The Retail Importance of Marks and Spencer Companies - Case Study Example

Marks & Spencer Introduction The Marks and Spencer family of companies is composed of several units but it is the retail arm of the business which seems to be most important for the company. Their stores and shopping locations of the company placed around the world form the basis of their business and they are clearly more important that their online sales department or their purchasing arm (Marks & Spencer, 2007). The company is an international retailer of clothing, fashion accessories, food items and other household goods. While it has been in the business of marketing clothing and accessories for several decades, there are other markets and regions that the company has only entered recently. For Marks and Spencer, the history of the company begins with Michael Marks since he established the company by expanding and developing a line of products that was sold for one penny apiece. Mr. Spencer joined the company after Mr. Marks spotted his talents while Spencer was working as a cashier for a supplier of the company. Spencer rose within the ranks of the company to eventually give the company the iconic name of Marks and Spencer. Not only was the company founded as a family run business, it operated as such since the transfer of ownership and management from father to son meant that Simon Marks replaced Michael Marks at the company in a managerial cycle of succession (Christopher and Peck, 2003). Simon Marks established the St. Michael brand that was noted as being an upscale brand for decades in the British fashion industry. Beyond the business of the company, the culture of the organisation is noted to be one which promotes close ties between the management and the employees. Training, employee development and promotion from within are quite important to the organisation since the philosophy followed at the company is to try and raise individuals from within the ranks of the company to leadership positions (Christopher and Peck, 2003). This means that many individuals may join the company at lower ends but then rise to control top positions within the company. This is strategically important as described by Wilson (1999) since such policies create a long term commitment with the company which means that only the stars of the business could come to the top of the heap. In this manner, Marks and Spencer is offering individuals who come to work for the company a real career rather than a short term job. The close nature of the company has also hurt it in the past since input from family members who control the company seem to have made the company continue to work with insiders and long standing suppliers rather than anyone else who might bring the same quality of product at a cheaper rate (Christopher and Peck, 2003). Such cultural elements put M&S in a position where it was unable to expand rapidly into the lucrative Asia pacific market while other competing retailers like GAP were able to capitalise on the use of production lines coming from countries such as China. Rather than to bring about changes that could have supplied customers with what they wanted, the company was unable to meet the demands of the customers or adapt to changing tastes in the 90s (Christopher and Peck, 2003). As described by Welch (2005) not responding to market changes scenarios can be quite harmful for the interests of a company and M&S was no exception since it had to roll back its American operations as it suffered losses in the late 90s. Strategy, Key Problems and Issues In terms of overall strategy, M&S seems to be placed in the differentiation position since it has a brand image of quality products even when it comes to the food products it sells. It is not a cost leader since there are alternatives available in the market for the products it is selling at a much cheaper rate. However, Marks and Spencer can charge a premium since they claim to provide superior service and the products they sell may have perceived superior quality for the consumers. The retail arm of the company is cash centre but the costs associated with maintaining the image of quality are quite an expense for the company. This means that the company has to question itself on how it should place itself in various markets. The company faced tremendous difficulties in the American market and in Europe for retail consumables. Even though the value chain of the company has always been driven by its top executives, it seems to have been unable to penetrate places other than its home market. As described by Christopher and Peck (2003), the executives of the company are known to give a lot of attention to the little details concerning the merchandise and the quality of the goods sold by the company. This can easily be considered the strength of the company since the buyers would know that a certain level of quality can be expected of M&S. The company has focused on providing timeless fashion classics and sharp designs rather than to focus on trends and fads. This means that it has developed a serious and viable brand image. However, the supply chain for these fashion goods was connected for a long time with suppliers who were selling their wares to M&S at a very high rate. Once the retail arm started getting goods from China, it was able to come back to compete with other fashion retailers. When the majority of their goods suppliers were British, the costs of acquiring goods was simply too much and a change of suppliers to China resulted in lower costs and improved profits (Christopher and Peck, 2003). The home market is critical for M&S since the majority of sales for the company come from the home market itself. Undoubtedly, while the market in the UK may be stable for companies such as M&S, regulation coming from the EU may have had a large effect on how the company operates. For example, in 2006 the Food Hygiene Legislation came into being which has affected every major food retailer in the UK (Jean, 2006). The laws find their justification in the fact that food businesses have to be registered with the local authorities such as the environmental health department, the meat hygiene service or other bodies that govern their business. Huxley (2006) notes that such laws can have a direct impact on the prices of food but the laws are still necessary to protect the public. Despite these legal issues, expansion and improvements in sales for growing markets is still an opportunity for the company since the emerging markets in the Pacific Rim as well as retail locations in other Asian countries can help the company get more profits. Overtime, these markets have become very important for retail sales and those who entered them early have obtained an advantage over those who were late to the party (Welch, 2005). Even though M&S is in financial trouble at the moment, it is in a position to undertake investments where necessary therefore an expansion into regional markets in Asia may allow it to obtain more profit. A significant threat that the company presently faces is fierce competition coming from American companies such as GAP which seek to provide quality service and reasonable prices just as M&S does (Christopher and Peck, 2003). In the retail food industry, competition from suppliers such as Tesco may further hurt the sales for Marks and Spencer particularly in times when the economy is facing a downwards trend. In recent times, M&S has responded to the changes coming to the market and the developments in consumer tastes and it has done so by stopping the use of the green bags and by repositioning the St. Michael brand. To retain present customers and to attract new buyers, the company changed everything it could possibly change up to the uniforms worn by the store staff. Further, M&S has developed their haute couture range and their clothing and other non perishable retail products come exclusively from Asian suppliers. This was done as a response to the need of the company to change itself while the structure of the company was changed to create five distinct segments. Recognising its inability to compete at the moment, the company moved out of America and some European countries (Christopher and Peck, 2003). This is certainly a good move since more investments in these countries may not have resulted in the same amount of profits as the company might have obtained from doing business in Asia. Considering that it was only recently that the company started using online sales as a source of revenue, it seems that technology still remains a difficult area for the company. In the past few years, retailers such as Wal-Mart have made extensive use of technology to improve their logistical systems and have used tools such as RFID tags to improve their inventory management (McClenahen, 2005). M&S can certainly benefit from using such tools to optimize its own supply chain especially in their food retail business where the tracking of food items that are being shipped by air to preserve their freshness becomes essential. Technology can also play a significant role in the process of selling as well as the manufacturing of the clothing lines handled by M&S. With the use of e-marketplaces and other tools of communication between buyers and suppliers, the company could easily seek out the cheapest possible producers for its goods without harming the quality of the product (Rayport and Jaworski, 2000). Such tools need to be used effectively if M&S is to continue as a profitable business across the world. Conclusion Even though the company has improved tremendously form a difficult position in the 90s, a lot more needs to be done to make the company a success. Global economic developments as well as the technological changes affecting the retail industry are very important concerns for the company that need to be managed quickly. It seems that the development and exploration of options in the Asian markets will be very important for Marks and Spencer and since competing brands such as GAP have already entered these markets. As a company, Marks and Spencer is quite interested in volume sales as well as repeat business since it is basically a retailer. Therefore, the company has to compete on price as well as quality in much the same way as other retailers are doing. Only focusing on the idea of quality and service may not be the best bet for the company and the value proposition of the company may need to be changed to reflect the changing attitudes of consumers. However, they must also maintain their brand image since they would not want to alienate their current and loyal base of consumers. In essence, such steps need careful manipulation of the brand as well as the product lines that come under the brand. If the company’s products are seen as being too expensive or not offering the right level of quality, it could quickly lose customers to the competition and may have a hard time bringing them back to M&S. In the current global economic situation, Marks and Spencer’s position as a retailer of quality food may also be quite shaky because the price competition coming from value brands may be more attractive to buyers when the economic situation is uncertain. It can be said that these risks are little more than opportunities for the company to make the right decisions since they can take the company to new heights and allow it to come to the markets that had previously been closed to it. However, a lot needs to be done and a lot of technological, business and cultural changes need to be made at Marks and Spencer before the company can say that the plans for change have been successful. Works Cited Christopher, M. and Peck, H. 2003, ‘Moving Mountains at Marks and Spencer’, [Online] Available at: www.cscmp.org/Downloads/CaseStudy/ms.pdf Huxley, R. 2006, ‘EU funds boost local food sector by 50%’, Farmers Weekly, vol. 145, no. 24, pp. 18-19. Jean, M. 2006, ‘The food industry and health’, Lancet, vol. 368, no. 9546, pp. 1490. McClenahen, J. 2005, ‘Wal-Mart’s big gamble’, Industry Week, vol. 254, no. 4, pp. 42-49. Rayport, J and Jaworski, B. 2000, e-Commerce, McGraw-Hill. Welch, J. 2005. Winning. Harper-Collins. Wilson, J. 1999, Human Resource Development: Training for Individuals & Organizations. Kogan Page. Read More