Marks and Spencer has been able to be a prominent retailer in the UK market due to its marketing and differentiating strategies. This position has been further aided by the firm establishment of the M&S brand as a prominent feature in the UK retail sector. The company also boast an improved profitability in 2006. The company also has been acquiring new businesses like ‘simple foods’ to expand on the products and services being provided by the company.
Porters Model:
Supplier Power:
Due to the immense growth in the retail industry in UK with the entrance of Wal-Mart with ASDA in the past decade the supplier concentration has increased. The same suppliers are providing services and products to all the retailers in the market. The apparel and textile market in the retail sector has also increased resulting in more demand for materials from the suppliers. Retailers in the sector have started forward integration by launching website which is an alternative to the retail stores in the form of e-retail shops.
Buyer Power:
As mentioned earlier the retail industry has gotten very concentrated with many big players in the market competing for their respective share. As a result the buyer has more choices now and the bargaining power of the buyer has increased. The buyer has an alternative to go to any other retailer if the current one does not fulfil their requirements. The buyer volume has also increased. This is mostly due to the fact that the retailers themselves have started to provide the customers with varied and diverse products and services which go beyond the traditional scope for retailers.
Barriers to Entry:
Due to the presence of large retailers in the UK retail industry and the technological innovations and investments made by them for keeping there competitive advantage the barriers for entry in this market have increase. However if a firm decides to be a pure online retailer, then the barriers to entry into the industry are reduced as the capital investment required is comparatively very low. However the main reason for the growth of the retail industry is due to the retail-branded products offered by the retail giants.
Threat of Substitutes:
No direct substitutes exist in the market for the retailers however as the retailers have started proving the target market with varied and diversified products and services, their scope has been increasing. These areas are threatened by the emergence of specialised stores which target the specific market for apparel as well as the food and organic food in the market.
Degree of Rivalry:
In the UK retail market very intense competition exists. The main competitors in the market include retailers like Marks and Spencer, Tesco, Sainsbury and ASDA. The main reason for the intense rivalry among these companies is due to the price war exiting in the food industry. Aside from this the market and channel innovation by Wal-Mart have also driving the competition high in the retail sector.
Overview of Three Areas of the Model and Their Impact on Marks and Spencer:
Buyer Power:
The retail industry has gotten very concentrated with large retailers like ASDA, TESCO, Sainsbury and Debenhams. This has made a host of other alternatives available to the customers of Marks and Spencer. Aside from this while the market for retailers has grown in the past few years, the consumer spending overall on shopping has decreased by 2.1 percent in 2006 (Datamonitor, SWOT Analysis – Marks and Spencer Group Plc). The cause of this has been the increase in taxes and other expenses. As a result the buyers have started to go for cheaper substitutes.
Threat of Substitutes:
Marks and Spencer faces no direct substitutes in the market however threat is apparent from due to the emergence of specialised stores which target the specific market for apparel as well as the food and organic food in the market. These stores have competitive edge of specialisation and customisation over Marks and Spencer.
Aside from this the barriers for entry into the market for online retailers has decreased due to technological advancements. As a result Marks and Spencer is facing problems from the e-retailers. While Wal-Mart and other retailers provide for transactions and online shopping through there websites, Marks and Spencer’s own website is inferior compared to them. For example food cannot be ordered online and delivered to home from its website. Also a very limited category of merchandise is available for customers online. Marks and Spencer also does not cater to customers overseas and the delivery to the local customers is through Royal Mail, or White Arrow courier service, instead of independent couriers.
Degree of Rivalry:
In the UK retail market very intense competition exists. The main competitors for Marks and Spencer in the market include retailers like Tesco, Sainsbury, Debenhams and ASDA. The main reason for the intense rivalry among these companies is due to the price war exiting in the food industry. Aside from this the market and channel innovation by Wal-Mart have also driving the competition high in the retail sector. The traditional supermarket channels are also evolving mostly again due to the innovations made by Wal-Mart since the 1980’s.
Due to the diversified products and services provided by Marks and Spencer it is believed that the company has lost its competitive edge by indulging itself in the including food and financial services. The food operations of the company are also very blight because of the price wars in the food industry as well as the fact that M&S has become very diversified and lost its competitive differentiating factor.
Technological challenges:
With the entrance of the global retail giant Wal-Mart which focuses on proving products at the lowest costs anywhere in the world, Marks and Spencer is facing problem concerning channel integration and supply chain management. Wal-Mart uses a just-in-time (JIT) technique for its channel and inventory management with strategic alliances and partnerships with its key suppliers like Proctor and Gamble. Marks and Spencer needs to integrate its vast expanding channels and suppliers into its supply chain as it will help the company drive its costs low and earn a better margin on each product sale.
Marks and Spencer has recently cancelled most of its operation in the international market in an attempt to focus on its main market in the UK. Despite this the buyer market for Marks and Spenser products and services did not reduce in the international market. Moreover the current website that provides the function of a transactional website for M&S has not been able to provide the same level of services to its customers. Very limited numbers of categories are available for purchase online and the delivery is made through traditional channels. Aside from this the food products are not provided through the website. “Online consumer spending worldwide is forecast to rise from $137 billion in 2004 to $228 billion in 2007. Significant growth in online sales is forecast for all categories of consumer goods.” (Datamonitor, SWOT Analysis – Marks and Spencer)
Effect of the Technologies on the Market Overview
Supplier Power:
As mentioned earlier retailers in the sector have started forward integration by launching website which is an alternative to the retail stores in the form of e-retail shops. This has been taken up by Marks and Spencer as well but their online option is not half as comprehensive as that of its competitors (Wal-Mart). As a result by operating a more active and comprehensive online retail website the company will be able to integrate with its suppliers and forge strategic alliances with them.
Buyer Power:
By offering an online option, Marks and Spencer would be able to provide customized services and delivery to its customers (e.g. incentives for bulk), while still reducing costs. This will give the buyers power as well, and help the company differentiate from the competition with the help of the technology.
Barriers to Entry:
If the company established channel integration then it will be able to implement barriers to entry for new entrants. This will help secure a position for Marks and Spencer in the future with limited competition. However as the barriers to entry for online retailers are very low, Marks and Spencer, with the use of an active online retail website, will be able to compete with new retailers as well as those like Amazon and Wal-Mart.
Threat of Substitutes:
The company currently does not provide food and grocery items through its online store. By implementing a more comprehensive and active online retail store, Marks and Spencer would be able to take advantage of diversification in the virtual market as well.
Degree of Rivalry:
The degree of rivalry will remain the same although the company will get a competitive advantage over other similar retailer s in the UK market. This is because implementing these technologies will become more a necessity in order to survive in the future.
Recommendations:
For Merchandising:
The company could invest in technologies which can promote and enable better decision-making for the company. This can be done by employing real time retailing through online retail option, which will decrease the cycle time of processing for the operations and will be targeting more customers. The company could also make use of tools specific for the purpose of price optimisation, markdown optimisation, marketing & promotion optimisation, and category analytics & optimisation.
At the Store Level:
By employing the best suited technologies at the store-level, Marks and Spencer can improve its productivity. Specific technologies that can be invested in for this purpose can include making use of store-level decision systems, using virtual payment options and automatic customer identification and employing in-store staff management and scheduling systems. Other in store technologies that can be invested in include using electronic labels for labelling and categorising shelves, setting up a separate self-checkout counter to enable those with few items or regular shoppers to avoid standing in long queues and setting up helpdesks or kiosks which can provide information, and process orders and purchases without assistance from an employee
Supply chain:
Forward integration into the market and multi-channel integration will help expand the market share for the company. Aside from this using the RFID technology could enable the tracking and management of materials easier and more accurate.
References
(2003), Apparel & Textiles in Europe, Apparel & Textiles Industry Profile, available at: http://web.ebscohost.com/bsi/pdf?vid=2&hid=6&sid=9e54c618-7641-4b6b-82d1-0aac5e6446b3%40sessionmgr3
Datamonitor, (2006), Company profile – Marks and Spencer, available at: http://web.ebscohost.com/bsi/pdf?vid=2&hid=6&sid=b2f8ee98-0c0e-4f10-bda7-96b7336a9f64%40SRCSM2
Datamonitor, (2006), SWOT Analysis – Marks and Spencer, available at: http://web.ebscohost.com/bsi/pdf?vid=2&hid=6&sid=9e54c618-7641-4b6b-82d1-0aac5e6446b3%40sessionmgr3
Smith, Stephen, (2004), Retail Research Report: Emerging Technology Hype Cycle for the Retail Industry, available at: http://web.ebscohost.com/bsi/pdf?vid=2&hid=6&sid=b86f741f-d54f-4015-909a-972c790bbaef%40SRCSM2
Piercy, Nigel, (1984), The Impact of New Technology on Services Marketing, available at: http://web.ebscohost.com/bsi/pdf?vid=2&hid=106&sid=4a9d6adf-0ac2-44d6-ba29-8eab9c83747%40sessionmgr9
Dawson, John A., Sparks, Leigh, (1986), New Technology in UK Retailing: Issues and Responses, available at: http://web.ebscohost.com/bsi/pdf?vid=2&hid=6&sid=7fca21e7-b822-4fc5-9578-ce3fe5a513a0%40sessionmgr3
