Case Study: Business Strategy For M&S

Summary

I will be using a case study on M&S as supporting evidence for my work

The contents in this report aim to provide an explanation to what strategy and strategic management involve, and how they can impact a business, positively or negatively. This will then be followed by a brief overview of the business that will be used in this report, Marks & Spencer.

The main body will then be introduced, this will contain the main findings of the report. Firstly, it will start by looking at the vision/mission statement of M&S and looking at what their goals are as an organization. This will then be followed by an analytical evaluation of the M&S case study, focusing on their strategy and what their overall objective was, this will then be latter compared to see if this strategy worked, what went right and what went wrong, and ultimately how did they fix it. Lastly the report will look at the main concepts, models and theories surrounding strategy and M&S. These will then be applied to M&S and how they theories link to them.

Followed by this, will then be a detailed explanation of the current macro and micro business environment and the key factors and considerations when implementing strategic decisions. This will look at the competitive environment around M&S and the internal and external (Micro & Macro) factors that may affect them.

And finally, at the end of the main body it will look at M&S and where they currently are now and what they have changed, what they did to help implement that change and how that has allowed their strategy to change.

And lastly, at end of the report it will finish with a conclusion. This will identify the main findings of the report, by looking at how M&S have adapted to the change and how they have utilized their strategy to help give them a competitive advantage.

Introduction

Strategy and Strategic management

A strategy consists of everything in between achieving a goal. It contains a high level of involvement from top management, and the organisation. Which then help implement directional decisions. Multiple questions should also be answered, such as, how you are going to achieve that goal, how are you going to achieve that goal, what resources/advantages do you have, what obstacles may prevent you from achieving that goal, and how are you going to solve them.

Porter (1980) gives the following definition on strategy, “broad formula for how a business is going to compete, what its goals should be, and what policies will be needed to carry out those goals

Strategic Management consists of a bit more in-depth analysis from top management. It requires top management to analysis the macro and micro environment of which they operate within. This helps the business then better understand the environment by allowing them to see how they compare to other competitors and what resources they have, to gain better advantages/opportunities. This then makes the strategy its self, easier to implement.

Mintzberg (1994) also gives the following definition on strategy, “Strategy is a plan, a ‘how,’ a means of getting from here to there.”

The business I will be talking about in this report is M&S. They’re a retailer currently focusing their operations primarily within the UK but do have a large international presence. They mainly operate within the UK in Markets such as, Food and Clothing, more prominently in food. They value quality and innovation above all which is also their unique selling point.

Main Body

M&S Mission & Vision Statement

M&S Mission consists of “values”, “quality” and “innovation”. They aim to offer the highest quality of goods at affordable prices by making “aspirational quality available to everyone”. With this they also aim to provide a positive customer experience and to care for any environmental and community needs. (M&S, 2005)

Strategy

M&S are a company that through years has suffered a downfall in profits each consecutive year. This makes strategy a very important factor in M&S as they’re constantly changing/adapting to help them grow. In a case study about M&S it states, that early in in 2001 “Marks & Spencer, gave a key speech regarding managements recovery plan”. This shows that M&S planned to adjust their strategy early on it 2001 as they felt things were going downhill. Part of that recovery plan on consisted of appointing a new CEO of the company, in the case study, the new CEO stated that “I will create shareholder value” this also links to the strategy of M&S and works very well with their vision/mission statement which is very focused on working with their customers.

Furthermore, in the case study, it also identifies that “Marks & Spencer will only operate within sectors of the market where it has real scale and authority”. It then goes on to say that “in food we have just under 4 percent of the total UK market, but up to 30 percent in our chosen categories.”. This highlights how a major part of their strategy was to focus mainly on food. And to also focus on market segmentation as oppose to focusing on the whole market, as that’s where they excel.

Part of M&S’s strategy was also to appoint a new team in the higher management positions, as mentioned in the case study, “my next step was to appoint a new team”. With this new team they wanted it to bring back some “Fundamentals” and the “Quality, value, service and innovation”. With this new team it would also help with the strategic management of M&S.

The case study goes onto mention that M&S are going to “focus the entire organisation on our UK business”. This part also ties in with their strategy as they’re allocating all their resources on their success in the UK, as appose to trying to operate in multiple national markets which would thin out their resources.

Ultimately, their overall plan was to survive, to do this they started cutting costs by re-allocating resources, firing staff and focusing entirely on the UK market. But still, this proved unsuccessful.

Concepts, Theories & Models related to Strategic Management

(Porter, 1980) identifies a Model to help analyse competitors in a market, Porters 5 forces.

The Model looks at 5 different factors to help analyse competition;

• Threats of new entrants
• Threat of substitutes
• The bargaining power of customers
• The bargaining power of suppliers
• The degree of competitive rivalry

Once each of these have been analysed, it helps give you a good understanding of the completive environment.

M&S are very unlikely to have a high threat from new entrants for a few reasons, this is not to say that it could not happen. For example, in the food market there is already a high level of competition than have large amounts of resources in Tesco, ASDA, Morrisons and Sainsburys. This makes it extremely unlikely for new entrants to try and contest this and take over. M&S don’t mix with the giants of the market but sit in their own market segment which focuses Quality. With it being a market away from the big retailers it offers more of a change for new entrants but is still very unlikely as M&S own a large amount of that market segment. This is mentioned in the case study “up to 30% in our chosen categories”.

The case study then describes M&S as having “uniquely high standards”. This makes it hard for companies to copy M&S as their products have a high degree of quality, making it hard and costly for competitors to try and mimic.

The bargaining power of customers in markets such as food and clothing are enormous. The amount of completive pricing that goes into each individual market changes daily giving customers endless choice. As mentioned in the case study, M&S are focusing more on market segmentation, so this does help limit the amount of choice some customers have but is still extremely competitive.

Similar to the bargaining power of customers, the bargaining power of suppliers is very high. With the amount of raw materials that M&S use and their competitors it allows the suppliers choice. M&S mention in the case study that they are “re-establishing closer relationships” this will help them cement relationships with suppliers, possibly making it cheaper and getting better quality.

The amount of competitive rivalry in the markets M&S operate within, especially food and clothing are huge. In each of these markets there are vast amounts of competitors, with a lot of them being relatively large-scale companies. This is show in the case study by the amount of market shares M&S have “under 4 percent of the UK market”. This proves that the amount of competition in these markets is endless.

(Mintzberg, 1999) identifies 5 P’s to help identify a business’s strategy;

M&S’s strategy likely links to a ‘Plan’ as their strategy is long term and shows plans to introduce different acquisitions and finance. This is shown in the case study as M&S plan to “build on success in foods”. The case study also mentions plans to “Total focus on UK Retail”.

The case study also goes on to mention that M&S is going through a “Group restructuring and UK retail operating plan”. This further links to Mintzberg’s 5p’s as a plan, because their strategy is not for a quick success, it takes time to implement.

It could also be argued that their strategy relates more to a ‘position’ as the case study mentions “returning Marks & Spencer to its rightful, leading position in the marketplace”.

Explanation of the Macro and Micro business environment and the key considerations when implementing strategic decisions

Micro

M&S have some very fundamental strengths that allow them to be at the top. They have very large financial resources, according to (M&S, 2018) Their group revenue last year was £10.7 billion. This amount of revenue allows them to have a backup, and allows them to compete at a high level

In the case study M&S also identify their strengths as “quality, value, service and innovation”. Quality and value are especially their most significant strengths as this is where their success came from, by offering high quality clothing and food at valued prices. M&S Also has high brand recognition within the UK, known for their high quality.

M&S rely heavily on the UK market, as mentioned in the case study “focus on the UK market”. Which allows for fluctuations in the economy to easily impact them negatively without them to give a positive response, due to them having a limited international presence. This is how in the case as it mentions, “Intends to close its loss-making business in continental Europe”.

The online presence of M&S is very scarce compared to some of the larger companies, this allows them the opportunity to expand their business to an e-commerce and gain the resources and brand recognition to compete with the giants in the market.

Macro

The most impactful political factor for M&S is Brexit. With M&S not being in a strong position and the uncertainty that Brexit brings with it. This will provide problems for M&S’s strategy as they will not know what problems will come with it, for example, importing and exporting fees. This may especially affect M&S due to their quality and higher priced items as people will not be spending large amounts.

The current economy in the UK is shaky and unpredictable due to Brexit. The GBP has dropped, and people are likely to value cheaper options over quality. This could cause problems for M&S as they aim for quality & value in almost every aspect of the business.

When it comes to M&S’s products they tend to invite the older population with this it limits their market opportunities. Trends are also always evolving and are moving away from the more casual aspects and, as mentioned, Brexit plays a big part into how customers are changing their shopping habits.

Technological factors also play a big factor to M&S as it affects how they trade. With competitors such as Tesco utilizing e-commerce, M&S need to utilize the benefits of it by offering online trading more efficiently as they were late to utilize it.

Explanation on how these link to the overall business mission and visions statement

M&S currently have gone undergone changes and implemented new ideas since 2001. They survived the 2009 recession in the UK and have managed to broader their range of services and products. Due to M&S not finding major levels of success, they have adapted their strategy to help them gain and possible advantages that they can/. A major part that (M&S, 2018) announced is that” Over 100 M&S stores to close in total by 2022 as a radical transformation plan continues”. This is very similar to the case study back in 2001, as it mentions that they will be implementing a “recovery plan”. As mentioned M&S in 2018 are going through a transformation so it’s still in a very similar situation it was in back in 2001.

This also Links back to Mintzberg’s 5p’s as a plan as they have a long-term strategy planned to have been fully implemented in 2022.

M&S have also recently announced a project, Plan A. (M&S, 2018) talks about their plan, “Plan A 2025 is our new 100 points plan the issues our customers care about the most: wellbeing, community and the planet.” Similarly, this links to their previous strategy which was to better relationships with stakeholders and customers. This also directly links with their vision, as a major part of their vision is to better the environment and create better relationships with its customers. The just shows that some aspects of M&S’s strategy have remained the same.

As much as M&S have kept some of their strategy they have also undergone a lot of strategic changes, for example, they have had a stir up in top management as they god rid of their marketing director. (Marketing week, 2018) identifies that “Patrick Bousquet-Chavanne, the marketing boss for the last 6 years, is out”. This is part of a new strategy as they play to give each individual department its own responsibility for marketing, food and clothing. This ultimately is to try and reduce costs.

Conclusion

Over the past 17 years M&S’s strategy has changed and adapted and has shown signs of success and failure. M&S also found success in identifying the importance of strategic management, as they made numerous changes to top level management to help better their strategy.

M&S also show a strong understanding of what is working within their strategy, they clearly identify what they need to impact their strategy positively, but they also have an understanding of what is impacting their strategy negatively.

The theories surrounding Strategy also helped understand the type of strategies that M&S used. It also gave a better understanding of the competitive environment and how those factors will affect M&S. Like the strategies, the micro and macro environment analysis helped give an insight to the factors internally that were impacting and M&S. And give an insight to the external factors and how they impacted M&S. In the Macro & micro analysis it helped find that an important factor that was impacting M&S negatively was the political factor of Brexit.

At the end of the report, it helped identify how M&S changed their strategy from 2001 to present. To help better understand how M&S are impacted by the constant changes of the environment. Looking at the new projects they have introduced, what they have changed and what they have kept the same, and ultimately, how did it affect them.