Marks and Spencer Issues and Strategies - Assignment Example

Case Study: Marks and Spencer Q1. Using appropriate concepts evaluate the underlying problems that M&S was facing in terms of its strategies in early2000s Answer: Mark and Spencer was started way back in 1884. It has held the best store position for a number of years. However it was in 2001 that the store slipped down from the best and fell to the fifth position, behind the five major supermarkets (Vaughan - Adams, 2001). The company at present operates out of 600 stores in the UK and abroad and has a strong expanding international business at present (M&S, 2008). As of 29 March 2008, the company’s revenue is close to £9.022 million, which showed an increase of 5.1% over the 2007 revenues (M&S – Financial Highlights, 2008). A UK retail report that was released by Retail Intelligence compared sales of M&S ranging from year 1990 until 2000. This survey highlighted the issue, and was also unsure if the struggling group would recover at all. However, the survey also highlighted that the group would be able to recover if it produced well – made clothes, which are moderately fashionable at competitive prices, provided the company also maintained the quality standards. The company had seen continuous growth until 1990 in terms if its profits and market share. The company had been able to handle this by using fundamental formula for its operations like simple pricing structures, high quality merchandise and friendly and helpful service. There are a number of possible underlying reasons for the decline of M&S in the early 2000s. Firstly, the shifts in demographic balance, is one of the most important factors that caused the company to decline. This mainly refers to the fact that there was a shift in the key customers of the company. The balance of the population of UK was moving towards the older people and this was threatening as it created a serious deterioration for companies (Davies, 1995). The older population with the high levels of pension provision and high health care costs for the people was causing deterioration for M&S, as for other companies as well. M&S’s strategy was designed in a manner to cater to all the levels of the society by providing quality products at competitive prices. Secondly, there were larger amounts of wealth that was available among the general public. This caused the people to look for buying clothes as they were seeking status through clothes. This was one issue where the choice of the people was changing, and the buying power of the general public was increasingly growing. Also the company found it difficult to compete with the supermarkets. The effects of this were mainly seen in terms of the pre - packed foods. This became an issue and a competing factor for the Mark and Spencer, as the prices for the pre prepared foods were relatively higher and it would be difficult for the company to reduce these prices. M&S had also created an image that was very stern and harsh. This however did not cater to the needs of the younger generation and was relatively ‘uncool’. This image was mainly due to the corporate style. The company had built an image portraying itself to be harsh and stern. Sir Richard Greenbury who was the chairman and the CEO of the company then, steered the company to high levels of success. The company did grow during his term 1991-1999. However the company faced dominance from Sir R Greenbury. It is essential to understand the external environment that also caused the decline of M&S in the early 2000s. To analyse this PESTLE has been used. Considering the Political factors that have affected the performance of the company, the War in Iraq was one of the biggest factors to cause the decline and disturbance in the performance of the company. Also the imports and exports versus the Euro caused a change in the performance of the company. The economic and social factors as already discussed deals with the change in the consumers monetary levels and also the increased competition that is faced by the company both from local as well as international competitors caused a decline in the performance of the company as well. Focusing on the technology used, it was not very developed and the company was lacking behind the competitors at that time. The internal factors that affected the performance then were the poor management and the failure to recognise the changing trends and the market trends. There was very less care and importance given to the marketing function and the brand image was not given too much importance and the brand image of M&S was not consistent. These issues formed the main reasons for the decline of Mark and Spencer in the early 2000s. The company’s strategy was designed to cater to all sectors and the changes in the general living standards, along with the corporate style of working of the company caused a sharp decline in the company’s revenues. Q2. a) Briefly outline why you think that Rose found success for M&S in managing a turnaround / Recovery strategy when all the preceding CEOs had not? b) How would you recommend the culture at M&S now be re – defined in terms of a new paradigm? Which elements of the cultural web would you recommend be changes and which elements of the web should be retained, in order to realise this new paradigm? Answer: a) With Sir Stuart Rose becoming the Chief Executive Officer of M&S in 2004, the company has seen a number of changes and a lot of improvements. Rose has been awarded the knighthood in the New Year’s Honours List. This list is the leading list of the other successful retailers (Kollewe, 2007). His strategy was based on four main aspects of the business: Merchandise Characteristics, Trading format, Customer Communication, and Customer Service (Anon, 2006). The difference of his approach when compared to other preceding CEOs was that Stuart Rose, was that Rose took personal interest in each of the four aspects and implemented the latest and most beneficial facilities within the stores. It has been noted that Rose ensured that the customer service portrayed that the customers comes first, and provided excellent service for every customer. It involved improving the store environment of the store and inclusion of escalators, lifts, and almost 20 miles of new refrigeration units being made available (Rose, 2007). This was simply to improve the products offered, better service which in turn led to more shoppers – as many as 16 million each week (M&S, 2007). The major difference in the strategy used by Rose was that it did not only look for making profits, but also wanted to ensure that the store moved in sync with times and provided the customers what they looked for within an environment that made shopping a pleasure (McAllister, 2008). With the plans that Stuart set down for the company, M&S’s advertising became one of the biggest contributors and the business was seeing large profits. However the one main reason that M&S grew under the management of Sir Stuart Rose, is the fact that all the aspects of the business were given a lot of importance and equal importance to ensure they all moved in sync with time. This gave the company a push towards better growth results (Birtwistle, 2008). b) The current cultural web which is implemented within the organisation has proved to be very beneficial for the organisation. The six major elements of the cultural web are stories, rituals and routines, symbols, organisational structure, control systems, and power structure (Mind tools, 2008). In the case of M&S the company needs to work on the first element the most. The Cultural Web (Mind tools, 2008) This is simply because the stories and the past in some terms have created an image of the company which requires to be changed. The image that was created for M&S was one which would not cater to the changing environment (Johnson, et. al., 2006). Hence this is one of the most essential elements which require to be looked into for M&S. Hence M&S can continue to keep this as it has proved the company to improve in a number of aspects and also has shown growth trends for the company. The management can use this as strength and make changes to improve the customer’s perspective of M&S so that the previous image of the company changes. Also changes made to the general working of the organisation will allow the company to gain customer appreciation and will also lead to increase of revenues. Strategic Change Programme The possible strategic change programme that the company requires to undertake also needs to keep in account a lot of factors. Firstly the company requires ensuring the time factor is taken into account as this is very important. The amount of time taken by a firm to change and improve its strategies and ensure that all the internal and external factors are considered to make the change is very essential. Also the amount of change is a very essential factor which is required to be considered. If M&S make too many changes at one time, the company could be faced with issues of liquidity and also problems of being accepted by the customers. Also the correct use and manipulation of the resources is very important for the company. This is simply because if the company uses a lot of resources for one change in the company then the company could find it difficult to carry on with the other daily routines and this could also lead to reduced productivity of the company. Also in every company having a diverse employee group is very beneficial as it allows for different views and also allows for higher capabilities of the staff to perform and contribute to the changes within the company. Finally the two other major aspects are the readiness of the employees as well as the power that the leaders of the company require to show to ensure that the employees are willing for the change and coordinate and cooperate to ensure the change is successful. After understanding the current working of the business, it is clear that the business also requires a little more balancing in terms of the number of initiatives that are taken as it is seen that the company undertakes a number of initiatives however there is a problem of analysis paralysis. And this requires the committee to take a number of decisions. Thus in short the company requires working on the stories element to improve the performance and can keep the current organisational and power structures (Johnson, et. al, 2008). Bibliography Anon., 2006, Investing in You. Your M&S, Sept./Oct, 22-23 Birtwistle, G., 2008, The Recovery of Marks and Spencer, 2008, Glasglow Caledonian University, Accessed on 20 December 2008, Retrieved from http://www.anzmac07.otago.ac.nz/anzmacCD/papers/Gbirtwistle_1.pdf Davies, G., 1995, UK avoids the global demographic time - bomb, 26 June 1995, The Independent, Accessed on 20 December 2008, Retrieved from http://findarticles.com/p/articles/mi_qn4158/is_19950626/ai_n13990960 Johnson, G., Scholes, K. and Whittington, R., 2006, Exploring Corporate Strategy, 7th edn, Prentice Hall, Essex Johnson, G., Scholes, K. and Whittington, R., 2008, Exploring Corporate Strategy, pg 208, Prentice Hall, Essex Kollewe, J., 2007, Stuart Rose, CEO of Marks and Spencer, Guardian, 28 December 2007, Accessed on 20 December 2008, Retrieved from http://www.guardian.co.uk/business/2007/dec/28/stuartrose McAllister, D., 2008, The wheels have come off Roses Recovery at M&S, 10 January 2008, Accessed on 20 December 2008, Retrieved from http://www.cityam.com/index.php?news=5572 M&S, 2008, About Us, Accessed on 20 December 2008, Retrieved from http://corporate.marksandspencer.com/aboutus M&S–Financial Highlights, 2008. ‘Financial Highlights – Growth on 2007’, Accessed on 11 November 2008, Retrieved from http://corporate.marksandspencer.com/investors/fin_highlights Vaughan - Adams, L., 2001, M&S Slips down the high street rankings as sales slide tahes heavy toll, 29 May 2001, Accessed on 20 December 2008, Retrieved from http://www.independent.co.uk/news/business/news/mamps-slips-down-the-high-street-rankings-as-sales-slide-takes-heavy-toll-686276.html Read More