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Strategic Analysis of Marks and Spencer (M&S) Group

Abstract
Marks and Spencer Group is ranked 55 in terms of market capitalisation on the FTSE 100 as of close of business on Friday 7th October 2011. This essay briefly touches on the key elements of Marks and Spencers existing and past strategies, exploring how specific resources have influenced strategies, and how these account for the companys performance. A very brief analysis of the difficulties that the current strategy might possibly encounter in the future is included.

Methodology
Due to the time constraints for this assignment, research resources have focused primarily on those available via the internet, with some textbook references added where available and relevant. Internet resources include M&S news releases, media articles (BBC online, Financial Times, Guardian, Telegraph) and relevant academic papers that were readily available online, without requiring a subscription. The analysis is based on Porters Five Forces model: Bargaining Power Of Suppliers; Bargaining Power Of Customers; Threat Of New Entrants; Threat Of Substitute Products; Competitive Rivalry Within An Industry

Introduction
Marks and Spencer Group is ranked 55 in terms of market capitalisation on the FTSE 100 as of close of business on Friday 7th October 2011. At the turn of the millennium, M&S was hit by a major crisis, which lasted for several years. In May 2000 Chairman Luc Vandevelde announced a boardroom cull and forced the resignations of three executive directors. The dividend payable to shareholders was slashed for the first time in the 74 years for which M&S had been a public company. By January 2001 the sales figures for the Christmas period revealed that M&S was the worst performing company of all the high street chains for the third year in a row. Profits and stock trading were both down (Left, 2001). The more recent recession has brought more problems for the company, as has been the case for the majority of high street retailers (Rayner, 2008). Robert Swannell became Chairman in January 2011.

Corporate Strategy Analysis: a Resource Based View


Initial Company Strategy
The brand is where the companys identity lies (Kapferer, 1992, p31

The original strategy employed by M&S was to build its brand. The companys resources included the St Michael logo, the policy of using mainly British suppliers, and good customer relations. Quality control was achieved by working closely with suppliers, and the M&S management system focused on a top-down approach that became standard in all stores. Customer satisfaction and loyalty was secured and there was steady growth in market share and profit until the 1990s, when competition at the top and bottom end of the market rendered this strategy obsolete.

Core Competencies
M&S core competencies resulted in the development of a strong brand, excellent quality control and good customer service. Pearson described a core competency as: a combination of capabilities such as advanced technologies and superior management skills, which provide a firm with a leadership position in the development of core products. (Pearson 1999, p170). However the rigid management structure proved inflexible in changing market conditions: decisions and policies made at the top were not challenged.

A Move to Restructure
The top-down management approach caused M&S to become vulnerable to market changes so new resources were created, including a department with a remit to seek out new business opportunities; more autonomy for store managers; different procedures for buying. M&S began to look overseas for suppliers. Simon Marks management style was directly linked to this strategy. Restructuring was designed to reposition M&S at the markets core and to restore and enhance some of its key resources. The close working relationship between suppliers, employees, management and loyal customers was enhanced. New customers were attracted by campaigns featuring Twiggy and younger models so M&S could widen the appeal of its clothing range.

Current Strategies
The techniques of broadening its appeal, responding to customer preferences and introducing new products in food and finance have assisted M&S towards recovery. The development of the quality food market has been a particularly successful new resource. Using designers to create unique food areas M&S has continued to sustain consumer interest in its food range. Marks and Spencers chief executive Marc Bolland is stepping up the battle for the upmarket food shopper, introducing delicatessens and bakeries as part of a 600m store overhaul. Mr

Bolland revealed on Monday that 400m-450m would be spent on the first phase of improvement, such as the changes to food. (Felsted, 2011 (a)) M&S plans to make continued investment in premises, specifically: an overhaul of the high street bellwethers stores, highlighting its in-house brands and revamping food operations. Mr Bolland said in May that he intended to spend hundreds of millions of pounds on M&S stores (Felsted, 2011 (b)) Also, M&S will develop its e-commerce operations: In November 2010, Marks and Spencer Group announced plans to grow our multi -channel ecommerce business both in the UK and internationally, which was followed up by the appointment to the board of Laura Wade-Gery as Executive Director, Multi-channel Ecommerce (M&S Corporate Press Release, 2011). Chief executive Mark Bolland believes future growth will come from international expansion, creating new products and rebuilding the companys website. Danger Sign In todays marketplace most M&S competitors are using the model of a shop within a shop (Ognjenovic, 1980). Supermarkets have introduced high quality food ranges, such as Sainsburys Taste the Difference and now supply many other goods others have developed inexpensive ranges of clothes with designer labels for example, George at Asda. M&S has lost experienced staff: Ms Lusher brings some 30 years of experience at M&S to Tesco. She has worked across all of the clothing areas, including womenswear, menswear, lingerie, childrenswear and accessories. (Felsted, 2011 (c)) Not all areas have been successful for M&S: general merchandise clothing and homewares was weaker, with same-store sales just 1.7 per cent higher. 3 (Barrett, 2011)

Proposed Future Strategies


Food: M&S should build on this resource. The Dine In campaign has proved a winning response to the competition for quality food, so far. A higher profile for food should provide increased volume of sales. Finance: discontinue chargecards. The M&S Credit Card can be used in other places. E-commerce: further development needed. The in-store pick up (free of delivery charges) is attractive. International expansion: proceed with caution. A second attempt to establish a successful store in Paris is planned this year.

Homewares: eliminate. Now being sold by a vast range of retailers supermarkets, DIY stores, independent furniture shops and competitors Debenhams and Next.

Conclusion
In terms of determining the rate and level of success a business can achieve, relative to the market competition, strategy plays a major role. M&S developed along fixed lines for a lengthy period of time, however its original strategy became too cumbersome to cope with changing market forces. It now needs to recognise and retain those elements that work well for it and to continue to seek out innovative new resources for the future. Plans for expansion, especially into international markets, should be considered very carefully indeed.

Bibliography and Reference


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http://markets.ft.com/research/Markets/Tearsheets/NewsSearchResults?s=MKS:LSE&source=F TNews&dateRange_to=10%2f3%2f2011+6%3a03%3a28+PM&dateRange_from=&wsodIssue=20 1870&keyword=&sortByRelevance=False [Accessed 15th October 2011]. History of Marks and Spencer (2002), Sourced from the Marks and Spencer website April 2002. Available from: http://www.examstutor.com/business/resources/companyprofiles/marksandspencer/history.p hp [Accessed 16th October 2011]. Kapferer, J. 1992. Strategic brand management. London. Free Press. Left, S., 2001. The highs and lows of Marks & Spencer: M&S results not good enough. The Guardian. January 23rd 2001 [Accessed 16th October 2011]. M&S Corporate Press Release, 2011. Online. February 7th. Available from: http://corporate.marksandspencer.com/page.aspx?pointerid=1c334d0e7c3f483ab62a0b7 ad685ba54 [Accessed 15th October 2011]. Danica Ognjenovic, 1980. Shop Within A Shop. International Journal of Retail & Distribution Management, Vol. 8 Issue: 2, p. 42 44. Pearson, G. 1999. Pearson Education Limited. Porter, M., 2006. The Five Competitive Forces That Shape Strategy. Harvard Business Review. January. pp 23-41 Rayner, G. 2008. Financial crisis: Marks & Spencer to announce drop in sales as slump fears grow. The Telegraph. October 1st 2008. Available from: http://www.telegraph.co.uk/finance/financialcrisis/3116808/Financial-crisis-Marks-andSpencer-to-announcedrop-in-sales-as-slump-fears-grow.html [Accessed 16th October 2011].