CASE ANALYSIS OF MARKS AND SPENCER
Category : Case Study Analysis, External Analysis Examples
ANALYSIS OF MARKS AND SPENCER
Table of Contents
Marks and Spencer is included in the long line of UK companies that has acquired a reputation of greatness and quality. Armed with experience, the company has been seasoned with its battles with both its internal and external environments. Since the 1880s, it adhered to a strict tradition involving its processes and trading practices which essentially spelled fairly well on the part of Marks and Spencer. To date, the company is considered as one of the most recognisable names in the area of retail. From apparel to even food services, the Marks and Spencer has ubiquitously hounding the top players in the UK market and the rest of the world. The case study provided by Collier (2004) provided several descriptions on the basic elements of the company. It has been described as a company that adheres to top-down management approach compounded by the close supervision provided by its former CEO. This has worked well with the company for several decades, however in the latter part of the 1990s a noticeable decline in the sales as well as in the overall performance of the company was observed. Various revolutionary and evolutionary changes have been implemented in the Marks and Spencer with the numerous changes in its leadership. To date, though there have been numerous changes in the strategies invoked by the company, its operations, to a certain extent, is still based on several principles: to offer a selective range of high-quality, well designed and attractive merchandise at reasonable prices; to encourage suppliers to use the most modern and efficient production techniques; to work with the highest quality control; to provide friendly and helpful service to their customers; to improve the efficacy of the business; and foster good human relations to its stakeholders. However, along the way they might have neglected to deal with the changes in the external environment as they focused on addressing the inner workings of their operations. This paper will look into the conditions surrounding that phenomenon.
The external environment is basically comprised of all the elements that determine what the company needs to compete in its respective industry. In this part of the paper, a presentation of the external environment and consequent analysis will be carried out employing the PEST analysis.
a. PEST Analysis
The PEST Analysis is called by many names (STEP, PESTEL etc) yet it still uses the same principles of examination. Specifically, it looks at the political, economic, socio-cultural, and technological elements of the environment. This too essentially places importance on how these elements influence the organisation. (Blair and Hitchcock, 2001, 99) Usually, the use of this analytical tool is for planning and strategy creation of the company specifically to find a way to complement these plans with the findings of this analysis. More importantly, it allows the company the volition to exercise flexibility on the company and to serve as a safeguard in instances where major shifts in the trading environment take place. The primary source of this discussion is the case study provided by Collier (2004).
The UK political environment basically encourages trade in its territory. It is generally accepted that any trade is allowed in the said region provided that it does not oppose public policy, public order, or any existing law in the land. This is reinforced with the inclusion of UK in the European Union and the World Trade Organisation. However, in the case of Marks and Spencer, one of the more troublesome political elements that they have to contend to deals with the issue of labour laws and industrial relationship. In the past decades, the development efforts sought by the company have been constrained by several infringements in labour laws not only in their local operations but also in their international initiatives. This is especially true in their operations in France where the company is charged of grave abuse and breaking of expressed labour laws.
The United Kingdom is one of the hubs of commerce in Europe. Consumers are not limited to the locals as a considerable number of tourists flock the streets on a regular basis. This is similarly true in the context of the retail business, particularly in the area of fashion and apparel. The consumer base tends to require numerous types of clothing based on the existing climate of the region.
In the context of social and cultural aspects of the environment, the common UK consumer tends to be loyal to a particular brand. Quality of the product is a must in every transaction but could easily be defeated by a fairly competitive pricing strategy from a competing brand. Recent observations also indicate that preference on trendy styles over the classics tend to manifest among the UK consumer. This is seen in the case of Marks and Spencer over the years as it struggled to gain a greater market share. This shows that the UK consumer places high value on their money.
iv. Technological Factors
In the area of technology, a good number of the population is able to access in the internet. This means that some of the trading organisations are able to make the most of their operations and widen their scope with the use of e-commerce. This is seen in leading retail companies like Tesco and Sainsbury. Thus, online marketing and purchases made through the net is becoming one of the competitive advantages held by the leading retail companies in UK.
The environment in UK, specifically its retail environment, appears to be highly attractive. Companies have the support of the government with minimal barriers of entry. The problem in this regard is the fact that there is some level of difficulty in penetrating the retail market, especially for new entrants, as there are existing monoliths that are willing to drive them out of business as quickly as they entered. This is similarly true in the case of companies with lush histories like Marks and Spencer. Seeing that their environment is essentially welcoming, neglecting the cutthroat nature of the competition would point to the imminent demise of any company.
In support of the external analysis of the environment of the organisation, the internal environment should also be taken into consideration. For this part of the study, the value chain of Marks and Spencer will be examined.
The value chain of the organisation is coined primarily by Porter as a tool to recognise the inherent capabilities of the organisation to realise its competitive advantage. The following will describe the primary activities and support activities of the company.
As indicated in the value chain theories of the primary activities take in hand several specific functions of the company: inbound logistics, operations, outbound logistics, sales and marketing, and service. In the area of inbound logistics, Marks and Spencer receives inventories coming from its suppliers. Initially, the management of the company held strictly on the exclusive use of English suppliers. Eventually, they have already taken the prerogative to receive materials from suppliers from other countries. In terms of operations, Marks and Spencer is involved in the direct selling of apparel, foodstuff, and even home furnishings. In the same manner, they are also involved in the distribution of these items to all the Marks and Spencer stores in UK. This essentially covers the outbound logistics of the organisation. Moreover, sales and marketing of the company seems to be one of the more prioritised elements in the organisation. With the intense competition present in the industry, vying for consumer favour and adding value to the brand takes a step above the rest of these primary activities. In the area of service, the company also have to deal with the maintenance of their respective stores. The case study provided by Collier (2004) provided that the company has acquired stores that also require maintenance. This is where the primary activity of service takes place.
In the area of support activities, the company holds of the areas of human resource and technology. In the context of human resource, minimal training is required as the skills needed to fulfil the duties of the common employee of the company involves knowledge of the product and the awareness of the processes of selling. On the other hand, the use of technology is significantly infused in the operations of Marks and Spencer. Basically, every store uses a computerised cash register not only to deal with payments but also to take into consideration the use of loyalty cards recognised by the company. Other areas involving technology covers e-commerce and other online transactions.
Based on the case study of Collier (2004), despite the long history of Marks and Spencer, it has yet currently takes on a larger market share and continues to suffer in its profits and other financial aspects of their operations. This implies weakness in a rather cutthroat world of retail. This then spells possible acquisition from much larger companies. On the other hand, the brand of the company appears to stay in a particular era. The management failed to display any form of awareness on the part of the market as they focused initially on the production process. As seen in the case study, the company is lagging behind the leading retail organisations in UK like Tesco and Sainsbury.
In order to generate sound strategic options for the company, one must first establish the faculties and flaws of Marks and Spencer. In this manner, one will know what areas to work on and what lot to maximise. In this part of the study, the SWOT analysis will be used as an analytical tool.
The SWOT analysis is one of the traditional and dependable tools in looking at the existing conditions of the company and how it fits with the current conditions in the external environment. The following will focus on the situation of Marks and Spencer as covered by the case study of Collier (2004)
Looking at the case study, Marks and Spencer possess a very potent weapon in business: very high brand name recognition. In this manner, their brand is connected with the elements of class and quality. Another strength that the company possess is seen in its rich history of trade. Throughout the years of its operations, it has acquired a lot of facilities at double as moneymaking centres. Along with this history is the existence of longstanding partners and alliances that has been acquired through over a century of operations.
Among the major weaknesses of the company are primarily seen its management. Specifically, a fit between the structure of the company, the nature of its trade, and the actual management styles has yet to be found. In the same regard, being a player in the cutthroat industry of retail, a company must possess dynamic marketing skills. Based on the case study, Marks and Spencer has been left behind in terms of marketing innovations like loyalty cards and implementation of customer-focused operations.
One of the seen opportunities in the retail market is the encouraging legislation present in the political environment. This shows that the company is able to maximise its operations provided that it is within the bounds of the law. In the same manner, the dynamic nature of the market also shows that the major consumers are placing value on their money. This means that they lay preference on issues of price over quality. Furthermore, the current marketing campaigns of the company appear to be highly promising as they are now employed icons of UK to help them convey the message of the Marks and Spencer brands.
As mentioned earlier, the competitors in this industry works 24/7 and they move like sharks. Every chance they have in acquiring a portion of the overall market share, they will take. This is a threat as the Marks and Spencer continues to hold that reputation of having boring and non-trendy designs that appeal to the much younger age brackets. Moreover, as Collier (2004) pointed out in her work, the company is for some reason always susceptible to imprudence, lack of skill, and lack of foresight of the management.
Looking at the discussions above, there appears several strategic options that Marks and Spencer could focus on to refurbish their operations. For instance, the company should look into a partnership with the more current and competitive players in the retail industry. This is to broaden the overall outlook of Marks and Spencer regarding their standing in the market. This also reduces the possibility of the company being acquired by the larger competitors.
Another possible course of action for the company is to further improve its brand by using repositioning initiatives. It is undisputed that Marks and Spencer has a strong name recall and significantly strong brand name. However, the company have to consider the constant repositioning of their brand so as to keep the public’s respect on their products. This has been the one of the innumerable mistakes held by the previous management of the organisation.
The company should look also in the possibility of improving the management of their resources. As stated in the SWOT analysis above, the company has a lot of resources yet they have yet to find a proper fit on how to manage these resources to their advantage. The maximisation may take on changes in restructuring the processes and the infusion of technology as well as other knowledge based processes.
And lastly, the change may well start with the internal structure of the organisation, specifically the human resource element of the company. Finding potential leaders and managers could spell a shift from stagnation to a culture of innovation and constant development.
The following discussion will evaluate the proposed strategic options mentioned above. For the purposes of this study, Rumelt’s criteria will be used to examine these options.
In the first option, the idea of selling an organisation full of history or at the very least tie up with other retail players is not consistent with the culture of the organisation as well as in the general strategies of the company. As seen in the case study, Marks and Spencer appears to be a company full of pride, too proud perhaps.
With reference to the option of brand repositioning, the case study shows that the company is taking on brand repositioning initiatives constantly and yet they still find their performance wanting. Possibly this option may not be consistent with the management strategies of the organisation.
As the case study presented, the problem of the company is in its core. Thus, it would be very beneficial for the company to look at this option. The case study also mentioned that the changes made by the management of Marks and Spencer appear to be superficial and merely serves as a remedy.
Looking at the strategic options above, it appears that each and every one is implemented in the industry. Thus, these constitutes to a trend in operations. The issue in this regard is whether or not Marks and Spencer is able to handle the consequences of employing all the strategies. The more logical thing to do for the company is to choose one specific strategy that they could immediately implement and reap the results as timely.
The more logical thing to do for the company is to choose one specific strategy that they could immediately implement and reap the results as timely. The company has a capable management but does not have the luxury of money or capital and time is even not on their side. Thus, alliance and repositioning are out of the question as they take too much time to take care of and cost mounds of money to implement.
The strategy involves an analysis on what modern models of quality would be effective for the company. The overall goal of the strategy is to maximise the existing assets of the company and look at ways to improve the performance in the market.
The strategy is done in two stages. The first one takes on pinpointing the what, where, when and how of change management. Plainly, it points to the area of improvement needed by the company. In this stage, streamlining the operations would be among the end results. For instance, the structure of the company as said in the case study is rather complicated; simplifying it by turning it into a flat structure would be advisable. In the same manner, the superfluous processes in the company should be done away with as it adds up to the overall costs of the organisation.
The second stage is the creation or development of a culture closely appended with knowledge management initiatives. Basically, this points to the flow of important data in the organisation. Information like receipts or sales documents is covered in this area. Moreover, this strategy could help in the planning process and meeting of the company’s economy of scale.
The case of Marks and Spencer provides for a clear and present manifestation of the need for awareness of the demands of the external environment. In addition, it also serves a lesson on having the need of a decisive strategy and opportune reaction to the changes in the business environment. Based on the case study, Marks and Spencer is slowly levelling up with its competitors. The proposed strategic options above present an opportunity for the company to gain more market share and compete more actively in the retail sector of UK.