SWOT Analysis of Marks and Spencer - Essay Example

Chapter Introduction: This includes all factors that can influence and organization, but that are out of their direct control. A company does not generally influence any laws (although it is accepted that they could lobby or be part of a trade organization). It is continuously changing, and the company needs to be flexible to adapt. There may be aggressive competition and rivalry in a market. Globalization means that there is always the threat of substitute products and new entrants [2]. The wider environment is also ever changing, and the marketer needs to compensate for changes in culture, politics, economics and technology. In this article the company selected for analysis is Marks and Spencer. One of the biggest retail stores in the UK. Chapter 2: SWOT Analysis: Strengths of Marks and Spencer, primarily is their assets. Many of their outlets are purchased when land inside metropolitan areas was not at a premium; as a result the value of these outlets has skyrocketed. Secondarily one of our key strengths is their image (also a weakness that I shall arrive at later) and their brand name, St.Michael. Finally their last identifiable strength is their market share (currently static at 13%) [5]. Their Weaknesses are, as mentioned already, the image and brand name. This is mainly because their target market is split into a number of segments, the most easily identifiable being: School Clothes; pre-teens; teens - 30; 30's - 40's; 50+. This diverse coverage means that they lack the Marketing Economies of Scale with which to target and cater for each of these specifically. In addition to this there is a certain amount of product association that occurs, in the same way Lexus is attached to Toyota, they can't shake the image of a post-war retailer from the minds of the younger people that they're targeting. Opportunities are present in their ability to reshape the firm. With the main segments of the market identified I believe positive steps could be taken to capitalize on this discovery [5]. They can use this information to re-brand certain areas to make them more focused on the individual segments rather than trying to nurture a "One product suits all" ethos. They cultivate a new strategy that makes us more individual. Threats to them still remain the use of Marketing Economies by our competitors. There is no way they can get these simply because of the range that our products are targeting. Other weaknesses include their recent bad press regarding treatment of suppliers which is magnified by their previously thought reliability as a top retailer [1]. The stock marketis a threat to them, mainly because their falling share price leads to less people being interested in purchasing our shares. Chapter 3: Factors Affecting Decision Making: 3.1 The threat of entry: Economies of scale e.g. the benefits associated with bulk purchasing. The high or low cost of entry, e.g. how much will it cost for the latest technology Ease of access to distribution channels e.g. Do our competitors have the distribution channels sewn up Cost advantages not related to the size of the company e.g. personal contacts or knowledge that larger companies do not own or learning curve effects. Will competitors retaliate Government action e.g. will new laws be introduced that will weaken our competitive position How important is differentiation This desensitises the influence of the environment. All they above questions are determinants for a competitor or a new firm to enter the market. Marks and Spencer is constantly bombarded with newer brands which are more consumers specific and focused. People perceive Marks and Spencer as being 'behind the times' and so they have to bring their image in line with the 21st Century in order to win back the customers they have lost to the likes of Gap, Next and USC. According to recent customer surveys, people believe that Marks and Spencer have no specific market. People have commented on the fact that they cannot identify with the store because Marks and Spencer do not target a specific group of people [6]. This is evident in their stores, because it is often the case that different clothes ranges are displayed next to each other so people do not feel that the store is designed specifically for their needs. 3.2 Internationalisation: Today it is clear that for an increasing number of these businesses, national boundaries have ceased to be a constraint to their activities and ambitions. They are becoming more outward looking in seeking opportunities beyond their local, regional and national markets for sustaining company sales and profit growth [4]. It is critical for Marks and Spencer wanting to internationalise their operations to understand how key economic, political, legal, social, cultural and technological environments impact on resource, competition and distribution dimensions, leading to the establishment of main drivers for international expansion. The combination of these drivers and Marks and Spencer's strategic and financial objectives, its capabilities and culture, will lead to the formation of appropriate entry strategies for the internationalization of operations. There is also another important factor playing a critical role in the internationalization process, which is that of Growth Patterns/Time Horizon. The next issue need to be examined concerns the main motives for overseas expansion. These are many and varied and can be divided into 'hard' factors and 'soft' factors [5]. The hard factors can be sub-divided into push factors, pull factors and facilitating factors. For each individual retail company, as discussed above, the final decision is a unique combination of these hard factors, soft factors and facilitating factors and, in turn, that determines the most appropriate route for international expansion. It should be emphasized that these factors highlight many of the motives for international expansion, but not necessarily for successful expansion. Success or failure in the international arena by organizations can be ascribed to many other factors and/or to the execution aspect of the chosen strategy [3]. 3.3 Catering Consumer Demands: Recent market research brought to Marks and Spencer's team attention that people like individuality when they are shopping. An example of this is, if somebody is wanting to go to the teenagers' clothes, the teenager does not want to have to walk through 60+ clothes to get to their department. For that reason they should analyse on the possibility of making their stores more segregated [2]. They have to constantly make shopping a more pleasurable experience then more people will return through their doors. If they make the store appear more upmarket then people may be more willing to shop there. Recent trials at their Oxford Street store have proved successful. The improved lighting, brighter colours and better displays have increased sales. By modernising their stores Marks and Spencer aim to attract new customers. It is crucial that once they have attracted new customers they are able to retain them. The efficiency with which business adapts to its changing environment is essential to sustainability and business success in modern market economies. As a result measuring the capacity to innovate and the capacity to learn has become increasingly relevant. 3.4 Maintain Competitive Advantage: The importance to competitive advantage of key internal and external relationships has been shown by the performance of Marks and Spencer during the 1990s, whose market position was created by its long-term and productive relations with its workforce and suppliers. This is also a clear example of the importance of creating and maintaining social capital. Another example would be relationships with investors and the trust whose value as an asset can be only too obviously seen in a company's cost of capital by its absence [6]. Chapter 4: Conclusion: Marks & Spencer PLC cannot afford to continue to lose our substantial market share. With our vast assets we are a tempting target for takeover if we allow ourselves to continue to fall like this. I believe that in order to correct this set of targets must be put in place. One of them should almost certainly be the increase in our market share within two years of the plan being implemented. This is the most effective way of judging our success (or failure) on a macro-business scale. Certain internal goals should also be set such as increased efficiency and better supplier relations; however such things will need to be modified around an official plan that takes all the information into account. References: 1. Alexander, N. and Morlock, W. (1992) "Saturation and Internationalization", International Journal of Retail and Distribution Management, 20 (3), 33-39. 2. Burt, S.L. "Retail Internationalization: Evolution of Theory and Practice", International Retailing - Trends and Strategies, Pitman Publishing, 51-71. 3. Dawson, J.A. (1994) "Internationalization of Retail Operations", Journal of Marketing Management, 10, 267-282. 4. http://www.edinburghacademy.org.uk/curriculum/business/gallery.htm 5. Marks & Spencer CEO: Keeping An Eye On Costs Marks & Spencer profit up 46.6 percent Nicholas Alexander, Barry Quinn, International retail divestment, International Journal of Retail & Distribution Management; Volume:30 Issue:2; 2002 6. Salmon, W.J. and Trodjman, A. (1989) "The Internationalization of Retailing", International Journal of Retailing, 4 (2), 3-16 Read More