Marks and Spencer Plc Business Strategy - Essay Example

? Business Strategy BUSINESS STRATEGY Introduction Companies in search of success or for the achievement of their business objectives can employ a number of strategies. These strategies need not be the same a company chooses strategy according to the various challenges that it is expected to face or it is facing at the moment. These strategies can involve changing the company’s management or the management system at large. This paper discusses a case study, which analyzes an organization’s pattern of strategic development from the time of its creation to its current position. In the year, 2010 “Marks and Spencer plc” took the position of the largest cloth retailer in the United Kingdom. With 885 stores in over 40 countries with 600 stores being in the UK, the company boasted that for everyone on three women were wearing their bras. However, analysts were worried about the sustainability of the company in UK; retailing recovery. In the same year, a new CEO took over the running of the company he was faced with several issues that were associated with the reassessment of the company’s competitive strategy and the present challenges of strategic change. The choosing of 50-year-old Mark Bolland, who previously was the CEO of a UK supermarket chain, was greeted with a very positive response from the public, media and shareholders alike. The new CEO faced several challenges in his new position; he had to implement strategies, which would secure the future of the company that had the most famous name in the shopping malls. The company for long had been the largest retailer of clothes in the UK. This was an organization to which analysts referred to when they were reporting whether the high street has a good or a bad season of sales. An organization, which historically is loved and known by the people of Britain. At the end of 2009 and the beginning of 2010, investors were nervous. Below are several questions that were raised about the future of the firm that needed to be resolved (Bevan, 2007 p45). Analysis In the year 2009, the company delivered reasonable results in the 2008-09 financial, trade year. This was a period that was hit by the economic recession. In the previous year, the company had registered a ? 1 billion mark in the pre-tax profits for the first time in the decade. The company’s reputation had suffered a great deal when in 1998, it became the first retailer in Britain to make profits that amounted to ?1 billion, however, within the same year the company was issuing profit warnings. This was a self-inflicted catastrophic injury from its premium position. The company managed to limp through the period with the turbulent changes that were hitting it from all directions. With Sir Stuart’s appointment as the CEO of the company in the year 2004, saw the company regain its lost glory, and, as a result, regained its health and returned to the profit level of ?1 billion (Bevan, 2007 p57). When the company was founded and was still being rum by Simon Mark, he was known for his personal, autocratic and top-down management style. He was also known for his infamous attention that he had to detail. He showed this with the way that he dealt with the suppliers. He ensured that he always got his supplies from specific suppliers and always ensured that the goods that were supplied by these suppliers were to specification. By this, he built a relationship between “Marks and Spencer plc” and the supplying group. This assured customers with high and consistent quality. The company became largely successful in terms of delivery of high quality and reliable brand to the customers. By this, the company earned outstanding rewards in profit and market share (Bevan, 2007 p60). Historically the company was run using a trusted, tried and tested recipe; this is in the way the company did business (Bevan, 2007 p65). It was embedded in several fundamental principles that the company was run on: 1. The customers were to be offered high quality and well designed merchandise that was also attractive and was sold at reasonable prices under a brand name of “St. Michaels.” 2. The company was to advise the suppliers to upgrade and use the latest methods of production . 3. The management had to ensure that they worked, with suppliers, to ensure that there is a high standard of quality control. 4. The company should always provide customers with a friendly and helpful service that offered great shopping comfort and offered convenience to its customers. 5. The company was to simplify their operation procedures to improve the efficiency of the business. 6. The company was to ensure that there are good human relations between the company and the staff, suppliers and customers and to the communities that the company serves. By following this set of principles, the company, was able to remain comfortably confident and at the top of the tree. All stores were identical in the procedures that were followed in each store. This ensured the customers’ guarantee of the company’s standards and gave the company a consistent image (Kelly & Gary, 2010 p67). The chief executives, who succeeded him, are all known for their attention to detail, this was in terms of supplier control, layout and merchandise; all these seemed to work well. The company also followed another recipe where it had CEOs who had considerable power as they were appointed both chair and CEO. During the reign of Greenbury, the company held more than twice the market share than any other retailer operating at that time (Finkelstein et al, 2008 p23). During the long years of growth of the company, few changes were made in the strategies and methods of operations. The reputation of the company as built on basics, which were essentials, needed by every customer and outlasted the trends in fashion of any other high street retailers. Using these principles the company had a record-breaking financial year, this was in the 1997-98 financial, trade year, and it topped its pre-tax profits and topped the ?1 billion mark. This record took the company ten years and three CEOs to repeat (Kelly & Gary, 2010 p56). The company’s recipe for success failed catastrophically in the year 1998. Its share prices, plummeted, and this jot lead the company through many years of turbulence. It was forced to renew its contemporarily place at the market at several places at once. The company’s allegiance with its British suppliers was becoming too expensive, yet the company was slow in seeking other sources for cheaper supply as other rivals were doing. The customers had been leaving “Marks and Spencer plc” for other competitors. This meant that the company had lost its touch with the market place, and results indicated that the company had 23% reduction in profit in the first half of the year. This lead to 50% reduction at the end of the year and a huge tumble for a figure more than 80% from 1988 to 2001 (spenser, 2012 p1). Recommendation The appointment of Sir Stuart as CEO in the year 2004 formed a turning point for the company. He followed a strategy, which was over delivering and under-promising in terms of its expectation setting. He repeatedly reminded the investors that he did not expect to see any positive results of his 11-point strategy plan until late after the spring of 2005. He had his first initiative being that of hitting the stores and the results began to improve. The 11-point strategy plan, which he followed, to achieve the turnaround revolver around five main core values that were designed to win the company’s core customers by value, quality, innovation service and trust. The strategy was popular with the employees, and gave investors the much-required assurance that the company was safe (Kelly & Gary, 2010 p90). Trading through the early times of the year 2005, trading was still difficult for the company. However, gradually the changes applied by the CEO started to take effect, and the results began to change. In 2005, October, the company recorded the first sales increase from the year 2003. The share price of the company rose, and the clothing rages were practical and stylish. When moving to the year 2005 with the first growth in clothing for more than two years, the company continued to perform well and in February of 2006 commentators and critics declared that the company had fully recovered (Kelly & Gary, 2010 p94). The biggest change that the CEO made in the year 2008 was the returning of an old and familiar formula, when in April of the same year he announced that he would take both the roles of CEO and chair of the board. This was a controversial move and bleached the advice of the combined code of corporate governance followed by almost all other companies that had a sizable share of the market place. This move was not popular with most of the investors. They believed that Rose had too much power, which had proven to be dangerous in the past, and they feared that history could repeat itself (Pearson, 2009 p98). The overall results for that year were poor, in July the company issued a profit warning. During the third quarter of the financial year, the UK’s slide into recession had an incredible impact on the sales of the company and gave the worst quarterly year of the company since 2005 with a fall of 56% in sales. In the year 2009, the company’s investors saw a 20.9% cut in their dividends. There was a mid year growth in share price, and September saw a huge boost for the company food chain. The statistics showed that the food chain was the most improved food retailer in the United Kingdom in terms of customer loyalty in the decade (Pearson, 2009 p102). The company has managed to maintain its string of success by following set of principles that the new CEO has set for the company. These strategies have enabled the company to be very successful in the past few several; years. The company had record sales in the year, 2011 and finial reports for the financial year 2012 are yet to be released, but the company has hinted that it expects record-breaking sales (Spenser, 2012 p1). Conclusion The new CEO is faced with many challenges that have left people raising eyebrows and wondering just how tough he will need to be through his reign as CEO of the most famous retailer “Marks and Spencer plc”. He will have to implement strategies that will reassure the investors and enable the company to maintain its customers in this period of strategic change. References Anderson C, and Hans J. Management strategies. Stuttgart: Poeschel, 2008. Ayers B, and Mary A. Retail supply chain management. Boca Raton: Auerbach Publications, 2008. Bevan J. The rise and fall of Marks & Spencer : And how it rose again. London: Profile Books Ltd, 2007. Calhoun F, and Stephen W. Threat assessment and management strategies : identifying the howlers and hunters. Boca Raton: CRC Press, cop, 2009. Eilon S. Management strategies : a critique of theories and practices. Boston: Kluwer Academic, 2009. Finkelstein S, Andrew C, and Jo W. Think again : why good leaders make bad decisions and how to keep it from happening to you. Boston: Harvard Business Press, 2008. Furash E. Management strategies : a special collection from the Journal of lending & credit risk management. Philadelphia: Robert Morris Associates, 2007. Gitman J, and Carl D. The future of business : the essentials. Mason: South-Western Cenage Learning, 2009. Grundy T, and Laura B. Strategic project management : creating organizational breakthroughs. London: Thomson Learning, 2002. Kelly K, and Gary E. Leading in turbulent times. San Francisco : Berrett-Koehler, 2010. Pearson J. The rise and fall of management : a brief history of practice, theory, and context. Burlington: Gower , 2009. Sadler P, and James C. Strategic management. London: Kogan Page, 2003. Saloner G, Andrea S, and Joel M. Strategic management. New York: John Wiley, 2006. Marks and Spenser. About M&S Money. January 05, 2012. Retrieved from; http://money.marksandspencer.com/about-money/history/ (accessed May 29, 2012). Thompson L, and Frank M. Strategic management : awareness & change. Andove: South- Western Cengage Learning, 2010. Read More