Executive Summary
Marks and Spencer is one of the largest multinational retailers in the UK. The food, clothing line and home products retailer have more than 1380 stores across the globe with the majority located in the United Kingdom while others are located in various territories in across Europe, Asia and the Middle East. Since the brand began more than thirteen decades ago, it has been recognised for quality and style. However, in the past three decades, the multinational corporation is facing various problems from the decrease in sales to a vast increase in competition from well-established online retailers, supermarkets and major fashion brands. The challenges illustrate that S&M market share has considerably reduced in recent years.
Moreover, the Brexit vote has a significant impact on consumer confidence, the purchasing power of the pound, the outsourcing of materials and the selling of products abroad. Undeniably, despite having a relatively strong brand, M&S is facing devastating macro and microeconomic issues. In recent years, the organisation has concentrated in a strong position of their profitable food business, investing in digital transformation not only for their online presence but also to keep pace with consumer tastes and preferences. Additionally, M&S recently developed Plan A in efforts of social, environmental and ethical consciousness. While M&S remains a market leader in the food business, its performance in the clothing line is yet to be seen.
Introduction
Marks and Spencer (M&S) is a multinational organisation with primary headquarters in the United Kingdom. The company is a retailer that specialises in various products from clothes to luxury food to home commodities. The organisation was initially established in 1884 by Michael Marks and later re-branded to Marks and Spencer a decade later when Marks decided to partner with Thomas Spencer. M&S initially began as a market stall, and more than a century and two decades later, it is considered one of the UK’s largest multinational retailers with more than 1,380 stores across the globe. In the UK, M&S has more than 900 stores with an estimated 223 wholly-owned, 350 in franchise dedicated to food products and more than 300 branches involved in clothing. In addition to the physical stores, M&S has an active e-commerce presence with millions of registered users in two principal divisions, food and general merchandise.
The organisation’s current chairman is Archie Norman, and Steve Rowe is the CEO. In the UK market, M&S is considered the “to go to solution” for womenswear, menswear in addition to lingerie. At an international capacity, M&S has around 469 wholly-owned, franchise or jointed-owned stores that are located in more than 59 jurisdictions in Europe, the Middle East and Asia. One of the most defining aspects of M&S is the “plan A,” which focuses on the organisation’s social, ethical and environmental commitments, which has been essential in the organisation’s brand positioning.
Performance
In the year 2017, M&S recorded total revenue of 10.6 billion pounds which was a definite increase of more than 2% of the previous year (Marks and Spencer, 2016). From the total revenue, 5.6 billion pounds was attributed to the organisation’s food endeavours. Since the organisation has recently introduced new products to the food product line, the revenue associated with the food division witnessed more than 3.3 per cent increase in total revenue. However, despite the company’s expansion in the number of consumer and total value sales compared to the previous trading period, there was an evident reduction in total revenue associated with both clothing and home product lines. M&S total profit before tax and other adjustments was 613.8 million pounds a 10 per cent decrease for those reported in the year 2016 (Marks and Spencer, 2017). The reduction in profits was attributed to an increase in operating costs and the reduction in clothing and home products gross profit. The organisation reported dividends per share at 18.7 (Marks and Spencer, 2017). Generally, the M&S’s performance in the food sector improved majorly due to new products and the organisation’s dedication to quality, superior and innovative and convenient products. However, the performance in both clothing line and home products declined due to the company’s efforts to reduce marketing and promotions.
Macro Environment Analysis (PESTEL Analysis)
The PESTEL analysis provides a model that is applied in examining an organisation’s non-controllable external attributes that have a possibility of influence the activities of the company. The PESTEL analysis is essential since it allows an organisation to consider the potential implications and take the necessary action to reduce and mitigate any future risks.
Political Factors
M&S has always benefited from activities related to the European Union’s efforts to integrate trading activities among its member countries. For instance, the European Commission’s free trade agreements facilitated product importation and decreased sourcing costs which positively impacted the organisation’s revenues and profits. However, in June 2016 the British EU referendum indicated the country’s withdrawal from EU which continue to adversely affect M&S sales and profit margins (Dentons, 2016). Additionally, in the trading period of 2015, M&S showcased limited expansion due to the uncertain climate in the global market. It was partly due to the international geopolitical unrest that leads to the closure of twelve stores in different territories across the globe. Indeed, issues such as political instability, local currency fluctuations and a decrease in consumer demand continue to affect M&S operations in the Middle East, Russia and Ukraine. Moreover, the British government lack of clarity on green measures legislation and energy efficiency techniques affects M&S dedication to “plan A.” For instance, the lack of charge on plastic bag distresses the company’s commitment to sustainability.
Economic Factors
A decade after the financial crisis of 2008 that adversely affected M&S revenues and profit margins as was the case of any organisation, the strategy adopted by the M&S continues to pay off. While many competitors such as Aldi decided to discount pricing, M&S continue to emphasise quality and customer satisfaction a factor that boosted consumer confidence with evidence of excellent consumer loyalty. However, the crisis increased the price sensitivity of thousands of loyal M&S customers (Butler, 2015). Moreover, there is evidence of the decline in consumer confidence due to falling commodity prices, the Brexit, pound fluctuations and other macroeconomic factors. Decrease in oil prices in 2016 and 2017 adversely affected M&S operations in the Middle East.
Socio-cultural Factors
The main aspects affecting M&S operations in the socio-cultural perspective is the constant changes in values and a generational shift from the Baby Boomers who are retiring to Generation X and subsequently the Millennials who are characterised with different characteristics. Each generation has different approaches to shopping techniques, the perception of products, and the application of technology among others. Additionally, it is paramount for M&S to consider that in recent years a majority of the consumers have ethical concerns regarding socio-environmental costs as such efforts of sustainability are essential (Grayson, 2016). M&S has focused various resources to ensuring not only the maintenance but also the profitability of Plan A.
Technological Factors
M&S as a large corporation in various locations across the globe is in a unique position to enjoy the advantages associated with the altering media platform, the advancement of social networks and proliferation of mobile wave across the world. For instance, in the clothing line, advancement in technology showcases an increase in speed in which fashion trends are communicated thus beneficial to M&S clothing line. To cope with the rise in the online shopping experience, M&S recently moved their online presence from Amazon to their website in efforts of increasing the delivery option and consumer experience (Davey, 2016). Additionally, M&S has invested in big data projects such as predictive analytics to keep up with consumer tastes and preferences. Moreover, there are more than 150 in-house software engineers in the organisation’s payroll who are committed to ensuring M&S keeps pace with the lasts trends.
Environmental Factors
In recent years, stricter environmental legislations are ordinary both at national and international levels forcing multinational corporations such as M&S to examine the life cycle of their products from the supplies to the final consumer. M&S’s Plan A is an environmentally conscious and ethical plan adopted in efforts of monitoring and managing the way activities are carried out both inside and outside M&S (Grayson, 2016). Undeniably, the program has assisted the company in sourcing responsibly, reduce wastes associated with their products while increasing their popularity in the modern-day environmental conscious consumer. M&S remains ahead of competition regarding sustainability since reports in 2017 indicate 86 per cent of the organisation raw materials are sourced responsibly. Currently, M&S is completely transparent concerning their supply chain.
Legal Factors
Several legal attributes such as health and safety guidelines, consumer rights, environment and antitrust laws affect the activities of S&M. M&S focuses on abiding in all the legal constraints. For instance, the “behind the barcode” initiative was started with the intention of allowing the organisation’s online consumers to examine products before delivery. Moreover, the new reporting regulations that M&S adopted in 2014 illustrates the organisation dedicated to the legal framework and necessity to demonstrate the company’s adherence through transparency to the stakeholders. Additionally, it is deductible following the exit from the EU, the company like other multinational corporations located in the UK are likely to face legal issue due to lack of access to a common market.
Industry Structure Analysis
Porters’ Five Forces Analysis
This particular framework measures the competitiveness and attractiveness of a specific industry. In the case of M&S, the five forces that influence the industry include; the threat of new competitors, risk of substitute products, bargaining power of the buyers, bargaining power of suppliers and the strength of competition.
The threat of New Entrants
The retailing industry has enormous barriers to entry due to the high capital costs associated with entry into the mark and strong brand names that enjoy brand loyalty. Many new competitors will be discouraged by M&S loyal consumers; the organisation focus on quality products and a well-developed supply chain. However, despite the barriers to entry, M&S is facing new competition both in the food and clothing lines. For instance, brands like George attract M&S consumers due to their low prices.
The threat of Substitute Products
M&S is engaged in an industry where change particularly related to innovation is paramount in efforts of keeping pace with changing consumer tastes and preferences. Undeniably, regarding the clothing line, M&S faces high threat regarding substitute products. Indeed, the financial crisis and decline of M&S in the late 20th century were primarily due to imports with similar utility (Davey, 2016). Indeed, as customer preferences change, S&M position continues to be threatened since consumers may prefer to get similar products elsewhere at better prices. Additionally, the food line is threatened by Britain’s four supermarkets, Tesco, Asda, Sainsbury’s and Morrison’s which have already penetrated the market that was traditionally recognised as M&S’S.
Bargaining Power of the Buyers
The industries, food, clothing and home products, with which M&S operates is characterised with high consumer bargaining power. Aspects such as customer price sensitivity, preference for classical designs, and predilection to foreign brand threaten the activities of S&M (Butler, 2015). Additionally, S&M focus to the product-oriented strategy that depends on the organisation’s brand is not beneficial since many companies in the industries of S&M operations are investing in customer-oriented products.
Bargaining Power of Suppliers
In the 20th century, many of S&M suppliers were British and enjoyed a high bargaining power. However, the decline of the organisation in the 1990s prompted international outsource a factor that illustrates S&M enjoyed competitive pricing from suppliers. Additionally, S&M brand image provides significant competitive advantage regarding the supply chain.
The intensity of Competitive Rivalry
In the industries in which S&M operates, there is high competition which continues to grow on a daily basis. Marks and Spencer face competition from hundreds of supermarkets and fashion retailers. Currently, the organisation food business faces competition from supermarkets such as Tesco while the clothing line is rivalled by retailers such as Zara. Additionally, the company faces competition in the online market where other brands with more affordable prices attract previously loyal S&M customers. Indeed after more than thirteen decades of operations that focused on quality value-for-money products, S&M has recently been focused on exploring low-cost strategy in the clothing line.
Value Chain Analysis
While Porters Five Analysis is concerned with the attractiveness of a particular industry, a value chain identifies operations in or close to an organisation that is involved in the creation of a specific product or service. There are various aspects associated with value chain analysis including inbound logistics, operations, outbound logistics, marketing and sales and services.
Inbound Logistics
Inbound logistics encompasses transport, storage and the delivery of goods that are brought into a business. Due to the benefits associated with Plan A and M&S recognition in the GBS Supply chain award, research indicates the organisation remains ahead of its competition in regards to conscious to the environment and social issues (European Commission, 2011). Additionally, currently, M&S has corporate control having reduced its dependency on full-service vendors.
Outbound Logistics
On the other hand, outbound logistics concern the transport, storage and delivery of goods that are moving out of the business, in most cases finished products and wastes. M&S has developed various techniques to ensure effective delivery options for their online consumers. Moreover, the organisation closed different close regional warehouse to open a megastore in Bradford in efforts of supporting better distribution systems. Additionally, M&S has recently set annual recycling targets with the intention of achieving zero waste to landfill by the year 2012.
Operations
Marks and Spencer has invested in various sub-brands and in-store bakeries with the intention of improving their customer experience. Additionally, the company intended to develop the GM IT systems and the logistics network in alignment with the efforts of a better supply chain flexibility and customer satisfaction. However, despite active efforts to improve its e-commerce operations, security remains a problem. For instance, in 2015 the organisation was forced to close its website owing to a security breach.
Marketing and Sales
The most common marketing strategy of M&S is the focus on the quality of their products. The company concentrates on modernising and simplifying their products while maintaining quality. Additionally, the organisation is exploring the digital platform in marketing especially through their website that facilitates the interaction between M&S and their consumers through various social media channels such as Twitter and Instagram. Moreover, since the mid-20th century, the company has steadily invested in television and magazine advertising. In recent years, through advancements in technology, the company has explored target marketing in its promotional activities as indicated with the customer loyalty data.
Service
Although M&S has faced various challenges in in-store service such as an increase in the quantity of out-of-stock commodities, it has currently focused on customer services such as free delivery for purchases above 50 pounds and free returns within 35 days of purchase.
Strategic Position Analysis (SWOT Analysis)
The SWOT analysis is applied in the practical investigation of the internal capabilities of an organisation (Harrison, 2015). The framework focuses on the strengths, weaknesses, opportunities and threats associated with a particular organisation.
Strengths
Marks and Spencer has more than 1380 stores across the globe hence an international presence that gives the organisation a strong competitive advantaged compared to other organisations that only operate in the UK (Marks and Spencer, 2016). It runs in Europe, the Middle East and Asia hence geographical diversification that reduces the risks associated with being overexposed in a particular region as such facilitating stability. Moreover, M&S is a brand that has been in business for more than a century and the fact that it has prevailed during various economic declines through investments and innovations reflects the strength of the company. Another benefit the organisation enjoys is related to its differentiated specialist strategy that enabled M&S to deliver like-for-like growth in every quarter particularly in the food line. Marks and Spencer recent shift to a more consumer-oriented approach has benefited the organisation since it is focused on consumers’ tastes and preferences and their satisfaction factors that appeal to many consumers in contemporary society.
Weaknesses
Marks and Spencer clothing line continues to witness a decline despite various efforts such as adding new sub-brands and attracting and poaching employees from rival organisations that are dedicated to reviving what was once considered M&S most profitable business endeavour. Unfortunately, analysts predict the decline in sales and profits in the clothing line is likely to continue and worsen in the coming years (Ruddick, 2013). Additionally, the organisation continues to lose their employees to competitors, which is expected to adversely affect the organisation’s finances due to investments in recruitment and training of new staff. Considering the importance of an online presence in current business activities, M&S is a latecomer since it has only explored the online activities in the past decade. M&S.com was launched in 2014 after more than three years of development.
Opportunities
Even though the clothing line is failing, M&S has a stronghold in the food business. Indeed, in recent years has utilised this particular advantage to expand into convenience stores. Moreover, the organisation’s online presence is likely to increase because currently it has an estimated six million customers and is yet to reach to more than 14 million who currently prefer physical stores or shop online from M&S competitors (Butler, 2015). Moreover, the M&S that was opened more than three decades recently explored a current account facility avenue characterised with no monthly fee and an M&S gift card (Jones, 2014). This particular business endeavour is praised by the consumers and business critics alike and provides opportunities for the growth of the organisation.
Threats
Macroeconomic factors such as weakening of currency continue to be a challenge to M&S. Additionally, even though it is almost a decade since the 2008 recession, S&M clothing line is yet to recover from the adverse consequences associated with an economic decline (Butler, 2015). While M&S was once considered the biggest retailer regarding both value and sales, it is currently ranked third after Primark and Asda in regards to volume. The unstable political environment in various M&S international franchise markets particularly in the Middle East threats the activities of the organisation.
Marketing Performance Applying Ansoff Matrix
The Ansoff product and market matrix are applied in efforts of establishing an organisation’s strategic direction. It provides an opportunity to reflect on the strategic options available to M&S regarding products and market coverage through the evaluation of the strategic capability.
Ansoff Matrix
Products
Existing New
| Market Penetration
Develop new products Focus in the UK market |
Product Development
Continue to develop per una brand Technological advancement in online operations |
Markets
| Market Development
New Segment New territory New customers |
Diversification
Food and beauty products |
New Existing
From the above matrix, it is evident market penetration can be achieved through product development to increase variety in the clothing line. Moreover, M&S can also enjoy high profits if it was to concentrate on the UK market and consolidate a high market share. Product development might be achieved through focus in the unit brand in addition to supporting IT development to promote e-commerce. Market development, on the other hand, can be attained through looking at new international markets, new consumers, venturing into a new segment such as teenage or children’s wear (Gill & Broderick, 2014). As a renowned brand Marks and Spencer may continue to explore the option of partnering with other retailers.
CSR Practices and Ethical Issues in Marks and Spencer
Marks and Spencer aspires to be the world’s most sustainable international retailer (European Commission, 2011). Efforts of sustainability are in line with the organisation’s corporate social responsibility (CSR). Plan A represents the organisation’s dedication to sustainability. Research indicates the Plan A initiative illustrates M&S evolution from the previous concept of corporate social responsibility to the contemporary aspect of how individuals conduct business operations (Grayson, 2016). Undeniably, the company’s foundation on fair trading, ethical treatment of staff, and a shared destiny with suppliers in addition to dedication to quality reflect the moral conscious of Marks and Spencer. For more than a century, M&S has been actively involved in contributions to charities and other community causes. However, the economic decline of the late 20th century and early 21st century with the tipping point of the hostile take-over of 2004 forced the organisation to abandon the majority of its corporate philanthropic and community engagement commitments in favour of focusing on higher standards in both environmental and social performance. As mentioned, M&S is recognised a leader in environmental and social conscious hence useful contribution to CSR and the associated ethical concerns.
Conclusion
Marks and Spencer is one of the most significant UK retailers with an active market presence in food, clothing and home products. Since its launch more than thirteen decades ago, the brand has been as an epitome of style and quality which has facilitated its growth both in the UK and at an international capacity. However, despite its specialist positioning, in the late 20th century and recently after the 2008 financial crisis, the organisation has witnessed a decrease in sales and an increase in competition. Additionally, the recent Brexit continues to have a substantial adverse impact on the company’s activities both in the USA and at an international capacity. Therefore it operations in the next few years will involve structuring the supply chain upon the loss of the open market associated with the UK’s membership to the EU. Additionally, it is paramount for the organisation to plan for the UK workers that are currently employed in other EU members and vice versa since the freedom of movement of workers will no longer apply to the UK.
References
Butler, S. (2015, May 20). Marks and Spencer profits jump for the first time in four years. Retrieved from The Guardian: http://www.theguardian.com/business/2015/may/20/marks-spencer-profits-jump-mark-bolland
Davey, J. (2016, July 7). M&S reports worst clothing sales fall for a decade. Retrieved from Reuters: http://uk.reuters.com/article/us-m-s-outlook-idUKKCN0ZN0EH
Dentons. (2016). Key Legal Brexit Issues for retailers. London: Dentons.
European Commission. (2011, July 28). M&S aims to become the world’s most sustainable retailer. Retrieved from European Commission: http://ec.europa.eu/environment/ecoap/about-ecoinnovation/business-funding/united-kingdom-4888-en.html
Gill, D., & Broderick, A. (2014). Brand heritage and CSR credentials: A discourse analysis of M&S reports. Critical Studies on Corporate Responsibility, Governance and Sustainability, 179-199.
Grayson, D. (2016). Embedding Corporate Responsibility and Sustainability Marks and Spencer. Journal of Management Development, 30(10), 1017-1026.
Harrison, J. (2015). Strategic Planning and SWOT Analysis. In J. Harrison, Essentials of strategic planning (pp. 91-97). London: Routledge.
Jones, R. (2014, March 7). Marks & Spencer takes on banks with new current accounts. Retrieved from The Guardian: http://www.theguardian.com/money/2014/mar/07/marks-and-spencer-bank-current-account
Marks and Spencer. (2016). Annual reports and financial statements. Marks and Spencer.
Marks and Spencer. (2017). Annual report and financial statements. Marks and Spencer.
Ruddick, G. (2013, October 24). Should M&S give up on clothes and focus on food? Retrieved from The Telegraph: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10403348/Should-MandS-give-up-on-clothes-and-focus-on-food.html.
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