Strategic Management: Analysis of Marks and Spencer's Entry into China Market
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This article provides an analysis of Marks and Spencer's entry into the Chinese market through external and internal environmental analysis, Porter's five forces analysis, value chain analysis, and core competencies. The article also discusses the challenges faced by M&S and the strategies used to overcome them.
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Running head: STRATEGIC MANAGEMENT Strategic Management Name of the Student: Name of the University: Author’s Note:
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2STRATEGIC MANAGEMENT Table of Contents External Environmental analysis.....................................................................................................3 Porter five forces analysis................................................................................................................4 Internal environmental analysis.......................................................................................................4 Value chain analysis of M&S to understand the organizational capabilities..................................4 Core competencies...........................................................................................................................7 References........................................................................................................................................8
3STRATEGIC MANAGEMENT External Environmental analysis Marks and Spencer is a popular global fashion and food retailer. This company has been operating for 20 years in the global market. In order to enhance their business in the international market, they have faced many challenges. Therefore, this company has adapted new challenges while entering in China market (Marksandspencer.com 2018). From thePEST analysisof China, it has been found that the government has given focus on developing e-commerce. On the other hand, high inflation rate in China creates challenges for M&S to grow their business in this country. Therefore, changing behavior of the customers is another big challenge for this organization to meet the needs of the current market. However, M&S has adapted the changing technology in China, which is a great challenge for this organization while taking entry in this market (Ahmed 2016). Strength High brand recognition A wide variety of the products Trends China market focuses on the innovation and the consumerdemandischanging.Thismarket trend is quite challenging for M&S to take entry in this market. Opportunities In China market, the scope of foreign direct investment is good as the government gives scope to the foreign investors. This brings an opportunity for M&S. Threat Economic recession in the year 2008 affected theChinamarketbadly.Theprofitability became lower and the FDI is also affected. This is a big threat for M&S to enter in China
4STRATEGIC MANAGEMENT market. Table 1: External environmental analysis (Source:Ahmed 2016) Porter five forces analysis The premium fashion market in China is very competitive due to entry of new fashion brands from other countries. This threat from new entrants necessitate the already existing international brands like Marks & Spenser to form strategies to counteract this challenge (Threat of new entrants of the Five forces model by Porter) (chinabusinessreview.com 2018). This creates major challenges for M&S while entering in this market. There is a high competition in China retail sector, which highlights that thebargaining power is fairly high. Therefore, the threat of substitute is also highin China market as Chinese marketers are technologically advanced and provide similar products at a low price, which brings a challenge for M&S. The bargaining power of the suppliers is lowin the Chinese market and theamount of rivalry is high. Hence, high competition creates a big challenge for M&S in this market. However, the market shareof M&S is low in the China market during its entry, which creates an issue for them to gain competitive advantages. On the other hand, the Chinese retail industry includes a high value in the international market (Dobbs 2014). This creates favorable scope for M&S. Auchan and RT-Mart are the major retailers in China and they are themajor playersin China market, which create huge competition for M&S. The growth rate of the business in China market is affected by the recession, which is a big barrier for M&S. However, in the recent years, the China market is growing but the effect of the recession is still present in this market.
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5STRATEGIC MANAGEMENT Internal environmental analysis Value chain analysis of M&S to understand the organizational capabilities ComponentsFindings Inbound logisticsIncorporatingchangesinthesupplychain, whichhelpstoachievesustainabilityin Chinese market Outbound logisticOneofthemajorbusinessstrategiesisto mergethesmallerwarehousetomakethe distribution process and supply chain process more effective in Chinese market (Simatupang et al.2017) OperationTheiranotherbusinessstrategyistobring improvement in the customer experience to gain competitive advantages in the Chinese market Sales and marketingHigh competition is a big challenge for M&S in Chinese market. In order to remove this, they have used modern marketing strategy such as social media marketing to maximize the sales.In 2014and2015 thesalesrevenue generation was high in M&S. ServiceThey offer a trial scheme to enhance the size of
6STRATEGIC MANAGEMENT their food hall in the international market Table 2: Internal environmental analysis (Source:Ahmed 2016) Figure 1: Sales revenue in M&S (Source:Simatupanget al.2017)
7STRATEGIC MANAGEMENT Figure 2: Revenue of M&S in million GBP (Source:statista.com 2018) Core competencies The core competency of M&S is to develop a strong brand aligned to the changing needs of its main consumer base, the upper class consumers. However, in Chinese market this organizationhasfacedvariouschallengeswhileexpandingitsbusiness (chinabusinessreview.com 2018). Hence, by using its rigid management structure it is able to adapt the trends of the changing market situations in the country. Such core competencies were beneficial for M&S to enhance its business and deal with the challenges in China market. This adaptive power has enabled the international premium fashion chain to retain its high market position in China in spite of entrance of new brands from across the border.
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8STRATEGIC MANAGEMENT References Ahmed, U., 2016. Marks & Spencer: A Global Expansion to Acquire Lost Momentum?. In Market Entry in China(pp. 61-72). Springer, Cham. E. Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of industry analysis templates.Competitiveness Review,24(1), pp.32-45. Marksandspencer.com.2018.MarksandSpencer.[online]Availableat: https://www.marksandspencer.com/ [Accessed 20 Jul. 2018]. Simatupang, T.M., Piboonrungroj, P. and Williams, S.J., 2017. The emergence of value chain thinking.International Journal of Value Chain Management,8(1), pp.40-57. Statista. 2018.Marks & Spencer revenue by segment 2018 | Statistic. [online] Available at: https://www.statista.com/statistics/413352/group-revenue-marks-and-spencer-mands-by- segment/ [Accessed 31 Jul. 2018]. UnderstandingChina’sRetailMarket.2018.Retrievedfrom https://www.chinabusinessreview.com/understanding-chinas-retail-market/