Conduct offer a holistic framework by which it

Conduct an
analysis of the internationalization strategy of a chosen multinational
enterprise (MNE) based on Dunning’s eclectic framework.

 

Introduction

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John
Dunning states that in order for organisations to be able to cross borders and engage
in Foreign direct investment, they must have ownership, location, and
internalisation advantages (OLI); which are also recognised as factors in
research and the philosophies of international business (Rugman, 2009 &
Verbeke, 2009).

This
report will be looking into Marks and Spencer’s current international strategy,
into analysing their effectiveness alongside their competitors such as Waitrose
and Sainsbury. Looking into their past issues and what strategies were
implemented during their time of downfall to assist them in keeping them in the
global marketing strategy. Marks and Spencer today is one of the UK’s leading
retailers, popular for their high quality, own-brand food, clothing and home
products which they offer in all of their 1,433 stores worldwide and online.

 

Marks and
Spencer is one of the leading retailers in the UK, standing out amongst their
competitors for their high quality, own-brand food, clothing and home products
throughout their 1,433 stores worldwide and online. M have ongoing goal
to advance and enhance their brand; working faithfully alongside their
suppliers, producing high quality and innovative products that are unique and
available only at M.

 

“The
intention was to offer a holistic framework by which it was possible to
identify and evaluate the significance of the factors influencing both the
initial act of foreign production by enterprises and growth of such production”
(Dunning, 1976)

Eclectic
– “meant to convey the idea that a full explanation of the transnational
activities of enterprises needs to draw upon several strands of economic
theory” – determined by a number of common factors such as the firm specific
advantages, location advantages and internalisation.

 

 

 

 

 

 

 

 

 

 

Dunning’s
eclectic framework

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ownership
specific advantages

Ownership
specific advantages refers to the competitive advantages of the enterprises
seeking to engage in Foreign direct investment (FDI).  that’s companies that engage highly in foreign
production have higher chances of achieving competitive advantage. The
ownership advantages are linked to the size and market position of the specific
firm and these ownership advantages are often referred to as monopolistic or
competitive advantage (Cantwell and Narula, 2001).

 

Pestle

Political

 

 

Economical

China is
one of the three most valuable destinations for foreign investments with
investments totalling US$126 billion in 2016; and is aiming for further foreign
investments by allowing for new policies to loosen control over market access
of foreign capital as an aim to assist and encourage its economic development
and revolution (Jin, 2018). The reason being
for Chinas new policy is due to its growth rate decelerating, while its inward
investments began to subside in 2016 as shown in the chart beneath.

This
displays ease of access to foreign investment for M within China.

 

 

 

Social

Marks and
Spencer’s is in the lead for competitive advantage amongst their competitors
due to their excessive entrepreneurial skills; while recession mirrored a major
threat in the change in consumer taste and they began seeking products at lower
prices, the retail industry felt strained to introduce wide ranges of discounts
to induce their consumers who had begun to broaden their choice of stores in
order to purchase items of better quality for less. M&S on the other hand
saw this as an opportunity to capitalise on their prices by announcing new
promotions such as ‘One Day Christmas Spectaculars’ and ‘Dress for Less: and
introduced permanent value options within their food range such as ‘Family
favourites for 4’ and ‘Dine in for two for £10’. This method proven a success,
and as a result they delivered products of better value without having
sacrificed their reputable quality or ethical credentials. M has equally
use those promotions with their store internationally and have proven to be
just as effective; for that reason, the research conducted deems the strategy
to be a success in China.

 

Technical

Marks and
Spencer is currently undergoing the UK’s biggest in-store experiment on radio
frequency identification (RFID) technology. RFID uses microchips that
wirelessly transfer product serial numbers into a reading device which allows
for merchandises to be traced electronically along the supply chain from
warehouse to the final point of sale. The product is to be used for the purpose
of confirming 100% product availability which as a result will allow managers
to fill their stores with as many different merchandises as possible. M&S
is the only company to have begun testing this advanced technology; ensuring competitive
advantage as this technological innovation will assist in improving product
availability in-stores at all times, demolishing the need for additional
inventory and minimising stock reduction
(Thomas,
2018).

 

Legal

Marks & Spencer carry out re-training and
updates every year whereby they maintain up to date with new laws and
legislations, including concerns such as Health & Safety along with
ensuring that their legal protection is updated yearly. When re-training M&S
introduce business changes such as tax and product changes as well as ongoing
developments where needed (DiMatteo and Chen, 2017)

This is of benefit to M&S as they develop
and re-train their employees depending on their host country in order to ensure
they are following their laws and regulations as well as their own. This means
that M&S will easily be able to adjust any functions of production down to
main point of sale accordingly.

 

Environmental

In 2012, Marks and Spencer became the first
UK retailer to become entirely carbon neutral; along with addressing and
working towards saving energy, carbon emissions to Fairtrade and animal
welfare; Marks and Spencer’s Plan A also focuses greatly on waste management
and sustainable sourcing of timber and fish amongst many more (Smithers, 2018).

 

Location
advantages

Location advantages is defined by Davidson as
the assets possessed by a country which influences a firm with the capabilities
to deliver overseas to desire the host country and not another (Davidson,
1980). These advantages include outsized domestic markets, operative and
resourceful conveyance and communication methods along with effective
governance within the political and economic structure and well-read labor;
which provide the firm with the confidence to invest within the country. Firms
value from locational selections when there is a suitable correspondence
between the potentials of the firm and the necessities and contingencies of its
host market. This means that the ownership advantages of the firm must align with
a location whereby the environment for production is dense rather than
translucent in order for the firm to gain competitive advantage with the
location (Yeung, 1999, p. 120).

 

Comparative advantage

With a population of over 1.3 billion people,
China is the fastest rising and upcoming economy with a per-capita GDP rate
over 9%; the fastest in the world justifying the motivation of millions of
firms worldwide that would choose china over any other location to invest in.
One of China’s main competitive advantages is due to its cheap labor and expert workforce which means that they
have the capability to work within any labor field (Jan, 2018). M&S are in direct contract
with 400 suppliers that manufacture their products within over 800 locations,
across 44 countries. M&S’s factories within China alone amount to 478 and
204,876 employees (Supplier Management, 2018). The advantage of M settling in China
and having their supplier within the same locations is the transportation costs
and time management as they are able to deliver their merchandise efficiently
and consistently within their location (Dunning, 2000).

 

Institutional factors

 

It is very vital that China improves its
protection of intellectual property rights as the counterfeit of brands within
the market is influencing the deterioration of private investments (The Guardian, 2018). In
every 10 products sold online in China, four are counterfeit or are in feeble condition (Williams, 2018).

China has been accused on of not doing enough
to restrict the exposures of intellectual property rights in spite of there
in-place anti-privacy laws (Reuters, 2017).

This poses a threat for M as the
regulation set in reference to the intellectual property rights is not well
practiced or maintained in China; Although
the laws and regulations leading anti-counterfeiting are vast and broad they
are inclusive of, the Copyright Law (2001), the Implementing Regulations of the
Copyright Law (2002) and the Criminal
Law (2009) (Lehman, 2018). This means that M’s strategies,
designs, models, privacy and confidential information can be illegally released
why also leads to replication of products which as a result will have a
negative impact upon M&S’s intellectual properties.

 

Investment
development

China’s
drastic transformation through economic growth and reforms within the last two
decades have been in recognition of state and local government power and
influence which have developed new economic institutions and enterprise procedures
under market socialism. Over the past two decades China has gained critically
from foreign direct investment entries (Marton & McCarthy, 2007).
The investment development path is a frame which institutes an eefective
rapport amid an economy and foreign direct investment in order to distinguish
the stages of which the country is at (Marton & McCarthy, 2007). Investment
development path is based on the structural improvements and their
competitiveness which will assess the quality of economic growth and its
combination of firms in the global economy.

 

 

 

China
falls under the second stage of the investment development path

 

 

 

 

 

 

 

 

 

 

Internalization
advantages

 

Ethical issues

Marks and
Spencer is very aware of the environmental issues and social inequality that
their company entails and are mindful of how their customers increasing
knowledge of their personal impact on the world and therefore businesses must
work hard to build and maintain their trust although their approach to
environmentally friendly products is of an advantage to them, the growing
pressure on natural resources and good stewardship, results in an increase of
their costs and restricts their access to key raw materials along with making
their global supply chains more volatile. (Corporate.markasandspencer.com,
2017)

 

In the
efforts to go beyond expectations of employees, customers and stakeholders,
M&S collaborates with their suppliers in order to create fair workplaces
and create changes in environmental performances.

M&S
does this by working alongside suppliers on obtaining sustainable use of water
in Kenya and setting up eco-factories in the UK, Turkey and China along with
creating fair pay principles in Cambodia, Sri Lanka, Indonesia and Bangladesh.

M&S
launched a customer focused sustainability plan in 2007, named ‘Plan A’ and
have since then improved their social and environmental performance, saving
more than £750 million in costs and winning more that 240 awards. Since the
launch of Plan A, M&A has improved their energy efficiency by 25% and cut
their waste by 34% along with addressing sustainability of raw materials,
developed healthy product ranges and improved their work on ethical trade. (M&S Today, 2018)

 

Plan A is
a place for both local and global challenges, through the products they sell,
their use and disposal throughout their value chain.

Plan A
challenges concerns business wide from climate change, natural resources,
responsible sourcing to responsible marketing and human rights.

M&S
are aware of the environmental effects of their activities and although they
work on reducing emissions from their supply chain they are also aware that in
order to decrease their carbon footprint they should avoid emissions all
together by reducing those that are unavoidable and replacing technologies with
those of less carbon.

M%S
believe businesses play a vital role in affecting human rights and that said businesses
have a responsibility as to respect individuals whereby they have an influence
within their lives. ‘Our business was founded on the understanding that we are
only as strong as the communities in which we trade” (Corporate.markasandspencer.com, 2017)

M&S
has policies and processes in place to recognize, avoid and diminish human
rights risks that the business may cause or contribute to. When in conflict
between national law and international human rights standards, is it that of
the national law that they adhere to.

M&S
also expect, through contractual agreements that their suppliers are conscious
and in compliance with their human rights commitments.

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