Marks and Spencer (M&S) was established through a partnership between Thomas Spencer and Michael Marks in 1884. The company grew to become the best British multinational and is headquartered in Westminster, London. The company specializes in luxury foods, home products, and clothing. The company is heavily present in the United Kingdom with over 970 stores currently. The company is involved in selling kids wear, womenswear, home products, beauty products, menswear, footwear, and lingerie. Marks and Spencer serve their customer through their full-time stores and online presence. Marks and Spencer operations are centered on two segments which include the international business segment and the United Kingdom segment. Every company desires to go global, and every expansion means increased sales that translate to increased profits. For M&S, expanding the cloth line to France is an opportunity that cannot be ignored. It is imperative to consider the business environment the company will face making a mark in the market. The paper focuses on the expansion of M&S cloth line to the France market. There is an analysis of the market environment and recommendations on what the company has to do to ensure they remain relevant in the market.
Businesses that decide to go global have different reasons and therefore use different entry strategies, market participation and performance goals. In expanding, a business enjoys an increase in sales, profits, innovations, exclusivity as well as economies of scale. However, the fundamental reasons for internationalization are to increase the demand level of products which becomes beneficial to a company or business. Reaching the foreign customers outside the home country is crucial towards maintaining a market presence that is dominant. Marks and Spencer objective through international expansion is attracting the global venture capital and creating new markets thus protecting the future market positions and territories. Internalization is expensive and requires vast amounts of capital to enter a new market in a foreign country (Oraman, Azabagaoglu & Inan, 2011). Though M&S had closed their stores in France since 2001, expanding the cloth line will improve their market presence and increase their customer base. Taking the services and products on an international level involves a replication of business to face new circumstances, culture, locations expectations, environments, and different market structures and demands. It is crucial to identify with the market environment in the new country to ensure the business can keep up with the level of competition in the market.
The scanning of external environment deals with factors and forces that affect Marks and Spencer cloth line business. Analyzing the factors and forces will help in assisting the organization to identify the changes in the environment and come up with strategies that support the company stay ahead of the competition by adapting to the market and new environment demands. PESTEL and Porter Five Forces analysis are used to identify the organization's challenges to be faced in the expansion of the company to France. After analyzing, the environment, what follows is a recommendation of the strategies to be used by Mark and Spencer in expanding their business to France.
Background of M&S
Established in 1884, M&S has expanded their presence to more than 50 countries across Europe, Asia, and Australia. The company has been a leading United Kingdom multinational in the retail industry and offered foods, clothes, and home products. M&S has over 600 stores in the United Kingdom and revenue of more than 5billion pounds. Marks and Spencer have been a market leader in the United Kingdom for all kind of clothes (Belfanti, 2017). The company has built an e-commerce platform where more than seven million users who are indicated to serve more than 33million customers in food and cloths sectors.
The diagram below indicates the market share enjoyed by Marks and Spencer in the United Kingdom in the years 2008 and 2018. The chart will also show the market share for the M&S competitors in the United Kingdom. Mark and Spencer have a high percentage of market share with 7.65 compared to the closest competitors Primark with a 7% value in market share.
Figure 1: Market Share For UK Cloth Line.
Figure 2: Mark and Spencer markets sales against competitors in the United Kingdom
Mark and Spencer spend more capital on advertisements than the competitors. However, M&S competitors spend even more hence the stiff competition in the retail industry.
Figure 3: advertisement investment in comparison to competitors
The business environment in France can be understood through the PESTEL analysis. The analysis introduces the environments where non-controllable factors which may M&S business expansion in France. Understanding the environment in France will help in identifying the entry strategies as well as minimize the expected risks of expansion (Yuksel, 2012). The external factors include political front, legal considerations, economic factors, environmental factors, social-cultural factors
France is a member of the European Union. M&S is favored by the EU trade agreements among the member states which makes it easier for the importation of products (Wilson, 2015). There are decreases in sourcing cost when a company is expanding into another country within the European Union. The Brexit referendum which was conducted in 2016 contributed to a drop in sales and means that M&S will have challenges in expanding to other European Union members. France has a stable political climate which will help the business in their expansion strategies. The high comparative cost of structure indicates that the company may face the risk of suffering losses due to expansion measures. France does not experience geopolitical unrests that unsettle businesses, and therefore M&S will have an advantage of business expansion through government support and good regulations of operations (Dekimpe, Gielens, Raju & Thomas, 2011). There are also regulations in France that are promoting the migration to green energy where government flagships are active. Marks and Spencer will have to develop carrier bags that are degradable to comply with government regulations.
France economy presents stability that companies enjoy for a long time. Foreign direct investment for Marks and Spencer will have a positive result since France is a significant player in the world economy. Since the 2008 recession, M&S had experienced a drop in sales and made losses that led to the closure of different stores. France consumers are known to desire quality and value for products and M&S is at the frontline in offering the same. There are price sensitivity issues in France which means the company has to adjust their prices to fit the France market demand (Thompson & McLarney, 2017). The pound fluctuations following the Brexit vote will result in low consumer confidence. The oil prices have been on the rise, and different microeconomic factors affect the expansion strategies of M&S into France.
On France social-cultural front, two external factors have been influencing businesses dealing with cloth lines. They include the generation shift and the dynamic values of the population. The company has to focus on the new generations of millennials who have become central to market growth in the country. The different generations in the country possess different values and perception towards clothing. The different viewpoints, therefore, result in changes in consumer behaviors and technologies used to do shopping (Carroll & Buchholtz, 2014). There is also a perception that the France community has on the quality and value of British products.
Consumer ethical concerns and green consumerism have also affected the sustainability of businesses in France. The society is becoming more aware of the impact of brands they consume on the environment. Companies have continued to build relationships with the target markets, and M&S has to identify with their customers in France and maintain a positive relationship.
The technology world continues to change every day. It is essential for a company to be at the frontline in keeping up with the technological changes that are happening. Marks and Spencer company is placed in a better position to enjoy the business benefits that are associated with technology. The rising mobile wave and social networks imply that businesses have to make their presence known in the networks and offer constant communication. Their fashion trends keep changing with technology and M&S has to be ready to integrate technology in the cloth line business. Customers are enjoying shopping experiences through online purchases while the real shopping is being abandoned.
There is a strict rule that has been enacted on the international level and the European Union. There is a need for businesses to adhere to the set rules and standards that are stipulated by the environmental regulations. Companies' have to re-examine the life cycle of their products to ensure they have no adverse effects on the environment. Business has to be focused on reducing waste and helping the target communities to maintain and protect the environment. France places environmental concerns as a top agenda and has been focused on promoting green economy and measures to reduce climate change. Business expansion of Mark and Spencer will have the best approaches to ensuring their products are environmentally friendly and that their business practices are in line with the environment regulations (Macrory & Newbigin, 2018). Protecting the environment can be a way of gaining a competitive advantage to other retailers in the country.
Different legal factors affect the expansion of Mark and Spencer in France. M&S will have to ensure the business practice does not obstruct or interfere with the regulations and laws of the international market and the home market in the expansion strategy. The main legal factors that could affect the expansion include environmental laws, consumer rights, safety, and health regulation. The legal department for M&s has to play a critical role in ensuring they can monitor the expansion strategies to avoid getting legal battles that may be costly to the company. The Brexit vote may expose Marks and Spencer to various legal issues which may hamper the expansion strategy in France. The litigations may contribute to a loss of market which affects the existing supply chains and movement of people and products internationally (Jackson & Sparks, 2005). New rules about foreign direct investment will have to be agreed between France and the United Kingdom which presents an uncontrollable legal factor for Marks and Spencer cloth line business.
Analysis of The Business Scenario
Porter Five Forces
Barriers To Entry
The retail sector in France has low threats to new entrants as there are strong brand names, mature markets, and high capital investments. Potential entrants in the retail sectors are discouraged by the loyalty of the M&S customers to their products (Prasad, 2011). Although there are low barriers to entry, M&S faces competition from ASD products which targets the loyalty of customers. Fashion Brands including Zara and Gap have increased their online presence and are targeting young people.
Bargaining Power Of Buyers
The bargaining power of customers is high in...
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