Competitive Advantage of Marks and Spenser - Essay Example

Critically discuss the basis of Marks and Spenser’s competitive advantage both past years and present and in doing so evaluate the change in initiative mounted in recent years Contents Contents 1 Marks and Spencer-Past and Present 2 Past Strategic Management Decisions of the Company 3 Present Strategic Management Decisions of the Company 7 Change in Strategic Management Decisions and Impact over Competitive Advantage 10 Conclusions 14 Reference 16 Bibliography 17 Marks and Spencer-Past and Present A peek into the past reflects that Marks and Spencer owing to its strategic decisions became able to gain competitive advantage over other firms in the region competing in retail trade. The company during the 1997 period focused on enhancing its brand name through its strategic management decisions. During this period the company took important strategic decisions like pushing the supplier groups to procure materials the far eastern and African region to help lower the cost of production. Side by side the firm also focused on not only enhancing the product assortments but also transforming its image from conservative to fashion minded. In taking such decisions the company found that the cost of supply chain activities increased for the goods being procured from Asiatic and African countries to their United Kingdom distribution houses. Again focusing on enhancement of product assortments meant display of garments in small numbers thus failing to counter high demand. Moving over to high trend fashion wear also led the company bear large chunks of unsold merchandises. Thus the past strategic decision taken by Marks and Spencer is found to render negative impact on its competitive advantage (Sheffi, 2005, p.196-197). In the present scenario, Marks and Spencer also was noted to carry out some important strategic activities like focusing on rendering diversification to the existing category and groups of products. Moreover the company also worked in expansion of the size of the stores from small units to help in effective stocking of its diversified displays and thus gaining in more consumers. Other strategic decisions incorporated by the firm are acquiring of other small firms for expansion of business to other areas and also in creating distribution houses for stocking merchandises. Marks and Spencer did not only focused on filling up the stores with different product categories and assortments but also in opening up diversified units like food marts and other speciality stores. Strategic decisions like changing on in displays to help stock more products also helped the store in grabbing more consumers. Again the business of Marks and Spencer also took resort of a diversification strategy thus moving into newer service sectors like finance and insurance. All these strategic decisions taken by the company helped in augmenting the level of competitive advantage of the concern in the light of other competitors. Past Strategic Management Decisions of the Company One of the key strategic management decisions of the firm to counter against external competition is taking into hold the power of its internal resources. Thus where it is found that external influences pertaining to a firm are quite high the company tends to exhibit a close linkage with its own power resources to gain competitive advantage over its competitors. Henceforth in the case dealt, Marks and Spencer to counter competition emerging from the international arena is found to urge its supplier groups to render large amount of investment to help in the rendering of quality and quantity products on time. This fact would help the company in gaining on in competitive advantage over other international and national competitors in gaining a profitable consumer market. This system of cultivating a long grown relationship with the supplier base has helped the company in countering emerging forms of competition in the merchandise sector (Thompson and Martin, 2010, p.14-17; Lynch, 2003, p.263). Another key feature of the strategic management decisions taken by Marks and Spencer is incorporating the parameters of innovation and diversification. The company that once started as a merchandise company moved into the realms of food sector catering to large amount of communities. Further diversification activities of the firm were noted when the company started its financial services arm thereby increasing the portfolio of goods and services offered to the consumers. Operating in the financial services sector the company also moved into several portfolios like rendering credit card and other loan and financial services to the consumers. Moreover the company also developed insurance and pension schemes both for its internal and external people thus diversifying into related financial sectors. This diversification of the company along such related sectors helped in sustaining growth and profitability margins in the face of intense competition in one of its business sectors. Moreover diversification into several related sectors helped Marks and Spencer in its initial stages to gain hold of larger market shares in the region of United Kingdom and thereby helped in drawing funds for the expansion activities of the company. Working on cost effectiveness and incorporation of new technology in its service parameters helped the company gain market leadership in the financial market other than its merchandise and food market in the initial stages (Cole, 2003, p.189-190; Harris, 2006, p.52). Marks and Spencer while in its food business is found to take resort of a strategic planning process to help reach its customers in a more effective manner. In that the company is required to firstly analyse what type of business strategy could be taken to gain access to larger markets. In the second step the company is required to formulate the different types of strategy that would help in meeting the needs for which they would be taken. Thirdly the company having formulated different types of strategies is required to choose one strategy that would help meet the need of the hour. Finally the company is required to take the key steps for the effective implementation of the strategy taken into consideration. The above discussion can be diagrammatically reflected as follows. Figure 1 (Morden, p.17) Thus in the process of reaching to the customers who would like to procure food items from Marks and Spencer the company worked in devising strategies to create food outlets in areas of frequent visits by people. The company formulated this strategy to gain hold of a larger pie of consumers who tend to visit the malls for gaining access to branded items. Creation of an outlet in the popular mall helped the company in not only making the consumers aware of the Marks and Spencer brand thus creating large brand awareness and also in gaining in on sales and revenue pertaining to its food business. Conceptualisation of this strategy is considered to help the company gain on the financial and marketing front. It is also held that through such strategies the company also aims at gaining on its consumer loyalty parameter. It is because the outlets opened up in busy areas pertaining to city centre makes it possible for the people to save both time and money in search for such fashionable yet healthy food items. Thus this strategic decision of the company taken in the initial stage is considered one of the pivotal decisions taken for business expansion plans of Marks and Spencer in United Kingdom (Morden, 2007, p.16; Johnson, Scholes, and Whittington, 2008, p.282). The strategic standpoint of Marks and Spencer counters severe criticism from the fact that the company focused on shifting from the conservative merchandise lines to fashionable garments thus countering a reduction in the sales lines. Moreover the diversification strategy taken by the company to venture into the food segment to gain more consumer space is also criticised where it could have ventured into the consumer electronic space. Moving into the consumer electronic space would have helped the company in gaining both on its sales and revenue margins. The strategic mix in the company also requires the internal culture to be largely changed. Thus the dependence on the company on the internal policies of the company that largely relied on the top-down hierarchy happened to create obstruction in regards to empowering the employees and managers at different levels to take potential decisions. This practice led the middle and lower level management impaired in taking key decisions that would meet the needs of the consumers. The middle and lower level managers are held to possess direct interactions with the consumer communities and thus is expected to render fruitful strategies. Hence impairment as to such makes the company fail in bringing out effective strategies. Present Strategic Management Decisions of the Company In the present day also the company having extended into international markets also needs to take resort to key strategic decisions in order to better thrive in such regions. In one such key example the company in its operations in Spain had to take resort to an important strategy in understanding the cultural and social needs of the people. Thus the company that first tend to dress up the mannequins of the store in plain and simple merchandises focused on the rendering of ornaments. The marketing and sales managers of the retail company understood that in markets like Spain the need for women shoppers would be met by putting in attractive jewellery on the mannequins meant for keeping in the windows wrapped in attractive costumes. Hence this key strategic decision taken by the company in understanding the needs of the local consumers helped the company in gaining larger footfalls of women consumers than before. Thus strategic decisions of a retail or marketing company turn effective when taken in relation to cultural dimensions of a particular region (Saloner, Shepard and Podolny, 2008, p.337; Butterick, 2011, p.50). In the present scenario the company took to effective strategies like designing of effective internet marketing strategies that aimed in gaining consumers in international markets. Similarly the company also focused in moving to another new sector based on home cataloguing that also helped the company in effectively using its diversification strategies. Moreover the marketing department of the company also resorted to another new strategy in enabling discounts and promotions through the stores and also through the online portals thus arousing interest in the minds of the consumer groups. In the present situation to enhance the competitive position of the firm the entire retail organization was found to be reorganized into five main operating units like that focusing on regional United Kingdom market, the other focusing on the international market, and the other three focused on segments like finance, property and the venture market. Moreover the sector focussing on the regional United Kingdom market was further sub-divided into other divisions like the merchandise for men, women, children, lingerie products, and also such pertaining to home furnishings and beauty products. This creation of separate divisions acted like key strategic business units for the company and helped the company render more effective monitoring and control in regards to each of the different units aiming to gain both on profitability and productivity. Again the management team of Marks and Spencer also looked upon on opening up of different formats that would focus on different specialised categories pertaining to merchandises and food sector and also like that of express and bigger formats. The opening up of the stores in different areas pertaining to different categories was held to be decided by the management based on demographic patterns of the society and also in regards to varying lifestyles of the population. Another set of strategic decisions taken by the management body of Marks and Spencer in recent times concerns the decentralisation of power that once concentrated in the hands of the head office. Through decentralisation the company meant to render power to the hands of the store managers that would directly work through the supply chain mechanism in rendering requisitions and procuring merchandises. Thus the new management team also helped to revitalise the supply chain activity of the company that operated in isolation and had no direct linkage to the store operations. The management body took another set of strategic decisions in which the entire store was revitalised through the ranging of new designs and change in the colour of the logo. Reformatting of the store through introduction of new systems and new blood was carried out to help motivate the staff to render more productivity. The two most important activities on the cards of Marks and Spencer pertaining to strategic decision making were working on to reduce the cost of operations and promoting large scale diversification. However the competitive advantage the firm was gaining on account of such activity gained obstacles owing to its low vision in enhancing the effectiveness of the supply chain machinery and also in not being able to effectively judge the needs and aspirations of the consumers (Cummins, 2003, p.426-432, 434). The strategic initiatives and decision making activities carried on in the past were found to have negative impact on the firm’s performance thus reflecting a steady decline of both profitability and productivity. Thus in the present era from 2001 onwards reflected some major strategic changes at the core of the business processes of the firm to help regain back its original position. The first set of strategies were designed during the period ranging from 2001 to 2002 and endeavoured to focus on the core business activities of the firm comprising of retail and financial ventures. The management also understood that ceasing all other non-core business functions would help the company focus more in its retail and financial business and thereby would be able to regain its past position. These strategies were conceptualised to help the firm gain on its capital structure and thereby would be able to meet the needs of shareholders and other stakeholders. Both the internal and external position being settled would help Marks and Spencer revive its past stature. In the second phase of strategies pertaining to the period 2002 thereafter the focus was further rendered into enhancing the parameters of value and quality into the production of food and merchandise segment. The strategies were further focused to enhance the social responsibility parameter of the organisation thereby aiming to augment the public image of the concern. Apart from enhancement of locations and retail formats the strategies also aimed to sustain the diversification in regards to the financial and home furnishings sector. These strategies were found to help revive the downfall of the company and thereby help the concern move to a better future (Gill, 2006, p.197-198; Norton and Hughes, 2009, p.62). Change in Strategic Management Decisions and Impact over Competitive Advantage Organizations require maintaining an image which not only represents itself as a responsible and trustworthy entity but also tries to cater to the changing needs of its customers. Marks and Spencer’s changing strategies are a reflection of its business aim to adapt to the changing business requirements, particularly the interests of customers. It is seen that with every change in strategy there has been a consequent impact on the competitive advantage in the market. Marks and Spencer, ever since its inception in1884 has had to constantly change its strategies in order to retain competitive edge and sustainability in the market. Initially its strategies were primarily influenced by internal conflicts, arising out of autocracy, short term vision, negligence of competitors and competitive forces, discontentment and dissatisfaction among customers and poor standards of services. However, with these problems the focus of the company shifted towards efficient marketing campaigns, focus towards customers, complete revamping of old shops, focus on customer satisfaction, innovation on idea of products and services. Market segmentation, localization and globalization have been some of its approaches to retain competitiveness and sustainability in the market. The company was faced with cut throat competition from low cost and fashion oriented retailers such as The Gap, Zara, and H&M. Consequently it had to change its strategic initiatives and pressed its own suppliers to procure finished products and materials from Africa and the Far East. This was done to lower costs of goods. This was also coupled with increasing the range of items that it carried and a shift in style from the most conservative and timeless styles to the more fashion oriented colours and styles. In the early 1998, when M&S was deciding its orders for the winter and autumn seasons in the year, blacks and greys were dominant in the catwalks of Milan and Paris. These were the hottest colours of the year. Accordingly the company revamped its production of new apparel in these colours. The consequent strategic steps undertaken landed the company in challenging situations. First of all now it operated in a long supply chain which extended from its Asian factories where the products were generated to the UK distribution centres, and from there to the stores in Europe. This consequently led to longer lead times on which it now had to forecast. Secondly, since it began to carry more kind of items, it necessarily carried smaller number of these and consequently generated more volatile demand for each of the items. Along with these challenges it entered into the more volatile market of fashion products apart from the steady market for functional and conventional clothing for which it was known for so long (Sheffi, 2005, p.197). This strategy made a severe impact on its competitive advantage which was mainly through its functional clothing. Besides incurring losses worth £150, it ended up accumulating three months of excess inventory which was also the wrong inventory because of the company’s attempts to gamble with the colour ‘grey’. Marks and Spencer’s strategies have also been effective in getting it the competitive advantage of low costs. The foundation of the St Michael’s products and competitive prices accounted for the main system of supply chain relationships of M&S. A major proportion of these were manufacturers in the United Kingdom. Recently the company has been including more products sources overseas which have been driving down its goods costs even further. In general cases they have been successful and the arrangement with suppliers have successfully turned into long term and non-contractual contracts. They are primarily based on common understanding and mutual trust. Marks and Spencer remain actively involved in the input management, product specification, product scheduling and quality control with its suppliers which make it the most important customer in the eyes of its suppliers. One of its main aspects has been fir dealing with customers, suppliers and employees which accounts for its reputation in the competitive market (Thompson & Martin, 2010, p.16). Some of its above strategies again caused a set back to its position in the competitive world. At the end of 1990 the long established business continued to incur losses and was suffering declining profits. One of the critical factors was a too much diversification of product ranges and losing out on the few products which were highly competitive in the markets. People could no longer associate those few and famous products with the company. Its management also required strengthening at all levels. Some of its strategies or moves which had serious implications on the competitive advantage of the company were that it took away its focus from customers and became over dependent on reputation and image (Thompson & Martin, 2010, p.16). Also the company’s over dependence on the UK based suppliers harmed its reputation since their costs were uncompetitive in the global international market. At the same time it allowed its margins to rise gradually which tarnished its long term image of value for money. Additionally it also lost its fashion elements in its key clothing ranges by too much emphasis on product diversification. The following SWOT analysis can be generated for Marks and Spencer. Strengths Provider of high quality products Catering to customers’ needs and requirements Internal training programs, especially the management training programs for development of effective managers Weaknesses Too much product diversification which consequently lost its original reputation of being the only provider of functional clothing Inefficient control over stock leading to stock accumulation and product wastage Strong Competitors Opportunities Adaptive to the internet technology and changing information and technology. Thus it successfully uses the IT and the internet for providing online opportunities of purchase to customers People’s preference from an all-round upliftment of lifestyle calls for diverse product varieties for satisfying their needs which could be attained through its diverse product diversification strategies Threats Change in social environment leading volatile demand for its products, change in the tastes and preferences of customers Emergence of strong competitors like Safeway, Asda, Tesco and Sainsbury Environmental pollution could be a threat for the company. Government has been taking crucial steps for controlling pollution and protecting the natural environment which could affect development of the company, Marks and Spencer Conclusions In United Kingdom the retail company Marks and Spencer started with a humble beginning focusing on business like merchandise and food. However in the later stage it was found that the company started focusing on separate areas like finance and other allied areas like home cataloguing business as a means to diversify. It was found that the strategies worked out by the company before 2001 happened to disturb the business environment of the concern devastatingly thus letting the company lose on profits and productivity. The set of previous strategies were thus found to hamper both the productivity of the firm and thereby lose its competitive position in the United Kingdom market. Other competitors like Zara, H&M and Gap happened to gain on gaining larger number of consumers and also enhancing on their market shares at the cost of Marks and Spencer. Thus a second set of business strategies were taken into consideration that aimed to focus more on the core business activities of merchandising and food business. This helped the firm to revitalise their profits and revenue which was then spent on the expansion of both the stores and also helped in the emergence of different business formats like express stores, speciality stores and other different formats. Moreover the expansion of the business was also taken through internet as a medium that helped to gain hold of larger markets and consumers. Special focus was taken by the management body of the firm in bringing about promotions and discounts to help attract larger amount of footfalls to the store and different outlets spread along the region. Moreover the management body also focused on enhancing the supply chain mechanism of the company to help bring about a cost effective medium in distribution of goods to the stores and different outlets. Decentralisation of authority in regards to both the distribution outlets and the different stores is also considered to help the company gain on manpower effectiveness and thus would help gain on motivation and productivity. Reference Butterick, K. (2011). Introducing Public Relations: Theory and Practice. SAGE Publications Ltd. Cole, G. (2003). Strategic Management. Cengage Learning EMEA. Cummings, S. (2003). Images of strategy. John Wiley & Sons. Gill, R.. (2006). Theory and practice of leadership. SAGE. Harris, D. (2006). CIMA Learning System 2007 Integrated Management. Butterworth-Heinemann. Johnson, G., Scholes, K., and Whittington, R. (2008). Exploring Corporate Strategy: Text & Cases, 7/E. Pearson Education India. Lynch, R. (2007). Corporate Strategy, 4/E. Pearson Education India. Morden, T. (2007). Principles of strategic management. Ashgate Publishing, Ltd. Norton, A., and Hughes, J. (2009). Cima Official Learning System Enterprise Management. Butterworth-Heinemann. Salone, G., Shepard, A., and Podolny, J. (2008). Strategic Management. John Wiley and Sons. Sheffi, Y. (2005). The Resilient Enterprise : Overcoming Vulnerability for Competitive Advantage. Pearson Education India. Thompson, J. & Martin, F. (2010). Strategic Management 6th. Cengage Learning EMEA. Bibliography Bowman, C. (1999). Strategy in Practice. Prentice Hall. Peng, M. (2008). Global Strategy. Thomson. Read More