Challenges faced by marks and spencer

Executive Summary:

The report tells us why Marks and Spencer is an essential British retailer functioning on the market of both textile and food. In spite of being an appreciated brand in UK as well as in Europe they are confronted with various impending problems. Its very necessary for Marks and Spencer to find a steady balance between its long lasting uniqueness of tradition and changing fashion industry and also its expected for them to bring in a balance in anxiety they face for customer, their man power and the surrounding and their ability to adapt and the most important one to renew things and do it in a better manner. During this report I will also cover the general strategies used by Marks and Spencer. What were the challenges faced by Marks and Spencer in the competitive environment.

The important verdict is that M&S holds successful business strategies and market plans, the issue is that this value is not maintained by them instead some advantages have turned out to be a disadvantage for them.

The idea of this detail is to estimate how they help themselves to survive in this ever changing market scenario it also analysis the SWOT of M&S. By analysing the existing business conditions. They also need to change their marketing segmentations it’s a must that they should divide their existing target market and serve their customers in a more effective and efficient manner.

Marks & Spencer (M&S) :

M&S is a one of the top most British Retail Organisation which is having more than 885 stores in more than 40 countries across the globe, over 600 domestic and 285 international stores [1] [2].It is the largest clothing retailer in the United Kingdom, as well as being an upmarket food retailer and as of 2009, the 43rd largest retailer in the world[3]. Marks & Spencer’s international business is supported by franchise partners in 30 countries worldwide. Operation Management plays a vital role in making or breaking of an organisation. We can say that it act as pillar for getting a success in a business. Basically “Operation and Process Management is the activity of managing the resources and processes that produce products and services[4].”

Franchise Support

Marks & Spencer aim to be a trusted partner to all their franchisees. And they are currently working closely with more than 20 companies around the world, to help them exploit the potential of the Marks & Spencer brand in their local territories.

The franchise partner (franchisee) has access to Marks & Spencer’s experienced franchise operations team who have practical experience of many international markets.

The Franchise Operations Team provides five key support services:

Five key support services provided to Franchise Partners

• Relationships : A direct link to a dedicated Country Manager at Marks & Spencer’s London Head Office, who provides commercial and operational guidance and keeps the franchise partner up to date with all the latest retailing developments.
• Brand Management : Clear guidance is provided on how to use the Marks & Spencer brand to ensure maximum impact. Marks & Spencer also work closely with the franchise partner to help them gain maximum value from one of the world’s greatest brands.
• Merchandise : Information and practical advice on which merchandise to stock, to ensure the franchise partner stores always have the right products in the right place at the right time.
• Systems : The franchise partner also benefits from some of the world’s most advanced systems for managing every aspect of a fast moving retail business, as well as access to Marks & Spencer’s leading IT support team.
• Operations : Access is provided to Marks & Spencer’s experienced human resources and finance teams who’ll provide focus and direction to help the franchisee manage their business effectively.

The UK retail division, the largest of the operation divisions, is itself sub divided into seven business units, each representing a defined area of merchandise ; women’s wear, Men’s wear, Lingerie, Child’s wear, Beauty, Home, Food etc.[5] Each of the business units follows the 4 V’s of operation management.

• Volume
• Variation
• Variety
• Visibility

Let us try to elaborate the above 4 V’s in day to day operations of M&S.

Every business unit generally keeps a high number of product depending on the need of the customer. This is what volume means, one should not run of the stock when it is in high demand. As every customer has his/her own taste, there should be variety with in the products. With this interest of the customer, we can make out the need in variation of each product. If some product is not getting sold, then it means there is a time to make variation in that product. Here variation can be in terms of cost, quality etc.

The best part of M&S is that they are having a clear picture of its performance objective, although in between they got deviated from its path. Following were the main performance objectives.

Flexibility

• Huge variety of the products of all the brands and with in the different price ranges.
• Working staff was having flexibility in there timings.
• Demand used to be covered with in the time constraint.

Cost

• They are having wide range of clothes in various cost ranges.
• They hardly offer discounts but you might find it on there own brands.

Quality

• They are trendy and go along with market requirement.
• Keep an eye on the expiry date of the stuffs.

Dependability

• They are not dependent on other contractors as they are having there own production houses.
• Goods are delivered mostly on the time.

Speed

• Proper management of space is there, so that work can be done at a higher speed like loading and unloading of goods..
• Customers can get rid of long queues as soon as possible.

The Group Sales breakdown of the business units can be shown by the below Figure

If we talk about day to day operations then we will find that they are quite complicated. There should be proper inventory management system for the goods so that they can make the note of the stock available in the unit. Mainly here only the ERP comes in the picture. Considering the operations like stock management, supply management, cash management & capacity management there were many risk or challenges associated with these processes which needed to be taken care by M&S team.

DESIGN LAYOUT

Principles Risk and Uncertainties :

It is quite natural facing barriers while running a business According to the Board these are the most noteworthy risks for achieving the business goals all the risks those are been listed are not the one associated with Marks &Spencer and are not listed in the order of priority also the other risks and suspicions on which less attention is been paid can tend to be a cause for bigger problems in the future.

Further listed are the main issues that were awaiting the management team of M&S

Product Innovations and Development:

There was a lack of product variation it was a major issue since they got wedged up with the same product for quite a long it was the need of the hour to bring in a variety in the list of the product

Superior Customer Service Satisfaction :

To stand in and make a mark in this growing industry its essential to have an excellent relationship with the concerned customers. Its very necessary that the customers have a firm belief in the organisation and for this to happen its necessary that the pricing strategy of the organisation don’t vary much in respect with other retail stores in the market

Competition :

It is essential that the company is aware about the competition they are facing in the market from other organisations corrective measures must be taken immediately and the necessary plan should be implemented keeping in mind the present market condition.

Consumer Preference/Behaviour and Culture :

The greatest of all the issues faced by the global supply chain is the sudden and ever changing preference and taste towards a particular product. There are various researches been undertaken on impression and insight, classification, decision making, recollection, approach, performance, transformation in outlook training and contentment level to read about the consumer behaviour. The judgement done in the market worldwide is affected by the consumers process as well as by the available facts. The thing that also matters a lot is the pre occupied thoughts of the customer about the product their opinion the purpose.

Strategies Involved:

In recent years UK’s retailing industry has been facing fierce competition to keep their profits and recent sign of improvement growing in the course of strong opposition from companies like Tesco and its core retail operation. Today it’s a consumer oriented market as customers are well aware of their choices and needs, and also expects their shopping experience to be exciting. This growing demand of customers has made it more difficult for the retailers to survive in the market. As a result Marks and Spencer developed a new business strategy; this was marked as a period of change for the whole organization. This change involved concentrating on the three basic business values mentioned below:

1. Quality
2. Value
3. Services

Marks & Spencer came up with a new promotional strategy that stressed on the term Your M&S. This eventually helped the company to maintain a good bonding with their customers and keep up the company’s heritage in the business thus leaving the mark of two other values of Innovation and Trust in the mind & soul of the customer. This process involved three key features:

1. To create a belief of value-for-money in the minds of the customer. For example: “cost cutting” this would enable the company to keep price of the products minimum and thus facilitating the customer.
2. Most of the investments are made for the betterment within the stores. If the staffs are technically equipped with better skills in sales and stock management it will definitely lead to higher sales and profitability.
3. If good service is provided by the company it always leaves a positive impact on the customer. So it’s a must that the company’s customer service must be absolutely excellent at dealing with the customers.

The above diagram explains that the basic business values (i.e. value, quality and services) and the values that Marks & Spencer emphasised on (i.e. innovation and trust) through its promotional campaign ‘Your M&S’; are all inter-related and inter-dependent and the outcome is good services. Even if one value is compromised the other value cannot be established which will have an impact on the services.

Operations Strategy:

As a part of doing business, all the organizations have to compete with companies which produce similar goods and which might supply similar goods in the future. Therefore, to be successful in this great competition, organizations must have a competitive strategy. It is very difficult for a company to compete successfully in the long run based just on operational effectiveness. A firm must also determine how operational effectiveness can be used to achieve a sustainable competitive advantage. An effective competitive strategy is critical. Waters(1999) states that to develop a competitive strategy, managers must look at the organization’s strength and weaknesses in relation to those of its competitors. At this point, we consider that explaining what are operation management and operations strategy is very important.

Focus on UK:

The main focus of was to established there business in UK as it was the hub from where they started their business. If the base is wrong than nothing will go right. So they decided that they will only sell their products, not like before, where they used to sell the products Orange mobile phones. Everything from M&S must be distinctive and must conform to the Company’s uniquely high standards. The way to achieve is by re-taking the command of supply chain — another of Marks & Spencer’s traditional strengths. Furthermore they decided that they will only operate in the sectors where there is a real and authority. For example in food they were under 4 percent of the market, however they were up to 30 percent in their chosen categories including such fast-growing sectors as ready meals and prepared foods.

Develop High-Growth Areas of Home & Beauty:

The Home business is growing strongly, with home furnishings and gifts the fastest growing product areas. Beauty, albeit relatively small, is also growing rapidly. Both of these areas offer promising opportunities for development and will be expanded.

More Intensive Use of Space:

Selling space will be reallocated to higher growth product areas to maximise returns per square foot. In total, 600,000 sq ft will be reallocated within the year to areas such as the new Clothing range supplied by George Davies, Home, 50 new Beauty Shops, and 30 new Coffee Shops.

Value Realisation, and Closure of Loss-making Businesses:

In order to focus all its efforts on the recovery of the UK business, Marks & Spencer intends to divest or close non-core businesses and assets, subject to consultation with its employees.

International:

The Company intends to close its loss-making business in Continental Europe, affecting some 3,350 jobs, subject to consultation. It also intends to dispose of its two profitable US businesses, Brooks Brothers and Kings Super Markets. These operations do not provide an appropriate platform for future international expansion by Marks & Spencer.

Direct:

Marks & Spencer intends to close its loss-making catalogue business including a dedicated call centre and fulfilment centre. This proposal will be subject to consultation with employees in the direct operation with about 690 jobs affected. Although the joint Clothing and Home catalogue will be discontinued, Marks & Spencer is committed to maintaining its e-commerce website: www.marksandspencer.com, as well as a Home brochure and a range of services including flower delivery.

Change the Capital Structure:

The third element is to change our capital structure to improve one of the key financial criteria on which investors base their decisions — namely, return on equity.

Return on equity and assets have traditionally been low for Marks & Spencer. One of the main reasons is that M&S owns an unusually large proportion of its property ? and returns are lower in property than they are in retailing. For this reason, they decided to sell or securities those properties that they don’t really need to own.

This doesn’t mean that they will be selling or closing stores. The customers won’t see any difference, whether they own or rent the property in which they operate.

As part of this decision, they made a commitment to hand back 2 billion to their shareholders.

Property

To reduce the dilution from the relatively low returns from property investment, Marks & Spencer intends to release value from almost half of its extensive property portfolio. Ownership of stores in prime locations will be retained to maintain maximum operational flexibility as well as capturing future increases in capital value.

Improved Capital Structure

To create a more efficient capital structure and improve the potential for a faster rate of earnings growth Marks & Spencer intended to return 2 billion to shareholders by the end of March 2002. Following the return of cash to shareholders, Marks & Spencer retained the financial strength and flexibility to fund future growth.

Product :

In terms of products, they were building the products to the best of their knowledge and understanding to provide exactly what our customers want.

To do that they focused their teams on the classically stylish, core customer. That’s not to say they turned their back on younger shoppers. These will be served by Per Una supplied by George Davies — products were made exclusively for them and according to their standards, but in such a way that doesn’t distract their own people from the core Marks & Spencer customer.

Branding Strategy:

Branding, it is a method which we implement in order to differentiate the multiple varieties of a product in terms of brand name, symbol etc. Hence it is very much important that one should have thorough knowledge about branding strategy, so that they can come with an extraordinary products. Therefore one who is doing business should know how to impart different branding techniques. This will keep a brand name to be alive in market for a long period of time that too when it will be getting a tough competition from other brands available in the market.

Effective Implementation of Marketing Mix:

Marketing mix is a standardised technique which consists of all marketing variables that every business or any other profit-making industry implements in order to figure out the outcome or to figure out things that they have planned on their target market. Marketing mix is technically composed of product, price, place and promotion which is also popularly known as 4Ps. Marks & Spencer perfectly applied the marketing mix in their day to day operations.

Conclusion :

To conclude we can say that M&S, is one retail organisation which is growing at very rapid pace and we might see it in top 20-25 retailers in the world in the near future. However to achieve that spot they need to make there basic clear and should implement proper cost cutting methods and you might find them selling many other brands other then owned by them.

REFERENCES

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Marks & Spencer. (2009). About us. Available: http://corporate.marksandspencer.com/aboutus/where/international_stores. Last accessed 30 Dec 2009.

Deloitte & Touche. (12 March 2008). Wal-Mart remains largest global retailer, according to Deloitte survey. Available: http://www.deloitte.com/dtt/press_release/0,1014,cid%253D196099,00.html. Last accessed 30 Dec 2009.

Slack, N. et al. (2009). “Operations and Process Management”: Principles and Practices for Strategic Impact, Operations and Processes, Second Edition, pp. 4.

Universitat Pompeu Fabra. (2009). Case Studies. Available: http://www.econ.upf.edu/docs/case_studies/16.doc. Last accessed 05 Nov 2009.

Marks & Spencer. (2009). Strategy Insight. Available: http://www.examstutor.com/business/resources/companyprofiles/marksandspencer/strategyinsight.php Last accessed 30 Dec 2009

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Marks & Spencer – UK Stores M&S website http://corporate.marksandspencer.com/aboutus/where/uk_stores,

M&S – International Stores M&S website http://corporate.marksandspencer.com/aboutus/where/international_stores

Wal-Mart remains largest global retailer, according to Deloitte survey http://www.deloitte.com/dtt/press_release/0,1014,cid%253D196099,00.html

Nigel Slack, Stuart Chambers, Robert Johnston & Alan Betts. (2009). “Operations And Process Management”: Principles and Practices for Strategic Impact”, Second Edition, pp. 4.

http://www.econ.upf.edu/docs/case_studies/16.doc