Historical background of Marks and Spencer

Historical background of Marks and Spencer Marks Spencer Plc started in a stall in 1884 by Michael Marks in a Leeds market after which he was joined by a partner Tom Spencer. They both had a reputation of selling only British made goods in the 20th century, a policy discontinued in 2002.Marks Spencer Plc is seen as the British Retailer that sells clothes, gifts, home furnishing and food formerly under the name of St. Michael but rebranded as Marks Spencer in United Kingdom, Europe, Far East and the Americas. Marks Spencer Plc has made itself widely known in the UK with over 450 stores and its largest store at Marble Arch, London. By 1975 they had moved to Europe and Canada where they are fully established. Marks Spencer Plc which initially functioned under the name St Michaels had an unlimited time period on their return policy as long as the customer could produce a receipt, this policy was later reviewed to 90 days in 2005 and a further review to 35 days in 2009. Marks Spencer Plc returns policy is seen as the most generous on the British High Street. By the end of the 1990s Marks Spencer Plc had a problem as their profit plunged because of the rising cost of using British Suppliers as rival retailers were importing their goods from lower cost countries and also because of the fact that Marks Spencer Plc did not accept other credit cards except their store cash cards amongst a host of other reasons. During their downturn period, Marks Spencer Plc refused to budge in switching to overseas low cost suppliers as it was seen as a n act which undermined a core part of its appeal to the public. All these fac tors constituted to Marks Spencer Plc sudden slump which caught the company, its shareholders, retail stores and the general public by surprise as not only did their share price fall more than two thirds of the original market price so also did their profit. In 2001 with drastic changes in its business focus such as accepting other credit cards, introduction of new range like per una , indigo etc, reengineering of its business model and strategy, restructuring and redesigning their store, providing adequate changing room etc, Marks Spencer Plc fought its way back into the UK market. Source: http://corporate.marksandspencer.com/aboutus/ourhistory TASK 1 1.1 Importance of external factors [P1] External factor plays a very important role in Marks Spencer Plc. No organisation can escape from the external factors of a business. It is the key that drives helps focus on what is most important to explore the different ways in which the business environment might change. These external factors are Political, Economic, Social Culture, Technological, Environment and Legal. This is known as the PESTLE ANALYSIS. The external factor helps to know and under study the political factor the company is operating in. The external factor helps to know the social life style of my customer. The external factor helps to know the technological situation I find myself inn. The external factor helps the organisation to understand the business environment It also helps the business to understand the business circle, exchange rate, economic growth rate etc. It also helps the business to know more about the legal standard of the economy such as health and safety, legislative constraints etc. It helps the business to understand and know their competitors The external factor also helps the business to understand the social influences such as changing culture and demographics Business that looks on the solution of the external factors will run its business properly. Oxbridge writers on Marks and Spencer corporate objectives: Full text [online] http://www.oxbridgewriters.com/essays/marketing/marks-spencers-corporate-objectives.php [END OF P1] 1.2 The needs and expectation of stakeholders [P2] A stakeholder is any person, group or institution that has an interest in an activity or project. This definition includes intended beneficiaries and intermediaries, winners and losers, and those involved or excluded from decision making processes. (Bryson 1995) The stakeholders who have got an interest in Marks and Spencer are: Their banks, Shareholders, Employees, Customer, Suppliers Stakeholders Needs of stakeholder Expectations Customers To provide good customer services To provide low price To provide good product To provide local source of product Provide community program Customer loyalty Promotion and activities Employee To provide pay raise Job retention Job training To provide a comfortable working environment Give bonus Provide education Rotation of job Shareholders Provide adequate communication Increase in share prices Increase in dividends To keep them informed Good turn over Good return on investment Banks Inflow of cash Loan lending Suppliers Increase in supplies Local sourcing of product Turnover increase Want to sell goods in volume at good prices. Source: By student from lecturer lecture note Managers need to be conscious of the financial impact on various stakeholders of the strategies they are pursing or planning to pursue. They also need to understand how the capability to meet these varied expectations could enable the success of some strategies whilst limiting the ability of an organisation to succeed with other strategies. [END OF P2] 1.3 Major change taking place in the external environment [P3] Political situation: The government plays a very important role within the operation of manufacturing these productions in terms of regulation. There are potential fines set by the government on companies if they do not meet a standard of laws. The changes in laws and regulation, including changes in accounting standards, taxation requirements,(including tax rate, new tax laws and revised tax interpretations) and environment laws in domestic or foreign regulations e.tc. This law has affected Marks and Spencer in different ways especially in the increase in Vat. This will increase the prise of their product and reduce the market sell of their product. Economic situation: The economic plays another important role in the business. However, things changed. Most economists loosely define a recession as two consecutive quarters of contraction, or negative GDP growth. Marks and Spencer s customer don t spend allot anymore instead there save their money. The ongoing recession has brought down their market sale and put them in a stage of looking for a better strategy to fight the recession. Social situation: Many people are practicing new lifestyles in the economy. The social culture of an environment can affect Marks and Spencer in a different ways. The government are cutting down medical budget. In this case, they are trying to educate allot of people to do exercise and those from the age of 37 to 55 will also increasingly concern with nutrition. Majority of the people are now looking after their health and doing much exercise to slim their body down. So this has affected Marks and Spencer because they will need to get better and fitted cloths for their customer to make sure there meets up their customer expectation. Technological situation: This can also affect the business especially now most organisation are introducing the online services, home delivery, virtual sales etc. This will reduce Marks and Spencer sales because it will depend on how fast the organisation will deliver a customer goods that will encourage the customer to be more attracted to them .And even where they have alot aged; most of the worker won t be able to operate this new technology. They will have to go through training process and this will cost the company to spend more. Most of this technology can be misused and might cause problem in the company. Environment situation: Studying the environment is another important way to prevent some environmental problems like, weather, transport problems, competitive problems, customer choices, customer queries etc. Marks and Spencer always make sure they are in the right position to provide for the customer the best services ever. Changes in weather affect seasonal products of Marks and Spencer so they always try to find the best strategies to make sure their goods are been sold out at a particular season. Legal situation: This can also affect Marks and Spencer in term of adjustment of the legislation. But the company try to make those changes in a way that their customer will be retain and their services will be increase. Sources: Morrison, M (2008) Pestle Analysis. CIPD Factsheet.RapidBi Marks and Spencer (2010) investor s Full text [online] http://www.marksandspencer.com/ [END OF P3] TASK 2 2.1 The current position of Marks and Spence [P5] INTERNAL EXTERNAL Product: The company offer stylish, high quality, great value clothing and home product, as well as outstanding quality foods. Political: This is an important factor that drives the strategic of many organizations to change. The change of constitution of politics affects the strategic of an organization. The changes of government affect the strategic of organization to change. The shift of political power from government to global organization affect the organization affects the organization strategy. Many organizations always try to change their strategy to fit the political view of the economic. Staff: The company provide good staffs that help improved the customer services. They also retain their staffs and provide them with training that will increase their services toward their customer. Economic: This concerns the financial structure, objectives and constrains place upon the organisation. This relates to both the external(that is, the levels of profit and turnover generated and the extent to which this is viable and able to sustain current and envisaged levels of activity) Market: MS have a high interest in the market. They always try to provide the best customer service and provide the best quality product that will enable them to gain competitive advantage. Social culture: This is another important factor that the organizations need to look into properly. The way the people lives, expectations, pattern of work, job, occupation and career patterns, changes in patterns of earnings etc. The social lives of most economy changes every year and organizations need to set up new strategic that will suite the social life of the economy. Promotion: Marks and Spencer introduce a promotion to keep their customer happy and to gain more customers. Technology: This factor affects the social, economic and business activities. Rendering many occupations and sectors obsolete; creating new occupation and sectors, opening up new spheres and location of activity. Organization should make sure there have the right technology to improve the organization works. Price: MS provide the best price to their product to gain competitive advantage. Environment: this is looking at what is happening within the environments where MS operate. Place: MS is located in a nice place where their customer can get a good car parking and quicker way to shop. Legal: this is looking on the changes in the legislation and how it s affecting MS. that is, the employment, access to material, quotas, resources, import/exports axations.etc. People: MS also provide the best people that will serve the best customer service to keep their customer happy. A good customer approach is very important in any business environment. Marks and Spencer (2010). Full text [online] http://corporate.marksandspencer.com/aboutus/student_info [END OF P5] 2.2 The strength and weakness of MARKS and SPENCER [P6] STRENGHT ? Strong balance sheet ? Increase in turnover and trading profit ? Strong cash flow position ? Good human resources ? Brand awareness ? Leading premium quality food retailer OPPORTUNITIES ? Capability to turn resources into advantages ? Market shift to globalisation ? New product ? Customer demands changes to more value for money ? Diversification ? Develop overseas supply chain WEAKNESS ? Perception on high price ? Customer disinterest ? Environment issues(pollution) THREAT ? New and existing competitors ? Economic recession ? New legislation volatility of raw material ? Takeover bids ? Market shift to globalisation ? Low cost retailers Source: Marks and Spencer http://corporate.marksandspencer.com/home [END OF P6] 2.3 Tools used to analyse the effects of the current business plan [P4] ? Ansoff growth matrix ? Value chain ? BCG matrix ? Core competences ? Porter generic matrix ? Porter 5 forces ? Product life circle ? The gap analysis ? Marketing Mix The Ansoff s product/market matrix Existing Product New Product Market Penetration Product Development Market Development Diversification The Ansoff growth matrix can be used to identify directions of Marks and Spencer strategic development. The Ansoff growth matrix provides direction for strategic option available to MS in terms of product and market coverage. Market penetration is the name given to a growth strategy when a business focuses on selling existing products into existing markets. And these penetrations seek to achieve increasing the market share of current product, i.e. by combination of competitive pricing strategies, advertising, sales promotion and perhaps more resource dedicated to personal selling. This has help Marks and Spencer to secure dominance of growth markets. It restructures Marks and Spencer market by driving out competitors and it also increase patronage of their existing customer. Market development is the name given to a growth strategy where the business seeks to sell its existing products into new markets. Marks and Spencer has develop their market in so many different ways by providing a new distribution channel, new product dimensions or packaging, new geographical markets (for example exporting the product to new country), different pricing policies to attract different customers or create new market segments. Product development is the name given to a growth strategy where a business aims to introduce new products into existing markets. Marks and Spencer brought up a strategy that may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets. Diversification: Marks and Spencer has diversified alot to introduce new products into new markets. Even as there are more risks in it but they still get the right strategy to win their competitor who was there before them THE FIVE FORCES MODELS Porter explains that there are five forces that determine industry attractiveness and long-run profitability of MS and the food retailing industry Threat of new entrants: The new entrants to an industry can raise the level of competition. The threat of new entrants largely depends on the barriers to entry and the market is also sensitive to reputation. The key barriers to entry include; the economics of scale, capital investment requirement, customer switching cost, access to industry distribution channels. In Marks and Spencer business line, the threat of new entrants is easy and high but the most important issues is to win your competitors and maintain the business. Threat of substitutes: substitute product can lower industry attractiveness and profitability because they limit the price level. The threat of substitute product depends on buyers willingness to substitute, the relative price and performance, the cost of switching to substitute. In Marks and Spencer the threat of substitute s product is low because majority of the customer who have been with them for a very long time enjoy their products and are still enjoying it. Bargaining power of suppliers: suppliers are very important in a business. They supply the company with raw material and other product. The cost of the item bought from supplier can have a significant impact on the organisation profitability. If the supplier has high bargaining power over the organisation, then the theory industry is less attractive. The bargaining power of supplier will be high when there are many buyers and few dominant suppliers, also when there are high valued product, when the supplier threaten to integrate forward into the industry (example brand manufacturing to set up their own retailer outlet), when the buyer does not threaten to integrate backward into supply Bargaining power of buyers: These are people who create demand in the organisation. The bargaining power of buyer is greater when there are few dominant buyers and many sellers, when the product are standardised, when the industry is not a key supplying group for buyer. In Marks and Spencer, the bargaining powers of buyers are not great Intensity of Rivalry: This will depend on the structure of the industry cost, the structure of competition, degree of differentiation, switching cost, strategic object, exist barriers. There are alot of competitor surrounding marks and Spencer but their customer still remain with them because of their old time being. All works above sources: Porter,M.E.(2008) How competitive forces that shape strategy, Harvard business review, p86-104. [END OF P4] Task 3 3.1 The modelling tools to develop strategic option are [P7-8] ? Ansoff growth matrix ? Value chain ? BCG matrix ? Core competences ? Porter generic matrix ? Porter 5 forces ? Product life circle ? The gap analysis ? Marketing Mix POTER GENERIC MATRIX Micheal porter suggested four generic business strategies that could be adopted in order to gain competitive advantage. Differentiation Focus Differentiation Cost focus Cost leadership Narrow Broad Scope of business activities Strategy Differentiation: This strategy involves selecting one or more criteria used by buyer in a market-and then positioning the business uniquely to meet those criteria. This strategy is usually associated with charging a premium price for the product- often to reflect the higher production costs and extra value-added features provided for the consumer. Differentiation is about charging a premium price that more than covers the additional production cost, and giving customer clear reasons to prefer the product over other, less differentiated products. The Price of Marks and Spencer products are cheap compare to Tesco and Asda that have very cheap prices on the product. But yet Marks and Spencer customer still remains because to the quality of their products. Strategy-cost leadership: with this strategy, the objective is to become the lowest-cost producer in the industry. Many (perhaps all) market segments in the industry are supplied with the emphasis placed minimising costs. If the achieved selling price can at least equal (or near) the average for the market, then the lowest-cost producer will (in theory) enjoy the best profits. This strategy is usually associated with large-scale businesses offering standard product with relatively little differentiation that is perfectly acceptable to the majority of customer. MS by cheap product/ clothing line and sell in a cheap price to meet competitors. Strategy- differentiation focus: in the differentiation focus, a business aims to differentiate with just one or a small number of target market segments. The special customer needs of the segment mean that there are opportunities to provide products that are clearly different form competitors who may be targeting a broader group of customer. The important issue for any business adopting this strategy to ensure that customer really do have different needs and wants. Marks and Spencer also deal on the older market (45-65 of age) which makes them different from other retailer shops like Tesco and Asda. They also used their brad to meet the needs of the olds. Strategy-cost focus: Here a business seeks a lower-cost advantage in just on a small number of market segments. The product will be basic- perhaps a similar product to the higher-priced and featured market leader, but acceptable to sufficient consumer. Such products are often called me too The Micheal Porter generic strategies are been used in many organisations including Marks and Spencer, either become the lowest cost retailer or different product and services in such a way that its valued by customer to the extent that they will pay a premium price. By Appling this strength in either a broad or narrow scope, the four generic strategies result: differentiation focus, differentiation, cost focus, cost leadership. Mark and Spencer core products are foods and clothing and it implement a focus generic strategy as it concentrate differentiation from Tesco, Asda, BHS, Top shop etc. Source: Porter,M.E.(2008) How competitive forces that shape strategy, Harvard business review MARKETING MIX The marketing mix is very important in an organisation. This is the elements that are associated with the product(s) that affect whether the consumer decide to buy or not. They are four main factors that will decide if a consumer wants to buy or not. Prices: Marks and Spencer charges premium prices through its differentiation strategy. Product: Marks and Spencer markets its product based on superior quality and reliability. Place: Mark and Spencer products are sold through its large numbers of stores in city and town centres. MS has also expanded in sales and distribution channels through internet via it website (online shopping) Promotion: MS integrated marketing communication is delivered through media in various form, advertising, TV, national newspaper and magazines as well as website [END OF P7-8] 3.2 Option to form the basis of future organisation strategy [P9] Having analyse this models one which I believe would be able to help the company will be The Ansoff s product/market matrix Existing Product New Product Marks and Spencer Market Penetration Marks and Spencer Product Development Marks and Spencer Market Development Marks and Spencer Diversification The Ansoff growth matrix can be used to identify directions of Marks and Spencer strategic development. The Ansoff growth matrix provides direction for strategic option available to MS in terms of product and market coverage. Under the market penetration, MS provide a good and quality service that has driven the organisation into a large market penetration. Marks and Spencer now introduce a product development by increasing the quality of their products and developing their product to enable them to develop their market. The market developments have also encouraged marks and Spence to employ the right staff with the right skills that will help reach the company objectives and achieve the organisation goals. Marks and Spencer diversification has also help the organisation in different ways. They started with cloths, and move to foods and drinks. The diversification has also enabled the organisation to stand up to their feet again and push forward to gain their goals. I will fully recommend the Ansoff matrix for marks and Spencer as they have been using it already in gaining in market penetration and development. [END OF P9] 3.3 Stakeholder mapping [P10] A stakeholder is any person or institution that has an interest in an activity or project. This definition includes intended beneficiaries and intermediaries, winners and losers, and those involved or excluded from decision making processes. There are different ways in which stakeholder mapping can be used to gain an understanding of stakeholder influence. The approach to stakeholder mapping here identifies stakeholder expectations and powers and helps in understanding political rarities. The stakeholders who have got an interest in Marks and Spencer are: Their banks, Shareholders, Employees, Customer, Suppliers Level of interest (A)Meet their needs Increase their effort Increase their level of interest (B)Key players Educate them on the company Engage and update the regularly Involve them in decision making (D)Least important Keep informed Try to communicate Let them know of any change (C)Participation Show consideration. Keep informed Participate in the company Try to increase the level of interest. Source: computed by student from lecture note Stakeholder mapping might help in understanding better some of the following issues: In determining purpose and strategy, which stakeholder expectations need to be most considered? Whether the actual levels of interest and power of stakeholders properly reflect the corporate governance framework within which the organization is operating. Who the key blockers and facilitators of a strategy are likely to be and how this could be responded to- for example, in term of education. Whether repositioning of certain stakeholder is desirable and/or feasible. This could be to lessen the influence of a key player or, in certain instances, to ensure that the key players who will champion the strategy. Source: Bryson,J.M (2004) Stakeholder Identification and Analysis techniques. Minnesota. Rouledge [END OF P10] TASK 4A 4.1 Criteria for reviewing a strategy are: [P11] ? Feasibility ? Suitability ? Acceptability ? Cost effectiveness ? Interest of other stakeholder ? Customer ? Competitors ? Nature of the product and services Customers: The customers of Marks and Spencer are very important to the organisation. MS customers find it hard to shop at another retail shop because of the old time relationship with the organisation. Customer satisfaction is very important to the organisation and MS always make sure that they provide the best customer services to their customer especially the aged. Interest of other stakeholder: the stakeholder is another important strategy MS love to use. The interest of their stake holders is how to develop and plan for the organisation growth. They love to stay close the stake holders, give them the right information there need to know and provides them with updated about the running of the organisation. Competitors: Marks and Spencer love to look at their competitor so as to get the strategy they are using and try to provide a better strategy to over shadow their competitor strategy. Competitors have been a big issue for Marks and Spencer and the always try to make their products as cheap like their competitor to attract more customer and to keep the own customer happy with no complains. Nature of the product and services: The nature of the product and services is always at a high level because they provide good quality products to their customer to show a differentiation between them and other competitors. They services they provide to the customer are very much enjoyable because they are always there to help u out and show u the best product u needs to have. The strategy plan for MARKS and SPENCER ARE [continuation of P11] PRESS RELEASE EXTRACT: 29 MARCH 2001 Source: From Marks and Spencer s Website 15/04/2002 PLAN 1, TOTAL FOCUS ON UK RETAIL 100% OWN BRAND: The company will return to selling only own brand products and brands exclusive to marks and Spencer so it can guarantee customers the quality, value and service they have come to expect. Central to the recovery plan is the delivery of significant improvement in product appeal, availability and value thereby rebuilding the relationship with core marks and Spencer customer. IMPROVED SEGMENTATION OF CLOTHING: Marks and Spencer will concentrate first on regaining the loyalty of core customer, who prefers classically stylish clothes. This is the priority. The company has plans to regain the confidence of its customer in the quality and fit of its clothing. It will sharpen price by rebalancing the price architecture, extending the range of entry-price merchandise and communicating this clearly to customers. BUILD ON SUCCESS IN FOOD: Marks and Spencer a food continues to perform well and has earned customers trust for providing quality, innovation and convenience. The business is a key platform for future growth and the company is considering opportunities to expand its reach through new locations and selling channels. DEVELOP HIGH-GROWTH AREAS OF HOME AND BEAUTY: the home business is growing strongly, with home furnishings and gifts the fastest growing product areas. Beauty, albeit relatively small, is also growing rapidly. Both of these areas offer promising opportunities for development and will be expected. ACCELERATE STORE RENEWAL PROGRAMME: Mark and Spencer will accelerate the rollout of the successful elements of its new concept format under a plan to refurbish more stores faster and at lower cost. Two thirds of its retail space (120 stores) will be completed by the end of the coming financial year, benefiting the majority of Marks and Spencer s customers. MORE INTENSIVE USE OF SPACE: Selling space will be reallocated to higher growth product areas to maximise returns per square foot. In total, 600,000 sq ft will be reallocated within the year to areas such as the new clothing range supplied by George Davies, Home, 50 new Beauty shops, and 30 new coffee shops. IMPROVE THE SUPPLY CHAIN: The Company continues to see substantial benefits from the reconfiguration of the supply base, being shown in a clothing primary margin that is rising strongly. The priorities now are to eliminate duplication and increase transparency. By re-establishing closer working relationships with its supply partners, historically and unique strength, marks and Spencer will achieve further improvements in quality, value, product appeal, and availability. Financial Services: Plans for the future include developing the Marks and Spencer store card as an essential partner to the growth of retail sales; a stronger presence for financial services in stores; continued growth of the credit business; and faster rates of growth of non-credit areas, which may involve bringing in external partners. PLAN 2 VALUE REALI