External and Internal Analysis of Marks and Spencer

This assignment provides an analysis of the external and internal environment of Marks and Spencer, including models like PESTLE and Porter's Five Forces. It also discusses the strengths, weaknesses, opportunities, and threats of the company.

Assignment
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INTRODUCTION
Every organisation operates under a specific boundary which is known as business
environment. The environment is not static as it fluctuates with change in trends or factors. There
are internal and external factors. However, a business needs to identify them as it directly
impacts on their growth and development (Ansoff, Kipley and Ansoff, 2018). For this they
need to develop various types of strategies and use tactics in order to sustain in market for long
term. Besides that, it depends on their capability and competency which allow in their growth.
Moreover, goals and objectives have to be formed in accordance with resources available.
Through that, short and long terms goals are attained.
In present assignment, it will be described about the external environment of Marks and
Spencer. Also, it will be discussed on mission and vision statement and how it relates to market
place. Furthermore, bac strategic competence and capabilities is mentioned along with analysis
of internal environment. However, at last strategies will be described that can be applied by
company.
Marks and Spencer is British retail company headquartered in Westminster , London. It was
founded by Michael and Thomas in 1884. They are operating world wide with 959 stores. It
offers variety of products and services such as grocery, food items, financial services, clothing,
etc. (Baumgartner and Rauter, 2017)
TASK 1
Models to analyse external environment
An organisation external environment depicts that what changes are occurring in it. Also,
the industry in which company operate needs to be analysed. Any change in market condition is
due to change in factors of industry. So, it is necessary for company to identify industry
scenarios so that they can get an insight on market conditions. This provide them relevant data
and info on current strategic position. On basis of that, strategies and plans are developed. For
understanding business environment, there are several relevant models and concepts available
which can be used in it. Thus, Pestle and porter five force analysis is done of Marks and Spencer
(David and David, 2016). It is as below
Pestle
Political – They are those factors related to change in political condition within a nation. It can
be change in government, trade laws, political situation, etc. Due to this trade and tariff laws are
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changed. It highly affect on business operation. Brexit will result in change in political situation.
So, they will have to change in trade laws. It will lead to decrease in sales and growth on its
company. It is because as company profits are dependent on UK economy so Brexit will result in
negative impact on it.
Economic- they are related to change in economic condition of nation that include GDP,
inflation, currency rate, etc. it directly impact on business operations and its growth. This is
because it changes interest rate, tariff policies, and others. Thus, Brexit can have a negative
impact on Marks and Spencer operation. It is because as company profits are dependent on UK
economy so Brexit will result in downfall in GDP of UK. Similarly, overall economic growth of
UK and retail sector will be affected (Hanson, Hitt and Hoskisson, 2016). Thus, Brexit will
affect on Marks and Spencer growth in negative way.
Social – In this the factors included are related to change in social trends, taste and preference of
people, their needs, etc. Alongside, it also refers to cultural ethics, beliefs, values, of people and
society in which they live. So, any change in social factor affect on business growth. Now,
people are becoming more trendy and fashionable. They want strain free clothes and of high
quality as well. But as Marks and Spencer is having a large customer base in UK so any change
in people taste and needs will highly affect on company growth. Moreover, they will have to
develop new cloth with latest design to fulfil needs.
Technological – As name suggest the factor is related to technological advancement within a
nation. Now, in retail sector many companies are focusing on online or E commerce platform to
increase sales and profits. So, there has been shift in doing business. Also, UK is already
advanced nation where most people use high tech technology. Therefore, organization needs to
transform towards online one. By shifting business to online platform, it will impact on Marks
and Spencer in positive way (Hitt and Duane Ireland, 2017). They will be able attract more
people and rise customer base in UK and other countries. In addition, they can compete with
rivals in the market for long term.
Legal- the external business factors are related to modifications in different types of laws and
regulations. They are employment, health and safety, minimum wage act, etc. These all directly
impact on firm operation as they have to adhere and follow these laws. Thus, any change in these
affect it. In UK change in minimum wage act is enforcing all organization to adhere it and
provide minimum wage to workers. Hence, Marks and Spencer will also have to follow it.
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However, as company operate in various nation, they have to follow laws of employment and
other regulations strictly.
Environmental- The changes are related to CSR polices, environment laws, etc. of countries.
Marks and Spencer business is expanded into many nations so they have to follow laws related
to environment strictly (Hitt, Ireland and Hoskisson, 2016). Apart from it, any change in laws
directly affect on business operations. Besides now, countries are imposing strict rules and laws
in or der to protect the environment. They are enforcing retail industry to reduce use of plastics
and other waste material. Along with it, CSR policies and practices are changed as well. Thus,
Marks and Spencer operate in retail sector so they have to practice CSR policies in effective
way.
Porter five force
It is a framework which is used to evaluate the competitive advantage within industry.
Basically, it is used by companies to find out
Competitive rivalry
Here, it refers to the level of competition within industry. The more number of firms
means stiff competition and less firms means low level of competition. However, in retail sector
there are many big brands already operating in it. They are offering variety of products and
services to people to fulfil their needs. Therefore, the competitive rivalry in retail sector is high.
It is becoming difficult for organization to compete with each other.
Power of suppliers
It means the power to influence the price of products by suppliers. If there are more
numbers of suppliers than it becomes easy for company to switch from one supplier to other.
This means that more number of supplier then less is power to influence price of products and if
less supplier then company have to depend on them (Lasserre, 2017). Thus, Marks and Spencer
is having a strong network of suppliers so they can not easily influence price of products. Here,
the power of supplier is less.
Power of buyers
It means the power to influence the price of products by buyers. This means that more
number of buyers then less is power to influence price of products and if less buyer then
company have to depend on them. Thus, Marks and Spencer is having a large customer base so
they are not able to influence price. Here, the power of buyer is less.
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Threat of new entrants
This element is related to threat of new entrants within industry. However, in retail sector
there are strict entry and exit barriers which makes it difficult for new entrants to enter in the
market. Moreover, it requires huge investment and effective strategy to enter in retail sector.
Besides that, there are many big brands operating in this (Moutinho and Vargas-Sanchez, 2018).
Therefore, it is identified that the threat of new entrant in retail sector is low.
Threat of substitute
It refers to the various types of products or services that is available to be replaced with.
This means substitute product that can be used by people in case of any non availability of
specific product. In retail sector there are many types of substitute available. So, it customers can
easily switch from one brand to another or from one company to another. This makes it easy for
them to fulfil their needs. Hence, in retail industry the threat of substitute is high.
Thus, the external analysis state that in retail sector many factors are affecting it. The
companies are not able to cope up with them. However, there is rise in competition due to
globalization. So, it is difficult for firms to compete and survive.
TASK 2
Internal analysis
Likewise, external environment it is important for business to analyse internal as well. It is
because it helps in finding out strength and weakness. Alongside, capabilities and competence is
identified as well. So, on basis of it strategies are developed. Moreover, the analysis is useful in
determining whether business mission and vision align with it or not. In addition to it, current
position within market place is evaluated (Newburry, Deephouse and Gardberg, 2019). Also, it
is easy to determine the competitive advantage that exist and to what level demand of market is
met. For this there are some models and concepts which can be applied. Thus, SWOT and porter
value chain analysis is done:
SWOT
Strength-
Marks and Spencer is having a strong brand name in all over the world. Due to this the stores are
easily ben recognised by people in UK and other places. Thus, it state that company provide high
quality products to people.
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They are having a wide variety of products offerings for people to chose from. For examples –
groceries, clothing, and other items. Thus, it provide various options for customers to select
preferred products according to their needs.
Global presence – they are having a many stores in UK and other countries which makes them a
globally presence brand in world. Only in UK there are over 300 stores of Marks and Spencer.
So, it is convenient for people to buy products from stores easily.
It is having a popular designer brands that leads to provide high quality clothing to people. This
helps in making things easy
Weakness
Due to its outdated clothing design it is known as non trendy store. This is its major weakness
which do not allow them to compete with other high profile brands such as Zara, H&M, etc.
Along with it, in clothing clothes are usually for old age men and women (Peppard and Ward,
2016). Hence, they are not able to attract new customers with such outdated products.
In Marks and Spencer most of the work is done manually which leads to rise in cost of products.
So, they do not work with new techniques that results in low productivity. Apart from it, as work
is done manually so it consumes a lot of time to produce products. It also results in delay in
logistics operations.
Opportunity
There exists a vast number of opportunities for company to expand at global level. For this they
can enter into other markets to increase global presence. It will enable in attracting more people
and rising sales and profits. However, they can follow internationalisation strategy.
Marks and Spencer can export products into various nations which will benefit them in
generating revenue. With this, organisation can easily compete with rivals in the market and
sustain for long term.
Another opportunity is using strategy of market segmentation. Here, they can segment market on
basis of certain criteria and different groups. Through that, it will be easy to identify needs of
people and enhance presence in the market. Company can also create a strong brand image
through this technique (Rothaermel, 2016).
By using high and advance technology Marks and Spencer can enhance their efficiency and
reduce cost. This will be useful in reducing manual work and producing more products in less
time. However, technology will also aid in streamlining process of supply chain and logistics.
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Threats
The major threat faced by Marks and Spencer is rise in competition in retail sector. There are
many brands giving a tough competition such as Aldi, ASDA, Sainsbury, etc. in UK. so, it will
leads to decline in sales of company. They will not be able to retain customers for long term.
Another threat faced is change in customer taste and preference. It may affect on Marks and
Spencer growth in future as people may start buying goods that are available at low cost. This
can rise risk of losing scope in business due to it.
Porter value chain
The porter value chain analysis helps in finding out business competency and resources
used in their logistics. Here, it divides activities into various categories that is inbound, outbound
and marketing (Zhao, Fisher and Miller, 2017). Thus, analysis is as follows :
Inbound logistics
Generally they are activities that are related to buying, purchasing and conveying the
sources of info that go into manufacture of products and services. M&S won the GBS store
network and has further noteworthy lead in its Plan A management program to make step
changes in its worldwide production network. M&S has additionally recognised from EC which
for maintaining and protecting the environment. M&S in this way a protection on support which
should it a significant competitive position over its rivals.
Operations
M&S is focusing on improving client experience and as per its 2016 yearly report it would be
progressing in the direction of expansion in customer base via "Moving and easy experience"
and enhance client experience. There have been delays in overseeing on the web activities when
high tech conveyance focus in Castle Donington faced issues prompting 2% decrease in deals on
their website. Company is installing new software to improve IT infra and strengthen its network
(Ansoff, Kipley and Ansoff, 2018). There was a problem faced as 800 online clients' restraints
getting dropped and keeping in mind that company declared that no info related to finance was
leaked.
Outbound Logistics
They are related to delivering and sorting, distribution etc. of appropriate of products and
services to the customers. M&S works with in store shopping and web based shopping. They
keep on putting resources into warehouse and they as of late gained stockroom in Bradford
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which would fill in as a robotized store National Distribution Center (NDC) for the clothing and
independent venture. Further M&S is additionally focusing on integration of storerooms to make
inventory network more effective and efficient.
Marketing and Sales
It helps in making customer mindset of the product and persuade them to buy it.
Computerized division M&S adventure lab works to bring up advances to improve shopping
experience for the people. The multi channel experience allows clients to perfectly shop utilizing
portable, online or through visit. It has been analysed that 60% of ever online deal are grown in
store indicating that individuals despite everything incline toward in store buying. The client
experience is expanded through commitment by means of online shopping. M&S likewise
participates in high effect advancements utilizing customer determination information to upgrade
an incentive for them.
Services
Services angle incorporates those practices that would upgrade or potentially keep up produce
value. It is necessary to gain customer satisfaction by offering high quality customer services is
vital (Baumgartner and Rauter, 2017). A sign of the needs for 2016 were expanding product
availability and delivery speed. Furthermore, the company has likewise made delivery free for
orders above £50.
It has evaluated that Marks and Spencer mission and vision align with demand of market. It
has enabled them to build a brand image in retail sector. Furthermore, Marks and Spencer create
value by producing high quality products. In this they include features which are different from
other. Apart from it, they deliver value by offering products in time. Through this, they are able
to retain satisfaction of client.
TASK 3
Strategies that the company can follow in future
It is essential for Marks and Spencer to develop relevant and proper strategies in order to
remain survive in market for long term. Also, it enables in gaining competitive advantage and
expanding in new markets. With the help of strategy it provides a direction to them and achieve
goals and objectives (David and David, 2016). For this usually strategic models are applied
which enable in developing effective strategies. There are different types of strategies developed
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that depend on business needs. Likewise, for Marks and Spencer they can also follow some of
them which is mentioned as :
Ansoff matrix
It is a strategic framework which is applied in business to develop new strategies. The
model was proposed by Ansoff. In this there are four strategies which can be applied in it. They
are defined as :
Market development
It is a strategy which can be followed by Marks and Spencer. Here, the company can
expand into other or new markets with existing products. This will help them to attract more
customers and generate revenue. Along with it, they will be able to create a large customer base
as well. The market expansion can be applied by identifying needs of people and entering into
new market. This strategy is useful in increasing global presence.
Market penetration
It is a strategy in which company can focus on increasing presence in existing market
with existing products (Hanson, Hitt and Hoskisson, 2016). They can emphasis on increasing
more sales and profits. It will be helpful for them to gain competitive advantage. For this Marks
and Spencer can promote and advertise it in effective way to attract more people. It will enable
them to compete with rivals in existing market.
Product development
This strategy can be applied by company in which they can focus on developing new
products and services within existing market. Through this, they can attract them and fulfil their
needs. Furthermore, developing new products will help in attracting people. In this firm can
increase customer base in existing market. The new product can be developed by making adding
new features or changing its specifications. It will enable in adding value of product.
Diversification
This type of strategy is one in which company expand in new market with new products. It is
done to attract more people and generate more revenue. It is highly followed strategy as it leads
to expansion in many new markets. But it is most risky as well because this can lead failure if
new product is not able to fulfil people needs in those market (Peppard and Ward, 2016).
Porter generic strategy
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This is also a strategic model that can be followed by Marks and Spencer in order to gain
competitive advantage and sustain in market for long term. It provides an overview to business
that how they can achieve goals and compete with other firms. Besides that, to what extent
advantage can be gained over competitor product in the market (Porte generic strategy, 2018). In
this four strategies are as follows
Cost leadership – It is a strategy in which company can gain competitive advantage by
becoming the lowest cost provider within industry. They can offer goods at low cost than other
competitors in market. Furthermore, economies of scale can be gained by it. Basically, this type
of strategy is applied by large firms that offer goods with little variation. Also, customers easily
accept the products. likewise, Marks and Spencer offer discounts, schemes, etc. in order to
increase sales and attract customers.
Cost focus- It is similar to cost leadership strategy where business gain competitive advantage
by offering products at low cost. But the difference here is they firm only do it specific markets
where customer base in large. However, only one or two market segment is selected in this.
Differentiation focus – It is a business strategy where company focus on differentiating its
products in target market segment (Rothaermel, 2016). Here, needs of customers are identified
and then products are offered to them. Basically, niche market segment is focused in it.
Moreover, small business apply this strategy as they are able to easily differentiate their
products. In addition, goods are placed at premium price as it reflect its high quality and
standards.
Differentiation leadership – This strategy is similar to differentiation one but here company
gain competitive advantage within industry. The product is differentiated on basis of one or two
criteria and then presented in market. They charge premium price for it and also provide value
added features as well. Along with it, there are many ways through which differentiation can be
done such as via superior product quality, branding, promotions, etc.
So, these are the strategies which can be applied by Marks and Spencer to grow and develop. It
will enable them to expand in other market and compete with rivals. Alongside, it will be useful
in attracting more customers and rising sales. In addition, organisation can combine two
strategies as well (Zhao, Fisher and Miller, 2017). For example- market expansion and cost
focus.. in this they can enter in new market and provide goods at low cost. In this way, firm can
become cost leader of that market.
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CONCLUSION
It can be summarised that in retail sector the level of competition is highly increasing. Also,
the business environment in fluctuating due to several internal and external factors and emerging
trends. The change in political factor such as Brexit has led to negative impact on Marks and
Spencer growth and development. Similarly, technology factors like online business has affected
on retail sector. Moreover, change in CSR policies is highly impacting on Marks and Spencer as
they have to reduce waste and maintain and protect environment. The porter five forces conclude
that the competitive rivalry in retail sector is high, Marks and Spencer is having a strong network
of suppliers so they can not easily influence price of products, company is having a large
customer base so they are not able to influence price. Also, it is identified that the threat of new
entrant in retail sector is low and threat of substitute is high. By internal analysis, company is
having a strong brand name and provide variety of products offerings. However, its weakness is
it is known as non trendy store and as work is done manually which leads to rise in cost of
products. However, there are many types of strategies which can be applied by Marks and
Spencer in order to gain competitive advantage. They are market expansion, cost focus,
diversification, etc.
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REFERENCES
Books and journals
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