Introduction Marks and Spencer’s were founded in 1884
Introduction In this assignment I will be investigating the effects that the internal and external environment has on a large company trading and operating in the EU (Marks and Spencer’s) The company Marks and Spencer’s were founded in 1884 by a man called Michael Marks in Leeds when he became partners with Thomas spencer the company became “Marks and Spencer’s” in 1894. Their main focus was to sell high quality products from Britain and closely monitored their suppliers to guarantee that their goods were of a high quality. Now they are a multinational private limited company with over 700 storefronts worldwide. Internal environment Swot analysis Marks and spencer’s has many strengths as a multinational retailer. One of the is that they have built a strong reputation with consumers as a friendly, convenient and high-quality retailer, one way that they have done this is by utilising a “no quibble return” policy, this means that any of their products that have been purchased can be returned within 30 days for a refund or trade for another product with the equivalent value, however the product has to be in its original condition and in its packaging. This helped build up their reputation because consumers like a company with a good return policy in case they don’t like the product when they get home etc, so they would rather go to a store with a good return policy than with a bad one because it’s more convenient and reliable. Another strength is that they also have a reputation for high quality products that are also sourced from inside the UK, this encourages customers because they like to know that their products are going to last and not have faults within them, however this means that their products are going to cost more money than products from a company known to make low quality products such as Primark, but people who can afford to shop at marks and spencer’s will obviously prefer their high quality products over a lower quality retailer, so marks and spencer’s appeal to people in the middle to upper class in general due to their high quality but more a bit more expensive products. They also offer a very wide range of products in their stores so they appeal to a wider variety of people so of course they will get more customers shopping at their stores than a shop with a narrower range. They have over 700 storefronts worldwide which obviously maximises profit because the more stores that are open the more likely people are to shop there due to convenience and the wide range of products they offer and their relatively reasonable prices relating to their high-quality and hand made products. Marks and spencer’s also has weaknesses as a retailer, a weakness of theirs is that their products aren’t seen as cool and trendy to people anymore, consumers would rather buy more expensive designer brands such as ‘Stone Island’ because it’s trendy and places them higher in the social rankings because it’s sought after, expensive and seen as trendy, especially within young people, to improve this weakness they could redesign their clothes, market them as designer and target their advertising more towards young people so they can build their reputation as a trendy brand again, they don’t really need to advertise for the older generation because they already buy their products because they don’t care about their clothes brands and how they look as much as the younger generation. Marks and spencer’s still manually manufacture their products so this increases the product prices to make that needed mark up on products, whereas other companies started using robots on assembly lines, this means their working costs go down and the efficiency that their products are being made at increases, so the prices of their products will be less than companies that make their products by hand such as marks and spencer’s, to improve this weakness they could use robot on assembly lines to increase their efficiency at which they are making products and lower production costs, on the other hand this could slightly break down their reputation as a retailer that has high quality and handmade products because they replaced the humans with robots, this could cause some customers to shop elsewhere that uses handmade products. Organisational structure & corporate culture Marks and spencer’s used to use a tall hierarchal structure within their company but because there are several layers of management and the structure is very narrow It decreases the amount of control that the managers have. In recent years however, marks and spencer’s have changed to a flatter, more democratic structure because in the last few years they have been trying to improve customer service and keep innovation level optimal, but the tall hierarchal structure doesn’t compliment their goals of improving innovation, so they made their organisational structure flatter and more democratic so they boost employee morale and innovation. The corporate culture in marks and spencer’s is fairly employee friendly since the recent change in organisational structure because they have started to focus on keeping the customers and employee’s happy which boosts sales and innovation, and both of those factors increase sales. “Culture begins with shared values, which then produce norms that govern behaviour.” (Mullins, 2010) Page BreakExternal environment An opportunity that Marks and Spencer’s could capitalise on is that they could further increase their brand awareness by opening more storefronts in new countries such as japan, japan would be ideal for Marks and Spencer’s because it has the third biggest economy in the entire world, because Marks and Spencer’s offers high quality products at a bit higher price it would be good for japan because people there can afford to regularly buy products from there whereas they tried to open stores in china but they had to be closed down because they weren’t making enough money, this is due to the high poverty levels in china even though it’s the second biggest economy in the world the lower classes are mostly living in poverty so people couldn’t afford their fairly expensive products and had to go to a shop which sells cheaper but worse quality products. Another opportunity for M&S is to launch a lower price line of clothing and other products, this could encourage people from a lower economic background to shop there in the long term so they could increase their consumer base and slightly dispose of their reputation of a retailer that only caters for rich or elderly people, which in itself could also encourage more people to shop there. A threat that Marks and Spencer’s are faced with is that other retailers such as Aldi sell their products for a lower price. This could attract more customers to Aldi and potentially lower the profit that Marks and Spencer’s make through sales, to face this issue they could lower their prices on some products so more people are willing to shop at Marks and Spencer’s and reclaim sales from retailers with low price products. Another threat to marks and spencer’s is that it only utilises big stores whereas other supermarkets such as Tesco also have little shops for convenience such as Tesco express, this helps them maximise profit because people go there for little things that they don’t want have to go all the way to the supermarket to get e.g.: milk. Marks and spencer’s are losing out on profit by not opening these little shopfronts and can potentially harm their opportunities in the future. Pestle analysis Some political implications on marks and spencer’s is that it used to be able to source it’s products from Europe tax and tariff free, however due to Brexit all businesses in the uk have to pay taxes and tariffs on goods imported from Europe, this will cause marks and spencer’s to make less profit on their products because they now have to pay more money to source high quality products from outside of the UK, Brexit will also make it harder for marks and spencer’s to find workers, because people now have to have a visa to be in the uk whereas before Brexit they didn’t have to, this can limit their options to workers, because people who would potentially work there can’t because they can’t get a visa. Some economic impacts on marks and spencer’s is that other supermarkets rely on cheaper pricing, the recent Brexit referendum caused the value of the pound to drop to its lowest point in 31 years, this made people become more money conscious towards the products they are buying so the supermarkets that use lower prices to attract customers benefitted from it because more people shopped there instead of the more expensive marks and spencer’s, however marks and spencer’s focused on promoting high quality goods which made up for their more expensive products and helped their reputation, this attracted more customers so they maximise the units sold and profits. Social impacts on the company is that its seen as a non-trendy store to the younger generations, this makes them a lot less likely to shop there which isolates almost a whole market segment, if marks and spencer’s stocked clothes currently trending such as “champion” or “a bathing ape” people of the younger generation are much more likely to shop there and develop a loyalty to shop there often after that, the younger generations also have a lot less disposable income than before due to rising university fees or rising rent rates, this causes them to have to shop at cheaper supermarkets so marks and spencers loses out on sales to the younger generation. Their reputation has been damaged recently by claims that they have used child labour in their factories in Indonesia, this has prompted many customers to boycott marks and spencer’s until they stop using such cruel and inhumane ways of producing their goods, they could use robots on their assembly lines instead of children, this would be more expensive at the start but more price efficient in the long term, it would also help repair their reputation as a retailer because they stopped using children for labour so more customers would start coming back to their stores to shop. A technological impact on marks and spencer’s is that they still use manual labour to manufacture their products (such as the child labour scandal) to improve this as I said in the social impacts section, they could use robots instead of humans in their factories, they are more expensive but a lot more reliable and faster, so the cost of the robots would be made up by the units per hour made compared to if humans were doing it. Recently there have been multiple hacks on websites where personal details (credit card details etc) of millions of people with an account on those websites have been released by hackers to the dark web where people clone their cards or take money from their bank accounts, so they could improve their web security people are less reluctant to shop online at their shop and will quell their fears about hackers a little bit, because people will start to shop online more this means that marks and spencer’s units sold will improve so profit will too. A legal impact on Marks and Spencer’s is that they got into a financial altercation with the landlords of the Frascati shopping centre in Dublin, it has gone to the high court and marks and spencer’s hopes that the case is fast tracked to the commercial part of the court that deals with multimillion disputes, the impact this has on marks and spencer’s is that they could become blacklisted by the other big landlords and that can stop them from opening new stores, so they can’t make as much profit as they could if they continued opening stores. It will also be very expensive for the legal fees for the court case. Enviromental impacts on marks and spencer’s is that there is increased pressure recently for supermarket chains to become more environmentally friendly with laws being passed such as the 5p bag law in an effort for all chains to become more environmentally friendly and reduce their carbon footprint, customers are also becoming more environmentally aware and are more inclined to shop at a store which has a reduced carbon footprint and does their part to help the environment. This is good for Marks and Spencer’s because in recent years they have become a lot more environmentally friendly, they have become completely carbon neutral and have significantly boosted the sales of their organic products, however they weren’t able to meet their target of tripling the sales of their organic products, this attracts customers that are conscious of the environment because they want to shop at a store that helps the environment, not destroys it. this is what gives marks and spencer’s a competitive edge over the other supermarkets, it’s unique selling point is that it has a heavy focus on preserving and helping the environment whereas other supermarket chains don’t care about it as much and just focus on solely making profit which makes marks and spencer’s more ethical than Asda for example. They have a lot of corporate social responsibility which can protect the company’s best interests in the future and it attracts more customers that care about the environment. Porters five forces analysis The threat of new entrants in this market is fairly small because it’s an oligopolistic market, filled with very well-established companies, the smaller companies normally don’t grow to the size of the big companies in this market because all the other big companies buy them out before they grow big enough to become a major player, Tesco in particular is notorious for buying out its smaller competition for sums of money that they can’t refuse so then Tesco buy them out and normally shut the business down so they pose no threat in the future. The threat of new entrants Is even smaller for what marks and spencer’s offer (high quality but expensive products) because the smaller businesses that are trying to break into the market aren’t going to be able to afford high quality products like marks and spencer’s. The smaller businesses wouldn’t be able to benefit from economies of scale either because they wouldn’t be buying in huge amounts lie the bigger supermarkets, this puts them at another disadvantage. The threat of substitutes for marks and spencer’s is quite high because their products are sold at a higher price than all the other retailers, this could push people to buy the cheaper substitutes from other retailers because they can’t afford the real marks and spencer’s products, The bargaining power of customers is quite small with marks and spencer’s, this is because the people who shop there are mostly very loyal to marks and spencer’s as a brand so they aren’t very price sensitive, even if marks and spencer’s raised the prices of their products the customers would most likely keep shopping there regardless of price Suppliers have quite a lot of bargaining power with marks and spencer’s, this is because marks and spencer’s focus on delivering high quality products to their customers, and not many suppliers sell the high-quality materials that marks and spencer’s want so marks and spencer’s have no choice but to pay the prices they demand.