Table of Contents
Marks and Spencer is a British multinational retailer. It is one of the most representative chain stores in the UK and it currently has around 1463 branches over 57 countries as well. Its food sales also account for a large proportion. Most of the stores are mainly selling clothing and food and It is serving about 32 million customers (Marks & Spencer 2018). However, in a highly competitive market environment, it is important for retailers to have operational management strategies to gain competitive advantage and achieve higher returns.
In the first place, the essay will have an overview of Porter’s generic strategies and Bowman’s Strategy Clock and explain the Strategic Business Units that M&S uses. Next, to identify the strategic position of Marks and Spencer in the competitive environment, focusing on the food rather than evaluating the whole company and analysing their competitive advantage they have in food industry. Finally, it will take three competitor companies and brief rationale for the positions of them.
Food Unit
Marks & Spencer Foods is a 100% private brand. From raw material procurement, manufacturing, to sales, they strictly control the quality, allowing consumers to taste delicious food while taking care of nutrition and health.
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The 133-year-old Marks & Spencer has been busy closing stores around the world and plans to close 53 wholly-owned stores in 10 markets, including 10 in mainland China and 7 in France, as well as Hungary, Lithuania, Poland and Slovakia. All shops in Romania, the Netherlands, Belgium and Estonia (Scott. & Walker, 2018). The closing of the store is actually part of the group restructuring plan, hosted by CEO Steve Rowe. After determining that the new growth point in the retail industry is food, Marks & Spencer will transform itself into a food-centric group after streamlining the retail sector.
The following two frameworks are used to analyse the strategic position of the M&S food unit.
Generic Strategy Matrix Analysis
Differentiated strategy – Private brand
Generic competitive strategy means basic types of competitive strategy was proposed by Michael Porter, a famous strategic management scientist at Harvard Business School. (AMADEO. K, 2018) There are three generic competitive strategies: Cost- leading strategy, differentiated strategy, centralized strategy. Companies must choose one of these three strategies as their dominant strategy, either to control costs to a lower level than competitors, or to differentiate themselves in enterprise products and services. The characteristics make customers feel that you provide more value than other competitors. The company can also be committed to serving a particular market segment, a particular product category or a specific geographic area. These three strategic frameworks vary greatly. Successful implementation requires different resources and skills. Due to corporate culture chaos, lack of organisational arrangements, and incentives for conflicts, companies caught in the middle may suffer greater losses.
The cost leadership strategy, also known as the low-cost strategy, refers to a strategy in which enterprises reduce their costs effectively, make the total cost of the enterprise lower than the cost of the competitors, and even the lowest cost in the same industry, thereby gaining competitive advantage.
Focused strategy refers to strategy in which a company’s business activities are concentrated on a particular group of buyers, a certain part of a product line, or a regional market. At the heart of this strategy is targeting a specific user group, a segment of a product line or a segment. Specifically, the centralized strategy can be divided into product lines, customers, regions, and low-occupancy centralized strategies.
Differentiated strategy refers to a strategy adopted to make a difference between an enterprise product and a competitor product and to form a distinctive feature. (AMADEO. K, 2018) The core of this strategy is to achieve something unique that is valuable to customers. Applying this strategy in M&S, they are not like traditional retailers, Marks & Spencer stores sell their products, whether they are clothing or food, all with their own brands, and use only one unified brand – St. Michael’s, that is, M&S does not provide consumers the opportunities with brand choices, consumers either afford to buy St. Michael’s products or go to other stores to buy other brands.
M&S’s adoption of this unique brand strategy is based on the following two points: First, M&S believes that the sale of goods using multiple brands is not necessarily beneficial to consumers. When using different brands, even though quality and function of the products are similar, the prices may be different. This does not conform to the principle of the same price same return. It also brings great trouble to consumers when choosing a brand, that is, in the face of different trademarks, it will instead make consumers embarrassed and at a loss. This not only wastes the customer’s energy and time, but also make transactions take longer times, which is not good for customers and stores. With the same brand, you can achieve the same price. Therefore, M&S are the same price in St. Michael’s products all over the country. If the price is different, M&S will be able to point out to consumers the advantages of high-priced products.
Bowman’s Strategy Clock Analysis
Bowman proposes a strategic clock model that summarizes the market strategy under the fierce competition. It is a tool for analysing corporate competitive strategy choices, which provides corporate managers and consultants with thinking about competitive strategies and ways to gain a competitive advantage. Porter has summarized three main directions on this topic: Cost Leadership, Product Differentiation, and centralized strategy. Bowman believes that these directions are too general, so the above framework is subdivided into eight strategies to create greater practical value. (Ahmed. G, 2018) Eight strategies are distributed on the X and Y axis, and x is the price, y is Perceived Value. These strategies cover different level of value and price. The schematic diagram is shown below:
First, low price and low perception
Applicable to price-sensitive consumers, the product itself lacks differentiation. This strategic clock position is not pleasing. Companies can only rely on cost leadership strategies for mass production. Compared to low-cost strategies, such as Wal-Mart, products that are low-priced and low-intuitive are inferior goods with no names on the shelves. Products at these endpoints must have a certain market share to maintain low cost, but do not require special design or packaging, as long as the functionality is above the minimum requirements.
Second, low price
It is the way for companies to move toward paradigm. The value is higher than the Low price Low perception strategy and it has begun to attract competitors to imitate. At this time, there are two ways to develop. The first one is when consumers are not quite aware of product differences, and everyone starts to fight price wars, inevitably transferring benefits to consumers. The second is to pursue a cost-leading strategy and actively change the cost structure while maintaining perceived value and market share, such as Wal-Mart.
Third, hybrid
Enterprises deliver medium to high value at relatively low prices. This will create an affordable brand image and quickly accumulate customer loyalty. Companies must focus on customer needs, and core strengths are difficult to imitate. Porter believes that such companies are in an embarrassing situation and are easy to move in other directions. They are often small and medium-sized enterprises, relying on convenient location or customer loyalty to survive. (Ahmed, G 2018)
Fourth, differentiation
At this juncture, companies may, by Viti’s considerable profits, may move toward a position-diversity of differentiated companies that can use brand strategy to consolidate differentiated images and keep prices high, such as Nike.
Five, Focused Differentiation
The products at this time are biased towards designer products. Even if there is no improvement in substantial benefits, there must be an increase in perceived value. The main reason why consumers buy him is not reasonable. These product brands such as Gucci and Armani. These brands retain highly differentiated consumers through social forces such as brand quality, customer service, and brand culture.
Enterprises adopting Routes 6, 7, and 8 are generally in a monopoly position, regardless of the cost of the product and the added value of the product or service. The premise for companies to adopt this business strategy is that no competitors provide similar products and services in the market. Otherwise, competitors can easily gain market share and quickly weaken the position of companies adopting this strategy.
M&S strives to have distinctive features for its products. Most of M&S’s food structures are specially designed and most cannot be purchased at other department stores. This impression is one of the keys to M&S’s success.
M&S offers customers a perceived added value at the same and slightly higher price than the competition, with the aim of gaining more market share by offering better products and services or increasing revenues at slightly higher prices. M&S not only plays a unique role in the appearance, quality and function of the products; it also gains competitive advantage in terms of service quality and brand culture. In summary, M&S uses a differentiation strategy.
Strategies of Other Competitors
As a result, there is only one brand for customers to choose for all the products which they sell. While Marks and Spencer stay with the sandwich And Spencer act as a supplier and a retailer at the same time, it is good for controlling the cost and quality of the product and also earn the profit. For Iceland, they act as another way. They mainly using Cost Focus as their generic Strategies. Firstly, in order to lower the cost of the food they are primarily selling, they are only selling frozen food only. Due to selling frozen food only, it helps to lengthen the selling period for their product as their product will be harder to get damaged As go result.
As a result, it helps increase the chance to sell the product and hence profit can be increased. For Aldi, they will stay with route leadership as their generic strategies. Compare to the other supermarket in the UK, Aldi turns to use another supplier which are not famous or common in order to lower their cost of operation. For example, they do not choose to sell orange juice with famous branding. Thanks to this strategy, Aldi turn to become successful as the cost of the product is the lower compared to the others and they can sell their product to the customers will a lower cost. Thus, more customers will be attracted due to the low price and Aldi can remain to earn a certain level of profit. Tesco is the last chosen competitor and It chooses to use cost leadership as their generic strategy. They use to earn the profit by lower the cost of their different product in a different category.
Conclusion
M&S has undertaken a food-focused transformation as the new growth point in the retail industry is food. The essay uses both the Generic Strategy Matrix and Bowman’s Strategy Clock as frameworks to identify the strategic position of Marks and Spencer, and finds the differentiated strategy is the key.
To achieve differentiated marketing, the marketing strategy is mainly based on the following four aspects: first, to understand the composition of the customer base; second, to understand the needs of the customer base; third, to promote effective sales; fourth, to provide customers with unique shopping service.
At present, consumers pay more attention to the experience, and often integrate other leisure activities. The food industry naturally has different changes from the past, which is mainly reflected in the dining place.
Second, the pursuit of food culture by the younger generation’s diverse hobbies has made the food industry more diverse. In recent years, the popular health, fast food, and coffee cultures are all based on young people. They love new things and are willing to try new products. In addition, young consumers are also very concerned about the socialization of diet, they will automatically demarcate the circle, and do similar things with people in the same circle, such as coffee shops are the colonies of the literary youth.
More importantly, the constant innovation of technology has made consumers more and more demanding about the food experience. In order to promote sales growth, companies need to work harder in terms of youthfulness, personalization, and service.
