Strategic Management. Industry Analysis, Strategic Drift and Re-Strategizing

Contents

1. Company Profile
1.1 Industry Evolution
1.2 Current Strategic Position

2.0 Industry Analysis
2.1 PESTEL Analysis
2.2 Market Failures
2.2 Mintzberg’s 5 Ps Concept
2.3 Risk Analysis

3.0 Strategic Drift
3.1 SWOT Analysis
3.2 Blue Ocean to Red Ocean
3.3 Sustainability

4.0 Re-Strategising
4.1 Strategic Objectives
4.2 Ansoff Matrix

5.0 Resource Management

Appendix 1 – Income Statement

Bibliography

List of Tables, Charts and Figures

Figure 1 - Financial Overview

Figure 2- Industry Evolution

Figure 3 - PESTEL Matrix

Figure 4 – Market Share – Overall Retail

Figure 5 - M S Business Model

Figure 6 - Strategic Differentiation

Figure 7 - SWOT Analysis

Figure 8 - Ansoff matrix

1. Company Profile

Marks and Spencer PLC has become a leading British retail icon since its conception more than a hundred years ago (Est. 1884). The company has more than 1,330 stores stretching across the globe with an annual turnover averaging at about 9 billion pounds over the last 5 years. According to the company’s annual report (marksandspencer.com, 2015), the company’s net profit for 2013 and 2014 was (in £ M) 506 and 481 respectively (ended March 28th 2015 – refer to Figure 1 below for financial overview and Appendix 1 for income statement).

Figure 1 - Financial Overview

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Source: (marksandspencer.com, 2015)

M S has over time created a very strong presence in the UK with 700 of its stores located around Britain and more than 360stores spread over 40 countries. The company operates via a networkconsisting of approximately 2000 suppliers and close to 80,000 employees worldwide and the retail giant currently holds the no.1 spot in the UK with their primary business products which is women wear and lingerie. Based on the company’s 2014 annual report almost 50 % of the company’s revenue can be attributed to women clothing and home products while the remainder revenue percentages are spread over food products and groceries. The group’s products can be categorized into 3 distinct categories which are clothing, home and food with geographical focus concentrated on the UK market(marksandspencer.com, 2015).

1.3 Industry Evolution

Theretailindustry is a multifaceted industry that is divided by a huge variety of sectors which include fast moving consumer products, food, fashion, electronics and others that target different market segments in different consumer platforms as such it becomes a necessity that retailers implement product category specific strategies in order to maintain their overall competitiveness. In order to sustain a business and maintain competitive advantage it is critical to focus on a company’s product life cycle as Retail Companies such as Marks Spencer have a diverse range of product that they offer to consumers. Due to this purpose, this report will focus on the women’s wear segment of the company’s product segmentation. According to (Sandberg, 2012), the Western retail industry has matured along with the general markets of Europe that have been producing declining growth margins due to the fact that retail companies such as Marks Spencer are faced with challenges that are unprecedented. Decreased profits and intense rivalry in terms of price and product offerings as well as overlapping overheads has forced Marks Spencer to import products from China to reduce cost, this switch was not received well by consumers as it was viewed as a compromise on the brand’s quality promise. Other issues that stemmed from their expansion plans to recapture markets shares included the designs of their apparels that did not go well abroad in terms fashion and high prices. Supply chains and mismanagement of corporate intellectual property were identified as core factors that were needed to be reassessed and restructured to meet the current business environments from different perspectives (Wrigley Lambiri, 2014), (Adebayo Jenyo, 2013), (Grayson, 2012) and(Burt et al., 2002).

Figure 2- Industry Evolution

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Source: Adopted from http://thegreatbritishhighstreet.co.uk/http://www.statista.com/

1.2 Current Strategic Position

Based on a downtrend in revenues for 2010 the company had shifted its focus in 2012 towards sustainability as a priority involving their customers as part of their “Plan A” with vertical integration that led to the production of sustainable carriage bags as well as advocating garments reuse on top of charity work that saw the collection of 20 million pounds. The company’s agenda also included the support for Social Equality as well as healthier and sustainable lifestyles in an attempt to become the world’s most sustainable retailer by this year (2015). These initiatives were basically targeted at enhancing the brand presence of the company and gain competitive advantage. The company’s initial strategy of producing 100 % British goods was became unviable as competitors were able to gain a price advantage by importing raw materials from countries such as China and when M S followed in the same footsteps to maintain profits and adapting to their competitive environments drew negative reactions from their loyal customers. Another promotional strategy that the company employed to recapture lost customers was a loyalty program called ‘SPARKS’ rewarded their customers with exclusive benefits instead of the usual points for every dollar or pound spent as it was with most other retailers.

2.0 Industry Analysis

The retail market sphere has undergone a tremendous transformation over the last 2 decades that can be attributed to a variety of factors that include but not limited to societal forces, technological advances, deregulations and globalization. As iterated by Kotler, these primal forces have introduced new market and consumer behaviours and challenges as the average consumers increasingly anticipate higher quality,better services and better prices (Kotler, 2003). The internet is a source for obtaining extensive product information that allows consumers to shop more intelligently due to the information they have on what is best in terms of price and quality against maximum satisfaction. Brandssuch as Marks and Spencer are faced with intense competition from both domestic and foreign brands that have direct impacts on promotion costs added to the burden of recoiling profits. Companies cannot just make decisions based on what the competition is doing; companies need to be innovative to cope with the constantly evolving retail market (Obaga et al., 2013).

2.1 PESTEL Analysis

In order to have a clearer perspective on the external influences (macroeconomic) that the companyis exposed to an analysis using the PESTLE concept which acts as a radar is used. The analysis scans the political, economic, social, technological, environmental and legal elements that the company is confined to and the framework allows the strategy managers to identify the negative elements and reduce (or eliminate altogether) their effects on the company’s business processes(Yuksel, 2012).

Figure 3 - PESTEL Matrix

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The political factors that influence the company’s business processes are primarily linked to government established taxes, labour policies, regulations attached to the environment as well as industry investment protocols. The UK government has taken a serious stand on environmental and consumer safety issues and as such compliance is compulsory. Thus far M S has managed to not only follow these regulations, but also taken it further by reducing salts and fat content in food, initiated recycling activities and advocates animal rights activities.

Economic factors that has affected the company drastically is the slow recovery of the UK economy, sluggish consumer spending, high cost of raw material and the high cost of the British Pound makes M S products manufactured in Britain too expensive for foreigners to import. The UK retail industry constantly reports an annual growth averaging at only 1 % which is targeted by a multitude of competitors (Chowla et al., 2014).

Social factors implicate the cultural aspects, that have direct correlations with demographics and buying patterns relate to the consumer trends based on their needs and wants. M S has moved into foreign markets and as such conforming to the different cultural aspects of their store locations must be taken into consideration. The current ‘one fashion (for apparels) fits all’ and high prices in the Asian region has not been successful, plus the current designs that are unappealing due to changing fashion tastes in the UK is another significant factor that has contributed to the decline in overall sales.

Technological factors have been favourable to M S with some of their retail sales being supported by their online stores, however in comparison to other apparel retailers such as Next Plc and other, M S online presence is still under par.

Legal and environmental issues have thus far been insignificant to the business as the company complies with every aspect of legalities that they must accord to in the region of their business operations. M S follows the labour laws and environmental laws associated with their businesses meticulously and have not had legal issues of any sort.

2.2 Market Failures

Over the past 2 decades M S has gradually lost its market share on their biggest segment which is women’s wear and gained market share on the food sector (Perks, 2014), according to the Guardian, the conflicts between costing management teams and fashion management teams have spilled over and affected the consumers as fashion labels such as Next Plc, Reiss Co and Primark have better offers in terms of quality, fashion and price that is coupled with a strong online presence with their online boutique. Another factor that that has been contributing to the decline in interest on M S women’s wear by consumers is due to the lagging advertising initiatives that are more focused on the grocery sector than their traditional champion products which has been women’s wear, this can be observed from the lack of fashion coverage in most print and electronic media.

Figure 4 – Market Share – Overall Retail

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Source: http://www.statista.com/statistics

Among the big players in the retail industry M S is positioned in 9th place, leaving the company as a follower in the grocery sector, and as for the merchandising segment M S is still very much under threat from other brands such as Victoria’s Secrets, Next Plc, Zara and H M.

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