A Porters' Five Forces Analysis of the marks & Spencer & more card.

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A Porters’ Five Forces Analysis of

the marks & Spencer

& more card

BUSINESS POLICY

FEBRUARY 2004

C13BP1/2

Word Count:- 2956


Contents

Introduction                                                Page 3

Threat of New Entrants                                        Page 4

Threat of Substitution                                        Page 7

Power of Buyers and Suppliers                                Page 9

Competitive Rivalry                                        Page 11

Conclusion                                                        Page 15

Bibliography                                                Page 16

Appendixes

Introduction

In this report  we are going to be looking at the Marks & Spencer ‘&More’ credit/store card using one of the tools given to us in the Business Policy classes.

The ‘& More’ card is the evolution of the Marks & Spencer  chargecard.  It was introduced to give users more freedom with their purchases and rewarded customers for purchases within and outwith Marks & Spencer stores.  Ultimately the customer received loyalty points which eventually amounted to vouchers which could be redeemed against purchases in M&S stores.  The card was launched on 6th October 2003 with a massive advertising campaign to support it.

We will be examining the ‘&More’ card using the Porters Five Forces Model (as shown below)

We will discuss each element in turn and show how they relate to the ‘&More’ card.

Threat of New Entrants

The Marks and Spencer ‘& More’ Card, albeit a new product itself, is at constant threat from new retailers or existing retailers coming into the market by launching store cards similar to that offered by Marks and Spencer.  We will discuss later in this report the threat of substitution with other store cards already on the market.  In this section we will look at potential entrants and the barriers they may face.

The obvious and potentially most worrying new entrant into the market would be Next who are now seen as one of if not the market leader on the High Street.  They capitalised on the slump that Marks went through in the mid to late 90s to grow and develop into the force they are today.

Other potential entrants into the market are stores which offer a single store card.  An example of this would be The House of Fraser.  At present they offer a store card and a loyalty card individually.  Both cards offer loyalty points with the account card giving more per pound than the loyalty card.  The downside of these cards is that they can only be used in House of Fraser stores.  The novelty of the & More card is that it can be used as a straight credit card.  The tie ups with MasterCard and VISA allows the card to be used anywhere.  Extra points are rewarded for purchases made in Marks and Spencer.  The introduction of a similar card may be difficult due to barriers which we are now going to look at.

Barriers to entry are more than the normal equilibrium adjustments that markets typically make.  For example, when industry profits increase, we would expect additional firms to enter the market to take advantage of the high profit levels.  Firms may be reluctant to enter markets that are extremely uncertain, especially if entering involves expensive start-up costs.  The barriers to entry discussed by Michael Porter are mostly applicable to goods for sale, for example MP3 players.  

However the premise of this report is to look at a credit card so some barriers would not apply.  We will look at each the barriers in turn and explain why they are or are not applicable.

The first barrier to entry is Economies of Scale.  This is a factor when the market is based on production.  Effectively it means that a larger company can say for example buy raw materials in bulk and get a better deal than smaller firms who have to buy small quantities and don’t benefit.  It is clear that this barrier would not have much effect on entrants into a credit card market.

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The next barrier is The Capital Cost of Entry.  As the title suggest, this is the costs associated with setting up and entering a market.  This is a very important barrier for potential threats to Marks and Spencer.  Marks and Spencer have the finances to underwrite a credit card whereas the Joe Bloggs retailer may not.  This is due to turnover and assets available to the firm.

Another barrier would be having Access to Distribution Channels.   This is particular prevalent for companies selling goods where there may be restrictions on where you can sell your products.  This ...

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