Strategy Formulation in the Retail Industry

Strategy Formulation in the Retail IndustryMarks Spencer and undermenti one(a)dJohnson and Scholes (2006) define dodge as, Strategy is the direction and scope of an organization over the vast-term which achieves advantage for the organization with its configuration of resources within a ch onlyenging environment, to meet the needs of grocery stores and to fulfill stakeholder expectationsCorporate strategicalal counseling helps us to understandDirection Where subscriber line is heading in the long run. commercialises Scope In which market commerce should compete and what activities ar involved. return How melodic line crumb do rectify than competitors in these markets.Resources To compete in the market what resources ar call for.Environment What ar the factors which testament affect the business.Stakeholders What ar the expectations of stakeholders.THE THREE LOGICAL ELEMENTS OF THE STRATEGY FORMULATION PROCESSThe three inseparable elements of the strategy proces sstrategic Intent is the driver of the strategy process. With surface an vestigial intent, strategy lacks an overall sense of direction and at that place is no reason out to hold one direction rather than an other(a). strategical intent provides the react to the forefront Where do we want to go?The fundamental role of Strategic Assessment is to provide relevant knowledge about the strategic context. It has to judge both(prenominal) the outside world and the relative capabilities of our own enterprise. The role of strategic assessment is to anchor future strategies in reality. Strategic assessment essential appendress the Where argon we now?Strategic Choice is fundamental to the strategy process because it is the link to action. It must address the question Which options will we choose for carryting where we want to be from where we argon? If strategy is to be anything to a greater extent than an intellectual relaxation so actions must result from the strategy process.Th e strategy formulation process three inter-locking aspects. (Macmillan and Tampoe, 2000 64-65)Corporate success derives from a war-ridden advantage which is based on distinctive capabilities, which is most often derived from the grotesque character of a stanchs relationships with its suppliers, clients, or employees, and which is precisely identified and applied to relevant markets. (Macmillan and Tampoe, 2000 22, 86, 87)In effectuate to develop belligerent advantage, the decision-maker should understand in expatiate the enterprises skills and resources, and after that manage in a means that the business delivers superscript client value to tar bring forth instalments at a address that leads to profit. (Wilson and Gilligan, 2005 405-406) displayWe create selected Marks and Spencer, and next as our case study. twain ar UK based fashion retail companies having almost same crop line. We shall look into both confederations current shoes and future potential development tally to their strategic management concepts and techniques. By comparing the statistics of two organizations we will mensurate their enterprise skills, objectives and competences that associated with their principals and formulation of individual organizational strategy.Our findings and research shall include companys resources that required addressing short term and long terming strategic challenges in pursuit of sustainable competitive advantage. Assignment focalise will implement the concept and theory they waste followed such as Porters Five Forces homunculus, cuss digest, School of caper strategy, etc. We will undertake a comprehensive review of their agone corporate strategies as tumesce as the present scotch website and crisis of world(prenominal) economy.The Marks and Spencer (MS) is one of the most famous retailers in UK. It started in 1884 by Michael Marks in partnership with Tom Spencer in Leeds. order offers various ranges of fruits that include stylish and naughty election clothe, womens wear and lingerie, federal agency wear, kids wear, home wear, groceries, freshly produce prepared meals etc. They have approximately 2,000 suppliers globally, about 75,000 employees and have 750 stores round the world. adjacent is also UK based retailer. It was founded in 1864 by J Hepworth Son as gentlemans Tailors in Leeds. In 1981 company develop a womens wear sort out of shops by the name of bordering. adjacent has wide range of collection around the world that offers high pure tone merchandises in clothing that include executive shirts and suits, stylish home products and accessories, children and immature fashion, footwear and etc. following has more than 500 stores in the UK and Eire. They have more than 170 franchise stores overseas. Next has following quin strategic businesses next Retail operates the high street shops NEXT Directory is the mail order division NEXT Overseas operates international retail outlets Venturaruns the fiscal work division and Other activities include telecommunication software services and attri exclusivelye managementMission StatementMission argument is written statement which tells the core purpose of existence of business. Mission statement show the descriptive form of visionMarks SpencerVision To be the standard against which others are measured Mission To make aspirational quality accessible to all and value Quality value, service, innovation and trust.NEXTWe atNEXT PLChave a task to build,with the principal(prenominal) focus of giving all of our customerswhat they deserve The Best. Individuality, long consume, courage in development, and open-mindedness are our tools. The idiom The Customer Is The King is, in our company, not patently a kind of marketing strategy -it isTradition.COMPETITIVE epitomeCompetitive psychoanalysis is done to evaluate the competitive do of the company with in an pains. on that point are many tools for competitive analysis but t he important ones are Porters five drags model, PEST Analysis, Group mapping, Pricing and quantity dynamics, SWOT analysis and etc.Porter ModelPorter says that there are five forces affecting a business and the company has to survive amongst all these forceBargainig force play of SupplierDue to big brand names and change portfolio both brands are not influenced by supplier. So bargaining force-out of supplier is low for both brands. This factor works more when product line of business is less and there are few suppliers in the market. There is no such situation for Marks Spencer and Next.Bargaining power of buyerBecause of much competition in clothing market there are many sellers and limited buyers so buyers have more options that is way bargaining power of buyer is high the disposition of product and nature of buyer both Marks Spencer and Next faecal matter not get under influence. This factor affects more in B2B system.Threat of Substitute productThere are may not be the e xact qualify of product in case of both Marks Spencer and Next. Because there micklenot be any substitute of clothing.Threat of impertinently entrantMarks Spencer and Next both have brand loyal customers. So none of them has the bane of refreshing entrant.Industry RivalryIndustry emulation influences business relatively more when overall industry volume is small. When there are crook of thespians in industry with huge investments and especially with brand name challenger turns in shape of innovation. Being come up established meetings and having vertical financial health both MS and Next dont have such fear.PEST AnalysisPEST stands for Political, Economic, Social and Technological. It illustrates a framework of macro environmental factors. It explains how easy or difficult it is to make profit in a certain market. So Political term of untied kingdom is constant and favourable for the business. So far as economic and social factors are concerned both are good. When we look at technological factor it also genuinely much in favour of doing business in UK. So PEST for both companies is same since both are in UK.SWOT AnalysisSWOT Analysis shows business strength,weaknesses,opportunities and threats.INTERNAL ANALYSISInternal analysis is an internal evaluation of the business. It tells us the footing of the business that where it stands and what is the actual worth of the business. There are many tools for checking internal health of the company. For example BCG Matrix, 7s Model and accounting data of the company. Now we look at internal analysis of both companies.BCG MatrixBoston consultant group matrix evaluates the strategic business units of the company with relative market component and market growth. If we evaluate different SBUs of MS and Next it will be interchangeable this.The portfolio of MSs products in terms of BCG matrix is good in clothing having star position and in food MS has occupied the position of question mark relative marke t shares is low with low industry growth and in financial services industry growth is high but MSs market share is low and will require hard capital investment to turn them into stars.either clicks (cash in balance) or question marks (cash user).In case of Next they too have good gross revenue in clothing sector occupying star position then comes its homeware at question mark position, electrical SBU comes at cash cow while its other product line the likes of flowers and wines comes at dog level.McKinsey 7S FrameworkIn strategic management McKinsey7S framework is considered as one of the major landmarks. In a wide variety of situations this 7S model can be used where it is necessary. The 7 Ss are Structure, strategy, system, skills, style, staff and shared values.Both NEXT and MS are fully exercising the 7s model and organise at all levels to generate maximum output. Structure of both companies are will defined since both are very old player in this industry so they have learnt a lot from their experience curve and now have developed an outstanding structure. In the sign phase both companies got experience through hit and trial system and now have developed good strategies and system. Both companies have got subtle skills and are full getting benefit of these skills. Both companies are well known figures in clothing industry and have gained professional and fecund staff. Both companies have shared values which are widely give out in its all 7s and are reflected by their strategic moves.Accounting selective information AnalysisAccounting data analysis shows the growth dispositions of the company which is very helpful in taking strategic decisions. Following figures just shows the trend of both companies that either company is getting positive response or if there is any coldcockward trend is seen then its reason is traced out so that right strategic move should be taken in future.M S is the leading clothing retailer with market share11.2% Market share of food sector is 3.9% of total UK market. Market share cut out down as compared with previous year from 11.2% to 10.7%this was because of effect of recession fundament 3 2009/10 INTERIM MANAGEMENT STATEMENTGroup sales +2.6%UK sales* +2.3% oecumenical Merchandise +3.2% (Clothing +4.0% Home -0.7%) Food +1.3%UK like for like sales* +0.8% oecumenical Merchandise +1.2% Food +0.4%Online sales +32% planetary sales +6.0%Next Progress in the first half has been better than expected and the business has proved itself resilient in the face of a weak consumer environment.Sales and operate margins were ahead of last year in both Retail and Directory.Financial highlights are as followsGroup revenues increase to 1,512mGroup operating profit increases to 199mEarnings per share rise to 68.2pCash inflow of 114m internet debt reduced to 514m, ample debt facilities of 1bnInterim dividend increase by 1p to 19pAnsoffs Matrix We can use Ansoffs product/market matrix to identify directions for Marks and Spencer and Next strategic development. This matrix offers directions for strategic option available to MS and Next in terms of products and market coverage, taking into account its strategic might and also expectation of stakeholders.We can see from the Ansoffs Matrix that Marks and Spencers luncheon of Financial services products will have involved a variegation strategy. As MS did not already sells financial products, so new market and new product. Both capability and market consideration has operate MS into development of new markets and products. Similarly Next has also entered into other businesses which is to be done to diversify the product portfolio.MS and Next generic strategiesThere are three main generic strategies available to all companies including, either become the lowest- greet retailer or differentiate products and services in such a way that it is valued by customers to the extent that they will pay a premium price. By applying these strengths in either a broad or narrow scope, three generic strategies result damage attractionship, eminence, and focus. The case of MSs core products (food and clothing), it implements a focus generic strategy as it concentrates on a narrow segment (a particular buyer group (executives), market segment (high-end), product feature (freshness) and within that chosen segment MS attempts to achieve differentiation from Tescos Asda, BHS, Top Shop etc. The effrontery is that the needs of the group can be better serviced by focalization entirely on it.Next has also adopted the product differentiation strategy by offer products of higher quality and charging premium price. therefrom Next is offering high end products by catering the speed middle social class of the society.GLOBAL STRATEGIC DECISION stickerWhen companies enter into international market so they have to take global strategic move in order to gain sustainable competitive advantage. For global strategic decision there are different models.G hoshal ModelGhoshal put forward a theory for three types of enterprise in international markets Multinational, Global and external. He discussed the strategic competency and structure in Multinational,Global and International Enterprise.Diamond ModelAnother model for global strategic decision making was defined by Michael Porters which is known as rhombus model. He said that first firms in nations gain competetive advantage in local industry and then compete in international market. He also said that endowment factors of nation help firm to flourish. In his model he also discussed that in order to develop a competitive environment with in an industry there should be rivalry so that firms take more strategic decisions and learn to compete.Marks Spencer can move and set up their outlay in developing countries to where businesslike workers and supportive utilities are available to gain advantage of factor condition and also act as supporting wall, have to move in those market where large and potential customer size (like as China, India where they currently operating) to gain demand condition by avoiding ethnocentrism with adoptive firm strategy. They have to practice one and only(a)-To-All marketing in developing countries to become cost leader in those countries and One-To-One marketing where to perform as quality is matter.NEXT plc obviously to move in developing countries to ensure low cost of production (mainly labor cost), and in large potential market like as in China, India etc. with adoptive marketing strategy but with the think of cost leadership which will create or add value. They have to FDI in global market place other than franchising.M S CURRENT STRATEGY (in recession)Short term PrioritiesCost deliverance initiativesIn global economic downtown and changing in customer needs the company taken major steps to cut down the costs and responding customer needs very quickly. Quality, Value, Service, Innovation and Trust is the thrill strategy of MS keeping in mind the firm analysed its position in the last few years and to tackle global challenges the firm draw a new plan is called PLAN A to get in to success. This plan includes cutting down the cost of production, reducing staff, blockage down less operative branches and reducing dividends to its shareholders to invest in new business, widening its business activity in the international market, improving writ of execution in food and to retain the leading position in General Merchandising.To improve business performance MS invested in pricing. Delivering the best quality at unbeatable value the MS introduced new promotions in General Merchandising and in Food sector. For exampleDress for LessOne day Christmas SpectacularsWise BuysDine in for Two for 10 major Steps in the recession period (Cost counseling)In 2009 the MS closed its 26 less operative branches mostly simply food stores, to cut down the cost. Secondly reduced its Head Office Roles and increased the level o f pay for eligible to get pension which is major cost to the company. Changing in Logistics system i.e. merging GM and Food together, Introducing mechanization in storage warehouse and Streamlining the international distribution system to reduce cost.The main ObjectivesIncreasing the pace of change and operational execution in the businessTo become multi-channel retailer focusing customer channelsInvesting in international business particularly in India, China and Eastern atomic number 63Reinvigorating the brand to customers to highlight ethical and sustainability objectivesFuture plansImproving UK Core businessIntroducing MS Direct Sales (Online)Expanding international business (the revenue in this market is proportionately higher than the UK market)Strengthening UK business Portfolio(modernising and expanding existing system) integrating Plan A across the business (become carbon neutral carbonic acid gas emissions tonnes, Send no operational waste sent to landfill tonnes, Improv e zippo efficiency in StoresCompany Perspectives (NEXT)Nexts mission is to be the natural choice retailer in the UK for fashion aware men women who expect style, distinction quality from their clothing.Next have a task to build with the main focus of giving all to its customers what they deserve the best. Individuality, long experience, courage in development, and open-mindedness are the tools. The idiom the customer is the king to the company and not simply a kind of making strategy it is tradition.Current Strategy (2009) distill on the design, quality and value of product together with excellent customer service and delivery. The company believe this will serve well through the current recessionary period and it will keep in well place when recovery begins.Controlling costControlling stock outride to invest in the brandOperational cost savingsNext found two ways to do the business during recession period. 1). do the best of current position by providing customers with what t hey expect. 2) Exciting brand name, lovely design with great quality in clothing and home ware. 3) plan product ranges to lower price points by reducing expense in design and quality.During recession next decided not to devaluate its product for the aspect of pricing nor quality and design of their product ranges, and keep maintaining market position and the company believes that this will provide strong foundation when economic conditions change.To improve the business performance the NEXT introduced pilot data warehouse recording system with its 300 stores to control inventory.REFERENCESBrews, P. J. and Hunt, M. R. 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Mattord, Management of Information credentials (P 505-507)Wilson and Gilligan, (1998), Strategic Marketing Management, 2ndedition, Butterwoth Heinemann, OxfordBaker, M. (2000), Marketing Strategy and Management 3rdedition, Macmillan Business, LondonNext ArticlesNext Trading Update, inUK Retail Report,May 2000.Next Homes in on Bigger Stores, inIn-Store Marketing,October 2001.Internethttp//www.next.co.uk/shopping/homewareLID=01_02_08http//www.mar ksandspencer.com/