Marks & Spencer: A Case Study in Business Strategy

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BUSINESS STRATEGY
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Contents
INTRODUCTION...........................................................................................................................................3
LO1..............................................................................................................................................................4
P1.............................................................................................................................................................4
LO2..............................................................................................................................................................8
P2.............................................................................................................................................................8
LO3............................................................................................................................................................11
P3...........................................................................................................................................................11
LO4............................................................................................................................................................14
P4...........................................................................................................................................................14
CONCLUSION.............................................................................................................................................16
REFERENCE LIST.........................................................................................................................................17
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INTRODUCTION
Business strategy refers to the actions or activities that an entrepreneur takes to achieve the
pre-defined organizational goal. It is known as the master plan to maintain and secure the
competitive advantage, for its operation and to satisfy the needs and wants of customers as
well as other members of the society. It is the outline which defines the actions to be taken to
achieve the organizational goal and objectives on time. Business strategy can be divided into
three categories or these involve three levels (Thompson et al., 2015). These are:
The corporate level strategy is the long-term strategy designed by the top management that
includes a comprehensive and detailed plan of future actions.
The business level strategy is the short or medium term designed by the general manager to
convert the mission and vision into concrete strategies.
Functional level strategy means the strategy formulated at the functional level such as
marketing, production, finance, human resource and all other functions of the organization.
Marks & Spencer
Marks & Spencer is a British multinational company and its headquarter is in London. The
company has its operation in clothing, home products, and luxury home products. Company is
known to be one of the market leaders of the retail industry in the UK. The total number of
stores in Marks & Spencer is more than 1400 in more than 50 countries. The company has
integration and innovation in its vision value. The efforts of the company are aimed to satisfy
the needs of the customers through innovative products and by giving a positive experience to
customers while shopping.
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LO1
P1
The vision statement of Marks & Spencer
The vision statement of the company is to provide a standard against which competitors can
measure and to take care of the environment and community and also provide a positive
working environment for the employees as well as to give the customer the pleasant
experience through the products (Campaign, 2005).
The mission of the Marks & Spencer
The mission statement of the company is to provide the aspirational quality of products for
everyone through depth and range of products.
The objective of Marks & Spencer
The long term objective set by the Board of the company is to build and maintain the
sustainable competitive advantage through consistent and profitable growth and in addition to
this; the company wants to meet the accountability of its shareholders and wider stockholders.
A framework to analyze the macro environment
The framework used to analyze the macro environment of Marks & Spencer is the BCG matrix.
BCG matrix is used to analyze the market position of the product or brand in the target market.
It is useful to review the position of a product in the target market before launching a new
product or expanding the existing product portfolio (Mohajan, 2017).
The BCG matrix consists of four quadrants which show the market growth rate and relative
market share. The four quadrants which show the market growth rate and relative market
share are as follows:
Stars
Question mark
Cash cows
Dogs
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Figure 1: BCG matrix
[Source: Spencer, 2019]
The detail and the products of the Marks & Spencer are detailed below:
 Stars
Products in the star quadrant show high market share and high growth market. The
brands or the products in the star represents that the company is the market leader in
the industry. They generate more return on investment as compared to other product
categories. Lingerie brand under M&S shows the highest growth and large market. This
brand sells the ladies garments at a time when the choice for the customer is very
limited (Schawel and Billing, 2018).
 Question mark
In this category, the company has to make a huge investment to push them in the star
quadrant. The challenge which is present in investing in the question mark is to get the
return from the products. This is because of low market share. In the case of Marks &
Spencer, food comes in the category of question mark (Bolisani and Scarso, 2017). The
company has more than 400 stores across the world but it is not able to convert it into
the supermarket.
 Cash cows
Cash cow shows low market growth but high market share. It is suitable for the
company to divest the funds from these products categories because it does not give an
appropriate return to the company. The product of Marks & Spencer which falls into the
categories of the cash cow is classic range. The company has the strong supporter for
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the classic range but the market is not attractive and hence the company should divest
its investment and invest in the product which gives a high return on investment
(Whitehead, 2015).
 Dogs
Dogs show low market share and market growth. The company should cut-off their
unnecessary cost from these products. It is suitable for the company to close the
business when the product does not generate any revenue and should invest in new
products. The brand that comes under dog is an Autograph range which sells premium
priced products of men and children. Although the premium priced means it makes a
significant contribution to the financial growth of the company (Barboza and Rojo,
2015).
Therefore the BCG matrix helps in managing different product portfolios and product line of
Marks & Spencer. All the members of the organization participate to know the actual position
of their products in the market. But it is a very complex task for the top management to
formulate the strategies for these product categories. Marks & Spencer considers all the
important issue such as health, hygiene, and safety to protect the interest of the company as
well as to provide the value to the customers.
Top management of the company uses the Strategic Planning and Action Evaluation matrix to
help them in taking strategic management decision. This model considers the following four
dimensions:
Company’s competitive advantage
The factors in this dimension includes are market share, product quality, product lifecycle,
customer loyalty and vertical integration (Alexander, 2016).
Company’s financial strength
The factors evaluated in this dimension are the return on investment, cash flow, required and
availability of capital and risk involved in the business (Lichfield et al., 2016).
Industry strength
Factors included in this dimension are growth and profit potential, financial stability, resource
utilization, and productivity.
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Environmental stability
Rate of inflation, market stability, and prices of competing goods, competitive pressure and
elasticity of demand are considered while evaluating the attractiveness of decision in the
environmental stability (Bryson, 2018).
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LO2
P2
The internal audit of the Marks & Spencer can be done by applying the SWOT analysis of the
company. SWOT analysis of Marks & Spencer is described below:
 Strengths of the company
High recognition of the brand
Marks & Spencer is a well-known brand in the UK. It is known for its high quality of the
products over the past years. The brand value of the company is very high even most of
the customer visits the store even after completing their shopping (Bohari et al., 2017).
Wide variety of products
The product portfolio of the company is very large aimed to satisfy the need of its target
market. The wide variety of products provides a large option to its customer to choose
from. In the food category, the company started selling vegetables and fruits over the
last 40 years. The company maintains a strong relationship with the farmers to expand
its product portfolio (Schoof et al., 2017).
A large number of stores and outlets
The giant Mark & Spencer Company have more than 900 stores all over the world and
around 600 stores in the UK. The company has its operation in more than 40 countries.
A large number of stores contributes to the growth of the company as well as an
increase in sales (Business Teacher, 2019).
Popular designer brands
Marks & Spencer has a wide range of popular and designer brands which help the
company satisfy the different needs of the customers. The popular brands include Blue
Harbour, Autograph, Classic, Indigo, etc.
 Weaknesses of the company
The weaknesses of the company include:
Bad word-of-mouth as the store is not trendy
The perception of the customer for the company is that the products of the company
are outdated fashion and non-trendy. Many people have an assumption about the
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company the product is only for aged and elder people and not for youth. Such type of
assumption lowers the business of the company. Therefore, the management has to
spend more to develop the strategies to attract the young generation also. To maintain
its reputation and image, management must have to prepare the strategies to change
the perception of the people towards the company to maintain its position in the
market (Gupta, 2015).
Manual working increases costs
The biggest weakness of the company is that still the company believes to work with the
older techniques and are not started to work with the latest technology. Such practices
increase the cost and time of the company. Almost all big companies adopt the new
technology to reduce its cost and to increase their company but the marks & Spencer
did not adopt this approach and hence loses its profitability. The manual work increases
the cost for the company and also decreases the productivity of the labor (Business
Teacher, 2019).
 Opportunities for the company
Targeting new segments
Company has the opportunity to identify and target the new segments. The huge and
attractive market for Marks & Spencer is Asia which is a big market for traditional and
ethnic wear.
New and innovative technology
By adopting the new and innovative technology, the company is able to use the pricing
policy as the differentiating strategy to attract the new market. It will not only help the
existing customer to remain loyal with them but it also helps in attracting new
customers through other value-oriented proposition (Chawla et al., 2016).
Cost of transportation
The company can also focus on the cost of distribution to lowers its price. The company
can make a strategy to lower the cost of shipping and this will reduce the cost of the
product and thus higher profitability. The company has also another option either to
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arrange the cost-effective mode of transportation or to pass on the cost to the customer
for increasing its profitability (Business Teacher, 2019).
Internationalization
International retailing is one of the best sources to expand the business. The company
can adopt various methods to enter the market such as joint venture, franchise, merger
or acquisition to have a geographical presence in other countries.
 Threats for the company
Threats of competition
The biggest threat to the company is increasing competition in all business. The
company loses its scope and market share due to existing and emerging competitors in
the country. Local vendor and retailer is the biggest competitor of Marks & Spencer. The
major competitors in the food and retail industry are Tesco, Asda, and Sainsbury, etc.
which captures the large market share. The company loses its reputation among the
customers because the numbers of stores are very less as compared to these big giants
companies (Business Teacher, 2019).
Currency fluctuation
Due to its operation in various countries, the operations of the company are significantly
affected by the currency fluctuations especially in the volatile political climate in the
number of the markets across the world (Li et al., 2018).
By analyzing the internal strengths and external opportunities of the company it may have the
option to expand its business in the emerging and developing market to expand its operation,
market share, profitability, and customer base.
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LO3
P3
Porter’s five forces model
Porter’s five forces model helps the management in taking the strategic decision and their
impact on the organization. Following are the description of Porter's five forces model to
analyze the impact of these five forces in building a sustainable competitive advantage in the
retail industry. The elements of Porter's five force model are as follows:
 Threats of new entrants (Barriers to the entry)
Entry in the retail industry requires huge capital investments which act as a barrier for
the new companies. Along with the huge capital, the companies must be competent in
bringing economies of scale and cost efficiencies in their production. Due to strong
recognition of the Marks & Spencer because of its quality, it becomes difficult for the
new entrant to break the loyal customer of the company. Also matching the channel of
distribution of the Marks & Spencer is difficult. Due to these challenges and effective
barrier the company is able to safeguard its competitive position in the market (Zhao et
al., 2016).
 Bargaining power of suppliers
Almost all the big retail companies of the UK purchase raw material from various
suppliers. Therefore the suppliers are in the dominant position to reduce their margins
in order to increase the profit of the retail coma0pny i.e. Marks & Spencer. The overall
impact of suppliers in the retail industry is low which encourages the retail companies to
earn higher profits from its customers. The competitive advantage of the company can
be gained by maintaining a strong relationship with the suppliers as well as the efficient
supply chain with different suppliers.
 Bargaining power of buyers
Buyers i.e. customer plays a dominant role in fixing the price of the products. Price
sensitivity nature of the customers forces the company to keep the prices low so that
they can afford to purchase the products. And the company should also have to keep
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the prices according to the demand for the price it is because customers have low
switching cost and a number of alternatives available. Any move of the company
towards disloyalty can change the overall look of the company in the UK. Therefore,
Marks & Spencer are developing the marketing strategies to retain the loyal customer
and also the pricing policy of the company is acceptable to the buyers (Harding, 2017).
 Threats of substitute products
When any product or services meet the needs of the customer the company and even
the whole industry suffers. The threat of close substitute is high when another company
sells the very less differentiated products to the same target market. In the retail
industry, the number of products that are a close substitute for each other is very large.
It becomes difficult for companies to develop differentiated products to gain a
competitive advantage over their competitors. To strategies which Marks & Spencer can
adopt is rather than only focusing on product differentiation, the company can focus on
service differentiation so that it can attract the huge number of potential customers.
And another way to gain a competitive advantage is that the company must understand
the core need of the customer rather than just focusing on the product.
 Rivalry among the existing competitors
If the rivalry in the industry is high it will slow down the growth of the industry as well as
it decreases the price and overall profitability of the industry. The retail industry is highly
competitive in nature in which the Marks & Spencer operates. The effect of the
competition can be seen through the long-term profitability of the company. The
competition is not only increasing through offline stores but the competition is growing
due to the emergence of the online platform for shopping for convenient goods as well
as fashion-related goods. To survive in the competition, Marks and Spencer have to
invest a huge amount in developing the online platform to meet the emerging needs of
the customer otherwise it may also lose its market share (Kharub and Sharma, 2017).
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