In the case of M&S, the analysis of these five forces allows for the group to know the key to success factors in its industry. In other words, the strategic elements that should be controlled in order to obtain a competitive advantage.
The power of customers: Since 1960, the population has almost doubled. The Chinese are now more than 1.3 billion. The fact that China has developed, the standard of living has also evolved. Unfortunately, for 80% of the Chinese, their wages were only enough to feed their families despite the low cost of living. In addition there are large gaps between socials classes so it is difficult to give a real purchasing power. Thus, we can say that by the number of inhabitants, consumers have a lot of power but seen in their wages, it is not really the case.
(www.chinafrique.com)Finally, some experts believe that Carrefour’s success can be attributed to the fact that it has already established a stable consumer group.
The power of suppliers: 80% of the products sold in competitor’s hypermarkets in China are purchased from more than 22300 local suppliers. (www.carrefour.com) Indeed, after his setting up, M&S has to develop a large network of point of purchase.
It enables its Chinese suppliers to sell their products across China and realised advertising. The threat of entrants: The arrival of new competitors is limited since the major groups worldwide are already established in China (Wal Mart, Metro ..
.). However, since the opening of barriers in 2004, many foreign companies have a real desire to establish business in China.However, in order to compete with them, M&S need maturity. But also, a lot of experience, a significant capital, the ability to provide the low-price with the quality of products, and finally, a good knowledge of the market. The threat of substitutes: The main threat of substitutes is the local retailers in China who still very appreciated by the Chinese customers. There are also the online retailers.
But these ones with their opening hours, their proximity and their easiness of purchase are a low threat.Indeed, competitors have also a variety of product, low costs. The competitive rivalry: There is a very large competitiveness in the Chinese market retailer. Indeed, there is a fierce war between competitors (Carrefour, Wal-Mart, Tesco and Metro), but also with its Chinese rivals which have decided not to stay without doing nothing. Indeed, according to Eric Legros, executive director of Carrefour China, “What makes the competitiveness of the Chinese market is that in China there are a lot of local distributors who are extremely powerful. We must not forget that a local distributor, which dominates in the Beijing area, is working on a market as large as Spain” (www.
france24.com)Thus, we can deduce that the foreign competitors are a threat to M&S because, like seen previously, the first retailer in the world “Wal-Mart” is going to maybe take the first place of in China instead or Carrefour. M&S is also impressed by the local retailers because they are in their country and the consumers are in the habit of buying in their stores.
But, M&S has to be confident about its quality of products and of services that can make a difference with its competitors.In order to finish this study, it is necessary to conclude with a summary of the different reasons for whereby M&S could became a main foreign retailer in China.First, as explained in the Background, M&S is a very famous retailer anywhere in the world. But M&S has to deal with high competitors. The objective is that customers have to be accustomed to shop in these stores.
The first reason is undoubtedly the expansion of China. Indeed, the past 20 years, China has grown very rapidly with a population of over 1.3 billion of people. Carrefour has taken root in China in 1995; China has since changed its policy of trade following its accession to the WTO. Thus, foreign companies can develop much more freely without restriction.The second reason is undoubtedly the differentiation of the group over competitors.
Indeed, M&S emphasizes customer service that the Chinese are not used to having in other stores. In addition, the group is very well placed in terms of price compared to its competitors. Finally, M&S has a very good distribution network which facilitates competitive advantage, thanks to its position over the world.The third reason is that M&S is able to develop throughout China. Indeed, the group would able to develop in areas such as wealthy major cities and coastal regions. But also further inland where the development of urbanization is booming.
M&S has to be where the demand is and this places it in front of its competitors. The fourth reason is that M&S offers a wide range of products at all the prices so it can meet any demand from China. With these points, M&S can manage to make the difference to be a good outsider today of foreign retailers in China.