Marks & Spencer and performance analysis - Assignment Example

? REPORT: Marks & Spencer and performance analysis BY YOU YOUR SCHOOL INFO HERE HERE Marks & Spencer and performance analysis Introduction Marks& Spencer is a diversified business entity that considers multiple elements of product and customer service related practices in order to align the organisation to meet its long-term strategic goals. The organisation currently operates with its core brand concept, fashion and home-related merchandise, acting as the foundation for its business success over the last six decades. The business operates in a highly competitive business environment, taking competitive market share losses from other stores such as NEXT, the Gap, House of Fraser, and BHS. Well-known domestic brand names continue to adjust their competitive strategies, thus forcing Marks & Spencer to continuously consider whether its current core philosophy should continue to be promoted in the pursuit of competitive edge or whether new branding/advertising/marketing strategies are required to achieve top performance. This report identifies the processes, strategies and systems that drive alignment toward meeting performance targets and analyses the environment in which Marks & Spencer operates today. The business environment Marks & Spencer continuously attempts to diverse its product offerings, launching new business opportunities in key test markets in order to create a business profile that is secure for a new generation of customers. The company has worked consistently to combat negative perceptions about the core brand philosophy, attempting to emerge from a staunchy and proud brand that has been a trademark of traditionalist buyers in the UK for decades. Because of this, the company has shifted its focus away from its traditional home and personal fashion philosophy to extend into foods services in an effort to compete with major grocers and also in terms of how the company promotes itself to a new class of buyers. This new focus changes the internal dynamics of management and also the supply chain in an effort to support new business function and principles. For example, M&S has realised that there is a growing trend in a new generation of buyers to secure the interests of the natural environment and reduce the carbon footprint left by operations. The business identifies that 80 percent of its buyers are concerned with sustainability issues, thus the company has developed over 100 different eco-targets to eliminate landfill waste and become carbon neutral (Palmer, 2010). Much of this is accomplished by establishing a new supply chain that consists of suppliers with sustainable raw materials (Palmer). In order to develop and maintain a sustainability programme, certain operational components must be altered and a new management focus developed. As part of this eco-focus, Marks & Spencer developed what it referred to as Plan A, a sustainability programme that involves waste reduction, the reduction of carbon dioxide emissions, and using renewable power to supply 23 percent of the firm’s total electricity inputs (Nagappan, 2009). Why is this important for aligning the business when other competitors continue to develop similar sustainability programmes? M&S has recently been forced to lower prices on merchandise, especially in the clothing sales division (Bokaie, 2008). This has been in response to lowering sales as older customers who were once loyal to the business in the mid 20th Century have been replaced with younger buyers who have a higher disposable income and a new preference for fashion and home merchandise. The difference between Marks & Spencer and other competition is that the business is using advertising and other marketing-based activities to sell eco-friendly sales in order to rebuild a damaged brand reputation. If 80 percent of customers have been identified through qualitative or quantitative research to have a significant concern over the environment when choosing a brand, M&S aligns the operational function of the company to meet this concern using a new positioning strategy to show itself as a leader in ecological recognition. However, when such initiatives are being explored, such as new partnerships with suppliers who are offering sustainable products and services, restructuring of the purchasing and supply chain is necessary in order to maintain control at the management level. The business identifies that despite this high interest stemming from customers regarding eco-friendly buying, only 10 percent would be willing to pay any extra to have sustainable product guarantees and offerings (Palmer). At a time when pricing is being reduced in response to a brand crisis, the company must consider how to recoup these costs effectively in order to ensure losses are not incurred on environmental sustainability activities. The performance targets for Marks & Spencer are to ensure diversity in its brand portfolio, apparent in its presence in foods, clothing, and mortgage offerings. However, the company makes many assumptions about its reputation in key customer markets and therefore does not seem to hit the mark when attempting to launch new branding or advertising strategies. Offers a senior executive at the firm, “Everyone knows that our food tastes good, so our new manifesto campaign goes a step further by introducing powerful messages on healthy eating” (annualreport2008.marksandspencer.com, 2008, p.20). The business relies on the health and viability of its traditionalist marketing efforts and assumes positive publicity as a foundation for moving forward, such as with the development of its Simply Foods concept that offers convenience products such as coffee and sandwiches to walk-in clients. The operational burdens stemming from these new ventures include labour payments, new management structuring, and even technology-linkages between home support divisions and the new concept stores. Unlike its competition, the business makes assumptions about its potential customer support when diversifying brands and then continues to build on these assumptions. Offers Marc Bolland of Marks & Spencer, “Our brand is our key asset” (Financial Times, 2010, p.18). This is why the company now devotes considerable marketing dollars as assumptive marketing does not bring intended results in relation to gaining higher volumes of customer loyalty. A review of the company’s financial results over a five year period show significant drops and then sudden spikes in sales that are not comparable to other businesses that operate in similar markets. This is one difficulty that was spotlighted in the company’s analysis of operations and strategy: There is a heavy and risky reliance on age-old branding successes at a time where customers are now more trend-focused and have much more selection geographically to fulfil their foods, home and fashion needs. Although the business meets its cost reduction objectives through reliance on old branding success, it does not seem to be exploiting its flexibility operationally or in relation to public image in a way that is in-line with profit expectations. “Personal income and fashion trends drive demand for clothing. The industry is labour-intensive: annual revenue per worker is about $130,000” (hoovers.com, 2009, p.1). Marks & Spencer is operating in an environment that relies on customer support and their preference for this brand in order to achieve its sales success expectations. However, at the same time, significant expenditures per employee drive a higher burden in relation to operations and labour payments. Each time a unique merchandise variety is offered or a new division is launched, the support teams necessary to guide each new venture must be developed and then coordinated in a hierarchy that is typically top-down. This relies on systems integrations and new technology purchases that continue to burden the profit margin. By the time the operational components are in line and ready to produce new outputs, higher labour expenditures in the long-term erode the profit potential of these new ventures. So how does M&S align the business to meet its expectations for profit when there are many negative factors weighing down its success? The business must come to understand what is driving buying trends and reposition certain key divisions in order to gain more customer attention or regain loyalty. There is evidence that the company aligns its operations effectively in order to accomplish this, even though there is a disconnect between brand image and how the company presents itself in advertising or other public marketing literature. For instance, the company found considerable profit success when moving into foods, therefore becoming a competitor with large-scale grocers in the UK. M&S was one of the first to coordinate operations at its foods centres to improve convenience whilst others were touting pricing as a competitive tool. M&S developed a click and collect grocery service in 2009 that allowed for customers to conduct their entire shopping online where it could be delivered to their homes or at a local M&S store (Felsted, 2009). The extension on this included the ability for non-food items to be delivered to food centres which is expected to become part of the entire business model its all of the firm’s 668 stores (Felsted). In order to ensure that there is ample customer-based support for these efforts and ensure that there is no breakdown in this new convenience marketing focus, M&S must develop support management and devote labour to the effort for monitoring purchases and ensuring proper packaging. Again, in an environment where high labour payments are commonplace, M&S continues to erode some of its profit effectiveness by not streamlining current labour to meet these goals. As another example of this, the company developed specific initiatives in order to give it a better public image, in relation to environmental friendliness, such as the Oxfam Clothing Exchange and Wash at30 that are designed to be interactive strategies for eco-sustainability (annualreport2008.marksandspencer.com, 2008). All of these efforts are only in the pursuit of public image and publicity that do not bring short- or even long-term profitability unless there is a significant push for product purchasing after customers have engaged in clothing exchanges or the Wash 30 programme. Analysis would seem to indicate that M&S does not effectively understand how to align operations in a way that is consistent with profit goals. The costs associated with advertising new eco-friendly efforts are significant that come on the back of already-high labour payments especially in the fashion division. There is clearly a disconnect between the processes designed to achieve a goal compared to the long-term revenue gains expected to be achieved through new strategies related to corporate public image. Effective performance for Marks & Spencer is making a success of its diverse portfolio of concept stores and those that continue to drive competitive profit success. It is a service-minded industry that is driven by complex customer demographics and ever-changing preferences regarding food and fashion. For instance, there is a growing trend for healthier eating that continues to drive buying behaviours. In response, Marks & Spencer developed a costly advertising programme that described how its food products consisted of 100 percent free artificial colours and flavours (annualreport2008.marksandspencer.com). This type of advertising impacts operations in terms of costs and the labour devoted to this campaign, however the specific healthy eating needs of its customers are constantly fluctuating. In marketing, it is necessary to develop a long-standing brand promotional philosophy in order to gain long-term commitment especially when offering products to large and diverse customer profiles across the region. The point of this analysis related to marketing costs is to identify that Marks & Spencer does not necessarily understand how to effectively devote resources (both labour and cost) to achieve goals. It is already operating in an environment where competitors are finding success in positioning their businesses on modernism or price, two powerful motivators for a new generation of buyer that is fickle and willing to defect to different brands based on these elements. Marks & Spencer relies on its perception of a trusted clothing and food brand and then attempts to build another layer of marketing on top of this in order to gain customer commitment to a specific goal or a new division with diverse product offerings. It is a likely reason why revenues spike sharply from year to year, and sometimes quarter to quarter, as the company lacks a focus its tangible reputation in the consumer market. However, Marks & Spencer is definitely not unworthy of recognition for its successes in linking an effective operational system with long-term profit goals. The company is currently boasting a position as the 9th largest brand in the UK with earnings of over 5 billion pounds (Baker, 2011). Some of these revenues are outside of the service industry with the company’s diverse financial services divisions that require a different strategy for marketing and gaining customer loyalty that are not as dynamic as those found in home, fashion and foods divisions. It is those that are interactive with customers, such as the supermarket division, that requires complicated, costly and sometimes redundant systems and processes simply to gain a single satisfied customer market. Cost recognition is something required at Marks & Spencer with a complete analysis recommended of its current branding strategies to identify where assumptions about brand quality in the minds of buyers should be identified in order to adopt a cost-aware and functional operational process. Acknowledgment and recommendation Offers Bluestein, Buchanan, Chafkin, Del Rey & Joyner (2009, p.75), “You don’t need big duges or expensive promotions to get corporate publicity. One of the most effective things you can do is to participate in established events”. Marks & Spencer does not appear to align the business in this function, instead large-scale and costly promotions for a new venture that does not generate enough long-term revenue continue to drive its forward operational strategy. At the same time where the company is forced to lower prices as a response to lowered consumer interest, there raises an alarm about the effectiveness of how the company measures long-term performance compared to short term diversification strategies. The brand considered as its largest asset might be a flawed strategy as it does not bring consistent revenue increases or sustainable profit, easily identified through a brief financial analysis over a five to ten year period. It is a customer-centric business that operates on a similar model to that of the round centricity model that links efficiency, customer satisfaction, effectiveness and relationship in a cyclical pattern always focused on satisfying customers as the primary goal. Value, product and customer focus are the trademark foundation of this type of model that is market-focused. However, aligning the business effectively to meet performance targets means having an understanding of what is driving buyer behaviour in key markets and then attempting to service these needs without radical overhauls of systems or processes for a small-scale service-based venture. The company appears to have too much of a reliance on its brand strategies from the past to justify how it approaches marketing and operations today, however with less-than-expected profit margins stemming as an output of these efforts. An analysis of the company’s positioning strategy, related to marketing and advertising, is recommended in order to effectively align service and satisfaction with revenue expectations. Marks & Spencer can reward its corporate publicity expectations by divesting some of its costly marketing in low-profit generating areas and focus more on promotion with established events. The company does not, currently, have a system or process in place to showcase its products or merchandise by partnering with high profile events, something identified as a key success strategy for gaining corporate attention positively. Low cost advertising in this form gives customer real-time exposure to products, values or other incentives and does not require a radical overhaul of a division and its labour systems in order to achieve success or profit growth. Marks & Spencer would sustain an advantage in terms of cost reduction and achieve performance targets if more attention to interactivity with clients was undertaken and a reassessment of its brand position in key buyer groups conducted. Conclusion The initial assumption about Marks & Spencer was that the business was moving forward effectively and gaining competitive ground through its strategies, since the business has been in operation for decades. However, analysis of its current focus and strategies associated with profit and operations identified many disconnects related to knowledge of key target buyer groups and also in terms of how to effectively satisfy diverse, modern buyers. With such high competition, there is the possibility of failure in meeting customer needs when there is ample fashion, home goods and foods selection in the region and pricing is being used as a competitive tool by M&S and other business to gain buyer support. Though the business seems to maintain a high level of control operationally with its supply chain and labour-related service components, understanding its real position in buyer markets is the largest area that requires re-analysis in order to be successful in the long-term and achieve performance targets. References Baker, R. (2011), Apple overtakes Google as most valuable brand, Marketing Week. May 9. Bokaie, J. (2008), A thorn in the side of negativity, Marketing, London. July 23, p.4. Bluestein, A., Buchanan, L., Chafkin, M., Del Rey, J. & Joyner, A. (2009), The ultimate business tune-up for times like these, Inc. 31(1), p.75. Felsted, A. (2009), M&S in further push online, Financial Times. October 12. Annualreport2008.marksandspencer.com. (2009), [internet] Building our brand. [accessed May 16, 2011 at http://annualreport2008.marksandspencer.com/building/building_the_brand.html] Financial Times. (2010), M&S brand value. November 10, p.18. Hoovers.com. (2009), [internet] Marks and Spencer Group PLC. [accessed May 17, 2011 at http://www.hoovers.com/marks-&-spencer/--ID__41199,FRIC__182--/free-co-competition.xhtml] Nagappan, P. (2009), Walking the talk: Marks & Spencer’s commitment to CSR, Apparel. 50(6), p.10. Palmer, M. (2010), M&S extends eco-plan after 50m pounds savings from previous scheme, Financial Times, London. Mar 1, p.20. Sandler, K. (2009), Corporate news: Marks sets strategy, Wall Street Journal. October 14, p.B7. Read More