Impacts of PESTLE environmental factors on Marks and Spencer

This report shows the impacts of Pestle environmental factors on Marks and Spencer. Also, it shows the challenges that are faced by the company. Ans also it focuses on the different business strategies that the company should use to overcome these challenges.

BUSINESS IN CONTEXT
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Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Impacts of PESTLE environmental factors on Marks and Spencer............................................3
Challenges faced by Marks and Spencer.....................................................................................5
Business Strategy in relation to challenges..................................................................................6
CONCLUSION AND RECOMMENDATIONS............................................................................7
REFERENCES................................................................................................................................8
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INTRODUCTION
Brexit is the short form for “British Exit” from the European Union. UK has been the
member since 1973 of the economic and the policy union. It was decided by the residents that the
benefits of free trade were not enough to offset the cost of free movement. So new trade
agreements were made between the UK and European Union regarding this and retaining their
tariff-free status. With the new trade policies, it has affected the business in the economy
adversely.
M&S is a British multinational retailer company. It specializes in selling clothing, food
and home products. It was founded by Michael Marks and Thomas Spencer in 1884. it has more
than 900 stores across the world. The brand is built on the core values of values, trust, qualtiy,
services and innovation. The mission the brand is to provide quality product which is accessible
to everyone.
This report shows the impacts of Pestle environmental factors on Marks and Spencer.
Also, it shows the challenges that are faced by the company. Ans also it focuses on the different
business strategies that the company should use to overcome these challenges.
MAIN BODY
Impacts of PESTLE environmental factors on Marks and Spencer
There various factors such as political, economical, social, technological, legal and
environmental that impacts Marks and Spencer in a positive or a negative way
Political Factor
it includes the tax policy, tarrifs, political stability and trade restrictions (Christodoulou,
2019). These factors determine to which extent the government influence a business or trade.
M&S is a brand which mainly operates in UK, but it also has stores in abroad. Free trade policy
in UK allowed M&S to sell their products in foreign market at cheaper rate. But with the UK's
decision to leave the European Union. It affected the company in a negative way. As Marks and
Spencer had to face a very severe consequence that the result of Brexit was that many free trade
policies were changed and because of that company cost of production increased and it had to
sell its products in the foreign market at higher cost which lead to decrease in the sales of the
company affecting the growth of M&S.
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Economic Factor
Economic factors include inflation rate, wade rate, exchange rate, rate of unemployment
and cost of living (Setyadi, 2020). These factors determine the economy's performance that
directly impacts the business leaving a long term effect. With the change in the economy due the
Brexit, there was a negative impact on Marks and Spencer. As the company's overseas business
was affected badly in the Great Britain and Northern Ireland as it stopped selling hundreds of
products due to the changes in the economy which lead to fall in the revenue of the company.
Social Factors
Society's culture and way of doing things influences the culture of a business in an
environment (Shtal and et.al., 2018). It includes cultural norms, population growth, attitudes, age
distribution and health. These factor help the company to determine the marketing and business
strategy. It has a positive impact on Marks and Spencer as it provides a better understanding of
their customers by analysing the culture, attitudes, beliefs of the society to the company. Thus
connecting the company with their customers and helping the company to identify the needs of
the company.
Technological Factors
It includes innovations and development in technology, rate of change in technology and
the evolution of infrastructure. Technology is evolving leading to a fast disruption in various
industries. It can lead to both a positive or a negative impact on the company. With the use of
modern technology Marks and Spencer can reduce the cost of production which will lead to
selling their products at cheaper prices then there competitors and providing them with a
competitive advantage. Thus, increasing there sales. But if the company do not cope up with the
technological advancement it can lead to a negative impact on the company.
Legal Factors
It includes changes to legislation having impact on employment, access to raw material
and resources and taxation (Phan, 2021). These factors impact the company both internally and
externally. With the change in the Britian's trade laws post Brexit. It has affected Marks and
Spencer badly as it has affected the operations of the company in the UK and Europe. And also,
due to the depreciation of Sterling which has impacted the consumer spending and resulting in
decrease in the sales of the company.
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Environmental Factors
Different markets have different environmental norms and standards that impact the
profitabilty of a business in those markets. It can also differ from state to state in a country. It
includes factors like climate change, law regulating environmental pollution, recycling, air and
water pollution regulation in retail industries etc. it impacts M&S in a positive way as it helps to
maintain high welfare standards and manufacturing products with use of less energy, chemicals
and water leading to environmental friendly and sustainable products.
Challenges faced by Marks and Spencer
Various challenges that are being faced by Marks and Spencer are:
1. Economic Instability- One of the major challenge that the company is facing is
economic instability due to the Brexit. As because of the Brexit many trade policy have
been changed such as the free trade policy. It has affected the company severely. As
earlier because of the free trade policy in UK it allowed M&S to sell its product in
foreign market at cheaper rate, but now as the cost of production has been increased, it is
not able to sell its product at cheaper rates affecting there sales. Also, it has affected the
business in Ireland as there is economic instability many of their products have been
stopped from selling in markets. This has also led to depreciation of sterling which has
impacted the sales of the brand as there is change in the consumer spending.
2. Dynamic Customer Preference- Another major challenge that Marks and Spencer is
facing is the fast change in taste of the customers. More specifically the company is
facing a strategic drift that is the company is not able to acknowlegde and respond to
changes required in the dynamic environment. M&S is not able to attract new young
customers as like its rivals, as the company is not able to cope up with fast changing
fashion trends so that it can attract the young demographics. And this has lead to a
perception that M&S brand suits the fashion tastes of the older generation. Because of
this, it has affected the brand image and eventually led to fall in the market value of the
company as its revenue had been decreased.
3. Shift to Online Shopping- Internet has made it very difficult for M&S as it has increased
competition. As internet has provided opportunities to brands like ASOS to grow their
dominance in the retail market which has lead to demise of traditional way of shopping.
And because of this there is a decline in the store sales of M&S. Also, internet has made
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easy for customers to compare prices of different brands. A GlobalData report also shows
that about 25% of fashion related products in the UK are purchased online. This has
affected the profit margins of Marks and Spencer because of the fall in sales.
4. Incapability of Store Management- One of the key challenge that Marks and Spencer is
facing is the incapability of managing store. Many M&S's stores are not been refurbished
from decades which has left the stores to look less attractive, scruffy and quite old.
Recently, it had to close about 100 stores in the UK that is 30% of its total number of
stores. M&S had to downsize so that they can survive in the market for a long term
period. And because of this the company has been badly affected as 30% of their store
have been closed down which will gradually affect the revenue generation affecting the
growth of the company.
Business Strategy in relation to challenges
Business strategy is an amalgamation of all the decision taken and actions performed by
the company to accomplish its goals and secure a market position. Business strategies are the
backbone of any business. Marks and Spencer with their business strategy can overcome these
challenges. Various business strategy used are:
Financial Management
It refers to the strategic planning, directing, organising and controlling of financial
undertakings of a business (Abdilazova, 2021). In other words it can be said it is a process of
estimating the capital required by an organisation. One of the major challenges that was faced by
M&S was the economic instability. With proper financial planning it will help M&S to prepare
for emergencies such as a situation like Brexit. Also, it will help Marks and Spencer to increase
its profitability which will gradually result in the increase in the value of the brand. Also, it will
help the company in making effective decision making. So with the financial management M&S
can make financial decision which will lead the company to prosperity.
Marketing Strategy
It is a strategy that plans to sell products and services in a way that generates long-term
profits and growth of the company(Al-Surmi, 2020). One of the serious challenges that M&S
face is the dynamic change in the preference of the customer. So with the help of marketing
strategy they can focus their attention towards the younger generation as they have high buying
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power and can create awareness about their brand in the market. Another challenge that the
company face is that due to the fast change in the fashion trends it is difficult for the company to
cater to the needs of their customers. Marketing strategy will help Marks and Spencer to create
an organizational plan that will help in catering the needs of the customers.
Information Systems
Management Information System is the study of technology, organization, people and the
relation among them (Chen, 2019,). One of the major challenge that M&S face is that stores are
very outdated in the sense that there is no departmentalization therefore there is no inventory
control. So with the help of inventory system the company can keep the track of inventory in the
warehouse, from warehouse to the outlets, items that have been sold and items returned. With the
proper information system M&S will have an inclusive picture of the whole organization which
will help in enhancing the operational productivity of the brand. And also, it will motivate
innovation which will result in adding value to the existing products.
Human Resource Management
It is a process of recruiting employees, training them, compensating them, and
developing policies related to the employees (Cooke, 2020). One of the challenge that M&S
faces that is it failing in acknowledging and responding to the needs of their customers. So with
effective human resource management M&S can have training and development of their
employees so that the employees are highly trained professionals and can understand the needs
of the customers and provide them with a better customer services.
CONCLUSION AND RECOMMENDATIONS
From the above report, it can be concluded that Brexit has a very significant impact on
the economy of UK. The new trade policy have affected the company severely. It can be also
seen from the above report that there various factors of PESTLE environment that has a positive
or a negative impact on Marks and Spencer. It makes things easier for M&S to understand the
factors affecting its brand providing the company a competitive advantage. Also, the company
has to face various challenges such as economic instability due to the effect of Brexit, changes in
taste of customers and incapability of store management which has affected the companies sales
and growth of the company. It is recommended for the company to enhance the use of various
business strategy such as financial management that will help result in better decision-making,
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using of marketing strategy that will help the brand to generate long term profits and use of other
such strategies that will increase the market value of the company and will result in successful
business operation.
REFERENCES
Books and journals
Shtal and et.al., 2018. Methods of analysis of the external environment of business activities.
Abdilazova, M., 2021, July. ENTERPRISE FINANCIAL MANAGEMENT: METHODS AND
ASSESSMENT. In E-Conference Globe. (pp. 97-100).
Al-Surmi, A., Cao, G. and Duan, Y., 2020. The impact of aligning business, IT, and marketing
strategies on firm performance. Industrial marketing management. 84. pp.39-49.
Chen, S., Yan, J. and Ke, Q., 2019, July. An Investigation to the Impacts of Information Systems
Flexibility on Information Systems Strategy Implementation. In International
Conference on Human-Computer Interaction(pp. 33-41). Springer, Cham.
Christodoulou, A. and Cullinane, K., 2019. Identifying the main opportunities and challenges
from the implementation of a port energy management system: A SWOT/PESTLE
analysis. Sustainability. 11(21). p.6046.
Cooke, F.L., Schuler, R. and Varma, A., 2020. Human resource management research and
practice in Asia: Past, present and future. Human Resource Management Review. 30(4).
p.100778.
Perera, R., 2017. The PESTLE analysis. Nerdynaut.
Phan, S., 2021. The effect of PESTLE factors on development of e-commerce. International
Journal of Data and Network Science. 5(1). pp.37-42.
Setyadi, A. and Wahyudin, E.R., 2020. Pestle Analysis Management Risk Iso 31000: 2018
Toward Integrated Management System (Iso 9001: 2015, Iso 14001: 2015, Iso 45001:
2018) For The Construction Services Industry In Indonesia. Solid State
Technology. 63(6). pp.6222-6281.
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