History And Background: Marks And Spencer
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Marks and Spencer, originally known as Penny Bazaars, was founded by Michael Marks in 1884 as a clothing sales company in Northern England. Thomas Spencer joined Michael Marks ten years after its startup, becoming co-owner of the company. The company has continued to work under the name of Marks & Spencer (M&S) since 1894.It became a phenomenon, first in its country of origin, the UK, and later internationally. American chain stores influenced M&S to start selling both food and clothes in the 1920s. The company saw itself grow from 1894 to 1939, by opening a staggering 234 stores. M&S worked in close cooperation with its suppliers and made strategies for the use of new technologies which in turn led to the highest quality in its products. The company had future foresight thus adding internationalization and product diversification to its strategy in the late 80s. Over the years it took over its competitors, as a major retailer selling diverse product ranges under their own exclusive brand in more than 30 countries. Marks and Spencer can be proud of leading the race over all its major competitors in the key areas of quantity, quality, and trust, breadth of range and customer service.
M&S decided to close one of its stores in Edmonton, along with 14 other stores in Canada, with the 8 remaining stores being closed in a short span of one month. This brought an end to Marks and Spencer's 26-year run in Canada. "Marks and Spencer were never successful in Canada," said Fin, director of Canadian Institute of Retailing and Services Studies at the University of Alberta. Mounting losses and a retail economy that was fierce and competitive had forced them out of the Canadian market. (Le Riche 1999). The expansion into new retail territory is part of M&S's pledge to create a 'viable business' in the People's Republic within the next five years. M&S has endured a difficult introduction to the retail scene in China - from the prosaic and workaday supply chain problems and sizing and pricing issues, to the sacking of the China boss and a death in-store shortly after opening. M&S with the help of market research and focus groups are making improvements. At present they have their own buying team in China and their sizing is much better. (Thorniley 2010) In comparison, their entry strategies into Indian Market were a different predicament that M&S had to face. Most Indian shoppers were of the idea that M&S did not offer the same products as they did internationally. (Jack 2011). M&S undermined the Indian market due to its vastness and complexities thus their strategies were deformed leading to problems such as products being over priced which lacked the affordability factor. From 2000 till 2007, M&S allowed its former franchisee in India, Planet Retail, to treat it as an up-market rather than a mid-market brand, pricing M&S goods even higher than in the UK, and it failed to adapt what it offered to local tastes. In 2008, frustrated that Planet Retail had opened just 10 stores in the seven years since it signed up with M&S, the UK-based supermarket chain ended the relationship and in the same year re-launched in a joint venture with Reliance Industries.
During its substantial growth, one can note changes in the methods of operation undertaken by Marks & Spencer. They were confident they knew what was right for their customers and would be able to satisfy their needs in the long run and this level of belief would help them succeed. This is why they refused to bring changes to the things they did. On examining the expansion of Marks & Spencer, one can conclude that the primary reason for their failure to succeed was that they tried to force their tried-and-tested strategy on a market that had their own unique culture - and refused to change. As a result, Marks & Spencer was forced to bring their expansion plans to a standstill and eventually pulled out.
M&S always had a much conformed formula which included identical layout, store design, training and so on. They also insisted on using only British suppliers. It was not a very wise decision in 1998 as at the time, plans were made to conquer the European and American markets which had totally different cultures to the British. They believed that customers thought that they received higher quality from British suppliers. From past experience, they implemented their tried and tested formula in various overseas markets. This strategy backfired bringing in a drastic fall in the share price and profits. However, the CEO at the time, Sir Richard Greenbury, insisted that the profit loss was due to the competitive environment. There were many reports that M&S no longer understood the customers' needs and had misread its target market.
Looking into various factors as to why internationalization failed in regard to M&S, there are various inter-connecting reasons. Analysts suggest that Greenbury gave focus only to the day-to-day operations of the organization rather than give priority to their long-term strategic plans which needed to be altered. Elements that contributed to the success of Marks and Spencer in UK did not apply to the global market. The long-sustained buy-British policy, the distinctiveness of the retail operation, the priority on a British brand alone and the lack of clear retail positioning and design, all presented problems in the global situation. Another reason behind it was the inexperience of decentralized control of businesses. When the crisis became inevitable, the reaction was to quickly to distance themselves from this global operation.
As Lassarre (2007) commented on Global Strategy, a company needs to possess Global ambitions, Global position, Global business system and Global organization structure processes along with the coordination of human resource management to have a competitive advantage. M&S needs to improve on its management and global supply chain. For an organization to survive, change management is critically important in their respective market. It is essential for an organization to understand that every market is in a state of imbalance. Marks and Spencer lacked itself in analyzing their market, finding out what the current trends were, what their customers wanted, and this is one reason why they struggle to keep their customers. The company failed to change with the "changing" times of their market though being dominant for many years. Finally they found themselves struggling to keep their customers satisfied or even keep their customers.
Looking closely at the M&S business model, Mellahi (2005) stresses that marketing strategy and its supply chain are some of the reasons for the deterioration of this company's sales and its profits. The buying team behind M&S had no contact with customers. M&S defines its new creations completely blindly from its customers or its potential customers' expectations and demands. Another reason behind the financial decline of M&S was the inaccurate supply chain strategy. M&S was capable of a well-defined warehouse, sufficient suppliers, structured store network and also had a cost-efficient supply chain. Although a boon, such a supply chain lacks in flexibility. In this scenario M&S found it difficult to restructure its production planning during the one-year product development phase. If a new trend occurred during the one-year development period, it was too late to change all its orders because its suppliers already ordered all the raw materials. Another weakness in the M&S supply chain was that it was completely decentralized. M&S lacked in one aspect namely being a "self-supplier" for any products sold in its store. Although St.Micheal was its own brand, it was produced by suppliers. Since all its suppliers were external, it had no flexibility to change any order or to manage the purchase of raw materials or the purchase of semi-finished products.
After a century of being leaders in the textile industry, M&S should rectify its economic situation and its market image in order to regain its place in the competition among its adversaries. If M&S changed its supply chain by using a responsive supply chain instead of the cost-efficient one, like Zara, it would have more flexibility to follow the trend changes and adapt its product to market demand. This will prevent M&S from losing its customers because of inaccurate forecasts and building up inaccurate inventory.
M&S could also adapt its marketing strategy to the growing trends in the textile market. M&S should maintain a direct contact with customers thus directing their creations based on the desires of prospective customers. Using this method, it can attract new customers without the fear of losing its loyal customers. This method can also enable M&S to have adequate inventory to respond the market demand and to avoid build up of the unneeded inventory.
The company needs more changes in order to avoid further financial problems.(Rankine 1998).To prevent troubles in the future, M&S should work and coordinate closely with its suppliers to implement a flexible production system within their plants. This will allow suppliers to respond to any order changes on time with demanded products. M&S obtains most of its products from suppliers implemented in the UK which are relatively expensive than those in European or Asian countries. M&S should adopt a new global sourcing strategy where purchasing products from cheaper sources can reduce supplies cost thereby increasing profit margin.
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