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PEST Analysis: Marks and Spencer
Introduction
Marks and Spencer is a clothing and retailer of prepared food with expertise in homewares. This essay will identify some of the main political, economic, social and technological factors which affect Marks and Spencer in the United Kingdom. This provides a basis for understanding the company’s external environment which can then be addressed by the company (Johnson et. al. 2011:50). The interrelationships between the different factors will now be examined.
The Political Factor – with links to Economic Factors
Marks and Spencer’s was a significant buyer of clothing from UK suppliers. UK employment at clothing producers, such as Dewhirst, was largely dependent upon contracts from Marks and Spencer’s. International free-trade policies and cheaper labour available abroad, has meant that Marks and Spencer have negotiated contracts with overseas suppliers. Members of Parliament have expressed concern on behalf of their constituents. “The problem is that ... the same (clothing manufacturing) skills are available in Morocco for a fifth of the (UK) price” (Mullin 2009:260-1). There have been wider implications from increases in unemployment in the UK. The loss of employment, e.g. from Marks and Spencer’s UK clothing suppliers, could lead to less demand for the company’s clothing products. Sales could fall as UK consumers have less disposable income. Britain, arguably, has a consumer economy with less capacity to consume (Lansley 2012:1). The lower clothing prices which Marks and Spencer’s have offered customers are not as positive as may first appear.
There are now ethical and political concerns over the possible exploitation of overseas labour. There is unease over employee rights and the enforcement of labour laws by clothing suppliers (Tyrell 2010). Marks and Spencer’s could be criticised for buying clothing from ‘sweatshops’. Its competitors, such as Primark, have been criticised for the use of ‘cheap labour’ suppliers (Jones et. al. 2009:1). Marks and Spencer’s has sought to distance itself from such political criticism with its collaboration with Oxfam. This is an important part of the company’s Plan A sustainability strategy (Grayson 2011:6), (Hasse et. al. 2012:294), (Carrigan and De Pelsmacker 2009:6).
There have also been recent concerns over the competitiveness of British industry. In November 2012, John Lewis, a UK competitor to Marks and Spencer, was complaining that is was at a tax disadvantage compared to Amazon (Ebrahimi 2012). This would suggest that Marks and Spencer’s, as a store based retailer, is at a similar disadvantage. People could purchase items, using the internet, through Amazon rather than Marks and Spencer. The problem is that because Amazon is paying less tax, than say Marks and Spencer, then it will have more money to re-invest in its business, which will make it more competitive with the consumer (Ebrahimi 2012).
The Economic Factor
In terms of the domestic economy, the recession has led to less consumer spending. This will be one of the reasons for the decline of Marks and Spencer’s clothing business. Sales of clothing fell by “nearly 7% in the first quarter” of 2012 (Wood 2012). This is also due to Marks and Spencer’s marketing as well as the poor economy. However, the company claims that its poll of consumer opinion suggests that customer confidence is improving towards the end of 2012 (Wood 2012). This opinion is contradicted by evidence from the Bank of England which has warned of persistently low growth and even a ‘triple-dip recession” (Moulds 2012). However, the relatively weak consumer environment will lead to consumer unease with Marks and Spencer’s. Their customers could spend more money at alternative and cheaper clothing retailers such as Primark. It could also be vulnerable to clothing ranges from the supermarkets (Wallop 2012).
It is possible that Marks and Spencer’s food business may actually be benefitting from weak consumer spending. The demand for its prepared food ranges could be counter-cyclical. In other words, its sales could improve as people spend less on eating out at restaurants (Horizons.com 2012). The public may therefore transfer their spending towards Marks and Spencer’s offers for pre-prepared food and eat-in rather than going out.
Marks and Spencer’s have been affected by recent increases in oil prices. This will have increased transport costs which in turn will have raised the price of food products (Anderton 2008:235). In the past, they may have been able to pass these rising costs onto consumers, in the form of higher prices. However, Marks and Spencer’s may now be concerned that its shoppers are trading down to cheaper rivals. Such rivals may be able to offer a similar level of quality of food products; although the retail experience at discounters could be perceived as harsher.
The Social Factor
Marks and Spencer’s may have dealt with the economic weakness well through the targeting of often affluent women who tend to be older. Although as this population group ages then this may leave Marks and Spencer’s in a vulnerable position. There has been concern that it is not selling fashionable enough clothing (Grierson 2012). Therefore, Marks and Spencer’s is struggling to maintain and enlarge its clothing market share in the United Kingdom. It needs to consider the competitive advantage that it might gain through “social changes taking place outside of the business” (Hall et. al. 2006:38). It has been successful at examining older people’s use of technology.
The Technological Factor
Like other retailers, Marks and Spencer’s have introduced self scanning technology into its stores. Marks and Spencer’s though has invested in interactive technology where consumers can ‘browse and buy’ within large stores (Wood 2012b). One area where they have learnt is that older customers, and who tend to be more affluent shoppers, may be willing to use technology which will help them to buy products (Wood 2012b). It has invested in internet facilities as there is increased consumer use of the internet. It states that its multi-channel sales are up by 18%, including sales made through the internet (Marks and Spencer 2012:9).
Conclusion
The discussion has outlined the relevance of PEST factors in Marks and Spencer’s external environment. The discussion has argued that there are interrelationships between the different factors which affect its business. For example, the need to cut labour costs has affected the business politically but also economically, as consumer demand has fallen. However, on a more positive note: Marks and Spencer’s has realised that its potentially ageing customer base can adapt to new technology.
References
Anderton, A. (2008), Economics: Fourth Edition, Causeway Press: Harlow
Carrigan, M. and De Pelsmacker, P. (2009) Will ethical consumers sustain their values in the globalcredit crunch? International Marketing Review, 26(6), pp. 674–687
Ebrahimi, H. (2012), John Lewis warns Amazon's tax avoidance 'willdrive UK companies out of business'
Grayson, D. (2011), Embedding corporate responsibility and sustainability: Marks & Spencer, Journal of Management Development, Volume 30, Issue 10, Pages.1017-1026
Grierson, J. (2012), Marks & Spencer boss Marc Bolland braced for shareholders fury over'excessive' pay
Haase, M. and Kleinaltenkamp M. (2012), The 37th Annual Meeting of the Macromarketing Society 2012, Papers of the 37th Annual Macromarketing Conference Berlin, Germany
Hall, D., Jones, R., Raffo C., Chambers I., and Gray, D., (2006), Business Studies: Third Edition, Harlow: Pearson Education
Horizons.com, (2012), Eating out reserved for special occasions as cautious consumers make spending cutbacks
Johnson, G. Whittington, R. and Scholes K. (2011), Exploring Strategy: Text and Cases, Ninth Edition, Pearson Education: Harlow
Jones, B. , Temperley, J. and Lima, A. , (2009), Corporate Reputation in the era of Web 2.0: The Case of Primark, Journal of Marketing Management, Vol. 25, No. 9-10, p. 927-939
Lansley, S. (2012), The Cost of Inequality: Why Economic Equality is Essential for Recovery, Gibson Square Books: London
Marks and Spencer, (2012), Annual report and financial statements 2012
Moulds, J. (2012), UK risks triple-dip recession: Mervyn King warns
Mullin, C. (2009), A View from the Foothills: The Diaries of Chris Mullin, Profile Books: London
Tyrell, P. (2010), Buyers unravel the ethics behind the label, Financial Times
Wallop, H. (2012), Marks & Spencer profits fall for first time in three years
Wood, Z. (2012), Marks & Spencer customer poll suggests better times ahead
Wood, Z. (2012b), Marks and Spencer gambles on bringing internet age to the shop floor
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