Motivation at Marks and Spencers - Case Study Example

How the economic crisis has effected motivation at Marks and Spencers Research aims and objectives Introduction. Marks & Spencer is one of the largest retail stores in the United Kingdom. It also operates in at least 40 other countries around the world. In the UK alone, Marks & Spencer has over 600 retail stores and its core products are fashion products. (Bevan 2007). More specifically it sells men and women clothes, kids wear as well as other home appliances such as furniture. Writing in the Financial Times, Audrey (2009, p.16) notes that Marks & Spencer just like other retail giants around the world was “badly hit by the recent economic crisis that swept major economies in the world”. Consequently sales of one of UK’s largest retail stores took a downward trend in mid 2008. A report published in the by Watson in the Daily Mail notes that in the 2009 financial year its profit before tax plummeted to £706.2 from a high of £1129 in 2008 financial year. So what resulted in this sudden decline in profitability? Could the worldwide credit crunch have played a role in Marks & Spencer’s recent sluggish performance? These are just some of the questions which this research topic will try to answer. It will also be interesting to find out whether the economic crisis has left any dent on motivation at Marks and Spencer as it gears to expand to more countries around the world and also open more retail stores in the UK and Europe. The worldwide economic crisis is infamously regarded as the US exported problem to the world. (Mishkin 2007). It started after the sub prime mortgage market went terribly bad in the United States. Several home buyers failed to repay their loans leading to massive home loans defaults. This left the major lenders in a crisis and a number of US banks resulted to government bailout. Soon the problem spread to other countries and the UK economy also went into recession. The main objectives of the research therefore will be 1. To investigate the effect of the economic crisis on profitability of Marks & Spencer. 2. To find out the effect of the economic crisis on motivation at Marks & Spencer 3. To explore the steps taken by Marks & Spencer to mitigate the effects of the economic crisis. 4. To make recommendations based of findings. 2. Preliminary literature review. The issue of the economic crisis that faced the world since 2008 has been of major concern to various writers. Its effect on businesses around the world has also been widely articulated. Of particular concern to writers was the effect on consumer purchasing patterns especially high end fashion products. According to Turner (2009, p.116) the world’s largest retail stores recorded decline in sales and profitability during this time. “Europe’s largest retail shop Carrefour recorded a 45% decline in profitability while US giant Wal-mart also declined by 7% at the first quarter of 2009”. This just paints a general picture of the effect of the economic crisis to major retail shops. The world wide economic crisis begun in the United States after the sub prime mortgage market went wild with high default rates. (Tran 2008). There was increasing pressure for the two major mortgage lenders in the US Freddie Mac and Fannie Mae to increase availability of mortgages to the lower end market. Tran (2008, p.78) observes that while sub prime mortgages were always below the “10% mark, this increased to an all time high of 20%”. Coupled with easy credit terms, low interest rates and super salespeople, soon everyone was rushing to get a home loan. (Mishkin 2007). Then suddenly interest rates jumped and home prices begun to fall. There were high default rates and a number of mortgage lenders such as Lehman brothers were soon in the red. Closer home Northern Rock was badly hit by the credit crunch and was eventually given a life line by the government. Marks & Spencer is one of UK’s largest retail shops mainly dealing with clothing and home appliances. It was started by Michael Marks a native of Poland and Thomas Spencer back in 1884. (Worth 2007). Although it started its global expansion in 1950, it hardly shed off its tag as a British retailer which follows British expatriates abroad. Worth (2007) notes that its venture into the potentially lucrative Canadian market failed after its version of British fashion failed to click in the North American country. M&S as it is popularly known operates over 200 retail stores around the world and its mode of entry is mainly through franchising. Prior to the financial crisis that hit the world, Marks and Spencer broke British records in terms of profitability in 1998 when it recorded in excess of £ 1 billion in profitability. (Johnson, scholes and Richard 2008). The same milestone was reached again in 2008 when it also recorded a profit of over £ 1.129 billion. Thomas and Malcolm (2001) argue that one of the major strengths of the company is strong brand familiarity not only in the UK but also around the world. Thousands of fashion shoppers associate themselves with the M&S brand and this gives it a head start over competitors. High brand familiarity gives the retail shop free publicity in the media and also from the man in the street. So what is the link between the financial crisis that hit the world and motivation at Marks and Spencer? Well Rigley (2008) has the answers. There exists a strong relationship between a decrease in money held in the hands of consumers and consumption patterns of the same consumers particularly when it comes to high end fashion products. “Consumer spending ultimately goes down and this is has an effect on the profitability of major retail stores”. (P.11-12). Stores that deal with luxury products are hardest hit during harsh economic times as witnessed by declining profits of Marks & Spencer. And how does this affect the levels of motivation at Marks & Spencer? Brandon (2008) argues that profitability is the blood that runs any business organization. “There are always consequences of declining profitability and the most obvious one is job losses”. (P.28). Employees live in fear of getting the dreaded redundancy letter that condemns one to long periods of unemployment. Can such an employee perform to his/her maximum under this environment? Not really, Brandon argues. According to Johnson et al (2008) motivation drives one to try new and bigger challenges in life. “A motivated person will therefore take more risks in life and generally has a larger than life appearance”. (P.118). It is not any different in business since it is employees who make up a business organisation. With a sharp decline in profitability, one can draw a hypothesis that Marks & Spencer is not adequately motivated and lacks enough fire power to face its competitors head on and also launch vigorous business ventures such as expansion or acquisition of new stores. After review of the literature review one problem stands out. The financial crisis affected countries and companies across the board. How do you account for the fact that Marks & Spencer had the largest decline in profitability when compared to similar retail stores in Europe and the United States? Was there something the retail giant was not doing right prior to the economic crisis? These are some of the gaps that the researcher will try to fill. 3. Research Methodology. Ketchen (2004) says that the research methodology used in a research is critical in ensuring its ultimate success. Taking this into consideration the researcher settled on a descriptive study. A Descriptive study best fits this type of research since it is aimed at “describing and analysing a given phenomenon”. (P 101). In this case the researcher intends to describe how the economic crisis has affected motivation at Marks & Spencer and find out the extent to which it has affected other retail stores in the same line of business. A descriptive study is essential in generating further research queries while at the same time clearly showing patterns of behaviour. In this case a descriptive study can be used to show the steps businesses take to survive during lean economic times and with what success. There are several advantages associated with this research methodology. Creswell (2003) observes that it gives plenty of information which can be used to as a basis for other research queries. For example in the Marks and Spencer research a descriptive study can be used to find out the methods used by businesses and individuals in dealing with low motivation. The other major high score for a descriptive type of study is that “it can be used to present accurate findings using statistical methods”. (Creswell 2003, P.55). Finally the methodology is quote flexible and can allow a researcher to use various data collection methods in coming up with the final conclusion. Ketchen (2004) points that the major limitation of descriptive methodology in research is that it lacks depth especially when it comes to finding the relationships behind two different phenomenons albeit with similar characteristics. Its major point of concern is describing a certain phenomenon but it fails short of explaining similar patterns of behaviour and the causes of such behaviour. When compared to other methods such as applied or empirical research, descriptive methodology fits this study since its much easier to administer and more likely to give accurate findings. Empirical research for instance involves carrying out experiments and observing patterns of behaviour and consequently drawing a conclusion with the aim of testing a given hypothesis. This would present a challenge in the current study as it would involve observing the behaviour of Marks & Spence employees or working with them to help determine if their motivation has been affected by the economic downturn. This would not necessarily result in correct answers particularly if employees are not interviewed. It would also be time consuming. Data collection methods. The manner in which data is collected is crucial and could affect the overall outcome of the research. (Kothari 2008). Taking this into consideration, the researcher will use both structured and non structured questionnaires. Personal interviews with Marks & Spencer employees will be carried out and all the information captured in the data form. “The major advantage of personal interviews is that it allows the researcher to be in control of the interview and it is possible to question the respondent further and get more detailed answers” (P.117). This is as opposed to a questionnaire filled by the target audience which could end up leaving out some crucial information in the research. Other possible data collection methods which would have been used include questionnaires, observation, focused group interview or experiments. The observation data collection method takes different forms. For instance a researcher can observe the level of customer service in a store. This could include the number of individuals waiting to be served or the length of a queue in a bank. This can help in coming up with a conclusion and possibly testing a hypothesis. (Kothari 2008). A focused group mainly involves a group of experts discussing a given topic. “In the course of their discussions, a researcher can get some information about a research query and also help in testing a hypothesis”. (P.77-79) Target population. Ketchen (2004) further argues that primary data is the hallmark of any successful research. “This data can only be got from respondents who a researcher feels they are best placed to give factual information related to the research topic”. (p.91). The target population for this research will be employees of Marks & Spencer. The researcher settled on this group because they are more likely to give the right answers and share their personal experiences and shed more light on how the economic crisis has affected their motivation while working at Marks and Spencer. Sampling design. After the target population of study is identified, it is imperative that a sample is chosen since collecting data from the entire population of study is not only expensive, time consuming but also nearly impractical. (Creswell 2003). For example in a population of 500 businesses, a researcher may settle on 100 respondents. “The reasoning behind a smaller sample selection is the fact that as the sample increases so does the margin of error”. (P.126-127). The logistics in conducting the research also becomes complex and this may water down the eventual outcome. Taking this into consideration, the researcher will use a sample of 100 employees. Using non probability sampling, the researcher will identify 10 Marks & Spencer retail stores across the UK and randomly choose at least 10 employees and pose the questions to them. Ethical consideration in the research. There are a number of ethical considerations that a researcher should take into consideration while conducting a research. “Falsification of data is a major ethical concern in any research undertaking”. Some researchers simply sit down, make up their own data and draw invalid conclusions. (Creswell 2003, p.288). To avoid this scenario, the researcher will restrict the respondents to a reasonable number thus making it easy to draw conclusion from. “Another ethical consideration in research is confidentiality of data received”. (P.290). Since crucial data relating to company operations will be obtained, then the researcher will include a clause in the questionnaire which promises that the information received is for the purpose of academic research and will be treated with utmost confidentiality and will not be passed on to competitors. Time table of plan to complete the project ACTIVITY November December Jan/Feb April Proposal Writing XX Data Collection XX Data Analysis XX Final Presentation XX Reference: Audrey, W 2009, ‘Marks & Spencer faces new financial challenges in recession’ Financial Times, 20 August p.16 Bevan, J 2007, The Rise and Fall of Marks & Spencer and how it rose again, Profile books, London Brandon, T 2008, ‘Fashion stores feel the heat as economic crisis spreads to Europe’ Journal of International Business Vol 35 pp. 18-22. Creswell, WJ 2003, Research design: qualitative, quantitative, and mixed method approaches, Sage, New bury Park, CA. Conley, TG & Galeson, W 2008, ‘New challenges for retail giants as economic crisis persists’ Journal of International Trade and Economic Development Vol 18 pp. 46-49. Mishkin, SF 2007, The economics of money, banking, and financial markets, Pearson, New York. Rigley, W 2008, ‘Fashion stores hardest hit by economic slump’ The Fashion Journal Vol 119 pp. 3-5. Ketchen, JD, Bergh, DD 2004, Research methodology in strategy and management, Volume 1, Emerald Group Publishing, Bingley, UK. Kothari, CR 2008, Research Methodology: Methods and Techniques, New Age International, New Delhi, India. Johnson, J, Scholes, K & Richard, W 2008, Exploring corporate strategy: text & cases, Financial Times Prentice Hall, London. Tran, HV 2008, Economic crisis management: theory, practice, outcomes and prospects, Edward Elgar Publishing, Cheltanham, UK. Turner, G 2009, The Credit Crunch: Housing Bubbles, Globalisation and the Worldwide Economic Crisis, Pluto Press, London. Thomas, R, Malcolm, M 2001, Marks and Spencer: Global Companies in the Twentieth Century, Routledge, Oxford Watson, J 2009, ‘New challenges in the Fashion industry: Marks & Spencer warms up to new reality’ Daily Mail, 23 July p.36 Worth, R 2007, Fashion for the people: a history of clothing at Marks & Spencer, Berg publishers, Oxford Read More