Strategic Management at Marks and Spencer - Research Paper Example

Strategic Management at Marks & Spencer Table of Contents 1.Introduction 2 2.Factors Enabling Success 3 2.1.Change in Human Resource 4 2.2.Change in Finance 5 2.3.Change in Information 6 2.4.Change in Technology 7 2.5.Change in the Competitive Position 8 3.Corporate Governance 9 4.Corporate Social Responsibility 11 5.Conclusion 12 1. Introduction Marks & Spencer plc (M&S) ranks among the leading retailers of the UK, and total weekly footfall in all its stores surpass a staggeringly high figure of twenty one million. The official website of M&S conveys its enormity of activities by saying that “We sell clothing, food and homeware and we work hard to provide our customers with the highest quality products, service and shopping environments” (Marks and Spencer plc-website-a, 2010). The company sells not only home products and clothing, but also ensures that its entire product portfolio is high quality, stylish, and of high value. Moreover, it also sells great quality food that is sourced through responsible procurement process from global supplier base of approximately two thousand (Marks and Spencer plc-website-b, 2010). The company which is rather a behemoth in its sector has an employee base of more than seventy five thousand. The retailing giant has a chain of over 600 stores in the UK alone. The company has also focussed strongly on expanding its international business (Marks and Spencer plc-website-c, 2010). Company data reveal that M&S is the top notch provider of lingerie as well as women’s wear in its home market. Simultaneously it is rapidly growing its market share in the areas of men’s wear, kids’ wear as well as home products. The company attributes its growth to its flourishing online business and reveals that forty nine per cent of its total business comes from clothing and home products, while the remaining fifty one per cent comes from food that comprise “everything from fresh produce and groceries, to partly-prepared meals and ready meals” (Marks and Spencer plc-website-c, 2010). Tuning itself on a proper note in terms of eco-friendly initiatives the company has put on the green jacket like most of the leading global players and testifies its moves by declaring that “Now more than ever, we’re also known for our green credentials as a result of our five-year eco plan, Plan A, which will see us, amongst other things, become carbon neutral and send no waste to landfill by 2012” (Marks and Spencer plc-website-c, 2010). 2. Factors Enabling Success Apart from corporate mission and vision, every company needs a comprehensive strategic plan in order to enumerate the areas wherein it needs to bring about changes in order to achieve the desired goal(s). M&S being a leading retailer of global stature is no exception in this respect and it conveys that “We have spent the last five years putting in place strong foundations in line with our long-term plan” (Marks and Spencer plc-website-d, 2010). With a continual focus on the core values of quality, service, innovation, value, and above all trust, the company has introduced new services as well as products in its core business, and armed with an undoubtedly strong brand, a wide spectrum of products and a skilled management team, it is “Increasing the pace of change and operational execution in the business; Leveraging M&S Direct by building more channels to market; Building our international portfolio to grow our global customer base; and Reinvigorating our brand communications” (Marks and Spencer plc-website-d, 2010). In order to bring about desired changes in its framework that will in turn augment its competitive advantage, M&S has to focus on the areas of human resource, finance, information, technology, and competitive position relative to its rivals both in the domestic market as well as in the global arena. Apart from these factors, the company should also pay importance to the increasingly vital elements of corporate governance and corporate social responsibility (CSR) in order to bolster its competence as well as corporate citizenship. 2.1. Change in Human Resource The Board of Directors (BoD) at M&S is chaired by Sir Stuart Rose and his deputy Sir David Michels (Marks and Spencer plc-website-e, 2010). Apart from them there is a battery of dynamic directors – both executive as well as non-executive. A piece of vital information that may be mentioned in this context about Sir Stuart Rose is that “Stuart began his career in retail at Marks & Spencer in 1972, before going on to the Burton Group in 1989, becoming Chief Executive of the Multiples Division in 1994.....Before re-joining Marks & Spencer as Chief Executive in 2004 he was Chief Executive of Arcadia Group plc from 2000 until 2002” (Marks and Spencer plc-website-e, 2010). It definitely testifies the levels of job satisfaction that M&S offers to its employees. Moreover, when it comes to the selection of candidates the company tries to ensure that they are aligned with the corporate goals and this is again reflected through the fact that “Stuart was knighted in 2008 for services to the retail industry and corporate social responsibility” (Marks and Spencer plc-website-e, 2010). Companies operating in contemporary market have realised the importance of their human resource which have led them to regard the development of their employees with utmost significance. M&S considers its human resource as its strategic partner because it is well aware of the fact that without well trained and efficient human resource it is not possible for any company to satisfy its customers. The management of M&S are renovating their stores to give it a more informal look. The company believes this move will help it to develop an emotional bonding with the customers. Such informal environment in the stores can be only attained if the front line workforces are aware of the needs, beliefs and value system of the local customers. Hence the human resource of M&S can assist the company to achieve its strategic goal. When it comes to expanding globally and into diverse markets, the best policy will be to hire the local people as the front line employees because they understand the needs of the local customer quite well whereas other strategically important position should be occupied by those who have a good experience and a precise understanding of the functioning of the company’s strategy. Specific training for the front line employees can bring noticeable change in the quality of service offered to the customers and thus the level of customer satisfaction will increase. 2.2. Change in Finance According to the annual report of the company, last year its revenue declined in UK by 1.7 per cent but the performance was good in other parts of the world as is evident from its international market growth in revenue which was 25.9%. Net margin of the company dropped from 13.4 per cent (2008) to 9.6 per cent (2009), the profitability of the company also declined from 12.5 per cent in 2008 to 7.8 per cent in 2009. Such financial condition of the company can only be improved by increasing the volume of sales and lowering the cost of operation. One of the ways to increase the volume of sales is keeping the prices of the products as low as possible. However, straight lowering of price will not help. The company needs to come up with attractive schemes in order to create new customer base and retain the existing one. In order to reduce the cost of operation, the company can enhance the efficiency of its supply chain by implementing concepts like JIT (Just in Time). The company must minimize the level of inventory for reducing the cost. Moreover M&S can implement some advanced performance measurement systems like balanced scorecard and benchmarking. The company should set up new financial objectives for each of the upcoming quarters. These objectives need to be achieved on a constant basis. Last year (2008), debt-equity ratio of M&S was 2.65 which reduced to 2.46 in 2009. This is a good sign because it enhances the creditworthiness of the company and the company can raise more capital through debt instruments. This capital should be invested in the developing markets with the objective of opening new stores and increase the market coverage. Once the company has stronger market presence, it will certainly influence its financial condition. 2.3. Change in Information Flow of information is a vital component that assists the company to gather the vital reports regarding market condition, activities conducted by the competitors, changing consumer behaviour and the internal state of the company. To develop an efficient communication channel in the company, the information should flow smoothly from one source to another. Since it operates in the retail chain business, the supply chain of the company is one of the factors that determine the success of the company. From the last few years Marks & Spencer has decided to make its supply chain more eco-friendly and efficient. Hence the company is introducing different changes which will facilitate the flow of information at a faster rate throughout the supply chain. The company should develop better contacts with the local suppliers in different countries so that certain specific raw material can be collected from local suppliers at a comparatively lower cost. Proper flow of information will improve the communication level between management and employees. The management can collect vital information regarding the preference of the customers from the front lie employees since it is they who directly handle the customers. This information can be further churned by the marketing department to formulate future marketing plans or to introduce the required changes in the company for enhancing the satisfaction level of the customers. 2.4. Change in Technology In the present world, technology is changing at a fast rate. Hence different companies are investing more in technology to gain competitive position in the market. In the retail industry, technology has introduced a major change in the way business is conducted. Apart from the physically existing stores, company makes good amount of sales through website & online business. Technology has helped the management to have a better control on the supply chain and business can operate more efficiently. Being one of the largest retail chains in the world, M&S has its own online storefront that enables customers and consumers to purchase almost all the products. However, online storefront has become a common feature of a global retail chain. As a result, in order to stay ahead in the competition for a longer period of time the company needs to be more innovative and technologically more advanced. Currently there is only one online storefront of the company. This storefront is for global customers. However, in order to be more competitive the company should open up different online storefront for the customers of different parts of the world. Telecommunication technology is becoming more and more advanced. The company should capitalize on this development. Consumers should be given more opportunities to shop from their mobile. M&S, apart from retail service, also provide financial services. Being present in both financial and retail market, the company has clear understanding about both the market. Using this experience the company can come up with a website where consumers can save their money as well as purchase products only from M&S. 2.5. Change in the Competitive Position Marks & Spencer is one of the largest retailers in the world. The company has positioned itself as a high street retailer. As far as its competitors of M&S are concerned, Tesco and ASDA worth mentioning. It is true that M&S is a large retailer, but it has not been able to beat its main competitors. Sullivan and Adcock (2002) had argued that the returns policy of M&S which is termed as ‘no-quibble’ helps enhance its brand equity. However, they had also observed that M&S “scores very highly on the measures of awareness, perceived quality and association, but recently has lost out badly in terms of loyalty and levels of repeat purchasing” (Sullivan & Adcock, 2002). According to Brenda Sternquist ideal customer of Marks & Spencer is “someone who is looking for good quality, classic-style clothing” (Sternquist, 1998). However in order to defeat competition the company has to modify its position. It needs to make itself more acceptable to all kinds of customers. In order to do this the company needs to modify its product range, pricing strategy and promotional strategies. 3. Corporate Governance In the recent business context it can be observed that companies have started paying special attention towards the concept of corporate governance. The term can be defined as “the process of controlling management and of balancing the interests of all internal stakeholders and other parties (external stakeholders, governments and local communities” (Du Plessis, McConvill & Bagaric, 2005). Figure 1: Framework of Corporate Governance (Source: The Fletcher School) According to the Corporate Governance Statement of M&S (2009) “The Board’s objective is to achieve success for M&S by building a sustainable business for the long term, generating shareholder value through consistent profitable growth, whilst making sure that our customers can always trust us to do the right thing” (Marks and Spencer plc-website-f, 2009). As an integral part of its corporate governance initiatives, M&S vows to reward its investors with gainful returns. Simultaneously it also strives to ensure that its “customers experience Quality, Value, Service, Innovation and Trust every time they visit M&S” (Marks and Spencer plc-website-f, 2009). Being an empathetic employer, M&S aims at making sure that its employees feel proud to be a part of the company. M&S also sees to it that its suppliers are satisfied through their engagement in lucrative partnerships, and finally the company aims at helping its communities as well as the environment through its sustainable business (Marks and Spencer plc-website-f, 2009). However, M&S agrees that “The Board’s challenge is to make sure this is put into practice and embedded in the M&S culture so that our employees understand their responsibilities” (Marks and Spencer plc-website-f, 2009). Being a truly dynamic player M&S has realised that “Governance is not just about the Board – it’s about how governance is understood and acted on throughout the business” (Marks and Spencer plc-website-f, 2009), and hence the BoD outlines the values as well as the standards of the company in order to ensure that the employees understand them and thereby meet the company’s obligations to its shareholders as well as wider stakeholders. However, it may be observed that the company ensures that “There should be a clear division of responsibilities at the head of the company between the running of the Board and the executive responsibility for the running of the company's business. No one individual should have unfettered powers of decision” (Marks and Spencer plc-website-f, 2009), thereby routing the chances of any personal bias and abuse of power. This can further be observed through the fact that “The Board should include a balance of executive and non-executive directors (and in particular independent non-executive directors) such that no individual or small group of individuals can dominate the Board's decision taking” (Marks and Spencer plc-website-f, 2009). 4. Corporate Social Responsibility The company is a part of the society; it acquires all the resources like manpower, land, capital and raw material from society. Hence it is its moral responsibility to think about the welfare of the society at large. Corporate social responsibility (CSR) includes the entire society. It can be well defined as “a commitment to improve community well-being through discretionary business process and contributions of corporate resources” (Kotler & Lee, 2008). Through CSR the company initiates certain activities to support the social cause and thus assist the society. The company should focus on the rising social issues in the world. It should make itself involved in activities like school building, health care infrastructure building. These activities should be performed in those countries where people lack these facilities. The company can be associated with various social movements like fighting with child labour problems. Environment is a major concern throughout the world. M&S can take initiatives in increasing the awareness about the environment and different factors that affect environment. The company can take initiatives regarding tree planting and fight against cutting trees. At present Marks & Spencer is trying to materialize its new plan “Go Green” which will make its supply chain eco-friendly and will reduce its effect on the environment. The company is introducing more eco-friendly and energy efficient products in its retail chains so that the rate of environment change can be reduced as far as possible. 5. Conclusion After the recent financial crisis, a lot of changes have taken place in the global business scenario, and these have affected the developed as well as developing countries alike. Under such circumstances a corporate having global presence feels the tremors of recession in varying degrees depending upon the countries in which it operates. Before implementing the strategic plan, the management should finalise what changes need to be introduced in its resources (people, finance, information and technology). This analysis will help the company to take the required steps before implementing the strategy. The company should also analyse how its competitive position will be affected if this plan comes into action. Few years back Marks & Spencer adopted a plan called “Go Green” through which the company attempted to reduce its effect on the environment and to make the supply chain more eco-friendly. The company is also actively participating in CSR activities for the betterment of the employees and the society as a whole. Corporate governance and CSR activities will help Marks & Spencer to gain a good market image which will facilitate its journey of achieving the position of market leader in global retail sector. References 1. Du Plessis, J. J., McConvill, J. & Bagaric, M. 2005. Principles of Contemporary Corporate Governance. Cambridge University Press. 2. Kotler, P. & Lee, N. 2008. Corporate Social Responsibility: Doing the Most Good for Your Company and Your Cause. Wiley. 3. Marks and Spencer plc-website-a. 2010. M&S Corporate Home. [Online]. Available at: http://corporate.marksandspencer.com/?ie=UTF8&intid=gft_company&pf_rd_r=1ZJQXDQCS94C76FZT16K&pf_rd_m=A2BO0OYVBKIQJM&pf_rd_t=101&pf_rd_i=42966030&pf_rd_p=469024773&pf_rd_s=footer-2 [Accessed on April 27, 2010]. 4. Marks and Spencer plc-website-b. 2010. About Us. [Online]. Available at: http://corporate.marksandspencer.com/aboutus [Accessed on April 27, 2010]. 5. Marks and Spencer plc-website-c. 2010. Company Overview. About Us. [Online]. Available at: http://corporate.marksandspencer.com/aboutus/company_overview [Accessed on April 27, 2010]. 6. Marks and Spencer plc-website-d. 2010. Our Plan. About Us. [Online]. Available at: http://corporate.marksandspencer.com/aboutus/Our_plan%283%29 [Accessed on April 27, 2010]. 7. Marks and Spencer plc-website-e. 2010. Our Board. Our People. About Us. [Online]. Available at: http://corporate.marksandspencer.com/aboutus/our_people/board# [Accessed on April 27, 2010]. 8. Marks and Spencer plc-website-f. 2009. Statement for Marks and Spencer Group plc (‘Marks & Spencer’; ‘M&S’; the ‘Company’) for the year ended 28 March 2009. Corporate Governance Statement – Website Version. [Pdf]. Available at: http://corporate.marksandspencer.com/documents/specific/investors/governance/governance_statement.pdf [Accessed on April 27, 2010]. 9. Sternquist, B. 1998. International Retailing. Fairchild Publications. 10. Sullivan, M. & Adcock, D. 2002. Retail Marketing. Cengage Learning EMEA. 11. The Fletcher School. 2010. Corporate Governance in Brazil: Constraints and Challenges. [Online]. Available at: http://news.fletcher.tufts.edu/reflections/?p=676 [Accessed on April 26, 2010]. Read More