Strategic Management: External and Internal Analysis of M&S

This report provides a comprehensive strategic management analysis of Marks & Spencer's (M&S) expansion into the Chinese market. It begins with an external environmental analysis using PESTLE framework, highlighting challenges like e-commerce development, inflation, and changing customer behavior. The report then employs Porter's Five Forces to assess the competitive landscape, emphasizing the threats from new entrants, high competition, and substitute products. An internal environmental analysis follows, utilizing the value chain to understand M&S's operational capabilities, including inbound and outbound logistics, operations, sales & marketing, and service. The analysis concludes by identifying M&S's core competencies, particularly its brand strength and adaptive management structure, which are crucial for navigating the complexities of the Chinese market. The report draws on various sources to support its findings, providing a detailed overview of M&S's strategic challenges and opportunities in China.

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Strategic Management
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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

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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 the PEST analysis of 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
consumer demand is changing. This market
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
the China market badly. The profitability
became lower and the FDI is also affected. This
is a big threat for M&S to enter in China

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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 the bargaining power is fairly high. Therefore, the
threat of substitute is also high in 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 low in the Chinese market and the amount of rivalry is
high. Hence, high competition creates a big challenge for M&S in this market. However, the
market share of 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 the major players in 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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Internal environmental analysis
Value chain analysis of M&S to understand the organizational capabilities
Components Findings
Inbound logistics Incorporating changes in the supply chain,
which helps to achieve sustainability in
Chinese market
Outbound logistic One of the major business strategies is to
merge the smaller warehouse to make the
distribution process and supply chain process
more effective in Chinese market (Simatupang
et al. 2017)
Operation Their another business strategy is to bring
improvement in the customer experience to
gain competitive advantages in the Chinese
market
Sales and marketing High 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 2014 and 2015 the sales revenue
generation was high in M&S.
Service They offer a trial scheme to enhance the size of

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their food hall in the international market
Table 2: Internal environmental analysis
(Source: Ahmed 2016)
Figure 1: Sales revenue in M&S
(Source: Simatupang et al. 2017)

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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
organization has faced various challenges while expanding its business
(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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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. Marks and Spencer. [online] Available at:
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].
Understanding China’s Retail Market. 2018. Retrieved from
https://www.chinabusinessreview.com/understanding-chinas-retail-market/