Marks & Spencer's Business Strategy: Capability and Sector Analysis

This report analyzes the business strategies of Marks and Spencer (M&S), a prominent UK retail company, focusing on its operational, strategic, and tactical management. It uses frameworks such as PESTLE and SWOT to assess the macro environment's impact and M&S's capabilities. The PESTLE analysis covers political, economic, social, technological, legal, and environmental factors influencing M&S. The SWOT analysis identifies the company's strengths, weaknesses, opportunities, and threats. Furthermore, the report examines M&S's internal environment using strategic capability and VRIO analysis. Finally, Porter’s Five Forces model is applied to analyze the competitive dynamics of the retail sector.

Business Strategy
Marks and Spencer

Table of Contents
Introduction.....................................................................................................................................2
Part A...............................................................................................................................................3
P1 – Analyzing the capabilities of M & S by applying appropriate framework and highlighting
macro environment and their impact on the organization.............................................................3
PESTLE analysis............................................................................................................................3
SWOT Analysis.............................................................................................................................7
M1..................................................................................................................................................10
P2 – Analysing the internal environment and capabilities of the Marks and Spencer Company by
using appropriate frameworks......................................................................................................11
Strategic Capability Analysis......................................................................................................11
VRIO analysis..............................................................................................................................12
M2..............................................................................................................................................14
Part B.............................................................................................................................................15
P3 (M3) – Analysing the Retail Sector...........................................................................................15
Porter’s Five Forces Model........................................................................................................15
References.....................................................................................................................................18
1

Introduction
The main aim of this report is to understand all the business strategies that are used in the
Marks and Spencer’s retail company (M&S) in the operational, strategic and tactical
management. The company is one of the retail-based organizations in the UK and its
headquarters are located in the Westminster city (London). The company is providing services
like clothing, food and home products to its customers at a good quality. The founders of the
company are Michael Marks and Thomas Spencer and they started the company in the year
1884. Currently, the company is providing services to the people of the UK by opening 950
stores in the country, out of all these, 615 are only dealing with the food products as the
demand is high. The company is focusing on getting the position of the most sustainable
retailer. In addition to this, there are few reliable suppliers that are providing high-quality
services to the company’s customers. The company’s stores also exist in many others; around
41 other countries in the world and the company is also having a workforce of around 70,000
employees. The company is in a good position in the market as it has achieved a benchmark in
the international market with the profit of approximately 116 million Euros in a year.
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Part A
P1 – Analyzing the capabilities of M & S by applying appropriate
framework and highlighting macro environment and their impact on the
organization
The macro environment can be defined as the external factors that are responsible for
influencing the decision making of an organization and are also uncontrollable. These factors
are also affecting the performance and strategies of the organization to a high rate. So, the M
& S Company applying some frameworks that are appropriate for analyzing those factors and
will also help the company to make changes according to the demand of the market. Following
are the two frameworks that are adopted by the company in order to stay ahead of its
competitors and to react according to the changing environment.
PESTLE analysis
This analysis contains all the factors that are affecting an organization as it includes the political,
economic, social, technological, legal and environmental factors. The impact of macro
environment can be easily calculated by analyzing all these factors. The result of PESTLE
analysis is used in evaluating the strengths and weaknesses of the M & S Company.
Figure 1: PESTLE MODEL
[Source: https://www.professionalacademy.com/blogs-and-advice/marketing-theories---
pestel-analysis]
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Political factors
Under this factors, all the rules, regulations, policies and guidelines come, that is set by the
government of the country and which have to be followed by each of the organization. The
activities of the organizations are directly affected by these factors, as it is not able to control
the political development. But, the M & S Company is observing the changes and also adapting
it according to its working structure. The European Union Development has enlarged the
number of customers by 50million due to which a large number of opportunities and threats
has also been created for many retail companies like M & S (Marks & Spencer, 2016). hence, it
can be concluded that the UK’s political stability is responsible for the growth of many
companies and business as they are affecting them directly.
Economic factors
The UK’s economic channels are at an unpredictable stable hence, the retail company is the one
which is the most affected one due to this. This is because the people who are living in the
country do not prefer spending money in buying luxury items, but they prefer to save this
money. On the other hand, there are many companies that are working in the positional
markets hence are receiving a good customer satisfaction, even if the company like M & S is
facing economic issues. This is only possible because they are importing foreign products at a
very low rate. On the other hand, the M & S Company is not accepting this concept because
they believe in serving their customers with only high-quality products.
Social factors
The company is offering high-quality and high-priced products to their customers which
become a problem because there is a change in the economic channels. Today, the customers
are ready to compromise with the quality of products in order to get the products on low
prices, hence the retail company like the M & S is facing the problem as it is offering high-
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quality products at high-prices (Woods and Linsley, 2017). The other competitors are getting
the advantage of this strategy.
Technological factors
The technology has developed in the recent years and all the companies are now providing
their products online. So as the M & S, Retail Company is also providing their products to the
customers online and through which the company's brand position and revenue are increasing
with a constant rate (Kew and Stredwick, 2017). On the other hand, the company has also
updated its advertising and marketing strategies as per the technological changes in the
country. Hence, the technological factors are responsible for affecting the M & S’s business in
terms of competition and asset.
Legal factors
All the factors like the risk control, assessment and hazard identification are some of the
standards that are made in the country in order to safeguard the working employees. The
companies that are not following these regulations have to pay the fine. The rules and
regulations are changing in very few intervals so the M&S is also adapting the legal changes and
hence updates its policies every year. For example, the company also provides training to its
employees when an act named “Fir packaging and labelling” in the year 1996 has come into
consideration in which quality and maker’s name have to be labelled on every product (Marks
& Spencer, 2016).
Environmental factors
All the manufacturing processes and products materials of all the UK based companies are
changes due to environmental factors. The UK’s government is making many policies and laws
through with the companies’ activities will not affect the environment. Hence, many of the
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companies like the M&S company are designing their personal policies for example, “Plan A”
which has been made to become more friendly with the environment (Marks & Spencer, 2016).
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SWOT Analysis
This analysis is a study that is undertaken by the M&S Company in order to identify its internal
strengths and weaknesses in addition to its external opportunities and threats. This framework/
analysis are also highlighting the macro environment and their impact on the organization (Quix
and van der Kind, 2016). SWOT analysis is also helpful for the company to define its fitting
degree between the strategies that are being used by the organization and the environmental
factors.
Strengths
M&S Company is providing services and products to the customers by expanding its business
in the international markets for example; the company is having 1300 stores all over all
world. This is one of the biggest strength when compared to the competitors who are only
providing services in the local markets. The company is focusing to grow in the precedence
market like India and it is also exploring the areas of Europe and Hong Kong in order to
expand its food business. The business activities of the company are separated into around
59 territories across Asia, Europe and the Middle East. Apart from this, at the time of
recession, the company has strengthened its position in the business market by the quality
and valuable products, which is also the strength of the company (Marks & Spencer, 2015).
The company’s marketing and advertising techniques are effective and attractive when
compared to its competitors. The food business of the company is offering large profit and
growth of approximately 3.5% every year. The consumer-focused strategies are also
providing a large number of benefits to the company in the form of customer satisfaction.
Apart from this, the rich and powerful trading history of the company is also the biggest
strength as the company is trading in the market for around 100 years.
Weaknesses
The company is only having UK based suppliers which are one of the weaknesses as the other
competitors are having external suppliers from which they are getting products at a very low
price. Company’s market shares are also weakened because the company has introduced sub-
brand in the clothing unit. The clothing branch’s head, Mr John Dixon also left the company
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due to the sales decline (Marks & Spencer, 2015). Apart from these, the company’s policies of
providing high-quality products at high rates are also becoming a weakness because the
customers are ready to compromise with the quality of the products and also prefer the low-
costing factors. The company is designing a large number of products for 35-40 years of age
group, due to this, the other customers believe that they are being neglected and hence
results in lo customer satisfaction. Apart from these, the company is also not giving special
offers to the customers at special occasions like birthday, anniversary, Christmas and other
festivals, which are adopted by the competitors in order to attract a group of people
(Morden, 2016).
All the above weaknesses need to be upgraded as soon as possible because the company is
making a benchmark in the international market but is losing the brand value in the local
market because of the local competitors.
Opportunities
The biggest opportunity for the M&S Company is to shift its business in the Electronic
commerce sector as the company can gain many new clients with the help of this. Hence, the
company has already adopted the concept of e-commerce and hence there is an up gradation
in its potential. The downfall in the clothing sector’s sells can be improved by introducing new
strategies in the food department. The company is also trying to connect 14.5 million
customers that are buying products from the street stores of the company and from the other
competitors, as a large number of customers are connected with the company through its
website (6 million) (The Telegraph, 2017). The company also need to improve its competitive
strategies in the clothing sector and have to attract all the ages of people so that a large
number of customers can be gained, which can create opportunities for the company.
Threats
As the company has expanded its business in the other countries, the local market is getting
affected at a high rate, which is creating the biggest threat to the company. Other
competitors are attracting the younger generation customers by providing a wide range of
attractive clothing products to them, which is also hindering the company’s success. On the
other hand, the competitors like Gap, Zara, and Nest etc. are also attracting the M&S
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customers by providing attractive products. According to sales, the company is in the first
position. But in terms of the marketplace, the position of the company has fallen to number
3. Russia and Ukraine's political and economic conditions are unstable which is also creating a
threat to the company (Reuters, 2016).
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M1
In order to determine and inform the strategic management decisions, the macro environment
of the M&S Company has been analysed by the above two frameworks. From the analysis of
the major 6 factors (PESTLE analysis), it can be concluded that the company is getting affected
by a wide range of factors but it is also taking some strategic management decisions that are
important for holding the benchmark in the international market.
From the SWOT analysis, the company’s strengths and weaknesses are also identified as the
strengths are helping the company is strengthening the position of the company and the
company is also making strategies and decisions in managing and improving the weaknesses.
The opportunities of the company are helping in transforming the weaknesses into strengths
and the threats can also be removed by strategic management decisions like improving and
increasing the measures related to security and safety of the tourists as many of the company’s
stores are present at the visitor’s attraction locations (Reuters, 2016).
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P2 – Analysing the internal environment and capabilities of the Marks
and Spencer Company by using appropriate frameworks
Strategic Capability Analysis
Strategic capability refers to the abilities of a business that are helping the business to
successfully employ all the competitive strategies that are allowing the business to survive in
the business market and also to increase its value. Foundation, cost efficiency, sustainability,
organizational knowledge, analysis and development are the core concepts in strategic
capability. Following are some of the reasons for How the Marks & Spencer's resources are
giving a competitive advantage to it (Collis and Montgomery, 2008).
Resources Competitive advantage in
Great Britain
Tangible
Freehold locations 1% occupancy costs versus 3%
to 9% industry average
Brand Reputation  Customer recognition
with minimal
advertising
 No promotional sales
Intangible
Employee loyalty  Lower labour turnover
 8.7% labour cost
versus 10% to 20%
industry average
Supplier chain Lower costs and high quality
of goods sold
Capabilities Managerial judgment Fewer layers of hierarchy
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