Changes That Have Contributed in Strengthening of the Companys Value Proposition - Essay Example

Value proposition models and changes that have contributed in strengthening of the company’s value proposition Abstract Marks & Spencer (M&S) is one of the largest retailers in the United Kingdom with a selling space of 12.5 million square feet, established since 1884 and earlier named as ‘Penny Bazaar’. M&S sells various products ranging from clothing, food, footwear, gifts and home furnishings (Lukechina, 2008). The company operates through more than 840 stores all around the world. The company’s franchise operates in almost 34 countries such as Europe, Hong- Kong, Australia, etc. M&S is regarded as the largest clothing retailer in United Kingdoms, and is forging ahead strongly towards capturing the highest rank in food retailing as well (Lukechina, 2008). Since the late 1990s Marks & Spencer has faced serious boardroom instability and made continual efforts to regain its position, but unfortunately couldn’t attain success. The coming years marked tremendous change in various arenas of the business, for instance in 2001 , changes in the business mainly focused on taking credit cards, introduction of the "Per Una" clothing range designed , redesigning of the business models etc but nothing worked to its best. The major challenges confronted by Stuart Rose at the time rejoining Marks & Spencer and in the process to revive the giant back were mainly intense competition, sustaining and revitalizing the brand image, downsizing, complicated business and ineffective management system. After analyzing the various available change management theory such as Lewin’s planned changed model, Action research model, positive model etc , Rose finalized a transformational change for M&S, whereby major focus was put on implementing a cultural and infrastructural change, self design, supply chain management, organizational learning and knowledge management (Cummings, T.G, Worley, C.G. 2005). Stuart Rose, the CEO of Marks & Spencer has clearly revealed the essence of change management. The need for change is depicted through the application of models comprising of ‘Leading Change’ and ‘ Managing Transitions’ approaches which have proven to be quintessential for the functioning of the business in a more structured and refined manner. Rose stands by the vision of the organization which is to maintain such “standard against which all others are measured” Background Stuart Rose pointed that inventory management was poor and needed proper and effective control and supervision. He also revealed that decision making was being delegated without accountability or senior management sign-off which was one of the major reasons for ineffective management, and led to the customers being attracted to newer, dynamic competitors. Stuart’s Changes and What They Brought About First model: Revamp from top to bottom Rose initiated the change process with a core team of reliable and dedicated people he had worked with earlier and was aware about each individual’s strengths and capabilities. Rose established a well knit team including the Executive Director of IT, Supply Chain, and Property, and the Executive Director of Marketing and Store Design and moved forward to accomplish the set targets. Instead of including lengthy and complicated research and consultancy teams, Rose firmly relied on a simple communicable statement of what had to be done and was more than enough to channelize effort in the right directions. For Rose, the concept or philosophy was just to "improve the product, improve the stores, and improve the service." Rose applied Kotter's Leading Change model of Change Management which emphasizes on the critical need for change (Cameron E, Green M, 2004). The model represents a 5-P framework for implementing change including ‘purpose’ which deals with specific targets of change, ‘priority’ whereby the identified changes should be prioritized, ‘people’ who are affected by the change and who can be involved in bringing out change should be identified, ‘process’ sets direction, participation and consultation and lastly ‘proof’ which demonstrates the accomplished proof. In-depth Flow of Change Deep Down into the Organization To incorporate change in the firm, it was made to flow deep down at the roots of the organization. Each and every employee comprising of 56,000 employees was put through rigorous training for imparting the best possible customer service and Rose made it a point to conduct operational day to day meetings to the "level of micromanagement" in order to focus the conversation in detail on the key points. Incentive structures were modified in order to encourage creditworthy performance instead of seniority, redefining the career progression path. The proof of the identified change and the change process was obvious in the company sales, profits and increased customer database. Second model: Bridges Managing Transitions Approach A second model of change management applied by Stuart Rose was the ‘Bridges Managing Transitions approach’ whereby the whole outlook of the stores was changed, just to meet the needs of the customers (Krovetz L M, Arriaza G, 2006). To adopt the specific approach, Rose encountered an environment whereby “people within M&S were already lobbying for different plans, different strategies." Due to the available market opportunities, it was meaningless to try one direction and perhaps change to a different course if that didn't work. Rose ended on a common point where there was no scope for any plan B. Rose committed to letting go of alternative ideas and the status quo, and committed the organization to the new path. Benefits that were Derived from Value Proposition Theoretical Models Stuart’s changes were based on the value proposition theoretical models and the same seemed to be working towards maximum benefit. Even though it was considered for Marks and Spencer, an established company, to pull off the new growth that business model innovation can bring, yet it did so and did it very well. In this regard Stuart seemed to be understanding its current business model very well and did not falter anywhere in hinging it to the new, innovative way of revamping the company. Marks and Spencers was already operating according to a business model, but Stuart’s intervention broke down the whole scenario into four elements: a customer value proposition, which made the customer the actor of the business and offered him an edge as compared to what competitions did; a formula for profit that outlined how the company can make money out of the proposition; and key processes and key resources that helped deliver what was envisioned. The value proposition model offered an incentive sort of to every level; the customer, the staff and the company. This helped company focus on its core values of quality, value, service, innovation and trust, while providing high quality products, for instance food and stylish clothing, financial services etc (Worth R. 2007). Sales of clothes have stabilized, and food sales have increased. Stuart as chief executive with fresh ideas led sales growth touch new highs, while gaining strong reputation for innovation, use of iconic models to attract core target group. With its customer centric approach, it was termed as a strong value proposition. Attractive and innovative campaigns, for instance ““Look behind the label’ campaign” gave it a new thrust, and that, in turn, led to ccontinual training and development cell with richest and most extensive customer database. This gave the company an edge over other competitors in offering products at a better price and in a convenient manner, apart from bringing about a complete makeover of the stores for customers comfort, improvement in store environment, reinforcing the leading market positions for the over 45 age group, making stores more attractive for customers, through easy navigation and inspirational environment, distinct products and refined service. This also brought about a price realignment and supply chain development and expansion. Another edge was iintroducing wider ranges such as Per Una, Autograph and classic collection to stores. These models, however, called for looking into operational issues and aattracting and maintaining high caliber sales and store staff remains a key concern. There was also need to look into poor performance on children’s wears and checking home for further improvement. There was also need to maintain highest standards of buying and continually improve buying processes and focusing on younger market too, in order to retain it. The Company’s Strength and Its Past Outlook Marks & Spencer generic value chain could be measured by identifying its primary and supporting activities: Inbound Logistics: deals with the receiving and warehousing of raw materials. M&S has full knowledge and control of the production and raw material of superior quality and innovation. M&S looks for differentiation in the market place which it realizes by its long-term supply-side partnerships. M&S emphasizes more on the sources from where they buy their raw materials. In M&S, merchandise is received through the process of automated matching orders and invoices and the related information of receiving is passes on both to the warehouse and the stores simultaneously. Such system helps to develop more co-operative relations with the suppliers due to timely payments. Operations: includes the transformation of inputs into finished products and services. M&S makes use of proper channels or supply side models such as direct supplier, indirect supplier, smallholders, certified supply chains etc. The whole process of the supply side helps in providing the best quality and value product. Outbound Logistics: the warehousing and distribution of finished goods. M&S runs almost 840 stores and carries out the distribution in 34 countries. M&S makes use of Multi-User Warehouse System whereby the stores sales are reported to the data warehouse and then the data is extracted for proper decision making on inventory replenishment. In its most attractive change, M&S have started selling its merchandize online. M & S now more accurately and precisely passes on information to its suppliers for fast delivery of goods, generally directly to the M & S retail stores. The new information system installed enables M & S to work with greater coordination with its suppliers and relocate merchandise to different warehouses and change allotments as per need and requirement. Marketing & Sales: deals with the identification of customer needs and the generation of sales. M&S uses special software’s whereby it can change access and allocation plans anywhere and at any time in response to the changing demand patterns which is the most important element from the competitive environment point of view and makes its customers more satisfied which in turn increases its sales. Service: includes the support of customers after the products and services are sold to them. This is one area where M&S falls weak. Few of its stores are not efficient in dealing with the customer grievances , hence marks and Spencer, especially Stuart Rose in particular has paid greater emphasis on strengthening its after sale service. Primary activities are supported by: Infrastructure: M&S is supported through its strong infrastructure and an extensive spread of stores all across the world. Implementation of advanced technology in all aspects is also a strong inspirational area for M&S to move ahead. New formats play an important role in enabling M&S to differentiate itself from value retailers and discounters. Human resource management: After many years of under-investment in staffing levels, M&S has incorporated many changes in its manpower management whereby the organization is trying to attract the crème of the retail crop. Employment of professional, high-caliber staff at all levels of management is the most significant change incorporated by the company. Technology development: as stated above, the latest software’s, advanced warehouse system, replenishment systems, marketing and distribution automated systems helps in proper and systematic functioning of the organization. Procurement: healthy relationships with suppliers and long lasting relationship with all stakeholders since past 30 to 40 years helps the organization to procure timely and high end quality distinct goods. Winning new customers and retaining exiting ones goes to the heart of most business models , including that of Marks & Spencer In retailing, consumers are generally confronted with a deluge of products and stores to choose from. Retail competitors have always attempted to differentiate their brand offering from their rivals in order to attract new customers and retain the current customers. M&S has developed from an offering of high quality and premium price products and are now a means of achieving store loyalty through a differentiated offering of high quality and reasonable priced products through cost cutting and improved production techniques (Vignali C, Vignali G, Pavicik J, 2006). M&S has always tried to excel in extending its customers a wide range of superior products including high-quality food for every occasion, trendy and easy to care for clothing, home accessories or financial services products that offer security, quality and value due to which it has been successful in winning new customer base and retaining its old ones (Bilton C. 2007.). However, the current market conditions and consumer confidence has certainly declined resulting in reduced profits year on year, major causes being lower sales and investment in margin (DBN, 2008). It was observed that although Marks and Spencer did experience lot of difficulties in the last five years, still the company in its strong administration and change approach was able to retain a significant market share of 15 percent (DBN, 2008) within the apparel and textile industry. Rose is still very confident in regaining a much higher market share through incorporating its change management through managing its cost base tightly. Communicating with the target market, implementing a direct marketing campaign and improving customer loyalty schemes were few major steps undertaken by M&S to revive back and increase the customer loyalty towards the company. The changes adopted by Stuart Rose regarding inventory and supply chain management along with proper transitions approach had a deep impact on the customers. Rose had reinforced the communication of the message symbolically in form of massive housecleaning. He felt that they were dealing with too many sub-brands , signage and titles and names on cardboard that just cluttered all over the stores and shops. Removing such mess from the shops had a significant impact on the way the stores looked and how employees felt. The same message was communicated to the customers as well. The outlook of the stores was completely transformed , for instance food halls were now decked out in matte steel refrigerators and shiny black tile floors to create an ambience in which people felt more comfortable and good about the premium they were paying for the quality of products served to them by M&S. In order to realize the broad goal of strong customer service relationship, Global retailer Marks & Spencer wanted to turn its already existing strong customer service operation into a highly efficient system for provision of quick response to customer. Successful Marks & Spencer’s stores have incorporated effective changes including cleaner, lighter, more stylish selling areas, more alluring food displays, leading-edge café areas, refreshed lingerie environments and larger, more comfortable changing rooms for enriching the experience gained by the customers. Impressive and attractive new store formats including Basingstoke, Shoreham, Richmond and Cardinal Place, Victoria etc aim to realize exciting prospects for sales growth just because of their renewed structure and design that sooths up the customer’s dealings with the brand. New store formats launched by Marks & Spencer’s have been well accepted by the customers as they greatly enhanced customer experience and also recorded a considerable sales uplift observed in ‘relaunched’ stores. New formats play a crucial role enabling M&S to discriminate itself from other successful brands. Stuart Rose has stated that analyzing the significant investment in the business over the past few years, the company had restricted its capital expenditure to GBP700 million in 2008 and projected a deduction of GBP400 million in 2009 (DBN, 2008). in future the main focus of the organizations investment would be to realize a major change that is none other than the store modernization which has already been achieved to a very large extent as almost 80 percent of M&S store base has been modernized, and secondly its expansion project related to the investments in supply chain and information technology which will drive improvements in costs and operating efficiencies in a longer course of time (DBN, 2008). Stuart Rose says that “We will work with our supply base in both GM and Food to mitigate the impact of higher cost prices and adverse currency movements and we will continue to manage our stock levels and commitments tightly”. Rose also confirmed that their tight cost control has resulted in the first half of 2008 figures to be up by 5.1 percent (DBN, 2008). The value proposition of new space, growth in volumes and inflation, have resulted in a reduction of costs almost GBP48 million and a further cost growth for the coming year is expected to be between a range of 4 to 5 percent (DBN, 2008). Marks & Spencer supports the DEFRA model (Gregory D, Vorley W, 2008) for attaining sustainable development involving components including environment, society, economy, governance, and science. These values propositions have been the core part of Marks & Spencer strategy since its establishment years back. M&S has always given importance to quality, value, service, innovation, and trust and tries to maintain its 100% brand image to ensure complete command of its supply chain (DBN, 2008). For decades, the Marks & Spencer brand is recognized by its customers for contributing and exploring products and services that genuinely meet their needs. The organization is acknowledged for offering high quality products at great prices. From so many years M&S brand name has become tantamount with quality, value, service, innovation and trust which are principles which have become the foundation of the Marks & Spencer brand value proposition. Over the years M&S brand has built up a strong goodwill for innovation. Its focal point has always been customers, their need and wants and exploring new ways of delivering it. Rose pointed out that their inventory and distribution system is weak which has a deep impact on the customer’s disposition. Marks & Spencer’s customers are fascinated by the fact that the organization’s innovations are designed in such a manner that tells the customers about the ways the company’s products are sourced and made through their new approach which says “Look behind the label’ campaign”. As part of the firms newly designed campaign, all M&S stores, including windows, and in-store graphics, reveal clear and strong messages with striking descriptions about M&S products and resulting health, quality and environmental aspects. This helps to gain the trust and confidence of customers and strengthen their loyalty with the firm. Results Thus after analyzing the Value chain model for M&S, it can be clearly ascertained that change management theory in and during Stuart Rose administration has certainly refined and restructured the past sloppy pace and growth of Marks &Spencer into speedy and swift sales, customer satisfaction and high profitability rate. Marks & Spencer’s has been successful in attracting new customers and retaining current customers( Miranda M J, Joshi M, 2003) as they ‘add depth and breadth to the retailers’ existing ranges and also provide a promotional pull. The organization offers a wide range of products which are distinct from their competitors. The firm by adopting a change theory has attempted to create a competitive advantage as exclusivity is built to the stores through its unique offering of quality and market segmented brands. It is the high quality M&S store brands that provide differentiation, store loyalty and profitability along with its contented customer base. Collaborative teams including Marks & Spencer, Accenture, Siebel and Microsoft have joined hands in order to establish Marks & Spencer's integrated customer relationship management processes and system built on Siebel's eBusiness Applications. Marks & Spencer has tried to restructure and explore their inventive capability that improves the procedure through which they serve their customers (Accenture, 2005). The company’s agent and employees are already aware about the company’s history prior to answering a call or clarifying the doubts, grievances or queries of the customers. Customer inquiries are resolved consistently, satisfactorily, accurately and as fast as possible. Future work To strengthen the company’s supply chain and systems to support the future growth, M&S is jointly working with its partners in areas such as buying, catalogue management and pricing. The firm is trying to attain the best possible margins and tightly control costs to ensure financial flexibility for enhancing company’s values for its customer database, hence facilitating customer attraction and retention both along with maximizing company’s profitability. The organization’s warehouse management and the merchandise receiving system along with its real-time data reporting, enhances its customer relationships to a very large extent. Customers are able to locate what they want because replenishment is accomplished within no time at all making them more than satisfied at all times. Marks and Spencer management believes that social conditions are very important to consumers, due to which the organization has put forward a step and works on the forefront for the establishment of SEDEX, which is an approach to manage excessive numbers of expensive social audits particularly for the small suppliers. Conclusions Stuart has shown that if a company is going to deliver on value proposition to its target markets and segments, given its current knowledge pool it has on the same, then there are a few key relationships that will sail this deliverance through. However, one may ask relationship with whom and why. And the value proposition model has a simple answer; with all those whom your company is directly or indirectly linked to -- starting from the immediate staff to the remote customer. As shown by the progress chart of Marks and Spencer’s, this model works at the chiefly six markets, which are: internal markets at the company's level; referral markets that give it word of mouth publicity; influence markets that make the company's working conducive; employee markets that help the company attract and retain the best talents; supplier markets that make the supplier ends very reliable and last but not least customer markets that help retain the customers. References Accenture. 2005. Case Studies. Marks & Spencer: Customer Relationship Management Solution, retrieved on 8th January, 2009, http://www.zdnet.com.au/whitepaper/0,2000063328,22107948p-16001339q,00.htm Bilton C. 2007. Management and Creativity: From Creative Industries to Creative Management. 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