Marketing, Human Resource, Operations, and Financial Management - Essay Example

Competitive Advantage Written By: Q1. An explanation of how the two management teams have attempted to restore the competitive advantage of the company. Your analysis should cover Marketing, HR, Operations and Financial management and should clearly COMPARE the approaches of the teams. Year 2003 Marketing – A significant improvement in customer service/relations and management included a new innovation in marketing management, which proves to be potentially beneficial for customer service. This marketing management consideration related to the tills for more automated checkout in what would be known as the Chip and PIN programme bringing banks, building societies and retailers together to combat the ever expansive problem of credit and debit card fraud. The trial began in fiscal year 2003 where cardholders would authorise purchases with the use of a Personal Identification Number (PIN) in place of their signature. (M&S Annual Review 2003 inside cover operating highlights) Year 2003 HR – Improvement in quality was managed in several ways including reconstitution of the store management structure including the presence of a store manager at each of the stores. Each of these store managers would have clear goals, responsibilities and accountability. There would be a field-based area management team offering the benefit of internal and external experience, which brings M&S in line with leading industry standards, thus providing a basis for further improvement in customer service, leadership and overall store standards. (M&S Annual Review 2003 inside cover operating highlights) Year 2003 Operations –There was increased market share in Women’s, Menswear and Lingerie with both strong product appeal and quality. The opening of thirteen Simply Food stores garnered 250,000 new customers shopping per week and the pilot program of the new credit and loyalty card proved successful with national roll-out in the second half of fiscal year 2003/2004. Considerations for the improvement of customer service involve potential for relocating the fitting rooms and the customer service within them. (M&S Annual Review 2003 inside cover operating highlights) Year 2003 Financial Management – The chairman, Luc Vandevelde, believes that “the key to regaining market share has been a focus on improving both the appeal and value of our products, thereby making aspirational quality more accessible to our customers, The Home programme opening just prior to the launch of the credit and loyalty card in Financial Services. During the fiscal year 2003 operating profit in continuing operations surged upward after exceptional items 14.1% and earnings per share rose 19% while group profit before tax actually decreased by 1.3%. The final dividend was up 12.1% per share (Financial Highlights inside cover M&S Annual Review 2003). Year 2004 Marketing – During this fiscal year marketing suffered in many locations including food, men’s and women’s wear. As a result, changes were made in design of the men’s departments in the M&S stores. Core departments where customers would first go would have clear definition within the stores and the products that are most desired based on customer demand shifts. Product displays would be more imaginative and more significantly signposted and new classic and contemporary brands would be brought under the Marks & Spencer umbrella brand, each with a section of the store for ease of location so that customers may locate the styles and looks that appeal to them the most. (M&S Annual Review 2004; p 13) Year 2004 HR – Stabilisation of King Super Markets in the US is managed under new management after decisions last year not to sell the franchise. The performance of all international stores and outlets was better than expected. Structuring of customer support in relation to financial services as a result of the issue of store credit cards has provided a new area of expansion in relation to human resources. (M&S Annual Review 2004; p 13) Year 2004 Operations – New display equipment was considered as of the last fiscal year and this has gained a 30% increase in choice for women’s clothing without overstocking. This allows for ease of view for customers in regard to new lines each season. Two fashion only stores have provided us more comprehensive operational changes. Displays have become important details in operations emphasising customer service and employee appearance to benefit customer service. As a result of an analysis of efficiency, it was announced that 500 jobs were to be lost this year and potentially as many in the next (M&S Annual Review 2004; p 16). Year 2004 Financial Management – The launch of the credit cards proved to be the largest undertaking in Europe. The largest ever promotional campaign was launched as a result. The introduction of this credit card was managed on schedule and within the budget of ₤60 million with nearly half of the current Chargecard customers moving to the new card within a short six weeks (M&S Annual 2004 Report; p15). At this point, M & S is one of the top-ten credit card operators in the UK. As a result of Parliamentary criticism on the way the credit card industry was being managed M&S sought to seek direct confirmation from our customers before sending the new card. We inquired with customers and requested contact before activation. As a result, there are now 2.1 million &more accounts and 2.7 million card-holders (M&S Annual Report 2004; p 15). Year 2005 Marketing – In regard to marketing franchise space was increased by 23.3% to 191 stores (2005 M&S Annual Report p 15) New store design has expanded to include 21 stores and retail structure reorganisation in the top 34 stores has prompted the creation of two flagship divisions to drive this initiative (2005 M&S Annual Report; p 5). Footage expansion for clothing and home and food departments will be between 1.2% and 3.3% along with ten new stores in retail parks. A 90-day refund limit was set in May 2005 (2005 M&S Annual Report; p 5). Year 2005 HR – Luc Vandevelde left the company early and stepped down as chairman. Paul Myners took his place. New executive leadership was managed in the employ of Stuart Rose as Chief Executive, replacing Roger Holmes and Charles Wilson became executive director of the Board. Reworking of shift patterns has facilitated the capacity of having more customer assistants on the sales floor during the busiest times. The creation of a Retail Training Academy has become a forum to improve service by provision of customer service training. Labour turnover due to resignation was 14% (2005 M&S Annual Review p15). Year 2005 Operations – The highlights for this fiscal year included the completion of the first stage of a three-year plan to refocus business beginning in 2004 and extending through 2006/2007 to broaden horizons. Focus was restored to our customers taking action in three areas including product, service and store environment. Supplier agreements were renegotiated and reorganized in terms of buying terms to speed delivery of high quality products to the stores. A reduction of stock commitments by over 35% (Operating Highlights Annual Review 2005 M&S) in order to increase flexibility and reduction in clutter to ensure ease of shopping and extended store format trials. The Marks & Spencer brand was strengthened by the launch of Your M&S. M&S Money was sold to HSBC and acquired per una, the Lifestore project was closed returning ₤2.3 billion to shareholders and 31 Simply Food stores were opened (Operating Highlights Annual Review 2005 M&S). Year 2005 Financial Management –Sales stood at ₤7,942.3 million, down by 2.6% (M&S Annual Review 2005; p1). Group operating profit after exceptional items was down 20.9 % (M&S Annual Review 2005; p1). Group profit before tax was at ₤745.3 m, which is up by a marginal 0.7% (M&S Annual Review 2005; p1). Earnings per share were up 27.1% and the full year dividend was up 5.2% (M&S Annual Review 2005; p1). The return on equity was at 31.1% before exceptional items and at 41.4% afterwards (M&S Annual Review 2005; p1). Operating cash flow from continuing activities was at ₤944.8 million before exceptional items and at ₤875.5 million afterwards (M&S Annual Review 2005; p1). Year 2006 Marketing – Though the beginning of the 2006 fiscal year proved to be difficult in the realm of marketing, the second half of the year proved to be more beneficial at this point. Clothing continues to be the strongest in sales performance raising the market share performance 0.2% over 2005. Primarily the reason for this was deflation of price. Overall, sales in clothing decreased as follows 0.2% in Womenswear based on market share, Menswear decreased by the 0.3%, Lingerie decreased by 1.4% and Children’s wear decreased by 0.2%. This was offset by the increase in full price clothing which was up 2.0%. The addition of the ₤5 women’s t-shirt, ₤6 bra and ₤50 career girl suit along with the ₤9 men’s jeans and fleeces contributed to some of the benefits. (All numbers from page 9 M&S 2006 Annual Review) Year 2006 HR – The decision was made to improve our employees’ ability to fulfil their roles and is key to our success. Simplification of the methods in which M&S would pay, train and motivate our employees was required. As a result, in May 2005 a clear structure with real opportunities toward careers for customer assistants and a clear pathway toward career progression through new roles including Trainee, Qualified, Coach and Section Co-ordinator (M&S Annual Review 2006; p7). Year 2006 Operations – To improve performance in children’s wear the choice to move management of Baby wear and Girls wear to the control of the Womenswear team was made. The same was done to move Boys and Toddler clothes under the management of Menswear. One of the first changes realised was that of the ‘Girls Boutique’ for ages 7-14, which had a good first season. Our value credentials continue to be re-established in the introduction of new offers in women’s t-shirts, bras, career girl suits and men’s jeans and fleeces (M&S Annual Review 2006; p 23). Year 2006 Financial Management – Significant changes have been noted in the operating profits from the previous fiscal year in an increase of over ₤200m. Profit before taxation rose by ₤140m (M&S Annual Review 2006; p 23). Total non current assets were ₤4,068.4m in 2006 as opposed to ₤4,035.0 in 2005 a marginal increase of ₤33m (M&S Annual Review 2006; p 24). Current assets rose from ₤832.3m to ₤1,142.1m in 2006(M&S Annual Review 2006; p 24). This was a significant increase. The ratio of liabilities to assets would be quite interesting, having increased by ₤97.1m, yet not damaging the asset net by a great margin (M&S Annual Review 2006; p 24). Total share equity was up ₤244.1m (M&S Annual Review 2006; p 24). Q2. An evaluation of the success (or otherwise) of each team, your answer should include a discussion of the financial performance of the company and other measures of success. Year 2003 - This team proved marginally successful in the launch of the new programs and the reorganization of the management structure. The successes are seen in the Chip & PIN programme, advertising campaigns and quality improvement along with customer relations, and as a result the increase, though marginal, in profits and sustainability during Fiscal Year 2003. With the improved management profits were seen where there had been none prior, including stores in Hong Kong, Cyprus, Turkey and Greece. (2003 M&S Annual Review; p 3) Year 2004 – The Myners team more than marginally successful in their efforts during the fiscal year 2004, but only in certain areas. Group operating profit was increased by 6.5% even after absorbing ₤ 59 million for the launch of the ‘&more’ card; the profits and efficiency rose significantly in those areas. The drawbacks included layoffs of a significant number of employees as a result of restructuring. The increased transference from the ‘&more’ card and administrative and store restructuring facilitated these differences. The restructuring in these departments allowed for better management and further growth in retail. (2004 M&S Annual Review; p 3) In this, the goals described may not have been fully reached but were realized. Year 2005 – Significant losses were noted by 19% profit loss. Children’s wear market stabilised. Womenswear and lingerie weakened sales. Menswear showed fair progress in some areas. Missed opportunities were identified and changes were made during the spring to include both petite and plus ranges for Womenswear in 33 stores to be expanded to 80 stores by August and inclusive of a maternity range. Increased market share in the range of 55 plus patronage followed as a result of the relaunch of the Classic Collection in late 2004. Opening price points are now benchmarked to provide better cross-range pricing and real choice and value for customers. Sales in food were up 2.4% and demand remains high (M&S 2005 Review; p 4). Year 2006 - Success for M&S was not seen necessarily in marked increase in profits but in the marketing structure, the customer service structure and the ability to maintain high standings in the rankings of retail stores. The launch of new product lines, streamlined management of the retail stores, customer service, training and availability of more employees facilitated a more detailed and driven organisation. (2006 M&S Annual Review; p 3) Q3: During seminars we looked at the M&S/Zara case study (please see M&S/Zara Summary of Issues) and identified a number of issues facing M&S. Discuss how far these issues have been addressed by the two management teams. The Vandevelde team attempted to repair the problems in the decline seen from the 1990’s but failed to see the underlying problems involved. For two years the struggle to regain lost ground in their work managed little in regaining their competitive advantage. Diagnosing the situation provided a list of strengths and weaknesses but what was left unseen in the first team were the underlying problems noted in the problems. This led to management changeover to Myners team who worked with the strengths, according to the M&S/Zara case summary of issues, which include a large market share, highly respected brand, technical excellence, a consistently high quality and continued growth in food and financial services. The problems consist of falling overall profitability cutting the profit in half within two years, poor financial performance throughout Europe and the Far East, a loss of market share in clothing sales and slow growth in the most recent figures. (M&S/Zara Summary of Issues, 2) The challenge for operations for Myners team would be questions in regard to whether or not redesign of the supply chain for rapid fashion design changes are requisite. This of course remains dependent upon market choices and the need to satisfy demand from the target market. In the realm of finance, the question remains as to whether cash may be afforded for new investment and whether or not it is dangerous not to invest. Human resource management faces management resistance to locate new thinking and potential in external recruitment. (M&S/Zara Summary of Issues, 2) Q4: Using your answers in Q1-3 discuss the current competitive position of Marks & Spencer. Is the company on course to return to the levels of profitability last seen in the 1990’s? Give your own proposals to enhance performance over the next few years. Overall, the progress, though slow, is positive. The broadening of customer service availability and the specialisation in clothing lines and other areas allows for further potential progress. The narrowing of focus in place of broadening allows for further expansion of the customer base and customer loyalty. Will this gradual change provide for the potential of explosive growth and profitability last seen in the 1990’s? This is possible, but a constant examination of the markets and customer satisfaction levels must be managed. This must be done in order to regain the ground lost since then. The narrowing of the brand names, but expansion of the range of choices facilitates potential growth in clothing and the expansion of individual specialty locales for food, clothes, and home products. This brings in more potential toward future growth and stronger ability toward competition in the chosen markets. Read More