Strategic Management: Marks and Spencer Case - Essay Example

?Running Head: STRATEGIC MANAGEMENT Strategic Management of Strategic Management Introduction This paper is basedon the company, Marks and Spencer and appropriate models have been used to conduct internal and external environmental analysis as well as the assessment of the culture which is being followed in the company. Company Background Marks and Spencer is located at more than 718 locations across 34 countries worldwide (Marks and Spencer 2011, pp. 10).. The company sells products such as clothing, footwear, gifts, home furnishings and foods, however these are sold to the customers under the trademark of St. Michael which has a chain of 294 stores in the United Kingdom. More than half of the stores of Marks and Spencer have been given to the local partners in the form of franchises. Besides this, Marks and Spencer also owns Brooks Brothers, a clothing retailer and the Kings Super Markets chain in the US. Internal Environmental Analysis In order to achieve the core objectives of the company, Marks and Spencer uses direct mail which gives the customers with easier and wider access to the products which are offered by them. These products include home furnishings, flowers, hampers and wine. The management of the company always helped in supporting growth; however the managers of Marks and Spencer failed to take proper strategic decisions in a year. This lowered the profits and reduced the sales greatly, because of which share prices reduced too (Armstrong 2000, pp. 10). UK Retail Division The largest division owned by Marks and Spencer is located in the United Kingdom and it was further divided into sub divisions which represented an area of merchandise that was defined. There were seven business units, names of which are mentioned below. 1. Women’s wear 2. Menswear 3. Lingerie 4. Children’s wear 5. Beauty 6. Home 7. Foods The first six divisions of the company were reported as general while the other ones were seasonal. Therefore, their sales were also dependent on the seasonal factors. Food was not seasonal and it had the largest demand, therefore largest space was allotted to food. However, with regards to financial results in the United Kingdom, the sales and profit reduced because of which the selling price dropped by 2.5% and 1.5% of the unit sales decreased which had an overall impact on sales (NASPERS 2011, pp. 10). Strategy and Structure Significant changes were announced by Marks and Spencer in March 2001 with regards to the strategic review of the business to strategy and structure of the company. The changes that have now been implemented by the company are mentioned below. Total Focus on UK retail The aim is to sell branded products and exclusive brands to Marks and Spencer in order to guarantee quality, value and services to the customers. Moreover, significant appeals have also been developed with regards to the products offered by the company and its availability in order to build strong relationship with the customers (Thompson & Strickland 1997, pp. 10). Recovery Plan for Clothing In order to regain confidence of the customers, the company is now offering quality clothing by rebalancing the price architecture, and by increasing their range of merchandise which has been communicated to the customers (Lewis 2005, pp. 25). Expansion in Units Expansion in other units such as food, home and beauty have also been planned which has enabled the company to perform well and earn trust of the customers mainly because of quality and innovative products that are offered to the customers. The aim of the company was to enhance the future growth of the company by opting for the opportunities that enable them to expand by offering products at new locations and channels (Hill, et, al. 1998, pp. 10). Since there has been an expansion in the home business, growth in home furnishing and gifts has been observed more significantly. Although demand for beauty products has also increased but it is significantly smaller than the division of home furnishings. However, promising opportunities are being offered for further expansion (Hunsker, et.al 2008, pp. 50). Acceleration of Store Renewal Programme With regards to the elements that are successful, new concepts have been introduced by Marks and Spencer to refurbish stores at a faster rate and at lower costs. Therefore, this has greatly benefited the customers of the company. Intensive Use of Space Marks and Spencer has allocated the selling space to the products that have a higher growth rate and the ones that gives the highest returns. Therefore, 600,000 square feet have been reallocated and space has been given to areas such as clothing, the range of which is supplied by George Davies, Home, 50 new Beauty Shops, and 30 new Coffee Shops (Marks and Spencer, 2011, pp. 20). Realization of Value To recover the business in the United Kingdom, the company has realized the value of the businesses which are its main assets and these are given more importance than the others. Therefore, the idea of cost cutting and closing businesses repealing losses has been proposed by the management of Marks and Spencer. However, the businesses that were to be divested were first consulted with the employees to ensure that no one got offended by the decision. This is because since Marks and Spencer is taking an initiative to develop global sales teams, it is necessary for the employees to interact with other employees around the world (Johnson, et.al. 2008, pp. 80). External Environmental Analysis Being Closer to the Customer Company has adopted strategies to be more customer oriented because of which the stores located in big cities remain open twenty-four hours a day. There are 125 modern stores of Marks and Spencer in the United Kingdom and they have been created to attract customers. Two-third of the total stores in the UK can be represented by the stores that are owned by Marks and Spencer. This has enabled the profits of the company to increase by 10% on a yearly basis (Marks and Spencer, 2011, pp. 20). Closing European Subsidiaries Marks and Spencer aimed to close Continental European subsidiaries except for the ones that were Irish. This was because the region made losses, however it was because of this decision that 3350 jobs were lost in France, Germany, Belgium, The Netherlands, Luxembourg and Spain (Marks and Spencer 2011, pp. 10). This had to be done because the business was not a success and stores were too big and the markets were not understood by the company before opening the stores in those locations (Burnes 2009, pp. 50). Franchising of Business Marks and Spencer has ten stores in Hong Kong which they plan to sell to the franchise. Moreover, the company also has franchises in more than 30 countries worldwide and it is operating with the formats of the local partners that are strong and successful (Briscoe 2004, pp. 50). Competition In order to deal with the competition, Marks and Spencer has reduced the costs of the company by cutting costs. This has been done by reducing the costs of goods sold using less suppliers and using foreign suppliers, who are significantly from Asia. Previously, 70% of the total purchases were represented by UK suppliers, and the aim of the company was to reduce this till 25% in order to decreases sales price and to increase profits of the company (Marks and Spencer, 2011, pp. 30). Moreover, jobs were also reduced to decrease the general and administrative costs that were incurred by the company at the headquarters. Therefore, the company aims to increase its operating profit by opting for cost cutting measures (Sutherland, et.al 2004, pp.50). Economy UK is the third largest economy in Europe and the real growth of GDP is 1.3%. Moreover, employment rate is 7.8%while 14% population lives below poverty line. The rate of inflation is 3.3% which also has an impact on the operations of Marks and Spencer in the United Kingdom (Marks and Spencer 2011, pp. 18). Social Trends Since there has been a change in the social trends that have been witnessed, the company has closed direct catalogue business in the United Kingdom (Crouch 2008, pp. 90). The company closed its loss-making catalogue business that included a call centre in which many employees were employed because of which 690 jobs have been affected (Marks and Spencer 2011, pp. 16). Discontinuation of the catalogue gave birth to e-commerce web site: www.marksandspencer.com, after which services such as home brochure and a range of services that included delivery of flowers was also started (Dobson, et.al 2004, pp. 20). Corporate Culture at Marks and Spencer Corporate culture refers to the values, beliefs and the behaviors that are followed in an organization. Generally, it refers to the beliefs and the values which are interpreted by the people after which they behave individually and in groups. The reason why corporate culture is useful is because it develops the environment in the companies on the basis of which they operate and attains success (Perkins 2000, pp.20). Initially, the culture at Marks and Spencer was very backward and this was mainly because it did not accept the change with regards to systems and procedures. The company did not take risks because of which they were unable to run the business successfully in the United Kingdom. Moreover, the company was also slow with regards to change. However, changes have now been implemented because of which the culture of the company has changed (Brooks, et.al 2004, pp. 25). Today, the management at Marks and Spencer is very supportive, active and it is fun to work and this is how their corporate culture is. The policies defined by the company are transparent, and can be seen as their employees follow them. Besides being a leading company, their main competitive edge, also allows the customers to enjoy quality and innovative products. Marc Bolland is currently the chief executive of Marks and Spencer and he believes that to create a winning corporate culture, the following points should be kept in mind and these are also the characteristics of the culture of the company. 1. Culture is owned by everyone and it is everyone’s responsibility. 2. Two culture committees are created at Marks and Spencer from which one is local culture committee and the other is corporate culture committee and both are responsible for focusing on the culture (Fitzroy, et.al. 2004, pp. 100). 3. The key components at Marks and Spencer are considered as a part of leadership expectations and this means that every employee should promote their culture. 4. In the annual employee performance appraisals, Marks and Spencer includes a section on the company’s culture because things that are quantifiable are also achievable. All these components help Marks and Spencer in a positive manner and enable the company to gain higher returns on the capital they invest. Moreover, a competency framework has also been developed for the employees (Johnson & Turner 2003, pp.12). The behaviours and competencies are reflected by the style of leadership which has been adopted by the management at Marks and Spencer. 1. The company accepts the challenges and established thinking in order to ensure value and sustainability in the long term. 2. Culture of respect and integrity is promoted at Marks and Spencer and a collegiate atmosphere has been established. 3. Sound judgment is maintained under pressure and the decisions that are difficult are made dispassionately. 4. The company has developed constructive relationships with the investors. This ensures that the concerns of the investors and their support are maintained. 5. Situations that are politically sensitive are navigated in a high profile organization. 6. Highest standards of integrity and decency are a part of culture at Marks and Spencer. Conclusion Marks and Spencer is a company which is known worldwide and it is very successful in its operations. This is mainly because of the quality products that it offers to the customers and also because of innovation. The largest division owned by Marks and Spencer is located in the United Kingdom and it was further divided into sub divisions which represented an area of merchandise that was defined. Significant changes were implemented by the company in 2001 which included total focus on UK retail, recovery plan for clothing, expansion in units, acceleration of store renewal programme and intensive use of space which were the internal strategies that were implemented by the company. However, the external environment included being closer to the customers and closing European subsidiaries. This decision of the company made 3350 people in France, Germany, Belgium, The Netherlands, Luxembourg and Spain lose their jobs. Moreover, franchising of business by opening stores in Hong Kong, dealing with competition by purchasing raw material from Asia, the economy of UK and the social trends followed in the region serve as the factors that make the external environment (Lych 2006, pp. 80). Previously the culture that was followed at Marks and Spencer was backward and the company was slow to change. However, today change in culture has been witnessed with regards to changes which have resulted in innovation. Marks and Spencer not just promotes respect and integrity but it has also developed constructive relationships with the investors and decency is a part of the corporate culture (Floyd 2000, pp. 55). Recommendations In order to further strengthen the culture of Marks and Spencer, there are some recommendations that I have suggested which would bring a positive change in the organization. Although the company has achieved excellence in operational performance, there is still room for improving its efficiency in operations. 1. In every company, the employees are the most important assets for the company and this is the reason why it is extremely critical for Marks and Spencer to ensure that their staff is motivated and satisfied. To keep the employees happy, the company must appreciate them and must reward them with incentives and promotions. 2. Previously, the corporate culture at Marks and Spencer could be reflected by top-down approach. Decision making was centralized and control was only in the hands of the top management. However, the approach should be changed and power should be given to the employees. Therefore, the company must adopt an open-door policy to encourage creativity and innovation. 3. Famous designers such as Paul Smith, Betty Jackson and Ghost were used. However, Marks and Spencer did not use their names to promote their stores and designs with regards to fashion. The company should educate the customers about the designers because it will boost the sales of the company (Marks and Spencer 2011, pp. 10). 4. The company has adopted the attitude that can be described in three words, “we know best.” Since this attitude prevails in most of the business practices of the company, it should be changed. New business models must be adopted to fulfill the needs of the customers. 5. Better quality products are offered by the competitors to increase market share. Moreover, the competitors have also introduced better services which they are offering at lower prices and are making the shopping experiences pleasant. Therefore, Marks and Spencer must also adopt these strategies in order to satisfy the needs of the customers. References Armstrong, T. (2000). A Handbook of Human Resource Management Practice. 7th Edn. Kogan Page, pp.10. Briscoe, D. (2004). International Human Resource Management. 3rd Edn. Routledge, pp. 50. Brooks, I & Weatherston, J & Wilkinson, G. (2004) The International Business Environment, Pearson Education Canada, pp. 25. Burnes, B. (2009). Managing change. Fifth Edition. Prentice Hall, London, pp. 50. Crouch, A. (2008). Culture Making: Recovering Our Creative Calling. IVP Books, pp. 90. Dobson, P., Starkey, K., & Richards, J. (2004). Strategic Management; Issues and Cases. Blackwell Publishing, pp. 18-50. Fitzroy, P. & Hulbert, J. (2004). Strategic Management. Whiley HE, pp. 100. Floyd, D. (2000) International Business Environment: Financial Times Prentice Hall, pp. 55. Hersery, P. (2003). Management of organizational behavior. 8th Edn. Prentice Hall of India, pp. 50. 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