Strategic Management in Practice at Marks and Spencer

Strategic Management in PracticeAbstractThis main purpose of this paper was to conduct an analysis of strategic management issues in Marks and Spencer. The paper provides a discussion of the strategic issues facing the organization, the goals that Marks and Spencer should be setting and the actions for recommendations within the firm and a strategy statement that summarized the recommended actions. In aIDition, the paper provides an overview of the key elements of performance management system to develop the strategy. An analysis of the external and internal business environment of Marks and Spencer revealed diverse strategic issues in the firm. The paper established that the business model and the strategic approach deployed by Marks and Spencer were not effective in fostering competitive advantage and meeting the demands of the changing market place.
IntroductionStrategic management involves the transformation of organizational resources into elements that can enhance the performance of the organization, mostly in their external business environments. Some of the effective approaches to strategic management include the specification of the organizations vision and mission, development of well-planned policies and effective allocation of resources in order to facilitate the realization of the stipulated goals and objectives of the firm. Organizations are in dire need of strategic planning primarily because of the unpredictable trend of the global market place. The main objective behind strategic management is to uphold the competitive nature of business enterprise in the current dynamic and turbulent market place. It is important for strategic plans to put more emphasis on outcome. An organization should therefore practice strategic management on a continual basis in order to meet the changing needs of the business enterprise. This can be achieved through the evaluation of strategic management strategies using variables such as feasibility, acceptability and its suitability in the current business context. Marks and Spencer was chosen for this report because it faces a number of strategic issues that resulted to its fall in profitability and market share.Company overview of Marks and SpencerMarks and Spencer is arguably one of the largest retailers that are based in the UK. In aIDition, the company is also a major retailer that deals with the selling of various product rangers under their brand name in at least thirty nations across the globe (Bevan, 2007). This implies that the scope of operations of the Marks and Spencer are from an international perspective, and therefore, the firm must put a keen consideration on its external environment (Marks and Spencer plc, 2011). The company relies on its customers’ confidence on their brand. Furthermore, research has reported that in the clothing industry, Marks and Spencer has a competitive edge over all its core competitors in terms of quality, customer trust and service, and diversity in product ranges. Over its existence, the company has focused on expansion of both scope of operation and product diversity, with a principal focus on the United Kingdom market. Currently, its global operations outside the United Kingdom comprise of mostly franchises, with a reported turnover of approximately 7.3 billion. The target market consists of the clothing, food, furniture and the provision of financial services (Marks and Spencer plc, 2011). The following section provides an overview of the strategic issues facing Marks and Spencer.Strategic Issues facing Marks and SpencerExternal Environment of Marks and Spenceri. Pestle analysisPESTLE analysis is important in affecting the ways in Marks and Spencer undertakes its operations. The PESTLE framework can be combined with other analysis frameworks such as SWOT in order to effectively devise strategic management strategies. The significant political factors affecting the external operations of the Marks and Spencer include the European Integration and the implementation of the Free Trade Agreements; this has facilitated the opening of the markets for the Marks and Spencer products and created an opportunity for the company to invest in the Eastern Europe. Some of the legal factors affecting the external operation for Marks and Spencer include the National legislation regarding the health and safety of the consumers, in the sense that the company must ensure that it adheres to consumer rights and production of clothes using renewable natural resources. (Bevan, 2007) This implies that the company has to deploy appropriate strategies in order to maintain its market share in the European countries.With respect to the economic factors, Marks and Spencer was of the view that the company should not lower their prices during and after seasonal periods such as Christmas. It is evident that this strategy was initially effective, but as time went by, consumers realized that could not only obtain the retail items that Marks and Spencer offered at a lower costs, but also other retail shops offered them with discounts, something which Marks and Spencer ignores in its business strategies. With this regard, Marks and Spencer did not take into consideration of the sentiments of the public in its business level strategies (Marks and Spencer plc, 2011).With respect to the Marks and Spencer, changes in the lifestyle and taste of their potential customers can represent an opportunity or a threat to their business depending on the products and services that they are offering. With regard to the socio-cultural factors affecting Marks and Spencer, it is evident that consumers of clothes were more fashion conscious during the 1990s compared to what Marks and Spencer offered in the market such as the classic and wearable designs. As a result, consumers opted to retail outlets that were trendier compared to Marks and Spencer. In order to aIDress this issue, Marks and Spencer employed George Davies, who was the founder of Next and other numerous fashion designers in order to meet the changing tastes of the consumers (Bevan, 2007).Another strategic issue that has significantly affected the effectiveness of Marks and Spencer is its inability to keep up with the latest technology. The company could not implement simple schemes such as the buying cards for its clients. Failing to keep up with technology at Marks and Spencer results increased costs of production, lack of customer satisfaction and inefficiency in the manner through which its internal operations are conducted. For instance, its global supply chain operations were significantly impaired by lack of up to date technology in the firm. This implies that communication between the head office and subsidiaries was poor and responsiveness from their customers was significantly affected. Innovation is a central business aspect that Marks and Spencer have ignored in its business level strategies. The company has been operating under the traditional business level. This implies that Marks and Spencer failed to manage information, optimize its stock management and increase failed to become responsive to its business (Bevan, 2007).With regard to the market environment factors, Marks and Spencer failed to keep up with the changes that were taking place in the context of the retail market. The competitors were strengthening their business level strategies while Marks and Spencer on the other hand laid focus on the establishment more retail stores (Marks and Spencer plc, 2011). This resulted to a tightening of the markets that imposed significant effects on its volume of sale, reduction in the market share and reduced profitability. This can be summed as lack of focus and direction and business foresight that was needed to position the business in the context of the times and future business environment.ii. Porters Five Forces of Marks and SpencerThe model was proposed by Porter during 1980, it is used in identifying the sources of competition within the retail business. With regard to the Bargaining power of suppliers, at least 90 percent of the company’s suppliers are from Britain, and this created reliance between Marks and Spencer and its suppliers (Varga, 2010). The strategic issue with this approach is that suppliers outside UK offered the raw materials at a relatively lower cost compared to UK suppliers. The 1990s saw a decline in the sales of Marks and Spencer, which resulted to the company outsourcing globally in order to reduce operational costs, this resulted to a loss in the bargaining power of its suppliers (Marks and Spencer plc, 2011).With regard to the bargaining power of buyers, clothing consumers became more prices sensitive while others were more sensitive towards image (Varga, 2010). The competitors of Marks and Spencer focused on their needs of the consumers, and ultimately took away of M & L customers. In aIDition, the consumers in UK were not ready to pay a premium price for any form of British products. The product oriented approach did not work for the case of Marks and Spencer (Varga, 2010).With regard to threat of entrants, the retailing clothes industry faces stiff competition from both high and low end markets. There were other competitors such as ASDA, which was offering high quality clothes at affordable prices compared to Marks and Spencer. Other brands such as Next, Top Man, Zara and Oasis offered trendy clothes and took away the customers of Marks and Spencer (Varga, 2010).Regarding the threat of substitutes, the retail clothes sector has high substitutes due to the increasing importers of foreign clothes. Consumers are usually willing to pay a premium for a designer label or any other similar product that is being offered at a relatively lower price.Competitive rivalry is high in the business environment of Marks and Spencer, whereby its competitors relied on business level strategies that were more customer oriented compared to product oriented strategy that Marks and Spencer used. The clothing retail market in the UK is mature, implying that there no exit barriers (Bevan, 2007). With the failure of the clothing business unit, the company did not embark on strategic expansion of its other business units such as food and home and furniture. The company was deploying its strategic expansion on the clothes business unit that was not effective; the outcome was a decline in the company’s profitability (Bevan, 2007).Internal Environment of Marks and Spenceri. Resource competency analysisWith regard to resource competency and analysis, it is arguably evident that the resources used by the company plays an integral role in influencing its level of success; this is mainly because they determine the strategic capability of the firm because it is the resources that are transformed into the activities of the firm (Nadine & Anne, 2009). It is arguably evident that the decline of resource splayed a significant role in reducing its growth and fostering profitability for the case of Marks and Spencer (Nadine & Anne, 2009). During the year 2000, the company promoted all its internal managers, implying that there was no new ideas and innovation brought into the organization. Lack of adequate resource affected customer satisfaction significantly because of the few staff that performed most of the tasks in the organization (Bevan, 2007). Opening up of new branches implied that the company constrained its financial resources, instead of diverting them towards meaningful strategies like sales and marketing and brand image. In aIDition, the available capital was misplaced in internet shopping and the streamlining of the company’s international relations rather the strengthening existing retail outlets. All these strategies deployed by Marks and Spencer imposed negative impacts on the customer satisfaction. In aIDition, its customers raised issues of discontent citing the arrangement of the products on grounds that they could not differentiate casual and work outfits (Nadine & Anne, 2009).ii. SWOT analysis of Marks and SpencerSWOT analysis is used to recommend strategies that are used in ensuring the best alignment between the external and internal environment. The strengths of Marks and Spencer include the development of high quality products, good employee relationship through better pay, quality reputation in its brands and maintaining long term relationship with the company’s suppliers (Nadine & Anne, 2009). The weaknesses of the company include increased reliance on UK suppliers instead of using cheap overseas suppliers, failing to keep up to date with the changes in the retail clothing market, absence of precise marketing strategy and non-consumer focus. The opportunities for Marks and Spencer include speedy technological changes, whereby the company must be ahead of its competitors, focusing on the market segmentation of the retail clothing market through variables such as age, men and women clothing and product diversity. The potential threats that affect marks and Spencer include extreme competition from Gap, Oasis, Zara, Top Shop and ASDA, maturity of the retail clothing market on UK meaning that consumers are always searching for other new trendy products; global expansion has not been successful (Nadine & Anne, 2009).Strategic issues at Marks and SpencerStrategic issues mainly entail the organizational decisions undertaken by the firm regarding its future and the strategies that are needed to respond to the pressures on its business environment. This is of ultimate significance in the case of Marks and Spencer, which mainly involve its corporate and business level strategies for business growth. For a long time, Marks and Spencer have relied on the aspect of conformance in their business strategies including similar layout and store design. The company also relied on suppliers that are only from the UK. This approach was an effective business strategy during the late 90s because the firm was embarking on a global expansion in Europe and America, markets that have notable cultural differences. Marks and Spencer was of the opinion that its customers regarded British Suppliers as of high quality compared to outside suppliers. This was a strategic failure in the context of overseas markets. The company lost focus on consumer needs and its strategies were more product-oriented. In aIDition, the company did not take into consideration the transitions that were taking place within the market place. The company did not embark on intense marketing as its marketing strategies were confined in the stores design and a high cost strategy that turned ineffective in the long run due to increasing competition.Strategic goals for Marks and SpencerThe goals that Marks and Spencer should undertake should primarily involve a shift from a product oriented strategy to a consumer oriented strategy, with the main objective of enhancing its profitability. This requires a critical analysis of strategic options regarding the decisions that the company will undertake in future. Such decisions should be implemented in order to aIDress the pressures and influences imposed by the internal and external business environment. Strategy formation typically entails option generation, which involves the establishment possible plan of approaches. Strategic formation is a sequential process, which begins by conducting a situation analysis for the organization, an evaluation of the status for the business enterprise and carrying out analysis of the competitors in the market place, which encompasses an analysis of both external and internal entities that affect the business enterprise. Having carried an analysis, objectives are set in accordance with the long term and short term business requirements (Baker & Sinkula, 2005). Vision statements are also drafted, financial goals and strategic business objectives are set up. It is important that the proposed objectives put into consideration the results of situational analysis, as a result, facilitate the establishment of strategic plan. The strategic plan should outline the process of the realization of the proposed objectives. Strategic evaluation on the other hand investigates the effectiveness of the strategic plan. It involves carrying out a SWOT analysis in order to determine the strengths and weakness of the strategy. The evaluation of potential threats and opportunities is also important during strategy evaluation. Strategy evaluation also entails the use of criteria such as suitability, feasibility and the acceptability of the plan (Baker & Sinkula, 2005).The second aspect in contemporary strategic management is strategic implementation of the plan, which entails the putting of the proposed strategic plan into action. Strategic planning depends on strategic evaluation, after the choice of effective plan of approach that clearly outlines the goals and objectives of the contemporary strategic management. Some of the activities undertaken during strategic implementation include change management, evaluation of the limitations of the plan of approach and eventually analyzing the benefits or drawbacks realized after implementation. It is also imperative to analyze economic factors such as returns on investments, the effects that the plan has on overall productivity of the business enterprise. The following are the strategic goals that Marks and Spencer should develop. The goals were reached after an analysis of the internal and external environment.Goal 1: reducing the cost of production without compromising quality product developmentObjective: obtain raw materials from suppliers outside UK and enhance production efficiencyGoal 2: develop a customer-oriented business modelObjective: establish effective customer relations, develop a business model that focuses on the needs of the consumers in the retail industry and offer high quality productsGoal 3: to develop products that meets the present demands and needs of its clientObjective: enhance business efficiency and adopt an up to date business modeGoal 4: Increase profitability and competitive advantageObjective: focus on customers, offer high quality products at affordable prices, and effective marketing and distributionThe identified goals and objectives are helpful in facilitating the solving the strategic issues in the organization. This will be helpful in the attainment of sustainable competitive advantage through the adoption of an effective business model that is customer-centric. The goals adopted by the Marks and Spencer are pluralistic in the sense that they can effectively aIDress the strategic challenges facing the company. Vision and statements are also drafted, financial goals and strategic business objectives are set up. It is important that the proposed objectives put into consideration the results of situational analysis, as a result, facilitate the establishment of strategic plan. The strategic plan should outline the process of the realization of the proposed objectives. Strategic evaluation on the other hand investigates the effectiveness of the strategic plan.Actions recommended that Marks and Spencer should takeA competitive advantage that is sustainable is usually central with respect to the corporate and business level strategies because it facilitates the continuance and enhancement of the competitive position of the firm in the market. The underlying idea is that business enterprises develop special expertise that is unique only to the firm and plays an important role in fostering organizational growth for the company. The developed areas of expertise are mainly centered towards aIDing value to the products (Duane & Hoskisson 2008).Core competency is crucial in fostering sustainable competitive advantage because it facilitates access to diverse markets by the company. This is because core competencies are vital in the creation of new markets. The core competence strategy puts more emphasis on the development of a distinctive product or service or the development of a perception of a distinctive product that consumers are keener to compensate a premium for it (Wheelen & Hunger 2008). If a business enterprise is not getting a premium pay for its products or services, then it has not effectively implemented differentiation, as in the case of Marks and Spencer. An effective implementation core competence requires an organization to exploit the resources and capabilities that enhance the responsiveness from their customers, quality product development and innovation (Schermerhorn & Holbrook 2005). It is important to take into account that costs are a vital issue of concern during core competence because the costs associated with unique product development may turn out to be higher compared to the premium amount that the consumers are willing to pay for it. An indicator that can be used to measure the effectiveness of the core competence strategy is the loyalty of a consumer brand, for instance, the case of Rolex versus Casio watches. The principal argument under the core competence strategy is that the customer should be willing to pay a premium for a given product or service (Baker & Sinkula 2005). There are potential threats can hinder the effectiveness of product core competence, for instance counterfeit products and the fact that as time goes, consumers have a tendency of ceasing to value the difference that they were paying highly during the early phases of product development (Goldsmith & Hu-Chan 2003).The core competency strategy recommended also involves meeting the requirements of a particular market segment, which in turn contributes significantly to the perceived end user benefits. This business strategy is usually effective for organizations that do not have an efficient cost advantage or they enterprise cannot get a higher pay for its products (Haines 2004). This implies that Marks and Spencer should make use of the focus strategy by carefully analyzing the nature of its target market in order to facilitate the understanding of the market requirements. In order for the focus business strategy to be effective, the firm must exploit the narrow differences of the target market form the overall market place by isolation of a specific buyer group, isolation of the distinctive segment of a specific product line and understanding their niche. There are various variables that a firm can put into consideration when deploying focus strategies, for instance, the use of geographical orientations (Ellen & Dana 2009). Some of the driving factors that can cause an organization to deploy focus strategies include the unavailability of resources to compete in the wider market place; most large enterprises underestimate small niche markets; a small market segment can make the firm serve the market more effectively compared to serving the wider market; and finally, focus strategies allow the enterprise to forward its resources to particular value chain activities, thereby fostering competitive advantage. Some of the significant risks associated with focus strategies include a change in the niche market requirements to conform to the wider market; larger organizations can set its operations in the niche market (Hill & Jones 2007).The emphasis on the low cost strategy involves operating at lower costs, but not essentially offering the lowest prices in the market. An organization that aims at the realization of the low cost strategy should focus on the use of resources that play an integral role in fostering its efficiency. The underlying principle is that an organization that has successfully implemented the low cost strategy can have the lowest costs in comparison to its competitors (Hiller & Belanger 2001). Therefore, an organization can use such a position to reduce its prices in order to increase its market share or maintain the current prices and increase its revenue per unit items compared to its competitors. The principal idea of the low cost strategy is that cost and prices are not dependent, and the strategy puts a lot more on costs to achieve a status that it can use to foster competitive advantage or use lower costs to increase its profitability. An integrated strategy entails the use of a combination of cost leadership strategy and the differentiation strategy. This integrated strategy is more effective when organizations aims at adapting rapidly to changes in the market, and control the core competencies of the firm against its competitors. A significant risk associated with the integrated strategy is that it normally entails compromises; as a result, the organization can turn out to be “stuck in the miIDle” (Hubbar & Beamish 2011).Organizational capabilities can be defined as resources and policies that describes a way of thinking and decision making guidelines that are applicable in the various functional units of the business, with the main objective of facilitation the realization of business goals and objective. The formulation of these strategies is done at the functional level such as marketing, finance, human resource, production and functional units within the organization. The underlying objective behind relying on organizational capabilities and resources is to get things done in appropriate manner in order to facilitate the realization of organizational growth and development (Shenja 2007). Functional strategies are primarily concerned with the development and cultivation of a unique competence in order to make the firm or a specific functional element of the business to gain a competitive advantage (Schermerhorn & Holbrook 2005).Organizational capabilities are an important element in organizational growth owing to the fact they enhance the effectiveness and efficiency of the decision making process, they provide a framework for delegating authority and facilitate effective communication. In aIDition, capabilities offer a simplification towards the control of organizational processes, and most importantly, they offer framework for fostering organizational growth and stability (Babette & Fleisher, 2008). The core elements of organizational capabilities include the various functional strategies that can be deployed in order to compel organizational growth in a competitive environment include marketing strategy, financial strategy, HRM strategy and information management strategy (Hodgetts & Luthans 2003).The marketing strategy entails pricing, selling and the distribution of a given product or service. There two basic strategies that can be deployed during marketing, they include market development and product development. For the case of market development, an organization aims at increasing its market share in an existing market. This is attained through market saturation and market penetration. In aIDition, market development aims at developing new markets for the current commodities or services that the organization offers. In order to implement the marketing strategy effectively, organization can deploy the use of advertising and promotion in order to foster market penetration and saturation (Bolman & Deal 2008). Advertising involves the use of various communication channels to manipulate people to pay for the goods and services of a particular brand name. The desired effect of advertising is to influence consumer behavior by use of commercial offering. The marketing mix is an indispensable concept that should be put into deliberation during advertising. The marketing mix comprises of four P’s, which are product, Price, Place and promotion. The product represents the tangible object that has been manufactured for the consumers (Duane & Hoskisson 2008). Aspects such as market duration and product differentiation should be taken into account during the marketing of a product or service. The price represents the monetary value that the consumers pay to obtain the product or use a service. The place represents the geographical location of the target consumers or a marketing channel used by the marketers. A significant revolution of the place concept in marketing is due to its consolidation associated with the onset of the internet, whereby marketers were faced with minimal challenges associated with geographical limitations. The promotion element of the marketing mix is also an important element of the Integrated Marketing Communications (Baum 1996). The aspect of promotion is applicable across all the four P’s. Advertising forms part of the promotional strategies that a company can deploy in order to reach the target market and appropriate strategies to have an impact on the consumer behavior towards the product. The advent of the internet revolutionized the advertising strategies since it created various opportunities to deploy online marketing, for example Search Engine Optimization, e-business frameworks and other advertising opportunities such as email advertisements and pop ups. The new technological frameworks had a significant impact on the advertising trends deployed by marketers, especially due to the elimination of geographical limitations facilitated by the internet and other digital advertising frameworks (Baker & Sinkula 2005).The Research and Development strategy primarily focuses on product innovation and process improvement. In aIDition, it deals with the assessment of internal development, external acquisition, role or technology in organizational growth and other factors that may revolutionize the way an organization operates. An organization can opt to be a technological leader, in the sense it aims at innovation, or it can be a technological follower, in the sense that it imitates other innovations by other firms. Depending on the option that the organization undertakes, it can attain product differentiation or a reduction in the production costs (Haines 2004).The Human Resource Management Strategy deals with people management in an organization. Human resource is arguably one of the most vital assets for an organization. The financial strategy on the other hand ensures that the financial management of the firm is in line with the business and corporate strategies of the organization, with a principal objective of fostering strategic advantage. Some of the financial strategies include forecasting and planning, the financial mix and liquidity strategies (Baker & Sinkula, 2005). These are internal strengths that play an integral role in fostering organizational growth and the attainment of sustained competitive advantage.In order for Marks and Spencer to be competitive, it must have tangible resources and capabilities such as core competencies, which are usually not easy to identify and achieve. In aIDition, it is critical for businesses to manage and constantly improve their core competencies with respect to the current and potential changes in the larger industry. It is arguably evident that Marks and Spencer can exploit its capabilities and tailor its strategies in accordance with the industry requirements in order to develop products that are of high value or perceived to be high valued by their potential consumers. This helps in the increasing the market share, which in turn results to a sustained competitive advantage (Duane & Hoskisson, 2008).Marks and Spencer should also embark on business innovation. It is arguably evident that the establishment of sustainable competitive advantage is a significant element of the business level strategies for firms across all industries and economies. The Research and Development strategy, which is an important business level strategy, primarily focuses on product innovation and process improvement. In aIDition, it deals with the assessment of internal development, external acquisition, role or technology in organizational growth and other factors that may revolutionize the way an organization operates. An organization can opt to be a technological leader, in the sense it aims at innovation, or it can be a technological follower, in the sense that it imitates other innovations by other firms. Depending on the option that the organization undertakes, it can attain product differentiation or a reduction in the production costs. Such an approach places innovation at the core organizational success as an element of strategies for organizational growth in competitor growth. As a result, a key iss