Strategic analysis of Marks and Spencer using SWOT, PESTEL, and Porter's forces

¶ … SWOT, PESTEL and Porter's 5 forces analyses of Marks and Spencer

Marks and Spencer situational analysis

Internal strengths

Long lasting presence within the British market place, ever since its founding in 1884. Additionally, within the national market place, Marks and Spencer holds a dominant leadership position, with a value market share by almost 11 per cent (Website of Marks and Spencer, 2012).

Powerful brand, reputation and trust from the customer base. Still at the level of trust, it has to be noted that this is not only increased among consumers, but also among investors, due to strong brand equity (Sullivan and Adcock, 2002).

Another internal strength is represented by the diversity of the products sold by Marks and Spencer, which retail not only clothing, but also luxury and specialty food items (Kerry and Butler, 2008). This strategy of diversification allows it to decrease its dependency on a single product category or a single consumer market and allows it to better consolidate its revenues.

External opportunities

At the level of opportunities, it should first be noted that the technologic community is evolving at a rapid pace, which allows Marks and Spencer to integrate technologic innovation in its products and services. At this specific level, the company is presented with the opportunity to integrate online sales and boost its operations and profits via its website (Hallbauer, 2008). The organization has already commenced to develop its website and promote it as a source of sustainable revenues in the future.

Another opportunity is represented by the changing tastes of consumers, obvious at the level of food items. In such a setting, the customers become more focused on food items which are more environmentally friendly, as well as healthier for the consumers. The company has the ability to serve this need through its food product line.

External threats

A major threat is represented by the current state of the economy, which negatively impacts sales in both Great Britain, as well as outside it. Specifically, the internationalized economic crisis has materialized in job and saving losses, and a subsequent decrease in disposable income (McEachern, 2011). This economic context poses important threats for Marks and Spencer by decreasing the purchase powers of its consumers.

Another notable challenge of the external environment is represented by the high levels of competition faced by the company in both domestic as well as international market places, by firms such as Tesco, Debenhams, the Arcadia Group Limited, ASDA Group Limited, Benetton or Wal-Mart.

Last, a final threat to be addressed at this stage is represented by the very international nature of the company's operations, meaning as such that the organization is sensitive to fluctuations in exchange rates. In other words, an important threat is represented by the fiscal policies present within the international community (Browne, 2000), with an important example at this stage being represented by the fluctuations in the value of the euro relative to the pound and the American dollar.

2. PESTEL analysis

Political environment

The political climate is currently a tense one at a global level and this is due to the internationalized economic crisis. Governments across the globe are unsure of how to best approach the recession in order to manage it. These tensions are obvious at the global level, but are even more intense within the European Union, where Great Britain is a member state. The complexities are increased by the severity of the crisis in Greece, as well as by the different opinions of European governments (Moreau, 2011).

Economic environment

As it has already been mentioned, the economic field is mostly characterized by an internationalized economic crisis which negatively impacts the demand for products and services, and as such impacts the financial results of economic agents. For Marks and Spencer, the complexities of the economic environment are further increased by the role of exchange rates within the international market place. Today, the economic environment -- in UK especially, but also globe wide -- raises the threats of higher credit costs (Floud and Johnson, 2004).

Socio-cultural environment

At the level of the modern day society, it has to be mentioned that the individuals come to place more and more emphasis on responsible economic operations. They for instance demand social sustainability and responsibility from the economic agents, which is manifested at several levels, such as the company's treatment of its employees, its customers or the general public (Fuller, 2008). A most important point to be made at this stage is represented by the increasing demands of UK customers, who expect the economic agents to deliver higher quality items, at affordable prices, and also in a manner which is sustainable (Ianuzzi, 2011).

Technologic background

The technological environment is extremely complex, marked by rapid developments that pose both opportunities as well as threats. In terms of the threats, these are represented by the need to continually engage financial resources to integrate the latest innovations, whereas at the level of the opportunities, these refer to the ability of economic agents to integrate innovation and create points of difference and competitive strengths.

Ecologic environment

As part of the wider socio-cultural move, the various categories of organizational stakeholders demand UK-based economic agents to operate in a more environmentally responsible manner. These demands refer to a wide array of aspects, such as the management of waste, the use of chemicals in various processes, the better control of carbon emissions and so on. In an effort to respond to this, Marks and Spencer has committed to becoming carbon neutral, to sending no waste to the landfill, to extending sustainable sourcing, to setting new standards in ethical trading and also to helping their customers and employees to live healthier lives (Springer, 2010).

Legal environment

Finally, at the level of the legal environment, its complexities are generated by the international feature of the company's operations, which means that the firm has to simultaneously comply with the laws in various global regions, as these have been issued by the governments of the respective countries, as well as by the international trade institutions. Within the UK for instance, the company pays taxes based on its profits, in the general absence of "a true fiscal consolidation regime" (Weber and Da Silva, 2011).

3. Porter's five forces analysis

Bargaining power of buyers

The bargaining power of the consumers in the UK retail sector can be assessed through two different angles -- individual consumers and collective consumers. At the individual level, the buyers have virtually an inexistent power as one person cannot influence the retailing practices of Marks and Spencer. From a collective standpoint nevertheless, this power is increased as, when united, the consumers can force the company to reshape its retailing strategies. The buyer power is also enhanced upon large volume orders (Singh, 2011).

Bargaining power of suppliers

At the level of British suppliers, their power is similar to that of the buyers, in the meaning that their individual strength is virtually inexistent. At a theoretical level, the suppliers could join forces and increase their bargaining power in front of Marks & Spencer, yet such a move is difficult to organize, especially since the suppliers compete against each other to collaborate with the retailers.

Threat of new entrants

The threat of new entrants within the retailing industry is generally increased since the entry barriers within the industry are decreased (Kandampully, 2011). Nevertheless, this threat is mostly important at the level of the small size retailers, who have yet to consolidate their competitive position. At the level of Marks and Spencer and other such corporate retailers, the low barriers to entry pose little threat as the new entrants would have to possess massive capitals, technologies, and other scale economy advantages in order to threaten their competitive position.

Threat of substitute products

Given the dynamic retailing environment, the threat of substitute products is fairly intense. Customers normally shop at large corporate retailers, but their loyalty levels are often unstable. In such a context then, the retailers -- including Marks and Spencer -- have difficulties in retaining their customers and preventing competitive items from replacing their own products (Dalic, 2004).

Competitive rivalry

Last, in the environment that has already been described, the competition among the retailers is intense. This competition is intensified by forces such as changing consumer demands, an increasing number of retailers in the market and a stagnant demand for products. In this setting, retailers strive to create points of difference in order to satisfy and retain their customers (Kneer, 2009).

References:

Ahlstrom, D., Bruton, G.D., 2009, International management: strategy and culture in the emerging world, Cengage Learning

Alon, I., 2000, Marks & Spencer: a case study in international retailing, Izmir Ekonomi Universitesi, http://homes.ieu.edu.tr/mdemirbag/523/marksandspencer.pdf last accessed on May 29, 2012

Browne, D., 2000, Heinemann business studies for as level, Heinemann

Dalic, T., 2004, Wal-Mart's European business strategy, GRIN Verlag

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