M&S has a long history of international expansion. It makes use of diverse types of entry modes worldwide which combined of entry strategies from organic growth, joint venture, and franchise agreements to partly or wholly-owned subsidiaries (Whitehead, 1994). This kind of widely use of ownership models and countries give the priority of the company to perform well globally even when some individual markets may not that good.
The company began its tentative internationalization activities by exporting its St. Michael brands products in the 1940s (Alon, 2000). Then M&S formalized some of its export activities through franchise agreements in the 1970s. These expanded in number and geographic scope through to the 1990s. By 1998, M&S had almost 500 stores in over 30 countries with the retail sales of almost £8bn. Meanwhile, the company owned Brooks Brothers and Kings Supermarkets in the United States (Burt and Mellahi et al, 2002, p200).
However, 3 years later, Marks and Spencer sold its Brooks Brothers clothing chain (USA and Japan) and Kings Supermarkets (USA) businesses, turned the Hong Kong stores into franchises in a downgraded regional structure, closed the European stores which were unprofitable (Burt, 2002, p1). Under these circumstances, M&S is facing a survival crisis on its overseas market and most of the company’s direct international activities were compelled to stop. As a consequence, the reputation of the company went downhill both at home and abroad.
Marks and Spencer suffered the sluggish of sales, slump of profits and sharply dropped market share owing to all sorts of reasons. Externally, more ambitious and vigorous competitors entered this market and therefore M&S faced more stiff competition over the 1990s. Moreover, technological changes happened in retailing industry. New entrants were more likely to use the computerized systems and adopted new methods of operating which could improve effectiveness and efficiency. Nevertheless, Marks and Spencer still depended on the old systems and approaches. Therefore, the company gradually fell behind (Mellahi et al, 2002, p23).
Internally, first of all, the company did not have a unified, well-recognized and trusted brand name when exploring the international market. The company did not build up the brand effect. For instance, M&S did not change the names of the US chains after it bought Brooks Brothers and Kings Supermarket and used Brooks Brothers’ chain to open the market of the Far East (Alon, 2000). Therefore, the company cannot touch customers through its brand image, whereas the brand image is vital in marketing literature.
Then, M&S did not consider the customer’s needs on global market in early years. The company transferred their business formula from the United Kingdom to Canada without any modifications. Nevertheless apparently, the Canadian stores required customization to local needs (Alon, 2000). It is an economy that driven by customers. If a business could not satisfy its customers’ needs and keep the customers in a cost-effective way and then it would confronted with losses.
Moreover, the company ‘lack of clear retail positioning and design’ (Burt and Mellahi et al, 2002). After enter each markets, M&S did not have a long-term plan for the sustainable development. Supply chain always to be a problem and the company did not solve it properly. Canada had these problems for years which gave no guidance on the United States purchase. Moreover, many elements make M&S run smoothly in the UK market but did not work on the global market and the business became a series of activities with little synergy and cooperative effect.
Last but not the least, the company did not have an overall and long-term development plan of international expansion. Such as the company signed franchise agreements in numerous countries, but they use diverse franchisees and different types of franchise arrangements. Therefore, over a long period of time, the international activities of the company were short of directions and lack of internal communication (Burt and Mellahi et al, 2002, p213).
After the failure of first-round international expansion, Marks and Spencer utilized contraction strategy that focus on domestic market to deal with the crisis. Ten years later, M&S is rebuilt as a trustworthy brand which demonstrates its quality, fit, and service are reliable and consistent. Globalisation is imperative and overseas expansion is regarded as an opportunity of future growth. Therefore, the company is fully equipped for a new round of global extension.
Circumstances change with the passage of time, now M&S has 327 stores overseas in 41 territories (includes Republic of Ireland). As we can seen from the chart below that Southern and Eastern Europe is the key area of expansion and there would be great opportunities in emerging markets such as Middle and Far East, as well as the Indian subcontinent.
Source: M&S Annual Report 2010
Marks and Spencer Group plc focus on the sustainable development of the company and proceed with internationalization sequentially. In addition to the European market, emerging markets such as in India and China are the countries need to pay close attention for the next step. Apart from this, the company intends to use multi-channels to drive the international business.
The company set a five year plan that their international business arise to 15 to 20% of total Group Revenue since 2008, and last year they established some guiding principles for help them complete the plan. That is:
“Growing our Central and Eastern European partnerships; building sustainable businesses in India and China; accelerating growth with our franchise partners; and continuing to explore new opportunities.” (M&S Annual Report 2010)
In order to achieve better performance in international expansion, M&S need take the failure history as guidance and look into the future. Here are some recommendations as follows:
To begin with, the company needs to transfer the national brand into an international brand. It is unlikely for a company to deliver a brand into a new market without any further consideration. Therefore, the first decision should be made is whether “use a brand in all chosen markets or to differentiate it depending on market peculiarities” (Kuvykaite and Mascinskiene, 2010, p446). And then, identify the brand positioning, symbol, logo and other images to arouse brand awareness. A brand is a promise to make customers know who you are and then help the company generate customer trust.
Following the point mentioned above, the company must have detailed market research and expansion strategy. The business strategy should generally cover the ambition, positioning, investment and organisation (Lasserre, 2007). Under the strategy, the company need has clear defined short-term and long-term objectives with a suitable value proposition to the market. The company also should organize itself properly and excavate a sustainable competitive advantage which is difficult to replicate or imitate. Moreover, analyze each specific market and meeting customer needs with superior quality products at attractive price playing a vital role in the overall strategy.
Another important point is that the company should choose a suitable entry mode for each individual target market and come up with the follow-up ways of development. The company can choose any of these entry modes (namely export, license and franchise, alliance, joint venture or wholly owned subsidiary) or some combination of them to enter a host country. It is depending on the country’s specific situation because the choice of entry confines the firm’s overall strategy (Johnson and Tellis, 2008). In order to be able to resist challenges of entering a new country and has an efficient operation, the company should be concern with activities after establishment.
Finally, all the plans and strategies must be implemented smoothly and adjust according to the changes of the market timely. It is well known that an effective implementation is always superior to a great strategy. A company can never succeed unless it can implement and carry out its strategy effectively (Sterling 2003, p27). Moreover, the strategy should also keep pace with the newly developed technologies, the changes of market environment of a specific country or region and most important thing is look squarely at the alteration of customer’s needs. Only in this way can the company use the market knowledge and power to tackle all the difficulties and successfully entering a new market and survive.
Marks and Spencer is in gaining momentum in internationalization which help the company seek new markets and reduce the dependency on the UK economic cycle. Moreover, the company has a rich experience on international expansion, therefore, learn from the mistakes of the past, or else watch Marks and Spencer Group plc grow into a world famous enterprise and the other way around is that the company’s international business offers an opportunity for long-term growth.
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