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External Analysis PESTEL Analysis Political While free trade…
External Analysis
PESTEL Analysis
Political
While free trade policies have been a tremendous political boon for Marks & Spencer and its over 1500 abroad outlets, they have also had a significant economic impact. With Brexit on the horizon, however, many of these rules may soon no longer apply to the organisation. It is anticipated that the Brexit would be followed by specific tax embargoes that will damage all English export brands. Therefore, Brexit might result in increased manufacturing costs for Marks & Spencer. If the United Kingdom genuinely disintegrates, Marks & Spencer’s abroad stores will be forced to close or raise prices, resulting in a loss of consumers.
Economic
Even though M&S is a major player in the retail industry, smaller shops are becoming more popular in the United Kingdom. As a result of the reduced markup price offered by these retailers, Marks & Spencer is able to maintain its upscale reputation. However, rather of purchasing Marks & Spencer’s high-end goods, the vast majority of British consumers are opting to shop at their own favourite stores. Marks & Spencer’s core customer base faces serious competition from discount retailers, and the company has yet to come up with an effective response.
Social
Marks & Spencer is well-known, although it is not considered a trendy retailer because of its lengthy history. Without a comprehensive makeover of the company’s identity, Marks & Spencer is expected to lose the bulk of its consumers from the newest generations since they link the brand with the past. However, the company has been successful in spite of this challenge by cornering the market on ready-to-eat foods. The popularity of ready-to-eat meals has skyrocketed not only in the United Kingdom, but across the globe. Presently, Marks & Spencer is one of the leading suppliers of ready meals in the UK.
Technological
This new era of retail establishments is always evolving and embracing new technologies. Self-checkout systems in stores and restaurants are a huge part of the modern economy. Marks & Spencer has already implemented many of these self-checkout locations, with plans to further expand its use of AI-based checkout in the near future. Also, they’ve set up a very successful online shop in the UK. Customers may save time and effort by buying at Marks & Spencer because of the comprehensive nature of their website. If the company is willing to embrace new technologies in this way, it may be able to increase its visibility among millennials.
Legal
Many lawsuits have been filed against Marks & Spencer throughout the years. These lawsuits have made it challenging to maintain the brand’s respectable reputation during the course of its century of existence. One such case is the recent landlord-tenant court case involving Frascati. In addition to other legal considerations, the brand will be profoundly impacted by the anticipated shift in British trade law after Brexit. Neither technological innovation nor savvy company planning can improve this.
Environmental
Marks & Spencer markets itself as a high-end retailer, and as such, the company takes care to minimise its impact on the natural world. They have pledged to be mindful of environmental impacts and have advocated for a more sustainable retail sector on many occasions. Marks & Spencer’s action has been widely praised in light of the present climate catastrophe, and many other British retailers have followed suit. Products made under fair trade conditions are also available at Marks & Spencer. Because of this, greener manufacturing techniques are now within the reach of smaller retail enterprises, since they can afford to use them.
Internal Analysis
Porter’s Five Forces Analysis
Threat of new entrants
Due to the significant capital investment requirements required to join the market, market maturity, and strong brand names that have garnered customer loyalty, the retailing industry has a low danger of new entrants. Potential entrants would be deterred by M&S’s strong consumer loyalty, the company’s concentration on quality items, and a long-established and well-developed supply chain network (Vizard, 2015). Nonetheless, despite significant entrance obstacles, the corporation is confronting entering competition in both its clothes and food areas. Under the ASDA umbrella, companies such as George and Matalan are targeting previously loyal M&S customers with reduced pricing at the lower end of the market. Indeed, Asda overtook Next as the UK’s second-largest clothes store by volume in the summer of 2014. (Butler, 2015).
Threat of substitute products
M&S operates in a market where innovation is critical to keeping one’s brand consistent and in line with the needs of a constantly changing client base (PWC, 2015). In its clothes industry, the threat of alternatives is strong; replicating or reproducing existing patterns is becoming increasingly simple. M&S’s fall after the 1990s was primarily attributable to rival stores selling foreign products. Its premium position is under threat from altering client preferences; they may want to search for a label or hunt for comparable quality items at a lower price elsewhere (The Marketing Society, 2010).
Bargaining power of buyers
Customers have a lot of negotiating power in the industries where M&S operates. Several consumer market developments, such as increased price sensitivity of customers seeking classic designs, increasing demand for trendy things, or UK consumers’ disloyalty to British companies, are increasingly influencing retailers (Cunningham, 2016). The company’s predominantly product-oriented strategy, which lays a great focus on its M&S brand, is not advantageous at a time when M&S’s competitors are taking a customer-oriented approach and investing in developing strong consumer connections (Ruddick, 2013). However, lower consumer confidence as a result of the Brexit vote (Reuters, 2016) is anticipated to impact sales growth and force the firm to decrease prices and focus on its customers’ demands.
Bargaining power of suppliers
M&S is a giant publicly traded firm with a vast turnover, and suppliers want their products to be on the retailer’s shelves in order to access the large client base. Furthermore, because it mostly offers its own branded items, M&S is less reliant on suppliers than other retailers. This implies that it mostly purchases raw materials rather than finished items, which benefits margins (M&S, 2007). Many suppliers are from developing nations that rely on contracts from Western firms.
Intensity of competitive rivalry
The retail industry is tremendously competitive. The problem is compounded by corporations’ attempts to diversify into non-core industries, resulting in extra rivalry. M&S is especially vulnerable to competition since it offers not only food but also clothing and home goods. As a result, it competes with supermarkets such as Tesco, Asda, and Sainsbury’s as well as clothing businesses such as Topshop, Next, Zara, and John Lewis. According to (Porter, 1985), organisations follow one of three general strategies: low cost, distinctiveness, or hybrid. M&S has always attempted to set itself apart from the competitors by portraying itself as a higher-quality, value-for-money brand.
SWOT Analysis
Strengths
Marks & Spencer plc is well-known for its 1,382 outlets throughout the world. The company’s international development through franchise agreements offers it a significant competitive edge over other UK enterprises that solely operate in the UK market (Rogers, 2012). M&S, which currently operates in 59 territories across Europe, Asia, and the Middle East through wholly owned retail businesses, retail joint ventures, retail franchise operations, or website-only territories (Marks & Spencer, 2016), is doing particularly well in priority markets like India, while its food business is expanding in places like Hong Kong and Europe (Marks & Spencer, 2015). M&S’s worldwide strategy’s geographical variety mitigates any possible dangers of being unduly exposed in a single area, while its two-fold foreign operation (food and apparel) provides even more stability (BBC, 2013). Marks & Spencer plc is an iconic brand that has been in business since 1884 and is still regarded as one of the top ten brands in the United Kingdom today (Vizard, 2015). Its choice to continue investing in innovations and brand-building advertising throughout the recession has effectively enhanced its brand positioning as a firm that provides high-quality, low-cost items (Marks & Spencer, 2016).
Weaknesses
Multiple initiatives, including the introduction of new sub-brands such as Autograph and Per Una, as well as the launch of a website in 2014, have been implemented in an attempt to strengthen the clothing arm of the business and thus reverse a decade of market share decline in what was once considered the company’s most profitable business (The Telegraph, 2014). However, these efforts have yet to provide a satisfying result (BBC, 2013). Despite a slight increase in April 2015, the company’s clothing sales have been declining for four years in a row, with the second quarter of 2016 being the company’s worst quarter since 2005. Analysts predict a more precipitous drop in the future years (Macalister, 2015). Because of the fall in sales, John Dixon, the business’s head of the clothes division, left the company in July 2015. (Macalister, 2015).
The corporation is losing important staff to rivals, including product developers, food technologists, and members of the General Merchandise design team. This will not only necessitate the firm investing in the recruitment, employment, and training of new personnel, but it will also expose the company to the danger of its know-how, know-how, and connections (connected to present or prospective contracts and business) becoming easily available to rivals (Davey, 2016).
Opportunities
M&S’s website now boasts six million online consumers, but it has yet to reach, engage, and convert 14.5 million people who exclusively interact with the firm in its High Street stores and buy online with competitors (The Telegraph, 2014). Sparks, a members club with four million registered members, is projected to promote online traffic with the introduction of a personalised shopping experience and personally designed loyalty programmes towards the end of 2015. M&S Bank, founded in 1985, recently (2014) introduced a current account with no monthly cost and a £100 M&S gift card. This effort has been well lauded, and with a great operational performance in 2015 (Marks & Spencer, 2016), it is regarded as a “challenge” to High Street banks (Jones, 2014). Additional advances in this area may create chances for the organisation (Brignall, 2016).
Threats
M&S was hit hard by the recession, with a significant drop in sales in 2009, a four-year loss in clothes sales, and, most recently, a ten-year low in apparel sales in the second quarter of 2016. (Davey, 2016). Macroeconomic issues and a sinking euro remain a concern, particularly in the Middle East (Marks & Spencer, 2016). M&S, formerly the largest clothes shop by volume, has now fallen to third place, trailing only Primark and Asda (Butler, 2015). Despite the fact that the firm still ranks first in terms of sales by value, its 14-quarter fall before a one-time increase in sales in the first quarter of 2015 suggests that the company will shift its focus from clothing to food (The Economist, 2015).
TOWS Strategies
M&S should conduct a TOWS study to explore viable strategic options to better handle these difficulties and maximise on the company’s present prospects. TOWS is an acronym that stands for “Threats, Opportunities, Weaknesses, and Strengths,” and it is a useful tool for building plans that include both an organization’s internal and external contexts.
Strengths are favourable internal traits that may be capitalised on in order to seek possibilities. M&S’s strengths include its well-known brand name, international development through franchise agreements, two-fold overseas operations in food and fashion, investment in innovations, four million Sparks members, and an in-house retail bank known as M&S Bank.
Internal elements may be acting against the company, which are referred to as weaknesses. Two of the company’s major problems include poor garment sales and the departure of key personnel to explore chances elsewhere.
Opportunities are situations that may be used to one’s advantage in order to reach one’s expansion objectives. M&S has opportunities such as reaching out to the 14.5 million individuals who shop in-store, connecting with them, and converting some of them, establishing a customised shopping experience with Sparks and competing with High Street banks with M&S Bank current accounts.
External elements that have the ability to hamper the organization’s development toward its goals are referred to as threats. Recession, a sinking euro, increased clothes sales at Primark and Asda, and the likelihood of M&S altering its focus from clothing to food are all threats to the corporation. Using the TOWS analysis as a guide, M&S should attempt a number of various solutions.
SO Strategies
SO strategies should leverage the company’s existing capabilities in order to capitalise on opportunities. These strategies include expanding franchise agreements to leverage the well-known brand name globally, leveraging the two-fold foreign operation in food and apparel to strengthen the business, increasing investments in innovations to reinforce brand positioning, leveraging the four million Sparks members to promote online traffic, and challenging High Street banks with the M&S Bank current account. Other ideas include exploiting the business’s dual overseas operations in food and clothes.
WO Strategies
WO strategies must fix any vulnerabilities in order to capitalise on opportunities. These techniques include putting more focus on clothes sales, expanding the product range, and investing in training and development programmes to keep personnel on board.
ST Strategies
ST strategies must leverage on their advantages to face possible threats. Among these strategies are, leveraging the well-known brand name to expand reach and engage more people in-store and online; leveraging the two-fold foreign operation in food and apparel to expand in priority markets Leveraging the investment in innovations to develop new products and services. Next, leveraging Sparks to personalise the shopping experience and attract more customers and leveraging the M&S Bank current account to challenge High Street banks.
WT Strategies
WT strategies should focus on strengthening susceptible regions to combat possible threats. These strategies include increasing the focus on clothing sales and improving the product range to mitigate the effects of the recession; investing in training and development programmes to retain staff and prevent know-how and connections from being easily available to competitors and investing in research and development to develop new products and services to compete with Primark and Asda. Invest in research and development to produce new products and services to compete with Primark and Asda.
To summarise, M&S should used TOWS study to establish their strategic approaches. The organisation should pursue a variety of strategies, including capitalising on the company’s strengths to pursue opportunities, addressing the company’s weaknesses to pursue opportunities, capitalising on the company’s strengths to respond to threats, and capitalising on its weaknesses to respond to threats. By implementing these methods, M&S will be able to capitalise on the possibilities that are now accessible to it while simultaneously addressing the obstacles that it confronts.
The question is
Make two Strategic Recommendations for growth and two for green management, based on your Analysis. For each strategy type green or growth, apply the SAF tool to evaluate and decide the strategies that would be most appropriate for implementation. Note that you will make four recommendations in total. Two growth strategy recommendations and two green strategy recommendations
Here we will want to see the use of strategic management vocabulary, and the use of academic texts, to explain the type of strategic recommendation you are making, and to debate its pros and cons of each strategic approach.
