Introduction

Business environment can be defined as the total internal and external factors surroundings a business. Both internal and external factors may work together and affect business operations. There are three levels of business environment which include; internal environment, external microenvironment, and external macro environment. The internal environment comprises of inner elements of the enterprise which produces, interconnect and provide market offerings. External microenvironment refers to the small external forces of an organization that influence its capacity to serve the clients. External macro environment refers to larger social forces that impact the existence of anenterprise.

Generally, the business environment comprises of the customers, competitors, the government, the society, etc. Business environment keeps on changing depending on the level of technology, consumer’s taste, and preference and government activities. Every organization should embrace changes to remain competitive and to meet customer’s expectations. Adopting new technology increases productivity and reduces the cost of production since the number of defects is significantly reduced. Advance technology also eases communication, and therefore all the stakeholders are well informed. Customer needs changes with time depending on the target customers. Businesses should look for new opportunities to win a significant market share. This report is aimed at analyzing the business environment for the Marks and Spencer Company.

The competitive rivalry for M&S is high due to the availability of various alternatives for the consumers. The consumers are rational and therefore willing to purchase a product at a lower price as long as their utility is satisfied. The supplier bargaining power is low while the buyer’s power is high. The threat to a new entrant is low due to high capital investment injected to establish efficient chainsand stores. The firm is significantly affected by economic, political, social and technological factors. Due to the changing demand of the customers, the firm has to offer products which satisfy the clients. M&S also endorses the use of technology to get reach to the customers. the company also abide by the laws of the land which it operates.

Description of your chosen business

Marks &Spencer (M&S) is a transnational retailer. The company has numerous stores and is involved in providing its own makes of home products, clothes, and food in its stores and online. The firm specializes in selling kid’swear, men’s wear, women’s wear, beauty products, and lingerie.  The company mainly operates in the UK however; it has expanded overseas in such for opportunities due to the high demand in the international market. The firm has its branches in countries such as; Canada, Europe, Hong Kong, Australia, Bahamas, Bermuda, Japan Middle East among other nations. The firm’s financial services have continuously increased thus offering personal loans, customer credit cards, life insurance, investment and pension plan to their clients.

The organization provides high-quality products. Management is keen on human and animal health — notably, this increased customer loyalty throughout the world. The entire administration is therefore committed to protect brand integrity and also to maintain a high level of consumer trust. Remarkably, this is achieved by ensuring that the products are safe, high quality, legitimate and preciselyreplicating any proclamation that they are made.

M&S provides highly competitive products and thus winning the sizeable international market. For instance, the following homewearproducts andclothingare sold internationally, while beauty products, flowers, duvets, furniture, food, and wines are sold in the local market.

M&S has dominated the UK clothing market. However, it has faced tough competition from its rivals such as Primark. The company’s large earning is relatively higher in the domestic market compared to foreign markets. Statisticsby GlobalData has indicated that since 1997 the firm’s market share has been declining. The firm has, therefore, to focus more on nonfood materials such as clothes, cosmetics, and other materials in order to increase their revenue. Consequently, this will generate more foreign income and therefore, high competitive capacity.

Analysis of the M&S micro-environment

To analyze M&S micro-environment, the paper will use Porter’s five tools. Arguably, this is a strategic tool which determines and scrutinizes a company’s competitive and production capacity. The, therefore, defines the desirability of a marketplace and the degree of rivalry intensity. The Porter’s five tools include; competitive rivalry, supplier power, the threat of entry, buyer’s power and danger of substitution.

Analysis of Competitive Rivalry

In the clothing sector, M&S faces a high rivalry. Competition in the industry is tough since there is little product differentiation. The principal competitor in the clothing sector is Primark which has significantly won a large market share in the UK as indicated by GlobalData. Similarly, in the food industry, the firm experiences tough competition from other companies such as Sainsbury and Tesco.

In business competition is healthy. M&S operates in a highly competitive environment and therefore. The management ensures that the products offered to meet customer demand. The company has a competitive advantage in the market since it has operated for more than a hundred years, it also has recognizable brand names and a reliable supplier relationship. There is a great challenge in both sectors; the clothing and food industry due to the presence of substitute products. Entry of other firms into the industry with the same price level, quality products, and updated fashions increases competitive rivalry for Marks and Spencer Company.

Analysis of Supplier Power

There are many suppliers in the market. Therefore, the bargaining power of the suppliers is low. Principally, this implies that the suppliers can easily be substituted since there aremany options. The retail industry also has a lot of raw materials and therefore, supplier power is significantly reduced.The high concentration of buyers in the industry also lowers the bargaining power of the suppliers.

M&S has built and maintained a healthy relationship with the suppliers who provide high-quality products to the company. Consequently, the firm can produce highly competitive deliverables in the international market.  The company has also established a decent reputation for supplier management.  When one supplier fails to deliver raw materials, the firm is open to allow a new supplier to distribute the same elements. The firm also embraces a policy to value the interest of thesuppliers. However, the company is also concerned to control possible increment of the cost of the raw materials.

Analysis of Threat of Entry

The marketing industry is highly attractive. However, new entrants find it difficult to penetrate the sector.Precisely, this can be linked to the resilient monoliths in the industry. The companies dominating the market are also highly branded. For instance, firms such as Marks &Spencer have a solid background in the market and therefore, it is hard for new entrants to endure. Conversely, M&S and other major companies are facing tough competition from low-cost manufacturers such as ASDA who introduces cheaper home products into the market. Decisively, the threat of new entrants into the industry is relatively low due to the presence of the already established companies dominating the market.

New entrants also find it difficult to penetrate the market due to the high capital investment required to establish an effective chain. The market is entirely mature, and new venture needs to introduce new products into the market to divert their loyalty from the incumbent firms. The current companies have established superior customer loyalty and would use all means to counter new entrants. The firms would use measures such as litigation to barn embryonic companies joining the industry. Lack of clear information and knowledge in the market especially foreign enterprises would also work as a barrier to a new competitor.

Analysis of Buyer Power

In the entire retail industry consumer’s bargaining power is high due to the presence of a considerable number of suppliers in the market.  The company recognizes the customers as the primary element of consideration. The firm focuses on maintaining a good relationship with the existing customer and also to trap more market share. The enterprise is also keen to meet customer satisfaction.  The management is, therefore, determined to offer high-quality products to the consumers thus, creating stronger customer loyalty.

M&S embraced a product-oriented strategy while the rivals imposed customer-oriented policies. Customer oriented approach ensured that the customers are provided with what they demand. Product-oriented strategy, on the other hand, involves the production of high-quality products.Such products are price sensitive, and therefore, the company lost its potential customers to the rivals.

It is also worth noting that, the buyers can dictate their taste and preference due to their high concentration. Customer bargaining power is too high due to the availability of numerous alternatives, and switching costsare relatively low. The level of income determines the prices of commodities. For instance, when the real income of the consumers is high, they are likely to buy more goods and services about when the actual profit is considerably low. Conclusively, the bargaining power of the buyers is high.

Analysis of the Threat of Substitution

There is a high threat of substitution which is associated with an increased number of retails who import their goods from other countries and sell at a relatively lower price. Outstandingly, this implies that a customer can buy the same product from other retailers at a lower price. Substitution reduces customer’s demand for a specific class of commodities or services since they can adjust to various options. In the cloth retail sector, there are numerous dealersselling imported clothes at a lower price. Consumers are rational beings, implying that they are willing to buy goods and commodities that will maximize their needs at the lowest price level.

M&S require taking up the continuous invention to keep their products secure and to remain distinct and to meet consumer demand. Clothing business is full of substitutes. Other firms can design their clothes and sell them at a relatively lower price. Strong rivals such as ASDA, Sainsbury and Tesco have infiltratedinto the food industry. Therefore M&S experiences a high threat of substitution.

Analysis of the Macro environment

The management team of any organization should have a precise knowledge of the macro environment since it comprises of primary factors required by a business to compete in the industry. Indeed, these are uncontrollable external factors which influence how a business run. Therefore, such factors greatly impact a company’s decision making and affect the strategies imposed by the firm. In an analysis of the macro environment for M&S, the paper uses a PEST analysis tool. These are external environmental factors which include; political, economic, social and technological situation. The PEST model gives an exterior analysis which provides ageneral idea of the various macro environmental factors a business should consider to realize the set goals.

Analysis of the Political Environment

Political factors are made, implemented and changed by the governing authority. Explicitly, these factors indicate the government’s anticipation in business and trade. Political factors include; trade policies, political stability, labor laws, trade restrictions, and tariffs. The government has the mandate also to determine the number of goods and services to get in and out of the country. The state is keen on infrastructure, health, education, and security. Hence, the authority set rules and regulations which every company has to obey. For instance, risk control and management, health and safety and planning for hazard identification. If any company does not abide with these rules, a heavy fine is imposed or closed.

Free trade policy and European integration opened up markets for British and other corporations to capitalize in Europe. Consequently, this has increased competition for M&S. The firm, therefore, has to put in place strict strategies to maintain its market share. The free trade policy states that any company is open to trading in the UK as long as it does not oppose public orders, public policy or any of the laws set by the UK government.  M&S is adversely affected by labor laws and industrial relations. Labor law infringement affects M&S development both locally and internationally.  Value added tax (VAT) is also a significant concern for M&S.When the government increases VAT; the firm has to raise the prices of their commodities positively. Otherwise, the firm’s income will be low. Political instability has increased due to global terrorism. Exceptionally, this remains a potential challenge to the firm in the international market.

Analysis of the Economic Environment

Economic factors can be defined as economic determinants which influence economic growth either directly or indirectly. The economic factors directly impact on the company’s performance and normally have a long term effect. For instance, inflation would greatly influence the pricing strategy of any given corporation. Inflation would also influence the purchasing power of the consumers and also change both supply and demand models. These factors include; inflation, interest rate, economic growth pattern, fiscal policy, monetary policies, exchange rate etc.  The economic factors also influence foreign direct investment (FDI). The UK’s economy is among the largest and open economies in the world. The state has strong monetary and fiscal policies since the nation is less affected by inflation and has substantial public finance.

The retail industry in the UK is extremely sensitive to interest rate and prawn to the economic recession. M&S embraces product oriented products, that is, high-quality products.Thecompetitors, on the other hand, impose customer oriented policies and therefore offer goods which best satisfy their needs. The competitors therefore heavily rely on imported goods which are fewer prices sensitive. Importation is cost-efficient and therefore the customers are able to afford the commodities at a lower price.

The interest rate in the UK is moderately low. Therefore, the level of disposable income is high. Hence, Marks&Spencer Company should highly focus on the fashion arena since most of the young generation spends much more on fashion about food. The firm also needs to be price sensitive to maintain consumer loyalty. The competitors are also likely to win a significant market share due to their relatively lower prices compared to the M&S.

Analysis of the Social Environment

The social factors are crucial in the operation of a company. Nevertheless, these factors do not directly influence the firm.  An analysis of the social environment involves addressing people’s concerns and interests.  Social factors include age distribution andcultural aspects.  The social factors influence the demand of the corporation’s products as well as how the firm operates. The UK’s retail sector is characterized by changes in consumer preference, taste, and lifestyle. Remarkably, this serves as both an opportunity and a threat to the existing and upcoming companies. The UK population is trusty to one make and quality which is also affected by the pricing level of other competitors.

M&S has occasionally modified the institutional structure, the brands, pricing strategies etc.in line with customer demands. The target market for the M&S is a population of people aged 40 and above and that is the reason as to why the firm offers conservative clothes products. In the last ten years, the choice of attires has changed and consequently, the firm has positively responded to the change by offering updated fashion designs.In the UK, consumer preference and taste has significantly changed. People are also concerned about the value of their money.  The customers have also changed their demand for British products. Initially, they considered these products to be of higher quality.

Nonetheless, their notion has changed. The company in question provides classic styles opposed to the customer demand who are highly interested in trendy styles.  Conspicuously, this poses a major threat to the Marks & Spencer Company to regain its market share.

Analysis of the Technological Environment

Technology has continuously evolved thus helping business to operate efficiently in the market as a result of reducing operational cost and increasing the level of productivity. The consumers are also making use of the internet to purchase products and delivered to their homes. The media has played a significant role in publicizing new styles to consumers. The knowledge of the demand for new fashions is then passed to the designers who produce updated styles to meet the demand of their clients. Technology has made it easier for shipment of stocks hence, trade has become efficient.

M&S has significantly embraced the use of online marketing where clients are able to purchase their products virtually both locally and internationally. The company has also installed free Wi-Fi in the stores in the UK with the aim of helping its customers to access information about their products. The company will generate more income by embracing technological changes.

Report Conclusion

Business environment refers to a sum of all factors surrounding a business. They are both internal and external environments. The internal environment refers to the elements within an enterprise which interact, connect and provide market offerings. The external market, on the other hand, comprises of the microenvironment and macro environment. The external microenvironment is the small forces of an enterprise which influences its capacity. The external macro, on the other hand, refers to large social forces which significantly impact on the company.

Porter’s five forces is a tool used to analyze the microenvironment of a company. It comprises of competitive rivalry, supplier power, threat to a new entrant, threat of entry and buyer power.  M&S Company has a high buyer power due to numerous alternatives. There is a low threat for new entrants since M&S and another corporation hasstrong brands. Supplier bargaining power is low due to the high availability of raw materials. There is also a high threat of substitution due to the availability of many options and also the policy of free trade allows new firms to trade operate within the UK economy.

PEST model helps in the analysis of the external macro environment. The model comprises of political, economic, social and technological factors. The political features embrace the measures put in by the state in order to regulate and control the companies.They include political stability, labor laws, trade restrictions, and tariffs. The companies which do not adhere to the rules and regulations are heavily fined or closed by the government. Economic factors directly impact the companies operation. For instance interest rate, exchange rate, fiscal and monetary policies etc. M&S should highly concentrate on the sale of fashions while targeting the young generations. Most youths spend a higher percentage of their income on fashions. The social factors are concerned with the demographical distribution. M&S should focus on the interests, tastes, and preferences of the consumer to optimize their revenue. Finally, technology is dynamic. The firm should embrace technological changes. The youths spend significant time on them , and this forms a suitable platform for Marks & Spencer to advertise their products.

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