The Strategic Report should strictly NOT exceed and demonstrate clear report style with relevant Harvard references. It is to be a unified whole that answers three questions (see below) focused on the selected organisation. Formative work in weekly seminars will guide students through analytical techniques and processes required to complete the task.
For the selected organisation, assume you are an outside consultancy reporting to the Chief Executive.
1). Identify 3 key strategic issues facing the organisation with a clear explanation of why they are “strategic”
2). Analyse fully the resources and key capabilities of the organisation plus key factors that give the company its competitive advantage.
3). Assess the extent to which the organisation’s competitive strategy addresses its strategic issues, and suggest improvements where they might be justified
Marks and Spencer is the retailer of UK, and they mainly focus on the home ware, clothing, and grocery products. This company experienced the great success in the long run, but because of the increasing competition and failure of the organization to respond to the external environment, this organization face strategic issues (M&S, 2018).
It must be noted that, Marks and spencer is the perfect example of the firm which familiarized with the type of change stated in the punctuated equilibrium model. It can be said that culture of the organization is the reason of both success and failure. A strong culture of the organization is an intangible asset of the organization, and it is the only asset which ensures the growth and long term survival of the organization. At the similar time, it is the organization culture which restricts the ability of the organization to adopt the external environment changes. It becomes difficult for the organization to ensure the customer satisfaction which raises difficulties for the organization (The Marketing Society, 2010).
This paper inspects the Marks & spencer Plc, which is a big brand and leading retailers of the UK. Structure of this report includes the identification of the 3 strategic issues which are faced by the organization and reasons behind these issues. Second part of the report defines the resources and key capabilities of the organization which provide competitive advantage for the organization. Third part of the report defines the competitive strategy of the organization for the purpose of addressing the strategic issues. At the end, brief conclusion is stated which concludes this paper.
This section of the paper discusses the strategic issues faced by the M&S, and it also state the reason because of which issue is defined as the strategic issue.
Presently M&S face the strategic issue in reviving their two important businesses that are food and clothing, as both the business deals with the issues of high competition from both existing and new competitors. High competition is the strategic issue which is faced by the M&S, as M&S operates its business in very competitive environment and there are number of factors which affect the organization operations in the outside environment. This company operates in number of segments such as food cloths, home & beauty products, and because of this they need to deal with number of competitors. This issue is considered as strategic issue because in this organizations deals with number of outside factors technological factors, social factors, and economic factors. Pressure of high competition can only be deal with the effective strategic framework (Jones, 2014). This strategic issue is evaluated on the basis of the three environments which are stated below:
PESTEL: This tool is used by the organizations for the purpose of conducted competitive analysis. Economic factors of the PESTEL analysis recognized the strategic issue of high competition faced by the M&S. This organization is also hit by the economic factors, as number of stores has been closed by the organization and this result in job cuts of 2% (70000 staff members). This increasing competition negatively affects the growth and profitability of the organization.
Porter’s 5 Forces: In context of the Porter 5 forces model, competitive rivalry is the first force which defines the competition faced by the organization. As stated M&S face the high competition because there are number of retailers which provide similar quality, price and up-to-date.
SWOT Analysis: As high competition is considered as big threat in the SWOT analysis, M&S needs to manage this threat in effective manner by framing the effective strategies which helps the organization in dealing with this threat (Spencer, 2015).
Another strategic issue faced by the organization is the changes occurred in the values of the population and a generation shift. Changes occurred in the generations result in the noticeable shifts in the consumer behavior, the manner in which consumers do their shopping, and the channels and technology used by the consumers for the purpose of perceiving the products. M&S also deals with these issues, and it can be deemed as the strategic issue because changes occurred in the customer preferences is the matter of research. As organization require to conduct deep research for understanding the situation of the market (Krish, 2012).
PESTEL: This strategic issue falls in the socio-culture factor of the PESTEL analysis, as there are two factors which need to be considered by the M&S that are changes occurred in the customer preferences and quality of the products. This issue can be resolved by the organization by focusing on the approach of Green consumers and ethical issues of the customers' in context of the socio-environmental costs.
Porter’s 5 forces: This falls is the ambit of the threat of substitutes, as M&S face high threat of substitutes as customers can easily switch towards the alternatives. As there are number of retailers which provide substitute products to the consumers at the reasonable price. Therefore, it can be said that threat of substitute for M&S is high.
SWOT analysis: This strategic issue also falls in the threat section of the SWOT analysis, and this threat can be managed in effective manner by framing the effective strategy (Ivory Research, 2016).
Third strategic issue faced by M&S is the internal strategic issue, and this issue relates with the loss of effective employees from the competitors. As stated M&S is trailing its significant employees to its key competitors such as product developers, food technologists and General Merchandise design team members. This issue is defined as strategic issue because in this organization fails to manage its internal environment in effective and efficient manner, and also fails to retain its key employees in the organization (Dentons, 2016). Following are the strategic evaluations which can be used by the M&S for understanding this issue:
PESTEL Analysis: This is an issue of economic factors, as organization is not able to analyze the economic needs of the employees because of which employees are dissatisfied in the organization, and this ultimately results in the high employee turnover.
Porter’s 5 Forces: As competitive rivalry steal best employees of the organization from them, but still M&S fails to deal with this issue by satisfying their employees and retain them.
Assessment of Competitive Strategy
SWOT analysis: This is considered as biggest weakness of the M&S, as they fail to retain the employees of the organization. Effective human resource capital of the organization is considered as the biggest strength, and this strength is not available with the M&S. Organization need to capitalize in the recruitment, hiring and training of new employees, and frame strategies for the purpose of managing with the risk of its show how, know-how and contacts which are easily available towards the competitors (Davey, 2016).
Till the period of mid 1990s, M&S had a market leading share of different markets and especially in the cloth market. Organization use their resources and subsequent capabilities for the purpose of gaining the competitive advantage, and following are the resources and capabilities of the marks & spencer which provides them competitive advantage:
- Manufacturers and suppliers of the organization are empowered in context of design responsibility.
- Supplier relationships are managed by organization closely.
- Organization ensures the brad management.
- Organization provides excellent services to its customers.
- Working conditions of the organization are excellent.
With the help of these above stated resources and capabilities, M&S ensures the competitive advantage and profitable growth (Beaver, 1999).
Marks & Spencer plc is known because of its 1382 stores across the globe. International expansion of the organization is happened through franchise agreements provides competitive advantage to the organization in comparison of the other UK businesses that trading only on the market of UK (Rogers, 2012). Presently, this company operates in almost 59 countries across the Europe, Asia and the Middle East through the wholly owned retail business, retail joint ventures, retail franchise operations or website only territories (M&S, 2016). Currently this market is developing in some priority markets such as India, Australia, etc., and on the other side food business of the organization in regions such as Hong Kong and Europe (M&S, 2015).
This geographical diversification is characterized in the international strategy of M&S, as this strategy reduces the potential risk of being extra exposed in the single country, and its two-fold international business strategy provides more stability to the organization (BBC, 2013).
It must be noted that, M&S is an iconic brand and this has been trading from the period 1884, and currently also this brand is counted in the top ten brands of the UK. Strategies of the M&S maintain its investments in innovations and brand building advertising in the complete period of recession has successfully strengthen its brand positioning because organization offer products of the high quality and good value.
M&S is the organization which is highly profitable, and hold unique resources and capabilities which together provide competitive advantage to the company. Following are the resources and capabilities which provides competitive advantage to the M&S:
- Organization holds the base of properties in the prime locations which help the M&S in achieving the occupancy cost but less than the sector averages.
- Organization holds the good brand reputation with the strong base of the customers, and this required the reinforcement or building with the help of the advertising and promotions.
- Organization also gains the employee loyalty which decreases the employee turnover in the organization and retains the key employees of the organization.
- Organization also holds the close and effective management of supply chains which results in the lower costs and higher quality of products (M&S, 2017).
- Organization ensures equal and fair management system in the organization.
Instead of above stated strengths and capabilities of the M&S, in last few years performance of this organization is declined, and the most important reason behind this that organization fails to maintain these capabilities in effective manner and this result in loss of competitive advantage. Particularly organization depends on its own brands goods and also on the brand reputation which is not supported by the effective marketing tools such as advertising, and this creates difficulties for the organization. Preferences of the customer have been changed with the shifts in the generation, and the target market is filled with high competition. At the similar time, competitors of the M&S were increasing sourcing the goods and services overseas, and M&S still depends on the suppliers of the UK which driving the organization’s relative cost base. It becomes clear that organization need to reinstate their existing capabilities and also focus on developing the new ones. Some of these new capabilities which M&S required to develop are stated below:
- M&S must offer new products to its customers, which means, organization needs to flair for the diversified products. In this context, innovations can help the organization in offering new products to its customers, as this creates increased taste for the customers of the company.
- M&S needs to focus on the international markets, which means, international expansion of the business is necessary. However, it is necessary for the organization to understand that competition is tough at the international level also, but if company understands its marketing mix and implement the 7Ps strategy in effective manner then it becomes it big opportunity for the organization (Butler, 2015).
- Another capability which organization needs to develop is the alliance, as it is considered as the big opportunity for the M&S to alliance with the existing companies with the proven history of the past success. It is necessary for the M&S to grab this opportunity for the purpose of developing the thoughtful and fruitful alliance.
- While being in the business for the considerably long time period organization needs to hold the assets and established structures which can be used by the organization for business expansion. Reflection in the existing flaws related to the company also help the organization in redevelop its business by developing the supply chain for overseas.
As stated performance of the organization is falling in last few years and this especially happens in the clothing business, but still food business of the organization still captures the large portion of the market with its effective strategy which results in the increase in sales. This trend is utilized by the organization for the purpose of its network of suitability stores, Food, and preparation of the wildest food store opening programmer (The Economist, 2015).
It is clear from the above facts that organization needs to redevelop its existing capabilities and also develop new capabilities for the purpose of ensuring competitive advantage over the competitors.
There are three important generic strategies which can be used by the M&S for the purpose of resolving the strategic issues stated in above sections of the report, and all these strategies help the organization in gaining the competitive advantage also (Porter, 1980). These strategies result in the cost leadership, competitive advantage, and effective internal management of the organization.
The most important strategy for the M&S is the market penetration strategy which falls in the ambit of the growth strategy for the organization. In this strategy business mainly focus on selling the existing products to the existing markets. Through this strategy, M&S tries to achieve four main objectives that are stated below:
- M&S uphold or enhance the market share of the present products, and this is possible by achieving the mixture of the competitive pricing strategies, advertising, etc (IFM, n.d.).
- Through this strategy, organization can provide high quality of goods to its customers across the globe. At the initial stage, M&S is acting in the single markets.
- This strategy helps the organization in restructuring the mature market by driving out the competitors, and for this purpose it is important for the organization to develop promotional campaign. This is reinforced by the pricing strategy which is intended for making the marketplace unattractive for the participants of the organization. The food service market of the organization is deemed as most difficult and urbane market in which this company operates. They enhance the practice by current customers by introducing end number of programs such as loyalty schemes.
Another strategy which can be used by the M&S for resolving the above issues is the market development strategy, in which business organizations try to sell its current products in the new markets, and for this purpose they can explore the new segments of the market, new uses of the organization’s product and services, and new geographical areas for attracting the new customers. It is necessary to understand that there are number of ways through which these objectives can be achieved such as new markets in geographical locations (Pindelski, 2015). This can be understood with the help of example; M&S can export its products to the new countries. This strategy not only helps the organization in capturing the large share of the market, but also helps the organization in attracting new customers for the purpose of serving its products and services. This strategy helps the organization in creating competitive advantage over its competitors.
Product development strategy is the tool which is used by the M&S for the purpose of introducing new products and services in the existing markets. In other words, M&S require to develop the new products with the help of innovation, and introduces these products in the markets which are already captured by the organization. This strategy mainly required the development of the new competencies and also required that M&S developed products with modifications which can impose the appeal to the existing markets. M&S financial service and banking can be considered as the good example of the new developed product (Tanwar, 2015).
One more strategy is the diversification strategy which helps the organization in resolving the strategic, but it is considered as the most risky strategy since organization is affecting in those markets in which they have less or no experience, and this can be considered as the dangerous. For the purpose of adopting the diversification strategy, organization must have the clear idea in terms of what is expected to get advantage from the strategy and also effective evaluation of the risks (Wang, Lee & Kuo, 2011).
Marks and Spencer is the retailer of UK, and they mainly focus on the home ware, clothing, and grocery products. As stated performance of the organization is falling in last few years and this especially happens in the clothing business. Still food business of the organization captures the large portion of the market with its effective strategy which results in the increase in sales (Davey, 2016). This company experienced the great success in the long run, but because of the increasing competition and failure of the organization to respond to the external environment, this organization face strategic issues. The three strategic issues faced by the organization are employee turnover, high competition, and customer satisfaction. International expansion of the organization is happen through franchise agreements provides competitive advantage to the organization in comparison of the other UK businesses that trading only on the market of UK.
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