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    Internationalization of Marks & Spencer: Strategic Analysis

    Introduction

    This report is a reflection of the present international strategy, which has been adopted by M&S based on the past issues faced by the company. M&S took various strategic steps during the time of their downfall and directed their sheer attention to overcome those mistakes. The purpose is to bounce back proficiently in the global marketthrough enforcement of its innovative marketing strategy. This report presents a mixture of case study materials and academic research on business strategies of M&S followed by strategic recommendation. In recent years, Marks and Spencer has ended their mainland online operations in retreat from China. The brand planned to close 100 stores all over world and the chain shed 18 outlets in France. In Canada, the brand has only 59 stores where there is a scope of business development. This report entails whether the organisation should advance to internationalization business or not after assessment of the present market situations.

    Market Structure of Marks & Spencer in France, Canada and China

    The major number of acquisitions made by M&S was Canadian Peoples Department Stores, DiAllaird’s and Walkers store. The executives of M&S realised that Canada is a good market to make investments because of its stolid infrastructure, high income, low political risk, large middle class and better use of English language (Plant & Veletanlic, 2017). The market structure is quite good with lots of customised stores according to local needs, which includes improvement of food departments, use of Canadian merchandise, initiation of suburban stores and reorganization of stores in inner city.

    According to the European report, M&S brand chose France as the gateway country and Paris as its gateway city to make an entry into European marketplace. After an in-depth market research, the brand strategized to adapt their outlets according to French lifestyle. The French stores of M&S offered closer fitting clothes, wide variance of French wines and least possible British imports. The market expansion of M&S in European countries has slowed down but still the company pledged that the employees losing their job would receive usual salary continuously for one year (Jones, Comfort & Hillier, 2016). Moreover, the brand strategized to provide up to €12,000 for further training.

    M&S adapted the appropriate entry strategy in accordance to Chinese market. The brand planned to open wholly owned subsidiaries all across China. The company implemented discounted policy for selling British made goods that are cheaper to source from China (Bao, 2016). Chinese consumers turned down M&S clothing products with the thought that those stuffs were indicated towards 40 years or above olds. Most of the stores in China are located in remote suburbs, which are populated with senior citizens. M&S clothes were expensive in China and only older people who are least reluctant to spend money can afford it because of core values of product quality. The products are unaffordable to Chinese customers and even foodstuffs are comparatively expensive. 

    Demand Conditions in French, Canadian and Chinese marketplace

    Considering French market, M&S really could not propel their business as expected from their entering strategy in European market. In France, there is least demand of fashion stuffs and on the contrary, there is unexpectedly high demand of food division. The brand thereby strategized to close 7 out of 18 stores in France. In recent years, M&S has tried out different strategies for bolstering their stuttering portion of their business (Khoury, 2016). Following that event in the year 2016, M&S focused to develop their franchised food business as there is demand for their good quality food and innovative products availed at convenient locations. The brands food and drink businesses are performing resolutely whereas its fashion arm has been beset by various issues. 

    The graph clearly signifies that the impression score of supermarket section is +48 while compared to fashion with +41, which reflects diverging impression of the customers. Apparently, the supermarket section appeals to wider demographic range, memorable advertisements have set apart brand image of M&S as supermarket in eyes of public.At present, though the brand products are much loved by Frenchmen, and holdsstrong reputation in French market, there is a downward shift in opinion. Specifically women are losing their faith on M&S fashion.  The following graph indicates that current approaches made by the brand is not doing good for retaining those which would open to shop at stores. 

    Marks and Spencer has never been successful in Canada. The brand decided to shut down one of its outlets in the city of Edmonton and 14 other stores. Remaining 8 stores has also been closed for a short duration of one month. This incident has brought the market demand of M&S to an end after long 26years of business in Canada. Increasing loss followed by retailing economy, which was competitive and fierce, has forced the brand to withdraw their extended business out of Canadian market. The expansion into innovative retailing territory has been part of M&S’s pledge for creation of viable business within People’s Republic in next few years.

    While considering the demand in Chinese market, a tough introduction was endured by M&S to retail scene. In China, with the assistance of market research along with focus groups, M&S is making promising improvements. Currently, the brand has its own purchasing team in China and its sizing has been much better. According to recent reports, the brand has planned to put an end to their online operations across mainland China. The brand has cited the complexity as well as trading cost on China’s high promotional online market (Bocken, 2017). However, the brand is grappling due to declining sales in few of its key international marketplaces, where the brand is bound to close its mortar and brick stores (Bocken, 2016). The cost of trading and complexity, together along with high promotion through online Chinese market signifies continuation of their online business operations is precisely unsustainable.

    Market entry strategy of Marks & Spencer in France, Canada and China

    PESTLE Analysis of Canada

    The second largest country in the world, Canada is beautiful and rich country. Having a service oriented economy and manufacturing growth, Canada has been able to secure its place at top economies across the world. For proliferation of their business in Canada Marks and Spencer need to examine all the external factors that are related to business propositions. 

    Political environment of Canada:

    Canada is considered as the most powerful country and earned great success through maintaining good relation with other powerful countries like China, UK, France and others. In Canada, the foreign trade regulations has opportune M&S retailing brand to import products and the process has become much easier over time than ever before (David et al., 2019). Being a democratic country and having parliamentary system will opportune the concerned company in their business extension. The country enjoys good political stability, trustworthy policing services and low crime rate, which offers good place for tourism and business.

    Economic environment of Canada

    Canada is a member of G20, Commonwealth of Nations and Organisation for economic cooperation and development. In Canada, the competitors of M&S are highly specialised in their niche markets and focus of consumers made those brands to provide better customer satisfaction. The brand preferred importation of their products from other countries for saving manufacturing cost which put the brand into cost disadvantage for perceiving high quality (Bocken, 2017). The highly developed and mixed economies will opportune Marks and Spencer to establish their business permanently provided the brand meet consumer expectation. 

    Social environment of Canada

    Canada is a diverse country where people call it the country of new comers. Unfortunately, there is a huge shortage of skilled labours in numerous sectors and many business owners objectified that labour shortage is obstructing their business growth. The Canadian customers demand high quality product and prefer online shopping. In Canada, concepts of consumers in the marketplace changes from time to time. Canadian person does not sense British stuffs as high quality. There prevails a shift of demand to get more fashionable clothing. In addition, for majority of customers, price sensitivity has increased which left M&S in least competitive position ("Marks and Spencer SWOT & PESTLE Analysis - SWOT & PESTLE.com", 2019).

    Technological environment of Canada

    In Canada, technology is the fastest growing sector. This sector is offering Canadian people high salary jobs, changing the landscape of numerous industries and ensuring lot of opportunities to companies and its employees. The brand has to communicate with the producers and designers of various countries around the world to be aware of present fashion trends (Bao, 2016).

    Environmental issues in Canada

    At present Canada is facing severe environmental challenges such as increased number of air pollutants, smog, climate change and acid rain, which is affecting Canadians. To many people, air pollution has become a significant concern (David et al., 2019). Canadian government has taken many initiatives for decreasing emission of greenhouse gases and air pollution. 

    Legal environment in Canada

    There are numerous opportunities for doing business in Canada. Joint ventures, cooperation, trusts, cooperatives, limited or general partnership and sole proprietorships are much common. For international businesses, most popular entry method into Canada is corporation. 

    PESTLE Analysis of France
    Political factors affecting France

    France is a major ally of USA and maintains a strong relationship with Germany, UK and others. Similar to Canada, France enjoys stability in their political aspects. However, the country is facing certain law and order challenges whereby, few French foreign policies has been criticised. In France, the taxation policy followed by changing government might bar growth of business processes of M&S. Moreover, minimization of sourcing cost because of free trade policy is another political barrier, which is pushing M&S retail business to the corner.

    Economic factors

    It is expected that France could see good pace in their economic growth over 2018-19. The inflation rate in France is 2.2% and standard company tax rate is 33.33%. In France, while doing their first business, the brand was engaged into various conflicts with new entrants and small retailers over price rise of products because of currency crash followed by Brexit. Marks & Spencer might face severe economic crisis in following years while pursuing their business with their prospectus in France.

    Social Factors

    Many French citizens prefer high living standards, which might enhance their business growth. In the last session of their business conductance, series of product recalling has infused negativity in social trends (David et al., 2019). Moreover, the brand has received dissension being non-trendy store. In addition, an initiative, which is supporting surrounding community, is forcing the brand in cutting down its internal costing. The social challenges common in France are high unemployment rate, industrial strikes, labour unrest and demonstrations. 

    Technological factors affecting France

    In France, rate of internet usage is stunning. Technology has partnership with the business processes of M&S to strengthen their compliance and security. The technological advancement has helped the retail brand in mitigating the risk. As M&S has burly online and social media presence, the brand is well placed for capitalising in this avenue.

    Environmental factors

    The brand has repeatedly failed on previous occasions in supplying the sustainable and environmental products that are highly preferred by Frenchmen. With stringent environmental rules and regulations in European countries especially in France and increasing consumer pressure, the brand might examine its product life cycles from cradle to grave("Marks and Spencer SWOT & PESTLE Analysis - SWOT & PESTLE.com", 2019). 

    Legal factors affecting France

    The legal length of working on a weekly basis is 35 hours, where employees do not work more than 4.5 hours without considering any break. French labour laws provide provisions for overtime employment, annual leave, maternity leave, sick leave, sabbatical leave, paternity leave and others (David et al., 2019). The brand has to abide by all the laws during pursuance of their business. 

    Pestle analysis of China
    Political scenario in China

    Chinas open door policy and its presence in World Trade Organisation has driven M&S to establish their business propositions as political decisions aided this process. Although the country enjoys stable political scenario but there is a lack of political freedom which is a concerning area (MacRae et al., 2016). The reason has been objectified as the lack of openness in Chinese political system. Unsurprisingly, the country has secured the third spot as FDI destination all over world. 

    Economic factors in China

    The elevated GDP of China has attracted M&S to pursue their business and grow dominantly. The standard corporate tax in China is 25%, which has been recently reduced to 15%, for attracting more enterprises that are international (Tian & Slocum, 2016). 

    Social factors

    There has been a rise of desire for retail products which predominantly driven by consumption culture in China (Rashid, 2016). Socio-culture has influenced the youth’s purchasing behaviour, which increased demand for fashionable cloths.

    Technological aspects of China

    Apart from France and Canada, in China, media played a vital role for communicating fashion with customers (Toms & Zhang, 2016). Moreover, because of transportation feasibility and speed a shipment of stock from a country like UK or other suppliers from different countries only need few days to supply in China instead of lengthy time of over a month.

    Environmental issues in China

    Selling of products manufactured by suppliers enforces a greater impact on environment depending on the ways these products are used followed by its disposal (Zhou et al., 2017). As retailers necessitate huge variety of raw materials for production of their goods, the environmental safety committees in China has structured stringent rules (MacRae et al., 2016). The regulations will manage use of raw materials in sensitive manner and pay appropriate regards on how these affects biodiversity and natural habitats.

    Legal factors of China

    In China, the health and safety regulations, antitrust, consumer right, environmental and legal attributes affected the brand. Following UK’s decision to exit from European Union has been likely for the M&S and other retailing brands to face legal issues ("Marks and Spencer ends mainland China online operations", 2019). This enforced numerous organisations to expand their business in other favoured countries. While pursuing their trade in these three concerned countries the brand has to ensure that it will never obstruct any rules or regulations framed by respective Governments.

    Porter’s Diamond Analysis in France
    Level of competition

    In retailing sector, competition is always extremely fierce. The reason behind exacerbation of certain issues is that all companies are tentatively expecting to be diversified into non-core fields and therefore creates additional competition (Islam, 2016). In all the three concerned countries namely France, M&S was vulnerable to competition because it trades not only food but also household items and apparel.

    Threat of new entrants

    The threat of new entrants has been quite low in France but this attribute has been significantly challenging in other countries like Canada and China. In France, it takes enormous amount of capital investment for setting up successful chain outlets (Porter & Kramer, 2019). Potential entrants can be discouraged because of strong loyalty of French customers backed up by the company’s strategy to focus on well-developed supply chain, and quality products. 

    Threat of Substitutes

    While operating in world marketplace, the brand faces a constant threat of substation of its products by other brands dealing in same business. As opined by Spencer et al. (2018), the clothing business of M&S has been beset with numerous substitutes, as it is easier to imitate designs and thereby get same design at comparatively reduced cost somewhere else. The brand is still offering some distinction in private label product line.

    Bargaining power of buyers

    M&S was also vulnerable towards negative shift with customer perception in France. Any move of disloyalty towards French products is likely to have severe consequences on company’s outlook.

    Bargaining power of suppliers

    All companies in France dealing in retail business deals with higher bargaining power of suppliers. M&S is necessary to build effective supply chain with numerous suppliers. Through experimentation on product designing by enforcement of various materials, so that considering the price goes higher for one raw material the brand can shift towards other options. 

    Porter’s Diamond Analysis in Canada
    Level of competition

    The brand is facing competition from both clothes retailers such as Zara, John Lewis, Next and Topshop and supermarkets like Asda, Tesco, Sainsbury and others. For pursuance of healthy business in competitive markets of Canada, the brand has to follow three generic strategies namely low cost, hybrid and differentiation.

    Threat of new entrants

    The Candian market was mature and an entrant was required to make an offer that is radically new, which is much difficult in apparel and food retailing business ("Porter Five Forces Analysis of Mark and Spencer (M&S)", 2018). However, Canadian market is full with new entrants, which are strongly holding their market share and utilise all strategies for countering other national or foreign brands.

    Threat of Substitutes

    M&S necessitates uninterrupted innovation strategy for sustaining brand position strong and thereby remain distinctive in meeting the desires of the customer base, which varies according to nations (Fan, 2016). The premium positioning of M&S is getting threat from the shifting nature of customer preferences. The competitors in Canadian marketplace is developing high quality and wide range of food stuffs which are offering more options for the customers to meet their desire at a competitive price. 

    Bargaining power of buyers

    The bargaining power of customers holds much significance to any brand for their business extension in abroad. In Canada, there are numerous brands and thus customers are offered very low switching cost due to availability of various alternatives("Marks & Spencer closing Canadian stores | CBC News", 2018). M&S required building up their loyalty by offering customers unmatched conveniences and value, which are hard to match.

    Bargaining power of suppliers

    The bargaining power in Canadian market was considerably high, compared to other markets. In Canada, M&S experienced a rapid decline in terms of their sales, has been forced for outsourcing globally, and tentatively do their business with overseas suppliers offering more reduced price. This step outcome to be favouring M&S with bargaining power of suppliers is low at present. Moreover, the brand models of the company ensure significant competitive advantage in Canada. 

    Porter’s Diamond Analysis in China
    Level of competition

    M&S has differentiated itself to stay distant from competition through positioning itself being higher quality brand, which provides value for money to customers (Jackson & Viehoff, 2016).  Recently the brand started to cut down prices of apparel for availing all things to all people. This might devalue the brand recognitions of M&S in world market where specialisation has become very important.

     

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