Strategic Management For Competitive Implications Of The Deployment

Strategic Purpose

Discuss about the case study Strategic Management for Competitive Implications of the Deployment.

Mark and Spencer (M&S) is a famous retailer based on United Kingdom. It has started with a small shop and now one of the leading retailer in the UK. It has nearly 910 stores in the home market and over 1380 stores around the world (Reuters UK 2016). The company delivers its own brand clothing; food; home products in the stores of UK and internationally as well. It has also online shopping facility from its website.  As on 2015, it has over 83000 employees over the entire world.

Mission; Vision and Values of M&S:

Mission Statement of M&Sis “to make aspirational quality accessible to all”.

Vision Statement of M&S is “to be the standards against which all others are measured”.

Values of M&S are “Quality; Value; Service; Innovation and Trust”.

The strategic purpose of the UK retailer Mark & Spencer is to provide a high class quality to its customers. They assure that they will provide quality goods that are affordable for all level of people. M&S aims to set a benchmark quality of its products that will be followed by others. The company assures to provide high quality that will worth the value and provide top class services. It emphasizes on innovating new products according to the ever changing market pattern and also on building trust(Mark & Spencer 2016).

Mark & Spencer objective is to become leader in clothing and specialty food. It followsits mission statement in achieving the quality of product. The statements of the company are based on the objectives it has formulated to achieve. To achieve its objectives of retaining customers, M&S provides quality services that complements its mission; vision and values. To attain high growth and improve profitability, M&S has gained trust of the stakeholders.

However, the functioning is at per its strategic statements, the focus on quality indicates that the company might charge a high price for that, instead of low quality and cheaper products. This means that the products of M&S might not be affordable for all class of people. The decisions of M&S are mostly based on ethics. Customers prefers products that are created under strong morale value. Hence, the objective of the company to capture the market share will be fulfilled. The company is expanding in the international market that increases competency (Bloomberg.com 2014). This can be mentioned that, the mission of the M&S is to achieve functional objectives in order to achieve its vision of the future, maintain the values of the organization. The performance of this company is quite good and as demonstrated in the following table (Table 1). The company’s strategy to strengthen its brand has been implemented properly. This is because, according to Global Reputation Pulse measures, M&S has ranked at number one position in 2009 (Prnewswire.co.uk 2016).

Strategic Statements and Functional Objective

Table 1: Income Statement of M & S, 2016

Source: Mark and Spencer 2016

Table 2: Top 10 Companies at Global Reputation Pulse Measure

Rank	Company	Global Pulse Score
1	Marks & Spencer	78.23
2	Smith & Nephew	77.58
3	Cadbury PLC	77.58
4	William Morrison Supermarkets	77.16
5	Rolls-Royce	77.09
6	Tate & Lyle	76.84
7	Sainsbury	76.43
8	Intercontinental Hotels	76.16
9	Thomas Cook	75.99
10	Inmarsat	75.31

Source: Prnewswire.co.uk 2016

Macro-environment Analysis

The external environment of M&S has significant effect on the strategies of the company. The external factors that influences the environment of the company are political factor (P); economical factor (E); social factor (S); technological factor (T); legal factor (L) and environmental factor (E). Hence, the PESTLE Analysis will help to analyse the macro-environment of Mark and Spencer.

Table 3: PESTLE Analysis

Factors	Impact
Political Factor	·         Opening up of East European countries in free trade agreement and European integration offers the companies like M&S to expand its business on those regions (Keukeleire and Delreux 2014). ·         The political stability of UK, attracts many investors that is a major factor for a growing business (Hamilton and Webster 2015). The taxation policy also changes the strategy of a retail company.
EconomicFactor:	·         The retail sector of United Kingdom is quite prone to recession and change in interest rate also affect this market significantly. During the financial crisis, the country has suffered a lot. ·          Moreover, the standard of living of the people of this country is improving. Hence, the ups and downs in the economic indicator affect the activity of Mark and Spencer. ·         The competitors of this company import products due to free trade regime in the most of the countries and save their expenses, whereas M&S faces high cost of production for maintain high quality.
Social Factor	·         Changes in the consumer’s taste; preference; attitudes and lifestyle affects the retail industry. The people of UK no longer put high demand for high quality product, rather they have shifted their demand for more fashionable and trendy clothing (Entwistle 2015). ·         The customers of this nation have also become price sensitive. The people of UK places high value for their money.
Technological Factor:	·         The technical changes severely affected the retail companies like M&S. The emergence of online marketing and online shopping has become common practices and widened the scope of ecommerce (Gehrt et al. 2012). ·         Moreover, the improved communication system enables the companies to stay connected to the customers. ·         The style and fashion are copied through technology and adopted in other nations.
Legal Factor:	·         The legislation of producing renewable natural resources for making apparels or clothes, closely monitors practices of the companies. ·         Moreover, M&S has infringed many labour laws in its local operations. This has hindered its development process.
Environmental Analysis:	·         The retail business involves packaging and huge waste disposal. However, M&S produce their goods in an eco-friendly manner. ·         The growing awareness among people regarding the environment affects the business. If production creates environment hazards, then people will reduce their purchasing from that company. This will lead to fall in sales and profit.

The industry profitability or success not only depends on the quality of products and uses of technology. The structure of the industry and some forces are responsible for industry attractiveness in the long term. There are five forces explained by Porter, which are the major tools to analyse the industry the firm operates in (Dobbs 2014). Porter’s Five Forces are: threats of new entrants; bargaining power of buyers; threats of substitutes bargaining power of suppliers and competitive rivalry.

Threats of New Entrants:  Entrance of a new firm increase the level of competition. The cost of setting up a retail industry is quite huge. Moreover, there are already many retail firms in the UK market that are already well established, capturing large market share. New entrants will take number of years to establish a high quality brand like Mark and Spencer. Thus threats of new entrants are low.

Threats of Substitute: There are increasing retailers who import goods from foreign market and sell it t cheaper price. Therefore, the substitute force of this industry is quite higher. The M&S increases feature of its product to retain the customers from shifting to other company. However, due to price sensitiveness, the customers substitute the M&S products with other low price products available in the UK market.

Bargaining Power of Buyers: The power of buyers is very high as they are large in number and there are many alternate options to them. If the price of M&S is too high, buyers will buy it from other retail stores that are offering cheaper prices.

Bargaining Power of Suppliers: The bargaining power of the supplier is low as they want to sell their produced goods and services through the large retail companies like M&S. There are plenty of suppliers in the market, so M&S have alternative options for purchasing raw materials from its suppliers.

Competitive Rivalry:  Mark & Spencer has number of rivals in the clothing sector like John Lewis etc. and high competition in food industry from firms like Tesco and Sainsbury. The competition in the retail industry is very high in United Kingdom.

External Analysis

Strategic Capabilities and Competency

The excellent and quality products of M&S are the key area of competency. In addition to this, the superior technology enhances the capability of this company. Core competency is vital for M&S. It enables the company to deliver high value; consistent quality. The investors and the customers trusts the company and the management quality of the company is also of superior quality. Its diversified product is another added advantage and makes it more competent in the competitive market. Reputation and the loyalty of the customers are important resources to run the business (Yu, Ramanathan and Nath 2014). It is the epitome of honesty in this nation’s retail industry. The core competency resulted in development of strong brand; excellent quality control and good customer service. Rigid management system once caused M&S to become vulnerable to the changes in the market. Therefore, the company created more resources to seek new opportunity. M&S allowed autonomy for the store managers; they adopted different procedure of buying and started to look for overseas suppliers. The internal structure of the organization is flat in nature. This encourages the employees to take part in the decision making process. The relationship between the employees; suppliers; management and customers are getting stronger; which has positioned M&S at the market’s core. The combination of capabilities and resources, the M&S has achieved unique competency. The resource and capability further improved the efficiency of the organization (Wang 2016).

The basic resources are those that the competitors also use. The unique resources are those resources that are different from the competitors and it is hard to copy. The unique resources create competitive advantage for the organization (Costa, Cool and Dierickx 2013). The basic resources of M&S are its number of store; experienced staff; high quality product and essential suppliers. Unique resource of this company is its brand awareness. Most of the people in UK along with people outside know the company.

The M&S operates in the retail industry in UK. The business function of this company incorporates developing a culture of quality awareness in the company. It ensures quality through rigorous examination of products from suppliers. This has helped the company to create its brand value and maintaining it for long years. The functions of the business of this company are also formulated in order to achieve the sustainability. Currently, the Plan A of this company is adopted to achieve goal of ethical and environmental objectives. According to this business plan, the company aims to make its business in UK, Carbon neutral(Corporate.marksandspencer.com 2016). The ultimate goal of M&S is to become most sustainable retailer. The company has expanded its international business as well.

Industry Analysis

The generic strategies of a company are analysed in order to understand the competitive advantage of the company. The Porter’s generic strategies are: Cost Leadership; Differentiation and Focus (Tanwar 2013). The Focus strategy is again divided into two categories; Cost Focus and Differentiation Focus.

Source: Jenkins and Williamson 2015

The three generic strategies of Porter extended to eight different strategies varying according to the price and value perceived to the consumers (Hill, Jones and Schilling 2014). This is known as Strategic Clock as illustrated in the following diagram.

Source: Metzger 2014

M&S is operating in a very tough competitive environment. It operates in many segments like, food; cloths; home and beauty products in order to deal with the competitors. M&S clothing changes according to the trend to maintain its competitive advantage over the market(Butler 2014). This company faces tough competition from Next; Debenhams; Gap etc. who provide clothing that is more fashionable. Similarly, in food chain Tesco and Sainsbury gives it a tough competition as they are offering frozen and readymade food items. The M&S has therefore obtained strategies that help it to compete in the market. M&S differentiated themselves from other with their top quality own label food; fresh food and food for special occasion. They do not offer discount offers to the customers rather they prefer to give them additional value for their money and consistently maintained its freshness and quality. The biggest retailers of UK (Tesco; Sainsbury; Morrison and ASDA) constitute huge percentage of market share together. Therefore, M&S cannot compete with them in low price strategy. Therefore, their strategy is to focus on the quality of product and make its product unique from what others offer. It offers high quality product for the upper end of the mass market. The company is a premium food retailer and trying to gain market share. Hence, it can be concluded that the company stands on “Focused differentiation” strategy in Bowman’s Clock.

Ansoff Matrix

The strategic choice determines the future of the company. From the above analyses, it can be said that the company will focus on maintaining its quality in order to satisfy their customers. They would prefer to sell their own labelled branded goods. Since, the company has number of rivals in the UK market, it must adopt strategy that will help to capture more market share. Since, the products offered by M&S have several alternatives, it will try to differentiate its products and services. Hence, innovation process is crucial to this company and its strategic choice of innovation will be focused on improving quality and offering differentiated or unique products to the consumers. From Ansoff’s Matrix, the strategic direction of the company can be identified. Company can gain competitive advantage through four options, such as, market penetration; product development; market development and diversification (Jenkins and Williamson 2015).

Source: Jenkins and Williamson 2015

Market Penetration: This entails the developing existing products in order to attract more people in the existing market. Through market penetration, Mark & Spencer can increase its market share. The loyalty program; sales promotion or pricing strategy can be used as tools for market penetration. M&S started with single company and now it has grown to many numbers in the domestic market. The company focused on improving their clothing fashion and concentrate on British market. Through aggressive promotional campaign and implementing of loyalty card, M&S has achieved competitive advantage.

Product Development: This entails development of new product in the existing market or development of production process through technological improvement. Mark and Spencer has developed some new products like banking and financial service. Product development requires developing new competency. M&S increases its competitive advantage by improving its clothing variety. It has developed its product through establishing a new brand “per una”. Promoting online services, the company developed its product and get access to more customers, which improves their competitiveness.

Market Development: This entails selling of existing product in new market. This includes exploitation of new market segment and having new users (Hood, Clarke and Clarke 2016).M&S has opened its largest store outside UK in Dubai. It has also opened stores in Shanghai and much other foreign market. By developing clothing wear specifically for teenage group or children (which is a different market segment), M&Shas become more competitive.

Diversification: This entails the riskiest venture of a business, as it moves to new market with a product. M&S through diversification strategy reduces its dependency on the UK market. The company also diversifies its products in food items; home appliance etc.

M&S can grow in future through penetrating market by developing new product as it will be less risky in the growth path of the company.

Market Development: While launching existing product into the new market, the strategy exploits the strength of the company. This is because, the product is already in the present market and M&S knows how to promote its product in new market. It also fit with the purpose of the firm. Hence, it is suitable. There is certain risk associated with this kind of strategy, as the new market is to be explored by the firm. However, this strategy is acceptable as M&S already knows everything about the product, like its demand etc. Moreover, the brand name is already established. Therefore, this strategy is acceptable. This kind of strategy is possible to implement if the company has sufficient resources. It is feasible becauseM&S can finance this strategy.

Conclusion

The strategic statement of Mark & Spencer, the famous retailer in the UK market, is similar to that of its functional objectives. It faces growing opportunity due to changing global politics and threats from some legal constraint. Industry analysis indicates that it faces a challenging environment. M&S achieved competencies through resources and capabilities of the firm. It has been identified that M&S follows “focused differentiation” strategy to achieve competitive advantage. The company also focuses on its growth that has been analysed with the help of Ansoff Matrix. The Suitability-Acceptability-Feasibility of market development strategy of M&S has been verified.

M&S can utilize their strength in terms of their strong brand value. It can make most out of its excellent quality products. Operating more than a century, the company has been consistence in its performance. The company must utilize these strengths in its functioning. However, it can avoid criticism by curbing down its excessive price of the products. The clothing fashion of this company reflects British royalty, but younger generation is fond of trendy fashion. M&S must be engaged in the promotional activity to attract its customers. M&S must capitalize on the online shopping facility. Entering into the new market segment is another opportunity of the company that must be utilized to improve the comparative advantage of the company. It is recommended to manage the threats of the company by reducing price, as most of the rivals are offering same products at cheaper price. M&S must differentiate its product, so that people find it difficult to substitute it.

References

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