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Marks & Spencer is one of the UK’s leading retailers with over 21 million people visiting their stores each week. However, in the fiercely competitive market environment, operational management strategies are quite important for retailers to obtain a competitive advantage and access to greater income. This report will introduce the history of M&S and different market segment in M&S, and analysis how M&S can running there business in the competitive environment. Some operation management theories are applied in the process of analysis.
Marks & Spencer is one of the UK’s leading retailers with over 21 million people visiting their stores each week. Now they sell stylish, high quality; great value clothing and home products and outstanding quality food. However, in the fiercely competitive market environment, operational management strategies are quite important for retailers to obtain a competitive advantage and access to greater income (Chase, 2001). First, it will introduce the history of M&S and different market segment in M&Sï¼Œand have an overview of Porter’s models of competition. Second, analyze how M&S can running there business in the competitive environment, trying to explain more different market segment in M&S and how the different market segment works together, analyzing their competitive advantage in this cloth industry. Finally, it will use Porter’s global generic strategy to analysis M&S, discussing how M&S attract different customers by using different strategy in the global environment.
Discussion and Analysis
Introduction about M&S and Overview of Porter’s Models of Competition
Martha is a retail business founded by a Jewish immigrant in United Kingdom 1884. 1884, 21-year-old Michael â€¢ Marcos in Kekegaite open-air market of United Kingdom Leeds City had opened a unique small stalls, which is the embryonic form of Marks and Spencer. Marcos. He displayed goods by category and price tag, getting rid of the bargaining traditional transactions. Most notably one is a billboard in his stall: “Do not ask the price, a penny can be.” This simple and eye-catching slogan quickly spread among the people in the middle and lower classes. By 1894, the British Spencer Tom with 300 pounds, and Marcos had co-founded Marks & Spencer. The company from the early 20th century has become a national chain store. In 1926, M&S in all major cities in United Kingdom has established a branch to become the UK’s largest retailer. Until today, M&S is still one of the world’s most profitable retailers (John Stanley, 1991).
Porter’s competitive strategy theories are mainly five force model, general strategies, value chain, diamond system and industrial clusters. 1) Five Forces model provides a very useful analytical framework to study the competitiveness of industry, competition in the corresponding morphology and how to design a strategy. Porter believes that the intensity of competition in any industry is generally affected by five kinds of factors. The industry’s competitive position and comprehensive degree lead to economy structure changes within industry, to determine the intensity of but from industry inner competition and determine the ultimate profitability within the industry. The company’s core strategy should be to choose the right industry, as well as the industry’s most attractive competitive position. 5 kinds of factors are the threat of potential entrants, threat of substitutes, the bargaining power of buyers, suppliers and the bargaining power of existing competition within industry. 2) The general strategy theory: Porter believes that the struggle with the five forces of competition, each company should only have two basic types of competitive advantage, namely, “low-cost and product differentiation,” which both with a special scope of business combination can be drawn from three types of successful strategic thinking, these three ideas is the overall cost leadership strategy, differentiation strategy and centralized business strategy. 3) Value Chain: Value Chain is an essential tool for analysis of source strengths. It can dissociate a variety of business activities with the value of transmission methods in order to understand the cost features of enterprise, as well as existing and potential differentiation sources. Business activities are independent and dependent. 4) Diamond system: the State plays an important role in the success of enterprise competition. Thus, Porter makes an extension of his research into the national competitiveness. In response to this theme, Porter puts forward the analytical framework of “Diamond System” (also known as diamond theory). He thinks factors that may strengthen their national enterprises to create competitive advantages include factors of production, demand conditions, business strategy, structure and competitors, related industries and support for industry performance. 5) Industrial clusters: regional competitiveness has a great impact on competitiveness of enterprises. Porter through the study of industrialized countries finds industrial cluster is a common phenomenon in the process of industrialization, in all developed economies, are it is clear that a variety of industrial clusters. Industrial cluster is defined as a specific area, with competitive and cooperative relations, and geographically concentrated, with interactive relevance enterprise, specialized suppliers, service providers, financial institutions, related industries such as manufacturers and other relevant bodies composed of groups. Complexity and depth of different level of industrial clusters is different (Francisco J, 2009; Mohr, 2002).
Analyze market segment and competitive advantage of M&S
In 1992, the company has 280 chain stores in the United Kingdom with sales of 75 billion dollars. From the view of Sales category, M&S accounts for 15% of the UK clothing sales, food sales 4.6%. Guinness World Records reveals that volume of the company’s flagship store in London MarbleArch is 3700 dollars per square foot. M&S offers clothing having exquisite style, quality and value for money and household items, as well as outstanding quality foods, all products undergo rigorous screening, from more than 2,000 suppliers around the world. M & S in the UK and other countries, more than 75,000 employees in the UK, currently has 622 stores in the international context, M&S is also actively developing business. In the 07 and 08 fiscal year, sales exceeded 90 billion pounds. From a market positioning perspective, since the 20th century, 30 years, M&S makes middle-class as a sale object, and make every effort to provide them with quality-price ratio appropriate goods. For customers to eat well and well dressed has always been motto of M&S, which is also main historical reason for 100 years of food and clothing at the same time.
After the First World War, due to a shortage of materials, a penny sales strategy is difficult to sustain. M&S decisively changed its thinking, making sell project focused on clothing and food, and expanding rapidly, with unprecedented turnover. Until 20 the eighties and nineties, M&S gained unprecedented praise in terms of quality, service, diversification. However, from 1998 to 2001, M&S operating profit had been on the decline. M&S decided to change strategy, developed a new program – in overseas sourcing and manufacturing goods. This saved a lot of costs, and profits began to improve. With the emergence of electronic commerce, M&S also creatively establish a website, combining traditional retailing with e-commerce. This allows people to see a century-old shop in the face of challenges, courage to change themselves and innovative vigor (Jemmeson, 1997).
Most traditional retail stores are selling a variety of brands of goods, of course, there are also some traditional retailers also selling a small amount of own-brand goods, such as designers for Target to sell tailored specialty products. M&S has sold almost all own-brand goods. And it has also characteristic of its own brand, types of goods is not exhaustive, but rather selective to provide customers with the best-selling inexpensive goods. At present, 80% of M&S operating goods have the brand of “St. Michael”. M&S approach is: from store to collect from the customer views and demands for commodities, and then from Martha’s technical development department for product innovation and design (or with the manufacturer to design), and then delivered the manufacturer to produce the final re – M&S Sales through distribution systems. Thus, Martha has become the world’s largest “no plant manufacturers.” M&S persists in shaping its own brand into image of a healthy environment, in its own brands contains a fair trade, sustainable, non-genetically modified products, animal welfare and so on. Almost 100% of sales of own-brand are a biggest difference for M&S with the general retailers. This unique brand strategy makes its own brand has become endemic in the United Kingdom as part of shopping culture, while Marks & Spencer thus have unmatched brand equity.
Marks and Spencer is known to the world due to a standardized and information-oriented management style of supply chain management and suppliers to make it a truly meaningful win-win situation. Standardization is Marks and Spencer’s consistent style, product quality, type and design of store layout, product display, and even the staff of the service program has a meticulous standard. Standardization Management greatest advantage is that we can save a lot of management costs, while consumers can enhance the overall impression of the Marks and Spencer, giving them a home away from home shopping experience. Marks & Spencer has achieved a paperless management, which ensures that all over the world Martha chain can continue to run in an orderly manner. Marks & Spencer and suppliers have far more than a general partnership, but rather become a complicit relationship to work. Marks and Spencer has nearly a thousand of suppliers, and suppliers Dibos companies having more than 100 years cooperation, with more than 60 suppliers with more than 50 years of partnership. On the one hand, Marks & Spencer suppliers guarantees strict demands on product quality; the other hand, Marks and Spencer takes it as its responsibility to help suppliers reduce costs, care providers technological transformation and staff welfare (Tony Grundy, 2003). As a result, suppliers are also with the development of the development of Marks & Spencer. Close cooperation of both sides ensures Marks and Spencer to achieve its corporate objectives – “provide its goal customers with high-quality product within the ability to purchase.”
“Customer satisfaction” business philosophy: “customer satisfaction” has always been Marks and Spencer’s business philosophy. Customer firstly thinks a lot of commodities with high-quality and low price, which is Marks & Spencer sought-after standard. Customers are also increasingly focusing on product design and after-sales service, so Marks & Spencer has also taken a series of measures accordingly. In recent years, Marks and Spencer pay more attention to understanding customer needs, internal management structure to take the simple and rapid decision-making mechanism, the focus from “how to buy” to “how to sell.” Customers buy Martha not satisfied with the goods that can be unconditional refund. Carried out on the part of the membership-based customer and sales records of the Commissioner of the members on a wide range of information, including birthdays, clothing numbers, special preferences, and settlement accounts. Marks and Spencer will be in the form of time by phone to inform new members of the listing, the monthly will be in the form of a letter seeking the views of members. 1999 opened on-line shopping service, but also a cadre of loyal customers, people satisfaction with Marks and Spencer increasing. Oxford Street is a well-known British commercial street on the number of stores, the London crowd to get on the top spot. M&S in such a competitive market environment also pursues their usual high quality of goods and services, and provide an elegant display of the environment. In this area, Martha’s main competitors are facing the department store, and Saier Fu Leach youth-oriented casual relaxed style of the shops, in addition to including many other stores. The advantage that M&S is different from these competitors is its depth and breadth of product portfolio and a unique marketing strategy (David Campbell, 2009; Lowson, R.H. 2001).
Strategy Theory and Practice Analysis about M&S
M & S retail as an industry has its own specific competitive structures, which can be analyzed from the Porter five forces of competition: 1) Entry threat. The low-cost of commercial retail enterprises, lead to lower barriers to entry the retail industry, retail businesses are always faced with the threat of new entrants. 2) Replacement threat. As the retail business operated products, the technical content of most is not high, more likely to imitate, so facing a greater alternative threats. 3) The bargaining power of suppliers. From the most developed countries show that, in the retail business and manufacturing enterprises bargaining in retail enterprises grow in power. 4) The bargaining power of buyers. As the retail business more and more abundant supply of commodities, increasing the power of buyers, which forced more and more retailers adopt the “low-cost, low-cost, high-quality service” strategy, retailers profiteering opportunities less and less. 5) Existing competitors. At present, the existing competitors in the competitive retail industry has become a variety of forms, a variety of tissue types, regions and business scope of the three-dimensional cross-competition.
Facing fierce competition, M & S retail businesses have successfully used a variety of competitive strategies to improve their competitiveness. To face the future social development, to further advantage, M & S should be good at using the Porter’s competitive theory, adopting strategy and measures suited to the situation on their own (Dinesh, 2008; S. Ambec, 2002).
(A) Differentiation strategy
Competitive differentiation is the basic strategy, to pursue “I have what people don’t have, my superior that what people have” customer value that is different from other competitors. Differentiation strategy is that the business through the characteristics production makes their product or service unique, and thus consumers are willing to pay a higher price. Successful examples adopting differentiation strategy are such as the United States Norton department stores, its different, nuanced human service has won praise from consumers, so that no rival can match. Commercial retail enterprises implement differentiation strategy with mainly the work to be undertaken: first, accurate positioning for the enterprise. The main way to differentiate their market position, that is, to determine a company’s market position is different from other enterprises or image. Second, establish and run enterprises to brand image. Large-scale commercial retail enterprises shall include at least the brand connotation of the brand of goods, services, brands, and on the basis of the previous two derived from the three-tier corporate brand meaning. Retail business once chooses differentiation strategy, it must be based on its own seeking to establish a brand image to reflect this brand image on the one hand business activities, on the other through the advertising campaign to promote this brand image. Third, long-term to maintain brand image. After companies establishing their own unique brand image, they should make long-term planning to maintain its own brand image (Harry J.P., 2000).
(B) Cost leadership strategy
Cost leadership strategy is to low operating costs or fees. Retail business goals taking cost-leadership strategy is to become the industry’s low-cost firms, which tend to have economies of scale, proprietary technology, preferential supply of commodities prices, lower transaction costs and management fees and other advantages. When enterprises have become a cost leader, they can effectively compete against the other forces of competition, obtaining advantage in competition. The most successful retailer using cost leadership strategy the world’s largest retailer, Wal-Mars. The 20th century, 80’s, it began to lease satellite transmission, integrated global marketing data, the commodity management, logistics and distribution, global procurement and data processing of all applications of advanced modern information technology to significantly reduce the cost, annual savings of more than competitors) 750 million of dollars in spending. Commercial retail enterprises can be achieved through the following areas cost leadership (Voss, 2003). First, they can through cost analysis identify the greatest impact factors on the business cost, controlling systematically cost. Second, it is to establish alliances among commercial enterprises, reducing procurement costs and jointly developing the market. Third is using capital operation, expanding the enterprise scale. Through joint, mergers, acquisitions, joining, enterprise implements chain operations, the rapid expansion of operation scale, to achieve business activities standardization, specialization, centralization. Fourth is scientific management with application of advanced technology. Retail enterprises further reduce business costs through the use of POS (selling real-time systems), MIS (management information systems), EDI (electronic data interchange), EOS (Electronic Ordering System) and other modern management techniques (Shankar, 2004).
(C) Objectives accumulation strategy
Retail enterprises to implement the strategic objective is to choose one or the accumulation of a group of market segments as part of its services, target markets, strategic optimization, to seek their presence in the target market on the competitive advantage. Because it takes a specific consumer group focused to meet their needs, so companies can be more economical than the other competitors, more thoughtful to meet their needs (Mittal, 2004). In addition, the strategy also adopted by the choice of the target market to find the weakest link in the existing competitors cut into, to avoid a competitor with a strong head-on collision. Select the target build-up strategy, first, to conduct market research and market segmentation. According to differences in consumer demand will be divided into different consumer market segments, so that enterprises can more effectively meet their needs. Second is to determine the target market. Not all segments have value to enterprise. Companies should choose a potential market segment as its target market that will not conflict with a strong competitor. Generally speaking, potential market segments should also have the following three conditions: 1) adequate, the reality of unmet demand or potential demand; 2) Enterprise has ability to provide products or services to meet these needs, and helping the can map; 3) Business in this market segment can achieve certain competitive advantage. Third, accounting for the characteristics of the target market, it is to develop practical sales strategy, including determining the number of sales outlets, choice of a commodity business scope, pricing strategies. In addition, the in the implementation process of objectives accumulation strategic, the cost leadership strategy and differentiation strategy can also be used at the same time.
Marks&Spencers is a leading retailer of clothing, food, home ware and financial services. Marks & Spencer is one of the UK’s leading retailers with over 21 million people visiting their stores each week. However, in the fiercely competitive market environment, operational management strategies are quite important for retailers to obtain a competitive advantage and access to greater income. It could supply goods whatever customer needs timely whether it is the variety of food products or clothing style. This paper first introduces the history of M&S and different market segment in M&Sï¼Œand have an overview of Porter’s models of competition. Second, analyze how M&S can running there business in the competitive environment, trying to explain more different market segment in M&S and how the different market segment works together, analyzing their competitive advantage in this cloth industry. M&S is changing the business strategy timely when market environmental change, while the continuous improvement on strategy goes along with the change of customer demands. Finally, it uses Porter’s global generic strategy to analysis M&S, to face the future social development, to further advantage, discussing how M&S attract different customers by using different strategy in the global environment. The outcomes through analysis and discussion give a useful help to retail industry. The experience of the old brand department store tells the world that they can create their own lands as long as the constant innovation even in a traditional industry.
Through the above analysis, M&S has made a great progress, getting over lots of difficulties. However, in today’s fiercely competitive market environment, M&S should also adopt optimal strategy to obtain a stronger competitive by reducing human and material costs by exploring overseas cheap labors and improving their quality of service and giving full play to their creativity.
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