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Beginning in UK as a penny store in 1880s, Michael Marks and Top Spencer started the company we know today as Marks and Spencer plc. Simon Marks, the son of Michael Marks took over the running of the business and introduced the core principals of the business. The core principals, which remained unchanged for most of their history, included the use of simple price policies, excellent quality of products under the "St. Michael" brand name, encouraging and working with the suppliers directly to ensure their processes were modern and of the highest standards and improve the business in efficiency and also by forming close relationships between the employees and the customers.
By operating with a centralized distribution system and having control over the entire process, enabled to them have the same quality and create consistent store experiences. This also meant that the local stores were unable to meet the requirements, as the managers were restricted in their powers. The powers seemed to be concentrated to the CEOs, who were also the chair of the board of members. Sir Richard Greenbury, known for his strong opinion and almost allergic reaction to bad news ran the company from 1988 to 1999. The problems started in 1998, when the share prices were hit severely, and the company was coping with rising costs due to the their reliance on expensive suppliers in Britain (while it seemed every other competitor was outsourcing to Asia), increased competition in the market segments they were present and the traditional bureaucratic management.
After his resignation, the new CEO Peter Salsbury did little and lasted only a year, before being succeeded by Luc Vandervelde in 2000. Until his departure in 2004, he made significant changes such as a new concept of "store in store", credit card fecilities, loyalty programs, "Simple Food" brand and the "Per Una" joint venture. However he too held the position of both the CEO and the chair. These changes little effect in the stock market, and many companies, who were their competitors were trying to take over the company. Their bids were fought off and also meant the introduction of a new head, Rose Stuart.
Rose, made several more changes, the most famous being the 11-point strategic plan based their core values of quality, service, trust and value for money. He made several cuts to stop wasting money, improve efficiency and also making upgrades in the stores. The performance was well, and in 2008, Ross officially took over the role of chair (he was already the CEO), and despite being controversial. 2009 proved to be a year of slow growth for the company, and this caused relationships between the board and the investors to become sour. Ross, announced his intensions to step down as the CEO, however he would retain the position of Chair until 2011.
Theory and concepts
The case study is based around change management and the strategies involved. Every company faces changes, and must make them to meet the needs of the business. Many factors can bring about this change and influence it. The authors (Witcher & Chau 2010) describe one such framework as the PESTEL framework. It consists of: Political matters such as the influence from the government, Economical factors that are caused due to matters related to cost incurred, Social factors which are the changes that are related to the changes in the society, Technological factors which involve changes in the technologies that are invented and technical changes made in processes, Environmental factors which are caused by environmental events or considerations of environmental impact, and lastly Legal factors which are changes in the legal institutes and frameworks.
According to the author (Henry 2008)the change influences can also be described by the "Porter's five forces framework", which can show the success or failure of a product or service. The five forces are: threat to new entrants, the bargaining power of the buyers, the bargaining power of the suppliers, the threat of substitute products and services and lastly the intensity of the rivalry among the competitors in the market. These forces can be examined to assess the whether the company will be able to compete in the market, and invest its resources.
These factors have all influenced M&S plc to make changes. To make these changes however a proper management is required. The company can take many routes to realize the changes, and many approaches can be taken to implement the changes. These are detailed in the sections that follow.
Objectives of the assignment
The objectives of the assignment are to:
Analyse the strategic routes taken by the company.
Identifying the core competencies of M&S plc.
Analyze and discuss the types of change management used in M&S plc.
II. Sources of competitive advantages of M&S and routes taken
Competitive advantages of M&S plc
Figure : Strategic Clock
The bowman strategy clock is used to make an analysis of the position of a company with its competitors. From the authors (Needle 2010) and (Thomson & Baden-Fuller 2010) we understand that, the "Strategic Clock" is set against two factors, the "Perceived Value of the product to the consumer" and the "Price". It came from an earlier rigid model, by Michael Porter, which was seen as insufficient. Companies can be analyzed using this model, falling not only in a particular segment, but choosing a mixed path. In the clock we can see, the low priced, low added value, which is focus on providing basic products and minimum pricing. From there, we see the low priced, which is for companies providing products that are cheaper variants of similar products offered by their competitors. The hybrid path is taken to put provide both a differentiation factor and a low price factor, which is only possible with high volume sales. The differentiation path is for products which are offered only to provide differentiation, and the focused differentiation path allows the company to charge higher by offering different, innovative and products which are only available from them. On the other side of the clock we see that risky, monopoly pricing and loss of market share, which are all bad for the company, unless under extreme circumstances where the company has a monopoly over the product. These strategies combine to form important factors to consider in order for improving the position of the company in the market.
The routes taken by Marks and Spencer are based on the hybrid and differentiation of its products to get a competitive advantage in the market. These allow the company to be:
Hybrid: The Company provides products which are products in a reasonable cost, but due to its reputation and the long history of attention to details, the company is able to portray a higher perceived value for the product. For this reason they are able to build a loyalty from the customers.
Differentiation: In this route the company is providing the customer with a higher perceived value for the products. They increase the margins of the products and have been doing so for some time, enjoying higher profit margins. This differentiation is based on the many factors according to (Obitz 2009) such as image differentiation which allows for the brand image to differentiate their products in the market using the company's image. Support differentiation is where the company provides the customers with convenient and innovative services such as shopping hours, discounts, store layout etc. Quality Differentiation is where the company differentiates its products based on the quality. This has been achieved by proper merchandising which is controlled by the company, the attention to details of the requirements of the products and innovation. And lastly the design differentiation where the importance is to keep it different and innovative in the market.
The core competencies of M&S plc can be identified as:
The brand is known for quality. This is one of the main competencies, which provide them with additional value from their competitors. From the early days, the company has been able to focus and control the quality of the products it sells in the stores, from design, production and distribution. This allows for the products at their stores to be of the highest quality and design.
The products of the company are known for their value for money. Although they are more expensive than their competitors, they are able to keep the prices at a level that is justified by the quality they provide. This can be significant when competition with competitors who provide lower cost products.
The brand of the company has been present in the market for a long time. Therefore it is well known by almost everyone. Due to this, they can compete with new brands that are not so well known in the market, and therefore needs to spend more money in advertising.
The company's management has always been a closely knit bunch. The work culture at the company, being closely related to the customers can mean that the customer service is better. This is important to providing the customers with a great store experience. Other competitors might not be able to provide the same level of customer satisfaction.
The company has been expanding and is present in many countries, with many stores. The stores are able to provide access to many customers. This is an advantage for the company, in contrast with some of their competitors who don't have such a huge global reach.
III. Type of change employed by M&S
Change management is an important part of any organization. (Harrington 2006) argues that, customers demand improvement and change in products constantly, keeping up to which requires the constant focus of any company to ensure they meet these demands in an effective and efficient way. In addition to this, the pace of change is increasing as the population of the world is increasing.
While points out that there are two ways in which change can be done. There are different types of change. The author (Martin 2003) point out these changes as:
Incremental Change: This type of change is when the company makes changes as the demand for them rises. The demand comes from the consumers and is met in a continuous fashion. To enable this kind of change it is important for the people involved to make accurate perditions about the types and scale of the change that is required and meets all the demands.
Step Change: This type of change effects the entire organization, and involves making significant changes in one or many areas within the organization at one go. The changes have a domino effect, which means that change made in one part usually causes changes to other parts of the organization. For example, the company can introduce a completely new product or service in the market, which would mean a significant change from its past.
Transformational change: This involves the complete change of one business process or the entire business as a whole. This is a revolutionary change, which means a completely different set of identity and procedure. The change is deep and involves everyone in the company. An example of this type of change is a merger between two companies that provide the same services, to form a new company (like in the recent case of two banks in Oman, merging into one).
The changes made in M&S have been basically incremental. Throughout their history, they have been making changes on a regular basis as the demand presented itself. For example, when the demand in the market appeared for improvement in technology usage such as credit cards, the company made those changes. Even more, when the company was facing challenges and concern from the investors, the top management was changed to allow them to meet the demands as a company. In times of changes in the market, and customer demand for better products, the company introduced the loyalty card schemes, credit card schemes and such. It would not be wrong to say that they have failed to even meet the incremental change requirements.
However, they have also made some step changes. During the term of Philip Green as CEO, the company closed down many store, acquired Per Una brand, cancelled many food products, and restricted their management to make it more efficient. These were significant changes that were introduced to improve the company and caused the first growth in sales since two years prior.
The company has yet to make transformational changes, and they are right in doing so. One of the key competencies of the company is its brand value, which has been a symbol of quality and innovation. Changing this would cause a significant strain to its financial stability and also cause it to be at a disadvantage in the competitive market.
M&S plc has had to make significant changes in their history. Organizations have to make strategic changes due to the many factors that can be defined using frameworks such as PESTEL and Porter's five forces. These changes have to be managed properly to be effective. As such, companies take paths, as M&S did, to providing their products and being competitive in the market. Furthermore they have made these changes in an incremental and few in a transformational manner to meet the demands of the consumers. We have been able to analyze and understand strategic change management. Change is necessary for any business, and important for any organization to succeed.
Harrington, HJ 2006, Change Management Excellence: The Art of Excelling in Change Management, Paton Press.
Henry, A 2008, Understanding Strategic Management, Oxford University Press.
Martin, V 2003, Leading Change in Health and Social Care, 1st edn, Routledge.
Needle, D 2010, Business in Context: An Introduction to Business and Its Environment, 5th edn, South Western Educational Publishing.
Obitz, C 2009, Supermarket differentiation in the UK: A theoretical and empirical investigation, Diplomica Verlag.
Thomson, N & Baden-Fuller, C 2010, Basic Strategy in Context: European text and cases , 1st edn, John Wiley & Sons.
Witcher, BJ & Chau, VS 2010, Strategic Management: Principles and Practice, CL Business Press.