MARKS & SPENCER (M&S)

Marks & Spencer (M&S)

Marks & Spencer (M&S)

1. Introduction

This report's aim is to analyse the main problems Marks & Spencer (M&S) faces in its business environment. In order to point to the most critical issues the report is divided into several sections, starting with an analysis of the broader macro and micro environment leading to focus on internal organizational problems afterwards. Thus, a broader picture is examined first and then narrowed down to more detailed analyses as illustration 1 shows:

Illustration 1 Main Topics of the Marks & Spencer Analysis

Having identified the most critical areas a list of recommendations will be provided before ending the report in form of a final conclusion.

2. Strategic Business Audit

2.1 The Macro Environment

Due to lack of available information in this case, the PESTEL framework, which is normally applied to analyze the macro environment, cannot provide great help in this discussion.

2.2 The Micro Environment

From the case, we can identify that "clothing" and "food" are the two major industries M&S is involved in. These two industries have the common feature of swift change. The pace of technological improvement and the speed of global communications mean more and faster change now than ever before. This trend, therefore, requires managers to react swiftly to adjust strategies which fit the changing business environment. Unfortunately, M&S seemed to have done this poorly, as analysts commented: M&S ignored the changes in the marketplace while its competitors quickly reacted to changes. The reasons should be analyzed by looking closer at the micro environment.

Before using the five forces model to analysis the micro environment, the market has to be segmented. However relatively few information for this aspect can be drawn from the case. We roughly breakdown the clothing market into three segments numbered from 1 to 3 to which the model will be applied:

A. Bargaining power of suppliers

- Bargaining power of suppliers in most clothing segments is relatively low but when purchasing cloths from luxury designer firms, the bargaining power tends to be higher.

- M&S previously had only British suppliers for its claimed reason of high quality, but later on it outsourced globally to lower the cost. M&S was no longer reliant on particular suppliers and therefore the bargaining power of suppliers is lowered.

- M&S' mass purchase also leads to lower the bargaining power of suppliers.

B. Bargaining power of buyers

- Generally speaking, bargaining power of buyers is high. However buyers' power in segment 1 is relatively low, while that in segment 2 and 3 is high.

- Products in segment 1 are usually designed for the non-price-sensitive people who prefer quality and fashion.

- People in favour of products in segment 2 and 3 are more price-sensitive. And normally they can choose from a variety of companies. Thus they have high bargaining power.

C. Threat from substitutes

- Broadly speaking, threat from substitutes is very low. Only products from different segments might work as product to product substitutes.

- In times of economic recession, people may shift from segment 2 to ...