Business Context and its Management

Business Context and its Management

1.0 Introduction

Business context relates to the functions, management, and environment of a business. Management is a crucial part of a business as it focuses on organising the workforce of the organisation. The report will elaborate on the various strategies for the operational, functional, and competitive edge of a business. It will also discuss the various internal and external factors affecting the business of the organisation. The internal and external factors are accessed with the help of PESTEL and SWOT approach. It is also important for the management function of a company to encourage and increase the productivity of their employees. This report will also discuss the various strategies used by the management function of the company to enhance worker productivity and their quality of work. Marks & Spencer is the company whose business environment and management function will be considered for the research purpose.

Mark & Spencer is international apparel, home and food products retailer company that sells its product through its stores and online. Michael Marks and Thomas Spencer founded the company in the year 1884 in Leeds, United Kingdom. Steve Rowe is the current CEO of the company and was appointed in 2016. The company is listed in the London Stock Exchange and has a share price of 134.65 GBP. It generated an estimated revenue of 1,018.19 crores GBP in the financial tear 2020 (corporate.marksandspencer.com, 2021).

1.1 Task One – Identification of Strategic Concepts

Identify and examine the different types of strategic concepts such as competitive, business, corporate functional and operational strategies. Show how these strategic concepts influence managerial decisions.

Competitive business strategy

A competitive business strategy refers to a plan formed by Marks & Spencer to overcome challenges in the market and position the organisation in such a way that it has a competitive edge over other companies in the market.

One of the major competitive business strategies that can be followed by Marks & Spencer is the cost leadership strategy. In the cost leadership strategy, Marks & Spencer must use the pricing strategy of a different company in the industry and use it as a benchmark for pricing its products. Marks & Spencer can target many customers with a competitive pricing strategy (Kharub et al., 2019). This strategy is usually used for setting low prices when the product feature or quality matches with the item of other company. However, if Marks & Spencer is providing a better quality product they may set a higher price compared to the prices of other apparel, food or home product company. It is the job of management to take necessary actions when setting prices for the company products.

This strategy is especially useful for a clothing brand since there are many other companies in the industry such as Zara and H&M. similarly, there are many other companies in the home and food products business.

Corporate strategy

A corporate strategy is a strategy that helps a company to develop a long-term plan so that it can achieve its vision and goals. It is very important for Marks & Spencer as it sets strategic goals and encourages workers to achieve them. The four pillars of corporate strategy are the allocation of resources, organizational design, portfolio management and strategic trade-offs. These pillars will be discussed below,

• Allocation of resources

There are two types of resources that Marks & Spencer must use affectively, which are capital and employees. The company must allocate these resources accordingly to generate maximum productivity and profitability.

• Organizational design

Organisational design can also be referred to as an organisational structure. In order to develop a productive corporate strategy, Marks & Spencer must ensure that the company structure suits its operation. Since the company operates across the world the company can adopt hierarchical structure (Mazzei and Noble, 2017).

• Portfolio management

Marks & Spencer can build a better portfolio by considering the diversification of products and different sales strategy.

• Strategic trade-offs

In order to form a profitable corporate strategy Marks & Spencer will also have to make a strategic decision while making transactions. Some of the strategic decision that the company can take are providing incentives, risk management and generation of returns.

Operational strategy

Operational strategy can be defined as the steps taken by an organisation to achieve its business goals and vision. In a business, there are various types of operations such as supply chain management, inventory, quality management processes, and so on. One of the most important operational strategies that Marks & Spence can use is the development of core competencies.

The development of a core competency strategy focuses on improving the company's resources and strengths. First Marks & Spencer must recognise its core competencies such as its design department, supply chain management or trained staff. The company can therefore focus on improving these core competencies (Nuwan et al., 2020). It would be easier for the company to develop these places since it is already the organisation’s strength, therefore it would have to invest less time in it. The management of the company is responsible for providing training to its employees and develop a better supply chain strategy to deliver products at record speed.

1.2 Task Two – Explanation of the analytical tools

Detailed explanation of the analytical tools for the internal (SWOT) and external factors (PESTEL) affecting business structures and strategy in the chosen organisation Detailed explanation on how useful the tools to managers in offering an understanding of the business environment in the chosen organisation.

The PESTEL analysis of Marks & Spencer is done below:

• Political: The United Kingdom has a stable political environment, which helps businesses to operate smoothly. Marks & Spencer had a positive effect due to the behaviour of government towards businesses (David, 2019). The government of England had very few restrictions on the distribution of products outside England, which made the company’s supply chain operation easier and was one of the strengths of the company.

• Economic: The United Kingdom’s inflation rate had decreased from 4.46 % in 2011 to 0.04 % in 2015 (statista.com, 2021). The decrease in inflation rate forced many companies like NEXT to reduce the prices of their products. However, the prices of Marks & Spencer’s products were 20% higher than their competitors, who provided the same quality in clothing. Due to which the company was losing its market share and profitability. M&S polo shirts were prices at £15 whereas NEXT had prided their polo shirts at £12 (theguardian.com, 2021).

• Social: Due to the nervousness created by the Brexit deal customers were losing their confidence to spends extra on clothing materials. Weak consumer confidence results in lower sales of the company, which even the CEO of the company Steve Rowe, cannot control (theguardian.com, 2021).

• Technological: The technology in England was innovation and was a major factor that supported the supply chain of Marks & Spencer. Due to the development of IT, the company was focusing one the operation of mega distribution centres rather than warehouses. The company's website and distribution centres helped it to raise its internet sales by 20.9% (theguardian.com, 2021).

• Environmental: Marks & Spencer had hired expert rag traders who previously worked for NEXT, Mark Lindsey and Neal Lindsey. These two traders helped the company to directly contact with the intermediaries who with whom the company traded from raw materials. Doing so helped the company to cut losses of materials that took place while the exchange of materials between the suppliers and the intermediaries, therefore saving the environment. The company also followed the plan-A sustainable programme even amid recession whereas other companies had overthrown their sustainable strategies to save money (theguardian.com, 2021).

• Legal: The government of England had formed many legal rules for business operation. Since, Marks & Spence followed all the legal policies the government did not interfere in the operations of the company (David, 2019).

The SWOT analysis of Marks & Spencer is done below:

Strength

• Food: The food products of Marks & Spencer were the strength of the company. Under Steve Rowe’s guidance, the company food department’s sales increased in 25 consecutive quarters. The company beat many foods retailing organisations including Lidl and Aldi (theguardian.com, 2021).

• Supply chain: The company supply chain was also one of the strengths since by setting up large distribution centres Marks & Spencer’s was able to increase its online sales by 20.9%.

Weakness

• Availability: Marks & Spencer created fashionable clothing that everyone wanted their hands on. However, due to poor management the company did not produce the popular sizer of the fashion due to which it lost lots of its sales.

• Stores: Marks & Spencer more than 800 stores in the United Kingdom (theguardian.com, 2021). However, the company's location strategy is not smart enough. Most of the stores are not located in convenient places where shoppers can have easy access to food.

Opportunity

• Fashion: Marks & Spencer has great fashion sense and designs and knows what customers want based on the current trend. The company, however, needs to focus on determining the popular fashion sizes can produce it in a large amount. With the help of quality content marketing, it can generate huge profits.

• Pricing: The company has been around for more than 130 years and has established its name in the industry (corporate.marksandspencer.com, 2021). However, it would be better if it could consider a competitive pricing strategy to increase its sales.

Threats

• Competition: The biggest threat that Marks & Spencer faces in the market is the competition from another popular brand in the industry such as ZARA, NEXT, H&M, and so on (theguardian.com, 2021). All these brands are popular in the fashion industry and people would prefer buying the clothing from the company that provides more variety, quality, and reasonable prices.

1.3 Task Three – Impact of the management practice on the business structure

Detailed explanation of well-researched work demonstrating the impact of management practice such as empowering staff, training staff, introducing schemes for improving quality, and introducing various forms of new technology on the business structure In-depth understanding of contemporary theories of operation management such as total quality management, lean management, Kaizen (Continuous improvement)

The management function of Marks & Spencer is very important as it guides the organisation and its workforce for various tasks and activities. There are several roles the management of Marks & Spencer must follow such as empowering and training staff, introducing strategies for improving quality and operation management theories, and schemes to improve quality. The management must ensure that whatever work is going on in the company premises are properly observed and actions are taken to improve several areas.

Empowering staff: The management department of Marks & Spencer must make sure that every employee is motivated towards their work. This will increase the productivity of employees and they may feel valued in the company. Therefore, the quality of the work done by employees will improve and the company will be able to satisfy their customers with their pricing strategy (Ortikmirzaevich, 2017). The company can motivate their employees in several ways such as motivating them with words or providing incentives, promotion and rewards for quality work or working extra time.

Training staff: Training is a very important role in the management department of Marks & Spencer. The management must focus on training of two types of employees, new employees and employees who need to be promoted. Training employees will help them to understand the processes of the company which is necessary for completing tasks (Krutyakova and Anyushenkova, 2018). Without proper training, employees will not be able to perform their best even if they are qualified.

Introducing Technology: Introduction technology in different areas such as operation, production, design, and quantity will help the company to develop better products in the least amount of time (Tursunov, 2017). As per the case study, the prices that M&S offered to their customers were 20% higher than the prices that its competitors provided and the company lost most of its revenue that year. Introduction of technology will help the company to reduce its production prices and manage their margin in such a way that customer would prefer buying products of M&S.

Operation management theories

Kaizen: Kaizen is an operation management theory that was developed by a Japanese scientist. This operation theory was very popular in Japan; however, it made its way through the world. The Kaizen approach focus on the continuous development of an organisation is possible it the company focus on making small positive changes every day or every month. This approach is based on the commitment and cooperation of company staff (Carnerud et al., 2018). The Kaizen cycle of continuous improvement involves 7 steps that are:

1. Getting employees involved

2. Gather a list of problems

3. Encourage solution and then choosing an idea

4. Testing the solution

5. Measure and analyse results regularly

6. Adopting the successful solution

7. Repeating the strategy

Figure 1: Kaizen Cycle

(Source: Daniel, 2021)

As per the case study, the revenue of M&S went from $ 4.1 Billion in 2014 to $ 4 Billion in 2015. This was happening due to several problems within the company. With the use of Kaizen approach, the company will be able to resolve the small issues of the company on regular basis and therefore have a large outcome at the end of the year.

1.4 Task Four – An alternative strategic approach

Reflection on the credibility of the chosen organisation concerning its management functions and practices highlighting an alternative strategic approach such as creative, emergent, and behavioural approaches

As per the case study, Marks & Spencer was facing problem to raise their revenue every year due to several reasons. The clothing industry has many other big players including ZARA, NEXT and H&M. One of the main reasons people were not buying the products of Marks & Spencer was because of its extremely high prices on products (theguardian.com, 2018). As the inflation rate was decreasing over the years customers were expecting the process of Marks & Spencer to go down. However, the company stuck to its original pricing strategy and did not make changes in their prices. In order to make their market share Masks & Spence will have to make use of a competitive pricing strategy. The competitive pricing strategy focuses on pricing the products of the company by comparing other players in the industry. NEXT is another fashion brand that was providing their polo t-shirts 20% lower than what M&S spencer was charging. This strategy would help M&S to consider lowering its prices and therefore attracting customers to buy their products.

Diversification is also a very useful strategy that M&S can use to differentiate their products from the ones provided by other fashion companies. It is a strategy which the company could use to develop new products and products lines while keeping their other products in stock. Since, it is a fashion company it could diversify its products by producing different types of accessories such as belts, bracelets, scarves, mobile cases, and so on. The company must also focus on researching the popular sizer that people wear (Oladimeji and Udosen, 2019). It is very important to know about the demographics as it gives the company idea of which sizes to mass-produce. Marks & Spencer can therefore increase their revenue by mass-producing the popular styles of the company that are being talked about on social media, magazines, and newspapers.

The company must also focus on behavioural strategy to increase the productivity of their employees. A company is formed by its employees and the employees must have a strong relationship with each other. In order to do so, the company must set a few behavioural policies in the company that restrict people from criticizing each other and the company and talk against someone's beliefs, colour, or religion.

1.5 Conclusion

It can be concluded from the report that Marks & Spencer was facing various problems to maintain their position in the industry. The management of the company is responsible for developing strategies for the company such as corporate, functional, or operational strategy. PESTEL and SWOT analysis can help the company to determine the various factors affecting their business and can act upon it to make it favourable in the future. Kaizen is a very useful approach that the company can use to increase the market share it has lost over the years.

Reference List

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