Marketing Environment - Part 4 - Marketing Essay Example

Marketing Environment

Introduction

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Marketing is the process of planning and executing the development, pricing promotion and distribution of goods and services to achieve organizational goals. Marketing directs the flow of products within an economy from producer to consumer by anticipating and satisfying the wants and needs of the market through the exchange process.

The process of developing a market plan begins with an assessment of the situation confronting the firm. The situation analysis identifies the relative strengths and weaknesses of the company as well as the opportunities and threats posed by their marketing environment. Based on this information, marketing objectives for specific products and market are established. The development of the marketing mix reflects the objectives set for each product market combination.

1.0 Company of Marks and Spencer

Marks & Spencer is a well-known retailer in UK. Marks & Spencer in their long-history boast of high-quality product, customer loyalty and successful performance. It is experiencing a hard time nowadays. Therefore, there is a need to analysis the nature, scope and business environment of M & S, evaluate the strategies pursued and analyse whether its strategies could be sustainable. (Johnson, G, 1988)

1.1 Nature & Scope

The core product area for M & S is clothing and it has dressed a substantial proportion of men, women and children in the UK for five generations from their underwear outwards. It has around 25% of the UK £15bn clothing market. In the 1960s, M & S sourced 99% of its products from the UK, and even by the 1990s still sources 70% of its products domestically, spending around £5.7bn a year. M & S is also well-known for its high quality grocery selection. It takes 3%-4% of the £60bn UK food market. M & S also sells a range of household products and furnishings, as well as becoming a major financial services supplier with 5.5million M & S charge cards holders.

2.0 Business Environment

Big organisations like M & S need to monitor the ever-changing business environment. ‘No company is an island, but exists in a sea of other organisations’ (Hartley, Palmer, 1999). M & S has seemed to lose its traditional business way in terms of intense marketing competition and rapid marketing changes. (Johnson, G, 1988)

The organisation has always monitored the performance by first making clear objectives for the business. Without clear objectives it is difficult to evaluate what a marketing plan is trying to achieve. It is usual to translate marketing objectives into quantifiable “result areas”, such as market share, market penetration or growth of sales. Some of these may be further broken down into specific sales volumes, value goals or geographical targets. (Lynch, R, 2000) Marketing objectives allow M & S to have a basis for evaluation which can then be analysed after a certain period of time. Each department most make sure that the organisational activities are coordinated in such a way that marketing objectives are met.

In order to point to the most critical issues the report is divided into several sections,

starting with an analysis of the broader macro and micro environment leading to focus on

an internal organizational problem afterwards.

3.0 Strategic Business Audit

3.0 The Macro Environment

This includes all factors that influences but they are in indirect control. A company does not generally influence any laws, although it is accepted that they could be a part of a trade organization and the M & S Company has done so. It is continuously changing and the company needs to be flexible to adapt. There may be aggressive competition and rivalry in a market. The marketing environment is also ever changing, and the marketer needs to make amends for the changes in economics, technology and culture.

3.1 Pestle Application of the organization

The PESTLE analysis is a useful tool for understanding market growth or decline. A PESTLE analysis is a business measurement tool. PESTLE is an acronym for political, economic, social and technological factors, which are used to assess the market for business and organizational unit. Marks and Spencer dropped their clothing sales 8.5% and a food sale by 1.7%. Few months back a group suggested its marketing analysis about food and clothing business, but Mark and Spencer Company did not implement it. Economic condition of the company is not so good so that they start the new brands. A PESTLE analysis examines the impact of each of these factors and the interplay between them on the organization.

Political factors include government regulations and legal issues and define the formal and informal rules under which the firm must operate. A business analyst, when considering a solution in a department or division of a company, might perform a PESTLE analysis. Some corporate brands can hold a variety of subsidiary products. Marks and Spencer have one idea and one brand. Marks and Spencer has gone out of the environment and not analysed the strategy of the market. The analyst would examine the organizational strategy, board makeup and organizational structure for political influences. Marks & Spencer has never re-branded its divisions.

Economic factors affect the purchasing power of potential customers and the cost of capital of the firm; for example, Home economy trends, Market and trade cycles etc… Social factors include the demographic and cultural aspects of the external macro-environment. Lifestyle trends, Fashion and role models etc. These factors affect the need of the customer and the size of potential markets. Mark and Spencer have never re-branded their products because they think that there are many brands equity in the Marks and Spencer label. But this rapidly declines their company.

Technological factors can lower barriers to entry, reduce minimum efficient product levels and influence outsourcing decisions. In the last ten years Marks and Spencer opened Technology department in thirteen stores. There is a wide selection of goods in the stores and they have home departments. Marks and Spencer Company focused on the quality which they maintained years back. Marks and Spencer invest only in re-vitalizing the brands as clothing. This re- vitalization needs to help throw off the dowdy image.

Current trends suggest that over the last 10 years there has been a large rise in the popularity of bulk buying with food items in particular being bought in bulk. Additionally there has been an increase in demand for convenience food such as sandwiches and microwave meals.

3.3 The Micro Environment

From the case, we can identify that “clothing” and “food” is the two major industries M & S is involved in. These two industries have the common feature of swift change. The pace of technological improvement and the speed of global communications mean more and faster change now than ever before. This trend, therefore, requires managers to react swiftly to adjust strategies which fit the changing business environment. Unfortunately, M & S seemed to have done this poorly, as analysts commented: M & S ignored the changes in the marketplace while its competitors quickly reacted to changes. The reasons should be analyzed by looking closer at the micro environment. (Lynch, R, 2000)

Before using the five forces model to analysis the micro environment, the market has to be segmented. However relatively few information for this aspect can be drawn from the case. We roughly breakdown the clothing market into three segments numbered from 1 to 3 to which the model will be applied (the illustration is as under)

 

Illustration 2: Proposed M & S Industry and Market Framework

A. Market

   It might not need segmentation in early year since people had similar requirements and very few competitors could challenge its market leadership. However things have changed. Strong competitors emerged and different products have been required by customers. Failure of the M & S to segment the market and to differentiate products resulted in shifting customers’ interests to other brands. Consequently M&S’ market share has been eroded.

    M & S must prioritize some segments. Different marketing strategies should be raised for each different segment so as to shield itself from competition.

B. Customers

   Demand and Competition are the determinants of industry profit. Therefore, understanding, stimulating or even creating demand is of great importance for profitability. (Ansoff, H, 1987)

    Understanding customer preferences and trends was deemed as a major reason of previous success. However, survey results of customer satisfaction in the late 1990s revealed that customers were more and more dissatisfied with product or service. This resulted from the fact, as frequently reported, that M&S no longer understood or reacted to its customer’s needs.

    As the technology develops and people care more and more about clothing fashion rather than only quality or price, the life cycle of the products in this industry tends to be short. That means if the company does not pay sufficient attention to collect information from customers, products might be outdated soon. This would then require a swift managing change including new designs, new concepts and new materials to meet customer’s needs.

    In addition to the product itself, value-added service is also an important part. The value of the product or service to customers should be created to appeal to customers. Furthermore, well working long-term relationships need to be established between the company and customers. This should greatly help to maintain them and to increase their loyalty to the brand.

4.0 Potential Changes in the Future

There are some issues that will occur over the next decade which marks and Spencer has to take into account now in order to prepare for the future.

4.1 The External Labour Market

This is a market of potential employees for Marks and Spencer or any particular organisation to choose from when recruiting more workers.  The employees are usually listed locally, regionally or nationally who have the skills and experience.

4.2 The National Labour Market

When Marks and Spencer examine the supply of the labour market in the next decade, a number of factors need to be taken into consideration:

·        Trends in size and characteristics of the working population

·        Competition for labour

·        The overall level of economic activity

·        The effect of government policies

5.0 Forecasting Techniques

5.1 Delphi Method

The name Delphi indicates a shrine at which ancient Greeks used to pray for information about the future. In this technique, a panel of experts, from whom opinions are gathered, is used but they do no interact face to face. They are given with the questionnaire to fill up and the decision is arrived at through written communication often through mail. In the conventional Delphi method, a small group designs a questionnaire which is completed by large number of respondents. The results are tabulated and used in developing a revised questionnaire is sent to respectively large group than before to use in subsequent responses. This procedure continues until the issue are narrowed and consensus is arrived at. This technique has the following advantages:

i.            It is quite useful where the problem is not clear to precise analytical techniques but can benefit from subjective judgement on a collective basis.

ii.            It improves the quality of the decision as a large number of persons give their opinions on the problems.

iii.            It is very useful in social and political forecasting.

iv.            This technique saves experts from the undue influence of other as they do not have face to face interaction.

However this technique suffers from the drawbacks of time consumption and excessive cost.

5.2 Input-Output Analysis

In this technique, a forecast of output is done on the basis of given output. But it can be done only when the relation ship between input and out put is known. Similarly input requirements can also be forecasted on the basis of given output with a given input output relationship. This is because of the reason that the various sectors of economy are inter- related and their relationships are well established. These relationships are known as co- efficient in mathematical terms. For Example, the demand for petrol and diesel can be predicted on the basis of its usage, at present and likely changes in future in various sectors like industry, transport, household etc. This technique is extensively used in forecasting business events.

6.0 Internal and External sources

When an organization uses the information about the environment through own records then it is called as internal sources of information. In addition to this, large companies are setting up their own corporate planning departments in order to collect and retrieve the relevant information. The people in the department interact with the various aspect of the environment continuously and collect information on various aspects which can be used at appropriate time. The internal sources include own files of the company and documents, company employees and Management Information System (MIS) which is specially designed to serve the needs of strategic planners.

The internal and external resources of Mark and Spencer are about to do something for re-positioning themselves. (1) Grocers on the food front. (2) Clothing Chains (3) Department stores on the furnishings front.

The manager can use various publications and can take help of various outside agencies for collecting relevant information for environmental analysis. These are called as external sources of information. The other sources may be suppliers, customers, government publication agencies, trade associations are marketing intermediaries, etc.

The use of intricate computer systems enabled firms to automate and accelerate many procedures previously done by hand. Linked systems have also enabled easier account collection, statistical analysis and identification of demographic data.

 

Reference

Grinblatt, M, 2001, Financial markets and corporate strategy, London, Irwin,

Johnson, G, 1997, Exploring corporate strategy, text and cases, 4e, London, Prentice Hall

Goyal, Alok, Business Environment, India

McMenamin, 1999, Financial Management – An Introduction, London, Routledge

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