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Success is the ability of a firm to do well than its competitors. By 1990s M&S had been massively successful in terms of market share & profit. Therefore, we can take up that the firm was overtaking its competitors in term of market share and profit. This was attained by different approaches. The companys maturity, strategies, philosophy and control of the value chain were all vital to its success.
Strategy of product and service differentiation was the main feature for M&S . The development of brand “St Michael” and its creation as a sign of British manufactured quality, at a sensible price were essential to the company. By providing a welcoming, co-operative service that guarantee superior shopping comfort and handiness to customers, distinguished M&S from further high street retailers. The company quickly turn into a household name, with a solid corporate image, that could be trusted upon to give good “value for money”. This prepared it stand out from the rest and therefore more fruitful.
As M&S matured, and it advanced along its ‘experience curve’, it was able to benefit from an accumulation of experience, process innovation, economies of scale and improving customer brand loyalty (Porter M. 1980. pp163-164). This Helped the company to deliver improved service at a low cost, to customers who were less ‘price-sensitive’, thus assuring success.
Simon Marks, well-known as aggressive Leader for his expertise over the business and his thought. His firm thoughts and realization of core values provided the company a strongly devoted ethos & culture. This ethos was continued through the employ of staff that would ‘fit-in’ and turn into part of the family. Staffs of M&S were very faithful, which meant that they could be trusted upon to provide the true level of service to the clients. They actually were Customer oriented through the start of the business to be crucial to the success of the company. M&S deployed a very thoughtful style of strategy, which empowered whole control of all features of the business. Thru its was effective years, the company kept and remained true to the durable core values, firstly set in place by Simon Marks. Every store manager tracked central route on all matters with devotion to rules and the company fundamental ethics and values. This confirmed that the M&S image was steady throughout the nation and Helped to support the business identity. The culture admired the policy and strengthened the company’s victory through differentiation.
Simon Marks recognized the market necessity for great quality at reasonable price. It was his trust that most of the British suppliers could arrange for these items and he rapidly forged close ties with his belief suppliers. This connection was so vital, it was incorporated in the company’s central principles. Suppliers had to deliver products of the high quality and description and this Helped to give M&S a large manufactured goods range that customers could trust on. The ‘locked-in’ suppliers, captive distribution, owned retail outlets, effective in-house service network and strong after sales support meant that M&S had a strong vertically integrated system that controlled most of the value chain (Porter. Ibid. p128). Guaranteed products from a assured chain Helped make M&S so fruitful.
The achievement of M&S was not only owed to the company itself, a certain amount of good fortune is also required for any business to succeed , creativity, hard work and market requirement. Back in the late 1880s, Michael Marks had not continued with the penny bazaars or Simon Marks not carried back ideas from America proceeding how to advance the business, then it is more than probable that the company would not have been a achievement.
M&S was so effective because it occupied an area of the retail market that no one other had. It distinguished itself and continued high criteria in product quality and customer deal whereas keeping price reasonable. M&S managers were devoted to the company beliefs and operated closely to produce strong links with British suppliers.
Market Penetration: i.e. existing products in existing markets.
Additional product lines have been offered in the food and clothing categories to gain more market share. M&S has introduced a designer collection with the aim of entering different segments of the younger (Thompson, 2001). Also, different product ranges such as cosmetics, furniture, books and CD, financial services etc have been introduced.
Certain marketing events has been introduced by M&S such as growing advertising, employing an outside agency for public relations and launching the marketing department to take a more dedicated customer orientation.
M&S has upgraded its product lines through innovation. E.g. Buying in new fabrics and colours, increasing product offerings (M&S 1998 annual report).
Product Development: i.e. new products in existing markets.
M&S offers customers a more extensive choice based by the highest quality and safety standards. M&S introduced in-store bakeries, rear-service delicatessen, hot food counters and so on into stores to differentiate itself from competitors for providing new selling opportunities for unique product ranges (M&S 1998 annual report).
Some innovative products are added such as washable silk, jumpers and etc. (M&S 1998 annual report). Furthermore, M&S introduces sub brand designer in order to supply a collection of women’s clothing for the fashion conscious woman (http://marksandspencer.com, 18/03/02).
Market Development: i.e. existing products in new markets.
M&S increased selling space by 410,000 sq ft in 1998 through opening 4 new stores, extending 16 stores and purchasing 19 selected stores from Littlewoods (M&S 1998 annual report) in order to upgrade and make the stores more pleasure experience for the customer. Also, M&S has opened a number of stores at UK railway station and airports.
M&S has tried to enter into the young segment by offering more fashionable clothing and introducing some designer brand. Moreover, M&S is now offering a mail order for busy people and those living in remote areas. Mean while the company continued to established markets in Western Europe, Canada, USA, and the Far East, this was now being done via a franchise method.
Diversification: i.e. new products in new markets.
Apart from its core products: food and clothing, M&S developed a new strategic direction within the UK through its diversification into financial services, home furnishings etc. (Maureen Whitehead, 1992).
M&S also diversified into US retail food market by purchasing Kings Supermarkets (http://www.clm1.org, 24/04/02). Until 1998, M&S has already had more than 20 outlets. M&S also diversified into the world market. They were following-up on their worldwide reputation that they had gained since the 50’s by only selling quality items at value pricing.
Current Strategic Situation:
Due to successful again M&S must to inspect what made them successful originally – Simon’s Marks understanding of customer preferences and trends. This led M&S to meeting the customers requirements in the market and launching some very solid core capabilities, which over time commanded to others. Though, where M&S pass on wrong is that they lost touch with the developing market and hence requirements of customers; customer’s needs transformed but they didn’t. To re-establish this success M&S must certify they know the market exceptionally well and decide what section of the market they wish to acquire. By going back to their original rudiments, inspecting their existing strengths and deciding on a market segmentation strategy that best matches these strengths, M&S should be able to become moneymaking once more. Continuous satisfactory market research must be accompanied to certify M&S does not lose touch again with their target market as another blunder could critically damage the organisation. Today M&S is operating in a highly competitive market where purchasers have a comparatively high percentage of disposable income and are spending large amounts. This gives them high negotiating power specially since they are well knowledgeable about competition and so it is important to use the most cost effective suppliers to be able to save costs and grow the profit. With modern manufacturing techniques consumers are expecting high quality even at this low cost. Buyers presume a minimum standard and a market accumulation situation had established. The large number of substitute products in the market today also helps makes it this highly competitive atmosphere; there are many other retailers having competition for both the top and bottom end of the market share. This necessitates M&S to have an aggressive marketing strategy to recapture market share. M&S needs to take opportunities which form on its current strengths and be cautious about current threats that could potentially lead to more difficulties. By structure on existing strengths or core capabilities M&S should goal to strengthen its market place and form new competencies earlier boarding on a noteworthy expansion program. Once a number of strong core competencies have been established M&S can consider dangerous growth.
SWOT Analysis
STRENGTHS
M&S became Well Known
M&S has created a Good image for their customers.
Their store locations were prime.
Clothing is a requirement but several peoples also purchase a wide-ranging variety of clothes to match their different events or desires.
Urge purchasing accounts for a high share of sales.
Customers are continually purchasing new clothes to fill their wardrobes, either for the reasons of fashion or to switch worn-out stuffs.
The UK industry is stronger in design & fashion.
Less common for people to get prepare their personal clothes than it was in the past.
Costs of manufacture are dropping down as manufacturing is progressively being moved to inexpensive places around the world.
WEAKNESSES
Severe rivalry lead M&S to heavy discounting that is grind down profit margins.
The UK cloth trade has lesser output than leading European competitors & is progressively being vulnerable by low cost foreign competition.
Substantial brands have high profiles and their goods are relaxed to copy by counterfeiters with slight changes by competitors.
Large chains dominate the retail sector and the only way to gain share in this mature market is to success to win customers from competitors.
Speedy fashion variations can render items obsolete very quickly.
Outmoded mail order collections are losing ground, as it is difficult to keep well-informed of fashion. Internet selling is unlikely to be significantly successful, as customers like to try on clothes and see the superiority of fabric and workmanship.
Sales are periodic, with the greatest spending taking place in the run-up to Christmas, when more expensive coats and party wear are anticipated. Clothes are also common gift choices.
The state of the reduced can have an important impact on sales at the top end of the market, as well as on desire buying.
OPPORTUNITIES
Men still spend less on dresses than women and this segment of the market remains underexploited.
There is quiet sufficiently of probable for further merging in the market.
The asset of brands such as Dorothy Perkins and the expertise of British retailers suggest there is probable for further growth abroad, mostly in the new EU member states.
The ending of the MFA should lead to more discounts in the cost of products which could increase retail sales overall and/or cause consumers to trade up to items once elsewhere their means.
Number of working women remains to growth, they will not only want more clothes for work but are also more probable to have the financial freedom to create clothes purchases.
The industry remains to encourage a ‘teenager’ marketplace for fashion-conscious 8 to 12 year-olds.
THREATS
Clothing chains from overseas, mainly those from Europe, such as Zara, have positively occupied UK high streets.
Conventionally popular retailers, like Marks and Spencer, will have to adapt or face the harm of more market share to aggressive groups such as Arcadia.
Both manufacturing and retailing are labour concentrated and are affected by legislature concerning minimum wages and working hours.
The increasing participation of grocery multiples in clothing retailing is adding low-price volume to the market.
A recession in the economy could cause men, in specific, to cut back on overall expenditure in this sector.
In the current market environment a quantity of choices are open to M&S now. These include:
Founding a strategic union with another organisation
This would involve an unwritten agreement with other clothes retailers not to encroach on each other’s market share. This would allow M&S to regain strength in it’s original core business and so ensure it is in a better position to possibly expand into new markets in the future.
Dis-investments
In order to focus all its efforts on the recovery of the UK business, M&S could divest or close non-core businesses and assets, which would allow it to focus only on core business until its market position is regained.
Purchasing of smaller competitors
To minor the level of competition and create trading easier M&S could buy up minor retailers. This would give M&S more control over the market and growth their market share deprived of making many changes.
For M&S to attain organic development and recover the market share they once had they neediness to initially toughen their core profit centres by selling more of their current merchandise to their current clients. After this M&S can initiate to reconstruct it’s reputation for quality & service and distinguish their products so customers observe them to be of higher value then the competition. By control the price constant this should help take back segments of the market missing to competitors. Once this is attained M&S can remain to look at choices for product innovation. By introducing absolutely new and original products they can further strengthen their market segments. After this has been completed M&S should begin to market their current merchandise to attract customers from fresh market segments through careful advancement planned by careful market research. Once they have recognized a position in other market segments they can begin to distinguish their merchandise within that market segment and additional strengthen their position. Finally, M&S can initiate to once again increase by looking at new product options in completely new markets such as financial services. Therefore I would recommend M&S primarily disinvest loss-making sub-sidiaries to allow the organisation to focus on upgrading its core business strength. This can be Helped by founding a strategic alliance with other organisations not to violate on each others market for the time being. Smaller competitors should not be attained at this stage until M&S is in a sturdier financial position.
Strategic Direction for the future:
Internal Development:
M&S’s will have to invest in training led to enhanced performance of supervisors and junior management. In-addition, M&S will have to give people widespread roles through inspiration in order to help organization grow more smoothly.
Inside the UK market M&S will have to decide to revolutionize the store with modern look. The upgrading on design and layout for the store will have been introduced in an attempt to gain customer demands on convenience and to increase more shopping attractive.
done
Acquisitions:
M&S have to buy more stores as part of the growth programme; this will allow the company to double the number of locations. The store bought will then be altered into M&S corporate style, with specific departments of the M&S business (Welwyn Garden City).
Joint Development:
The relationship with suppliers allows M&S to sharing knowledge and information throughout the supply chain i.e. M&S worked with its suppliers e.g. Dupont to pioneer the use of the material Lycra for the mass market (case study).
Future – Resources of M&S:
Tangible:
ª Wide variety of high quality products with value for money, own-brand products
ª Hard working staff and good management team
ª Loyal customers
Intangible:
ª High product value
ª Good image, so it will converted into high reputation
ª Buyer and staff loyalty
ª They will must have some Strong relationships with suppliers
ª Highly expertise expertise & knowledge
Human:
ª Supply-chain management; expertise in outsourcing
ª Outstanding services in purchasing and merchandising
ª Small hierarchy that will allow outstanding communications between head office purposes and stores.
E.g. managers ask about employee’s opinions frequently to encourage argument and the expression of new ideas
Successful strategic management requires winning, retaining and balancing resources.
Performance depends directly on simple, mostly tangible, resources, but the growth of tangible resources is dependent on intangible factors. However, for M&S, the loyalty of customers and the reputation is decreasing, the morale is shrinking and the cost is increasing (Kim Warren, 2002).
The value chain analysis could be used to identify the organisational capabilities.
Value Chain Analysis:
SUPPORT ACTIVITIES
Firm Infrastructure:
ª Subcontracting with suppliers as well as outsourcing domestically and internationally
ª Development of financial services such as availability of credit cards
Technology Development:
ª M&S’s technologists working together with suppliers to gain knowledge about product development (e.g. with Dupont-Lycra)
ª EPOS system to help M&S improve productivity so that it can respond faster to market changes
ª Customer ordering system (mailing system)
ª Having its own website for online selling, which allow customers to see products and service online
Human Resource Management:
ª Good appraisal system for employees such as store Management training program and so on (Morgenstein & Strongin, 1992)
ª Specialist advisers in key departments
ª Staff service initiatives
Procurement
ª Minimising the environmental impact of their operations and merchandise
ª A well established supply base, with a high product specification standards
PRIMARY ACTIVITIES
Inbound Logistics:
ª Long-Term and non-contractual relationship based on mutual trust and understanding
ª Integrated business process with suppliers in terms of product specification, material management, quality control and so on
ª Sharing knowledge and information throughout the supply chain
Operations:
ª Exclusive quality control in the operation process
ª Dealing direct with manufacturers instead of through intermediaries, understanding and controlling products from raw materials to finished goods
ª Subcontracting production with very tight conditions to suppliers
ª The costs of stockholding were carried by the supplier
ª Working across within franchises
Outbound Logistics:
ª Franchise agreement overseas such as Greece, Indonesia, Thailand and so on
ª Good Store location
Marketing and Sales:
ª Comfortable shopping environment
ª High quality products with good value for money
ª Wide ranges of products and services
Services:
ª Offering the highest standard of customer care
(Johnson & Schole, 1997; Case Study)
The value chain analysis helps M&S identify the way to cooperate across different functions in the chain and then add more value to products and sustain competitive advantages.
Having had the value chain analysis, the core competences of M&S are as following:
ª Sourcing methods
ª Ability to deliver high value, reliable, consistent quality products
ª The trust from investors and customers
ª High quality of management
4.0 Assessment M&S Strategy:
In order to evaluate M&S strategy, the SFA analysis will be give below:
Strategy
Suitability
Feasibility
Acceptability
Differentiation
*
*
*
‘Do Nothing’
Withdrawal
*
*
*
Market Penetration
*
*
Market Development
*
*
*
Product Development
*
*
Diversification
*
Internal Development
*
*
*
Acquisition
*
*
Joint Development
*
*
*
Differentiation
The company had serious consideration regarding the future direction of the company and its brand (St. Michaels). Because of its success in image, branding and quality, it is viewed acceptable to continue down the same road.
“Do Nothing”
The “Do Nothing” strategy has not been successful as it leaves M&S behind in the market place, due to this M&S has lost its continuous development in terms of quality, branding, customer values and so on. They have proven too slow to take action against those changes in a very competitive market place.
Withdrawal
According to the company inability to operate successfully in countries such as Canada, US, Fast East and some European countries as well as the Asian crisis in 1997, the choice left for the company would be to close the unprofitable outlets while remain operating in the other countries that still profitable.
Market Penetration
M&S starts to introduce a number of new product lines in 1998 such as cosmetics, financial services, furniture and etc. however by the time they were introduced it’s competitors had already followed M&S some successful strategy. Consequently, M&S has lost its competitive advantage.
Market Development
Regarding to the acquisition of 19 outlets from the Littlewoods group this was suitable because it allowed the company to achieve its reposition in the market place.
Product Development
M&S re-evaluated and improved a number of product lines mainly in the food and lady clothing, but also entered into the furnishing business. The food lines improved M&S’s profitability; however, the clothing and soft furnishing have not yet been able to compete with high street competitors.
Diversification
M&S had taken their standard strategy formula and tried to stall it in their overseas operations, but they did not take the culture differences and other risks, i.e. economic, commercial and political.
Internal Development
The modernization of outlets, the retraining of employee and upgrading their central purchasing system helped M&S to be more competitive in the marketplace.
Acquisition
M&S acquired the 19 stores from Littelwoods for the purpose of adding them to the up-grading programme with the purpose of adding to the company’s property assets. The company also acquired the food chain “King Supermarkets” in the United State, this operation operates under its own name.
Joint Development
M&S required new ideas to add excitement to its product lines and therefore enhance the shopping experience of their customers. The failure of M&S’s suppliers to develop possible new products has been viewed as a failure in their relationship which had to be addressed without delay. The problem was due to the past attention had been given to quality and efficient delivery of the product, Marks & Spencer standards have always be strict, the M&S and not enough effort on focusing on their customers and what customer wanted from the relationship. When the customers feel satisfied then will be prepared to commit themselves to future purchases from the same supplier, this can be viewed that the relationship gives M&S a real competitive advantages as well as economic
5.0 M&S’s situation:
Text Box: Industry Saleshttp://www.coursework.info/document/3/4/4/44381/44381_files/image013.gif
According to the life cycle, M&S is sitting in the mature stage and the fortunes have been in decline. As the increasing competition such as from Next and Gap, the customer tastes changing and the short of experience of going overseas, M&S’s profit declined sharply from £1,102m in 1997 to £546m in 1999 and the share price declined from £6.65 to £4.61 (The Chartered Institute of Marketing, 2001).
http://www.coursework.info/document/3/4/4/44381/44381_files/image014.gifGap Analysis:
M&S was very successful in product range and quality in the past; therefore, they overlooked the changes in the environment such as increasing competition, changes in customer tastes and so on. As a result, they remain ‘do-nothing’ strategy without investing in product innovation, environmental monitoring or marketing, which led to the decreasing in profits in 1998. In order to fill the gap, M&S should start to look at and change product and marketing strategies. Furthermore, different options should be looked at by M&S such as brand identity (different brands for different segments), segmentation (more attention on key segments), diversification (for the financial service, they should choose the effective target audience and identify their needs and wants properly).
(M&S Corp. Press Office, 2001)
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In the past, M&S’s strategy based on broad differentiation (image of good quality and wide range of products at affordable price). At the moment, its strategy was unclear because they were trying to do everything to maintain its competitive advantage. They are using unrelated strategies such as cutting costs (cost leadership) as well as trying to use differentiation focus by entering different niche markets (financial services and so on) as well as differentiating its brand through the range of products on offer. Consequently, leads to the company positioning in ‘stuck in the middle’.
All in all, M&S failed the sustainable competitive advantage hurdle. With fickle customers, changing fashions and intense competition, a sustainable competitive advantage is difficult to maintain in this particular sector. Although M&S has plenty of attractive retail space and George Davies brought a magician, however, M&S need to have some dramatic change in order to survive and revive.
6.0 Recommendation and conclusion:
M&S faces the toughest test of its ability to survive in the war of the High Street. It must not only defend its market share, but must also find ways of gaining back customers perception in terms of quality, brand loyalty and so on. M&S required new ideas to add excitement to its product lines and therefore enhance the shopping experience of their customers (Dennis Adcock, 2000). M&S is changing itself such as outsourcing and recruit more new and young employees. New strategies are in Place: an upmarket clothing line has been introduced, returning to selling only own-brand products, stores have been revamped, top management appointments made, the utilization of Microsoft BizTalk serve and Window 2000 serve and opening out-of-town stores to shift surplus stock. The difficulty for M&S is achieving the right balance between the corporate values that gave it its strong market position, and the innovation that is required to stay competitive.
It is a tough time for M&S and also the right time for a new broom, M&S should get lessons from past and look at more about what is happening in the market place and change itself from the old way of doing things to a brand-new image in order to sustain its competitive advantage and regain its leading position.
Reference:
Books:
· Case Study from Declan
· Daft and Marcic, 2001
· Dennis Adcock, 2000, Marketing Strategies for competitive advantage; John Wiley&Sons Inc.
· Hartley and Palmer, 1999
· Jennings and Wattam, 1994, Decision Making – An Integrated Approach, 2nd edition, Financial Times, Pitman
· Jobber, 2001, Principles and Practice of Marketing, 3nd Edition, McGraw-Hill Publishing Company
· Johnson, Scholes, 1993, Exploring Corporate Strategy – Text and Cases, 3rd edition, Prentice Hall International (UK) Ltd.
· Johnson & Schole, 1997, Exploring Corporate Strategy, 4th Edition, Prentice Hall
· Kim Warren, 2002, Strategic Performance – connecting to the fundamentals of business dynamics, London Business School
· Morgenstein & Strongin, 1992, Modern Retailing – Management Principles & Practice, 3rd Edition, Prentice Hall
· Naylor, 1999
· Thompson, 2001, Strategic Management, 4th Edition, British Library
Internet:
· http://www.clm1.org/education/2001/ms.pdf, 24/04/02
· http://marksandspencer.com, 18/03/02
· http://www.statsed.co.uk/bes/bes_spring1999/28_2/sec2.htm, 19/04/02
Other Sources:
· Chartered Institute of Marketing, 2001
· Marks & Spencer Press Release, June, 1996
· M&S 1998 annual report
· M&S Corp. Press Office, 2001
· Maureen Whitehead, 1992, Management Decision, Vol. 32 No. 3, 1994, pp. 38-41
· Pawlyna, Andrea, ‘British retailer on the roll,’ Asian Business, April, 1996
· Welwyn Garden City, Deputy Head, Stanborough School
Appendix 1:
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