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Marks & Spencer Case Study
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1. Why did M&S suffer its downturn in the late 1990s? Distinguish between
internal factors (expectations, culture and organisation) and external factors
(customers and competition).
To understand why M&S suffered a downturn in the late 1990's it is important to identify what made them a successful
company to begin with. Until the late 1990s M&S had a clear purpose. As the article discusses; it applied a structured
formula to all its operations and maintained a set of fundamental principles which were held at the core of all its
business activities.
From the early days the organisation was managed in a bureaucratic style by Simon Marks who was a clear figurehead.
His way of managing was seen to be aggressive; a channel 4 programme reported that it took the form of "shouting and
bullying." But he was a meticulous and efficient manager which enabled close relationships to develop with suppliers
to "ensure high and consistent quality." Marks' business strategy was also clear and focused; placing particular
emphasis on quality of goods and customer service, efficiency in production and operating procedures and good
relationships with suppliers and customers. Marks's success as chief executive officer was also attributed to his
understanding of customers and consumer trends.
The culture at M&S during this time of success was one of a family business with most of the top management and
board being made up of family members. As the article states this gave a "feeling of camaraderie and a close-knit
family atmosphere" and was reflected in the trusted brand quality of 'St. Michael,' as well as the reasonable pricing of
products and commitment to using British suppliers. These M&S traits also gave a traditional edge to the company.

The structure of the organisation was centrally directed; all the management decisions on merchandising, store layout/
design etc came from the head office. This restricted the store managers' flexibility to respond to the local needs of the
customers but gave a consistent image and a guarantee that each store kept to the high M&S standards.
Marks & Spencer followed the same successful strategy for many years. Its reputation went before itself and led to
continued growth in the UK and overseas retail markets. However, as a traditional organisation with a well-established
culture, M&S was 'stuck in its ways.' When Greenbury took control as chief executive the bureaucratic style of
management began to reveal its flaws. For instance, it was well-known that his understanding of fashion trends was
limited, but because he made the decisions buyers tended to present him with items they knew he would approve of,
paying little attention to the customer.

The problems which M&S ran into were a culmination of both internal and external factors. The internal factors which
contributed to this include expectations, culture and organisation. Expectations encompass what stakeholders expect an
organisation to achieve. Greenbury focused on day-to-day processes and expected an efficiently run business. This was
in conflict with shareholder expectations that would have seen efficiency as one mechanism to fulfil their purposes: to

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grow profits. Because of Greenbury's autocratic approach it was difficult for anyone to question his decisions and
would have brought an edge of dictatorship to the organisation. This led the organisation to fulfilling his expectations
rather than those of the whole organisation. An example of the damage that centralised authority made is described in
the article as follows: "Greenbury had decided that to control costs there would be less full-time sales assistants...this
led to an inability in stores to meet the service levels required by M&S." Greenbury had little understanding of what
was going on in stores and was not aware of the dissatisfaction amongst customers.
The second internal factor which contributed to the downturn of M&S in the late 1990's was its culture. An
organisation's culture is made up of its own unique combination of values, beliefs and paradigms. As previously
mentioned M&S had a family culture; in the past its chief executives had been from the Marks family. Since Simon
Marks retirement in the 1970's the top management had been appointed from within the organisation. This tradition
gave M&S an inward looking culture. Managers were immersed in the routine and long standing beliefs which blinded
them from developing strategies relevant to the present market situation. The strategy which Marks started with was
once revolutionary but was now causing the organisation to focus too much on day-to-day operations leaving them
stagnant in an increasingly competitive and changing environment.
When Greenbury stood down from his role as CEO a replacement was sort for internally. This reflected the apparent
inability of M&S to seek a leader from outside the organisation. This could be through a fear of change or because
Greenbury did not want to relinquish the control he would maintain as Chairman. The arguments which broke out over
who would replace Greenbury also symbolised a break down in the family atmosphere that had once been the 'heart
and soul' of the organisation. If M&S had broadened their search for a chief executive outside of the organisation they
could have brought someone with a wider perspective of the industry into a commanding role.
The final internal factor to be mentioned which contributed to the downturn of M&S in the late 1990's is the
organisation. This includes the structures and processes within the company. One of the organisational errors, identified
in the article, was that the top level of management was dominated by men when a large proportion of the customers
are women. This could also be seen as a cultural issue; it symbolises how out-of-touch M&S was with its market.
Another blunder that was made in the organisational sphere was the poor planning which led to recently acquired
Littlewoods stores being refurbished at the same time as M&S stores. Such mistakes cause inconvenience to the
customer and a loss of trust in the company-customer relationship. Organisational issues which were rife within M&S
caused a lack of market segmentation to be performed. As a result M&S had little understanding of their customers and
were slow to respond to market trends. This was reflected in the way M&S did not have a loyalty card when all of their
competitors did.
The internal factors which led to the downturn of M&S may not have caused such a dramatic impact on the
organisation had it not been for the external factors such as customers and competitors. One of the external factors
which had a particularly strong impact on M&S was the insurgence of competition; overlapping its market and
poaching its customers. The article states that "M&S had lost sales from both the top and bottom ends of the retail
market." Their market share was being eroded from the top by niche organisations such as Gap, Oasis and Next who
offered a similar price but more up-to-date fashion. This competition attracted customers that would naturally progress
to M&S. At the bottom end, market share was lost to supermarkets such as Asda, Matalan, Tesco and Sainsbury's who
were offering similar basic and essential range of clothing as M&S; but at a lower price. This competition caused a
dramatic decline in profits which can be seen in the profit and loss account, in the appendix of the article. In 1998 M&S
had £406.8 million retained profits whereas in 1999 they were at loss of £41.2 million. This loss along with tough
trading conditions abroad hindered the efforts being made for international expansion.
Customers arguably had the biggest impact on the downturn of M&S in the late 1990s, since it was the customers who
chose not to shop at M&S. Although the blame for this really lies with M&S and their failure to meet customer needs.
In a rapidly changing market, with a greater source of competition M&S were too concerned with their internal
processes to see their customer's dissatisfaction. The culture at M&S did not promote risk-taking so they ignored
changes in the marketplace. They also stuck to targeting the traditional 'middle ground' and failed to conduct more
specific market segmentation. This all led to a misreading of the market, and a misunderstanding of their customers.

2. Using the cultural web as a model, identify some of the more important and
influential aspects of the M&S culture.

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The cultural web is a representation of an organisation's paradigm, the assumptions which are taken for granted, and
how these physically manifest themselves in the organisation's culture. Evidence of these assumptions is apparent in
the day-to-day activities of people within the organisation. The cultural web can be used as a way of understanding
current organisational culture and future desired culture. The article discusses the culture at M&S during its years of
success leading up to its downfall in the late 1990s; and then goes on to explore the efforts made to change the culture,
re-structure and return to success.
To identify the more important and influential aspects of the M&S culture two cultural webs have been drawn and will
be discussed. The cultural web, above, is a representation of the paradigm as it was leading up to the downfall in the
late 1990s. The web can be split into two areas- the intangible aspects and the human created aspects. The intangible
aspects include the stories, symbols, and rituals & routines. The stories which members of M&S may have been
discussing with one another, during these times of difficulty, would have been about how good things used to be and
how out-of-touch the organisation is with the way things are now. Their may also have been stories about Simon Marks
who was a shrewd businessman and revolutionised M&S into a successful company. The stories going round M&S
would reflect what people considered to be important aspects of the culture. The success stories of the past would have
motivated staff and driven share prices, whereas the negative stories about the organisation's downturn would have
escalated the impact on its performance. As Vandevelde once stated: "In the glory days of M&S everybody felt proud
to be associated... it drove our reputation and our share price up to levels that we may not have deserved. Whereas
when things started going slightly sour I guess everybody just exaggerated and we probably were punished more than
we deserved as well."
Symbols are a representation of the nature of an organisation. As M&S had a strong hierarchal structure it is likely that
there were plenty of status symbols within the organisation. For instance, top management would have had the prime
positioned parking spaces, company cars and other privileges which show their power and influence. Traditions can
also be symbolic of what is valued within the organisation. For example, the fact that the CEO was either a family
member or promoted internally showed that M&S valued, and was protective over, its traditional culture.
The rituals and routines which were infused into the culture at M&S were very influential. Particularly during the
downturn period of the 1990s when the routines took root and caused the organisation to be too focused on 'day-to-day'
activities. Because M&S is a well-established organisation it is inevitable that a certain way of doing things would
develop.
The human created aspects of the cultural web include the power structures, organisational structures and control
systems which are in place. The organisational and power structures at M&S were founded in the early years when
Simon Marks took over the running of the business. As a strong leader and figurehead he created a hierarchal structure
where decisions and control came from the top management and everyone else was 'working to orders.' This structure
continued to be a strong influence on the M&S culture up until the downturn in the late 1990s.
Like all aspects of its culture the control systems that M&S had in place were deep-rooted. The autocratic style of
leadership, that the hierarchal structure promoted, also created a bureaucratic culture. This produced a control system
based on specific procedures, and led to a central control over suppliers, stores and products.
The cultural web below identifies some of the more important and influential changes that were made to the culture at
M&S after the late 1990s. This will be discussed in more detail in the next question.

3. Which 'levers' did M&S use to try to bring about change?

The 'levers' for change correspond to the outer rings of the cultural web. The following discussion will therefore relate
to the cultural web above. The 'levers' can be split up into six different categories.
Many of the changes which were made at M&S were brought about through changes to the structure and control
systems. These 'levers' are implemented by top management for other members of the organisation to follow. They
require a response by each individual. Though changes may be made to the structure and control systems; behaviour
and assumptions may not be changed. When Salsbury became chief executive he implemented a re-structuring,
"splitting the company into three: UK retail business, overseas business and financial services." M&S later ran into
more problems and responded by implementing further management re-structuring. Seven business units were created
to separate out its different retail markets making M&S a more multi-divisional structure; and allowing it to become a
more responsive organisation to market changes and customer needs.

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While Salsbury was in a leading role at M&S he also tried to alter power and political processes to bring about change.
He began by re-configuring the power structure by creating a company-wide marketing department to break down the
power of the buying departments which were established around product lines. "Salsbury wanted the marketing
department to adopt a customer-focused approach, rather than allowing the buyers to dictate what the stores should
stock." Salsbury also established a property division to charge individual stores rent. This enabled store manager's to
have more decision making power while still being held accountable to the M&S company. In this way M&S was
beginning to devolve its hierarchal power structure and allow members of M&S to become 'free-thinkers.'

Communicating change is an important part of turning an organisation around. Change is often complex; and so for the
change to be embraced by the whole organisation there needs to be communication which is clear and meaningful
across the different layers of the organisation. Salsbury made an attempt to communicate change to the members of
M&S: "(he) issued a memorandum explaining that he wanted to move M&S away from its bureaucratic culture, by
creating a decision making environment that was unencumbered by hierarchy."
When Vandevelde took over as chief executive he seems to have made more effort to communicate change in a
meaningful way. He not only conducted interviews with the press to try to put a positive swing on the changes at M&S
but he launched a campaign within the organisation to "encourage staff to get behind M&S and make a difference in
key areas of recovery." Posters appeared in staff rooms to get individuals involved in the changes. This was also an
effort to challenge people's routines. Routines are "the way things are done." They can block efforts to change because
they are often deep-rooted and are closely linked to the 'taken for granted' attributes of the paradigm. Vandevelde made
an attempt to tackle these routines by getting 2,000 staff at head office to work in a local M&S store. As the article
states: "The idea was to give an insight to those who usually operated 'behind the scenes' and to lift employee morale."
It is likely that this idea did more than just that because education and communication is a less persuasive way of
challenging people's routines than involving them in the change.
Symbolic processes are another way to change beliefs and taken for granted assumptions. They are the expression of a
change process which is not overt or formal in nature. A symbol of change can have a substantial effect on promoting
change because they can be observed in day to day experiences and can be embedded in systems or processes which
form part of individual's rituals or routines. M&S used several symbolic processes to try to bring about change. One of
the most important changes was there move to appoint Vandevelde as chairman, from outside the organisation. This
represented a move away from an internal focus and opened up the culture to change. Another important symbolic
change was a physical aspect which all members of the head office could identify with. This was the move out of the
Baker Street headquarters which represented "a static environment with many closed offices and long corridors,
redolent of a company that has not fully embraced modern management techniques and working methods." The re-
location was to a new building in Paddington and symbolised its intent to reform its culture.
The most dramatic of the symbolic processes was the complete over-haul of the M&S brand, which took place in
March 2000. This was a change that not only affected the internal culture at M&S but was something that
communicated a change to customers. The changes included an alteration to the image of its stores, uniforms,
packaging and labelling; they also stopped using their famous green carrier bags and relegated the St. Michael brand to
the inside of clothing labels. Vandevelde commented on these changes as being "evolutionary rather than
revolutionary." The changes were a natural progression with the changing market environment. They did involve a
transformation of the organisation but it was not a sudden change and it did not have a sudden impact.
The final 'lever' which M&S used to bring about change is the change tactics. This is the way in which M&S went
about delivering change and includes: choosing the right timing, managing job losses and delayering, and using visible
short-term wins to provide evidence of change. One of the problems which M&S encountered when withdrawing from
the overseas market was the impact of job losses in France. The impact of withdrawing from this market was under-
estimated and caused the suspension of restructuring plans as well as the generation of negative headlines and
employee demonstrations. This could also be seen as a symbolic process to represent the difficulties M&S were facing
in their efforts to bring about changes in the organisation's culture. To counter-act the negative aspects of the change
process the top managers were interested in achieving visible short-term wins. Strategy is often about long-term
direction and major re-structuring decisions but to motivate members of the organisation and provide hope for the
future and belief in the changes short-term wins are important. Vandevelde initiated some improvements to the
customer service (an extra 4,000 staff were placed on the shop floor) and image changes to the stores and brands "to
create a mood which 'looks to the future with anticipation of creating change'." These initiatives may not have been

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significant aspects of the new strategy but were visible indicators of a new approach. They were small changes which
were put in place to stimulate commitment to bigger and more significant changes in the culture.
At the end of the article it states that: "Commentators felt that although quick results for sales and profits had been
achieved, underlying structural problems had not been dealt with." This suggests that although M&S attempted to use a
number of different 'levers' to bring about change they had only been successful at producing 'short-term visible wins.'
Through all their attempts they had failed to substantially change the rituals and routines which were deep-rooted in the
organisation. As an M&S insider commented "Decision making is so slow. The bureaucracy hasn't really changed.
They had a go at it, but now it's gone back to the old ways."

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