Overview of Marks & Spencer’s Business Strategies and Challenges

Introduction Marks & Spencer is a British retailer with over 800 stores in more than 30 countries around the world. It is the largest clothing retailer in the UK, as well as being a food retailer. Most of its domestic stores sell both clothing & food, and since the year 2000 Marks & Spencer have started to expand into other ranges such as home wares, furniture & technology. Marks & Spencer became the first British retailer to make a pre-tax profit of over ?  billion “BBC News online 1998” Though a few years later Marks & Spencer were hit by the “credit crunch” which has had a dramatic effect on the company as they struggle in the current economical climate. M&S is a successful company. In macro-environment, M&S obeys the government and protects the natural environment. Moreover, M&S is influenced by the factors of economic, social, and technological to make its business strategies. On the other hand, in micro-environment, the M&S has created a good and long-term relationship with the suppliers and customers.

From the SWOT analysis, the most important factor for M&S is to satisfy customer needs. On the other hand, the main disadvantage is the lack of clothing market segmentation that causes M&S to lose its brand awareness among the existing customers. The significant strategies of M&S are creating potential customers and maintaining the existing customers. To sum up, the analysis of M&S has found that its business structures follow the trend of society, keep the position in the market, and increase its potential market share. Mission

The mission of the M&S is to make as high quality accessible to all. Marks & Spencer is a leading British retailer of clothing, food and household goods. They prefer to call themselves "Marks & Spencer," using an ampersand instead of the word "and. " Their logo is a style form of the characters "M&S. " They have a "Plan A" for tackling environmental issues "because there is no plan B. " M&S outlines its core business as clothing and Food. Its’ financial objectives is to deliver shareholder value in terms of increase returns, but also in terms of increase sales and market share in retailing.

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It beliefs and values are outlined as “Our customers continue to see Marks & Spencer as the place to shop for special food, produced to exacting standards”. M&S also sees its workforce as an important part of its plan and also considers modern its stores as a key corporate objective. Vision The vision of the M&S is to be the standard against which all others are measured. They sells clothes, food and home wares at more than 650 stores in Britain and about 300 shops abroad, said it expected to achieve annual benefits of around 250 million pounds by 2015-2016 from upgrading its supply chain and information technology systems.

They will supply chain and IT improvements. The improvements will include shrinking the firm's network of 100 warehouses, which are run by third parties, to just four. And also to revamp its website and said it would expand its business abroad, including at least 50 stores in India over five years. They have established a long-term vision for where we want to take the business which they believe will create long-term sustainable growth. At the heart of this vision is moving the business from being product focused, store centric and UK dominated to being customer focused, multi-channel and international.

M would conduct a review of its UK store network in the light of fast-growing online retail sales, with future new store likely to be offset at least in part by closures. They plan to cutting prices, stepping up promotions and introducing new products, add 800 new lines to sustain the recent improvement, including extending a trial to sell a small number of brands. They think the strong growth potential in children swear and footwear as well as home wares. PESTLE Political Factors

The government sets regulations for companies to abide by such as Health & Safety British Standards such as, planning for hazard identification, risk assessment and risk control. If companies do not abide by these regulations they will be fined or even in some cases be forced to close down. Marks & Spencer did not abide by the British Standards as they were charged for neglecting health & safety regulations after a door fell on an employee. George Blair was allegedly injured after a warehouse door in their store near Glasgow was left hanging on loose fixtures.

Marks are alleged to have ignored repair requests, allowing the door to fall in to disrepair. Marks & Spencer pled not guilty to this; there is still no outcome of this trial. Also according to “BBC News 30th January 2006” Marks & Spencer would be the first major retailer to go down the Fair-trade route on both clothing and food. The fair-trade policy, which they have launched will include, cut salt and fat in M foods, recycled packaging and animal welfare protection. Marks & Spencer Chief Stuart Rose stated, “Customers want good value, but they care more than ever how food and clothing products are made”.

Economical Factors Currently the economic outlook is very uncertain and this is more than likely to affect retail sales, as people do not have the spare cash to spend on luxury items such as clothing and food luxuries. Marks & Spencer have been hit by this and have recently closed a number of stores and have had to make job cuts of 2% of their 70,000 staff. And also to show what affect the recession has had, they took the decision to have two days of 20% discounts in the run-up to Christmas.

They have also recently introduced a 20% of all Wine and Champagne to keep up with their competitors. Marks & Spencer have had to change the way they market themselves so that they can try and stay ahead of the recession. Sociological factors In the last few years society has changed. In 2006 as stated by the Guardian, Chief Executive of Marks & Spencer Stuart Rose wanted to stretch the company brand, for example he considered selling food online as part of a plan to become a multi-channel retailer, this was obviously to keep up with the competitive market such as Asda.

Asda and Marks & Spencer appeal to different markets in terms of social class and other demographics; this has a major influence on the way they respond to current issues. In response to the current cheap clothing industry supermarkets have increasingly over the last few years caught up with fashion trends, helping them to rival the high street clothing stores with their less expensive versions. Marks & Spencer is no exception to this and they have bought their clothing ranges up to date to keep up with the latest trends and to keep their customers interested.

Consumer purchases are influenced by cultural, social, personal and psychological characteristics. For the most part, marketers cannot control such factors, but they must take them into account. Technological Factors Technology is vital in the retail market. Companies must manage their brand scare. First the brands position must be continuously communicated to consumers. Major brand marketers often spend huge amounts on advertising to create brand awareness and to build preference and loyalty.

For Marks & Spencer to continuously communicate to consumers they need to be heavily into advertising, which they are. They have Celebrity icon Class as the Face of Marks & Spencer who appears on the adverts on the TV and she is also on their website model the M clothing, so their adverts appeal to women not only in their 20’s but also to the more mature lady so they are covering all areas with their advertising campaign. Also their website is very appealing with bright and very easy to use, it is also constantly updated with the new M brands. Legal Factors Legislations are always changing.

Marks and Spencer carry out re-training & update every year, they keep up to date with new laws or legislations, and with issues regarding Health & Safety they also ensure that their legal protection is updated. For re-training Marks & Spencer invite business changes to the business, tax changes to the business & products changes amongst many other things. Marks & Spencer invite objectives/methods that need to be changed and new training, and also on going development. An example of legislation is the “Fair Packaging and Labeling Act (1996) – Provided for the regulation of packaging and labeling of consumer goods.

Requires that manufacturers state what the package contains, who made it, and how much it contains”. Here is an example from Marks & Spencer’s website to show that they are adhere to this legislation, “Packaging helps to protect the product between being produced and used by the customer. It prevents product wastage, carries important instructions and information on ingredients and helps the product look its best in the store”. Environmental Factors With the current environmental climate as it stands, issues are being promoted daily on the television, in magazines and newspapers and on the radio.

All companies, industries and organizations are being pressured to change their ways when it comes to the materials they use and how they manufacture. Marks & Spencer have established their own Green Policy which they call “Plan A” The chief executive of Marks & Spencer states that it is called this because there is no “Plan B”. Marks has today announced a 100-point five-year plan to re-engineer itself to become a carbon neutral, zero-waste-to-landfill, ethical-trading, sustainable-sourcing, health-promoting business SWOT 3. 1 Strengths 3. 1. 1 High Quality

High quality is the major strength that makes M successful. Customers always find high quality goods such as fresh fruits, vegetables, and other superior goods in M food hall (Ciao, 2002). With many people turning to eat vegetarian meals. M grasps the consumers need. M has high quality of products that are the food and other products, such as baby products and women under wears. 3. 1. 2 Customer Services M has high reputation for focusing on customer service. (Christie, 2002). This is one of the most important methods to make a good relationship between customers and M.

For example, when women want to buy under wears for themselves, the shop assistants will help them to measure sizes and give them good suggestions. 3. 1. 3 Shopping Environment M tries to make customers feel more convenient and comfortable. It makes stores brighter, and uses modern designs (Rung 2001). All goods in the shop can be seen immediately. Furthermore, customers do not worry about being drowned in many shelves and avoiding multitudinous people. 3. 1. 4 Manager Training One of M strengths is its strict and excellent manager training system (Retail Technology,1999).

Every manager of M must be familiar with duty of every post. In fact, managers of M are arranged practice of every post. It helps them to improve both work experiences and management skills. 3. 2 Weakness 3. 2. 1 Clothing Lack Segmentation The clothing market of M has many segments. In fact, especially ladies outer wear, is outmoded design and cut. In addition, affluent younger consumers prefer purchasing brand-labels, such as Gap, Next and Top shop (Jobber, 2001: 149). 3. 2. 2 Stock Control The non-performance of the home delivery/shopping service even sometimes involves wedding lists.

Customers were told that items were out of stock (Jobber, 2001). Customers complain the defect of e-shopping and delivery services. To some extent, M suffers from the unbalance between the stock and Information Technology System. 3. 2. 3 Waste Store Spaces Another problem is that M has many store spaces. In fact, it has added 75 percent of square foot age since the early Eighties, but its market share in clothing has not increased (Stewart, 2000). M needs to find some new products to stuff its extra spaces. 3. 3 Opportunities 3. 3. 1 Internet Technology

Internet technology has developed fast, it offers an opportunity to increase the demand for the online products (Zakon, 1999). In terms of this circumstance, buying products online became a new trend. Customers are getting used to accept the model and adapt it to their daily lives, and the demand for this kind of products would be increased in the future. 3. 3. 2 Healthy Eating Healthy eating offers an opportunity that the demand of specific food will be increased (Leyshon, 2002). People pay attention to the life quality, they request companies to offer varied products to satisfy their needs.

For example, in the food market, M does good segmentation in providing the vegetarian, low fat or organic food. This is the advantage that the competitors have not aware of it. 3. 3. 3 Marketing Extending The Company owned stores in the Republic of Ireland and Hong Kong and has 131 franchise stores in28 countries operating through a network of successful partnerships (Marks & Spencer, 2002d). In the future, the company will expand its business beyond the existing area. 3. 4 Threats Although M has its own strengths, opportunities and weaknesses, it still occurs some threats from itself and other competitors. . 4. 1 Strong Competitors Strong competitors are the most threat to M. For example, in the food market, there are four main supermarkets, such as Tesco, Asda, Safeway and Sainsbury (Oct, 2002). They provide not only high quality but also value-added products to build customers loyalty. In the clothing market, Gap, Next, Topshop and other fashionable brands may compete with M (M shuts, 2001). 3. 4. 2 The Change of Social Environment Except other competitors, M will be influenced by social environment.

Since the social environment changes at any time, the customer tastes are also changed. For example, people move to other countries, and their culture will affect the local people lifestyles, such as eating, and dressing. M can adjust its products to satisfy different needs. 3. 4. 3 Chemical Pollution Environment pollution is a threat for M. An environmental systems manager of M claimed. Every one of the 30,000 product line that M sells is dependent on chemicals (Friend of the Earth,2002). Governments are taking measures to protect natural environment and reduce pollution.

This potential risk will affect its development of M in the future. Invest strategy Focusing on improving its operations to save costs, expanding the options for customers to buy products - especially online - and driving its business outside of the U. K. The U. K. 's biggest department store operator told attendees at an investor day that was webcast on its website that it would improve its supply chain and implement new IT systems which would save it GBP250 million by 2015/2016 through capital expenditure over the same period of GBP1 billion.

Some of those changes would include consolidating distribution sites which would mean further warehouse closures on top of the 21 already closed, sending products directly to the country of sale rather than routing everything through a central U. K. hub, and refreshing stock systems and data collection. The second stage of the company's strategy calls its 2020 program. It is to offer more choice of when and how to buy M products, with online sales a particularly large growth area especially as more people turn to shopping on the Internet.

Store sales are expected to shrink slightly by 2020 to GBP206 billion from GBP212 billion this year, while online sales are expected to almost triple to GBP57 billion in 2020 from GBP21 billion this year according to research by Verdict, Forrester and Javelin Group provided by M at its investor day. Marks & Spencer aims to target some of its 8 million customers who shop online elsewhere but not at M. There is also an untapped 21. 5 million M customers who don't shop online at all.

The final plank in ITV's strategy is to grow its international business which currently accounts for 15% of M profits through 296 international stores and its online presence. The growth is expected to come from increasing the group's central and eastern European operations as well as building on its business in China and India. The company expects to open 50 stores in five years in India, and identify key regional growth areas in China where the company will focus on property, products and local sourcing.

Marks & Spencer unveiled its new strategy program under the banner "2020 Doing The Right Thing" in May, which received a lukewarm reception from investors. At the time, the retailer outlined its targets but gave few details on how exactly it would implement the plans. A bellwether for British consumer sentiment, Marks & Spencer has been hit hard over the past 18 months by the economic downturn as shoppers either cut back spending on nonessential items or sought less expensive food and clothing elsewhere. As a result, the company has revamped its food offer and availability and introduced a budget range of grocery products.

It has also cut capital spending, laid off 1,230 staff and closed some stores. At the start of the month, Marks & Spencer reported better-than-expected fiscal second-quarter sales, buoyed by the introduction of less expensive food and revamped clothing and house ware ranges. Still, it cautioned that business will remain difficult well into next year due to the economic downturn. Second-quarter group sales rose 2. 7%, due to a 9. 6% rise in international sales and a 30% jump in online sales. The company also raised its outlook on annual profit margin thanks to better stock control, sourcing and supply chain management.

Targeting strategy Targeting approach used by Marks & Spencer (M&S) is more multi segment targeting than a concentrated targeting approach. When we look at the segmentation statistics, middle aged women are the prime revenue generator for the company but even the 80% of customers who bring the 20% of sales according to the 80/20 Pareto's rule can be developed to increase the sales. Therefore M has been more focused on targeting multi segments of people with good educational socio economic class and who some high income urban populations as well.

M has been previously focusing on women gender only but now environmental variables are changing and M has entered into the men market with high quality products as well that has increased the brand image in the clothing and accessories industry. M cannot follow undifferentiated or differentiated approach as the product pricing techniques are such that it is targeted to limited segment of higher socio economic class, who have high demands and can afford luxury and pleasure easily. Positioning strategy M, as now has become an international brand, therefore the company needed to position its brand in variable manner.

The promotion in South East Asia region needed to be very different from what it was positioned in Britain. The company has focused a few important parameters that lift the brand in clothing industry. M has positioned its clothing and accessories with relaxation and high quality, moreover when it comes to international market specially in India where people are more in lower socio economic class and the consumer purchasing power is not equal to other international markets where M has been making profits, therefore in such regions the company has also focused on flexible pricing strategies in order to retain and add new customers.

The competitors of M in the international market are large in numbers and in order to be differentiated from the others the positioning strategy currently adopted by M is well suited to the situation. The comfort and quality has been a prime concern for the clothing industry and positioning the product with such parameters requires M to provide constant results on long term basis so that the company is able to build the brand equity and customer loyalty.

Positioning is promises that a company makes to its consumers and fulfilling this promise is not only the toughest task but it also need great sacrifices and unpopular decisions at times. However it is fact that if the positioning of the brand is well justified by the company with sincerity the increase in customer level is significant. In the world of similar products and services retaining customers is not easy and therefore M as a brand has to strive harder to get to the top clothing positioning.

Financial position |  |Notes |As at |As at | | | |3 April |3 April | | | |2011 |2010 | | | |? m |? | |Assets |  | |  | |Non-current assets |  |  |  | |Investments in Group undertakings |C5 |9,179. 8 |9,168. 6 | |Total assets |  |9,179. 8 |9,168. | |Liabilities |  |  |  | |Current liabilities |  |  |  | |Amounts owed to Group undertakings |  |2,591. 8 |2,603. 5 | |Total liabilities |  |2,591. 8 |2,603. | |Net assets |  |6,588. 0 |6,565. 1 | |Equity |  |  |  | |Ordinary share capital |  |396. 2 |395. 5 | |Share premium account |  |255. 2 |247. | |Capital redemption reserve |  |2,202. 6 |2,202. 6 | |Merger reserve |  |1,397. 3 |1,397. 3 | |Retained earnings |  |2,336. 7 |2,322. 2 | |Total equity |  |6,588. 0 |6,565. 1 |

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