Marks and Spencer Critical Evaluation - Case Study Example

Marks and Spencer Critical Evaluation (Insert Name) (Institution Affiliation) Marks and Spenser is one of the leading retailers in the United Kingdom. M & S sell high quality clothing, great value home products and outstanding quality food unrivalled by the major competitors. The company was founded by Marks back in 1884 where it operated as a penny bazaar and in 1894, Marks formed a partnership with Tom Spencer and from this partnership Marks and Spencer registered a steady growth and became a leader in the retail industry which emerged from a humble beginning (Davies, 1999). Marks and Spencer Company dominated the British high streets for many decades and was the epitome of enlightened capitalism. For nearly a century, M&S was the largest high profile retailers in Britain which was selling a wide variety of goods and services such as food, clothing, loan services and high quality furniture. M&S had successfully implemented a retail formula which was the key element of its growth. However, despite the superiority of the retail formula, success of the M&S begun to crumble in the wake of the 21st century. The profits fall rapidly and the glory started to run out. In 1998, Marks and Spencer suffered a major financial ruin when it halted its expansion programs on America and Europe (Mellahi, Jackson & Sparks, 2002). The company announced a 23% decline in the second quarterly profits after being hampered by tough trading conditions. This resulted in drastic fall in share prices which the company CEO blamed the turbulent competitive environment. Extensive research has been conducted to critically evaluate the condition of Marks & Spenser and the root causes of its decline in the late 1990s. This paper evaluates the company profile, the SWOT analysis and the validity of the strategic management models to the M & S experiences through the use of key frameworks of global business as analytic lens to explain the polices of M&S. The organization culture of Marks and Spencer is characterized as a reflection of the aggressive ideas of Simon Marks who was renowned for his attention to details and personal control over the retail business. The structured formula introduced by Simon has been very successful until 1990s. M&S had a corporate culture which have been in operation since it foundation until its decline in the late 1990s (John, 2003). The company was dependant on the British suppliers while overlooking the impact of their operation system on the financial cost. Also, Marks and Spencer had a traditional way of involving specialist buyers especially in Britain through an operation which was performed from the central buying office and distributed to the other stores. This strategy however overlooked the effect of supply chain on the time factor. Secondly, all the stores owned by Marks and Spencer have identical design, layout, management and staff training. The store manage have a strict guidelines and culture to observe and are not at liberty to deviate even slightly from the specifications. This is because there exists severe restrictions on the ways in which the store managers relate with both local and international customers. During the growth period of Marks and Spencer, there were limited changes in its strategies or methods of operation. For instance, M&S was not concerned with the current changes in trends and fashion. However, it stocked generic clothing and furniture ranges which had a wide appeal to the general public (Moore, 2010). The customers often made choices which outlast the current trends and fashion witnessed in the high street retailers. M & S had a reputation for high quality clothing which was built on basics and essentials which every consumer needed. Marks and Spencer continued to be successful into early 1990s, registering an ever rising profits and growing share prices. The CEO from 1991 explains the success as follows: I think that the simple answer is that we followed absolutely and totally the principles of the business with which I was imbued. I ran the business with the aid of my colleagues based upon the very long standing, and proven ways of running it. (Radio 4, 2000) It is clear that the M&S was committed from the very top, a culture that was passed on for generations since its foundation. Majority of the chief executive officers starting with Simon Marks were renowned for their attention to details in terms of merchandise, supplier control and store layout. However, in the late 1990s, the company began to experience inevitable downfall due to its monotonous ways of operation and adherence to the traditional level strategies. The use of static outdated systems in doing business also led to the increased loss of customer satisfaction which is crucial to the success of any organization. Furthermore, the decline of M & S is also attributed to its ignorance on the dynamism of the market place through its strict adherence to the traditional risk aversive formula. In an attempt to overcome the difficulties it has been facing and regain its confidence, Marks and Spencer started to implement new tactics in early 2000s. The company implemented a restructuring strategy which split the company into three: United Kingdom retail business, financial services and overseas business (Spenser, 2012). These plans involved establishment of a companywide marketing department aimed at breaking down the power of the traditional buying fiefdoms that were established around the product lines. The marketing department adopted an approach that was more customer focused in place of the traditional formula which enabled the consumers to dictate what should be stocked in the M & S stores. In an attempt to restore the image if Marks and Spencer as an innovative retailer renown for offering quality and unique products, new food, clothing and furniture ranges were launched and reinforced by promotional campaigns that were conducted on a large scale. The CEO, Salsbury, also issued a memorandum aimed at breaking the company from the bureaucratic culture through creation of a decision making environment which was unencumbered by the hierarchy. However, M & S continued to experience problems despite all these efforts by the management. SWOT Analysis The SWOT Analysis is a tool to clarify the Strength, opportunities, weaknesses, and the threats pose to a business organization by various factors. The fundamental reason for application of the SWOT analysis is because provides a track on the evolution of change and growth while examining an organization’s pros and cons (He, 2012). The strengths examine the potential factors of the firm that yields to profits and benefits. Weaknesses, on the other hand, examine the limitations, vulnerabilities, risks and threats. Threats usually cause major concerns to a smooth flow of a business and can be derived both internally and externally. Opportunities seize the case to expand and profit from the situation such as increasing the quality of the service. Growth or decline of a firm can be easily examined by applying the SWOT analysis which helps to establish the volatility of a financial market. One of the strengths of Marks and Spenser is market leadership. M & S is the largest footwear and clothing retailers in the United Kingdom by both volume and value. M&S sell high quality, stylish and great value clothes and footwear for all ages and is the leader in menswear, lingerie and women wear. During 2012 financial year, the clothing and home sales was around 4.2 billion pound while Food sales was 4.5 billion pounds in all the 703 stores across the United Kingdom in the high streets parks and retail as well as stations located in airports (Barry & Calver, 2009). Furthermore, M&S have approximately 362 franchised, wholly or partly owned stores across Europe, Asia and Middle East. In addition, Marks & Spenser has more than 150 stores including 130 franchised businesses operation in more than 30 countries worldwide (Jackson & Sparks, 2005). Market leadership enhances the M&S brand image and gives it a competitive advantage. The second strength lies in the improved profitability and the strong brand image which has been in existence for decades (Doyle, 2012). Despite the challenges in the market place and the fragile consumer confidence, the company had managed to remain profitable. The consumer confidence fragility was basically driven by the uncertainty which led to consumers increasingly becoming cautious due to the global recession but M&S have managed to survive due to its reputation and strong brand image which is based on high quality and reasonable prices. However, M&S also have some weaknesses. First one is the geographical concentration. The company derives more than 93% of its revenue from the United Kingdom market with a volume market share of 12.3% and value market share of 11.7%. This places it at a disadvantage since the major competitors such as Wal-Mart enjoys a global operation which gives them a better revenue profile and economies of scale in purchasing (Spenser, 2012). The geographical concentration in the UK market makes Marks and Spenser venerable to the UK weak economic conditions and remains less competitive in the global retail arena. The second weakness is the limited online transactions. Despite having a fully operational transactional website, the online services of M & S are still inferior to many other retailers in various aspects (Campbell, 2000). For instance, food products cannot be ordered online and be delivered to homes from the website. Also, the online store consists of only a small section of general merchandise products and the company does not deliver to overseas customers. The delivery is only via white arrow courier services or Royal mail which has lower service levels and thus limits the online transactions. Competitive pricing and new acquisition tops the list of opportunities. M&S has implemented price restructuring across brands and product categories and also increased the online spending. The acquisition of new stores in the republic of Ireland is projected to increase the company revenue and international market share. Marks and Spencer facer various threats which includes intense competition, increasing labour wages in the United Kingdome, Weak retail sales which resulted from sharp rise in fuel and utility bills and new regulations for the European Union nations which imposes quotas on some imports. If the situation continues, these threats could adversely affect the spending and consequently diminish the M&S revenue. Today, M&S is trying its best to keep up with the changing market place in order to recover its glory and position in the retail industry which declined in the late 1990s. New strategic approaches are being used to hasten the recovery. M&S aims at influencing both the buyer and supplier power in order to overcome the competitive rivalry and the threat of substitution and at the same time respond to the dynamic market trends. There is therefore a need for M&S to employ new technology in improving the inbound logistics, suppliers and operations. References Barry, M., & Calver, L. 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