Globalisation refers to the process through which a business develop its international influence or start performing its business over a global scale. Internationalisation of business will open up several growth opportunities for business in term of expanding market share, customers and profitability. Mark & Spencer is a British Multinational retailing brand which has its headquarter in UK. It deals in different product categories like food, Household products, clothing etc.
Background of Mark & Spencer Case Study
Mark & Spencer is a British multinational retailers which operates its business in selling cloths, household accessories and luxury food products. It was established by Michael Marks and Thomas Spencer in year 1884, at that time it was just a penny bazaar. But now after passing around 125 year in this sector, it has become a biggest retailer in UK. M&S operates its business all over the world by maintaining a chain of retail stores. It entered in international market by setting up franchises in various countries like USA, Canada, Ireland, Belgium, France etc. But by the end of 19thcentury, international trade of M&S get collapsed due to improper management of operations by senior management of company. Hence, the company faced a heavier loss and decide to step back from international market and focused on home market only. There are number of issues that company faces in expanding its business off shore which it lead to withdrawn its business and focused on domestic market to achieve sustainability. Some of the most common issues faced by Mark & Spencer are as follows:
- M&S firstly enter in international market by targeting South Africa and Hong Kong by exporting its product under the brand name of St. Michaels. After which company terminated its contract with Do dwells which was the major mistake as the local retailers and franchise provide a tough competition and did not allow it build up a strong presence.
- M&S targeted the Canadian market to expand its global presence through family tie-ups and after which for broadening its customer base company entered in US market by purchasing retail market chain named as King's supermarket. But, North American market refused to accept M&S as competitive brand due to lack of branding and positioning effectiveness. As a result of which company fails to achieve sustainability in market place because of high competition.
- Third major mistake done by M&S was that it did not shift its production to other countries because of quality concern which in turn has increased the company's cost of production. This in turn leads to charging higher price from customers which started shrinking the market share of company.
These are the issues which lead Mark & Spencer to step back from global market and more focused toward domestic market as they have to cover losses. Apart from this company also get affected by the recession faced by global market and its profit share dropped down. But it started recovering and by the year 2009 it become successful to increase profit as well as market share respectively. It has learned from past experience for structuring its plan related to future growth and re-entering in international market. In this direction, M&S focused toward improving their promotional activities by marketing its product in various segments. Apart from this it also work over improving the multi-channel retailing, growing space and building up current capabilities. These all supported Mark & Spencer in becoming a most demanding and well known global brand.
Internal and external analysis
Mark & Spencer has faced several issues while entering in global market but by dealing with all these threats, company is now consider as a biggest retailer in UK. So for its continual growth and expansion in global market, company is required to analyse its internal as well as external factors that may affect its operations. This information will help in formulating an effective strategy that support M&S in achieving competitive advantage in market place and expanding its business worldwide. The internal and external analysis is explained below:
Internal analysis:- It refers to the process of analysis the strength and capabilities that a company have which act a driver for future growth. Internal analysis of Mark & Spencer can be better performed using SWOT, a analytical tool which depict about strength, weakness, threat and opportunity that a company have which support in formulating effective growth strategy.
·M&S has a multichannel presence such as brick & mortar, online stores and also maintain long range of franchises world wide. This has created high brand image and larger market share internationally.
·Company maintain a diversified workforce which includes employees from different religions, ethnicities etc. This support company in catering the need of people belong to different culture.
·Though Mark & Spencer offer a range of products but still wrong publicity as a non trendy store affecting its profit. As people believe that its stores offer cloths for aged people only and not for teenagers.
·Mark & Spencer doesn't maintain its production house in different countries which increases its cost of production.
·Asian customer prefer to purchase ethnic and traditional wear, so by involving this category in their clothing range company will be able to expand its customer base.
·M&S can develop their own website for selling its product or services online.
·Major threat in front of company is losing its customer base due to increasing competition in market place.
·M&S operates its business in different countries and hence it may exposed to different political facts.
External analysis:- It refers to process of evaluating the macro environmental factors in order to determine the opportunities and threats that are present in external environment which may affects the operations of company. This can be done using PEST tool which focuses over analysing the external factors that must be consider by M&S as it may influence the business operations.
·Political factor includes policies and regulations formulated by government. This may affect the profitability of Mark & Spencer as it operates its business at different geographical area and get exposed to several legislation that are followed in particular region. So, company must consider these political environment before entering into new market for avoiding nay legal compliance or failure in particular market.
·Economical factors includes import-export taxes, foreign exchange etc. which may affect the sale and profit of company. After getting recovered from global economy recession, people become more brand conscious and ready to pay any cost. This is a major opportunity for M&S as they can cover their off shore trade cost from its products price.
·Social factor includes the taste, culture and demand of customers which may affect the business operations. As M&S deals in clothing which is a most changes prone segment where trend and choice of customer changes frequently. So, company must try to offer trendy clothes for maintaining its market share and keeping customer satisfied.
·It includes factors like change and up-gradation of technology which affect the operations performed by company. Technological sector is growing faster and introducing several new technologies for enhancing and simplifying the production process. This is an opportunity for M&S as they can adopt these technologies to simplify their operations which saves its time & cost.
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Identification of company's Sustainable Competitive Advantage
Retail industry is one of the fastest growing and competitive sector which experience changes on regular bases as key players are focusing over eating one other market share by enhancing their quality of services. So, in order to deal with such competitive environment Mark & Spencer is required to formulate effective strategy. This can be done using Porter's generic strategy model which present three basic strategic options that a company use for gaining competitive advantage in marketplace. This can be better understood using following points:
Cost leadership:- This strategy suggest that a company must either sell its product at average industry price to earn higher profit then rivalry or below the average price to capture large market share. This support a company to maintain its profitability even in competitive market, as firm that can produce at low price will always remain profitable for longer time period even when industry get matures and prices decline. Mark & Spencer generally offer its clothes at premium price which is a main cause of its limited market share. But if company reduce its product price then it will be able to broaden its customer base by targeting low income or middle class people along with high class people.
Differentiation:- This strategy suggest that company must focuses on offering product or services with some unique attributes that are valued by customers and which people willing to choose over other major options. The uniqueness of product allow company to charge a premium price over their services. Mark & Spencer currently uses differentiation strategy for offering its product and maintaining a customer base. It offer high quality in its clothes which attract the customers most to pay off the premium price for purchasing high quality and trendy clothes. This is more beneficial strategy as by providing high quality product company is able to charge more which further support them in covering the extra cost incurred in offering those products.
Focus:- This strategy focuses on narrow segment and in that segment it attempt to achieve either differentiation or cost advantage. This strategy benefits a company with higher customer loyalty and achieving competitive advantage at marketplace. Under differential focus, company generally focuses over catering the special need of customer within the segment. Hence by adopting this M&S will be able to satisfy the different need and expectation of customers which are not being matched by competitors product. Therefore, M&S will be able to achieve competitive advantage in market by catering the niche market.
On the other hand in cost focus strategy, company target the niche market and try to offer them product in lowest possible price. This support them in penetrating in competitive market most effectively. By adopting this strategy M&S will be able to cater the need of different group of people by offering them product at lowest possible price. This will support them in gaining trust and loyalty of customers which in turn support them in achieving competitive advantage.
Strategic Recommendations Based on Analysis and Discussion of Implementation Issues
From the above analysis information it has been found that Mark & Spencer has faced several issues while internationalising its business which make company to step back and limit its business to domestic market only. After recovering from all the losses, Mark & Spencer now started expanding its business in different nations. But the competition is increasing rapidly which restrict the company to capture market share. So it is recommended to M&S that it must deeply analyse the macro environmental factor of the country it want to enter to determine the threats and opportunity present in that nations. This information will support it in deciding whether there is any growth opportunity or not.
Mark & Spencer is recommended to focus on entering in larger market like China, Europe etc. where there is already demand for this brand. Apart from this it must concentrate over one particular market and position itself first before moving to another which support them in getting established and acceptable by market. Mark & Spencer also focuses on improving its promotional strategies like creating more TV commercials, advertisements over social media sites, providing discounts over product much frequently etc. Because for every market there should be a different and effective marketing medium which support them in attracting customer toward it. But Mark & Spencer must perform its promotional activities by keeping in mind the traditions, culture and lifestyle that the people of particular country or region follows. Company must also changes it marketing style and convert it from product driven to market driven. This will support Mark & Spencer in understanding the regional demand of their product or services which in turn help them in catering the need of its customer much effectively.
In addition to this, Mark & Spencer is also recommended to offshore its manufacturing unit so that different needs of customer can be satisfied and also support in reducing the production cost. Company must also focus toward decentralising its operations and should involve other regional departments in decision making process as it will support them in improving the marketing process as expected by customers of that particular area. As M&S deals in different product categories so it become very essential for them to balance their brand image carefully. It must segment and position its product at lowest possible level before entering into new market as it effective portfolio management will support company in positioning its brand effectively. Mark & Spencer must reinvest the revenue into its current department which in generated from the operation instead of transferring it to other nations. This support them in enhancing the operations of that particular branch and also simplify the work of company as they do not have to manage the foreign exchange around the world.
From the above given information it can be summarized that for maintaining and expanding business internationally, a company must focuses on developing effectively strategy for entering into market. As improper planning will leads to failure of company and it may face sever loss that can also affect its brand image. So, company must perform internal as well as external analysis of target market before entering into it using SWOT and PEST analysis. This provide information regarding the growth opportunity or threats that are present in front of company. Apart from this a company may also use Porter's generic strategy model which support them in achieving competitive advantage at marketplace. Read analysis report on Global Business Strategy.