Marks and Spencer is one the UK’s leading retailers, offering high quality, great value clothing as well as home products and outstanding quality food. The company employs over 75,000 people and has over 600 stores in the UK and over 2754 in 39 territories around the world. The group revenues of 2006/7 were $ 8.5 billion.
The marketing policies of marks and Spencer have led to introduction of new promotional brands with corresponding logo. The company’s main brand is now sold online through its online and in store merchandising that instrumental in the company’s recent resurgence in the success of a new clothing campaign of both young and celebrated models, TV Ads campaigns on food range (Martinson, 2006)
M&S has launched new online products online inline with a new web store in partnership with Amazon, one of the world’s largest online retailers. Customers can now view their M&S accounts online and has been reported to have $100 million as revenue.
The store formats are numerous with most selling select merchandise (Julia 2006) they also recently opened stores in locations outside factory outlet centre, both in Retail Park and high street environment. They have also opened international stores in Asia, Canada, Ireland, Hong Kong, Kabul etc.
Training policy include training staff on customer service techniques using customized program “their service style”. They also have graduate scheme to fast track candidates to commercial managers which have boosted customers and training..they also identify training need i.e. flatter organisational structure results in many employees with many jobs thus contributing to staff’s higher expectations and gaining the corporation. This trying leads to response to business needs (succession management) marks and Spencer develops existing staff from within the organisation.
Reviewing performance/appraisals takes place when employees are given rating for the skills and competencies shown over the past. The feed back helps employees identify how they perform in relation with the skills and competencies.
Economic analysis
An investor (Neil) typically starts evaluating an economy. This is because of the hope that an accurate forecast and examination of economic activity will provide the basis for accurate stock market predictions and indicate which industries are likely to prosper.
There is need to understand the expected interest rates, monetary & fiscal policy, government and consumer spending patterns and other economic data. There is also need to understand business cycles. Most companies are influenced to some degree by the general level of economic activity.
Government policy focuses on monetary and fiscal policy; the aspects broadly touch stable prices, business stability at high levels of production, sustained real growth in host countries GDP, and balance in international balance of payments (BOP). Goal priorities and economic policies change to reflect current economic conditions.
An expansion in economy creates employment, reduces unemployment, low interest rates, and reduces inflation rates. The stock market experiences a full market in response to improved conditions.
Analysis of fiscal policy is an important considerable for the investor to determine flow of funds. Countries can create trade (Geoffrey, Stanely (2000) barriers by neither setting up import tariffs or taxes that raise the price of foreign goods and make them less competitive with the domestic industries.
Government policy, real growth and inflation are other principles considered. The gross domestic product measurement makes us more compatible with the world and measures the output from countries and their consumption. It does not include products made by a country’s companies in foreign outlets.
To understand the major sectors of the economy and relative influence of each sector, the GDP is divided into four basic areas; personal consumption expenditure, government purchases, gross private investment and net expects. Geoffrey A. Hirt, Stanley B Block (200).
Mark and Spencer being a retail company is also affected by business cycles and cyclical indicators. The economy expands and contracts through business cycle lose. Through the measurements of GDP and other economic data, an economy pattern would be developed (Geoffrey & Stanley, 2004)
A trough represents the end of a recession and the beginning of an expansion and a peak represents the end of expansion and the beginning of recession.
Mark & Spencer predicting business cycles is not easy as each business cycle is unique. That differs in length and depth, monetary policy related while others are demand related. The different sectors of retailing i.e clothes, food household goods and financial services are not affected by business cycles. However, if investors can make forecasts at the beginning and ending of a business cycle, they will better able choose which type of investment to hold over various phases of the cycle.
Economic indicators are equally used to evaluate the direction of the business cycle and industry relationship.
Industries where the underlying demand for the product is customer oriented will quite likely be sensitive to short term swings in the business. Necessity oriented industries such as food are consisted performers since people have to eat.
(Mark & Spencer) it is more of a service industry and this becomes extremely important in our economy. Service oriented business firms are less susceptible to business cycles.
Industry life cycles are created because of economic growth, competition; availability of resources by particular goods and services. A particular phase in the life cycle of an industry/ company determines the growth of earnings, dividends, capital expenditures and market demand for products.
To companies’ undertakings, wide range of ethical activities from local producer loans facing great competitions, strategies to improve their ethical credentials. Investors interested in ethical practices would want to evaluate how far a company is involved in ethical practices and thus find favorable for investment or unfavorable.
M & S has packaging that is distinct; packaging in the food and drink sectors is intrinsically linked to consumer trends across the whole industry. However trends in the packaging tend to involve a slower pace.
A company gains a competitive edge when it tries gaining insight into the methods used by important industry players to identify specific areas for operational improvements and acquiring the knowledge and experience necessary for extending new market or niche. Therefore, a company that does sales prospecting, competitive analysis; vendor and supplier evaluation, customer evaluation and analysis is well positioned to do a strategic planning. Combating growth trends from traditional supermarkets.
Another principle or policy is regarding divided policy. This is important in planning a company in a particular state.
A company life cycle is as shown below
The development stage is one which involves a lot capital expenditure companies pay no dividends because it needs all the profits for reinvestment in new productive assets. The demand for products will create growth in sales, earnings and assets in the company.
M & S has achieved a degree of market acceptance for its products. Sales and returns on assets will be growing at an increasing rate. Companies become profitable at the growth stage and want to acknowledge its shareholders that they have achieved profitability.
A cash dividend policy is sometimes necessary to attract institutional investors to the company stock as companies/industries provide investors with an opportunity for large gains/losses. An investor will be purchasing shares for capital gains based on expected growth than on current income.
The expansion stage signifies expansion of sales and earnings; though at a decreasing rate. There is more competition in the market that eats into the existing market share of firms. Cash dividends are paid as stock dividends, stock splits are common. Investors (Neil) understanding this situation will be willing to take advantage of cash dividends or stock dividends & stock splits.
The maturity stage occurs when company sales grows at the rate equal to the economy as measured by long-term trend in GDP. Due to its domestic and international outlets, cash flow from operations is usually more than enough to meet the growth requirements of the firm. This is attractive for investors in need of high returns.
Economic structure of an industry consists of competing firms. They compete with each other and employ different strategies for success. Investors evaluate the attractiveness of a company for long term a competitive position that shapes the industry environment
Investment refers to the use of financial capital in an effort to create more money; investors forego consumption today in an attempt to achieve an even higher consumption in the future. As Neil seeks to determine which firms is suitable for investment, they should consider factors like safety and risk of the principal No investment can be evaluated without assessing how safety relates to risk. The amount of risk an investor is ready to assume, especially the risk of losing invested capital and losing the purchasing power. Company provides short term debt instruments in which the government is party.
Evaluation of a company’s suitability as an investment opportunity on the basis of its financial strengths and weaknesses. An overall assessment of the company including an initial (favorable of unfavorable) based on the company’s financial disclosure system, whether the annual report contain sufficient information to gain a working knowledge of the company.
An examination and reasoned explanation of the company’s investing activities, focusing on its current investment policies and culminating a more precise assessment’s of the company’s stability for client’s portfolio.
References
Davin, Robert & Robert L., Hazel, A Shifter adjusted indicator for monetary policy, Economic Quarterly 1994.
Geoffrey A. Hirt, Stanley B Block (200). Fundamentals of investment Management.
Porter, Michael 1985: Competitive Advantage Creating and Sustaining Superior performance, New York.
Cavaglia, Stefano; Christopher Bright man and Michael Aked (200). The increasing importance of industry factors.
Principles of investment management (articles 2008).
Michael S Roseff (2008) on Sound Fundamental Principles of Investment.
Steven Selengut Geoffrey A. Hirt, Stanley B Block (200). (2007) Principles of Investment Management.
John Price (2008), Warren Buffet; Secrets Revealed.
Jane martin son, (2006) the guardian unlimited.
Finch, Julia (2006) simply food to triple in size with restaurant plan, guardian unlimited.