Marks and Spencers Success Story - Essay Example

Marks and Spencer’s is one of Britain’s most well known companies. Started in 1894 by Michael Marks and Tom Spencer, this company was a small enterprise. However, this changed over time. Tom Spencer died in 1905 and Michael Marks died in 1907. After their death, their children took over. The bought the London Penny Bazaar Company and in 1916, Simon Marks became the chairman of the company. Simon Marks was a pioneer. He was responsible for Marks and Spencer being the first company of its kind to buy products directly from the manufacturer instead of the middlemen, thereby saving the company a lot of money. In 1926, Marks and Spencer became a public company and then there was no looking back. They went on to register the St. Michaels trademark and eventually started selling textiles and food products. As time went on, they released products that catered to specific communities like the Chinese and Indian community. They introduced charge cards and opened stores in different countries of the world. Marks and Spencer’s developed their brand very carefully and successfully. Their name became synonymous with quality and class. The St. Michaels brand grew so rapidly that they even released candy bars with that name and it was a hit. In the last few years however, things have started to change. There have been a number of problems and changes in the global market that led to a sales decline for the company. Some problems have been coming their way for years and they didn’t acknowledge them, and now they are so big that they can’t handle them. One of the main problems is price competitiveness. Marks and Spencer’s is a very expensive brand. However, with the global markets opening up, other brands have been outselling Marks and Spencer’s. They are cheaper and yet just as trendy and are of good quality. The consumer too has changed. The new generation has more access to information on fashion through magazines and the internet. They are a lot more aware of their options and a lot more price conscious. They don’t just go out and buy a product; they research it and look for the best value for money. Marks and Spencer have taken a big hit here. Low cost retailers have improved the look and feel of their product. They don’t just make clothes, but they pay designers to design them and then mass produce them at a lower cost. This is now possible with a lot of Asian countries becoming more manufacturing intensive. In 1993, China had to reverse the fortunes of their failing economy. They researched their own economy and found a number of ways to become more efficient. The downside of this was mass unemployment resulting from cutting a number of redundant jobs. At that time, they had to provide employment for about 100 million people over a five year period. This is when they became a more manufacturing intensive country. They used their large population to their advantage. This political change hit a lot of companies like Marks and Spencer. Now, retailers could get their newly designed clothes manufactured at a much lower price and a faster rate. They suddenly dropped their prices and everybody could afford to dress a little better. With lower overheads, they could spend more money on advertising and marketing and over time they helped form new attitudes amongst the consumers. Suddenly, Marks and Spencer was not the only big brand out there and people felt just as good about themselves when they bought clothes from other manufacturers. As if this wasn’t enough, St. Michaels, the leading brand for the company started to lose popularity. This brand had been around for more than 70 years. The younger generation did not identify with it like their parents and grand parents did. Instead of re-branding, Marks and Spencer decided to keep depending on the brand equity they had built over the years. This was a double edged sword for them. On one hand, they risked losing a brand that had taken them so long to build, and on the other hand they risked losing a younger generation. They decided to persist with St. Michaels and as a result, sales declined. It is unbelievable, but Marks and Spencer seems to have lost touch with innovations in marketing. In the early 1900’s stores were set up to give out an element of grandeur. Shopping at Marks and Spencer was a sort of a privilege. This has changed over time though. Today, big stores actually hire psychologists who help set up the store. They observe shoppers and how they react to visual stimuli. They actually map out the store in such a way that it will make shopping an enjoyable experience for the consumer. If the consumer is enjoying themselves and are comfortable, they will tend to spend more and return to the store repeatedly. Marks and Spencer has not changed their store layout for a number of years. As a result, when people walk in, they are struck with a sense of déjà vu. They remember their fathers and grandfathers shopping there and automatically perceive that products sold here are old fashioned. This perception actually leads them out of the store and into a more modern store. Marks and Spencer needs to change their layout. They need to become more modern. Changing with the times is not an option, but a necessity. All these are factors that have combined to spell doom for Marks and Spencer, but the factor I feel has hit them the most is the generation factor. The main target audience for Marks and Spencer is Generation X and Generation Y. However, unlike previous generations, these generations are not as brand loyal. Especially Generation Y. They look for the best deal and it is not necessary that if they bought and liked one product, they will persist with it for the rest of their lives. If you look in the closet of a Generation Y person, you will find a number of products from different manufacturers. Brand name is only one of the factors they use to make a purchase decision. Other factors are the design, the price, the availability, and the convenience of purchase and the marketing of the product. Till the seventies, Marks and Spencer enjoyed high sales because of brand loyalty. However, with more choices being available over time, and with the change of generation attitudes, these sales have taken a hit. All the above mentioned factors are responsible for the decline of this powerhouse. However, it is not necessarily the end of this great company. Marks and Spencer have acknowledged the problem and have been working furiously to change this trend. Currently they are still recording losses in sales and clientele but some of the counter measures they have taken have reduced the decline. They are now trying to change things. One of the first things they have done off late is to reduce their prices. They recognize the fact that price is sometimes a make of break factor in the purchase decision. Dropping the price can make them a little more competitive, especially considering the fact that they still do have a fair amount of brand equity. Marks and Spencer is still a classy product in the consumers evoked set and if the price is made more affordable, it could change purchase decisions in their favor. They have also tried to make their procedures a little more efficient. They have cut down on redundancies internally. Unfortunately, this comes at a price. They have laid off more than a thousand employees. This has reduced their overheads. An effect of this is more of an ability to drop prices and more money for marketing. Over the next year or so, Marks and Spencer will spend over 400 million pounds on marketing and public relations. They are using this money to re-brand their product. They are going for a younger look to target a whole new audience. Instead of classic, they are trying to promote shabby chic. This money is not just being spent to promote products, but to promote the company itself. They also launched Lifestores. These were modern furnishing shops. They did well for a while, however over time the sales for this declined too and they are now in the process of closing these down. One of their most successful products came with Simply Food. They re-branded their foods division and this is one of the few products that have shown an increase in sales over the last year or so. This has been very positive for Marks and Spencer. Another brand that is helping lead the recovery for them is Per Una. This is a new brand of clothing that they launched targeted towards fashion conscious women. This brand was launched in 2001 and has been fairly successful for Marks and Spencer. Under this brand, they have tried to sell trendy clothes at affordable prices. Their main target audience is career women who are fashion conscious as well as deal conscious. Marks and Spencer also have a website that has become an effective tool for them. A lot of Generation Y people shop online or at the very least research products online. The website gives more product information along with pictures and one can buy products from there too. Since there is no real salesperson involved, overhead costs are low. With international shipping available, it is a global store for Marks and Spencer. The company has been working hard to turn its fortunes around. They are becoming more innovative and are actually studying the reasons for their decline. One by one, they are trying to tackle their problems. Their food department is growing in sales and Per Una is doing well. This however did not stop retail giant and billionaire Phillip Green from making a hostile takeover bid for the company. He saw the potential in the company and made as many as three different attempts to take the company over. Marks and Spencer rejected all three bids. According to the latest reports, Green has decided to abort his take over attempt. The challenge however, is not over. Marks and Spencer now needs to work hard and change their fortunes. One strategy they have been heading towards is to become smaller but profitable. They are now thinking of reducing their store sizes and becoming smaller in order to reduce prices and increase volume. This challenge has many elements to it. They have to re-brand to reach a different and evolving target audience, discover more efficiencies in order to cut costs, become more price competitive with their rivals, revamp all their stores and ensure that their newly launched brands do well in the market, thereby increasing brand loyalty. This is not going to be an easy task for them. Especially considering the fact that their rivals have a head start on them. They are definitely headed towards the right direction. Sources: www.marksandspencer.com http://business.scotsman.com/topics.cfm?tid=363 http://news.bbc.co.uk/1/hi/business/3624961.stm http://query.nytimes.com/gst/fullpage.html?res=9B06EEDE153AF930A25752C0A9669C8B63 http://en.wikipedia.org/wiki/Per_Una http://www.examstutor.com/business/resources/companyprofiles/marksandspencer/history.php Read More