Evaluation on Marks and Spencer

ASSIGNMENT 3 - WRITTEN INDIVIDUAL ASSIGNMENT (MARK AND SPENCER)

1. Analyze the five forces acting on Marks and Spencer. Identify the element that appears to bring the greatest threat to the company.

Nowadays, there are many new high street stores entrants such as Top Shop in this clothing industry which create several threats to existing competitors as they may bring new technology which are not available to current traditional clothing retailers. Competitors such as supermarkets namely ASDA have operated successfully in introducing attractive and acceptable quality clothing range into their operations to achieve scale of economies with other businesses. It is obvious that the decreasing level of customers' loyalty owing to the confusion and disappointment has resulted in higher degrees of competition. The losses of understandings in customers' needs reduce the sales of the company. This is because the main concern of supermarkets such as Selfridges is on low cost clothing whereas Marks and Spencer have trailed a different strategy which is to maintain competitive position in luxury products (Business Teacher, n.d). Therefore, the level of new entrants is high.

The main fact of substitute products is performing the same function as the product of the industry (Swathen, 2010). For Marks and Spencer, their substitute products are available at many places such as supermarkets, convenience shops and others. Hence, the substitute level of Marks and Spencer is high. Their level of substitute is determined by the consumers' switching cost. For instance, Marks and Spencer launched their own school uniforms in the early 1950s, however there is many other local clothes shops selling moderate quality basic school uniforms but with a lower price compared with Marks and Spencer which cause customers to easily switch from this brand to its substitutes brands. The threat of substitutes is can be high if the substitute product is equal quality with the Marks and Spencer's products. For example, Marks and Spencer offer healthy food for their customers yet there are many varieties of healthy foods which are available at many food shops.

For Marks and Spencer, the level of power of buyers is high owing to the plenty of substitute's products from competitors of Marks and Spencer in the clothing markets. Competitors such as TK Maxx and Tesco who are the cost competitors offer acceptable quality basic clothing at lower process which boosts the buyer switching cost which relative to firm switching cost. The differentiating competitors such as Next and Gap offer attractive varieties with similar terms of trade with Marks and Spencer can increase the differential advantage of industry and the buyers' power. The competitors of Marks and Spencer were more focused on customers' satisfaction and took away its potential customers while Marks and Spencer targets too many segments and loses the understandings of their customers' needs.

The bargaining power of suppliers in clothing industry will be low owing to the other rival retailers. Marks and Spencer bought directly their raw materials or stocks from few UK suppliers such as Dewhirst for clothing and Northern Food for food. Owing to Marks and Spencer is one of the largest company and retailer in UK that owns many branches at various places results them to purchase the raw materials for all their branches at large quantity and this create a situation where the supplier is fully dependent on this company. Hence, the bargaining power of suppliers is low when the suppliers have its own permanent and profitable buyers. However, based on the case study, Marks and Spencer has decided to increase their overseas sourcing from lower cost counties in search of cost advantages in order to minimize their producing cost after the damaged of supplier relationship owing to the sales fell in 2003.

There is high threat of intensity of rivalry for Marks and Spencer. Competition not only comes from existing competitors but also potential new entrants. Marks and Spencer faces a great intensity rivalry from its established strong brands competitors such as John Lewis and many others. They are enduring declining of profits due to the slide of sales owing to their less customers orientated businesses methods. For example, Gap has exploited young people's demands and expectations by emerging eye-catching design clothes. Besides, they face huge rivalry intensity although it has high share of market because of fading customers' relations due to lose understanding of customers' needs. To illustrate, Sainsbury have developed its varieties of ready cooked meals in order to attract more customers.

2. Perform a SWOT analysis of Marks and Spencer's business.

In term of strengths, Marks and Spencer has high brand or reputation recognition as one of the UK's leading retailers of clothes, food and home products. They were ranked as 11th on Consumer Superbrands Official Top 500 (100) by The Centre for Brand Analysis on 2011 (Ranking The Brands, 2011). With this brand ranking reputation, this brand could get a great amount of loyal customers worldwide. This brand is an established and famous brand that had been founded in 1884 by Michael Marks and Thomas Spencer. Besides, they have a strong and high market shares which holds on 11 percent share of the UK market. They also owned high sales which is 7.3 billion as turnover of a year. They have a wide range of distributions where they owned 155 franchised stores in Europe, Middle East, Asia and Far East. They have committed and loyal employees around 65, 000 people in their 375 UK stores. They own a brand loyalty among the customers which resulting in 10 million people shop in Marks and Spencer stores each week. They also are offering excellent customer services in clothes retailing and they historically been an ironic retailer of British Quality Goods. Further, they provide extremely high quality and rare products for their customers by responding to customers' health and nutrition concerns (Danieletheridge, 2011).

In term of weaknesses, Marks and Spencer offers bad customer services during the declining period causing the weakening of customers' relationships due to confusion and disappointment. Competitors such as Gap is coming out with new varieties in a low cost price for the customers while Marks and Spencer is maintaining their best luxury clothing quality in a high cost price which causes customer to confuse to purchase Marks and Spencer's products. Marks and Spencer is lack in creative ideas and innovating strategies which causes them to lose the understandings of customers' needs. They still stick on the traditional bases for competition