Business Environment Report

This report analyzes the business environment of Marks and Spencer, a British multinational retailer, using Porter's Five Forces model to assess the competitive landscape and the value chain model to examine internal operations. It explores the impact of external factors on the business environment and discusses adaptations to mitigate their influence. The report also evaluates the usefulness and limitations of Porter's Five Forces model.

Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
a) Porter's 5 force model for identifying and analysing current environmental influence on
industry........................................................................................................................................1
b) Value chain model to analyse internal business environment of firm....................................3
c) Adaptations that will helps the company to reduce impact of external factors on business
environment.................................................................................................................................4
d) Usefulness of the Porter’s 5 Forces model and its limitations................................................6
CONCLUSION................................................................................................................................7
REFERENCES ...............................................................................................................................8

INTRODUCTION
Business environment is defined as total of internal and external factors that influence
firm and its operations. It is a marketing term which refers factors and forces that affects
enterprise ability for building and maintaining successful relationship with customers. There are
different factors such as external and internal environment which affect business (Belás and et.
al., 2015). The given assignment is based on Marks and Spencer (M&S) which is British
multinational retailer founded in 1884 at Westminster, London. It deals mainly in selling branded
clothes to United Kingdom market. Also deals in home products, luxury food items to fulfils
need and requirement of people. In this report will be discussing about Porter five force model
for analysing macro environment of retail business and value chain model to analyse internal
business. Adaptation and limitation of porter five force model are also discussed.
MAIN BODY
‘Industry analysis and possible adaptations’
a) Porter's 5 force model for identifying and analysing current environmental influence on
industry
The five forces analysis is a useful tool which will be utilized to determine level of
competition within inner environment of business. This tool serves as a structure used to
ascertain quality in terms of gain to industry. As per Porter, M.E (1980), the state of competition
in an enterprise look on five forces which represent micro-environment. In this analysis, those
important operational element of micro-environment will be known and examined. Marks and
Spencer (M&S)is an organisation founded in 1884 in UK by Michael Marks and Thomas
Spencer. This is one of the leading company in retail sector (Budhwar and Debrah, 2013). This
Report demonstrates about Porters five forces to give a better market representation to Marks and
Spencer. Bargaining Power of Customers; Buyers are demanding a lot and want to obtain best
offerings available by paying lowest price as possible. This put force on M&S profitability for
long period of time. The smaller and more powerful customer base is of M&S, the higher
bargaining power of buyer and higher their ability to seek increasing discounts and offers. They
can also address bargaining power of purchaser by constructing a large base of customers. This
will be helpful in two ways like it will diminish bargaining power of the customers and it will
provide a chance to firm to sleek its sales and production process. Bargaining power of

Suppliers; mostly all the firms in retail industry buy their raw material from different suppliers.
Suppliers at high position can reduce margins that helps Marks and Spencer to gain profit in the
market. Powerful suppliers in consumer services sector use their negotiating power to remove
higher prices from the firms in retail area. The overall effect of higher supplier bargaining power
is that it lowers overall profit of market. Focus on exclusive tag also gives M&S capacity above
external suppliers. They can also address bargaining power of suppliers by constructing efficient
supply chain with multiple suppliers.
Threats of New Entrance; the new entry is always a factor which affects working and
profits of an existing organization. The threat of new entry in retail market is very common. But
it is very tough for a new entrant to compete Mark and Spencer Ltd. As to touch the level of
M&S a huge amount of capital investment is needed which can turn to be a big risk. Defining of
cost efficiencies and economy sales of M&Swill be very tough task for a new entry. M&S
popularity and product quality are also reasons which make it very tough to attract loyal
customers of the organization (Erasmus, Strydom and Rudansky-Kloppers, 2016). Threats of
Substitutes for any organization substitutes are the major problems. M&S also requires a
continuous innovation in their products as it is very easy to copy designs of their clothing
products and avail them at very low prize. The food sector also under taken by big stores like
Tesco, Sainsbury, and ASDA having similar types of products. To avoid this M&S have to make
some distinct products on regular basis. Rivalry in existing market; the rivalry between
competitors of market is very tough. Super markets, online markets have the same type of home
wears, clothings, and fashion products along with food products. Online market is one which
provide products just at one click. M&S also manage to build it's online sales in percentage of
total retail sales. Loyalty membership card also benefits the organization but can also be
followed by other organizations. Sparks loyalty program is most beneficiary program for M&S.
The focus is on old female customers and providing them every day low price rather than
discount. M&S has announced to open new “simply food” outlets (Hilton and Platt, 2013).
There are two types of factors internal and external environment that is micro and macro.
Micro environment is internal factors which affect company within surrounding. It includes
customers, suppliers, competitors, dealer, distribution, investors, public which greatly influence
market. Macro environment is external factors which affect society at larger extend. It includes
political, economic, social, technology, cultural, legal. Retail sector is greatly affected by both

micro and macro factors for surviving in market. Sustainability of business is related with waste
reduction, packaging, renewable energy. Big entity have already invested lots of money for
reducing carbon and renewable energy. Due to change in technology, government, social and
economic factors which influence environment. Laws, regulation, can help to grow and influence
retail business in society. Increase in income leads to grow this sector very effectively and
efficiently (Kew and Stredwick, 2017).
b) Value chain model to analyse internal business environment of firm
Value chain refers to set of activities which an organisation operating in particular
industry performs in context to provide valuable service or product in the market. It is a process
where company determines its primary as well as support activities that can help in add some
value to its final goods and then examine these activities to minimize cost or enhance
differentiation. It represents internal activities, company engage in transforming inputs in to
outputs. Marks & Spencer company use this tool to analyse the internal activities of business. Its
main goal is to recognise those activities which are more valuable to company and helpful to
provide the competitive benefit. Marks & Spencer divide its different activities of business in
primary as well as support and analyse them to final products.
Under this, value chain is divided in to two different parts primary activities and support
activities. In Primary activities, functions are directly related with conversion of input in to the
output as well as distribution activities. The primary activities are linked with support activities
which help in improving efficiency as well as effectiveness. The primary activities are divided in
to five areas. The first area is Inbound Logistics, in this products and services which are being
obtained from the suppliers of Marks & Spencer company and also used for developing end
product. It is necessary that there should be relationship with supplier to create some value. The
second area is Production and it is related to convert outputs of services or products in to the
finished and semi- finished goods. Third area is Outbound Logistics, these activities are
concerned with delivering goods and services to consumers and consist transport, storage,
distribution etc (Khan and Quaddus, 2015). The fourth area is Marketing and Sales, in this,
Marks & Spencer will put services or products in markets consisting managing as well as
generating better customer relationships. The fifth area is Service and Marks & Spencer use this
area to maintain value of service or product to consumers as develop relationship that based on
procurement of products.

Support activities for value chain analysis, the primary and support activities that are
followed in organization's environment. Support activities like human resource management, is
example of important with in primary activities also supports services like services and out
bound logistics. M&S can manage activities like resource management, technology
development, human resources, firm infrastructure. Firm Infrastructure; the work of managing
support activities to maintain it's daily operation of organization. M&S can make activities that
create value to them like Line Management, Administrative Handling, Financial Management.
Human Resource Management; this is support activity related to management and development
of work force in an organization. M&S can perform activities like recruiting staff for
organization, training and coaching of staff to increase productivity of human resources,
compensating and retaining staff for organization. Technology Development; these activities
deals to up gradation of technology. This may help in development of product and services of
organization in both internally and externally. M&S can make better good and can produce better
products by upgrading technologies. Procurement; the services provided by organization to
customers are listed here. M&S can perform activities like entering into and managing
relationships with suppliers, negotiation to arrive at best price, agreements of product with
suppliers and out sourcing agreements. They can use primary and support activities to building
blocks to create valuable products, services, and distinctiveness. Resource Management, these
activities use to manage resources available in organization to produce quality products. M&S
should be able to manage resources and activities in order to complete work in an appropriate
manner. This will help them for competitive environment and one step ahead from competitors
(Portugal-Perez and Wilson, 2012).
This value chain is very important for Marks and Spencer to analyse market. It is very
flexible strategy tool used for looking business, competitors, and their respective places in
industry value system. This assist in creating competitive advantages and diagnose
differentiation and cost. It helps in understanding issues of enterprise that involved with promise
of making consumer value commitment. Value chain also focuson gaining attention on various
activities that are required to deliver value proposition. There are various elements which
composed value chain for consumer as well as organisation (Prajogo, 2016).

c) Adaptations that will helps the company to reduce impact of external factors on business
environment.
There are different factors which greatly impact market share, revenue of business
organisation because of change in infrastructure, economy, laws and regulations, customer
preference. In order to overcome such issues it is necessary for entity to accept measures and
strategies to reduce impact of such factors. Modern technology adoption helps in survival and
existence of business in market. As retailing firms is facing challenges and complexity in
developed and advanced economies countries because of change in trends. The most important
factor of technology adoption by M&S is cost reduction. Many enterprises neglects essential
factors such as supplier, customer and global presence which lack to enjoy technological
innovations. Through research, it has concluded that retail is rapid technology adoptive sectors in
market such as Walmart, Tesco. Appropriate adaptations that will helps M&S to reduce impact
of external factors on business environment are described below.
Economy, This factor is largest external aspects which has great impact on business.
Effect on firm is seen on regular basis because of economic variations. This impact on retail
business took place due to terrorism attack, wars, currency devaluation and political instability.
Here, Marks and Spencer should keep record of economic changes, monitor and control them
from time to time. There are different factors includes in global economic such as interest rates,
income, recession, inflation. In order to survive in market and solving issue of income, company
have to fix price as per purchasing power of people (Savrul, Incekara and Sener, 2014). For
example, if UK economy is facing high recession and interest rate, in this case customer cannot
afford to buy expensive products. This greatly impact sales and revenue of business. In order to
avoid situation, M&S should use latest technologically advanced machines to reduce cost and
lower rates of clothes which helps people to easily purchase products and earn revenues and
profits. Changes in Trends, Environment is dynamic which keeps on changing that influence
people and their purchasing power. Every customer want to buy stylish and modern clothes as
per change in trends. This has greatly influence retail market in United Kingdom. For example, if
Marks and Spencer spends large part of profits for promotion activities of their clothes then there
is high chance for company to earn huge profits consumer became aware of products. In case if
competitors has introduce same product as low price then it is loss for firm. Thus, for
overcoming such issues proper analysis of market should be done by marketing manager of

M&S through research, taking feedbacks, surveys and social media. By this, M&S can easily
bring upgradtion in their products and meet need and expectation of customers.
Change in Federal, state and local laws, This directly impacts working of an
organisation that occurred when good and service offered by firm became highly regulated and
outdated (Siewiorek and et. al., 2012). In order to overcome problems related with changing laws
and regulations, M&S should regulate and monitor policies from time to time. This assist
company to upgrade their methods and distribution production patterns. For example, if UK
government pass law in which company have to pay for luxurious items which results in
increasing expenses and cost for firm. In this case, M&S should manufacture bulk quantity of
clothes which results into increase of profits and revenue and paying tax will not have impact on
capital of industry. Demographic Factors, Demographic factors means characteristics of
population such as gender, income level, education, age, marital status, religion, occupation.
These all elements of demographic affect business and working patterns in negative way. For
example, people between 35-40 have various choice then age group below 35. In order to
overcome such problems, M&S should analyse strength of target customers and manufactures
product as per their requirement. It is very important to produce as per target segmented for
surviving and sustaining in market (Sodeyfi, 2016). New shopping experience and increasing
customer's sophistication, Increasing sophisticated customers and intense competition add more
innovation in store format by retailer. In current scenario, consumer expect friendly environment,
unique products, innovative shopping methods beyond price and quality. It is responsibility of
manager of M&S to provide comfort and good environment to increase sales and profit. For
example, if M&S provide good ambience, setting facility at store which attract consumer to buy
product from that particular outlet. This helps in retaining individual and surviving in
competitive era.
d) Usefulness of the Porter’s 5 Forces model and its limitations
Porter’s five forces model is a tool used for analysing industry surviving in marketThe
five forces model is a good tool to understand level of competitiveness and competitive
dynamics in a specific industry. This assist marketers and business manager to look at balance of
power for various types of organisation, analyse attractiveness and potential profitability of
sector (Yoon, 2012). It assist in reviewing strength of market position that is based on five key
elements. The are advantages of model helps Marks and Spencer for better running of business,

maintain sustainability and growth. It provide comprehensive structure to help and think about
competitive forces for business structures. It gives M&S, a rational guide for considering
competition in marketplace. The firm can use Porter's five forces to develop their strategic
reasoning. This model can help M&S to increase their evaluation of their present position in
market and shape their thinking about where they eventually want to be. Any individual or a
team of M&S with the right amount of knowledge or an extensive familiarity over their industry
and strong research skills can easily use this analytical tool (Belás and et. al., 2015).
Each Model has their pros/cons in the same sense they have their advantages and
disadvantages too. Advantages of Porters five forces are explained above. Let's talk about the
negative aspects of Porters Five forces for the firm Marks and Spencer. Firstly, one critical
drawback of the Porter's five forces Model is that it only works as a initial stage for more
detailed analysis of M&S performance. To be certain, the model provides a checklist of external
forces that can be favourable or deleterious to M&S. Secondly, the model is that it is generally
regulates toward a partial assessment of the strategic position of M&S. This model does not
provide a method for quantifying how each force and its factors affect the performance of M&S.
It does not also have a mechanism for directing which of the factors within each force have more
pressure. Thirdly, This model is outdated! It does not consider the use of data in computing
marketplace competition. This model doesn't take into the account the various economic forces
that are evident in the digital economy. Fourthly, These five forces may not capture the whole
picture of what drives M&S and their convergence makes defining sectors difficult. And lastly,
sometimes this model creates completely new markets instead of selecting from existing
ones(blue ocean strategy).
CONCLUSION
It has been concluded from above mention report that internal and external are the
necessary part of business environment. Marks and Spencer need to analyse market through help
of Porter five force model in order to know about its competitors and survival. Here, value chain
model is applied in order to know about internal factors of environment. There are various
elements such as procurement, human resource management, logistics and other should be
studied properly. Appropriate adaptation are needed for Marks and Spencer to overcome the
impact of external factors in business. As Porter model helps in knowing market effectively and
efficiently and also creates problems to depict future occurrence in present scenario.

REFERENCES
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