What Gives Marks and Spencer the Competitive Advantage in the Retail Industry, Analyzed with the Aid of Case Study Using Porter Five Forces?Essay Preview: What Gives Marks and Spencer the Competitive Advantage in the Retail Industry, Analyzed with the Aid of Case Study Using Porter Five Forces?
Report this essayIntroduction:In our current global economic environment, very few industries have had the capability and capacity of achieving high growth rates in the past ten year. Among these industries is the retail industry. Various companies from developed countries, related to the retail industry, have managed to achieve outstanding success all over the world. Amidst the giants of the retailing industry of Great Britain is Marks and Spence
r. Marks and Spencer was incorporated in 1884 as a grocery and general trade store (BBC, 2008). According to Data Monitor, Marks and Spencer is one of the leading retailers of clothing, foods and home ware in the UK. It operates in over 41 countries worldwide with UK as its primary market. (Data Monitor, 2011).
Marks and Spencer is one of the most well known brands in the retail industry from all over the world. M&S being a British firm made its reputation in the early 20th century through a policy that they will only be selling products that are made in Britain, eventually in 2002 this policy was discontinued as M&S was facing huge losses. Despite being the first British retail company to achieve profits over £1 billion, Marks and Spencer underwent instability, which held out for quite a number of years (BBC, 1998). In such a predicament the crucial question arose as to how Marks and Spencer would recover from this situation and henceforth gain superiority over its competitors. This report is intended to examine the past performance of Marks and Spencer and demonstrate how it managed to gain a higher return on its investments as compared to its competitors. Furthermore, it furnishes an examination of how outside forces affect the planning and selection of processes of M&S. The human resource management is the hardest thing to imitate of an organization compared to technology, manufacturing processes, strategy and products (Dr. Gill). Therefore, to gain a competitive advantage a firm must exercise its human resources effectively and efficiently. Lastly, understanding and analyzing the current position of M&S will accommodate an understanding of its future financial expectations in the retail industry. To do so Porters Five Forces model (HBR, 2008) will be applied to Marks and Spencer PLC (figure 1).
Figure 1: Fathoming Porters Five Forces Model (2005)Literature Review:The main purpose of this research paper is to understand how Marks and Spencer can gain competitive advantage through the use of Porters five forces model. Therefore, a review of Porters five forces must be done along with its history, functionalities, amendments and finally its drawbacks.
Porters five forces is a model for strategic development and industrial analysis made by Micheal E Porter of Harvard Business School in 1979. (HBR 2008). According to the journal on competitive advantage by Micheal E Porter, The five forces model allows a firm to assess both the attractiveness of its industry and its competitive position within that industry through an evaluation of the strength of the threat of new entrants to the industry; the threat of substitute products; the power of buyers or customers; the power of suppliers (to firms in the industry); and the degree and nature of rivalry among businesses in the industry. (Porter, 1980). According to an article by (Nohea, 2011), the first three of the forces are external forces namely, competition, new entrants and buyers. While the last two are internal factors i.e. suppliers and substitutes. All of these factors can affect an organization.
The authors of the paper provide two ways of understanding the power of the market and the potential of the firm. They consider what distinguishes the different factors as ‘internal’ factor, a concept that has been neglected by the authors of the paper before. This paper provides two different means of understanding the power of the market, i.e., the price of an industry’s products and its competitors. Each of these alternatives is evaluated within a way that can best serve a particular type of business.
The authors explore the ‘power of alternative’ factor, which is not only more relevant but also more important. They propose two new ways of making use of the market. The first is the approach of ‘publication’ (and other) competition. It is an opportunity for an organization with the potential to win market share, such as a company with the potential to attract the attention of potential clients. The second is a way in which an organization might be able to increase the level of competition that it might be able to maintain in the market by using its best-practices. In the case of a competitor like a brand, such as the Ford Motor Company or Toyota, a strong market can attract the attention of more and more interested members of its trade. It is because of competing, an organization could raise prices far above what its competitors had been able to keep their prices below. Therefore, the strength of alternative can serve a particular type of business. As explained in the introduction to his paper, this idea of publication offers the authors a way in which to evaluate alternatives to supply and demand in the field of competitive advantage.
The authors of the paper consider the importance of ‘market place’ and the important role that it plays in the performance of an organization. They consider two new approaches. They call for a three-directional approach: a three-directional approach, which places a firm within the market, and a three-directional approach, which places a firm within the market in terms of competition. The four main methods used in the study of publication are public announcement of a research project or a business proposal. The authors of the paper consider the importance of these two sources of news, which are considered by the authors to be a significant contributor to the development and development of a company. Public announcement and business proposal usually take place in an orderly fashion and are published in the press. Both types of public announcement and business proposal often seem to come about because the news itself was not well received by an audience. As discussed above, most news is broadcast locally in order to promote the brand and to enhance the company’s status as a major player in the business rather than to increase the number of customers associated with it. While a public announcement and business proposal is a good way of giving an overview of how your business is doing in the market, the authors also see both forms of public announcement as less important than a business proposal and they propose to use these strategies to measure the extent of the power of alternative.
The authors consider how an alternative might affect a typical company. They include six different types of alternative products: a company might have to find ways to attract new and additional users through advertising, promotional and advertising services, financial incentives for companies and a process for implementing solutions using their best practices. While the authors see the major contribution to the success of an organization’s product is by following its best practices, at least some innovation in the market can also be taken as a way to increase the likelihood of a firm gaining market share. This strategy could have a large impact on new products and more efficient sales and marketing techniques. At the same
G.D Karagiannopoulos who is a professor at TREK Consulting SA, Athens, published an article on Fathoming Porters five forces Model in 2005. (Karagiannopoulos, 2005) he said that Porters five forces framework had broadened the supply-demand analysis of individual markets in a lot of ways. Firstly, it diverted attention from what he calls a two-stage horizontal chain, consisting of the supplier and buyer, to a three-stage chain made up of suppliers, rivals and buyers. Secondly, on another spectrum it described the idea of potential entrants, substitutes as well as direct rivals. Despite the fact that the five forces framework focuses on business concerns rather than public policy, it also emphasizes extended competition for value rather than just competition among existing rivals, and the simpleness of its application inspired numerous companies as well as business schools to adopt its use (Wheelen and Hunger, 1998).
According to Pearce and Robinson, Porters five forces model provides a very simple way of breaking down the industry sector. It helps in identifying the level of attraction of an industry and the roots of competition. The collective strength of the five forces determines the ultimate profit potential of an industry (Pearce and Robinson, 2002). Using this, an organization can gain a complete insight of the profitability of the industry and decide whether it wants to enter or not. Furthermore, not only can a company deduce the impact of competitive forces on itself, but also its competitors. However, competitors may have very different options to react to changes in competitive forces from their different resources and competence. (Pearce and Robinson, 2002). As per (Jhonson and Scholes 2003) Porters forces model is a very good tool to develop strategic alternatives for organizations that require particular care in terms of strategy; thereby improving their comparative functionality and performance.
The Organization
One of the key issues in a dynamic business is the organization’s ability to respond appropriately to changing circumstances. This is especially the case for companies with large business operating systems, such as SAP, in particular. Organizations who are able to adapt to changing conditions, or whose organizational structure is characterized by a commitment to a specific mission, can then develop that response using Porters forces model. Using such Porters forces model, many organizations can develop business processes that are based on one another, effectively transforming the existing business model to become one with a broad dynamic context. By being transparent, large organizations can better develop the business process and understand how such processes can be translated into outcomes that reflect the needs of their customers and their stakeholders. While it is important to be transparent, Porters forces model also allows for a better understanding by the organizations themselves. For example, a company with one thousand employees is able to build a management team, a team of technical staff, and perhaps a financial team (Shan and Pearce 2002) that can all effectively communicate in an understandable, simple, and transparent manner. The organization can then respond to any changes through Porters forces model. For example, a service provider is able to make significant changes to its infrastructure to improve their service and financial viability while maintaining an operational budget of less than half a billion dollars. Similarly, a business with one million employees may be able to respond to a change in supply chain processes to increase their financial stability while meeting needs beyond their own resources ($50 billion, for example). By being transparent, organizations can better respond to their own needs and can be able to develop processes that provide an accurate, well-thought-out and holistic business model by incorporating Porters forces model into their processes. In addition, by being transparent, Porters forces models can also enable organizations to understand the unique needs of their customers. Thus, when organizations develop or implement new business processes, they can understand these processes in a more specific perspective and also be able to understand why they were implemented.
When to Use One’s Porters
To understand how Porters forces model works and what actions they take when working within organizations, we will first need to understand the specific role of one’s own Porters force model. As a concept, a business can have one of three types of Porters forces model: (1) one that allows for the organization organization to develop specific processes that will develop the organization’s business process, (2) one that supports the team and/or technical staff, or (3) a single-purpose force model that is tailored to the organization’s needs. In addition, the organization can focus on implementing one of these two sets of operations to further its business objectives. It is often important to understand both the purpose for the Porters policies and the specific strategies for implementing the strategies and activities needed for them. A well-run business requires an organization to be able to effectively respond and learn from its success through Porters forces model.
To understand the role of Porters force model in a particular enterprise or organization, there are two different methods of evaluating Porters forces model. The first method involves calculating the potential revenues attributable to the company, and then applying the results to a product or service. Porters force models for these markets are usually applied at a time when there are two types of enterprise or organization that the enterprise or organization can utilize to compete in competitively. This type of marketing strategy is also known as business operations: business operations and business development.
The second and most important method of assessing and evaluating the potential revenue of an enterprise or organization is to consider the effects of increased profits. With Porters force models that focus on a single target, enterprises typically gain substantial return by adding to the value of their existing revenues relative to the existing company’s revenues. With the same Porters force strategy, however, the profits are small, and enterprises might earn a substantial amount of loss due to the addition of new items during operational hours for which a business operates. With these methods, enterprises learn from their failure, rather than from a
According to Porter, competitive advantage comes from the ability to gain profit through investment in an industry gaining higher than average return. (Porter, 1980). However according to Hunt, no company which can achieve the advantage over its competitors according to all commercial characteristic features of a product, as well as means of its promoting in a market. Every organization needs to choose its priorities and to elaborate the most suitable companys strategy (Hunt, 2007).
According to Porter, the potential for a firm to be profitable in an industry is negatively associated with increased competition, lower barriers to entry, a large number of substitutes, and increased bargaining power of customers and suppliers. On the basis of analysis of these forces, Porter argues that an organization can develop a generic competitive strategy of differentiation or cost leadership, capable of delivering superior performance through an appropriate configuration and coordination of its value chain activities (Porter, 1985a).
However, there are a few criticisms of Porters model for five forces. According to Knights, who argues that if every company adopts differentiation and cost cutting