Managing Strategy: Marks and Spencer - Essay Example

Managing Strategy Question Draw a cultural web for M and S during the early 1990s. Using this and any other appropriate strategic models and concepts to analyse the factors that lead to the success that Marks and Spencer experienced before its performance down turn in the late 1990s. The Cultural Web The cultural web for Marks and Spencer includes the stories, the signs, the procedures, the power relationships, the control mechanisms and organisational structures that made up the company (Johnson, 2005). The cultural web is rather difficult to break especially for a company like Marks and Spencer since it has had a substantial history and a well established culture. However, as the mapping of the cultural web shows, it did lead the company towards success. Stories Stories are real events or even myths which are believed to be true about the company by people connected with the organisation. This includes the company’s history of successes, failures and even outright disasters since they inform present individuals how the company came out of them and how the company met with success in the past (Johnson, 2005). Stories therefore, are a part of the culture of the organisation since they lead to the explanation of what type of organisation the company really is. For example, even though Apple computers may be currently a small player in the PC industry, it can certainly tell a story about how revolutionary and popular its earlier computers were. For Marks and Spencer, the first story which can be told is of Michael Marks and the way in which he established the company for the first time by expanding and developing the line of products which was sold for one penny apiece. Another story which can be added to the mix is the case of Mr. Spencer who was a cashier for a supplier of the company but eventually rose within the ranks to become a partner of Mr. Michael Marks to make the company be named Marks and Spencer. The take over of the son from the father establishes another story in the cultural web which supports the idea of promoting from within since Simon Marks was the one who replaced the founder of the company in terms of management. His influence on the company also led to the establishment of the St. Michael brand which was considered an upscale brand for many years. A feeling of camaraderie and fellowship is also prevalent in the stories since this was the atmosphere the company was born into and this feeling is always important for a company which runs like a family business (ONeill and Kramar, 1999). Symbols Of course the St. Michael brand can also be treated as a symbol for the company since it was the creation of one of the company’s original masters. Similarly, the logos, the images, store layouts and the mechanisms by which Marks & Spencer operate are all considered part of the symbols for the company. Being a UK brand, the company also held symbolic value by pushing UK suppliers thus adding to the idea of being British. Power Structures Power structures are perhaps the most interesting part of the cultural web created at Marks & Spencer primarily because power and control rested with one individual who is placed at the centre of the company and who does not have to really respond to questions from line managers. Sales associates at M&S were paid rather better wages than other stores therefore it can be expected that they had better power relations with the individual store managers. On a larger scale of power structures, the CEO of the company set the direction for the company with very little input from store managers or others who were actually responsible for being in contact with the individual buyers. These issues certainly had a negative effect with time because the CEO was often told that everything is going fine while it was not. However, once sales started declining the company did realise that power belonged to the customers alone and not to the managers of the company. The company itself was shown to have power over its suppliers because it was able to influence them to have better means of production and to continually improve their quality. The company could also influence suppliers towards improving their efficiency of production which meant that both the company and the suppliers would benefit from the positive relationship in the long run. Overall, the power structures established how the company would run and how it did run before it was obvious that changes are needed. Rituals and Routines The longer a company remains established on certain ways of operating, the more entrenched the rituals and routines become for that company (Wilson, 1999). Since Marks & Spencer has a long history to call on, the rituals and routines for the organisation include everything from being helpful to the customer and understanding of their needs to accepting returned merchandise without question. Similarly, reasonable pricing and maintaining stock levels was also a routine at M &S simply because that was the way things were done. Control Mechanisms The company was able to create effective control mechanisms because it could train, retain and develop many individuals who joined the company at lower ends and then rose within the ranks to many top positions within the company. A long term commitment with the company meant that only the stars of the business would come to the top (Wilson, 1999). Marks and Spencer was offering these individuals a career rather than a summer job or a part time work position and could control how they functioned within the company. However, even if they rose to the position of management within a store, they could not control what was to be offered for sale on the basis of local demands. Similarly, the input from family members who controlled and governed the company also established the control mechanism of working with insiders rather than individuals who come from the outside of the company. This certainly helped in maintaining and reinforcing the cultural architecture that M&S was used to rather than to bring about any change that could have allowed the company to meet the demands of new customers or the rapidly changing tastes of its present customer base. However, as recommended by Welch (2005) not responding to changing scenarios can be painful in the long run and so it was for M&S. The Success Analysis To better understand the factors which led to the success of M&S as a company, we can utilize a SWOT analysis to see the strengths, relative weaknesses, opportunities and threats which the company faced (Budhwar, 2004). It seems that the mixture which M&S had was responsible for making the company a success but as the company ignored its weaknesses and did not do anything to counter the threats it was facing, it landed in a lot of trouble in the late 90s. Strengths The most important strength of the company was in the quality of its products and the effectiveness of the prices that it charged. For example, the company never needed to have a sale simply because the products were reasonable and the margins were justifiable in the market. Similarly, the company had a brand advantage over others since they were an established name with a long standing history of quality and service. The company also had an established history with suppliers who could be pushed into improving their quality control and efficiency since they had a major interest in dealing with Marks & Spencer. On the other end of the supply spectrum, the sales staff was trained and required to be more helpful than the competition to the extent that dressing rooms need not be placed in shops because the sales persons would immediately know the measurements of the individual to see if clothes would fit or not. Such training is indeed a valuable asset and can be considered a strategic strength (Smith & Hayton, 1999). The management of the company itself was strengthening for the company since as recommended by Welch (2005), top executives paid a lot of attention to the little details concerning the merchandise and the products sold by the company. This turned out to be the unique strength of the company because they were able to provide better value for most of the products they sold as compared to their competition. Individuals in the market knew that St. Michael was a brand specific to Marks and Spencer and they could not get that exclusivity in the given price range elsewhere. It was also a part of the company strength to provide timeless fashion rather than invest in fads which quickly went away. Weaknesses Essentially, the primary weakness of the company was the management style and the operations cycle which did not look at cost effectiveness of importing from outside the UK. Similarly, centralised management regarding what goods and services would be provided in local stores was one of the management weaknesses that other stores could capitalise on. Although the individuals were well trained they were not given the independence or decision making powers that could have helped them be better workers which is a mistake common to many businesses (Budhwar, 2004). A lot of the weakness faced by Marks and Spencer can be blamed on the management and the passive attitude of local managers who seemed more bent on appeasing the management in the home office rather than their clients. Local managers did not and often could not disagree with the rulings given by the home office which led to a pacifist attitude which reduced conflict but also weakened the company in terms of customer satisfaction. Service, which used to be a strong point for M&S became a weakness since it left a lot of room for improvement and development but training was lacking in many situations which left service personnel unable to help customers (Smith & Hayton, 1999). The use of a UK supply base meant that cost effectiveness went more or less out the window when the competition started using outsourcing techniques for the supply of their own products. Suppliers located outside the country could produce clothing as well as the materials required much cheaper than the UK suppliers and not changing the supply line meant that the profit margins of the company eroded with time leading to a financial weakness. Opportunities In the early nineties, the company had a significant opportunity to revamp and capitalise on the classic image of the Marks & Spencer brand name which it did not and lost a chance to break into new markets which were coming up for the rest of the clothing industry. Developing markets and opportunities such as online sales, cross promotions, loyalty cards and other means of retaining customers and repeat sales were not utilised affectively which meant that the company had to acquire new customers or simply continue to appeal to them on the basis of the M&S brand. International expansion and improvements in sales for growing markets was also an opportunity for the company in the early nineties since the emerging markets of the Pacific Rim as well as locations in South East Asian countries could have served to add up to the profits. As we know today, these markets have become very important and those who entered them early have a clear advantage over those who did not (Welch, 2005). Although the company entered the American market as Brooks Brothers, it could not capture the market figures it needed for stable placement. Similarly, the European expansion plans can be seen as an opportunity that was lost in the same decade. Threats The biggest threat which the company faced was competition coming from America in the shape of retail chain stores such as GAP and others in the same league which provided quality service and reasonable prices. Similarly, in the retail food industry competition from giant suppliers such as Tesco and others was hurting the sales for Marks and Spencer but the company did not realise the magnitude of the threat until it was a little too late. Most importantly, technology and environmental changes in the industry were not kept up with because the company did not optimise its supply chain nor did it introduce online shopping for its customers. Other technology related implements such as a customer loyalty card or giving rewards to frequent buyers by noting and tracking them were not used which meant that the company lost business to others who were doing these things. Marks and Spencer had simply been left behind in a time that was moving forward and since the company could not see how the customer had changed, they did not know how to change themselves. Question 2 Discuss how M and S revamped their value chain and its links into its wider value system in 1999. What was the rationale for these changes? Rebuilding the Value Chain The process of rebuilding the value chain began a change in management and Salsbury was appointed to restructure the company which he did by changing the structure into three distinct ventures. The first dealt with the UK retail business, the second dealt with the overseas business and financial sector, the third dealt with marketing and branding for the company. This challenged the traditional operations of the company where everything was joined together. The company also launched new lines for clothes which were closer to what the customers wanted and most importantly, for whatever the company did it tried to shift its focus towards the customer rather than the home management body. The marketing department focused its attention on a huge media campaign to promote the new image of M&S and when these measures failed to make a perceptible difference the management continued to make changes to see what would turn them around. Reducing the decision making hierarchy was one such step in which the old style, red tape system of ordering and buying merchandise was removed and a more streamlined decision making process was introduced. Individual store managers were made more accountable for sales in their area since they were given more freedom in terms of allowing them to request certain items and certain styles which they thought would sell well. In terms of cutting back on losses, the company closed six of its stores in Europe, reduced the number of employees at the head office and completely pulled out of their Canadian venture which had been seeing losses for twenty four years out of the total twenty five years of existence. This is a debatable idea since Welch (2005) suggests that any company facing losses for such a long time should be shut down while the idea of staying in Canada in terms of market penetration could have been important for M&S. In terms of making more investments where they were getting some returns, the company decided to pour more money into UK stores and decided to change the look and feel of those stores by implementing a costly revamp programme. The supply chain for the company also changed significantly because instead of focusing on suppliers from the UK, the company began to look for opportunities elsewhere including suppliers from abroad, customers from the internet and diversifying into home shopping. While many of these steps could be seen as effective business planning and strategy some analysts continued to think that it was a case of too little too late. The Rationale The basic rationale for the changes in the value chain was the need for profits and sustainable expansion. The adventure of expansion in Europe and North America had gone badly due to difficult trading conditions and the company needed to bring change. The company was losing sales to both the top end and the bottom end of the market. Products from suppliers such as Oasis and Next were more or less of the same quality but their profit margins were high and their service levels were close to M&S. It seemed that the press reports were perfectly true that Marks and Spencer had become a dinosaur in the market who simply did not understand the needs of the customer. Instead of focusing on the customers, the local managers were more wishful of keeping the home management happy. The management failed to realise that individuals who bought one thing from its store may not be interesting in buying goods which are not direct compliments to each other. In 1999, the customer satisfaction rates for M&S stood at 45% but these figures were kept away from the management. With a changing world, the market changed but Marks and Spencer did not change with it. The competition on the other hand, was changing with the world and it could certainly change the delivery of its products. M&S could not and with an inward looking culture the company dwelled deeper into its problems and discovered that the only way to survive would be to revamp their value chain and their business. The strategy of remaining focused on doing just a few things but doing them right as the central management saw fit was certainly starting to show its age since other companies were looking towards Marks and Spencer as a possible target for takeover or a buyout of the company. Question 3 Use Ansoff’s matrix and any other appropriate strategic models and concepts to analyse the changes made by Luc Vandevelde after he became chairman in 2000. Did these changes make strategic sense, why, why not? What mechanisms were used to implement these changes? Discuss the quote from the case - “In retrospect, it’s clear that what Luc did was to tart us up with a lick of paint” (Sunday telegraph, 9 May 2004). Ansoff’s Matrix The Ansoff’s matrix focuses on four different strategic aspects of business and of those, two connect with the market and two deal with the product. In market penetration, the existing products are marketed to current customers through promotions and repositioning strategies. With market development, existing products are sold in new markets which does not change the product itself but the customers may be entirely new. Product development is done through the sale of an entirely new product to existing customers and finally, diversification is done through the sale of new products to new customers (Johnson, 2005). Market Penetration Luc Vandevelde was the first person to be appointed as a chairman to M&S who was brought in from outside the company and his recruitment was not cheap for the company. As per Ansoff’s model, he started by using the idea of market penetration and by marketing existing products to current customers. Hiring more staff meant that M&S could offer more personalised service and by entering into partnerships with local clubs, the company was able to offer its services catered to the local flavour. Focusing on the local market is certainly a good idea for a company like M&S and the sponsoring of a major football star only added to the prestige of the company. Market Development The new corporate image of the company contains elements of both market penetration and market development but since the target of the image change is mainly new customers, it can be discussed under market development. The stores stopped using green bags and the St. Michael brand was downgraded by the company. In fact, to retain present customers as well as to attract new customers the company changed everything that it could possibly change including the uniforms worn by the shop staff. Product Development For existing customers, M&S developed their haute couture range and the products themselves came to be sourced almost exclusively from Asian manufacturers. Luc Vandevelde accepted that the company had lost its path with the customers and need to change itself and its outlook. With a need for this change he further divided M&S into five segments to better focus on product development. The steps also had a negative impact since during the process of product development, Marks and Spencer moved out of markets it could not compete in leading to legal complications in France and financial difficulties in North America. Diversification Factory outlet mall is one area into which Marks and Spencer stepped in by using them as a diversified outlet for their products. Although the competition had been doing the same for years, M&S took this step only after Luc Vandevelde became the chairman of the company. Similarly, Marks and Spencer produced a new classic look which was certain to appeal to its core customers who were used to getting a certain level of product quality and basics from M&S. Its diversification into the food markets also helped the company significantly since it could use the revamped M&S brand to attract new customers to the company. Strategic Sense The proof of these steps working, as they say, is in the pudding and although earlier on these steps were rather cumbersome and difficult to implement, with time they did show their strategic value. The brand did become valuable and visible differences were made to the bottom line of the company. The one decision that I would question in the set of strategic moves made by M&S would be the closing of their international stores and coming out of the American market which might have been helped by targeting a more upscale audience rather than to remain in competition with sellers like Gap. This would mean closing down a few of their shops and making themselves more exclusive in the American market where upscale products have a better chance of becoming preferred goods. Had they placed themselves to become the American Burberry’s they might have not need to sell Brooks Brothers at a significant loss as compared to when they bought it at a significant premium. Similarly, although the idea to move out of the European market might have been a good one, it was surprising to see that Luc Vandevelde did not foresee the legal troubles that the French employees, unions and the French government could create for them. This political and legal oversight of a PESTEL analysis is certainly questionable as a strategy. This idea is in fact reflected in the quote since the steps taken by Luc Vandevelde are little more than superficial strategic changes which will need to be reversed if Marks and Spencer is to succeed as a company. As suggested by Welch (2005) expansion in the European market, entry into America and new stores in the emerging markets of the Pacific Rim are necessary implements for any retailer in present times therefore Marks and Spencer will have to take these steps eventually. The underlying problems for Marks and Spencer are many and complex which were certainly provided temporary relief by the methodology used by Luc Vandevelde. However, to come to a complete resolution of the problems the company needs to have additional structural changes and it should try to model its functioning towards a certain segment of the market. Since the company is clearly interested in volume sales, it has to compete on price and quality in much the same way and using the same tactics that other manufactures and sellers of ready made clothing have to employ. The might entail careful manipulation of the brand since to be seen as an expensive brand in the market is certainly a good thing but to be seen as outrageously expensive brand which has no room for younger buyers is to be kicked out of the volume game quite quickly. Similarly, Marks and Spencer’s placement as a food retailer is also shaky since the price competition from value brands and lager markets will certainly hamper its efforts to break their stronghold. I feel that although Marks and Spencer has had a shaky start on the road to recovery, by carefully manipulating the placement of the company and the products being sold by the company, it can eventually come to terms with its present dilemma. Most importantly, as the company seeks to diversify the products it is offering to various customers, it will also have to look into diversity with regard to the markets it has selected to enter. Works Cited Budhwar, P. 2004, Managing Human Resources, Routledge. Johnson, G., Scholes, K. and Whittington, R. 2005, Exploring Corporate Strategy: Text and Cases, FT-Prentice Hall. ONeill, G. and Kramar, R. 1999, Human Resources Management, Allen & Unwin. Smith, A. and Hayton, G. 1999, ‘What drives enterprise training?, International Journal of Human Resource Management, vol. 10, no. 2, pp. 251-272. Welch, J. 2005. Winning. Harper-Collins. Wilson, J. 1999, Human Resource Development: Training for Individuals & Organizations. Kogan Page. Read More