every day.
increased the rules and regulations for retail
organizations, which are creating problems for
the company.
(Source: Marksandspencer.com, 2018)
Considering the above SWOT analysis, it can be stated that Marks and Spencer has a strong
position in the market. The company has several strong points that the managers can utilize for
developing better business strategies and grabbing new business opportunities in the
international market. Considering the strengths of the business, the internal capabilities of the
company can be understood. The company has wide employee base, which has made the
business process easier for the managers. The company is able to expand the business at a large
scale. On the other hand, the SWOT analysis is also indicating that the company has large
customer base, which indicates that the revenue level of the company is high. It means the
financial position of the company is stronger. In the other words, it can be stated that the
financial capabilities of the business is high.
However, in this context, it is important to note that the company has several weaknesses, which
have made the capabilities of the company limited. For example, the SWOT analysis has
indicated that the cost structure of the company is very high. It is indicating that the financial
9 | P a g e

capacity or earning capacity of the company has hampered due to this particular internal
weakness of the business. At the same time, it is also noticeable that the waste level of the
business is high, which means the control strategy of the company needs to be improved. This
has limited the resource utilization capability of the firm. In this context, it is also needed to be
mentioned that the resource utilization capacity of the company has also been hampered due to
the internal conflict between employees and management of the company.
Though there are several internal weaknesses of the firm, there are several opportunities in the
market that the managers of Marks and Spencer may use for improving the weaknesses of the
business. For example, in the SWOT analysis, it has been indicated that the company has high
business opportunities in the developing countries like, India, China and Bangladesh. Therefore,
the company can easily enhance its financial capabilities by expanding business in these
countries. As the company already has strong brand image in the existing market, it will not be
much difficult to expand business in the new markets. Moreover, the company can use the
advanced technological infrastructure in the countries for improving its market position.
Hence, the management of Marks and Spencer needs to consider the existing competition level
that the company is facing. Due to the high competitive environment, the company is facing
trouble in enhancing market share further. Therefore, management of the company needs to
develop more effective and unique strategies for grabbing the market in a better way.
10 | P a g e

Conclusion
This report establishes that the economic impact due to Brexit in external macro environment has
been a major challenge for M&S to increase their sales revenue in the year of 2017. However,
the organisation have capitalised on the Technological advancement in the business process
delivery and adopted the legal considerations in their service delivery. According to the SWOT
analysis it is clear that the Cost structure of M&S is highly ineffective, which has resulted in
increasing the threat to the business. However, through development of management process and
pricing strategy, M&S will be able to overcome the challenge.
11 | P a g e

References
Akter, S., Wamba, S.F., Gunasekaran, A., Dubey, R. and Childe, S.J., 2016. How to improve
firm performance using big data analytics capability and business strategy
alignment?. International Journal of Production Economics, 182, pp.113-131.
Companies Act (2006). Companies Act 2006. Available
at:http://www.legislation.gov.uk/ukpga/2006/46/pdfs/ukpga_20060046_en.pdf [Accessed on
6/05/2018]
Cubas‐Díaz, M. and MartínezSedano, M.Á., 2018. Measures for sustainable investment
decisions and business strategy–A triple bottom line approach. Business Strategy and the
Environment, 27(1), pp.16-38.
Klettner, A., Clarke, T. and Boersma, M., 2014. The governance of corporate sustainability:
Empirical insights into the development, leadership and implementation of responsible business
strategy. Journal of Business Ethics, 122(1), pp.145-165.
Leonidou, L.C., Christodoulides, P., Kyrgidou, L.P. and Palihawadana, D., 2017. Internal drivers
and performance consequences of small firm green business strategy: The moderating role of
external forces. Journal of business ethics, 140(3), pp.585-606.
McDonald, M., 2016. Strategic marketing planning: theory and practice. In: The marketing book.
London: Routledge, pp. 108-142.
Marksandspencer.com. 2018. Welcome to Marks & Spencer. [online] Available at:
http://www.marksandspencer.com/ [Accessed 7 Jun. 2018].
Martinez-Simarro, D., Devece, C. and Llopis-Albert, C., 2015. How information systems
strategy moderates the relationship between business strategy and performance. Journal of
Business Research, 68(7), pp.1592-1594.
Nocco, A., Ottaviano, G. & Salto, M., 2014. Monopolistic competition and optimum product
selection. American Economic Review, 104(5), pp. 304-309.
Parenti, M., Ushchev, P. & Thisse, J., 2017. Toward a theory of monopolistic competition.
Journal of Economic Theory, Volume 167, pp. 86-115.
12 | P a g e

parliament.uk (2018). The retail industry: statistics and policy. Available
at:https://researchbriefings.parliament.uk/ResearchBriefing/Summary/SN06186 [Accessed on
6/05/2018]
Santos, N. & Laczniak, G., 2015. Marketing to the poor: A SWOT analysis of the Market
Construction Model for engaging impoverished market segments. Social Business, 5(2), pp. 45-
57.
Schleper, M.C., Blome, C. and Wuttke, D.A., 2017. The dark side of buyer power: Supplier
exploitation and the role of ethical climates. Journal of business ethics, 140(1), pp.97-114.
Wilmers, N., 2018. Wage Stagnation and Buyer Power: How Buyer-Supplier Relations Affect
US Workers’ Wages, 1978 to 2014. American Sociological Review, 83(2), pp.213-242.
13 | P a g e