This Slideshare presentation is a partial preview of the full business document. To view and download the full document, please go here: http://flevy.com/browse/business-document/marks-and-spencer-strategic-analysis-553 This report presents the step by step strategic analysis and the strategic position of Marks & Spencer, one of the leading retailers of UK and industry leader in women wear and lingerie segments. The report starts by presenting a brief background about the company and its current business position. Further, an external environment analysis is conducted using PESTLE analysis in order to understand the macroeconomic and environmental factors impacting the organization. After this step a brief financial review is conducted to assess the financial position of the company in terms of revenue growth and basic ratios. A competitive strategy review using Porter?s Generic Strategy Framework and the Resource based is conducted further. Moreover, in order to understand the strategic direction, the strategy of Marks & Spencer has been evaluated using Ansoff?s Matrix. After understanding the strategic direction, an overview of the methods of development used by Marks & Spencer is provided and the future expected challenges are discussed as well. The paper concludes by presenting the final strategic position of Marks & Spencer using the SPACE analysis and providing recommendations for future growth. Key Findings External Environment ? Political, Social, Technological factors are favorable, while Environmental factors are neutral and Economic and Legal factors are slightly unfavorable Marks and Spencer competitive strategy ? They employed differentiation focus strategy in the UK market, but now moving towards a differentiation strategy for the broader market Marks and Spencer Product market strategy ? Currently the company is moving from a ?Market Penetration? Strategy to a ?Market Development? Strategy SPACE analysis ? The strategic position of Marks & Spencer is found to be moderately aggressive.

1. Marks & Spencer Strategic Analysis

2. Contents
Executive Summary.................................................................................................................... 3
1. Introduction & Company Background................................................................................. 4
2. External Environment Analysis ........................................................................................... 7
3. Marks & Spencer Industry & Financial Performance.......................................................... 9
4. Marks & Spencer Competitive Strategy ............................................................................ 13
5. Marks & Spencer Strategic Direction................................................................................ 16
6. Marks & Spencer Methods of Development ..................................................................... 19
7. Conclusion & Recommendations ...................................................................................... 21
a. Recommendations for future growth ................................................................................. 22
8. References.......................................................................................................................... 24

3. Executive Summary
This report presents the step by step strategic analysis and the strategic position of Marks &
Spencer, one of the leading retailers of UK and industry leader in women wear and lingerie
segments. The report starts by presenting a brief background about the company and its current
business position. Further, an external environment analysis is conducted using PESTLE analysis
in order to understand the macroeconomic and environmental factors impacting the organization.
After this step a brief financial review is conducted to assess the financial position of the
company in terms of revenue growth and basic ratios. A competitive strategy review using
Porter’s Generic Strategy Framework and the Resource based is conducted further. Moreover, in
order to understand the strategic direction, the strategy of Marks & Spencer has been evaluated
using Ansoff’s Matrix. After understanding the strategic direction, an overview of the methods
of development used by Marks & Spencer is provided and the future expected challenges are
discussed as well. The paper concludes by presenting the final strategic position of Marks &
Spencer using the SPACE analysis and providing recommendations for future growth.
Key Findings
External Environment – Political, Social, Technological factors are favorable, while
Environmental factors are neutral and Economic and Legal factors are slightly unfavorable
Marks and Spencer competitive strategy – They employed differentiation focus strategy in the
UK market, but now moving towards a differentiation strategy for the broader market
Marks and Spencer Product market strategy – Currently the company is moving from a “Market
Penetration” Strategy to a “Market Development” Strategy
SPACE analysis – The strategic position of Marks & Spencer is found to be moderately
aggressive

4. 1. Introduction & Company Background
Marks & Spencer commonly known as M & S is one of the largest retailers in Britain with a
worldwide presence. M & S is known for its high quality clothing, home products, fresh food
products and groceries. It has managed to create a UK wide presence with 700+ stores and about
360+ stores in 40 countries through a network of 2000 suppliers and 78,000 employees globally
(M & S , 2012). It is currently the no.1 retailer in UK in the women wear and lingerie category.
About 49% of its revenue comes from clothing and home products while the remaining 51%
from food products and groceries (M & S , 2012).
The entire group’s revenue is around 9.9 billion British pounds in the year 2012 and a profit of
about 658 million British pounds (MS annual report, 2012). As far as group’s product focus is
concerned, they have three categories viz. clothing, home and food. The group’s geographical
focus is on the UK market, which is there priority with an eye on international development. M
& S has come a long way since its inception in 1884 by Michael Marks in Leeds and then
partnership with Tom Spencer in 1991(Alon, 2000). They have moved forward with philosophies
of providing quality and value at affordable prices and maintaining strong relationships with
their numerous suppliers. Moving forward, the retailing giant has added another dimension to its
corporate vision and mission – Sustainability.
Sustainable Vision&Corporate Social Responsibility
M & S is very focused on promoting sustainability in retail and as a part of their larger
sustainable vision they implemented “Plan A” in 2007. Plan A is a five year ecological plan and
M & S hopes to achieve carbon neutrality by 2012. They have made significant progress so far
and have already achieved 138 sustainable commitments that were a part of Plan A. The three
main focus areas of Plan A can be described below –

5. Figure: Main focus of “Plan A” by M & S
For M & S achieving sustainability is not a one stop solution but an ongoing process and is very
well reflected in their commitments of Plan A. As part of the Plan A commitments M & S
decided to achieve 100 tasks broadly segregated in five categories with a deadline of 2012. But
later in 2010, the company added further 80 commitments with a deadline of 2015. The figure
below shows the main pillars of Plan A as adopted by M & S.
Monitoring Progress
Involving customers – Involving the customers to be a part of the “Plan A” by selling sustainable
carriage bags, promoting garments reuse and collecting about 20 million pounds in Charity
Make Plan A how we do business – Net benefits of about 185 million pounds reinvested back
into the plan
Plan A
M & S
Sustainable use of
finite resources
Promote Social
Equality
Promote healthier
and sustainable
lifestyles
To Become the World’s most sustainable retailer by 2015

6. Climate Change – Becoming carbon neutral and improving energy consumption by about 28%
per sq mt in their stores and warehouses
Waste – Reduction in the number of carriage bags by about 1.7 billion and zero waste to landfills
in the year 2012
Natural Resources – About 18% reduction in the water usage in M & S offices, stores and
warehouses and sustainable food sourcing
Fair Partner – Promoting stronger relations with the suppliers by involving them in the Plan A
Health and wellbeing – Removal of artificial ingredients from the products and selling
organically produced food.
Apart from the sustainable activities of Plan A, M & S is also involved in various charities, fund
raisings, employee support programs and natural disaster support (M & S report, 2012)

7. 2. External Environment Analysis
One of the best ways of assessing the external environment is either using Porter’s five forces
models or the PESTLE analysis. Here we would be using the PESTLE analysis as it also
involves studying the environmental factors, which have become an important part of the global
retailing industry.
Using this framework we can analyze any country’s macroeconomic environment on six
important factors viz. Political, Economic, Social, Technological, Legal and Environmental.
“A PESTLE Analysis is one of the most important frameworks of macro-environmental scanning,
framework which comprises the most important factors used in environmental scanning, as part
of advanced strategic management”
- (Marketing Minefield, 2011)
PESTLE analysis for Marks & Spencer is given below –
Factors Description
Political Factors The political factors mainly correspond to the role of the government in
setting up taxes, establishing labor policies, environmental regulations,
industry investment norms and others. As far as retailing industry is
concerned, several safety, environmental and health regulations have been
adopted by the UK government. M & S have taken several initiatives of fair
trade by cutting salts & fat content in food, animal welfare and recycling.
Economic
Factors
Economic factors talk about the industry growth and the future economic
outlook. Factors like consumer spending, inflation, raw material cost and
others play a very important role in shaping the economic environment for a
company. As far as company revenue growth is concerned it is low at around
2 % for M & S. The UK retail market showed a low growth of 1.2% , third
lowest in the past 40 years (SAS, 2012)
Social Factors Social factors include cultural aspects, population demographics, buying
patterns and others. For the retail industry, fashion trends, consumer’s need

8. for health and safety products and personal characteristics play an important
role. In the UK market, preferences of customers are changing and M & S has
responded to these changes by creating low price versions of its products
Technological
Factors
Technological factors include the latest forms of technology, automation,
research & development. In the retail industry there are two key drivers of
technological change – 1) focus on sustainability 2) e- commerce / m-
commerce.
Legal Factors Legal factors include various types of laws related to consumer safety, health,
environment, antitrust and others. M & S has taken various steps to be
compliant with the laws by promoting safe and convenient work environment,
employee support programs, customer services etc.
Environmental
Factors
Environmental factors in today’s global scenario have become a very
important element of the external environment in which any company is
operating. They include several environmental regulations, climate change,
waste reduction and others. In the retail industry, there is a huge pressure on
retailers to decrease raw material costs, introduce sustainable manufacturing,
recycle, reduce carbon footprint and reduce waste. M & S with its Plan A,
launched in 2007 is already on its way to become one of the most sustainable
retailers by 2015.
Table – PESTLE analysis for Marks & Spencer
Thus, the analysis of the external environment shows how the macroeconomic factors and
environmental factors would affect M &S overall strategy.

9. 3. Marks & Spencer Industry & Financial Performance
After studying the external environment, the next step is to review the financial performance of
M & S and the industry in which it is operating
UK Retail industry
The UK retail industry market looks bleak with low growth and low spending. Food retail is
expected to grow at 3.3$ but non-food retail is expected to be down. The following graphs give
an idea about the expected performance of the UK retail industry (SAS, 2012) –
Figure- UK retail expenditure growth and expenditure value. Source (Verdict Research)
Clothing and footwear sector is expected to drive the value growth, while the electricity sector is
expected to pull down the growth.

10. M & S financial performance
The group revenue for M & S was 9.9 billion pounds in the year ending 2012. M & S divides the
group revenue in four key segments that are shown below –
Clothing & Home Revenue Market leaders in women
wear, lingerie and menswear
4.2 billion pounds (down by
0.9% from 2011)
Food Revenue Natural and processed food 4.7 billion pounds (up by
3.9% from 2011)
Multi-channel revenue Shopping through internet and
mobile channels
559 million pounds (up by
18% from 2011)
International revenue From about 387 stores in 43
countries
1.1 billion pounds (up by 5.8
% from 2011)
Table – Revenue Break up of M & S in 2012. Source (M & S , 2012)
The trend in the group’s revenue and operating profit can be seen in the tables given below –
Figure : Revenue trend for M &S. Source (By the author)
2008-09 2009-10 2010-11 2011-2012
UK 8164 8567 8733 8868
International 897 968 1007 1066
Total 9062 9536 9740 9934
0
2000
4000
6000
8000
10000
12000
inmillionpounds
Revenue trend for M & S
UK International Total

11. Figure: Operating profit trend for M & S. Source (By the author)
It can be seen from the both figures that the revenue growth and the operating profit growth has
been low for M & S due to uncertain economic conditions. Due to this M & S had to revise their
three year target in 2010 from 1.5 to 2.5 billion pounds growth to 1.1 to 1.7 billion pounds.
Shareholder value
This represents the return to shareholders of the company in terms of the dividend payout and the
stock returns. The company already paid an interim dividend of 6.2 pence per share and intends
to pay 10.8 pence per share as final dividend making the total dividend payout of 17 pence per
share (MS annual report, 2012). As far earnings per share (EPS) are concerned the growth rate is
negative and was -3.465 for the last 5 years and fell by 16.13% as compared to 2011 (Financial
Times, 2012).
The figures given below show the trend in the Dividend payout and the Earnings per share for
the past 5 years –
2008-09 2009-10 2010-11 2011-12
Total 768 844 824 810
International 116 142 147 133
UK 652 701 677 676
0
200
400
600
800
1000
1200
1400
1600
1800
inmillionpounds Operating profit trend for M & S
UK International Total

12. Figure: Dividend payout and EPS for M & S. Source (Financial Times, 2012)
Another important parameters that measure the balance sheet strength are the current ratio
(company’s ability to meet short term debt), quick ratio (company’s liquidity situation) and debt/
equity ratio (ratio gives an idea about company’s financial leverage) (Investorwords.com, 2012).
Following are the numbers for M & S (Financial Times, 2012) -
 Current Ratio is 0.7189
 Quick Ratio is 0.3102
 Debt / equity ratio is 1.04 (meaning that assets are financed through debts)