International Marketing of Marks and Spencer Company - Case Study Example

International marketing: Marks & Spencer BY YOU YOUR ACADEMIC ORGANISATION HERE HERE HERE International marketing: Marks & Spencer Executive Summary Marks & Spencer (M&S) operates in a very competitive environment. The business provides fashion products and accessories to a wide variety of consumer demographics, housewares, food and beverages, and cosmetics and fragrances as part of their store concept. In order to improve profitability and competitive edge, M&S is considering expansion into Italy, a market with significant opportunities for this business. This report provides an analysis of Italy as a market opportunity as well as industry, competitor and customer analyses to justify the expansion of M&S into the Italian consumer marketplace. Country analysis – Italy The Italian retail trade experienced a growth rate of 1.2 percent in 2003, led largely by recent developments in distribution which sprang from changes to long-standing import barriers in the country (alibaba.com, 2008). Easing of legislative restrictions have made the Italian marketplace more favourable for retailers of all varieties in relation to ease of setting up new business ventures in this country. Lower costs plus the development of a new distribution infrastructure in this country make it appealing to international companies looking for new market opportunities. M&S products are considered fast-moving products and, in Italy, these types of goods are purchased by a younger market audience (Eghbal, 2007). Marks & Spencer has often been criticised for not appealing to younger demographics, instead relying on far-too-traditional marketing which has driven the business’ operating model for over 80 years. M&S must be aware that younger demographic purchases will make up the majority of fashion and houseware purchases in this marketplace. The Italian economy is currently experiencing the worst recession in the last sixty years, with household consumption rates falling by 1.1 percent in early 2009 (OADBS, 2009). However, despite this recessionary environment, consumer disposable income levels grew by 4.3 percent since 2008, indicating that there is strength in consumer incomes and availability of resources needed to purchase M&S products (OADBS). In comparison to other European countries, declines in spending in Italy are not as substantial while other countries experience more difficulty in a recessionary environment. “There is an imbalance between the north and the south of the country” in terms of retail infrastructure, with more competitors and the existence of distribution infrastructures in the north region of Italy (alibaba.com, p.1). Because of this infrastructure, the northern regions of Italy reflect more favourable market opportunities, despite higher competitive forces in the north. Italy is a country renowned for some of the world’s most well-known and respected upscale fashion designers, including Gucci and Versace (among others), therefore in terms of fashion this country is experienced with fast-paced retail businesses and sustains a market interested and willing to purchase fashion clothing and accessories. This trend is noticeable in housewares as well. Industry Analysis In the fashion industry, “personal income and fashion trends drive demand for clothing, where the profitability of companies depends heavily on effective merchandising and marketing” (Hoovers.com, 2009, p.1). Therefore, the competitive structure of businesses which offer products similar to M&S is one where differentiation and effective promotion are key success factors for industry players. In today’s difficult global economy, cost-cutting is a common business practice and companies are using this to achieve competitive edge. For instance, industry players, including M&S, are consolidating distribution hubs and looking for methods to move product to foreign locations with a focus on cost reduction in the supply chain (Sandler, 2009). Rising costs within the retail and housewares supply chain force new methodologies of distribution to reduce the financial burden on retail companies. From an industry perspective, this has changed how retail companies perform business and maintain relationships with various vendors and product suppliers at multiple levels, not just financial. New partnerships and new distribution networks are being developed consistently in this industry, creating new incentives for retailers across the UK and Italy to focus more strongly on relationship marketing as a key strategic advantage. M&S, however, has been unable to hold onto its market share due to a multitude of reasons, posting a drop in profits of 37.5 percent from 2008 (Marketing Week, 2009, p.6). At the same time, competitors are not all experiencing drops in sales of like-products, which indicates that this industry depends on heavy marketing focus to achieve high sales results. Marketing, above other business activities, appear to drive success in this industry. Some major competitors, from the investor perspective, have been forced to reduce dividends in order to cut back on expenditures. M&S, in over 80 years of business operations, has never had to cut dividends as a cost-reduction measure (Bearbull, 2008). Marks & Spencer has a strong industry lead in satisfying external investor shareholders which makes this an attractive company to invest with in the hopes of maximizing per-share value and benefits. Competitor analysis Marks & Spencer maintains many different competitors, both small- and large-scale. The competitor list is too exhaustive to list all competitors, however major players include Wal-Mart, Zara, Burberry, and PPR. M&S, in regards to its fashion and housewares business concept, has some of the highest volumes of competitors at the domestic and international levels over that of other unrelated industries. This highly competitive marketplace is one reason why M&S has experienced such a dramatic drop in market share. Many competitors in this environment have well-developed online sales forums which cater to the consumer looking for convenience and rapid service in an at-home shopping environment. M&S, however, is only now developing its online click and collect service to capture the attention of new consumers or regain loyalty from existing customers (Felsted, 2009). While other companies have the information technology systems and support, as well as the distribution capabilities to support online sales, M&S has lagged behind, giving them further lost market share. To outperform competition, the company is currently offering international product delivery, from online sales mediums, to over 73 countries (Stacey, 2009). However, these efforts are in the infancy stage which poses a competitive risk to more online-focused retail competitors. In areas of public relations and brand reputation, competitors often resort to attempts at discrediting the marketing or operational efforts of competing retailers. For example, M&S recently chastised a competitor who had used promotional tactics which were similarly benchmarked against Marks & Spencer’s promotional model (Duke, Gray, Leih and Lawrence, 2008). This competitive landscape is driven by innovation and, with longer-standing competition, it has become quite difficult to generate new ideas and promotional campaigns to differentiate each business (Duke, et al). Publicised, negative competitor statements appear to be commonplace in this competitive environment in order to build a stronger brand reputation on various consumer markets. Marks & Spencer has also been criticised for failing to “reverse the company’s drift towards a much older customer base” and appeal to youth markets (Murray, 2009, p.50). Other competitors have established niche marketing campaigns and mass market campaigns which each cater to unique demographic markets, without necessarily focusing on a single consumer segment. M&S appears to be outperformed by many retailer targeting strategies which likely contributes to their rapidly-decreasing market share in this industry. The method by which retail competitors promote their products is also significantly different as each competitor attempts to find the correct methodology to build higher consumer interest and sales volumes. Marks & Spencer relies strongly on the use of celebrity in promotions, which awarded them fourth place in Adwatch’s 10 best list for innovation in promotional campaigns (Burnett, 2008). Key celebrities have included Antonio Bandares, Twiggy, and many other well-known international personalities (Centaur Communications, 2007). Competitors in this business do not seem to rely as heavily on celebrity endorsement, which might be a competitive edge for M&S despite the cost of recruiting these contracted endorsers. These competitive advantages or potential disadvantages in relation to competing company strategies will be either effective or ineffective in the Italian marketplace, which is marked by quite different consumer values and lifestyles in this new market. Customer analysis In Italy, consumers have a very strong brand loyalty regarding their favourite retailers, with a recent survey of over 2,000 consumers indicating that 67 percent of consumers are brand loyal (PambiancoWeek, 2008). Having a well-established brand loyalty to domestic fashion and houseware companies could spell a competitive risk for M&S if they are unable to use marketing effectively to give the incentive to abandon favourite retail brands. This environment is still strongly driven by the promotional merits of window displays, with 87 percent of surveyed consumers indicating that they make product decisions based solely on this aspect of marketing (PambiancoWeek). Unlike the UK marketplace, the Italian consumer is not driven to make purchases through catalogues (zero percent of consumers surveyed) and only 27 percent using television as a decision-making medium for retail purchases (PambiancoWeek). This will require Marks & Spencer to reconsider more traditional promotional efforts such as in-store presentation, in a manner which is more sophisticated and relevant than competition, in order to gain consumer interest. It is likely that heavy investment into concentrated advertising on television or through print catalogues would be ineffective and a waste of business financial resources. The contemporary Italian consumer represents different values and lifestyles than the domestic customer, requiring the need for consumer-oriented research to be conducted prior to entry into the Italian market. Research did not uncover that Marks & Spencer maintains a strong research focus in their domestic marketplaces which offer real-time consumer trends and values, which could pose a strategic risk to meeting consumer demand through product offerings and promotional materials. SWOT Analysis of M&S This positive business reputation with suppliers and employees will provide superior competitive advantage in the Italian marketplace, as the business can draw on these relationships to secure faster and more efficient distribution of product as well as internal expertise to meet with changing macro-level business forces. However, the company’s inconsistent brand reputation can work against these competitive strengths if the business is not able to generate more positive public relations buzz about entry into the Italian market. These forces could theoretically cancel one another out if M&S does not remain focused on gathering consumer data on the Italian consumer prior to launch and after operations have begun in Italy. Additionally, M&S has been accused of having outdated in-store environments which require refurbishing to meet a more contemporary consumer mindset. Because the Italian market is saturated with upscale fashion competitors with a flair for quality and modernism, the consumer markets (from a mass market perspective) are likely going to be driven by the aesthetics of the M&S retail store. This is a perfect opportunity for the business to consider a new floor plan for Italian retail stores and test market this concept for use in domestic markets as well to gain more consumer interest domestically and internationally. Since the consumers in this region are driven to make purchases by window displays and in-store presentation, this should be a strong focus for M&S as a key success factor in the new Italian market environment. However, the existence of high brand loyalty in many consumer segments in Italy poses a competitive threat and could impact the potential successes of launching a new store concept with a modern aesthetic appeal. It is recommended that Marks & Spencer work, using promotional releases prior to launch, to put M&S on the forefront of the traditionally brand-loyal consumer. Research analysis The secondary source information used to analyse the Italian consumer as well as Marks & Spencer’s current marketing focus offered a wide variety of statistics and industry opinion about the performance of this company domestically and internationally. Differentiation strategies, promotional strategies, and the method used in merchandising will be key success factors for the business in the new Italian environment. These materials provided an accurate view of the Italian consumer as well as the overall industry and competitive environments for entry into this marketplace. It is strongly recommended to consider entering the Italian marketplace as a new opportunity for growth and profit. References Alibaba.com. 2008. Italy: Selling and Buying. Viewed 26 October 2009 at http://news.alibaba.com/article/detail/country-profiles%2523italy/100019504-1-italy-selling-buying.html Bashford, Suzy. 2009. Brand Builders. Campaign, Teddington. 17 July, p.24. Bearbull, M. 2008. Bottom Marks. Investors Chronicle, London. 29 July. Burnett, Leo. 2008. Adwatch of the year 2008. Marketing, London. 17 December, pp.6-9. Centaur Communications. 2007. Antonio Banderas to join M&S girls for festive push. Marketing Week, London. 30 August, p.3. Duke, S., Gray, N., Leih, G. and Lawrence, G. 2008. Is it acceptable for brands to mimic other companies’ strategies? Marketing, London. 22 October, p.24. Eghbal, Media. 2007. Italian ageing and declining population will affect consumption. Viewed 27 October 2009 at http://www.euromonitor.com/Articles.aspxfolder=Italian_ageing_and_declining_population_will_affect_consumption&print=true Felsted, Andrea. 2009. M&S in further push online, FT.com. London, 12 October. Hoovers.com. 2009. Marks and Spencer Group Plc. Viewed 26 October 2009 at http://www.hoovers.com/marks-&-spencer/--ID__41199,FRIC__182--/free-co-competition.xhtml Marketing Week. 2009. M&S should return to core values after profits tumble. London, 21 May, p.6. Murray, Iain. 2009. The obsession with youth ignores a swelling mass of mature shoppers, Marketing Week, London. 12 March, p.50. OADBS. 2009. Italy: Economy poorly placed for a recovery. Oxford Analytica Daily Brief Service. 29 July, p.1. PambiancoWeek. 2008. Internet: Fashion’s burning moment. Viewed 25 October 2009 at http://www.fashion.at/survey/2008/pambianco5-2008.htm Sandler, Kathy. 2009. Corporate news: Marks sets strategy, Wall Street Journal, New York. 14 October, p.B7. Read More