Introduction
Challenges that Businesses in the UK Face will be evaluated in this report with different data and statistics. Businesses in the UK face various types of complexities in their operations, and the challenges of the UK are the focus of the research. The purpose of the research is to find out the challenges that UK companies face, which will assist companies in taking significant initiatives to minimize the impacts of the challenges. The researcher of this report will conduct secondary research to do this report, and authentic information will be collected from authentic internet journals and pages to maintain the integrity of the research. In this research, challenges of the UK will be founded, and challenges of the chosen industry will also be founded. The challenges faced by the selected company ‘Marks & Spencer’ will also be identified with its impact and the company’s fight-back process, including some recommendations.
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Challenges that businesses in the UK face:
Brexit: Brexit has created uncertainty for many businesses around the UK. It is estimated that investment will reduce to 6% for the first two years after implementing Brexit, and employment will also reduce to 1.5% (Harvard Business Review, 2019).
Contemporary issue (COVID-19): COVID-19 is a contemporary issue that has affected the businesses of the UK vastly. A survey has been conducted on SMEs in the UK, and it is found that the revenues of 90% of SMEs have been reduced because of the pandemic by 10-30% (McKinsey & Company, 2020).
Digitalization: Online shopping is the result of digitalization and has created different challenges. The growth rate of UK E-commerce is 4.47% and is expected to be 10.96% furthermore store sales have been decreasing enormously because of online shopping (Ecommerce News, 2020). As a result, businesses that do not have online services have less revenue.
Technology: Information technology shifted companies toward keeping digital records but it maintaining the security of digital data is a great challenge for UK companies (BasicSafe, 2020). Hackers can hack the website and computers of different companies to steal digital data, which is a great risk for companies.
Change of customers’ taste: Customers’ taste often changes regarding restaurants, fashion brands and other sectors (Rahimi & Kozak, 2017). It is a great challenge for UK companies because the sectors have to keep themselves updated according to customers’ demands.
Social media and buying decisions: Social media like Facebook, YouTube, WhatsApp and others have influenced customers’ buying decisions because they can compare prices and benefits of products while sitting at home. 45 million people in the UK use social media; therefore, companies have to ensure a strong social media presence to get more customers than competitors, which is a tough challenge (Avocado Social, 2020).
Cost of production: Labour costs in the UK increased by 113.70 points in 2020, which was 110 points in 2019; therefore, production cost has increased for UK businesses highly (Trading Economies, 2020). As a result, profit level is decreasing, and companies are trying to cope with the challenge.
Government policy and relation with foreign countries: Relationship between UK and China has worsened, which will also influence UK companies (BBC, 2020). Fewer Chinese companies will be attracted toward the UK capital, and UK companies will miss the capital opportunity from China because the capital may help the companies to have great growth.
Challenges in UK retail industry:
The retail industry will face a tough time because of Brexit: Most of the food items in the UK are imported from the EU, such as 9% dairy products, 18% meat products, 20% fruit and vegetables and other foods (European Commission, 2020). After Brexit, the UK will have no business dealing with the EU, and the country can reduce its supply of food or delay supplying the food. As a result, the retail industry will fail to fulfil customers’ demand with enough food, and their revenue will decrease.
COVID-19 has reduced retail sales in the UK: Retails sales have dropped to 5.1% in the UK because of the national lockdown which was given to control COVID-19 (Forbes, 2020). The fashion sector of clothing faced a huge reduction in sales to 34.8% among all retail businesses of the UK (Forbes, 2020). People did not go out during the lockdown, and the retail sector generated the lowest revenue.
Customers prefer online shopping to offline: UK customers prefer online shopping to be offline, and the number of customers is 51% (Ecommerce News, 2020). The retail industry is being forced to start online services but they have less experience in this sector, and lack of investment in R&D does not permit the retail industry to ensure its strong presence in the online sector.
The retail industry of the UK cannot maintain customer loyalty: Retailers of the UK do not focus on enhancing customers’ satisfaction through special offers and promotions. As a result, they do not get loyal customers, and customers do not maintain repeatable purchases from retailers.
Introducing Marks & Spencer:
Marks & Spencer is a British multinational retailer. It sells high-quality fashion, stylish home products and award-winning food products. Per Una, Autograph, Limited, Rosie, Blue Harbour, M&S Collection and M&S Energy are the brands under the company. The mission and Vision of the company are to ensure aspirational quality accessible to everyone through the depth and range of its products (Haymarket Media Group Ltd, 2020). Marks & Spencer has 1463 outlets, of which 959 outlets are situated in the UK; furthermore, 615 outlets among them sell food only (Marks & Spencer, 2019). The company have business in 57 countries of the world, including Canada, German, France, Australia and other countries (Marks & Spencer, 2019). The clothing and Homeware sector of the company generated £3.2 billion in revenue, and the food sector generated revenue of £6.0 billion (Marks & Spencer, 2020). Marks & Spencer serves 32 million people globally (Craft: 1, 2020). Marks & Spencer has 78,000 employees globally (Marks & Spencer, 2020). Debenhams, Macy’s, John Lewis Partnership, Aldi UK, Asda, Tesco, Next and Waitrose & Partners, etcetera are the major competitors of the company (Craft: 2, 2020).
The challenges Marks & Spencer faces in the UK:
COVID-19’s impact on Marks& Spencer:
COVID-19 has influenced the business of Marks & Spencer enormously, and the impact will last for the next year, including the current year (Financial Times: 1, 2020). Store sales have reduced greatly because people avoid going to market without an emergency to stay safe from COVID-19. People buy less fashionable clothes and homeware to control their spending and save money during this pandemic; therefore, sales of clothing and homeware declined by 75% (BBC, 2020). Because of declined sales, the profit of Marks & Spencer has fallen more than 20% to £403 million, which was £ 511 million in 2019 (BBC, 2020). It refers to the enormous negative impact of COVID-19 on the company.
How Marks& Spencer coping with COVID-19 and recommendation:
Marks & Spencer has taken many initiatives to attract more customers to their stores during COVID-19 to increase sales again. Teams of the company provide hand sanitiser for the customers who visit their stores to disinfect their hands and stay safe from the virus (GOV.UK, 2020). To ensure social distancing, they have marked on the floor of Marks & Spencer’s stores, and it makes customers remember to maintain their distance from one another. The company has started 30 minutes of online delivery to customers who are avoiding going out in order to beat competitors’ revenue and enhance sales in online retail to enhance profit level (BBC, 2020). They have provided a refund policy; therefore, customers can buy their products through online and return if they think that the quality of the products is poor (GOV.UK, 2020). This policy will help Marks & Spencer to win customers’ trust and increase sales greatly. To cope with reduced sales of clothes and homeware, Marks & Spencer buys these products from fewer core suppliers to reduce clothes and home ranges (BBC, 2020). Because of declined profit the company is going to cut 950 jobs because of their declined profit during COVID-19 (The Guardian, 2020). By cutting the jobs, Marks & Spencer will be capable of reducing their cost.
Brexit’s impact on Marks & Spencer:
Brexit will harm Marks & Spencer’s businesses greatly because the price of some foods and products will rise sharply for the reason that the UK will have no business dealing with the EU (REUTERS, 2020). 73% of dairy products, including milk, meat products, and food preparations, are imported from the EU, and this import may be influenced by Berixt (European Commission, 2020). It means that the UK is dependent on imported foods from the EU, and the country can reduce exporting these food products, and they may increase the price of the foods because they will have no business dealings with the UK (Word Press, 2020). As a result, Marks & Spencer has to import these food items at higher prices. After Brexit, there will be a labour shortage in the UK which indicates the company will have to invest more in UK labour to hold on them. The significant investment Marks & Spencer will make in UK labour will also increase the costs of the company.
How Marks& Spencer coping with Brexit and recommendation:
It is seen that Marks & Spencer may have a shortage of food supply after Brexit because of its great dependence on EU foods; therefore, the company have to find out an alternative source for other countries to import these foods directly from the countries. The company can have business deals with the suppliers who will manage the food supply for the company from other countries because the company have to face many complexities to import the foods directly. As a result, Marks & Spencer will be able to maintain its flow of raw materials and fulfil customers’ demands. To cope with the labour shortage after Brexit, the company can bring in employees from emerging countries like India, Brazil, Russia and others (IG, 2020). As a result, Marks & Spencer will not need to invest higher money in UK labour, and it will also reduce its costs.
Evolution of technology and its impact on Marks& Spencer:
Online shopping is one of the great evolution of technology, and people can shop from anywhere they want through their mobiles, laptops, smartwatch and other devices. Online shopping saves time for going out; therefore, 51% UK population have become online shopper who has shifted Marks & Spencer toward online services (Ecommerce News, 2020). People compare prices of their desired products online before purchasing and choose the competitors of Marks & Spencer, who provide quality products at a reasonable price. It has decreased the store sales of the company (University of Birmingham, 2020). Because of declined store sales, the profit margin of Marks & Spencer also decreased.
How Marks& Spencer coping with the evolution of technology and recommendation:
The demand for online shopping is increasing in the UK continuously, and Marks & Spencer has started to provide online shopping services to capture the customer base who prefers online shopping to offline shopping (University of Birmingham, 2020). The company have given its clothing and homeware online at about 18.5%, and customers can purchase these products online (Financial Times: 2, 2020). The revenue of the company increased to 0.2% after 26 weeks of starting online services (Reed Exhibitions Ltd, 2020). Marks & Spencer has a 5% annual growth in online retail and is expected to have an annual growth of 33% within 2022 (Financial Times: 2, 2020). It is noted that the growth rate of the company is slower, and they may not be capable of attaining 33% growth by providing only 18.5% of products online, whereas competitors like Sainsbury provide 60% of products online (Financial Times: 2, 2020).
Marks & Spencer should increase its online stock of clothes and homeware from 18.5% to 50/60%, like its competitors, to increase digital sales (Financial Times: 2, 2020). The company should give online delivery of some food groceries across the UK. It will create a huge customer base for Marks & Spencer because fewer competitors of the company provide online services for groceries and food.
Conclusion:
UK retail sector faces challenges like Brexit, and COVID-19, increasing customers’ loyalty and being technologically sound according to customers’ demand. It is seen that Marks & Spencer will also be influenced by Brexit because its costs will increase hugely. COVID-19 has decreased the sales of the company and compelled them to take all types of safety measures, including 30 minutes online delivery. Marks & Spencer has become online to fulfil the demand of customers which is shopping through online service but lack of experience and investment is the challenge in the way to make high online sales of Marks & Spencer.
References:
Avocado Social, 2020. The Latest UK Social Media Statistics for 2019. Retrieved from: https://avocadosocial.com/latest-social-media-statistics-and-demographics-for-the-uk-in-2019/ [Assessed on: 01 August 2020]
BBC, 2020. Coronavirus: Shopping may never be the same, says M&S. Retrieved from: https://www.bbc.com/news/business-52724901 [Assessed on: 3 August 2020]
BasicSafe, 2020. THE IMPACT OF TECHNOLOGY ON SAFETY FOR SAFETY PERSONNEL. Retrieved from: https://info.basicsafe.us/safety-management/blog/the-impact-of-technology-on-safety [Assessed on: 30 July 2020]
BBC, 2020. Why are UK and China relations getting worse? Retrieved from: https://www.bbc.com/news/world-asia-48868140 [Assessed on: 31 July 2020]
Craft: 1, 2020. Marks & Spencer. Retrieved from: https://craft.co/marks-spencer [Assessed on: 01 August 2020]
Craft: 2, 2020. Marks & Spencer competitors. Retrieved from: https://craft.co/marks-spencer/competitors [Assessed on: 01 August 2020]
European Commission, 2020. EU agriculture and the withdrawal of the United Kingdom from the EU. Retrieved from: https://ec.europa.eu/info/food-farming-fisheries/farming/eu-agriculture-and-brexit_en [Assessed on: 02 August 2020]
Ecommerce News, 2020. Ecommerce in UK to reach €222 billion in 2020. Retrieved from: https://ecommercenews.eu/ecommerce-in-uk-to-reach-e222-billion-in-2020/ [Assessed on: 30 July 2020]
Ecommerce News, 2020. 51% UK consumers prefer to shop online rather than in-store. Retrieved from: https://ecommercenews.eu/51-uk-consumers-prefer-to-shop-online-than-in-store/ [Assessed on: 02 August 2020]
Financial Times: 1, 2020. Five ways coronavirus will change British retail. Retrieved from: https://www.ft.com/content/901a679e-d3e1-4842-9f12-8f36b0d3a0b8 [Assessed on: 3 August 2020]
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Forbes, 2020. Worst Ever Decline In U.K. Retail Sales Due To Coronavirus. Retrieved from: https://www.forbes.com/sites/callyrussell/2020/04/24/worst-ever-decline-in-uk-retail-sales-due-to-coronavirus/#2a954b7a1b65 [Assessed on: 02 August 2020]
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Marks & Spencer, 2019. About M&S. Retrieved from: https://global.marksandspencer.com/about-ms/#:~:text=Marks%20%26%20Spencer%20offers%20high%20quality,of%20the%20UK’s%20leading%20retailers. [Assessed on: 01 August 2020]
Marks & Spencer, 2020. KEY FACTS. Retrieved from: https://corporate.marksandspencer.com/investors/key-facts [Assessed on: 01 August 2020]
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REUTERS, 2020. UK sets out post-Brexit tariffs to underpin trade talks. Retrieved from: https://www.reuters.com/article/us-britain-eu/uk-announces-new-post-brexit-global-tariff-regime-idUSKBN22V0LK [Assessed on: 3 August 2020]
Trading Economies, 2020. United Kingdom Labour Costs. Retrieved from: https://tradingeconomics.com/united-kingdom/labour-costs [Assessed on: 31 July 2020]
The Guardian, 2020. Marks & Spencer to cut 950 jobs in latest Covid-19 blow to high street. Retrieved from: https://www.theguardian.com/business/2020/jul/20/marks-spencer-cut-jobs-coronavirus-sales-redundancies [Assessed on: 3 August 2020]
University of Birmingham, 2020. The 2018 Retail Crisis Catches Up With Marks and Spencer. Retrieved from: https://blog.bham.ac.uk/cityredi/the-2018-retail-crisis-catches-up-with-marks-and-spencer/ [Assessed on: 4 August 2020]
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