External Environment and Organizational Resources
M&S operates in dynamic social, political, and economic environments. Its main competitors include NEXT PLC, GAP, and H&M. The last three years have been useful for the Organization because it has developed a strong foundation for the growth of its business.
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Over the last 3 years, the marketing environment for M&S has had a mixture of fortunes and misfortunes. Despite this fact, the market environment has remained relatively stable, meaning there have not been major changes. According to the Chief Executive, Mr. Marc Bolland, the Organization’s focus over the last 3 years has been to strengthen its foundation by investing in areas that improve customer satisfaction. According to his assessment, the Organization has made good progress, even though it has faced some hurdles. For example, the food industry outperformed all other retailers in the UK. However, its general merchandise did not produce impressive results as expected (HelpMe.com: Marks & spencer strategic analysis 2015).
According to Mr. Robert Swannell, who is the Chairman, the Organization is currently better positioned than it was three years ago. The positioning is based on Porter’s theory of five forces that shape business strategy. Due to the huge investments which it has made over the last three years, the Organization expects the next three years to be a time of reaping the benefits of the investments (M&S: From transformation to delivery 2014).
Over the last three years, the following are some of the Organization’s statistics:
- Opening of 55 new stores outside the UK
- International sales increased by 6.2%
- Food sales increased by 4.2% in the UK
- India recorded the highest growth in terms of international sales
- Flagship projects opened in China
- Gross margin for general merchandise decreased by 11% in the UK
- The total gross margin in the UK decreased by 40% in 2013
- Operating costs in the UK increased by 3.5%
According to the projections by the chairman of M&S, the Organization expects to realize the following over the next three years:
- Drop-in capital expenditure by £500million per annum
- Significant improvement in the gross margin in general merchandise due to operational improvements which are currently underway
- Significant improvement in free cash flow due to completion of the single-tier logistics network
- Maintain a progressive dividend policy
Some of the factors in the retail environment which have affected the performance of M&S include increased cost of promotions and production, efficient supply chains, inflation, the decline in general merchandise sales, and effective management of promotions (M&S: From transformation to delivery 2014).
The main competitors of M&S are listed below:
- Top Shop
- Next PLC
- ASDA Group Limited
- Tesco PLC (Hoover’s Inc: Marks & Spencer Group P.L.C. Competition 2015).
The main strength of these competitors is that they focus on trendy fashion. For instance, GAP’s main target customers across the globe are those aged 15-35 years. The reason is that the customers in this age bracket are usually attracted to fashion trends.
The Primary PESTLE Factors Driving Change
The political environment under which the Organization operates is very stable. There are minimal political risks for the business, both in the UK and in other countries where it has operations. The Organization also enjoys the goodwill of the host governments, which has enabled it to invest heavily without the fears associated with political risks (Slideshare.net: Marks & Spencer strategic analysis 2015).
In 2008, the world underwent a global recession, which was the biggest since the great depression of the 1930s. Just like other multinational corporations, M&S was not exempt from the effects of the recession (Slideshare.net: Marks & Spencer strategic analysis 2015).
M&S also enjoys a friendly social environment in all the countries where it operates. The friendly social environment has been achieved through the sensitivity of the Organization to the needs of the local customers as well as the provision of very friendly goods and services at affordable prices. The organization also engages in charity work and other corporate social responsibility activities, thus creating a very conducive social environment for its operations.
The Organization has adopted technology in most of its operations and service delivery. It provides its customers with various online services. It also operates a website where it posts business information for access by potential customers (M&S: student information 2010).
The Organization’s strengths and internal resources can be summarised as shown below:
- Strength 1: The managers have the leeway to make business decisions based on the situations on the ground
- Strength 2: Few centers of power in the Organization’s structure
- Strategy: 1 specializing in food products, clothing, home products, and other luxurious domestic products (M&S: the official board 2010).
- Strategy 2: To meet the needs of customers by providing them with high-quality products and services at affordable prices
- Strategy 3: Quick procurement of business decisions
- Strategy 4: Use of social media for marketing
- Strategy 5: Regular review and change of business strategy
Some of the key issues which the marketing department of the Organization must address over the next 3 years are as follows:
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- Lower the cost of production
- Lower the cost of promotions
- Enhance promotion on social media
- Invest more in market research
M&S’s overall objective is to become a global leader in the retail industry over the next decade. Even though its general merchandise division didn’t do well over the last three years, the organization has developed strategies for overcoming that challenge.
Buyer Behaviour and Consumer Profile
M&S targets various segments of customers such as the youth, low-income earners, high-income earners, and the elderly. However, its main target is women who earn a high income. It offers varieties of goods and services which suit all types of customers.
The M&S’s market is broadly classified into two categories named below:
- UK market
- International market (M&S: 2015 – A year in Preview for Sustainable Business 2015).
Its market is segmented as follows:
- Food -48% of UK market (Newstatesman.com: Marks & Spencer: great food, bad clothes 2013).
- General merchandise- 41% of the UK market (Marks &Spencer: company profile 2013).
In the UK, M&S has a total of 622 stores and 270 others in 34 countries
M&S’s market segments are based on the following criteria
The market can further be segmented using the following criteria
- Social status
- Economic status
- Educational status
- Levels of income
In terms of income, the customers are further segmented using the following criteria
- High-income earners
- Middle-income earners
- Low-income earners
In terms, if age, the customers are segmented as follows:
- The youth (18-35 years)
- People aged between 35 and 54
- The elderly (55 years and above)
Among all these segments, those that are most attractive to M&S include the following:
- High-income earners
- Middle-income earners
- The youth with high-income
The reason is that the M&S brand is perceived as expensive by its customers. The other reason is that M&S derives most of its profits from selling expensive clothes, especially to middle-aged men and women with high-income. However, that does not mean that it has neglected the other segments such as low-income earners. It simply means that M&S has positioned itself to attract all types of customers. It has also differentiated its products and services to suit the specific needs of customers in different segments. The motivating factors of the customers in these segments include differentiation and positioning
In the field of strategic management, the concept of differentiation refers to the process of making a product or a service popular among customers. It is achieved through the description of the unique characteristics of the product or service is differentiated. The whole idea behind differentiation is to create a market niche for that particular product or service. When customers are made to understand the unique characteristics of different products and services, they are able to make informed decisions regarding different products and services. If done well, differentiation enables customers to purchase specific products or services in a market flooded with many varieties of products and services (Thompson & Martin 2010).
Positioning entails using various strategies like promotion, distribution of products or services, and production of unique products with low prices to build an identity of a particular Company in the minds of consumers (Armstrong & Kotler 2009). Positioning seeks to stabilize and retain the positions of the differentiated products for a particular Company so as to retain the competitive advantage of the Company in regard to those products (Ferrell & Hartline 2010).
As shown above, M&S’s customers are classified into various segments. Even though most of the customers are motivated by positioning and differentiation, there are other specific factors that motivate them. For example, low-income earners are motivated by the following:
- Quality products and services
- Low prices
- Variety of products and services
- Quantity discounts
- Friendly customer care services
- Quick service
On the other hand, the high-income earners, who consider themselves as the affluent are motivated by the following factors:
- High-quality products
- Online shopping
- Home delivery
- Availability of customized products and services
- Availability of children-friendly services
- Friendly customer care services
- Sensitivity to customer’s needs, concerns, and worries
The youth are motivated by the following factors:
- Youth-friendly services and products
- Varieties of fashion
- Interactive customer care on social media
Currently, M&S’s focus is on women with high-income. The reason is that those women have expressed a lot of interest in women’s outfits which are currently sweeping across the UK and in other markets. M&S hopes to make huge profits from the sale of women’s outfits (M&S: transforming M&S 2014).
For M&S to increase its bottom line, it should stop focusing on specific market segments and revise its marketing strategies to target all its core customers. In other words, it should avoid operating at the extremes and embrace modesty. The reason is that all customers are important. Even though focusing on specific segments may enable the Organization to make huge profits within a short period of time, it may not be sustainable in the long-term.
Focusing on all the market segments would also enable the organization to improve customer loyalty and its brands, which would be sustainable in the long-term (The telegraph: Analysis: Marks & Spencer making progress, but sales still falling 2014).
M&S relies on differentiation and positioning to attract and retain its customers. As a result, it has been able to open many stores in the UK and in other countries. Through differentiation and positioning, the Organization plans to become a global leader in the retail industry.
M&S has an excellent communication strategy which has enabled it to maintain a good relationship with its customers and stakeholders. The strategy has also enabled the Organization to constantly update its customers and stakeholders on its undertakings.
M&S’s communication strategies interface with the prospective consumer in the following ways:
- Corporate social responsibility
- Market research
M&S’s communication strategies interface with the actual customers in the following ways:
- Labels on products
- Advertisements (Dahlén & Lange 2008).
The following are the communication strands used by M&S:
- Integrated marketing communication campaigns
- Public relations
- Sales promotions
- Personal selling
- Social media:
- google +
- Community outreach
- Web site
- Email lists
Some of these are discussed below
M&S has incorporated technology in its business and as a result; it has been able to boost its revenues by 40% in the past decade. M&S’s e-business model is focused on marketing and sales (Strinfellow 2010). The marketing strategies of the Organization involve advertisement on various platforms on the internet.
The Organization has a Facebook page where it posts information about what it does, the kind of services and products it deals with, its uniqueness, and how customers may get its products and services. Facebook has a function that allows people to ‘like’ the Organization’s page by clicking on the ‘like’ button. When people ‘like’ the page they are able to access the Organization’s business information such as services offered, physical addresses, the Organization’s mission and vision among other information. On the Facebook pages, the Organization invites those who ‘like’ their pages to give their views regarding the Organization’s operations. In other words, the Organization operates an online suggestion box, which it uses to improve its services (Bodnar & Cohen 2012).
The Organization also has a Twitter handle where those who want to know more about it are requested to ‘follow’ the Twitter handle. Once they ‘follow’, they are able to access the Organization’s business information. The Organization uses its Twitter account to advertise and market its business. It also uses it to update customers on new products and services. In other words, the Organization uses Twitter for acquiring and retaining customers (Jones & Silverstein 2009).
M&S uses the google+ feature to market its products and services. One of the interesting features of google+ is YouTube. This feature enables the company to store videos and pictures of various products. Due to its ability to store huge files, google+ enables the Organization to share as much information as possible with its customers, a feature that is missing on Facebook and Twitter. As a result, it becomes easy and convenient for the Organization to reach many customers with comprehensive information about their products and services (Harman 2014).
M&S uses email for advertisement purposes. Through e-mail, the Organization has been able to increase its audience on social media. The reason is that over 85% of people who have an e-mail account are also on social media. For instance, Facebook has a feature for customizing audience using e-mail. Once Facebook users ‘like’ the Facebook page of the Organization, the feature directly connects Facebook to the users’ email accounts. Once that happens, the users are able to receive updates on various products and services in their e-mail inbox (Pearson & Saunders 2013).
Just like Facebook, the majority of people who are on Twitter also have email addresses. The reason is that many people use their e-mail addresses to register with Twitter and Facebook. In an effort to increase audiences for various advertisements, Twitter has a tailored audience feature that enables those with email addresses to get updates from Twitter via their e-mail addresses.
Using Amazon.com to build a brand
Due to its good reputation in online marketing, Amazon.com is the leading online retail company in the globe. It is preferred by many companies that want to increase their coverage and number of customers. M&S believes that advertising on Amazon.com not only makes it known but also makes it appear fashionable. Due to its huge popularity, Amazon.com is capable of building brands for different products from different companies (Lunden 2012).
How Amazon.com marketing can strengthen brand identity
When a brand is advertised on Amazon.com, it is accessed by millions of people across the globe and as a result, Amazon.com is capable of strengthening its brand identity. However, there is a need for consistency when marketing products on Amazon.com. The reason is that there are many products that resemble each other and therefore, it is easy for customers to shift loyalty from one product to another. As a result, companies need to keep on marketing their products on Amazon.com for the products to be properly known by customers (Lunden 2012).
Creating a favorable brand image on Amazon.com
For any brand to be popular among customers, it does not only need to be marketed on popular sites like Amazon.com but it also needs the development of an excellent brand image. The brand image has both physical and psychological aspects. The physical aspect of brand image has to do with how products appear. It also has to do with the choice of colors for the products and how the products are packaged. The psychological aspect has to do with the mental interpretation of various products by customers in terms of what the products mean to them (Lunden 2012).
All these communication strands carry consistent brand messages such as:
- To make aspirational quality accessible to all
- Commitment to quality
- Growing together
- Affordable and high quality
- Caring for your needs
The key brand values include the following:
- High-quality products and services at affordable prices
- Long-lasting products/ durability
- Sensitivity to the needs of consumers
- Caring for the environment
- Taking care of the welfare of the less privileged
- Sophisticated products
All these values apply to the internal market as well as the external market. The reason is that the Organization always aims at treating all its customers equally. In order for M&S to boost the perceived value of its products and services without changing its products and services, it needs to invest more in marketing, especially through the promotion of its products using different marketing platforms.
Communication is an essential component of business strategy because it enables organizations to reach their customers. As a result, it is important for Organizations to ensure that they have elaborate communication strategies to reach their customers effectively.
Positioning and Competitive Advantage
M&S has placed itself in a strategic position to effectively compete with its rivals. Its main strategy is to sell goods and services of high quality at affordable prices.
The objective of M&S has always been to transform itself into a leading player in the retail industry. Over the last 12 months, it has taken measures aimed at boosting its position at the global level. At the local level, it has taken various measures aimed at boosting growth in the UK. It has also taken initiatives to strengthen its foundation and improve customer satisfaction. In addition, it has taken serious campaigns to expand its international market. The Organization’s positioning initiatives are likely to remain the same over the next 12 months. The reason is that it aims at delivering quality and affordable products and services to all its customers over the next three years.
A positioning statement for M&S would be ‘to improve customer service through excellent relationships with suppliers’.
This statement is based on the Organization’s business model. Unlike many of its competitors, M&S does not operate factories and as a result, it does not manufacture any products for itself. Instead, it relies on different suppliers, located in different parts of the globe to manufacture its products. This model has enabled the Organization to satisfy the shopping needs of many customers within a short time without incurring huge costs. The reason is that it has established a good rapport with all its suppliers, who supply it with products at cheap prices (Business case studies: Using supplier relationships to serve customers better 2013).
The above positioning statement does not fit with all the targeted audience. The reason is that some of its targeted customers, like the high-income earners with high social status require customized products and services. As a result, it is not easy to micromanage the work of the suppliers for them to manufacture customized products. The Organization, therefore, needs to establish a division to deal with the designing and production of the customized products for customers who need such products.
The positioning statement is, however suitable for the following market segments:
- The youth
- The elderly
- The low-income earners
- The children
In 2007, M&S launched an initiative known as Plan A. This initiative was aimed at helping the Organization attain sustainable customer satisfaction (Smith & Cockburn 2013). The initiative was designed to incorporate the customers in making decisions about product development. The initiative has been restructured to reflect the Organization’s new four pillars namely below:
This initiative is highly valuable to consumers. The reason is that it makes them feel part and parcel of the Organization, which in turn increases their loyalty to the Organization. Consequently, their perception of M&S’s brands has been strengthened. That is the reason why some consumers do not even care about the price offered by the Organization due to the trust they have in it (Contextsustainability.com: Report review: Marks & Spencer Plan A report 2014: Putting consumers center stage 2014).
The initiative has been praised for enabling M&S to achieve some milestones, especially increasing customer satisfaction. Through the initiative, M&S has managed to outperform its competitors in household and food markets (Yudelson 2009).
The drop in sales in the clothing division has been taken by the management of M&S as an incentive for it to strengthen the marketing of the division. As a result, the closure of the division due to poor performance is not the best solution to deal with the problem. The reason is that the closure would negatively affect customers’ loyalty to the clothe ware products of the Organization. In fact, the closure would make some of the customers to shift their loyalty to the competitors of M&S (Beaver 1999).
The Organization, therefore, needs come up with strategies which would boost customer’s confidence in its clothe-ware. Such strategies should include the following:
- Doing market research to identify the gaps in sales
- Understanding what the competitors are doing, which is not being done by M&S
- Focusing on what the customers want
- Investing more resources in promotions and advertisements
- Employing more designers at the clothing division
- Boosting personalized selling (Thompson & Martin 2005).
Even though positioning is an effective strategy for competitiveness, Organizations need to combine it with other strategies such as differentiation and Porter’s five forces of competitiveness.
Internal and Stakeholder Marketing
Employees are considered essential assets by all Organizations. The reason is that they enable Organizations to achieve their objectives. The employee market sector has various segments.
The following are the stakeholder groups with an interest in M&S:
- Taxation agencies
- The business community
- The unemployed
- Business consultants
- Information technology experts
- Law firms
- Environmental regulation agencies
The employee market sector is broadly categorized into:
- Skilled employees
- Non-skilled nonskilled employees
The skilled employees are further categorized into the following segment:
- Junior employees
- Middle-level employees
- Management level employees
- Senior management employees
- Chief executive officers
In terms of Organizational design, M&S is structured in a bureaucratic manner, that is, it has a chain of command. The bureaucratic structure is based on the bureaucratic theory of management. The bureaucratic approach views Organizations as being guided by rationality (Stanford 2007).
It is through the chain of command that authority and power to make decisions are entrenched (Sims 2007). The Organization has rules of conduct at the workplace. Such rules govern things like working hours, holidays, and communication protocols within the companies.
Employees are selected not on the basis of friendship, but on merit and qualification. The approach does not encourage the mixing of friendship or family issues with Organizational business. All employees are therefore selected through a transparent and competitive process (Strinfellow 2010).
According to the scientific theory of management, employees are remunerated according to their positions and qualifications, meaning that those at the top of the hierarchy get higher remuneration than those at the bottom (Taylor 2008). However, in terms of responsibilities, those at the bottom are mostly involved with the daily activities of Organizations while those at the top are mostly involved with policy issues and public relations activities.
The employee segments named above have specific needs and concerns as shown below:
Specific needs of junior employees:
- To learn about the Organization
- To acquire basic skills
- To build a friendship at the workplace
- To establish themselves financially
- To pursue higher education
- To be recognized by supervisors
- To be promoted
- To be appreciated
- To be rewarded for exemplary performance
What M&S would want employees in this segment to know is that they need to humble themselves and work hard. They should also internalize the Organization’s core values and embrace them at all times
Specific needs of the middle-level employees:
- To establish themselves financially
- To build networks within the Organizations and outside
- To expand their knowledge
- Pay increment
- To get a promotion
- To be recognized
- To be appreciated
- To establish careers
What M&S would want the employees in this segment to know is that personal, professional, and career growth are based on the commitment to the set goals and objectives. It would also want them to know that they are a sign of the growth of the Organization and as a result, they should always put the interests of the Organization ahead of their interests (Leat 2012). Something else which M&S would want them to know is that the Organization has a potential for growth and as a result, they should dedicate all their efforts to help the Organization grow (Gattorna 2009).
Specific needs of the management and senior management employees:
- Stakeholder satisfaction
- Employee motivation
- Quality improvement
- Meeting Organizational targets
- Reducing the cost of production
- Improving profits
- Increasing efficiency and effectiveness
- Change management
- Exercising power and authority
- Mergers and acquisitions
- Application of technology in business
- Global recognition
- Boosting innovation and creativity
- Moving to the position of a chief executive
What M&S would want these employees to know is that people do not only work for financial gains but also to serve the community. It would therefore advise them to engage in charity work as a way of giving back to the community (Jeremy & Steve 2012).
Specific needs of chief executive officers:
- Meeting personal goals and those of the Organization
- Setting the vision of an Organization and realizing it
- Expansion into international markets
- Creation of a conducive culture for the growth of Organizations
- Managing the external environments for the benefit of Organizations
- Policy development
- Building networks with international Organizations
The following are the ideal communication channels for all the segments:
- An Organization’s chain of command
- Departmental meetings
- Phone calls
- Social media
- Notice boards
- Conversation with a fellow employee
Organizations to realize their mission and vision, need to take care of the welfare of their employees. The reason is that once employees’ welfare is taken care of, they become motivated and dedicate themselves to the success of the Organizations.
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