Company Overview

M&S was founded by Michael Marks and Thomas Spencer in Leeds in 1894 (Marks
and Spencer, !!8"# $% wen% on %o become one of %he &'(s leadin) depar%men% s%ores
and endurin) brands# Throu)h )ood %imes and economic %urbulence, i% remained a
%radi%ionally *n)lish brand wi%h a focus on +uali%y, ,alue-for-money and prac%icali%y#
M&S specialises in sellin) food and drink, apparel and household i%ems, bu% i% has
also recen%ly di,ersified in%o financial produc%s such as credi% cards and insurance#
The company was in a difficul% financial posi%ion in %he early !!!s due %o problems
wi%h i%s supply chain and poor produc% offerin)s# The mos% difficul% was perhaps %he
year endin) March .1, !!1 when ne% profi% was as low as /#8m on re,enue of more
%han /8bn (M&S, !!8"# 0owe,er, followin) %he appoin%men% of Sir S%uar% 1ose as
%he 2*3 in !!4, %he re%ailer mana)ed %o %urn i%s for%unes and has since achie,ed a
remarkable )row%h in profi%s due %o ri)orous cos% cu%%in), e4%ensi,e s%ore
refurbishmen% and a))ressi,e marke%in) campai)ns# Thus, profi% before %a4 (/9.5m"
and ne% profi% (/66!m" for %he year endin) March .1, !!5 were a% %heir hi)hes% since
1998 (M&S, !!5"# 0owe,er, due %o %he credi% crunch in %he &S and difficul% %radin)
condi%ions in %he &' o,er %he !!5 2hris%mas period, %he company(s sales )row%h
saw a marked slow-down and i%s shares plumme%ed almos% o,erni)h% (*conomis%,
!!8"# M&S is %radi%ionally called a 7bell-wea%her( of %he &' re%ailin) indus%ry,
which means %ha% if M&S is s%ru))lin), hard %imes are ahead for %he whole sec%or#
Porters Five Forces
Level of competition
2ompe%i%ion in %he re%ailin) sec%or is e4%remely fierce# The problem is
e4acerba%ed by %he fac% %ha% companies are %ryin) %o di,ersify in%o non-core
fields %hus crea%in) addi%ional compe%i%ion#
M&S is par%icularly ,ulnerable %o compe%i%ion as i% sells no% only food bu%
also apparel and household i%ems# Thus i% faces compe%i%ion from bo%h
supermarke%s such as Tesco, 8sda and Sainsbury(s and clo%hes re%ailers
such as Topshop, 9e4%, :ara and ;ohn Lewis#
<or%er (198=" wro%e %ha% companies pursue one of %hree )eneric s%ra%e)ies>
low cos%, differen%ia%ion or hybrid# M&S has lon) %ried %o differen%ia%e
i%self from compe%i%ion by posi%ionin) i%self as a hi)her +uali%y ,alue-for-
money brand# 0owe,er, i% recen%ly s%ar%ed %o si)nifican%ly cu% apparel
prices and %o %ry %o be all %hin)s %o all people, which risks de,aluin) %he
brand in %he marke% where specialisa%ion is becomin) increasin)ly
impor%an% (8rms%ron), !!8"#
?anks and buildin) socie%ies compe%e wi%h M&S @inancial bu% i% is no% a
core business for M&S#
Threat of Substitutes
3,erall, %here are no subs%i%u%es %o food and clo%hes, which makes %he %hrea% of
subs%i%u%es low#
0owe,er, M&S food and apparel can be subs%i%u%ed by produc%s from o%her
re%ailers# 9o%ably, %he mos% direc% ri,al in food marke% is probably Aai%rose,
while ;ohn Lewis and <e%er ;ones offer hi)h +uali%y apparel# Tesco and 8sda
ha,e also in%roduced cheaper al%erna%i,es and are e,en sellin) dinner Backe%s
(Ailkes, !!5"# $n %his respec%, %he %hrea% of subs%i%u%es is hi)h#
Threat of New Entrants
Threa% of new en%ran%s is low# This is because i% %akes enormous capi%al
in,es%men%s %o se% up a successful chain of s%ores# The marke% is ma%ure and an
en%ran% would need %o offer some%hin) radically new, which is ra%her difficul%
%o do in food and apparel re%ailin)#
8ll maBor re%ailers ha,e s%ron) es%ablished brand names and so enBoy cus%omer
loyal%y, which becomes increasin)ly impor%an% in homo)enous marke%s
(Coyle, !!"#
The incumben%s are firmly holdin) %heir marke% shares and would u%ilise all
means %o coun%er any new en%ran%s, includin) li%i)a%ion#
$mpor%an%ly, absence of e4perience and knowled)e of opera%in) in %hese
marke%s - especially for forei)n companies - would be a barrier %o any new
en%ran%s#
Bargaining Power of Buyers
$s hi)h# The concen%ra%ion of buyers is hi)h and %hey %herefore can dic%a%e %heir
rulesD%as%es#
There are plen%y of al%erna%i,es and swi%chin) cos%s are low#
The &' economy is likely %o slow down in !!8 forcin) re%ailers %o cu% prices
and focus e,en more on cus%omer needs (??2, !!5"#
Similarly, as people(s incomes become more uncer%ain, %hey will shop around
more#
Bargaining Power of Suppliers
$s ra%her low# M&S is a hu)e lis%ed company wi%h a massi,e %urno,er and
suppliers wan% %heir )oods on %he re%ailer(s shel,es %o reach %he lar)e cus%omer
base#
@ur%hermore, M&S is no% as dependen% on suppliers as o%her s%ores as i%
mainly sells own branded produc%s# This means %ha% i% lar)ely buys raw
ma%erials and no% finished )oods, which is fa,ourable for mar)ins (M&S,
!!5"#
Many suppliers are from de,elopin) coun%ries, which depend on Aes%ern
companies for %heir con%rac%s#
References
1# 8?2 9ews (!!8"# ?uffe%> &S essen%ially in recession# . March !!8#
www#acnews#)o#com (8ccessed 19D!.D!8"#
# 8rms%ron), L (!!8"# $s M&S and i%s 8u%o)raph line fashionableE 1 March !!8#
www#%imesonline#co#uk (8ccessed 19D!.D!8"#
.# 8rnold, F# (!!"# 2orpora%e financial mana)emen%# d# ed# *sse4> <ren%ice 0all#
4# ??2 (!!5"# Carlin) si)nals economic slowdown# 9 3c%ober !!5#
www#news#bbc#co#uk (8ccessed 4D!.D!8"#
=# ??2 (!!8"# M&S %o char)e =p for carrier ba)s# 8 @ebruary !!8#
www#news#bbc#co#uk (8ccessed !D!.D!8"#
6# Ca,ey, ; and Laurance, ? (!!8"# M&S under fire> how %he 2i%y %urned a)ains%
1ose# The Sunday Times# 16 March !!8, p#1-1.#
5# Coyle, <# (!!"# Marke%in) Mana)emen% and S%ra%e)y .d ed#, <earson *duca%ion#
8# @inancial Times (!!8"# Marke% da%a# $nforma%ion on oil prices# 4 March !!8#
www#f%#com (8ccessed 4D!.D!8"#
9# 0M Treasury (!!8"# ?ud)e% !!8# S%abili%y and oppor%uni%y> buildin) a s%ron),
sus%ainable fu%ure# 1 March !!8# www#hm-%reasury#)o,#uk (8ccessed 19D!.D!8"#
1!# Le)al&Medical (!!8"# Man loses M&S )rape case# 14 March !!8# www#le)al-
medical#co#uk (8ccessed !D!.D!8"#
11# M&S (!!5"# M&S 8nnual repor% !!5# www#marksandspencer#com (8ccessed
18!.D!8"#
1# 9u)en%, 0 and 0awkes, S (!!8"# Feor)e follows ;eremy <a4man as M&S faces
ano%her brief challen)e# ! March !!8# www#%imesonline#co#uk (8ccessed 18D!.D!8"#
1.# <idd, 0 (!!5"# M&S )e%s %he lowes% )reen ra%in) in packa)in) sur,ey# The
Fuardian# . 3c%ober !!5# www#)uardian#co#uk (8ccessed 4D!.D!8"#
14# <or%er, M# (198=" 2ompe%i%i,e ad,an%a)e> crea%in) and sus%ainin) superior
performance# 9ew Gork> @ree <ress#
1=# The *conomis% (!!5"# The world in fi)ures> indus%ries# The world in !!8# p14,
16#
16# The *conomis% (!!8"# 8 1ose by any o%her name# 8 re%ailin) s%ar %icks off
in,es%ors a% an awkward %ime# 1. March !!8, p=8-6!#
15# The Sunday Times (!!8"# Top !! companies indices# 16 March !!8, p#19#
18# Marks and Spencer (!!8"# H3ur 0is%oryI# h%%p>DDwww#marksandspencer#com
(8ccessed 18D!.D!8"#
19# Ailkes, C (!!5"# 8sda launches /.= %u4edo in a%%emp% %o sew-up formal a%%ire
marke%# The Caily Mail# 14 9o,ember !!5# www#dailymail#co#uk (8ccessed
4D!.D!8"#
!# AT3 (!!8"# 2hina J member informa%ion# www#w%o#or) (8ccessed 19D!.D!8"#