Marks and Spencer Group plc (commonly abbreviated as M&S or colloquially Marks and Sparks) is a major British multinational retailer with headquarters in London, England, that specialises in selling clothing, home products and food products. It is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index, having previously been in the FTSE 100 Index from its creation until 2019.
Free trade agreements and European integration had opened up new markets for the UK and other organizations and countries to invest in Europe; however, due to the Brexit the political situation of UK has vastly changed and hence it has greatly affected M&S and has caused it to fight hard so as to maintain its position and market share with innovative and aggressive strategies. In general, any trade can be performed in The UK as long as it does not affect the country’s existing laws, public orders and policy. However, for M&S political factors which greatly affect it are those that deal with industrial relationships and labor laws. It affects the company’s development efforts through labor law infringements in both its international initiatives and local operations
The retail sector in the UK is quite prawn to economic recessions and it is also very sensitive to interest rate changes. The economic recession of 2009 set the country’s economy struggling for survival but it has managed to get back on its feet again. UK is the hub of ecommerce which means that Customers are not limited to local retailers’ only but also to external tourists which creates a diverse retail business and base trends. However, due to the recent Brexit the British economy’s growth has slowed which has affected the overall economy of the country as well as the spending capacity of the people of the country.
Consumer’s tastes, preferences and lifestyle changes have presented both threats and opportunities for the UK retail industry. Consumers in the UK have the tendency of being loyal to one brand and the quality of products. However, this easily changes with a competitive pricing strategy from other competitors. Consumers also have a preference for trendy styles as opposed to classics which presents a threat to M&S in regaining a big market share for its consumers. This means that consumers in UK’s retail industry usually place a high value on their spent money.
The retail industry in UK has witnessed radical technological changes. Changes as such include the use of internet as a basis of online shopping store which widens the use of ecommerce in the industry. In addition to that, paperless operations are being used and IT systems have offered a basis for this operation. Online marketing is also another technological aspect being used by Marks and spencer and other retail companies in the market as a basis for competitive advantage in the market place.
The renewable and environmentally friendly sources of resources used in production are opted by most of the companies across globe now which has posed greater struggle for companies to maintain its market share. For Marks & Spencer, careful use of fabric and raw materials is a greater concern now.
National legislation for health and safety both in terms of consumer rights and also in terms of production of own natural renewable resources for making clothes is closely monitoring practices of companies so as to evaluate them on complying with legal restrictions.
A Mission statement is a statement reflecting what the organization business is and what key purpose is there. – Mark and Spencer Mission are to make inspirational quality accessible to others.
A vision helps working in goal congruence. It comes from within as well as outside. It accomplishes the following Give a sense of the future Guides decision making and strategy Creates a platform with same purpose Laydown behavior guidelines Inspire emotion Reflects the values Mark and Spencer vision is to be the standard against which others are measured- Benchmarking
- To expand more globally and compete in a dynamic market.
- To increase sales and profitability through continuous innovation.
- Grow business through acquisition for fast market development.
- Improved process for supply chain management and CRM.
INDUSTRY ANALYSIS USING P5F MODEL
Threat of New Entrants:
In UK, on average it is estimated that around £172,000 is required to set up a retail business, which is a huge amount. Besides the capital to start the business, licensing and insurance is another important aspect of starting a retail business. One need to secure proper license from local authority and also have the right insurance for the business, which again requires the money to be spent. Also, the proper marketing, renting a place for the business, maintenance of the business and employees require extra amount of money. Therefore, overall the setup of a retail business required quite a huge amount of money, which makes it highly difficult for any person to start such business immediately.
Moreover, M&S is a huge business with strong footing in the retail business, so it can be concluded that it is challenging for any retail business to enter and compete with the existing business of such caliber.
Threat of substitute:
M&S requires continuous innovation to keep brand position strong and to remain distinctive to meet the demands of its customer base. The threat of substitutes of M&S is high due to competitive rivalry. The clothing business is to be set with substitutes, it will be very easy to copy and get similar design
at lower cost elsewhere. The food business of M&S is already being attack by big store. M&S need to think extra with the similar product. M&S private label, M&S need to focus on its food line by offering clear advantage to its valuable customer over the competitors.
Substitution would reduce customer’s demand for the particular class of products because customers able to switch to the alternatives. In the cloth retail sector, there are a lot of retailers operating with foreign imports by lower price. Consumers today are prepared to pay a premium for label or they can buy similar products with lower price. Thus the threat of substitutes of M&S is high.
Bargaining power of Suppliers
All most all the companies in the retail industry buy their raw material from numerous suppliers. Suppliers in dominant position can decrease the margins Marks and Spencer can earn in the market. Powerful suppliers in consumer services sector use their negotiating power to extract higher prices from the firms in retail field. The overall impact of higher supplier bargaining power is that it lowers the overall profitability of Retail. More than 90 % of M&S suppliers were British. M&S bought directly from a few UK suppliers all their stock that they manufacture which created a situation where the supplier was reliant on M&S and vice versa. The bargaining power of suppliers is quite low because M&S was concentrated purchase from few suppliers only.
What M&S does while tackling Bargaining power of the suppliers?
- It builds efficient supply chain with multiple suppliers. It directly contract with around 400 suppliers who produce our products at over 800 sites located in 44 countries – 90% of which are in Europe. Raw materials and commodities are sourced from more than 70 countries. We estimate that our suppliers source raw materials from around 30,000 farms.
- M&S also experiment with product design using different materials so that if the prices go up of one raw material then company can shift to another.
- Developing dedicated suppliers whose business depends upon the firm. One of the lessons Marks and Spencer can learn from Walmart and Nike is how these companies developed third party manufactures whose business solely depends on the, thus creating a scenario where these third party manufactures have significantly less bargaining power compare to Walmart and Nike.
Bargaining power of Buyers:
Buyers are often demanding lot. They want to buy the best offerings available by paying the minimum price as possible. This put pressure on Marks and Spencer group Plc profitability in the long run. The
smaller and more powerful the customer base is of Marks and Spencer group Plc the higher the bargaining power of the customers and higher their ability to seek increasing discounts and offers. In general, bargaining power of buyers is high. Consumers were either seeking classical clothing became price sensitive or seeking high image became fashion sensitive. M&S competitors were more focus on customers which took away its potential customers. M&S had misread its target market, because UK consumers were not willing to pay a premium price for supporting British products, they just want a lower price with high quality products, therefore a consumer oriented strategy is needed instead of product oriented strategy.
What M&S does while tackling Bargaining power of the Buyers?
- It builds a large base of customers. This will be helpful in two ways. It will reduce the bargaining power of the buyers plus it will provide an opportunity to the firm to streamline its sales and production process.
- It also focus on innovating new products rapidly, customers often seek discounts and offering on established products so if marks and spencer group Plc keep on coming up with new products then it can limit the bargaining power of buyers.
- New products will also reduce the defection of existing customers of marks and spencer group Plc to its competitors.
Rivalry among existing competitors
- The global retail industry is on an upward growth trend as sales continue to increase year after year and has higher growth rate.
- The retail industry growth forecast for 2020 is 4.1 percent. This is a slight dip from 4.5 percent in 2019 and 5.8 percent in 2017.
- M&S is facing intense rivalry from supermarkets chains, homewear stores, fashion retailers and different online stores.
- The major competitors are: Tesco, Sainsbury’s,Asda , Topshop, Zara, John Lewis, Amazon, Alibaba
- Competitive rivalry is intense due to other companies enter into its market with similar quality goods with affordable similar price and up-to-date fashion.
- The competitive rivalry is intense due to increasing preference in online stores and increase in cost effective stores.
- Clear Brand Image: Marks & Spencer positions itself as a high-end value product which targets the premium segment. In sync with their brand image the products sold by the retailer especially in clothing line are stylish, modern, and sophisticated. This has resulted in a clear branding and customers are sure of what to expect from a Marks & Spencer store.
- Private labels: In addition to selling premium brands like Louis Vuitton, Vero Moda and Versace, Marks & Spencer also has their own labels in almost all categories. Some of their popular private label brands include Per Una, North Coast, Indigo Collection, Autograph, and Classic Collection. These private labels have been successful in making customers familiar with the name Marks & Spencer and also improved brand recall.
- Innovations: Across the 150 years of operations, Marks & Spencer has been in the race primarily because of their spirit of innovation. Innovation in Marks & Spencer is also synonymous with creativity and communication and people across levels are encouraged to think out of the box and suggest ideas wherever they feel necessary, This free spirit of innovation is the company’s biggest strength.
- Diversity: Marks& Spencer have around 80, 000 employees who work in their showrooms and offices around the world. The company encourages diversity and thus has people from all ethnicities, religions, and genders. The company is also an equal opportunity employer and ensures that there is no discrimination of any kind at the workplace. All these factors ensure that the employees are culturally sensitive and understand the customer better.
- Multichannel presence: Marks & Spencer has both brick and mortar and online stores and also offer franchising options. The company operates 300 full-line stores, 910 stores in the United Kingdom, 220 owned and 310 franchised Simply Food Stores. In addition to this, they also have an online store from where customers across the world can shop for Marks & Spencer merchandise.
New Segments: Fashion is an evolving business and new segments come up on a regular basis. In Asia, there is a huge demand for ethnic and traditional wear which currently Marks & Spencer has
been unable to capitalize on. This is one area which can show a lot of promise to the retailer.
Marks and Spencer has already reached some of the biggest countries in the world e.g. Russia, India, & Indonesia. However, exploring expansion opportunities in other big economies (e.g. Brazil & Poland) is worth the effort.
Marks and Spencer’s online presence is good. However, it is no way near to other big retailers in the UK. There are some good online growth opportunities which the company should pursue. In fact, the company has recently revealed its plan to move a third of clothing and home sales online for a digital-first future (Rigby, 2017).
They are broad action plans for achieving objectives. They identify sustainable competitive advantages. They provide direction and scope to the organization.
- Corporate Strategies:
Corporate strategies are overall strategies those provide long term direction and scope to the organization. It determines what business the organization should be in. It defines products, markets and functions. It is also known as grand generic strategy. It. is concerned with managing a portfolio of businesses and allocating resources to them.
M&S has the following corporate strategy
- Expansion and Retrenchment Strategy:
Marks & Spencer’s decision to close stores in 10 countries is the latest move in a chequered saga of international expansion and retrenchment dating to the 1970s.
2014 Bolland announces plans to open 250 stores around the world with further expansion in France, Spain and Italy.
For M & S achieving sustainability is not a one stop solution but an ongoing process and is very well reflected in their commitments of Plan A. As part of the Plan A commitments M & S decided
to achieve 100 tasks broadly segregated in five categories with a deadline of 2012. But later in 2010, the company added further 80 commitments with a deadline of 2015. The business transformation program aims to return M&S to sustainable, profitable growth and to deliver long-term value for all stakeholders. Our priority in 2019/20 has been to evolve Plan A to reflect our new operating model and to embed the programmed into the core strategy rather than continuing to exist in parallel with our partners. Is aligned to the business strategy; Has clear deliverables owned and actioned by each business unit; Maintains our position as a committed sustainable retailer; and
Provides a programed to build competitive advantage in selected areas and to engage our customers on the issues that matter to them. Towards the end of this process, the business’s focus was rightly on managing the impact of Covid-19 pandemic on colleagues, customers and communities – particularly the most vulnerable and healthcare workers. Therefore, confirmation of Group level governance and sign-off of targets will now be completed in 2020/21.
- Diversification Strategy:
Diversification has also been one of the Corporate Strategy of M&S. It is one of the most diversified companies in the world. Company brand is one of our biggest assets. Working with trusted partners we have extended the M&S brand to new product areas M&S Bank and Energy. Company UK Franchise Partners, Working with M&S franchise partners we ensure that our Simply Food stores are in the most convenient locations – from railway stations to motorway services. Our partners include WHS, MOTO, COMPASS, SSP,BP. M&S International Franchise Partners, Working with M&S international franchise partners helps extend the reach of the M&S brand to even more customers around the world. This model enables us to benefit from company partners local market expertise and gain better access to prime retail locations. Company partners include AL-Futtaim group, Central Group, Fiba group, Reliance retail, S groups, supermarkets 1960 Ltd. And retail International, York Limited etc.
- Business Strategies:
Business level strategies relate to choosing which users an organization should serve and which services it should offer them. They make decide to develop specialized outputs so as to focus on the needs of a small group or niche of customer. Business level strategy aims to achieve advantage over competitors in a given market. It follows from corporate-level strategy.
M&S has the following Business strategy
- High cost leadership strategy:
Mostly company is offering high price goods and service. Company should reduce the price due to
recession customers want to purchase goods in low price. The strategy applied by Marks & Spencer is covering wider market share only among the rich people so it should follow low cost
competitive strategy. Provide good quality products with low cost by utilizing modern fabrication techniques play very important role to maintain competitors advantage level. Modern technology, superior resources and capabilities with better management are the key factors to sustain the position of competitor’s advantage.
- Broad Differentiation Strategy:
Information technology is playing a significant role in every field, supplying plenty of relevant information available to business resources. The business information resources may be used to set the suitable business strategy that is superior as compared to the competitors. Business information companies provide such services to become advantage competitors. Financial services is also one of the important differentiation strategy provided by M&S. The core brand values of quality, value, service, innovation and trust have consistently remained the cornerstones of
the Marks & Spencer proposition. In terms of sheer presence, Marks & Spencer has built a formidable business – trading in 30 countries and with more than 300 stores in the UK alone Methods of development correspond to the actions taking by the company with respect to its chosen product – market strategy. With respect to the Market Penetration Strategy in UK, M & S took the following actions – Product Strategy – As far as the clothing segment is concerned, M & S showed tremendous growth in the women wear and lingerie wear and became a market leader. It clearly segregated its various sub brands, making it easier for consumers to choose the right quality and price value combination. But now with sustainability demands and changing customer preferences from extravagance to simplicity M & S needs to look at new markets. Price Strategy – M & S always followed a value price strategy and focused on the mass market. It should continue the same strategy in the developing markets. Place – M & S stores mainly had two formats – 1) Mixed store with merchandise and food 2) Smaller stores with food products only. Moving forward M & S needs to build a strong distribution network to meet the global demands posed by its various locations.
Promotion – Initially M & S was heavily dependent on the word of mouth promotion rather than core advertising. With changing times, in order to highlight its brand philosophy in a better way it resorted to advertising. M & S has so far followed an “Internal Development or org satisfaction the company has evolved into one of the largest retailers of UK. Market Penetration strategy has worked for M & S. But now with low growth of the UK market and stricter environmental regulations, M & S needs to adopt the Market Development strategy.
- Focused Strategy:
The term target market refers to the group of customers and communities at which the organization aims its services and products. Distinction between target markets based on social, demographic and
common characteristics make the best target for the organization to focus. Marks & Spencer (M&S) is one of the leading retailers in the United Kingdom (UK). The high quality services are being provided to the customers in the areas of clothing, food and home products. Based on reliable statistical data, the number of customers visiting M&S stores every week approaching the figure of 21 million. From all over the world, 2,000 suppliers take the responsibility of outstanding quality products to satisfy the customers. The key factors behind the business such as service, quality, value, trust and innovation are equally important since the beginning of M&S 125 years ago till date.
Business is growing in 41 different countries other than UK by following the well-defined rules and regulations regarding customer care, product quality, innovation and trust. More than 76,000 people work in UK and overseas for M&S. To become the world’s most sustainable major retailer is the ultimate goal of M&S. For the achievement of this goal, Plan A was launched in January 2007 consisting of 100 commitments to attain in 5 years, but Plan A has extended to 180 commitments to reach by 2015. The Plan A consists of five pillars to help the M&S customers to lead healthier lifestyles. To combat climate change, reduce waste, use sustainable raw material and trade ethically are the four pillars upon which Plan A stands. All the 180 commitments are under the five pillars of Plan A. M&S is trying best to work through Plan A by involving customers and suppliers to achieve the desired results.
- Functional Strategy:
Each of organization’s individual functions will have its own functional strategies. Functional strategies have an important influence on the organization’s value chain. Functional strategies include marketing strategies, new product development strategies, human resource strategies, financial strategies, legal strategies, supply-chain strategies, and information technology management strategies. The emphasis is on short- and medium-term plans and is limited to the domain of each department’s functional responsibility. Each functional department attempts to do its part in meeting overall corporate objectives, and hence to some extent their strategies are derived from broader corporate strategies.
M&S has following Functional Strategy
- Human Resource Department:
It focus on promoting working environment free from discrimination and harassment. Also give everyone equal treatment in all aspects of employment. There is also the provision of incentives. It delivers a training program. Rendering of quality services to their customers.
- Information & Technology and Operations Department:
M&S.com is right at the heart of our ability to deliver the products, customers want through a service they love. As shopping habits continue to change, it has enabled our transformation into a truly multi-channel retailer. Milestones include the development of own platform to gives us greater control; the creation of an E-Commerce distribution Centre, international websites and in-store technologies to improve the customer experience. Company has grown to deliver on sales objectives. It has led a revolution in digitizing our business. It has been an unqualified success.
Company Support Office functions operate out of our London headquarters, offices in Stockley Park, Chester and Manchester. Step into the nerve Centre of M&S and get amongst the action that steers the heart of our fast-moving business and world-famous brand.
- Marketing Department:
M&S is Clothing & Home is a business that seeks to do things in a responsible way. Company advertising and communications are designed to inspire and inform customers and our commitment is to always do this in a way that is fair, considerate, informative, inclusive and transparent.
Company have a daily dialogue with our customers and value their input and feedback. Every day our marketing team ensures that our customers are at the heart of everything we do. At M&S Food, M&S pride ourselves on our strong heritage of brand values and our unique business model that allows company to create long-term value for our customers through the effective use of resources and relationships. Central to this model is our belief in being responsible, fair, decent and truthful in how company source and produce our food. And M&S recognize that company also have a duty to be just as transparent and responsible in how they sell and market our foods too. Therefore, this document seeks to set out the specific principles that they follow in any of our external marketing communications. For details on how they source and produce our foods. Some of the responsible marketing principle used by M&S are as follows:
As an absolute minimum, all our marketing, advertising and promotions must comply with the relevant laws, regulations and self-regulatory codes;
Company will never mislead our customers;
They will always be fair and transparent when labelling and promoting our products, enabling our customers to make informed choices;
They always take a responsible and inclusive approach to casting models;
They always take a responsible approach when marketing children’s products, for example we are signatories to the BRC Children wear Guidelines;
They will never take part in any unsolicited marketing activities and will always alert customers if
They will never knowingly advertise in media or on websites that contain extremist views or explicit content.
- Procurement Department:
M&S operates more than 700 stores in the UK, employing 78000 staff. It has annual turnover in excess of £9bn. M&S has a further 390 stores in 44 countries around the globe. It sells general merchandize (clothing, home, beauty) and Food, and is the No.1 retailer in the UK for womenswear and lingerie. It had launched Plan A in 2007 with the goal of becoming the world’s most sustainable major retailer. Through Plan A, M&S is working with its customers and suppliers to combat climate change, reduce waste, use sustainable raw materials, trade ethically, and help its customers lead healthier lifestyles. It has adopted BS 8903 as the leading source of authoritative guidance on how it can achieve its sustainability objectives in its corporate procurement activities. BS 8903 has helped to embed further the concepts and methodology of sustainable procurement in M&S’s procurement processes.
Cash Cow: Food
- Cash cow products in low growth market with high market share.
- Cash cow products, the simple rule here is to milk these products as much as possible without killing the cow, often mature, well established products. The company Procter and gamble with manufacturing foods.
- Example: Food for years M&S refused to consider food and today has over 400 simply food stores across the UK. Whilst not a major supermarket, M&S simply has follows products in low growth with high market share.
- It refers to the low market share and growth. Clothing are the Dogs for the M&S, as it is not bringing much benefit to the company due to high level of substitutes products available in the market for clothing store with various types of brands as well as design. Also on Clothing
store there is a decrease of approximately 120 million British pounds on the previous year.
- M&S intends to have fewer, larger clothing and homeware stores in better locations. The retailer points out that its clothing and homeware business has “an ageing customer base, a very wide range, a weak supply chain and ageing store portfolio”.
- It is facing heightened competition from online retailers, as well as discounters such as Aldi, Lidl and Primark.
- Its directors were not awarded bonuses this year because of the disappointing results.
STARS: M&S Energy
- The product line with high market share and high market growth is termed as STAR product of a company.
- STAR product for M&S at present is M&S Energy. The market share for M&S Energy is growing rapidly in the current days.
- M&S Energy was started with the partnership with SEE, one of the top six electric companies in UK. M&S Energy focuses on green energy which in current scenario is gathering a huge interest from every country of the world.
- The market of renewable energy is expected to reach $1,512.3 billion by 2025, showing a growth rate of 6.1%. Since the market growth is very high in this industry and M&S Energy is making its strong footing in this industry and increasing its market share, M&S Energy can be categorized as STAR product of M&S Company.
Question Marks: International Market
- M&S has faced much fluctuation in the international market.
- M&S has shut down its 33stores from international market as the major focus was given only on expanding the stores rather than providing quality services to the customers.
- The exit and pullouts from international market have resulted in serious damage to the brand image of Marks & Spencer causing widespread anger among employees and customers.
- This therefore resulted in less profitability and lower revenues causing the company to withdraw eventually.
- A strategic alliance is where two or more organization share resource and activities to pursue a strategy. M&S brand is one of the biggest assets, working with trusted partners. M&S extended the brand to new product areas. M&S has working with other franchise partners, international franchise partners like AL-Futtaim Group, AL holeair Fashion retail, central group, PT Mitra, etc.
- A company may enter into a strategic alliance to expand into a new market, improve its product line or develop an edge over a competitor. The arrangement allows two business to work toward a common goal that will benefit both. The relationship may be short or long term and the arrangement may be formal or informal.
For various types of product line different types of business growth strategies need to be implemented.
- For M&S International, the company needs to work on localizing the products as per the needs and spending capacity of the local countries. In order for the company to run smoothly in the countries like India and China, it is important that the products be more of the liking of the citizens of the respective countries the stores are located in so that the company can make a connection with the local people of the countries and make them be known in the local market of the countries.
- M&S also needs to focus on diversification of their products especially their clothing ranges so as to carter to the diverse and changing need and demands of their customers. This can be beneficial not only for their in country business but also for their international business.
- M&S also needs to focus more on online direct marketing so as to make a close two way relationship with their customers. One of the second reasons for the failure of M&S International is “having no contact with the customers.” Hence, investing on ways to make a direct contact with customers can provide the company with the information regarding the need and demands of its customers and help them make provisions to bring necessary changes in the services or products they are providing. This can also help sustain the existing customers for every other stores, have a strong customer satisfaction and build trust with valuable credential customers. .
- M&S need to invest on strong online portals so that large number of customers can have easy and informative access to the ranges of food and clothing products available