Marks and Spencer - Organization Theory and Strategy - Case Study Example

ORGANIZATION THEORY AND STRATEGY PROJECT CASE STUDY: MARKS AND SPENCER (Name) (Institution) (Course) (Instructor’s Name) February 21, 2009 Background Marks & Spencer is one of the best-known chain store retailers in the UK. The company has been in operation for more than 120 years. The company’s over 600 outlets within the UK employ more than 65,000 people. Following successful operations in the UK, the company has opened over outlets in over 40 foreign countries such as Hong Kong. As of the beginning of 2009, the number of stores located outside the UK stood at 275. The UK’s retailing industry is very competitive and dynamic as it is significantly sensitive to fashion and lifestyle trends as displayed by celebrities. Shoppers have shown tendencies to shop where these celebrities shop other than where they are best accommodated (Cummings, Wilson and Duncan 2005, 417). This has locked out small retailers who remain obscure to celebrity icons and subsequently almost the entire market. For the surviving players, change of strategy has become a necessity rather than a tactic. Customers are more informed on what they want, where it sis or should be and how service during shopping should be delivered. Consequently, Marks and Spencer has been at the forefront in changing strategy. Many authors have documented the failure and rise of the company through turbulent times as early as during the Great Depression of 1930’s. In 1998, the company made record breaking pre tax profits of over $1 billion dollars but in 2008 recorded a 50% drop in share prices (Stanford 2002: Ackroyd, 2003: Cummings, Wilson and Duncan 2005, 417). This fashioned a period of transformation for the whole organization. This change involved refocusing on the basics which included the three business values of Quality, Value, and Service creating a business environment with more challenges for employees. Stanford (5) says “the start-point is knowing your organization’s business purpose.” At M&S, Managers had to train employees for the new challenges in the newly created business environment. A case in point is when Marks & Spencer launched Marks & Spencer Direct, as a direct mail clothing catalogue. To support this service, a call center was set up at Warrington (Strategy Insight). The new program flourished well in the market and the unprecedented growth in number of customers and enquiries presented a new set of problems to the company. This pointed out the poor or lack of proper strategic planning on part of the company. In response, the company hired the services of a management consulting firm, Trinity Horne. The firm initiated a structured program that focused on operating framework, process redesign, operating structure and management development. During the six months that the program took to implement, a better method of market and industry forecasting was developed. Again, a precise method of self analysis that sought to check on accountability among employees was put in place. This enabled the company to more precisely analyze its performance, that of employees and report wisely that allowed the management to take the right decisions. The company has always been accused of instituting changes that have a tendency of deepening the troubles of the company. However, the company in the same lengths institutes changes that push the company forward ahead of its competitors. With the prevailing economic difficulties in the UK and around the world, the company reported a decrease in profits last year. This however is being blamed on failed strategic decisions by the management of the company. For instance share price is also dropping and shareholders feel insecure for the future. Managers have had to prepare employees psychologically and through training for them to handle the challenges presented by the new business environment. The training and preparation has centered on developing career paths for the employees (Cummings, et al, 417). Organizational Structure and design Over the years, Marks & Spencer have diversified business to include selling goods as merchandise food retailing by running a subsidiary Marks and Spencer café. Stanford (8) explains that merchandising involves selling goods as a complete set. As such, the company has had to abandon the personnel hierarchical order preferred by many British corporations that have a common center of authority. Strategy insight offers a miniature look in figure 1 and 2 of the company’s old and new organizational structure. The old organizational structure has a centralized power while the new one is a bit decentralized in what the company called delayering. This involved empowering employees on the lower categories on the chart that enables them to have more responsibility and sense of belonging. The old structure as explained by Haas (285) entails employees following orders from above. He says in such an organization, “the only relationship that matters is between employer and employee. It is irradiating and unidirectional from the top downwards.” Fig. 1 Fig. 2 New Marks and Spencer structure The above structure is representative of Marks & Spencer’s Head Office in London which employs around 3,000 people headed by the CEO assisted by the board of directors. Each of these employees has a dignified role in the company which makes it hard to draft an actual hierarchy structure of all the employees. However, it is important to note that the role and job specification of each employee has gradually changed as the company implements new management and organizational theories and even the redesigning of existing ones. The more than 60 000 employees positioned in various outlets are answerable to branch managers. The Branch managers oversee a number of supervisors usually categorized in a manner to oversee a certain retail section. Marks and Spencer thus has a mechanistic structure whereby there is individual specialization that involves employees working separately and specializing in one task (Grundy and Brown, 77). The hierarchy of authority is well-defined, decision-making is kept as high as possible and most communication is vertical and written. Again, there is extensive use made of rules and standard operating procedures and the organization is a network of positions, corresponding to tasks. Typically each person corresponds to one task. This contrasts sharply with an organic structure where there is joint specialization in that employees work together and coordinate tasks, the task forces and teams are primary integrating mechanisms, the authority to control tasks is delegated and most communication is lateral and verbal, there is a need for face-to-face contact for coordination which makes the work process to be unpredictable and the organization is a network of persons or teams. People work in different capacities simultaneously and over time. Given that Marks and Spencer is involved in the retail business, a mechanistic structure is more suitable given the numerous and varying tasks available. However there is a need to coordinate the activities. In a flatter organizational structure, many employees have more responsibilities. Higher expectations from employees, according to Maslow’s hierarchy of needs theory, motivate them to work harder for the benefit of the company. Again by delayering power and responsibilities places substantial power in the hands of employees who are motivated to access more power through hard work (Drucker 97). As such, the retailer has to constantly train employees from all levels so as they serve the market and business needs appropriately as they arise. Strategy M&S adopted a new promotional brand and logo in 2004 as “Your M&S” that was introduced by Steve Sharp as marketing director. This has been transformed into the company's main brand in all its marketing and promotional activities such as advertising and merchandising. This has deviated from the traditional logo that had become a boring scene in the market and was viewed as unmodernised by the young and hippy. This new logo is marketing the M&S brand in a new manner as it is being done on promotional materials such as being sewn in clothing labels featuring the traditional lime-green ampersand (M & S). The new look has also been targeting the celebrity market such as Twiggy among a number of other young models. The idea is basically seen by market analyzers a new marketing strategy that targets the young generation market segment. As a result the company has resurged back in the market where its market share had shrunk as new players make entry into the lucrative market. M&S has also been keen to market its new products in form of foodstuffs. This is important in informing the market of the new range of products. Through this move, Drucker (p 98) says that the company is making use of the company’s strong brand equity and recognition in the market. An ongoing TV advert features an advert with the tagline "This is not just food, this is M&S food.” (M&S) In 2002, M&S introduced the first ever self-check-out tills among retailers in the UK. These tills at first tried to serve the food-halls of a number of stores. This program was rolled later to the general merchandise sections. Still on the line of innovation and change management, the company also introduced technology products in their stores. However, not all stores offer these technologic products. For the stores that offer these products, additional customer support services are involved thereby complicating the aforementioned employee hierarchal order. Such support services include installation of TV sets and accompanying technical help. The company’s new business strategy lays emphasis on the following key areas as stated in the company’s plan: Continue to invest in and grow our core UK retail business, by introducing new goods and services. Strengthen our UK property portfolio. Drive our M&S Direct business. Expand our International business. Integrate Plan A (our ‘eco plan’) into every aspect of how we do business, so that we grow in a sustainable way (M&S). Appropriateness of technology During the 2007-2008 trading period, Marks and Spencer registered as 13.5% drop in running costs partially due to improved and more efficient technology. The 2007-08 company reports that cost had been higher in previous trading periods due to the cost of installation and purchasing of such equipments required. The company’s finance director points out the place of technology in the company’s operations stressing on the emphasis the company lays in it through the ₤200 million annual budget on improving the supply chain. Again the company plans to spend ₤450million on IT systems, it revealed in its annual report. This is in recognition of the role that technology plays in changing the market patterns such as lifestyle, trend and more the influence of the internet. The company has been working with IBM to refresh its point of sale systems. It is now adding more than 2,000 tills and 258 handheld terminals in-store to make stock-checking more efficient. Around 97 percent of its tills are fully operational, an improvement from 90 percent two years ago, M&S revealed. The technology upgrade program will underpin the grocery chain's growth plans, including establishing a presence in China (Ackroyd, 112). Further supply chain improvements are in M&S's plans. As M&S expands internationally it is planning to take more control of our logistics from source to store, allowing them to monitor their stock more efficiently and improve margins. Last November, the retailer signed a deal with Logicalis to modernize its networks which involved engineering, design and development support for M&S's wired and wireless network infrastructure, which spans 591 UK stores and regional offices. In a trial partly funded by the Department of Trade and Industry, M&S used RFID tags on a selection of men's suits, shirts and ties at the store between 13 October and 7 November 2003. M&S has declared the trial a success, although it admits that some modifications need to be made to the hardware and software. The tremendous results achieved by employing service improvements reveal a massive improvement in capacity utilization. The technology employed by the retailer is therefore very appropriate and is proving to be competitive edge for the M&S (Cummings et al, 420: Stanford, 20). As such, M&S is one of the best companies that have engineered their way through change successfully. The company has responded well, though not always, to change in its internal and external environments. The company has thus developed a culture where employees are empowered n decision making helping them to deliver more. With the company having a long history in Britain, the conservative shoppers have supported the retailer and in response, the company is gradually transforming its stores as one-stop outlets that offer basic items. On the other hand, the common is adaptive to change and has incorporated technology in its operations to accommodate the young market segment. As such, the company has succeeded in targeting various market segments in most of the outlets. Issues and recommendation History has taught the company the need for change in organization and company strategy to suit to changing market environments. Through the company’s 120 year history, there has been a great change in the people factor in pursuit of the company’s shifting objectives. The changes in objectives are also adjusted according to markets. Changes in the macro economy necessitate the change in set of objectives and strategies used. Therefore government policy becomes an issue in managing such as multinational company. Furthermore the company operates across boarders thus its exposed to varying government polices that may require different organizational structuring and designing in order to fit the local market. On the other hand, there is also the issue of diversity in employees and demographic factors of the various markets. As a company targeting different market segments and selling a wide range of products, a variety of strategies or the best mix of strategies have to be designed and employed in order to allow the smooth running of the company. Throughout the history of the company, there has been a problem in toothing whenever an organization redesign or change is introduced. Across the many case studies on the company by many authors, the company is either portrayed as a failure in one aspect or on a positive note on its ability to rise again and reclaim its spot in the market. This is indicative of poor planning in execution of change and organization redesign. However, the company definitely recognizes the need to keep on repositioning itself in the market though with better planning and probably by outsourcing such services from management consultants. In addition, the retailer needs to consider the issue of continuity in management. When senior staff or even individual employees retire or move the company has a problem in performing as before. As such the company needs to develop a team rather than powerful individuals whose absence affects operations. Works cited Ackroyd, Stephen, The Organization of Business: Applying Organizational Theory to Contemporary Change, London: Oxford University Press, 2002 Cummings, S., Wilson, D., and Angwin, D. Images of strategy, New York: Wiley-Blackwell, 2003 http://books.google.com/books?id=pxVJvWhGQJIC&printsec=frontcover&dq=Images+of+strategy&ei=nQP4SbjqCJjAzQTh27yLDA#PPP7,M1 Drucker, Peter, Management: Tasks, Responsibilities, Practices, London: Transaction Publishers, 2007, Chapter 8. http://books.google.com/books?id=j0IHaUc85l0C&pg=PA95&dq=marks+and+spencer&as_brr=3&ei=G-j3SbHhGKCuyQS2seiABQ#PPA95,M1 Grundy, Tony and Brown, Laura, Value-based Human Resource Strategy: Developing Your HR Consultancy Role, London: Butterworth-Heinemann, 2003, http://books.google.com/books?id=QKUjFlF2m1gC&pg=PT1&dq=Value-based+Human+Resource+Strategy:+Developing+Your+HR++Consultancy+Role,&ei=3fv3SdT_OJ6GyATC6KH5Bg Haas, H. The Enterprise in Transition: An Analysis of European and American Practice, London, Routledge, 2003 http://books.google.com/books?id=yCQidn6_W54C&pg=PA285&dq=Haas+It+is+irradiating+and+unidirectional+from+the+top+downwards&lr=&as_brr=3&ei=P_73Sf6wA5vuzQTul_2QBQ M&S, Retrieved on 21st April 19, 2009 from, http://corporate.marksandspencer.com/home Stanford, Naomi, Organization design: the collaborative approach, London: Butterworth- Heinemann, 2005, Chpt 1&2 http://books.google.com/books?id=f75bdpuhzloC&printsec=frontcover&dq=Organization+design:+the+collaborative+approach&ei=vfv3SZuKLIKszgSq1fijBQ#PPA19,M1 Strategy insight, Retrieved on 21st April 19, 2009 from, http://www.examstutor.com/business/resources/companyprofiles/marksandspencer/strategyinsight.php Read More