Strategic assessment of Marks and Spencer

Question

I want to know more about the business model of M&S using strategic tools.

Answer

Marks and Spencer (M&S) is a major retailer that mainly operates in the UK. It operates primarily as a high street department store, with a focus on food and clothing. Stores are often located in prominent positions in town and city centres.

We can assess the external environment for M&S using Porter’s Five Forces framework:

Supplier power – Weak – M&S has historically enjoyed a strong influence over suppliers, due to the scale that it developed. By purchasing in bulk the company can negotiate for lower prices with potential suppliers. It held a position as the 6th largest UK retailer for the 2014/15 year (Wiggenraad, 2016).

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Buyer power – High – M&S supplies directly to consumers, and thus faces strong competition. The growth of online retail has been a major threat to the company, as it offers consumers access to a wide range of purchase options with companies running a cheaper online business model.

Threat of new entrants – Medium – New entrants do not pose an immediate threat to M&S, due to its scale, but the growth of recent online entrants is a danger.

Threat of substitutes – Medium – The high-street retail format has been declining rapidly due to pressure from online retailers. While the essential products sold by M&S are not in danger of substitution, the business model overall may be substituted. M&S has been expanding its online efforts to compensate for this (Rigby, 2015).

Internal rivalry – High – Due to selling a wide range of products M&S face a wide range of competitors. Most notably pressure comes from clothing stores, supermarkets and department stores. M&S have effectively competed with various major retailers in this area through positioning as high quality and developing brand trust and loyalty.

Barney’s resource based view of the firm can be used to identify that M&S’s key resource is its brand and reputation. This is because the resource is valuable, rare, inimitable and well organised (VRIO).

References

Wiggenraad, P. (2016) Data: The top 50 retailers by sales during the 2014/15 financial year (online) RetailWeek, available [https://www.retail-week.com/analysis/data/data-the-top-50-retailers-by-sales-during-the-2014/15-financial-year/7005429.article], accessed 07/10/16

Rigby, C. (2015), Marks and Spencer’s online sales rise by more than a third (online), Internet Retailing, available [http://internetretailing.net/2015/07/marks-spencer-reports-online-sales-up-by-more-than-a-third/], accessed 07/10/16