Issues of marks & spencer

Introduction

In this assignment, an analysis and discussion of the strategies and issues of Marks & Spencer will be carried out.

M&S was developed by immigrants. It was in 1884 that Michael Marks, a Russian-born Polish refugee, opened his first stall at a market in Leeds. Around ten years later he moved the trestle-table empire to Manchester where he went into partnership with Tom Spencer, a former cashier. Over the next ten years they built an operation that would grow to become the most British of institutions.

M&S is a major British retailer with over 885 stores in the United Kingdom and with over 600 domestic and 285 international stores too. It is the largest clothing retailer in the United Kingdom, as well as being an up market food retailer, and as of 2008, it was rated the 43rd largest retailer in the world. Most of its domestic stores sell both clothing and food, and since the turn of the century it started expanding into other ranges too, such as home-ware, furniture and technology. M&S has in place objectives to bring shareholder value in terms of increase returns, but also in terms of increase sales and market share in retailing. Its beliefs and standards are outlined as “Our customers continue to see Marks & Spencer as the place to shop for special food, produced to exacting standards”. It also sees its workforce as an important part of its plan and also considers modernising its stores as a key corporate objective. Its vision is to set high customer standards and its mission in making inspirational quality accessible to all.

Nevertheless, the time when M&S was extremely successful has long gone, as their clothing sales have come under pressure from other big companies such as Next and Asda WalMart, in 2001 the company recorded a mere £145 million profit (US$ 275M), adding to this its food revenue has been hit by Tesco. Furthermore, in the last 5 years the company has experienced a succession of changes in management and corporate structures, following a massive decline in sales. What used to be a leading worldwide quality food and clothing retailer has now become uncompetitive in the market industry internationally, especially in the United Kingdom. A major contributing factor to this has been due to the pressure from the economic crisis world wide.

In 2002 the Chairman and Chief Executive of M&S, gave key information regarding the management’s recovery plan for the company, and the speech and extracts from Marks & Spencer Press Releases provided a valuable insight into the strategic plans for Marks & Spencer. The Chief Executive of Marks & Spencer insists that firstly the heart of the company should be dealt with, and focus needs to be given to the entire United Kingdom business, with a mission to make inspirational quality accessible to all.

The main objective of the strategy for Marks and Spencer is the expansion into the worldwide market, and then aim to continue keeping ahead of the fashion market so that it can always inspire customers and raise the quality and standards or their product range. However, for the company to continue its previous success, they kept adapting new strategies when former strategies started to fail. Marks and Spencer’s plans to focus on keeping strong connection with their current customer, whom have been loyal for many years and are the reason for the rapid growth and success of the company. Another main focus for marks and Spencer is to work closely with the market to build a strong bond and trust with their shareholders, and also to provide best possible dividend whilst maintaining the company standards and profits. In addition, strongly considering their stakeholders opinions which are important as many companies success depends on its market and production, so even keeping a strong connection with employees on company improvements, and keeping peace between pressure groups and the company is useful in improving the brand image.

The main issues that Marks and Spencer has faced over the past five years are their sales, since they have dropped massively compared to previous success. Marks and Spencer have currently published what their business plans are, and what they hope to aim within the upcoming years. Through this research it is aimed to investigate whether Marks and Spencer has successfully abided to the strategy but still failed, does this mean that the strategy was poorly planned, or whether in fact the strategy has increased their growth within the UK and worldwide market.

Marks and Spencer as an international company

From an international market perspective, Marks and Spencer’s aims and standards of their presentation and for the wider Marks and Spencer’s brands in selected export markets were a successful business globally. However, it seems that Marks and Spencers franchise stores are regarded much smaller than the UK stores. Nevertheless, part of its strategic review, Marks and Spencer announced the closure of its loss-making businesses in Europe due to this. In 2005, Marks and Spencer’s internationally began to operate in 29 countries including Hong Kong. and had 198 franchised outlets together with 19 directly owned stores in Hong Kong, along with 65 stores were located in the Asia-Pacific region, 60 in Europe, 45 in Central Europe with the rest in central Asia and the Middle East. M&S used to own and operate 38 stores across France, Germany and Spain, but they were closed down in 2001 by the previous chairman, Luc Vandevelde, as it ran into problems due to the economic crises in the UK. In April 2007 the company set out many plans to open 150 new international stores over the following three years, the majority via franchising. The first of the openings were scheduled to take place during the summer in Ukraine and Bulgaria, alongside further company-owned expansion in Ireland. Franchisee-owned developments are also underway in India and Russia too. Marks and Spencer set out how the stores should look and sell its branded goods and also view each store widely.

Furthermore, its competitors such as Next and Debenhams across India have had also finance problems, however, there strategic plans did not fail as much as Marks and Spencer’s did globally, this is due to their continuous new products and brands compared to that of Marks and Spencer. They also focused on selling more than just clothes and food but also to sell furniture etc. Much has been said that Marks and Spencer needs to commit and be determined of what they sell best, which is food and clothing, which in turn this will help the company as a whole to maintain there previous success.

Despite its recent financial problems and its slightly confused brand image, M&S shows what can be done with tradition in the development of brand equity. Standing for values that have a place in society beyond the product can have important cultural ties for consumers. M&S stands for Britain as much as it does for retailing, and that’s a symbol that British consumers aren’t keen to give up in a hurry.

During 2007/08 Marks and Spencer announced there plan to grow their International business to between 15 to 20% of total group revenues by 2012. There strategy remains unchanged, although they are adapting their plans as the economy dictates. Marks and Spencer’s aim is to reach their own target, with sales up 25.9%.

Marks and Spencer’s five key elements for an International growth strategy are the following:

• The Growing of their equity partnerships in line with their revised business model.
• The Expanding of footprint into new markets and within markets where we already operate.
• To Achieving operational excellences.
• To highlight the brand integrity and awareness
• Finding innovative ways to grow our food offer.

France

M&S’s most concentrated European effort was in France. The clothing offering generated great profit, however, the foods section did not do as well asexpected.

Strategies

• High fashion strategy

Target area: European Countries, especially France

As Paris is the fashion capital, therefore, M&S should and needs to provide more fashion elements into their design in order to broaden their target market, and attract more female customers. For example, M&S could hire some world famous designers to work for their European market, it could not only upscale M&S’s level, but it also let M&S charge premium prices on their merchandise.

• Advertising strategy

Target area: Canada

M&S nearly had new brand name has entered the Canadian market. Accordingly the brand was consciousness in one biggest weakness in Canada. Therefore, M&S have to spend more money in both like TV marketing or local news paper marketing to build up their weakness. For example, M&S could have hire a famous Canadian stars to communicate to their clothing, M&S they can provide some of kind of sales promotions which is weekday shopping coupons or give discount to get more customers.

• Multiple sales channel

Objective area: All

The conventional sales channel is though local stores and mostly all of M&S stores are located in downtowns areas. To promote the sales, M&S need to expand the conventional channel, which have some catalogues of selling. M&S can try to mail the recent season of catalogue to their customers, which would make ordering and purchasing easier and convenient.

Class Control

Objective area: All

Good quality is a strong point with M&S, it’s also the reason how M&S’s has high customers maintenance. However, because of the low supply chain in Canada, M&S products slowly became decreased and damaged the sales of M&S. As a result, M&S should closely control the market supply chain to have guarantee of the value. TO decrease the operating cost M&S may have even more imported materials and goods from Asia or Europe.

Evaluation

The evaluated have been implemented not after it has occurred, so to discover if the interference having desired effect. This would be involve evaluation and after completion evaluation. These both provide the organization and the feedback about the intervention.

Evaluation expected at the guiding this can be called implementation feedback and assessment of interference is called evaluation feedback.

Implementation feedback comprises collecting data about facial appearance of the intervention its result and feeding them back in short intervals.

Evaluation advice involves to collecting data effect terms of about to effect intervention which are takes long feedback intervals.

The problem of the nature organization develop interventions makes them very hard to evaluate. Very few of OD interberatnre are driven by the theory or designs which make it difficult to interpret cause and effect. As does that fat they never been haven separation to other activates and changes in the organization.

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However, OD interventions can be aided by applying the following guidelines:

• amount should be derive from the theory intervention original the interventions and include events of the skin of the intervention
• select right variables
• deceitful good events e.g. operationally clear, dependable and official
• Research plan e.g. quasi trial designs.

Critique of strategy Change

Every change of situation is different, and different techniques and approaches for change need to be managed accordingly.. Although this is discussed earlier, the Models considered for the changes to give strength to the strategy on the each situation only in the general of way. As a result, the individual different of the situation goes on flexible advance.

The change of models balanced change through Fairley stages- yet, when you consider the impact of change princess, it could be considered as disordered. Intervention involves of changing the individual’s goals, introducing the new evens, and having changes that do not fit to norms business. Other condition it may also come to change process thorough management which is not part of the original of plan of change.

There is no hard confirmation that effect of planned on business performance as evaluation is very difficult and imprecise.

Consultant facilitating planned change their own business favorite biases that will influence the operation and intervention used. Lack of the open mindedness and awareness may cause the ineffective decisions for change.

The planned change the strategy approach involved long terms, but its often case organizations want to be fix solutions with immediate results. This can be leading the corner in strategy to development or unfortunate alternative being used.

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Strategy Plan

Harris and Walters’ (1992) model of store positioning, based on the four overlapping circles of merchandise characteristics, trading format, customer service and customer communication, is proposed to be central to the competitive strategy of multiple retailers (Figure 1). They suggest the four factors interact to create the market positioning of a company and provide detailed flowcharts and descriptions for each contributing factor. Moreover, they link store positioning to critical success factors, such as sales revenue; gross profit and gross margin; and sales per square foot. This framework is extremely useful in exploring the recovery of M&S. The first step was to take the company back to basics by reviewing the strategy to ensure that the offer for the target audience was right. This led to the plan, where the main goals were to get the correct product for the various customer groups, to implement a staff training programme to improve customer service, to refurbish the stores, and overall to communicate all of this to customers.

The reputation of M&S was built on quality, reliability and service. Suppliers were nearly all UK based with long term contracts. However, when firms such as Next, Top Shop and George started to outsource from the UK, they could be far more competitive on price, providing more fashionable clothes with ranges that were changed frequently, due to Quick Response methods (Birtwistle, Siddiqui and Fiorito, 2003). This led M&S to source from abroad but they failed to pass on the increased margin to the customers, hence they remained uncompetitive. Customers viewed the clothing ranges as unfashionable, unattractive and over-priced. During 2006, there was a launch of the new focused ranges of womens wear, and an expansion of the Per Una brand was launched, created by George Davies of Next and George at Asda. This undoubtedly improved the image of the brand and increased M&S’space. When Stuart Rose became the Chief Executive, M&S had 16 fashion sub-brands, quality and styling was inferior to the competition, and due to the lengthy supply chain fashion trends were missed (Rose, 2007).

In their new strategy, M&S continue to use world wide suppliers with relationships based on partnerships rather than the previous paternalistic management style (Khan, 2006). This has enabled the firm to reduce supply chain costs by £100m (Rose, 2007). For the clothing ranges, M&S invested in the design process and product development, and intensive staff training too, giving the teams full product control, making the company more agile and enabling lead times to be reduced, giving increased flexibility and reducing stockholding from £4bn to £1.3bn (Khan, 2006; Rose, 2007). However, it has forced suppliers to take on increased risks by having to be very flexible, producing short runs and by storing fabric and stock (Birtwistle, Moore and Fiorito, 2006). Every week Stuart Rose reviews stockholding and supplier commitments to ensure that price points and quality are right and he has implemented a new strategy of ‘good, better, best’ ranges, each representing good value (Rose, 2007). To create products to the various customer groups the Customer Insight unit holds regular focus groups where customers are provided with samples of goods. For instance, to understand the requirements of the older consumer, M&S invites in the members from the Women’s’ Institute to give honest, highly opinionated advice (Woods, 2007)

Customer Service

For many years M&S customer service was based on the halo effect of their liberal returns policy. Moreover, they were not used to have fitting rooms and did not accept credit or debit cards, and even when they did introduce them, they did not communicate this fact to their customers. M&S is aware that customers have become more demanding with higher expectations in terms of service and that they had become less competitive in the rates they were paying shop floor staff, hence they found it difficult to recruit quality staff. A customer service programme was created by Mary Gober and implemented in 2005. All 56,000 members of staff attended and this training is ongoing. The key message is that the customer comes first, by making eye contact, providing excellent service in key areas such as the fitting rooms, at the till and information areas, and in the cafés (Anon, 2006). For example, all staff should be able to handle queries on fashion trends, sizes and pricing, fittings and alterations, offers and incentives. M&S also increased the number of staff in areas such as shoes where customers need more assistance, and this investment in product and sales training for shop floor staff is seen to be paying off.

Trading Format

M&S had been very slow in taking up the trend to move to retail parks (Khan, 2006). and many of their smaller stores have not been refurbished in recent years either. Davies and Brooks (1989) argue that the best way of getting consumers to re-evaluate the product is to undertake a store refit. A plan to modernise the stores was implemented in 2006, and the first roll out of the new format began. In the first year M&S spent £500m and they planned to spend an additional £800m in the next years (Fletcher, 2007; Rose, 2007). The process consisted initially of improving the store environment by taking away the shortage or embracement of signage. This was followed by a number of new store formats, hence, an order for 100 new escalators, 100 lifts and 20 miles of new refrigeration units was made (Rose, 2007). The improved product offer, the service and the increasingly attractive store environment has led to 16 million shoppers visiting the stores each week (Marks & Spencer, 2007).

Customer Communication

In general, customer communication is further achieved using the in-store magazine. First forays into advertising went drastically wrong when their TV campaign pictured a naked women, size 14, running up a hill. This sent a completely wrong message out to their customers (Khan, 2006). Today they have become the leader in retail marketing communication. The first advertising campaign during autumn 2004 featured the food offer using mouth watering food photography and a sensual female voice-over stating “this is not just food, this is M&S food”. This TV campaign presented an entirely new format, which has been dubbed ‘food pornography’. For instance, the chocolate pudding advertised just before Easter 2005 increased sales by 3,500 per cent, and as Steven Sharp said at the time “it makes you want to lick the telly!” (Martinson, 2006).

When the clothing range had been reviewed and new lines introduced the spring summer season was preceded by a strong advertising campaign which included TV, radio, cinema, print, posters and even five M&S branded taxis. This was very successful and attracted customers into the stores, thus, sales and profits increased. A number of models present the M&S look such as Noemie Lenoir, Laura Bailey and Myleene Klass. Now anything worn by Twiggy, the 1960s fashion icon, Erin O’Connor or Lizzy Jagger, the daughter of Rolling Stone Mick Jagger sell out in days. The attractiveness of the marketing campaign is that it appeals to all age groups. Whereas the womens-wear range is presented by models, the menswear range is promoted by celebrities such as the comedians Jimmy Carr, Martin Freeman and Bob Mortimer and football pundits such as Alan Hansen, Ian Wright and Jamie Redknapp. Bryan Ferry the voice of Roxy Music is the face of the Autograph range for men. The 2006 Christmas campaign last year featured the Ice Hotel in Sweden with Shirley Bassey, and David Bailey did the photography to give the campaigns fashion credibility (Brown, 2006). The success of these campaigns can be measured not only in sales but also by the number of retailers such as Matalan, Debenhams, John Lewis Partnership and Next, who are now actually copying the format.

Recently, the ‘look behind the label’ campaign promoting fair trade products, environmental concerns and customer health has increased consumer perception of the organization. This helped to attract 350,000 new customers a week into the stores (Brown, 2006). M&S was awarded Company of the Year in 2006 and the Responsible Marketing Award in 2007 by Business in the Community. The marketing expenditure for the year ending 2007 was £145m, of which approximately half was spent on advertising (Fletcher, 2007).

Consolation:

The recovery plan appears to be working well, as shares peaking at £7.49 before the announcements of the results in May 2007 (English, 2007). The year end results to March 31st 2007 showed an increase of 28.5 per cent in profits to £965.2m, with a 6.1 per cent increase of like-for-like sales to give credence to the five year recovery plan due to be completed in 2009 (Table 2). M&S has 520 stores in the UK and has plans to open several Simply Food format stores as well as some out-of-town retail outlets, and they plan to employ an additional 10,000 members of staff (English, 2007).

M&S has been more successful than other retailers in using integrated marketing communication methods to get its message to both, disaffected past and present customers, increase brand equity and support the recovery of the firm. The advertising campaigns have been a strong contributor to the re-evaluation of M&S as a retailer and have helped to increase footfall and the conversion rate. It has also led to Steven Sharp achieving a number of marketing awards, such as the Marketing Society’s Marketer of the Year 2006; the Marketing Week Effectiveness Awards 2006; and the Chief Marketing Officer of the Year award at the Global Marketer Summit in Frankfurt in 2006. In January 2007, Stuart Rose at last used the ‘r’ word and stated the business was now well into the recovery phase. However, in a very competitive trading environment, turning the short term recovery into long term growth will be more difficult and awaiting to see the direction of the long term strategy.

Conclusion

Reference

• http://annualreport.marksandspencer.com/operating-financial/ms-international/ms-international.aspx