Various Strategic Decision of the Organisation
Strategic management is the objectives framed by the top executive on the behalf of their owner which are based on the resources available. This is done by assessing the internal and external environment of the organisation where they use to compete (Boyne and Meier, 2009). It provides the overall direction to the management of the firm by covering the aspect of business objective. Strategy also helps in the developing of proper policies and plans which helps in achieving the goals by proper allocation of the resources. Mark and Spencer is the biggest retailer company operating in UK. They are the largest retailers of clothing, food and in many other varied areas. In the year 1998 their pre tax profit was more than 1 billion, but after few years they were hit by the credit crunch which had a great affect in their functioning and now in the present climate they are struggling. So the study tries to understand the strategy which has been adopted by Mark and Spencer by applying various analytical models. Companies’ internal analysis has been done which emphasised on the strategic capabilities and competitive advantage of the firm (Chalmeta and Palomero, 2011). It was also studied that the analytical techniques can whether help or assist in developing the new strategy.
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Mark and Spencer have to make a depth analysis of the industry in which they operate. This can be done by studying the various models which can be helpful in understanding the various global forces and innovation which affects the functioning of the business (Jeffs, 2008). With the help of this model company can frame various strategies to fight against the various factors which impact their operation.
Bargaining power of suppliers- There is a low bargaining power of the supplier in the clothing industry. The cloths purchased from the expensive designer companies generally tends to be higher. Mark and Spencer earlier had their suppliers from the UK itself for their quality products (Feure and Chaharbaghi, 2005). But know they have spread their market globally by lowering down the cost. They have never depended on the particular supplier and company also use to purchase the product in bulk it has lead to decrease in the bargaining power of the supplier.
Bargaining power of buyers- Mark and Spencer has divided their buyers into various segments such as segment 1, 2 and 3. It is considered that the bargaining power of the buyers is high. Segment 1 customers are those who are not concerned about the price and prefer to have high quality and fashioned products (Podolny et.al. 2008). But segment 2 and 3 consumers are highly price sensitive and they can shift to the other companies in the market so the products are offered at the prices according to their need and preference.
Threats from substitutes- Company consider that they are having very low threat from the substitute products in the market. Mark and Spencer feels the products from different segment can become the substitute of the product (Kohtamaki, et.al. 2012). Firm has seen that during the recession buyers have shifted from the segment 2 to 3 and during the period of development they have seen that consumer have shifted to 1 and 2 instead of 3. It means that segment 2 of Mark and Spencer has the threat from its substitute that is segment 1 and 3.
Threat from new entrants- Company considers that they are having high threat in the segment 1 but low in the other sectors. Mark and Spencer give a tough competition to their competitors with the help of their brand image and in the requirement of high capital in the area of segment 1 customer (Andrews, 2004). For providing the high quality and fashionable products to the customer they use high quality material, efficient employees and modern design. This helps Mark and Spencer in maintaining their brand loyalty among the buyers of product. In the segment 2 and 3 there are more chances of entrant of the competitors for the business due to lower cost and low brand loyalty.
Rivalry among existing firms- Mark and Spencer has got the heavy competition in the segment 3 as compared to their other segments (Bryant and et al, 2011). Due to lower price there is a high competition in 3 segments which ultimately affects the profitability of the organisation. This has also lower down the market share of the enterprise as there are many competitors in this segment ho dissolves the market capitalization of Mark and Spencer.
Directors of the Mark and Spencer can understand the impact of global forces and innovation on their company by the PEST analysis. This model will help in identifying the various factors which are affecting the business in spreading out their operation. Global forces of the organisation can be impacted by the three factors which are political, economical and socio cultural but the innovation can be brought in the technological area for developing the working of the business in the varied areas.
Political- When the company operates at a global level they have to consider the political factor to be very important in conducting their business. The major factor which affects the operation of the Mark and Spencer in the external environment is due to the integration of European Union and free trade agreements (Rippin, 2007). It has lead to the opportunity for the company to expand their activities and to invest in the Eastern Europe.
Economical- Mark and Spencer has to consider the economic factors when operating globally as it directly affects its functioning. The important economic factors which business has to consider are interest and inflation rates and exchange rates (Ferrell and Hartline, 2012). Company must look after all these factors in framing out their strategic decision with respect to external functioning.
Socio-cultural- Here company has to look after the changing need and preference of the consumer with respect to quality and fashion in the area of their operation for the strategic decision making (Faupel, 2012). This factor is an opportunity and even the threat but depend on the product that company is offering to the consumer.
Technological- Mark and Spencer has been benefited by the internet transformation which has lead to market their products by e-retailing (Dudovskiy, 2014). IT Management systems has also helped as a strategic management decision of the organisation.
According to the British retail consortium report it was found that in the year 2013 the retail industry sale was over £321 billion. It means the industry is in growth and there is huge scope for the expansion by taking proper strategic decision (Porter, 2008). UK trade and investment report shows that commerce is going to deliver the £500 million value in promoting the UK economy. Government of Britain is continuously supporting this industry to grow its operation internationally and in achieving the more secured investment value. Mark and Spencer can form their strategic decision on the basis of this report as their continuous growth in the industry so they can expand their activities in a much better way and government will also be supporting. With the help of this data business directors can review their strategic decision more efficiently.
Strategic capability means that the ability of the organisation in successfully employing their competitive strategies to remain in the market and to increase the market capitalization with time (Ackermann, 2011). This takes into account the strategic decision which the business has taken for the achievements of business objectives. The strategic capability of the business entities includes organization assets, resources, market share, brand image and etc (Chan and Lee, 2011) (2005).. The strategic capability is considered to be as the most crucial aspect in the business as it helps the business organization to become financial viable in the market irrespective of competition in the market. Organisational capabilities can be classified into two parts:
Functional analysis- This helps the firm in identifying those functional areas of the business which are principal in its functioning (Barney, 2007). The functions help to identify those core principles which are present in its operations.
Value chain analysis- This method will divide the activity of the firm into a chain. The analysis has been divided into two methods that are primary activities which involves the transformation of the inputs and the support activities.
Strategic capabilities of the Mark and Spencer must be in such a way that it provides the value to its stakeholders. They are the key persons to whom the company has to provide with the essentials for their proper functioning (Hill and Jones, 2009). This could be done by framing such strategic capabilities for the business which competitors cannot copy. It is important for the firm to develop such strategies so that they can compete in the market.
Customer- Mark and Spencer have to provide the product quality to the customer which fulfils there and preference and imitate their capability. They have to differentiate themselves in the market by providing the highly quality product which satisfies the needs of the consumer. This also helps the firm in maintaining the competition with their competitors. The products offered to the customer must be highly efficient and this is possible only by taking strategic decision with respect to the goods produced.
Shareholder – The value which the Mark and Spencer can give it to their shareholder will be in the form of return which they have to give it to their investor who invests in the firm (Andrews, 2004). These proper returns can be given only when the management frames the strategic decision which is highly efficient in capturing the market. This will show the imitating capability of the organisation and will differentiate the company from the other competitors.
Supplier- Mark and Spencer can provide the value to their supplier by making the timely payment. This is possible only the proper management of funds. Being a big enterprise in the retail sector they have to look after the goodwill which they have to maintain by paying the suppliers on time (Bradfield and et. al, 2005). It will also lead proper availability of resources for the production. This area can be improved by the proper strategic management of the funds in the organisation and this and this can be done by framing the right strategies.
Owner- The value which the owner is going to derive is by the expansion of the business into many other countries. For this the top management of the company has to decide about the expansion. They have to study the many areas which can benefit and affect its operation in other countries (Andrews, 2004). This can be done by planning such strategies which are not adopted by the other international business in their operations.
Mark and Spencer have to develop the strategies according to the stakeholders of the organisation. If any one of them will not be provided with their value which they must get out of the operations of the business then it can affect the firm. So the overall strategies framed must be such that it enhances the capability of the company.
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Company must frame their strategic capabilities in such a way that they are able to expand their operation globally. This can be done by establishing their proper image in the domestic market. Proper strategy formulation will help in achieving the good brand image in the origin of the business (Benedict, Steenkamp and Kumar, 2009). Once, the image has been build of the organisation and consumer starts recognising the brand at the international level. It will be achievable only by enhancing the strategic capabilities of the firm at various operational level of the firm. After this the Mark and Spencer must go for the strategies which they are going o implement at the international level. They have to take out the proper research in conducting their operation in the potential market.
Mark and Spencer can make their internal analysis in understanding their strategic capabilities. This will help the organisation in framing their strategy in a better way. It is important to identify those inner strategies within the company and working on those operations for making it more effective.
Resources what the Mark and Spencer has
Physical- Mark and Spencer are having the wide networks of their store and they are having the product and brands which are well known among the consumers of UK and globally (Andrews, 2004). This is one of the strategic capabilities of the business.
Intangible- Organisation is having huge brand popularity among the consumer. This helps them in expanding their operation globally as the product is demanded by the different consumers of varied region due to the fame of the rand (Rao and Krishna, 2004). Mark and Spencer are even having a strong relationship with their supplier.
Competencies what Mark and Spencer does
Physical- Mark and Spencer are having a strong marketing team. They use to market their products very efficiently (Al-Ghamdi, 2008). This helps them to maintain their brand image in the eyes of the consumer.
Intangible-They are efficient in managing the quality control. They use to offer the products which are high excellence and according to the need and preference of the consumer.
There can be many models which can help the Mark and Spencer in framing the proper strategy. Company on the basis of this technique can form the efficient strategies which will help them in achieving the goals and objectives of the organisation. Application of the model is very important in the success of the organisation (Benedict, Steenkamp and Kumar, 2009). This help in the formulation of newer strategy which helps the business to compete in the market for a longer period. With the efficient strategies the firm can retain their customer for a longer period. This will be possible only by employing new and innovative ideas in the product and services offered to the society. Company has to differentiate themselves from the competitor in all senses for enhancing the brand loyalty among the customers.
Cost leadership strategy- This strategy of the Mark and Spencer will help them to gain the competitive edge over their competitors. It will help the company to develop more sales and in achieving their target. This can be done by applying the two ways:
The profits of the company can be increased by reducing the cost this can be done by reducing the price of the industry to the average.
Market capitalization of the company can be increased by reducing the price of its product (Kim and Mauborgne, 2013). This is also going to generate the profits on the sales as the cost of the production has been reduced.
Cost leadership is the strategy where Mark and Spencer can become the market leaders by selling the product at the low cost in the industry. Here they can target those customers who fall under the segment of 2 and 3. Only by producing the product at low cost will not be enough for the management they have to keep a keen check on the competitor’s price as they can cut the price which has offered by the firm in the market (Aaltonen and Ikavalko, 2002). This is a method where the business has to be sure about the price for becoming the cost leader in the market. Mark and Spencer can successfully adopt this method by assessing the capital which they need to invest in the technology which brings down their cost down. Reduce the cost by efficient use of labour, material for substantially cutting down the cost from the competitors and by proper use of logistics. The strategy adopted for the cost reduction will not remain unique in the market for a longer period. Competitors are going to copy down soon or later the strategy adopted in the cost reduction by Mark and Spencer (Porter, 2008). This is the reason why the organisation has to bring out continuous improvement in the strategies by reducing the cost. It can be improved by adopting the philosophy of Japanese that is “Continuous improvement”.
Differentiation strategy- This is the strategy where Mark and Spencer differentiate their product from the competitors. Here the management has to understand about the nature of the industry properly and their product and services. But the business also has to maintain their brand image, innovative features, functionality and the durability of the products offered to the consumer (Porter's Generic Strategies, 2014). For making the successful differentiation organisation need to have a proper research, development and innovation in their product. By providing the high quality products and making the sales and marketing so effective that it shows the benefit and differentiate the products from the competitors. Mark and Spencer being a big enterprise need to be agile in the development of their new products.
Cost focus strategy- Here the products are developed according to the need of the customer this market is particularly the niche. Mark and Spencer must develop the product of their segment 1 where the customers are mainly concerned about the quality and the moving trend of fashion this helps in building the loyalty among the customer (Rao and Krishna, 2004). This helps to become the market leader of the product and the competitors are less attracted towards it.
Porter’s generic model helps Mark and Spencer in segregating their product according to the need and preferences of the customer. Business has already distinguished their customer on the segment basis where the segment 1 customers are mainly concerned about the quality and the fashion trend they are not concerned about the price (Barney, 2007). But the segment 2 and 3 consumers are price sensitive and they can shift to the other competitors in the market. This strategy will not apply to all industries or the companies. It can be critically evaluated that there are many companies who were the market leader in their product but due to lack of innovation and feature development they are out of the market. So it is important to develop the new strategy on the regular basis then only Mark and Spencer will be able to stay in the market for the longer period.
According to porters generic method Mark and Spencer have critically evaluated the segment 2 and 3 consumer to be the most important as price sensitive customers are comparably large in the market. If they are not going to cut down their cost in producing the product then they can go into heavy losses as consumers are going to shift towards the competitors (Michael Porter’s “Generic Strategies”. n.d). Here they have to become the cost leader in the market then only they can earn the market share and profits from the market. The consumer which fall under this category are segment 2 and 3 of the Mark and Spencer who are mainly concerned about the price of the product and if the cost is not according to them then they can shift to the competing products. In case of differentiation the company has to differentiate their product from the other competitors but here the quality and the brand image is not compromised (Chalmeta and Palomero, 2011). The consumer which are covered here are the segment 1 who don’t compromise with the product which have been offered to them. Focus cost strategy are the consumer with special needs they are also the consumer who are covered under the 1st segment. They need the product according to their need and preference. Here the company gets a chance of charging the premium price from the consumer.
Only by discussing the model or by framing the strategy it will not solve the purpose of the Mark and Spencer until and unless it has been implemented. With the help of the Porters’ generic method they can divide the whole market into various segments and accordingly they can produce the product according to the need and preference in the market (Chan and Lee, 2011). The method of segmentation is definitely going to help the management in taking the important strategic decision. The can apply these strategy effectively in increasing their market share. Models utilization in an appropriate manner and can bring out the new concepts or ideologies in the development of the product in the more efficient manner. Future possibilities can be predicted and on that basis the product can be developed so that it is differentiated from the market competitors of the Mark and Spencer (Simonds, 2013). Business is mainly into the industry where the need of the consumer has to be understood by the management and this can be done by the proper research.
So it has been observed that by proper utilization of this model Mark and Spencer can develop new strategy for the future growth of the business. The strategy evolved will be such that it can beat the whole market and will help in capturing the larger amount of market capitalization (Aaltonen and Ikavalko, 2002). If the strategy framed will be in accordance to the need of the consumer then they will be loyal to the brand and it will increase the brand image of the company among the customer at global level also.
From the above discussion it can be concluded that it is important for the management to initiate their operation on the basis of the strategic decision. This can be done by applying the various models in taking the various strategic decision of the organisation. The study also concluded that the Mark and Spencer have efficiently used the Porter’s generic method in segmenting their customer. They have very efficiently divided the market according to the need and preference an according to the price which is accepted by the consumer. This has given the heavy competition to the competitors who are competing against the organisation in the market. The techniques can also help in the identification of new strategy which is different and unique in all senses.
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