Corporate Governance and Strategic Analysis of Marks & Spencer (M&S)

This report provides a comprehensive analysis of Marks & Spencer (M&S), a prominent retailer in the UK. It begins with an introduction to corporate governance and strategy, followed by an industry overview of the UK retail sector, highlighting its significance and key players like Tesco and Amazon. The report then delves into environmental analysis using the PEST framework, examining political, economic, social, and technological factors impacting M&S. It also assesses the impact of Brexit on the company, outlining both positive and negative effects. A SWOT analysis is conducted to evaluate M&S's strengths, weaknesses, opportunities, and threats, providing insights into its current strategies and competitive positioning. The report concludes with a discussion of future prospects, offering a detailed understanding of M&S's strategic landscape.

Corporate governance
and
strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
Industry overview...................................................................................................................1
Environmental analysis..........................................................................................................2
Company current strategy.......................................................................................................4
Future prospects......................................................................................................................5
CONCLUSION ...............................................................................................................................6
.........................................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Corporate governance is defined as the system of rules, procedures as well as practices
through which an organisation is directed and controlled (BennandDunphy2013).Corporate
strategy is considered as direction that firms consider with the intent of attaining business
success for longer duration. The company undertake for this report is Marks & Spencer which is
a fastest growing retailer, which specialise in selling high quality products such as shoes,
clothing etc. Its headquarters is in London, UK. This report covers, overview of industry,
environmental analysis and company current strategies. Apart from this, future prospects of firm
are also discussed in this report.
Industry overview
Retail industry is considered as the essential to United Kingdom economy. As in year
2017, they gained around £395billion value of retail sales as well as within 2018 it housed about
319, 000 retail business. As per the Filatotchev and Nakajima, 2014retail is defined as the sale of
products to public for usages or consumption instead of resale. Moreover, this encompasses
department stores, market stalls, internet retailers, shops and many others. According to the PWC
report, the retail growth in year 2019 is known as the wining shares. The UK retail sector have
four biggest retailers which are Sainsbury's, Tesco, Walmart, Morrision. All these are dominated
through supermarkets and related to internet retailer Amazon as well as department stores like
Marks & Spencer (Overview of the retail sector in the UK, 2019). In addition to this, individuals
who are employed within this particular industry are 2.9 million and percentage that retail sales
generates through online in year 2018 is 18%. Moreover, the United Kingdom retail sales growth
is 4.0%. whole number of retail outlets into respective country is 299,415 and the amount that
produced of overall GDP is 5% (UK RETAIL STATS & FACTS. 2019).
As the trends like market fragmentation, modifying customer attitudes, over storing as
well as increases of experiences versus products are primarily changing into retail sectors so they
are facing several challenges such as Amazon is known as the Britain's fifth largest retailer, as
per the global data analyst. Also, online shopping currently accounts for about 17pc of retail
within UK in April 2018 as per the ONS report but leading threats to British high street.
Moreover, retailer of high streets reveals that rates of business is a limitation for them as rate are
currently pegged to low customer price index that is evaluate of inflation from year 2018 instead
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of retail price index measure. In addition to this the key issues that retail industry are facing like
changing consumer behaviour and store closures are impact respective industry. As per the
House of Commons briefing paper, 28 retail firms with several stores has ceased trading in year
2018 and effects around 39,000 jobs. Fashion retail sales has also experienced a dip because of
clients modifying spending habits (Idowu2013). Instead of spending its money upon cloths and
shoes person currently spend their cash on leisure practices like eating outside, going on holiday
and so on.
Marks & Spencer is primarily based into UK that operates within 57 countries form 1487
stores as well as 35 websites across. The significant part of this company is they lie under
fashion retail sector that facilitates high quality products to its customers as well as also operates
online. Its aim is to encourage as well as involves billions of individuals who visit their shops.
The main intent of respective company is to enhance lives, each day. The broads objective of
Marks & Spencer is to develop sustainable business by consistent, gainful growth as well as to
assure that they act responsibly in meeting.
Retail trade is mostly known as very competitive part of commercialized endeavour. Like
other sector, this is also has several drivers which are discussed below: Demographics or store location: Location is considered as very much critical to retail
store success. Various population segments are seeking for several products as well as
shopping atmospheres. In this sector, the store trading part is area environment the store
from which outlets draws majority of their clients.
 Target markets: Retailers is generally intent at mass market, a leading number are
involved into market research as well as segmentation as they are identifying it is tough
to satisfy whole people. Moreover, retailers can utilise its resources as well as abilities for
positioning themselves more effectually and attain differential advantage (Retail Industry
– Drivers & Dynamics. 2019).
Environmental analysis
PEST analysis is a method to analyse the external environment of an organisation. It
stands for political, environmental, social and environmental (Johnson2016). It is a strategic
business tool use for evaluating and organizing external factors which can impact organisational
business now and then. The results of the analysis helps in to build strategic planning and
process to contribute in market research. PEST analysis of Marks and Spencer helps to identify
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political, environmental, social and environmental factors. It will help respective organisation to
build strategies useful for competing in market. PEST analysis help to attain a desirable and
respectful position in market and to produce profitability (Klettnerandetal2014). It helps in
decision making process of organisation and to build risk management strategies in order to deal
with competitors and other problems.
Political factors:
Political factors of marks and Spencer play an important role in analysing the factors
which impact on profitability of the organisation. M&S build certain strategies to analyse such
factors before entering in market. They develop plans for intellectual proper protection. They
build relations with their trade partners and ensure their employee benefits.
Economical factors:
Country's economical factors such as growth rate of the retail industry and consumer
spending can be use by respective organisation (MadsenandWalker2015). M&S should consider
some economical factors like quality of infrastructure in retail industry, skilled workforce,
economic growth rate, interest rates etc.
Social factors:
The culture of the organisation is impacted by social culture and manner of doing things
in an organisation. The social beliefs and attributes of population plays a signifiant role for the
understanding of their customers and how they promote the message of retail industry customers.
Respective organisation should develop a class structure, hierarchy and power structure in a
society.
Technological factors:
Such factors include technological innovation and development which can effect an
industry. In respective organisation, technology can effect product offerings as well as their cost
structure.
The respective organisation is focusing on new intelligence on their operations. They
have a vision to involve machine learning and computational technologies both in stores and
their operations. They will include screens and scanners in future to make them to be able to
track, managing and filling up their stock levels. They will build several advance strategies to
deal with unexpected events. Thus, they are using technologies and methods to build a stable
future in retailing industry.
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Effect of Brexit on the company
The impact of Brexit can leads towards profitability at Marks and Spencer to stagnate in
year 2019 as economic headwinds minimises their earning growth. Within retail sector forecast
for coming 12 to 18 months, Brexit is expected to cut down their earning growth of about 1.2%
off. With retailers of UK expected to return an average EBITDA OF 3% in comparison to 4.2%
for continental European retailers (Brexit to hit retail profits, Moody's warns. 2018). Moreover,
this have been also assumed that retailers of mid market will identify trading condition tough.
Widely flat profitability are desired for Marks & Spencer and Next. Also, a disorderly exit from
EU will be negative for United Kingdom upon number of level, involving currency devaluation,
delays at ports as well as resultant hit to economic development and customer confidence. Firms
that has been listed as returning less than 2% compound annual growth rate involve M&S,
Debenhams and others. In addition to this, Marks & Spencer reveal that, there has been a sharp
drop within clothing sales, with their chief executives, Steve Rowe, citing weak customers
confidence ahead of of European Referendum. Its sales fell by about 8.9% within three months
to end June while like for like food sales drop down by around 1% (Has Brexit uncertainty hit
Marks and Spencer profits?. 2019).
Positive impact of Brexit on M&S
The affirmative influence of Brexit on Marks & Spencer is that emphasis will be laid on
sourcing of UK producing that will cause less dependency on the products which are being
delivered by EU. Furthermore, emphasis is laid on sourcing/import efforts which are made from
global market which exist on outside of EU for peculiar products which are not available in UK.
Along with this, investment has to be made with respect to training of labour which is based of
UK by which effective workforce can be developed.
Negative impact of Brexit on M&S
Brexit has lead to new challenge for Marks & Spencer in context food price inflation
which has resulted within decrease in value of pound which has lead UK to pay more for
imports. Along with this, there is a lack within uncertainty related with trade relationship as well
as absence of free trade. It will act as an important concern for M&S as the cost associated with
bringing in labour after Brexit or enhancing the skills of individuals need relevant investments.
With the rising inflation prices, there will be a decrease within sales and profit margins of the
organisation. It is driven by lowering confidence level of individuals, decreased spending of
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consumers, shortage of labours as well as uncertainty with respect to future trade for dealing with
EU. Apart from this, trade tariffs can be increased which will create a pessimistic impact on
overall performance of M&S.
Company current strategy
Swot analysis is defined as the strategic planning techniques which is utilising to aids
firm for identifying strengths, weaknesses, opportunities and threats associated to project
planning. Marks and Spencer is a well known retail clothing as well as accessories brand having
headquarter is in London. So, for knowing its current strategy respective company have to
perform SWOT analysis that are discussed below:
Strengths:
Innovation within Marks & Spencer is also similar with communication as well as
creativity and person have to think beyond and biggest ideas. Whenever it feel essential. Its
focused upon innovation is their crucial strengths. So, for the competitive positioning currently
they are using innovation strategy which assist them to be attain competitive advantage as well.
Distinctive competences of Marks and Spencer include that it provide good quality of products
and have ability to produce innovative products.
Weakness:
The Marks & Spencer consumers often exhibit lower satisfaction level as well as there
has been a lot of problems in context to return policy. It outcomes in bad brand loyalty and
enhanced brand switching. Moreover, its one of the biggest weakness is poor supply chain
scalability. They have been trying to provide international access to its merchandise by its online
store that it unable to scale up its supply chain for delivering whole areas globally. By this, they
tried to reach out to Asia due to its inventory circumstances it has to resort to end of season sales
for selling off its merchandise.
Opportunities:
Being a fashion retailing industry, M&S have different opportunities to come up with
new segments. Marks and Spencer can introduce new styles of traditional and ethnic wear which
is in the great demand in Asia. The technology will provide an opportunity to involve pricing
strategies in new market. It Wil help the firm to maintain their loyal customers. The supervisors
and all the stakeholders of Marks and Spencer should involve governance performance and
provide feedbacks, documentation and accountability of desired outcomes. It helps the
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employees of organisation to improve their talents for achieving organisational goals. Thus,
M&S have a good opportunity to build a respectful position in market.
Threats:
Some of the major threats of Marks and Spenser are Tommy High-flier,Zara, United
colours of Benetton etc. The respective organisation should change according to the current
trends and should involve latest designers and operational machines otherwise it will lag behind
in the retail industry. The respective organisation should build a competitive position in a market
and create a value for their organisation. Thus, M&S should closely analyse strength and
weakness of organisation and should fulfil the needs and demands of their customers. In order to
stay in market the organisation should offer some discounts on specific occasions and try to
improve their methods for delivering market values at highest level.
Current strategy
Competitive positioning: The competitive positioning is about developing strategies for
differentiating products or services of the company from the products of their competitors in
order to create value . To keep competitive positioning in market, the respective company should
follow the growing and changing trends of clothing and make them different from their
competitors.
Competitive advantage: This is the ability of a firm to utilize their resources in an
effective manner. A company can earn competitive advantage either by lowering its prices or
through differentiating their products from other organisation. The competitive advantage of
Marks and Spencer is that they develop a good business relationship with their suppliers. They
have a strong brand image which is consider as a competitive advantage for their organisation.
Distinctive competence: These are the skills and practices of an organisation which
increases its competence and make them differ from their competitors. The distinctive
competences of marks and Spencer is that they produce excellent quality of goods and have
ability to introduce more innovations in their operations in order to add value to their products.
Governance performance: The governance performance is the structure of rules and
practices through which organisation is directed and controlled. Thus, the mangers and directors
of Marks and Spencer build strategies for controlling and directing overall organisation in order
to improve its productivity. Also, they ensure that they are meeting business accountabilities to
shareholders and stakeholders.
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Analysis of Marks and Spencer strategy.
Marks and Spencer are doing better as they focus upon the effective reputation with
consumers, strong relation with suppliers of several products and services as well as the greatest
level of calibre and biggest professional commitment level of personnel within organisation.
Also, they utilised several external as well as internal entities strategies ahas been applied
through firm during current and previous years. These has provided respective company a huge
opportunity to enjoy their competitive advantage over their competitors. An effective internal
business strategy have been to provide best meal and treatment to staff efficaciously. As this aids
respective organisation staff to perform with potential and gain interest in work with firm and
obtain competitive advantage over its competitors.
Future prospects
In order to lie in the top ten position in market, the respective organisation has developed
some specific strategies to deliver high quality of clothing and food services. The basic strategy
of M&S is to expanding their business globally and creating a respectable value in market. They
try to plan strategies to understand their customer demands, analysing competitive advantage and
so on. The organisation made risk management plans and evaluate daily performances of
employee in order to work on their weakness. Thus, such strategies are appropriate for the
development of retail industry because they are considering each and every aspects to run a
business successfully.
Hence a type of change that respective organisation could implement is to introduce
innovative and more trendy clothes in their stores. They can take a survey or feedbacks from
their loyal customers regarding their services and should consider their suggestions. It will help
them to grow more in market to produce positive outcomes and profitability. However, the
company should build strategies to divert all operations in a way to make large amount of profit.
The company could use financial indicators for business performance to compare their company
performance with other organisations. The profitability of an organisation enhances its value in
market and generates a high amount of income for their employees. The company should
introduce new and advanced technology to expand their business and to reduce labour work for
employees.
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CONCLUSION
From the above study, it can be concluded that corporate governance is important for an
organisation to set rules and principles to run organisational operations effectively. It is essential
in retail industry to build a respectful position in market. Current trends of the organisation has
been studied for environmental analysis for analysing macro and micro factors effecting
organisation. Different management tools are being used to understand the current trends of
organisation such as PEST analysis and SWOT analysis. Determining future prospects of the
organisation helps in understanding organisational current strategies and their importance in
business environment. Financial implications of organisation brings profitability and positive
outcomes for an organisation.
REFERENCES
Books and Journals
Benn, S. and Dunphy, D., 2013.Corporate governance and sustainability: Challenges for theory
and practice. Routledge.
Filatotchev, I. and Nakajima, C., 2014. Corporate governance, responsible managerial behavior,
and corporate social responsibility: organizational efficiency versus organizational
legitimacy?.Academy of Management Perspectives. 28(3). pp.289-306.
Idowu, S.O., and et.al., 2013.Encyclopedia of corporate social responsibility(Vol. 21). New
York: Springer.
Johnson, G., 2016.Exploring strategy: text and cases. Pearson Education.
Klettner, A., and et.al., 2014. The governance of corporate sustainability: Empirical insights into
the development, leadership and implementation of responsible business
strategy.Journal of Business Ethics. 122(1). pp.145-165.
Madsen, T.L. and Walker, G., 2015.Modern competitive strategy. McGraw Hill.
Online
Overview of the retail sector in the UK. 2019. [Online]. Available
Through:<https://www.prospects.ac.uk/jobs-and-work-experience/job-sectors/retail/
overview-of-the-retail-sector-in-the-uk>
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Retail Industry – Drivers & Dynamics. 2019. [Online]. Available
Through:<https://www.technofunc.com/index.php/domain-knowledge/item/retail-
industry-drivers-dynamics>.
Thompson, A., Strickland, A.J. and Gamble, J., 2015.Crafting and executing strategy: Concepts
and readings. McGraw-Hill Education.
UK RETAIL STATS & FACTS. 2019. [Online]. Available
Through:<https://www.retaileconomics.co.uk/library-retail-stats-and-facts>
Brexit to hit retail profits, Moody's warns. 2018. [Online]. Available
Through:<https://www.drapersonline.com/news/brexit-to-hit-retail-profits-moodys-
warns/7032752.article>
Has Brexit uncertainty hit Marks and Spencer profits?. 2019. [Online]. Available
Through:<https://www.bbc.com/news/av/business-36732928/has-brexit-uncertainty-hit-
marks-and-spencer-profits>
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