Exploring Corporate Strategy of Marks and Spencer - Case Study Example

Marks and Spencer A summary background look into Marks and Spencer This multi-line retailer was founded in 1884 in Leeds UK by Michael Marks and Thomas Spencer who established a niche by selling varied branded goods (Scott and Walker, 2017). From that beginning, the company grew from its initial one outlet to 1.463 stores globally and revenues of £5.9bn (Marks & Spencer, 2018). Despite the success in growth that included its pioneering no questions asked refund policy and year-round stocking of timeless goods described as “… classic, wearable fashions …” (Collier, 2004, 28), M&S started to experience declining customer satisfaction and sales. The reversal of the company’s opinion by the general public and its revenues was due to a number of factors. One of these represented cost controls implemented by the chain’s CEO Richard Greenbury where the company operated under a centralised authority. This is a systems organisational theory approach that Miller and Rice (2013) describe as a company operating in an interrelated manner where small changes in one part can cause changes in other segments, but the information and focus is top down. Latif et al (2012) advise that whilst a centralised organisational provides a highly efficient structure for conducting business decisions and maintaining control, it suffers from layers of bureaucracy. This can inhibit information from the lower levels of operations and management is passed on to top management that is more interested in a top-down approach that limits customer-centric feedback (Latif et al, 2012). An example, in the instance of M&S, represented the reduction of full-time employees as a cost-saving measure that resulted in a lower level of in-store efficiencies and interaction with customers (Collier, 2004). The top-down centralised operating structure minimised upward communication concerning the fact store managers concealed they added staff on Greenbury store visits to provide a false sense of heightened service levels in order to appease his strategy (Collier, 2004). This inability to communicate upward also applied to other policies and decisions that top management was not made aware of (Collier, 2004). The result is the chain declined steadily in terms of customer satisfaction levels (71% in 1995, 62% in 1998 and 45% in 1999) (Collier, 2004). The above is a core aspect which is present throughout this analysis that is repeated in terms of the failure of the company to respond to new market trends and internal changes because of its centralised top-down approach. Marks & Spencer Problems The centralised organisational control structure at Marks & Spencer, as identified in the opening chapter, needs to be remembered as a core problem that has plagued company operations throughout this analysis. This centralised organisational approach was established by its founders when they opened the first store and continued after their passing as family members opted to retain control over operations (Goffee and Scase, 2015; Ward, 2003). Marks and Spencer’s centralised organisational structure represents the common approach used by many founders and strong business leaders who desire control over their operations under the principles of agency theory (Mudambi and Pedersen, 2007; Lan and Hercleous, 2010). Agency theory is brought forth in this analysis because it addresses disputes that usually arise in areas such as a difference in terms of goals, or the aversion of risk (Ballwieser, et al, 2012). This is an important underpinning that provides an understanding concerning the look into problems impacting Marks and Spencer. This founder approach, in terms of agency theory, in addition to the centralised organisational control aspects extends to other areas as well. Examples of the top down centralised control that created problems for H&S can be seen in the company’s commitment to classic product lines and the reduction of sales floor staffing that hurt service delivery (Collier, 2004). In terms of the company’s product approach, the case study by Collier (2004) stated a key reason for declining sales represented competitors moving onto goods that were priced similar to M&S but were trendy and design conscious, such as The Gap, Next, Oasis and others versus M&S’s classic styles. The moderate pricing that had served M&S for decades was now also under attack from discount chains and supermarkets such as Tesco, ASDA. Walmart, and others (Collier, 2004). In addition, these supermarkets were also competing with M&S’s food segment using lower prices and branded products (Collier, 2004). Evidence of the struggles M&S was having with strategy was summed up in an article that appeared in the Financial Times in 1999 that stated: “There are so many items here to find and they don’t tend to segregate it out, so there’s something I might like next to something my granny might like” (Collier, 2004, p. 31). The appointment of Lus Vandevelde as chairman lead to strategy changes representing four strategies (Collier, 2004): A. The creation of clear profit centres B. The creation of a customer facing organisation (customer centric) C. Restoring overseas profit, and D. Building revenues in the financial services sector that represented a better utilisation of M&S store cards These foundational aspects addressed core problems within Marks and Spencer that shaped strategies which addressed the core issues of the company and resulted in profit and revenue gains. A ‘hitch in the formula’ The above strategies were utilised by the company to craft its approach to retail operations that were based on the application of a fundamental formula represented by the following (Collier, 2004): A. A simple pricing structure, B. Offering high-quality merchandise under the St. Michael brand name, C. Clothing was selected based on a generic, essential theme at reasonable prices, D. Quality control by working closely with suppliers, E. Providing customers with helpful and friendly service, F. Having a close-knit family type atmosphere by employing staff that fit this customer mode. G. Leverage of financial services (credit card issuance) to increase distribution of M&S cards and the resulting interest charges they bring. The underlying issues that later surfaced represented the close control by family members (agency theory using a centralised operational mode). This caused a push approach due to the top-down views of management where the company was pushing its concept of retail onto its customer base (Collier, 2004). These underlying strategies ran into a ‘hitch’ in the mid-1990s as a result of trendy, moderate priced retailers who customised their store stock to their localised based on a pull (attraction_ strategy (Chiou et al, 2010). The hitch in the formula represented M&S holding onto core aspects such as its core clothing approach (simple as opposed to variable pricing that took into account new clothing and cheap fashion options), and its top-down centralised outdated family controls that minimised feedback from stores concerning localised merchandise customisation and staffing (Collier, 2004). These approaches were based on a push strategy of having the customer buy into the M&S culture as opposed to it taking a more customer-centric approach of incorporating customer pull factors (Chiou et al, 2010; Rust et al, 2010). Varadarajan (2010) explains the push strategy as directing products at customers through the manner it is displayed which included sales personnel, the types of merchandise carried. Push strategies tend to be static as they seek to establish a certain image or approach of a store chain and thus lack flexibility in modifying themselves to new merchandising or marketing change trends (Baker, 2014). This overall push approach has been a long-standing aspect by M&S that can be found in the family-controlled chain that has sought to hold onto the core aspects of the founders in a retail environment that changes and adapts to new trends and approaches. Adaptation is a core difference that explains pull strategies (Urde et al, 2013). Varadarajan (2010) describes pull strategies as being based on customer-centric principles that represent offering consumers a customer experience that is positive at the point of sale as well as after. It works in consort with customer relationship management (CRM) that utilises feedback from customers and the sales staff, for marketing, support and sales strategies where these are the guiding approaches (Urde et al, 2013). This differs from the M&S push approach where the company continued with the principles set forth by the founders in terms of clothing, store layouts and positioning M&S in the same method as its founders that is a strategy which is outdated. Varied M&S Strategies In delving into strategies formulated by Marks & Spenser, this is contained under its fundamental core principles set forth by the founders and continued by family members. The connectedness to that heritage is contained in the book by Tse (1985) where he stated one of the principles of the company represents offering its customers a range of well designed, high-quality merchandise that is attractive at prices that are reasonable using the brand St, Michael. Other strategy options represented the following (Collier, 2004): A. Suppliers M&S had a two-pronged strategy in place for suppliers. The first part consisted of encouraging suppliers to utilise efficient, as well as modern techniques for production. This was enforced by the company working with suppliers to obtain high-quality control standards. In terms of outcome, this strategy approach was acknowledged to be successful. However, the degree of success in terms of a breakdown was not included in the Collier (2004) case study. It was noted the company met with success, with reasonable pricing and the use of mainly British suppliers that accounted for approximately 90 percent of its supply chain (Collier, 2004). B. Business efficiency improvement This represented a broad scale strategy that sought “… to provide friendly, helpful service and greater shopping comfort and convenience to our customers” (Collier, 2004, p. 28). Whilst the above is a nice sounding statement, it did not provide details on the manner these objectives would be achieved. This was found to be a common theme in terms of statements and strategy pronouncements made by Marks & Spencer where broad strokes are penned, but the specifics on how these strokes will be carried out are missing. Despite these broad strokes, the company’s profits and share prices rose during the latter part of the 1990s (Collier, 2004). A look at business efficiency bought forth the issue of the centralised authority of the company C. Business operations In reviewing strategies and strategy changes, along with adjustments made by Marks and Spencer in the case study by Collier (2004), the ambiguity of goals and how they would be achieved is the missing element for business operations. The article states the company will seek “… to improve the efficiency of the business by simplifying operating procedures” without adding or referring to how this is to be accomplished (Collier, 2004, p. 28). The lack of clarity on how strategies will be carried out or the means via which they will be achieved is a constant oversight on the part of management pronouncements. D. Company culture Under this broad category, M&S refers to fostering “… good human relations with customers, suppliers and staff and in the communities…” it operates in (Collier, 2004, p. 28). The case study did not provide any details or instances to illustrate how this would be carried out. The review of strategies and new strategic approaches in the case study took place almost every 18 months during the period from the mid-1990s through to the beginnings of 2000. These basically represented the rephrasing, amending or adding to established strategy areas with the same degree of overall ambiguity as to how they would be carried out. This is why different segments of this analysis seemingly contain similar strategy pronouncements that were announced during different timeframes. The net effect was that all of these amended strategy formulations resulting in limited if any results achieved. In terms of new style, Vandevelde strategies in 2000 represented a departure from the reoccurring past approaches used by the company. After his appointment as chairman, Vandevelde implemented the following (Collier, 2004): A. Addition of staff to improve the in-store experience and customer service to change the culture of the company, B. Upgrades to the clothing lines to reflect modern trends and tastes that included haute couture lines, C. Increase in the multi-format retailer positioning to off a one-stop shopping experience for customer draw and retention D. Change in the corporate image to revitalize the brand as a means to signal the internal strategy changes E. Floor space for merchandise was changed to reflect the demographic buying patterns of the locale as opposed to a singular floor plan throughout all stores, F. The above strategies were predicated on a ‘pull orientation for bringing in traffic as opposed to the old M&S approach of pushing its trends and strategies on consumers. As can be seen by the category headings and subsequent explanations, Vandevelde introduced strategies that addressed the areas M&S had been missing in prior strategy formulations. The results of the above strategies saw the company increase its operating profits to 643.8 and 717,9 pounds Sterling for the years 2002 and 2003 respectively (Collier, 2004). These strategy changes also saw the company achieve retained profits in 2003 for the first time since 1999 and increase its earnings per share to 22.2p, which was considerably the highest rate since 1998 (Collier, 2004). Conclusion This exploration of Collier’s (2004) case study on Marks and Spencer represented a look into different time periods starting in the 1990s. These periods consisted of the company formulating new strategy approaches aimed at addressing problem areas and challenges whilst ignoring the main contributor to its operational issues which was the company’s centralised and non-customer-centric operational structure was out of touch with market dynamics and its own stores. This represents a pull strategy utilisation where a retail operation observes and learns from the market and thus adjusts its stores to respond to new trends and changes. Termed as customer-centric marketing, this approach consists of an operational structure that is able to take in and process market change dynamics and then implement new strategies that employ what the company has learned. M&S operated under a push strategy that is basically the opposite of pull approaches. The case study revealed this core aspect as a repeated and reoccurring failure on the part of Marks and Spencer that preferred to stick to its formula of classic styles from a past era rather than adapt to market and customer trends. References Baker, M. (2014) Marketing strategy and management. New York: Palgrave Macmillian. Ballwieser, W., Bamberg, G., Beckman, M., Besterm H. (2012) Agency theory, information, and incentives. London: Springer-Verlag Berlin Heidelberg. Chiou, J., Wu, L., Chuang, M. (2010) Antecedents of retailer loyalty: Simultaneously investigating channel push and consumer pull effects. Journal of Business Research. 63(4), pp. 431-438. Collier, N. (2004) Marks and Spencer A. Exploring Corporate Strategy, In Johnson, G., Scholes, K., Whittington, R. Case Studies. New York: Routledge. Goffee, R., Scase, R. (2015) Corporate Realities: The Dynamics of Large and Small Organisations. London: Routledge Rivivals. Lan, L., Hercleous, L. 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