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Marks and Spencer, having grown from a Penny Bazaar stall, is one of the UK's leading retailers of quality clothing, food and home products. It is also an expanding international retailer with 296 stores in 40 territories (M&S 2009). In November 2010, Chief Executive of M&S said that the Priority markets 2020 were India and Shanghai (Murphy 2011). This report aims at reviewing the competitive edge and weakness and producing a set of recommendations to senior management of M&S on how it should proceed with internationalization.
CURRENT INTERNATIONALIZATION STRATEGY:
2.1 Good Selection of Priority Markets:
Marks and Spencer wants to compete in India and China (especially in Shanghai) which is their priority international markets 2020. These countries have a high growth rate, attracting strategically in the near future (Lasserre 2007, p. 43).
ECONOMIC GROWTH RATE
Data Source: India in Business, Trading Economics 2010
2.2 Marks and Spencer India-No Food products:
Indian Retail Market is fueled by urbanization, incomes on younger population, plastic revolution and favourable demographics. India has been ranked number ONE for the most attractive market for global retailers to enter (India in Business).
RETAIL SECTOR - SEGMENTATION 2006-07
Data Source: India in Business
The Telegraph (April 2008) news articles states that in India, M&S, in partnership with Reliance Retail, would sell clothing and home-wares stepping back from food department. It would be a matter of concern where almost 60% of the retail sales are derived from Food and Groceries whereas Clothing and Footwear lends only 9% to the net. M&S is a brand known for its quality. M&S entering Food segment would not be a bad idea but it is dominated by large number of unorganized retailers (Indian in Business).
In order to render a decision to the present scenario, using Ansoff's Matrix, Marks and Spencer must consider product development in order to enter into Food segment (Richardson and Evans 2007). Re-entering retail sector as a hyper-market through enhancing the existing products in terms of quality or introducing new products under M&S Brand would be helpful to tap the potential market for food and groceries. ITC sells quality foods representing mainly ready to eat foods, staples, confectionery and snack foods.
Hyper-markets can be started as joint venture of Marks & Spencer, Reliance Retail and ITC Foods where M&S would look after clothing and home-ware, ITC for food products and Reliance Retail for retail property stores.
NEW JOINT VENTURE
(Clothing & Homeware)
2.3 Failure of Franchise Model-China:
Marks and Spencer is adopting franchise model to sell in Chinese Retail Market. The Telegraph (December 2010) throws an insight on newly opened 3rd outlet of M&S in SkyMall, Shanghai, China. SkyMall, shopping mall, is a desolate and unpromising shopping centre situated in the outskirts of Shanghai. Marks and Spencer is doing the same mistake again and again by selling the British fit products in Shanghai. Data shows that H&M, Zara and Uniqlo had opened-up in SkyMall. Wrong franchise partners, who generally tend to target their competitors, have lacked synergy in fulfilling customer needs and convenience. Improper outlet location and lack in targeting customers continue to pop-up in M&S internationalization story which might result in failure and changes in direction (Burt et al. 2002).
Marks and Spencer needs to achieve the legitimacy of Chinese markets. It has to get proper local networks and relationships by hiring local executives who can bridge the gaps of culture and management (Bianchi and Ostale 2005). It has to lay a harder emphasis on franchise partner selection which can make proper utilization of strategic advantage. M&S should be able to get the consumer data regarding size, queries and complaints from franchise. This could help in learning and recovering from the mistakes at a quick note.
2.4 No Online Sales Platform:
Marks & Spencer do not offer online shopping facility in India. It just has a static website displaying the on-shelf products. In India, less than 1% of the total organised retail trade is achieved through online retailing. But, online sales would mount upto $4-5 billion by 2015 which is increasing at 40%-50% year-by-year. Security concerns on using plastic money like identity theft, improper usage of customer data, etc are the main issues driving the the online sales down (The Financial Express 2011).
In China, M&S hasn't build the website platform yet. But China Daily (2010) stated says that Chinese are the keenest online consumers to purchase clothing in the Asia-Pacific region. Online retail would earn revenue upto $66.45 million by the end of 2011-12 growing at an average of 117% annually from 2007-2009. Language will be a matter of concern while considering Chinese E-Retail market.
As said in The Financial Express (February 2011), E-Retail can serve as an alternative medium for liquidating the excess inventories and saving up the excess premium real estate cost. A dynamic website displaying all the product lines should be built in India. Strong security measures should be taken while building the website for online sales. Same should be implemented in China with strong transport and logistics partner but the site should be built in Chinese local language to attract the customers.
2.5 No Focus on Brand Image:
Marks and Spencer adverts are quite less in numbers when compared to other retailers. In priority markets, where there is large number of TV viewers, M&S never tried to exploit the market using TV adverts. Chief Executive of Marks and Spencer in his annual presentation stressed on Facebook Fans where "Likes" and "Buying" makes lots of difference (Murphy 2011). Problem of being a "British Store" is also felt among customers. These reasons might make M&S to lose it strategic opportunity (Burt et al. 2002).
A proper promotional strategy has to be developed implementing both indoor and outdoor advertisements. A new strategy for clothing should be implemented through product development making use of "International sizes" and "British Style". The cultural difference has to be overcome in order to gain more strategic opportunity.
2.6 Other Niche Markets:
Chief Executive of Marks and Spencer strongly felt M&S's absence in 10 out of 15 strongest apparel markets. In its internationalization strategy, M&S follows broader approach and cover up whole market, then move on to another (Murphy 2011). This strategy would take almost 10-15 years to cover stronger markets and 5 more years to lay stronger foundation in big emerging countries.
More appropriate strategy has to be laid to cover stronger and emerging markets in early 2010s because early players capture the market place very soon. Internationalization strategy has to be reviewed with respect to financial constraints. It should re-enter into American and Canadian markets using market penetration of Ansoff's Matrix model where there is competition for each and every product. In order to gain market share, M&S has to gain competitor's customers by proving more product and/or service benefit and develop a relation with the environment it operates (Ansoff 1957).
From the above analysis and suggestions, a strongly recommended Global strategy has been framed.
Marks and Spencer has to change its role in the world marketplace as global player from a global exporter. Currently, M&S sells the products produced for British in other key markets of the world. Instead, it has to build an integrated business system accommodating international sizes and establish a sustainable competitive position in the key international markets.
Global Strategic Positioning:
Emerging countries like India and China should be the prime focus because they have a high economic growth rate and will prove strategically attractive in the near future. American and Canadian market should be re-entered since they prove to be the key countries to compete. Separate value curve for each country has to be developed.
Global Business System:
Proper franchise selection, in order to gain customer data, will help M&S in future developments relating to design, size and trends in international market. A new joint venture consisting of Marks and Spencer, Reliance Retail and ITC foods, will be helpful in market development to exploit the Indian retail conditions. A dynamic website with online sales platform must be developed as an alternative medium. Advertisements and other promotional activities will help in building the brand image of M&S in international market. Product development in terms of combining "British style" and "International sizes" is specifically needed to achieve growth internationally.
For Marks and Spencer, to achieve optimized efficiency and responsiveness, the organizational structure should be integrating the entire transnational network. Multi-dimensional information system by hiring local executives will be helpful in transfer of both customer and market knowledge. Culture of M&S organization should be team-mined which would be helpful to partners, franchise and M&S (Lasserre 2007).
After analysis of present business climate and past internationalization failures, the above recommendations have been arrived. In order to proceed with internationalization, M&S should review its global strategy and change some of its ownership models in order gain and maintain international market share. M&S will have a bright future internationally if it succeeds in managing the cultural difference efficiently.