marks and spencer 5 year business plan/strategy

MARKS AND

SPENCER 5 YEAR

BUSINESS PLAN

ABSTRACT This report/project comprises of analysing Marks and

Spencer in its current state and strategies as well as

past achievements. The findings was then formulated

into a report as recommendations which showed how

strategically Marks and Spencer can improve. This

also comprised of looking competitor analytics and

their campaigns for Marks and Spencer to be

competitive.

By Aminul Hoque Strategic Decision Making for Marketers

Aminul Hoque MARK 1147 Hawa Phairor 0006548571 Strategic Decision Making for Marketers

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Contents Introduction ............................................................................................................................................ 2

Business analysis ..................................................................................................................................... 3

PESTEL Analysis ................................................................................................................................... 3

Industry, Competitors and Consumers ................................................................................................ 8

SWOT analysis ....................................................................................................................................... 12

Current Marketing Strategies ............................................................................................................... 13

Plan A ................................................................................................................................................ 13

Financial analysis ................................................................................................................................... 14

Forecasting ........................................................................................................................................ 17

Recommendations ................................................................................................................................ 18

5 - Year Business Plan ........................................................................................................................ 18

Conclusion ............................................................................................................................................. 21

List of References .................................................................................................................................. 22


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Introduction Marks and Spencer’s is a major British retailer in the food and general merchandise industry (Spencer, 2013). They have been around for 129 years. They have evolved from the single stall seller to an international multi-channel retailer, employing almost 82,000 people. A British company trying to remain as close as they can to their foundations, which was; quality, value, service, innovation and trust. Through diversification, M&S are reducing their dependencies within the UK economy and focusing more of their efforts in the international markets. M&S turnover splits between two categories food (54%) and general merchandise (46%) (Spencer, 2013). They have 766 stores across the UK and as well as a growing e-commerce business. M&S aim to become the world’s most sustainable retailer through their Plan A program, which focuses on eco and ethical corporate behaviour. This report will consist of a 5-year business strategy, which is aimed at addressing stockholder, who are an integral part of the business, and will insure that their stocks are safe in Marks and Spencer and will remain competitive in the near future. In this report, I will also be going through the business environmental analysis in to developing the 5-year plan. This will also contain market-forecasting models, also a plan of how my business model will be implemented.


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Business analysis

PESTEL Analysis

Political and legal:

Many aspects of government policy can affect businesses; in particular, they must also consider the

implications of any forthcoming legislations and adhere to them within their daily operations. In the

context of Marks and Spencer, they will need to comply with trading standards, as well as health and

safety standards within their operations. This is fully in line with their aims of Plan A, (Spencer, 2013)

which aims to tackle such matters like ethical trading and health and safety as well as reduction in

waste. Marks and Spencer also need to take into consideration the UK taxation system within their

daily operations. This is because they may feel the need to lower their efforts in the UK if the tax is

too high. Currently the main rate of corporation tax in the UK is 23% in 2013 and 21% in 2014 (Customs,

2013).

In terms of the legal aspects that Marks and Spencer need to comply with are the FCA (Financial

Conduct Authority) and PRA (Prudential Regulation Authority) FCA, Authority, (2013) as they have

their own M&S banking sector as well. They also need to consider the guidelines of the FSA (Food

Standards Agency) (Agency, 2013) as they provide groceries too.

Economy:

Currently the economic outlook for the UK is getting better, as stated by the BBC ‘UK economy

avoids triple dip recession’ (BBC, 2013).

Marks and Spencer must also consider the Economic Cycle within the UK as this plays a major role on

how they should plan their daily operations as well as setting their pricing and future marketing.


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Social:

Social and cultural factors play a major role in how any business is shaped. As with the recent recession

within the UK and the UK just coming out of a triple dip recession, unemployment levels are still high.

This has a major effect on any retailing company. In addition, there is the rise of an aging population,

which decides whom the company will be targeting most of their products are aimed at.


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From the table above you can see that there is an aging population as 41% of the UK population are

in the age group of 25 - 54. The table below shows that menswear and womenswear were among the

top popular products purchased in department stores within the UK. This shows that although there

are signs of recession consumers are still buying clothes.


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The socio-economic table below also shows that menswear and womenswear are in very high

demand, by the ABC1 socio-economic groups. However if you look more deeply into the results you

will find that footwear is also rising in trend and according to Mintel, (2013) ‘Footwear saw strong

sales growth as consumers see buying new shoes as an easy way of updating an outfit’.

Mintel, (2013) also suggests that there is a demand for frequently updated fashion lines, and in terms

of age demographics, there is a change in age range of which group set the trend. As Mintel, suggests

that the new age group that set the trend are the 25 – 34 year old demographic. This is because the

15 – 24 age group are facing more financial pressure and are less likely to be shopping.

Technological:

As for the technological aspects of the environment, steady improvements have been made, such as

e commerce and smartphone application support. As the internet is growing day by day, more and

more people are consuming products and services online and the barrier stopping people from doing

so is diminishing. The graph below derived from Mintel, shows the attitudes to online shopping as well

as its importance for firms like Marks and Spencer.


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Environmental:

As for the environment Marks and Spencer currently have, a plan in place, which is in line with their

corporate strategy this, is ‘Plan A’. Plan A is in place to reduce their carbon waste as well as packaging

waste by a significant amount. Marks and Spencer is one of the few companies that is dedicated to

their Fairtrade and organic range (Spencer, 2013).


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Industry, Competitors and Consumers

Industry:

According to Bloomberg, (2013), Marks and Spencer are in the “Retail Discretionary” industry, which

then falls ino the sub-indsutry of department stores. Marks and Spencer is major british retailer, which

has been around for 129 years and employing around 82,000 people to date. Markes and Spencer in

2013 managed to secure £10bn in sales as well as £665m in profits (Spencer, 2013). Within the same

industry there are many other department stores such as John Lewis, harrods, Debenhams and Harvey

Nichols. The department store indusrtry is changing heavily, as more and more consumers are

changing the way they shop. As Mintel, (2013) suggests that consumers are shopping in less linear

ways and are using different channels when buying from department stores. As there are many new

retailers launching, there is the issue of trust that is key within business. As Blau, (1964) states that

‘While trust represents a complex social phenomenon, it has been argued to be the essence of social

exchange’. This shows that great emphasis on trust and its reliance in not only business but also social

conducts. The table below derived from Mintel indicates the level of trust from other department

stores as well as M&S.


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Competitors:

By looking at the Porters 5 forces model above, and putting this into context of Marks and Spencer

the main problems that Marks and Spencer now face is the growing number of entrants into the

market as well as the threat of substititues and the degree of rivalry within the industy.

In terms of threat of new entrants, there are a number of competitors within the market. These can

be similar departmenal comapanies like John Lewis, Harrods, Harvey Nichols, Selfridges and

Dedenhams. However, as there are many entrants within that industry Marks and Spencer has the

degree of trust within their brand which can be used to uplift itself.

Moreover, there is also the threat of substitues which need to be tackled by Marks and Spencer.

Hoewever, given the nature of Marks and Spencer as they have a groceries section as well as general

merchandise. They will have twice as many substiture companies in both areas. For example in the

food section there are Sainsburys, Tesco, Asda and Morrisons. And in the clothing section there is

competitors such as Next, Asos, Oasis and even Boohoo.

Furthermore, there is also the degree of rivalry within the industry itself, as Marks and Spencer have

a larger market share than other departmental stores they are in a better position. This is also the

same for their level of trust within the brand.


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The buyer also has some significant part in the business as by looking at the current state of the UK it

has just barely come out of the recession (BBC, 2013). This displays that spending has changed within

the UK and new age structures are forming the trends as shown by Mintel, (2013) the new age

structure is 25-34. Here we can see that the buyer is not only changing the products sold, but also the

type of consumers it wishes to attract. This can also relate to why Marks and Spencer wish to employ

their tactics in countries other than UK as they fall into their age range as well as the overall strategy

as shown by the Guardian, (2011) ‘Marks & Spencer returns to France, with new store on the Champs

Elysées’.

Consumers:

The type of consumers that Marks and Spencer are currently targeting is the 45 – 54 age groups. The

graph below displays the type of people that visit each of these sites which is derived from HeatSync,

a web analytics web based program. The 3 graphs show us which age sector is most interested in

departmental shopping styles. However if you look at John Lewis and Harrods, you will find that they

have a rise in the 25 – 34 age group. This is crucial insight because Mintel, (2013) also states that the

under 25 age group is being squeezed in terms of finance. Mintel also states that the 25 – 34 age group

is taking more interest as they have more disposable income.


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SWOT analysis

SWOT analysis:

Strengths Weaknesses

Powerful retail brand

High quality

Good store locations

Own brand items

Online growth

Clothing lack segmentation

Price too high for middle class people

Need to change their strategic approach to better-fit surroundings.

Opportunities Threats

Expansion in other countries

New customer segmentations

Donations to charities

Plan A

Competitors have cheaper suppliers

Too many substitute companies entering the market e.g. Next, Oasis.


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Current Marketing Strategies

Plan A

Currently Marks and Spencer are focusing their main marketing efforts in ‘Plan A’ (Spencer, 2013). Plan A incorporates helping communities, less waste and more recycling, durable and sustainable clothing and home products, healthier and sustainable food as well as efficient shops and suppliers. Although, most of ‘Plan A’ is mainly focused around CSR (Corporate Social Responsibility) there is great importance within it. Chomvilailuk & Butcher, (2013) ‘A more socially responsible organisation will engender enhanced business performance, including product purchase, firm loyalty and favourable word of mouth’. This suggests that firms should take up as much CSR as they can to better their outlook and performance. Marks and Spencer have also unveiled their new strategic plans, which is to better the quality and style in womenswear as well as making store shopping easier (Guardian, 2013). This plan alone has risen their share price 15.4p to 436p.


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Marketing Mix

Product Price

Groceries

Clothing

General household merchandise

Price more focused around middle and upper class

Promotion Place

Celebrity endorsements

In store and online promotions

In store and online

International stores

Financial analysis

From the tables below you can see the financial activity of Marks and Spencer in the years of 2012 to

2013. Within the cash flow table, you can see that the underlying EBITDA (Earnings before Interest,

taxes, depreciation and amortization) shows that that they made less on 2013 compared to 2012.

However, by looking at the capital expenditure table you can see that more was spent in the year

2013, which could mean why less EBITDA was made. As the capital expenditure shows us that most of

the capital was spent on focuses in the UK and supply chain. As Spencer, (2013) states that ‘£200

million investment by Marks & Spencer into new distribution centre at London Gateway’. There is also

the revenues table showing the total revenue for Marks and Spencer within its different categories in

the UK.


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Forecasting

In the case of Marks and Spencer, forecasting is needed to ensure that there is a plan of thought made

to back up the assumptions made in the future. Wensley, (1979) states that ‘Forecasting system can

be defined in terms of encouraging the use of historical information (in the widest sense) to develop

a better understanding.’ In terms of forecasting, you have two main approaches, which are the

qualitative and quantitative. As qualitative approaches are more subjective and based around

opinions and judgements of consumers. I believe this should be tackled with the use of a quantitative

approach to forecasting. As Tsolacos, (2006) states, ‘Quantitative forecasting plays an important role

since future outcomes are conditional on identifiable drivers and their future trends’.

I believe that a time series method is best suited for the nature of this business. This is because the

retail environment can be quite volatile and past data needs to be used effectively in order to present

future opportunities. I have selected the Holt-Winters Method (Kalekar, 2004) which in its simplest

form is, exponential smoothening, but with the predictions of seasonality combined to give a forecast

of the next observation (Statistics, 2008). The prediction is created once there is updated information

and then revisions are made to the existing series.

Time series method best suit the purpose of Marks and Spencer as statistical information provided by

this method is very accurate compared to other time series methods such as moving averages as well

as qualitative based approaches. A study done by Brandon, et al., (1987) shows that it proved

extremely well as a forecasting method and even capturing volatility within markets, as opposed to

random walk and indicator models.


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Recommendations

5 - Year Business Plan

For this plan, I will be using the Ansoff's Matrix (Jobber, 2010). This is because Marks and Spencer

already have an existing business however; they need to further penetrate the market and they need

to further develop some markets. According to Calori & Harvatopoulos, (1988) ‘Diversification may be

defensive or offensive’. Defensive reasons may be that to spread the risk of market contraction when

current product or market is not offering further opportunities. There is also the offensive, which

requires taking over new areas of the market. Moreover, Jobber, (2010) satets that ‘although the

Ansoff’s Matrix does not prescribe when each strategy shall be employed, it is a useful framework for

thinking about in which ways growth can be achieved’. This states that the Ansoff’s Matrix will be a

useful tool for Marks and Spencer as it can provide strategies into growth which the aim.

I have decided to use the Ansoff’s Matrix instead of the Boston Consultancy Group Matrix (BCG)

because the approach is far too simplistic and does not meet the requirements of Marks and Spencer.

For example, Jobber, (2010) states that the model overlooks other factors within the market, when

measuring market attractiveness. Jobber also states that the model heavily emphasises on market

share, and it is very useful in terms of brand building. However, it may not do so well in terms of

competitive rivalry. Moreover, Slater & Zwirlein, (1992) conducted a study on 129 firms and concluded

that planning with the BCG model gave lower shareholder returns.

The table below derived from Jobber, (2010) shows an adapted version of the Ansoff’s Matrix which

has key highlighted areas in which Marks and Spencer may need to work on. From my analysis, I have

found that Marks and Spencer need to develop their markets, as Mintel, (2013) suggests that the 25

– 34 age group are setting the trends within the market. This shows that if they are to win competitor

customers they may also need to change their product line too.


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Year SMART objectives Reason

Year 1 Meet all plan A objectives by year 2

Increase market share internationally by 5% by year 2.

Increase clothing line revenue by 5% in 1 year.

This is vital as this is part of their current strategic plan and must be met in order to improve efficiency as well as the image of the company through extended CSR.

International market is vital for Marks and Spencer because they need to expand and not be dependent on the UK economy, as there is a risk of the country entering recession as well as expected GDP rising in other countries.

Increasing their clothing line revenue is vital because it would mean they are competing against not only their direct competitors but also indirect ones too. This will also give them a higher market share as well as a newfound segment for their clothing range.

Year 2 Increase non-food sector market share by 10% by year 5

More emphasis needs to be placed in the non-food section of Marks and Spencer as they are currently losing market share to competitors direct and indirect.

Year 3 Expand in Indian and china market.

This falls in directly with Marks and Spencer corporate plans to expand in international markets. If you look at the predicted GDP rates for 2017, the countries mentioned are among the top to get high GDP stats (Dun & Bradstreet, 2013).

Contingency Plan

Year 4 Change target market

Revert to original plan that bought in the £1bn sales

Focus more on food sector

As Mintel, (2013) suggests that there is a new age group making the trends as they have more disposable income. This is the 25-34 age group. This will help the sales of the non-food section of Marks and Spencer.

If the plans in years 1 – 3 are somewhat failing then go by the plans which Marks and Spencer had the most confidence in which brought in their best sales (£1bn). This not only had the most sales but also had the highest confidence levels within the shareholders.

If the previous year plans fail, then I believe Marks and Spencer should focus more on food and less on the clothing side to increase its market share in one sector. This will not only provide strong sales as proven in past fiscal years but also give investors strong confidence to remain within the business.

Year 5


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Conclusion

In conclusion, I have found that Marks and Spencer need to address a few problems before opening

chains in international grounds. They need to fully address ‘Plan A’ in order to achieve maximum

efficiency within the UK. In addition, Mintel, (2013) suggests that there is a new age sector emering

within the market. This age group will be the sector to be setting trends as the under 25 age group is

squeezed on finance. Within the report I have also combined the 5 year plan and contingency together

as that will make it more feasible as 3 years is long enough to revise again. And to gain back investor

trust classical methods can be employed to get back lost share price.

Moreover, Marks and Spencer need to use Ansoff’s Matrix to their advantage so they can see what

areas need improving. After careful analysis, the report has found that there is a need for market

development as well as product development as new age segmentations are found. Furthermore,

Investors, (2013) states that ‘we need to see clear progress in clothing, store layouts and customer

service before we upgrade our recommendation’. This implies that major work needs to be done

within the non-food section of Marks and Spencer as well as customer service section.


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