Marks & Spencer Porter Five Forces Analysis

Published in Companies category by MBA Skool Team, Last Updated: February 25, 2022

Here is the Porter’s Five Forces analysis of Marks & Spencer that covers threat of new entrants & substitutes, bargaining power of buyers & suppliers and competitive rivalry.

Threat of New Entrants:

The threat of new entrants in the Marks & Spencer Porter Five Forces Analysis can be explained as follows:

Marks & Spencer is international apparel, home and food products firm headquartered in London. It has its presence in more than 1000 locations globally. It commands a good amount of brand loyalty, which is the case with established players in this industry. This market is mature, and it means that the current players look to hold on to their existing market share and not lose it. Also, in order to set up a chain of stores with a huge presence as Marks & Spencer does, it needs huge capital investment to achieve that feat. But even that does not guarantee high revenue from sales.

Due to the brand equity that Marks & Spencer have built over this span of 138 years, it has made it possible. This is the same case with all other major players in the market. Also, the absence of knowledge and experience required to operate in this market for new entrants will be another barrier to entry for this market. Owing to all these factors, the threat of new entrants can be considered high.

Image: Wikimedia

Threat of Substitutes:

Below are the threats of substitute products of Porter’s Five Forces analysis of Marks & Spencer:

Marks & Spencer's operates in the food and clothing industry. Both these are basic necessities for human sustenance.

Hence, there are no substitutes for them per se. However, they can be substituted by products offered by other companies. As for the apparel industry, there is a good amount of brand equity that Marks & Spencer have developed over the years and that it continuously spends on designing to differentiate itself. But as it is not hard to plagiarize the designs and make the similar product available for a cheaper cost. Still, the brand equity helps here in selling its products. There are also many substitutes available for the food products that Marks & Spencer's offer, such as Waitrose. Considering all these factors mentioned above, we can infer that the threat of substitutes is high.

Bargaining Power of Customers:

In the Marks & Spencer Porter Five Forces Analysis the bargaining power of the customers can be explained as:

Customers are the purchasers of Marks & Spencer's products. The retail industry is intensely competitive by nature, and its customers are price-sensitive inherently. As the switching costs for the customers are minimal, it makes it harder to retain customers. The concentration of customers is also high. There are many alternatives for the customers to choose from as well. There is also a variety of competitors that offer differentiated and similar products as well. The alternatives available are also both expensive and affordable.

In the end, the customers have different alternatives available at their disposal with minimal switching costs, which means customers' bargaining power is high.

Bargaining Power of Suppliers:

Following is the bargaining power of suppliers in the Porter’s Five Forces analysis of Marks & Spencer:

Suppliers are the entities from whom Marks & Spencer's procures their input materials. It is a well-known fact that Marks & Spencer is a globally operating firm with a presence across multiple countries and has high brand equity. It procures its input materials from multiple suppliers and not one. The materials supplied by them is not much differentiated. Also, as the company actually manufactures them and does not purchase finished goods, this gives the firm an edge over others to sell at higher margins which will not be possible in the case of purchasing finished goods. Also, there is less scope for forwarding integration from suppliers. Further, the switching costs for Marks & Spencer to shift from one supplier to another is also low as they procure from multiple suppliers already. Given that the scale at which M&S purchases from suppliers is large, it can demand purchases at lower margins. Considering all these factors mentioned above, we can conclude that the bargaining power of suppliers is low.

Competitive Rivalry:

The impact of key competitors in the Marks & Spencer Porter Five Forces Analysis is as follows:

Competition is very high in the retail industry, as mentioned previously. There are many players in the market, and the customers also price sensitive. There are practically zero to minimal switching costs for the customers, and they have a wide range of retailers to choose from. There are a good variety of alternatives available for the customers as well. This competition is further worsened by large firms diversifying into the retail space and also the increasing online retail. Marks & Spencer's positioning in the market are as a high-quality brand that offers value for money products. This is true for both the clothing and food vertical it operates in. The company is able to increase its online sales values, but there is still a long way to go. Marks & Spencer are benefiting from its loyalty program, which includes personalization. But as its stand has changed from what it used to be to providing everyday low pricing, it is devaluing the brand and trying to provide products to everyone from its previous specialization stand. This makes it indifferentiable in future if that keeps up.

Overall, considering all the factors mentioned previously, we can conclude that the competitive rivalry is high for Marks & Spencer.

To conclude, the above Marks & Spencer Porter Five Forces Analysis highlights the various elements which impact its competitive environment. This understanding helps to evaluate the various external business factors for any company.

This article has been researched & authored by the Content & Research Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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