Marks and Spencer, known as M & S, is one of the biggest retailers in the world. It has around 150 stores in 30 countries, including 130 franchises operating across the globe. Though it is very popular for its clothing chains in the United Kingdom, M & S is also known for its multi-million pound food industry. M & S also sell home furnishings, footwear and gifts other than clothing and food. In the United Kingdom alone it has 450 stores and under the trademark St. Michael, it has a chain of 294 stores. Almost all the company's overseas branches are locally franchised. M & S owns the United States of America's Brooks Brothers and King Super Markets. To meet the demands of the customers the company gets facilitated by Direct Mail. The company's core objectives of meeting the customer expectation and giving consumers easier and better access to a wide list of products. The financial services for the customers are provided by the group's financial services which comprise of the unit trust management, life insurances etc.
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M & S in recent years suffered a succession of adversities, both at home and abroad. The sales of the company have dropped. The market capitalization and stock prices reduced substantially and the overseas profits have tremendously declined. As a result the company was forced to form a marketing department in January 1999 and become more proactive and market driven. M & S followed a very simple marketing philosophy for a very long time. That is to produce high quality products under a recognised brand and advertise through the word-of-mouth. But in the recent past, this advertising strategy has come under criticism as the company started losing its competitive touch. The challenge now is to develop a good marketing strategy and emerge from the slump to reposition M & S as a fierce global competitor in the international arena.
Internationalization Strategy of M& S
The internationalization of the M & S began in the early 1940s. It is because the company started to feel that the domestic market has been saturated and the expansion has to come from abroad. Unlike most of the firms, M & S began to export its products on the brand name St. Michael as a way to test the waters. It has been successful and the company was exporting about $1,146,000 worth of products by 1955. Externally, the members of a local labour party were suggesting nationalizing the leading domestic retailers.
Sooner as a tool of diversification, some international franchising relationships were formed. This franchising allowed the company to achieve global presence with minimum political and economic risks. As the relations of the company grew with other global countries, M&S choose to invest directly (FDI).
M&S uses various types of foreign entry around the world. But mostly the company believes in opening its own stores in major economies. It has its own stores in Belgium, Canada, France, Germany, Spain and Netherlands; and franchises in Cyprus, Israel, Bermuda, etc. when forming international alliances; it often prefers an experienced retailer in that particular country. Its first joint venture was established in Spain as it felt the cultural distance and market power of its co company will help to mitigate the political climate and behaviour of the company. Its international strategies in Spain yielded successful results which helped it to gain popularity in the global markets. Through franchising, its approach was mostly top-down. That is it has a centralised management which could not be better off in various marketing situations. Hence it was forced to change its internationalization strategies through foreign direct investment. Due to this there is a forced change in its technology, cultural behaviouring and regional promoting aspects. M&S started to open stores in America, Far East and Europe. In different parts it has slightly different operational strategies depending upon the host countries values. In America it used acquisitions with Brook Brothers (clothing company), in Europe it has its direct stores running and in Far East, some stores were run with franchise and others through direct investment.
Following a wide range of strategy reviews of its business, board of M&S announced in 2001 significant changes to its strategies. The important decisions in its strategy are:
Always on Time
Marked to Standard
Expansion in growth of profitable products.
Acceleration of store renewal program
Being close to the customer
More intensive use of space
Release value from half the property portfolio
M&S has a wide range of returns on food products and has earned customer trust. So it decided to invest its major investment in food, home and beauty products. Its other plan was to accelerate the renewal of store renewal. Under this, it planned to refurbish more stores faster at the lower cost. It also reallocated to higher growth product areas to maximise returns per sqft. Apart from these strategic changes, it uses direct investment in global sectors which gained them a competitive advantage.
Factors affecting M&S strategy
There are various factors which has a certain impact on the M&S internationalization strategy. Of them, technology has been one of the factor in which the company was forced to change its strategy in various countries. But broadly speaking, in this fast developing technological world, technology used by M&s is been available where ever it opened its stores. A small adjustment to the technical functioning of a store is enough for the company to have its strategy working. The most important factor that has its resemblance in the formulation of internationalization strategy is geography and distance.
As the marketing strategy of M&S is universal, however it does not mean that it uses similar strategies in all parts of the world. There is a large effect of globalisation to the formulation of internationalization strategies. Consumers from various countries are different due to varying culture, economic development, and income level and so on. So in certain cases M&S does not use its centralised operating strategies instead it combines with some other company through mergers but has its own standards running. This initial phenomenon of outsourcing and then after some recognition opening its own store had a significant upward success in M&S organization.
As marks and spencer is generally known for its clothing and food products, the locality of the company is very important. As M&S runs its stores in different countries, transportation of the products has to be done in a précised manner such that there is no shortage. So in order to overcome this transportation and time differences, M&S has its own outlets in specific countries. These outlets have immediate access to the supply of products whenever required. There are certain situations where it cannot have its own outlets due to some government policies and other factors. In these cases, marks and spencer uses its internationalization strategy of franchising. So that it has its own functionality running by other company. All these have significant impacts in the brand distribution globally.
Apart from these, government trade policies also play a part in the strategy formulation. Given the growing links among nations, it is very difficult to consider domestic policy without considering international repercussions. In the case of formulating its strategy in US, bilateral negotiations are carried out covering wide range of products, services and investments. Such a policy should pursue the government to facilitate competitiveness and encourage collaboration among companies in the areas of goods and process technologies. M&S is an UK company where the marketing conditions have to be emphasized by the government and the product is socially accepted. Also great emphasis is placed on efficiency by government policies. Where as in US and Far East countries, they regard individualism and the promotional appeals should be relevant to the individual to incorporate lower power distance within the market.
Also the main advantage of Marks and Spencer government policy is that it had an opportunity of taking advantage of NAFTA (North American Free Trade Agreement) in US. It takes advantage of tax under this agreement and is outsourcing its products to Mexico and Canada. It also has an advantage of making economic sense in terms of logistics. The important policy priorities for the tax Policy Action Group (PAG) in the future include:
The Tax Framework for Business
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The Value Added Tax
The National Insurance Contributions
M & S will be benefitted over the above made policies by the government. The idea is to focus on the oversight and the management of the policy implications in indirect tax, company tax, personnel tax and customs duty.
The conventional wisdom on 'development' of the developed companies like M&S has focused on learning from mistakes. The leading M&S Company showed that their high risk strategy of acquisition and direct investment can yield successful results backed up with technology, and cultural values. The insights from the study on M&S suggest that overseas expansion is related to the need to improve global competitiveness in order to boost their outsourcing capabilities. No matter the distance and differences between the countries, M&S has been the successful organization to open its companies in different countries and make them profitable ones. The only important aspect for it is to make a minimum number of changes to the functioning and marketing aspects depending upon the country in which it is operating in. thus from the above analysis it can be understood that the globalization strategy of M&S created a new marketing paradigm in its success and also gained superior advantage and reputation irrespective of the host country policies and other factors. Hence it is clear from the strategies of an M&S company that we live in a truly globalised economy where differences across countries are given little importance in development.