Principles of Practice Marketing for Next plc: Applying SOSTAC Model and Porter's Five Forces Analysis

This report discusses the marketing practices of Next plc, a UK-based fashion retailer. It applies the SOSTAC model and Porter's five forces analysis to evaluate the company's current situation and competitiveness in the market. The report also evaluates the effectiveness of Next plc's current SOSTAC strategy and suggests implementing it in an international market. The report concludes that the external environment of the UK is suitable for Next plc and the company can easily expand its business in the potential retail market. Subject: Marketing, Course Code: N/A, Course Name: N/A, College/University: N/A

Principles of Practice Marketing

Table of Contents
1.0 INTRODUCTION.....................................................................................................................1
2.0 OVERVIEW OF THE COMPANY..........................................................................................1
3.0 APPLYING SOSTAC MODEL................................................................................................2
3.1 PESTLE analysis...................................................................................................................3
3.2 Industry analysis- Porter’s five forces model........................................................................5
4.0 EVALUATING THE EFFECTIVENESS OF NEXT PLC’S CURRENT SOSTAC
STRATEGY....................................................................................................................................8
5.0 IMPLEMENTING CURRENT MARKETING STRATEGY USED BY NEXT PLC IN AN
INTERNATIONAL MARKET.......................................................................................................9
6.0 CONCLUSION........................................................................................................................10
REFERENCES..............................................................................................................................11
List of figures
Figure 1: Procedure of SOSTAC model..........................................................................................3
Figure 2: Porter's five forces model.................................................................................................5

1.0 INTRODUCTION
Marketing is a procedure for making existing and potential consumers to be interested in
the goods and services (Oyedijo, Idris and Aliu, 2012; Zwick and Cayla, 2011). Marketing
practices include the advertising, promotion, distribution of goods and services for sale etc. With
the help of marketing practices, it becomes convenient for the seller to deliver the products with
higher satisfaction to the consumers. In this context, the current report is based on marketing
practices of UK based company of fashion retailer Next plc which deals in clothing and other
accessories as electricity, home products, technology etc. Moreover, a SOSTAC model has been
used to know about the marketing practices of Next plc by including PESTLE analysis. Further,
industry analysis has been done in consideration of Next plc through Porter’s five forces model
to analyze the competitive situation in local and international retail market. Apart from this, the
effectiveness of current SOSTAC strategy has been identified in the context of Next plc and a
comparison is done for the achievement of potential growth. At the end, it has also been analyzed
that the current marketing strategy of Next plc can be implemented at the international level due
to suitability for the company as well as customers expectations.
2.0 OVERVIEW OF THE COMPANY
Next plc is a multinational clothing company which deals in fashionable products for
men, women and children. The company is operating the business since 1982 and has a wide
variety of clothing products along with shoes, home products and other accessories for the all age
group of people. By considering the fashion aspects, Next plc is offering the most stylish and
quality products to grab the entire international retail market (Next plc, 2018). From the year
2014, the company is gradually expanding the outlets all over the world. Moreover, Next plc has
more than 500 stores in home country UK as well as Eire. Furthermore, also associated with 200
stores in around 40 foreign countries. Apart from this, the company is also operating the online
business at a global level to meet the demand of customers at least 70 countries in and outside
the UK (Next plc, 2018).
Next plc has strong corporate connections with 702 family corporations and has 28
subsidiaries along with 673 branches all over the world of the retail sector. Further, the company
has a strong base of skilled employees approximate 58,706 who are capable to produce quality
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products. Besides these, Marks & Spencer Group, Debenhams, Arcadia group ltd. etc. are the top
competitors of Next plc in the UK and global market (Dun & Bradstreet, 2018).
3.0 APPLYING SOSTAC MODEL
The SOSTAC is a marketing model which was founded by PR Smith in 1990 and the
model refers to main six elements such as situation analysis, objectives, strategy, tactics, actions
and control (Smith and Zook, 2011). According to the SOSTAC model, the macro environment
and situational analysis has been done with respect to Next plc as follows-
 Situational analysis- On the basis of the situational analysis, the current situation of the
company has been identified that what is the market position, about competitors,
strengths and weaknesses of the company etc. Moreover, the managers of the company
apply the situational analysis to measure the internal and external environment with
respect to organization's customers, capabilities as well as the business environment
(Morse et al., 2016). Situational analysis can be done through industry analysis-Porter’s
five forces model, SWOT (Strengths, Weaknesses, Opportunities and Threats) and
PESTLE (Political, Economic, Social, Technological, Legal and environmental). Hence,
on the basis of these analyses, the current situation of Next plc can be easily analyzed that
where it is lying in a competitive market.
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Figure 1: Procedure of SOSTAC model
(Source: Smith and Zook, 2011)
3.1 PESTLE analysis
PESTLE analysis is used by organizations to recognize the macro environmental factors
which have a direct impact on the performance and strategic management of the company
(Zalengera et al., 2014). In this regard, the external environment of Next plc, UK has been
analyzed through PESTLE analysis and has also been acknowledged that how the country is
supportive or against to respective company.
 Political factors- The Political condition of UK is stable in nature and government is
focusing on activities to provoke the reasons that destroy the economy. The UK
government is major emphasizing on the maximization of employment opportunities for
citizens. Besides this, UK is more successful in comparison to other countries due to
political stability. Furthermore, political stability has a contribution in controlling
corruption, regulations of law and the effectiveness of government in different sectors
(Banco Santander, 2018). According to collected data of 2009, it has been found that the
UK government has taken the adequate steps to revise the income tax rate for higher
income level people from 45% to 50%. (Thomas, 2018). Hence, it is beneficial for the
country to maintain the economy refreshed. Apart from this, Brexit has generated various
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political issues and uncertainties for the growth of the country. Although, it has
developed the new opportunities for the country in the form of Foreign Direct Investment
(FDI) and has also been opened the ways of external opportunities for the country
(David, 2018). Further, the country has invited the many professional business tycoons to
invest in UK industries such as real state, retail, sports, technology etc.
 Economical factors- Economic conditions of the UK is stronger in comparison to other
countries including US, Australia. UK has 5th highest Gross Domestic Product (GDP)
across the world as well as Europe has 2nd position and Germany scored 3rd rank in
context to GDP. Further, UK has a large number of populations which is beneficial for
small market enterprises (United Kingdom Economy, 2018). Moreover, the country is
based on a diversified economy by including both private as well as public sector
industries. There is free entry for all countries to invest in different industries through
FDI. On the other hand, the respective country has dealt with economic recession during
the year of 2008-2009. The highest GDP rate 3.85 has been recorded in 2000 and it was
reduced by 3% in 2007 (The Financial Times Ltd, 2016). Hence, it again increases to
3.1% in 2017. There is a low-interest rate in the financial markets as 1.5%; however, the
inflation rate has been increased from 3.19% to 4.29% in the year 2009. Besides this, the
prices of oil, households, food and beverages have been reduced at the lowest level.
 Social factors- According to collected data, it has been found that the UK has large
consumer market with the population of 65.6 million in 2016 and it has been estimated
that it would be maximized by 74 million in coming years of 2039. The country has more
aged people than youngsters; hence, it has been found that 18% of the population is
above the age of 65 years and 2.4% associated with the age of 85 and over (Thomas,
2018). By considering this, many organizations have invested in different sectors such as
healthcare, insurance, real state etc. to manage the old age people. Apart from this, the
population of UK has high living standard and diversified cultural people; owing to this,
UK companies are proving the expected products to meet the demand of customers
(Advameg Inc, 2018).
 Technological factors- UK has strong and effective telecommunication infrastructure
across the world. The country is using the advanced technologies in the
telecommunications, mobile and internet industry as fiber optics, microwave radio relays,
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satellite earth systems etc. (Business case studies, 2018). In 2006, the growth rate on
internet connectivity has been increased to 36.2% in 2007 and in telecommunication, the
growth rate has been enhanced from 10% to 11% respectively in 2010 and 2011. Besides
this, the population of UK is more competitive and skilled in Information technology (IT)
field. Moreover, appropriate laws have been amended with respect to intellectual
property (PESTLE Analysis, 2018).
On the basis of PESTLE analysis, it has been identified that the external environment of UK
is suitable for Next plc and the company can easily expand the business in the potential retail
market. The UK has a large consumer market and economic condition is also strong in
comparison to other countries such as US, Germany.
3.2 Industry analysis- Porter’s five forces model
Industry analysis refers to measuring the external environment of the particular industry
that affects the competitive advantage in a specific market area (Dobbs, 2014). In this context,
Porter’s five forces model has been used to analyze the competitiveness of the Next plc fashion
retail industry in the UK market and also identify the profitability of the current business
environment.
Figure 2: Porter's five forces model
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(Source: Rothaermel, 2015; Dobbs, 2014)
o Competitive rivalries- Next plc is dealing in fashionable clothes and other trendy
accessories in the retail industry. Here, Marks & Spencer group, John Lewis, Harry
Corry, Arcadia group ltd, Gartner, Tesco, Debenhams plc, Walmart, New look, River
Island etc. are the top competitors of Next plc who are offering the differentiated
products on low-cost pricing policies (Owler Inc, 2018). It indicates that Next plc has a
strong competitive market in the retail industry in the UK. Moreover, there are huge
chances of shifting of customers as well as suppliers towards the rivalries.
o Bargaining power of suppliers- Bargaining power of suppliers always affects the
regularity of business in a competitive market. According to analysis, it has been
recognized that Next plc has several numbers of reliable suppliers who provide the raw
material and manufactured products directly or indirectly but they have strong bargaining
power in the UK retail industry. Further, suppliers have a right to demand upfront
payments and create further pressure on retailer’s cash position (Next plc, 2015). On the
other hand, Next plc has strong and constructive relations with suppliers. By considering
this, due to the availability of a large number of suppliers and uniqueness of services
shows the strong power of suppliers.
o Power of buyers- UK has large consumer market due to the higher number of population
and consumers are the king of the market, so the company has to produce the products as
per the requirements of buyers. In this regard, it has been found that the bargaining power
of buyers is high in the UK market because of the availability of a huge number of
competitors. Further, the customers can easily shift to substitute products, reason that
price sensitivity as well as changing the cost of the products.
o Threat of substitutions- Next plc has several competitors in the entire retail industry as
Walmart, Tesco, Debenhams plc etc.; hence, there is a higher level of threat of substitute
because the competitors offering the products and services on cost-effective price along
with differentiation of products. By considering this scenario, the customers can be
attracted towards the substitute and productivity of Next plc can be low in comparison to
competitors due to the threat.
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o Threat of new entry- UK has a strong economic market which has allowed FDI for the
maximization of profits and productivity (Banco Santander, 2018). FDI has opened the
door for foreign countries to invest in the local market of UK without any governmental
barriers because there is a free entry for the investors and entrepreneurs. Hence, it
indicates that a threat of new entry is higher in the UK market which increases the
chances of a greater number of rivalries and substitutes for Next Plc. Owing to this, it can
affect the optimum outcomes of the respective company in the potential retail market.
 Objectives- According to macro-environmental analysis, the objectives for Next plc has
been determined as follows-
o To maximize the sales volumes by 25% at the end of current financial year
o To enhance the number of customers by 20% at the year ending 2018
o To enhance the diversified portfolio of products by involving substitute products of
beauty, fashion and occasion wear etc.
o To improve the ratio of customer service by 15% by offering the quality and to satisfy the
consumers
o To involve more skilled workforce in the management to frame the smart policies
 Strategy- The company can apply the specific strategy at the international level for the
achievement of objectives of Next plc in subject manner. In this regard, growth and
product differentiation strategies can be suitable for Next plc to attain the specified
objectives. In growth strategy, the company focuses on the expansion of the company in
unspecified locations and can attract a large number of customers by offering the new
brands with quality products of clothing and other accessories. Further, the company can
emphasize on the expansion of product line with a diverse range of fashionable clothes
that will be helpful to achieve the objective of maximization of product portfolio; hence,
the number of customers can be rise. Ultimately, it affects sales volume and profitability
of the company in extending form. On the other hand, differentiation strategy can also be
appropriate to achieve the objective of product differentiation along with a cost-effective
price. In this context, Next plc can focus on making available a wide variety of products
on low prices plus low margins. Consequently, it attracts a greater number of consumers
across the world.
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 Tactics- To achieve the objectives, Next plc can adopt social media marketing and online
voucher codes to attract a large number of customers towards the company. With the help
of social media marketing, Next plc can be connected with online customers because the
current era is based on digitization to save time and efforts for shopping of apparel. By
considering this, online customers would communicate to offline customers in their
regular life; thus, it can be helpful to enhance the number of customers and sales volumes
of the company. On the other hand, in online vouchers, the company can include a 10%
ratio of discount in seasonal time to attract the consumers and can develop better relations
between customers and company.
 Action and control- The tactics for Next plc can be applied in a specific way to achieve
the stated objectives. To bring the objectives in practicality, tactics can be in an effectual
manner, therefore, the company can recruit additional skilled employees to cater the
online marketing procedure and required training can be provided to existing capable
workforce to deal with the offline customers. In this manner, a link would be maintained
between customers and company; hence, it can be supportive to maximize the new buyers
for Next Plc. Moreover, the customers can be attracted towards the company due to a
diversified portfolio of products of clothing and home products. Apart from this, all over
the plan would be controlled in a systematic manner to know that the plan is working or
not in the context of the achievement of objectives. In this regard, a weekly review
procedure would be implemented to measure the performance of employees for the set
goals. All issues will besorted out in the weekly meetings so that employees can be closer
to specific objectives of maximization of sales, profitability and customer relationships. If
the plan is not working properly then an alternative would be kept as to conduct new
workshops and personal communication program would be executed to engage the
employees for the attainment of objectives.
4.0 EVALUATING THE EFFECTIVENESS OF NEXT PLC’S CURRENT SOSTAC
STRATEGY
Next plc’s current SOSTAC strategy is relevant to code of practices- COP and multi-
channel retailing strategy which is based on the advanced technologies along with digitization of
Next Plc. On the basis of this, it has been found that this strategy has opened the immense of
opportunities for overseas business along with the growth of UK. Moreover, through digitization,
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the company is including various ranges of brands to tackle and attract a large number of online
customers. Hence, Next plc is focusing on the online businesses according to insights of store
customer segmentations along with online buyers which has a major contribution in the growth
and success of the respective company (Next plc, 2015).
Currently, the company is associated with a multi-channel strategy to cover the entire
consumer market across the world. In this context, it has been evaluated that this strategy is
effective and suitable for Next plc because it is more closure to the set objectives such as sales
and profit maximization, diversified portfolio and a greater number of customers etc.
Furthermore, investing in cross channels including a directory in which by reviewing a catalog
customer can conveniently place the order for buying, hence, the business of Next plc is growing
in the fastest way by achieving a huge number of revenues. Moreover, by analysis, it has been
recorded that digital sales have been reached at 530 million pounds through the concept of digital
strategy (Zhang, 2013). Apart from this, Next plc is using the price discounting policies for more
time period to maximize the sales and revenue at online stores by 5.8% a year ago (Vertical Web
Media Inc, 2018). In this context, the company is offering a great discounting on first arrivals, at
festive season, occasions; however, it is charging the premium prices on exclusive designer’s
products to maintain a standard in international fashion and clothing market. Therefore, it shows
that the current SOSTAC strategy of Next plc is effectual because it has a major contribution in
maximizing the sales volumes as well as profitability by enhancing the number of customers.
5.0 IMPLEMENTING CURRENT MARKETING STRATEGY USED BY NEXT PLC IN
AN INTERNATIONAL MARKET
Next plc currently using the COP, price discounting and multi-channel strategies to
attract a greater number of customers. The company is associated with the customer's demands
instead of thinking about competitors. By considering this, Next plc as a fashion retailer can
easily implement the existing marketing strategies at the Australian international market. In the
current marketing strategy, the company is emphasized on local adaptation, hence, Next plc is
providing the designed stores and offering the products on the basis of culture, taste and
preferences of customers. In this context, it would be suitable for Next plc to use the current
multi-channel strategy in the Australian international market because it relates to supply the wide
variety of products and services to consumers through different media channels.
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In the local market of UK, Next plc is achieving the profits and developing a large
number of customers through differentiation and multi-channel strategy. Thus, the sales volume
and productivity of the company has been raised with the application of the current strategy. In
this regard, the respective company is profitable in the Australian international market due to a
small number of franchise partners, online retailing under direct or indirect channels and
availability at online sites. Apart from this, due to differentiation strategy, Next plc can easily
create a brand image in the international market of Australia because it is engaged with effective
marketing mix as children, men’s and women’s clothing and footwear, home products, holiday
shopping criteria and electrical appliances etc. Here, it can be easily stated that Next plc can
implement the local marketing strategy of UK at the international market of Australia for the
growth and development in the retail sector of fashion clothing.
6.0 CONCLUSION
On the basis of the report, it has been found that the UK is a suitable market for Next plc
because it has favorable external environmental factors towards the company. Owing to
SOSTAC model, it has been concluded that Next plc has several competitors across the world,
although the company is performing well in the local market of UK due to strong economic
conditions as well as political stability. Further, according to Industry analysis, it has been
summarized that the bargaining power of suppliers and buyers is at a higher level due to strong
competitiveness in the retail market. At the end, it has also been concluded that the current
SOSTAC model of Next plc is effective in nature because it is helpful to achieve the set
objectives and aim of the company. Hence, it is more associated with the expectations of
customers instead of that what competitors are doing.
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