Case Study on Marks and Spencer

Introduction
Marks and Spencer became a household name, Iirst in its country oI origin, the UK, and later
internationally. However, the late 1990`s saw a reversal oI Iortune Ior this company. In this
case study, we look at the relevant issues surrounding this decline and the initiative to turn
this problem around. The topics that will be discussed include the business environment,
resource and competence analysis, strategic leadership, culture, strategic options, managing
change, and the Iuture oI Marks and Spencer.
usiness Environment
The environment encapsulates many diIIerent inIluences. The diIIiculty is to make sense oI
this diversity. IdentiIying very many environmental inIluences may be possible, but it may
not be oI much use because no overall picture emerges oI the really important inIluences on
the organisation. Furthermore, there is the issue oI the speed oI change. Managers typically
Ieel that the pace oI technological change and the speed oI global communications mean
more and Iaster change now than ever beIore. There is also the issue oI complexity.
Managers like other normal` individuals try to simpliIy what is happening by Iocusing on
those Iew aspects oI the environment which have been important historically. (p.97, 98)
The strategy oI an organisation is thereIore, the result oI decisions made about the positioning
and repositioning oI the organisation in terms oI its strengths in relation to its markets and the
Iorces aIIecting it in its wider environment. (p.40) We Iind that Marks and Spencer Iell
terribly short in revising its strengths within their wider environment, and this short-
sightedness contributed to their slump.
A changing and unpredictable environment will generate a diversity oI ideas and innovations
because it will demand responses Irom organisations and they will vary. An organisation that
seeks to ensure that its people are in contact with and responsive to that change is likely to
generate a greater diversity oI ideas and more innovation than one that does not. On the other
hand, one that tries to insulate itselI Irom its environment, like Marks and Spencer, by trying
to resist market changes or rely on a particular way oI doing or seeing things sometimes
known as strong culture` will generate less ideas and innovation. (p. 52)
We see that Marks and Spencer relied heavily on the traditional way that the company did
business and did not encourage innovation and idea generation amongst managers and
employees. In reality, these employees Ieared to show thought patterns that would anger` the
senior management. It is clear that the market that Marks and Spencer were in was complex,
dynamic and unpredictable and encouragement oI ideas and innovation would have probably
saved them Irom the Iate they endured.
Similarly, high degrees oI control and strict hierarchy are likely to encourage conIormity and
reduce variety, so innovation is less likely the more elaborate and bureaucratic the top-own
control. We see that Marks and Spencer typically was a company oI this description. (For a
detailed explanation, see the section on Culture`).
II we look at the PESTEL Framework (Political, Economic, Socio-cultural, Technological,
Environmental and Legal), we see that Economic, Socio-cultural, Environmental and
Technological Iactors are relevant to Marks and Spencer`s problem.
Economic
Marks and Spencer had the notion oI that they did not and should not have to reduce prices,
either at end oI range or during seasonal periods like Christmas. We see that although this
strategy worked initially Ior them, in time, the public realized that with other stores in the
market, they could not only purchase the same items that Marks and Spencer stored at lower
prices, but also receive discounts Irom these other stores at times as mentioned above. Marks
and Spencer once again did not pay attention to this sentiment oI the public.
Socio-Cultural
In terms oI socio-cultural Iactors that aIIected Marks and Spencer, we see that the public
became more Iashion conscious in the 90`s than they had ever been in terms oI what Marks
and Spencer provided them with, i.e. 'classic, wearable Iashions. Hence people decided to
shop Ior clothing in trendier places. As a result we see that they employed George Davies
(Iounder oI Next) and other haute couture Iashion designers to design clothing exclusively Ior
Marks and Spencer.
Environmental
In terms oI the market environment, Marks and Spencer did not keep .'pace with the
tremendous changes taking place in the retail market. While our competitors strengthened, we
were busy developing new stores. So when markets tightened in the second halI oI the year,
we were hit by Ialling sales, loss oI market share and declining proIitability. (Peter Salsbury,
Marks and Spencer Annual Review, 1999)
This quote, by the then CEO oI Marks & Spencer, sums up the lack oI Iocus, direction and
Ioresight that existed at senior management level in terms oI the environment.
Technological
A Iactor that haunted Marks and Spencer was their inability to keep up with technology.
Simple schemes like buying cards Ior customers were not in place. This coupled with the
close on to extinction EDI system that controlled communication between Marks and Spencer
and their suppliers made sure they stayed at the back oI the pack. However, in 1999, Marks
and Spencer announced the integration oI a new inIormation system called BizTalk. There
were three reasons Ior using BizTalk. Firstly and most importantly, the principles behind the
BizTalk Iramework, industry standard XML, and the opportunity to avoid writing custom
interIaces between each oI our applications. Secondly, the BizTalk server product
architecture, and its use oI core products, such as MSMQ, SQL Server and MTS. And thirdly,
its seamless integration into our strategic architecture based on MicrosoIt Windows and IBM
System 390.
Marks and Spencer recognized that they needed a global supply chain to compete, and radical
changes in the way they use inIormation throughout the company. To create this, they would
have to manage new richer inIormation more quickly, optimise our stock management, and
be more responsive to our retail business.
Firstly, in terms oI managing inIormation, they needed to maximize the availability oI our
inIormation throughout their business. The variety, volume and Irequency oI that inIormation
was increasing. Using BizTalk, they were changing the way that sales inIormation was being
delivered to central systems. Rather than aggregating sales and transIerring these back to the
centre overnight, they would pass sales as they happen to the central systems that could act
upon them. They would use the same technology to transIer event-driven inIormation out to
their stores, such as short-term promotions or red alerts. On the Internet side, they would use
BizTalk to link their customer web sales into their existing back-end systems, and ultimately
through to their suppliers.
Secondly, in terms oI optimising stock management, they would improve their product
availability, whilst reducing costs by passing sales inIormation in near real-time to their
suppliers, so that they could change what they manuIacture and what they distribute. BizTalk
would, over time, replace their existing batch EDI links to their 500-plus supply chain.
Thirdly, regarding being more responsive to their business, internally they leveraged their
existing application developments by using BizTalk to enable true application cooperation
and business process integration.
It is evident Irom the above that Marks and Spencer Iinally came to the realisation that
changing just slightly enough to try to keep up with the market was no way oI doing business.
They needed radical change iI they wanted to survive. As will be seen later in this paper,
thankIully Ior them, this change did take place.
#esource & Competence analysis
A company`s resources are able to dictate its success. The resources available to a company
underline strategic capability, as it is these resources that are deployed into the activities oI
the organization. It is evident Irom the Mark`s and Spencer`s case that there was a decline in
the success oI the company because it did not have adequate resources in some instances and
in other was not making eIIicient use oI the resources available to the company.
There are diIIerent types oI resources including physical, human, Iinancial and intangible
resources. Human resources are the employees oI the company as well as the knowledge and
skills they possess. By 2000 it was reported that almost all Marks and Spencer`s managers
were promoted internally meaning that no Iresh ideas were brought into the company. This
hardly sends a positive signal to the market or to the customer and depicts how ineIIicient use
oI human resources can lead to a company`s decline. Another example oI bad human
resource management was inadequate staII. To reduce costs, Iloor staII was kept to a
minimal. This led to a decrease in customer service which is also a deIining Ieature oI the
manner in which inadequate human resources can reIlect poorly on any retail store and
Iurther added to the company`s decline.
With regard to Iinancial resources, the company chose to purchase and reIurbish the
Littlewoods stores at the same time as the existing Marks and Spencer`s stores. This
decreased available capital, which it could have used elsewhere to revive the company, such
as marketing. Financial resources seemed to be deployed in the wrong areas such as home
and Internet shopping, streamlining international relations in 1999 rather than to improve the
existing stores or research existing markets to Iind where the department store was in Iact
lacking. Inadequate physical resources such as the initial lack oI change-rooms meant
customer dissatisIaction, as there was no way to try on clothing.
Customers voiced discontent at the arrangement oI the clothing commenting that it was
diIIicult to see the diIIerence between the work and casual clothing. In this way inadequate
positioning oI their physical resources also led to customer dissatisIaction. With regard to its
intellectual capital or its intangible resources such as the knowledge that has been captured in
brands, business systems, customer databases and relationships with partners there were also
discrepancies leading to a decline in proIitability. Further support Ior the importance oI
resource-based strategies in retailing Iirms comes Irom the theory itselI. Retailing companies
tend to be social and complex, employing many people at many levels all oI whom have to be
well presented and pleasant and skilled in diIIerent areas (the Iood department, the makeup
counter). Such an environment provides incentive Ior the emergence oI distinctive and
diIIicult to imitate intangibles (such as patented brands); the very stuII oI establishing unique
and sustainable competitive advantages.
Generic resource identiIication and analysis methods can be reIined by capturing more
reliably the value oI resources and competences lying outside traditional company boundaries
through improved management oI such relationships. This Iramework is based on the
resource-based view oI the strategic management emphasising the signiIicance oI Iirm
resources in achieving a Iavourable position in the market. For the Iramework, a distinction is
made between two types oI Iundamental resources: 1) strategic core resources and 2) critical
supporting resources The resource-based view oI strategic management emphasises the
signiIicance oI a Iirm`s unique or distinctive resources as sources oI competitive advantage.
The Iocus oI strategic management research as well as strategic thinking has evolved and
changed over time. According to this view, a Iirm should develop speciIic resources and
capabilities so that it could create and sustain a competitive advantage.
With regard to its core competencies or the activities or processes that critically underpin the
organization critical advantage, it can clearly be seen that Marks and Spencer`s Iailed to take
advantage oI theirs. What Marks and Spencer`s had Iirmly established was its brand name
and perception oI quality due to it`s British supply base yet when sales began to decline and
proIits began to Iall, the Iocus was placed on competition and instead oI enhancing their
image and promoting their brand as one oI quality.
They began to immediately restructure, changing CEOs and decreasing the eIIicient use oI
their intangible resources. This unique resource, which critically underpins competitive
advantage, was underestimated. Having knowledge oI the Marks and Spencer`s brand and the
distinction oI quality it brings, one would have thought that dealing with improving customer
satisIaction and marketing, and promoting their brand would have proved more eIIective than
total restructuring. Practically all Iirms base their business objectives on satisIying their
customer needs. This is a valuable initial approach Ior aligning products, services and
objectives with existing markets. It is based on the Opportunities and Threats halI oI a SWOT
analysis. However, most Iirms neglect the other halI oI the analysis. They do not identiIy the
sources oI their Strengths and Weaknesses. For example, Marks and Spencer, by hiding
problems about inadequate physical resources and a decline in proIit only paved the pathway
Ior more problems. Why do Iirms neglect to analyse their strengths and weaknesses? Partly
because it is much easier to analyse markets that are, so to speak, 'out there than to speak
about strengths and weaknesses. It is also because there are Iew pragmatic methods to help
managers and because those that do exist do little to reduce the inherent subjectivity in
managers looking at themselves.
The issues here are less to do with the markets the Iirm is in and more to do with the
company itselI. What are they good at and not so good at? What are the important diIIerences
between one Iirm and its competitors? We believe every Iirm is unique. And it is on the
peculiarities that make a Iirm unique that sustainable competitive advantages can be based.
The processes help to understand a Iirm`s potential and actual strengths and weaknesses.
They show how managers can build a more sustainable competitive advantage by revealing
the unique resources that underlie their Iirm`s strengths and weaknesses. Improving these
resources and managing them more eIIectively will reinIorce their strengths and ameliorate
their weaknesses and thereby improve their competitive position.
Accordingly, the strategic core resources represent the core idea around which the business is
built. It can be stated that without these resources a real competitive advantage cannot be
created. Strategic core resources should be approached by identiIying which resources among
a Iirm`s resource collection are such Iactors that diIIerentiate a Iirm and its product Irom
principal competitors. The critical resources are not necessary rare Ior a Iirm. The critical
supporting resources, thereIore, should be approached by identiIying common resources the
lack oI which in a Iirm makes it diIIicult to achieve or maintain a Iavourable position in the
market. With regard to Marks and Spencer, one would argue that their critical competencies
were its human resources, supply chain, physical resources.
StaII was increased by 4000 members, the supply chain was changed, physically the store
was restructured. But the core competency was largely misconstrued. The primary types oI
the competitive advantage are cost advantage and diIIerentiation. Marks and Spencer`s did
not exploit their core competency; their diIIerentiation in terms oI their image oI 'quality to
their best advantage. Surely iI one is promoting a product oI quality one is appealing to the
middle to upper class market and thereIore the initial blame placed on competition is
questionable. Surely discount stores are not appealing to this market nor promoting quality
products. While Iashion had changed to become more trendy and less classical making the
likes oI GAP and Oasis more competitive, Marks and Spencer`s had they been quick enough
to recognise the change in the Iashion could have quickly adapted but one questions whether
this would have had an impact given the preconceived ideas about their clothing in any
shopper`s mind.
II one were to look locally, when the Iashion scene changed to be more trendy` and youthIul,
Woolworths, which can be viewed as the South AIrican Marks and Spencer`s, also
experienced similar problems. Having similar values with regard to conservative clothing and
with a Iocus on quality, Woolworth`s realized that they were not the store oI choice in the
wakening oI the more vibrant Iashion trends. However, Woolworths instead oI totally
restructuring to combat this, began to promote their quality. They recognized their core
competence oI quality, and targeted their market with Woolworths 'quality Ior liIe as well
as 'the Woolworth`s diIIerence.
It is evident thereIore that Marks and Spencer`s decline can be attributed to inadequate usage
oI resources and well as a null exploitation oI their core competency.
Strategic Leadership
Leadership is the process oI inIluencing an organisation in its eIIorts towards achieving an
aim or goal and thus, a leader is someone who is in a position to have inIluence. (Johnson &
Scholes 2002:549) A strategic leader is deIined as an individual upon whom strategy
development and changes are seen to be dependent. (Johnson & Scholes 2002:65) They are
the individuals who are personally identiIied with the organisation and are also central to the
strategy oI the organisation. In terms oI change management, it is Iound that the management
oI change in an organisation is directly linked to the role oI a strategic leader. The leader
plays a vital role in this process. The case oI Marks & Spencer revolves primarily on the
management oI change and thus Iocusing on how leadership aIIected this process is
important.
Marks & Spencer was Iounded by Michael Marks and then subsequently run by his son
Simon Marks. For many years thereaIter the business was seen to be largely a Iamily
organisation. In a Iamily contracted business the strategy oI an organisation is usually
associated more symbolically with an individual like the Iounder. Further, in eIIect, the
strategy and the individual become embedded in the history and culture oI that organisation
(Johnson & Scholes 2002:534). This is precisely the case with Marks & Spencer. Many oI the
older values and traditions, as well as the strategies set by Michael and Simon Marks were
Iollowed by the subsequent leaders. In Iact until the late 1970`s the board comprised only oI
Iamily members and the thing to note about Marks & Spencer leaders was that all the CEO`s
were generally liIetime employees or part oI the Iounding members Iamily. We begin our
analysis oI strategic leadership by looking at each oI the leaders in the Marks & Spencer
business and discuss their management and leadership styles.
Simon Marks had taken over the business Irom his Iather. He had adopted an aggressive
attitude with regards to his ideas Ior the organisation. He was also responsible Ior Iounding
many oI the procedures and strategies oI the organisation by studying what Iirms in the US
were doing and then bringing many oI those ideas to the UK. A strong sense oI personal
control was exhibited by Marks and he was also described as meticulous, paying a great deal
oI attention to detail. A large part oI his success may also have been attributed to his keen
understanding oI his customer`s preIerences and trends. However his management style was
essentially top down and Iollowed the organisation`s hierarchical nature. Marks was reported
to have been a leader who shouted and bullied his employees. He was the type oI leader who
could be classiIied as instrumental in that his Iocus was on designing systems and controlling
the organisation`s activities.
Marks was succeeded by Richard Greenbury. Greenbury had Iollowed a similar management
style to Marks and his leadership exhibited centralised authority. Many oI the managers were
actually scared oI him. Instead oI Iocusing on long -term strategy a large part oI his Iocus,
unlike Marks, was on the day to day operations oI the organisation. Greenbury may be
regarded as an autocratic leader when we look at the approaches he Iollowed. When the
organisation was not doing well he was quick to blame the Iailure on the competitive
environment.
AIter much controversy Salsbury succeeded Greenbury in 1998. Salsbury had adopted a
management style and approach Iar diIIerent Irom his pre-decessors. Rather than Iocusing on
the business processes, he shiIted the Iocus on to the customer. His aim was to adopt a
customer centric approach and to restore the image oI the company. Essentially this involved,
moving the organisation away Irom its bureaucratic culture and stripping away Iurther layers
oI the hierarchy. His leadership allowed Ior eIIective change management in trying to
implement a reorganisation strategy. He could be described as a charismatic leader, in that he
had a vision Ior what the organisation should be and tried to energize people to achieve it.
Another important person that needs to be mentioned is Luc Vandervelde. He was appointed
the new chairman in 2000. Like Salsbury he had an approach which was geared more at
restructuring the organisation and enIorcing change management. He adopted a Iorward
looking approach and looked towards the Iuture instead oI the past. He was a huge driver oI
change and implemented many new ideas in the organisation. Unlike many oI the other
leaders, Vandervelde may be classiIied as an outsider as he was previously employed as a
managing director at the French Iood retailer, Promodes. OIten it is the case that an outsider
may be introduced into an organisation to eIIect change. The idea is that they will bring a
Iresh perspective on the organisation, not bound by the constraints oI the past or the everyday
routine oI doing things which can prevent strategic change. The introduction oI such new
management Irom outside the organisation increases the diversity oI ideas, views and
assumptions, which can help break down the cultural barriers to change and may help
increase the experience oI and capability oI change. (Johnson & Scholes 2002:553)
The experience lens ideology may also be extended to leadership and strategy, in that the
strategy advanced by the individual may be Iormed on the basis oI individual
experience.(Johnson & Scholes 2002:66) The strategy advance by a long established CEO
may strongly reIlect or be inIormed by his organisation`s paradigm (like Greenbury).
Alternatively a strategy advance by a CEO new to an organisation may be based on a
successIul strategy Iollowed in a previous organisation (like Vandervelde)
Culture
Although strategy is decided in terms oI processes and decisions, it is only through people
that it is implemented. The way in which they behave cannot be predicted or controlled.
ThereIore, an organisation needs to consider their cultural dimensions while planning their
strategy. As we have seen in many cases, an organisations` strategy is doomed to Iail iI the
right atmosphere and culture are not present.
From the beginning, we see that a very strong, autocratic culture prevailed at Marks &
Spencer:
'There was a Ieeling oI camaraderie and close-knit Iamily atmosphere within the stores, and
this was compounded by employing staII whom the managers believed would Iit in` and
become part oI that Iamily. The staII were also treated better and paid more than sales
assistants in other organisations. The Iamily nature oI this Iirm dominated top management
too: until the late 1970s the board was made up oI Iamily members only.
We can see that Marks and Spencer had always Iocused on their culture. Although it was
autocratic and hierarchy-based, was also 'strong and 'close-knit. The 'Iamily atmosphere
that prevailed would always be a winner with their customers since most oI the people that
Irequented their stores shared these same 'Iamily values and belieIs.
Looking back at this case in hindsight, many attribute Marks & Spencer`s Iailure during the
90s to a problem oI culture. The problem may not have been that they had the wrong culture
indeed it had done wonders Ior them throughout the years but rather the Iact that they
were unwilling to adapt their culture and management style to the world that was changing
around them.
'Every M&S was identical they looked the same, they did things in exactly the same way,
and answered to the same people. But this meant that each store had less control oI its own
operations 'Store managers were severely restricted in how they could respond to the local
needs oI customers and could do little that departed Irom central discretion.
Managers Iollowed decisions sent down Irom the top, regardless oI whether they agreed with
the decisions or not. As a result, many problems that occurred at the store level were ignored
and customers grew more Irustrated.
During Marks & Spencer`s growth period there were Iew changes in its methods oI operation
or to its strategies. They Ielt that they knew what was right Ior their customers and this would
help them succeed. This is why they reIused to change the way they were doing things.
In the meantime, their competitors were being praised Ior reacting quickly to changes in the
environment and this proved to be the source oI their success. Rather then Iorce their own
culture onto their customers, they instead Iocused on what the customer wanted, and adapted
their strategy to meet those needs.
Even iI we examine the expansion oI Marks & Spencer, we will see that the primary reason
Ior their Iailure to succeed was that they tried to Iorce their tried-and-tested strategy on a
market that had their own unique culture and reIused to change. As a result, Marks &
Spencer was Iorced to halt expansion plans and eventually pulled out.
In April 1999, aIter realising that they needed to change, Salsbury issued a memorandum
explaining that 'he wanted to make changes to Marks & Spencer which would move the
organisation away Irom its bureaucratic culture. One way Salsbury Ielt this could be achieved
was by creating a decision-making environment that wasn`t encumbered by hierarchy. But
still their problems continued. One possible reason this did not work was that the public saw
through` them and realised that even though they knew they needed to change, they did so
reluctantly, iI only to curb losses. This transparent move by Marks & Spencer was not
enough they needed to determine what their customers wanted beIore giving it to them.
Finally, in January 2000, Marks & Spencer made a bold move and appointed Belgian-born
Luc Vandervelde as executive chairman. He was the previously the managing director oI a
large, successIul French Iood retailer.
'This was the Iirst time that anyone Irom outside the organisation had been appointed to the
position oI chairman at M&S, and many commented that it showed an indication that M&S
had plans to develop as more oI an international retailer. Furthermore, in March 2000, they
introduced a new corporate image, complete with new colours and logos a new
organisation.
Albert Einstein once said, 'The signiIicant problems we Iace cannot be solved at the same
level oI thinking we were at when we created them. Could Marks & Spencer`s current
upturn be attributed to this out oI the box` thinking? Most probably.
ST#TEGIC OPTIONS ND THE FILU#E OF M&S
Strategic options are concerned with decisions about an organisation`s Iuture and the way in
which it needs to respond to the many pressures and inIluences in its environment. This is
particularly oI great importance in the case oI Marks and Spencer. Strategic choices are
grouped into three parts: Corporate strategy, competitive strategy and directions or methods
oI development. The consideration oI Iuture strategies has to be mindIul oI the realities oI
translating strategy into action which, themselves, can be signiIicant constraints on strategic
choice. The strategic options employed by Marks and Spencer`s will be discussed in detail.
Until the late 1990s Marks and Spencer`s was successIul in terms oI proIit and market share.
It maintained a set oI core principles which it used.
%ese were.
To oIIer customers a selective range oI high-quality, well designed and attractive
merchandise at reasonable prices under the brand name St Michael;
To encourage suppliers to use the most modern and eIIicient production techniques;
To work with suppliers to ensure the highest standards oI quality control;
To provide Iriendly, helpIul service and greater shopping comIort and convenience to
customers;
To improve the eIIiciency oI the business, by simpliIying operating procedures;
To Ioster good human relations with customers, suppliers and staII and in the communities
in which trade takes place.
M&S always had a very conIormed Iormula which included identical layout, store design,
training and so on. They also insisted on using only British suppliers. This was not very wise
in 1998 as at the time, they were planning an expansion into Europe and America which had
totally diIIerent cultures to the British. They believed that customers thought that they
received higher quality Irom British suppliers. The Iailure oI M&S began with a strategy that
should never have been applied to overseas markets. They had implemented their tried and
tested Iormula in various overseas markets. This resulted in a drastic Iall in the share price
and their proIits. However, the CEO at the time, Sir Richard Greenbury, insisted that the
proIit loss was due to the competitive environment. There were many reports that M&S no
longer understood the customers` needs and had misread its target market. M&S had
continued too long with its traditional risk-averse Iormula and ignored the changes in the
marketplace.
Why did the internationalisation activity oI Marks and Spencer Iail? With hindsight, it might
be said that there are a number oI inter-connecting reasons. Firstly, analysts commented that
Greenbury Iocused too much on the day-to-day operations oI the organisation rather than
their long-term strategy which needed to be altered. Secondly, many oI the elements that
made Marks and Spencer successIul in the UK, did not apply in the global arena. The long-
sustained buy-British policy, the peculiarities oI the retail operation, the emphasis on a
British brand alone and the lack oI clear retail positioning and design, all presented problems
in the global situation. Thirdly, despite the length oI time in international activities, there was
no experience oI decentralised control oI businesses and the systems needed to develop these
businesses. Values in the companies taken over were not enhanced. Arguably, Marks and
Spencer never really understood what they had bought, as it was so diIIerent to their own
operation. When the crisis hit at home, the reaction was to quickly to distance themselves
Irom this global operation. II it had really worked, then this international dimension could
have been a source oI strength in times oI crisis.
M&S also had a peculiar aversion to marketing. It appeared to have such a total belieI in its
oIIering as to negate the need to have marketers within the organization. Advertising in
newspapers, radio and television was conIined to new store openings and did not promote
either the brand (another peculiarity in its well-known reliance on the 100 retailer brand St
Michael) or its products. Its marketing strategy was to introduce new products in the hope
that the customers would buy them on the basis oI trust. II the lines were unsuccessIul, the
company used its pricing mechanisms to discount the goods quickly so as to eliminate the
mistakes quickly.
When Peter Salsbury became CEO, he began to implement a reorganisation strategy, splitting
the company into three parts: UK retail business, overseas business and Iinancial services.
His plans also involved establishing an organisation-wide marketing department to break
down the power oI the traditional buying IieIdoms. Salsbury wanted the marketing
department to adopt a customer-Iocused approach, rather than allowing the buyers to dictate
what the stores should stock. Salsbury tried to restore M&S`s image as an innovative retailer
by launching new clothing and Iood ranges. In the UK, Marks & Spencer implemented a
costly change strategy as it wanted to create a new store image. Another strategic change,
was the use oI overseas sourcing while severing links with UK suppliers. Despite the
implementation oI all these strategies, there was still a decrease in proIits.
In January 2000, Luc Vandevelde was appointed as the new CEO- this marked a great change
as it was the Iirst time someone Irom outside oI the organisation was appointed as CEO.
Vandevelde`s strategy was to create a whole new corporate image by changing the original St
Michael brand and the M&S supply chain. Also, a great strategic change was that the stores
outside the UK developed their own strategies which were tailored to the needs oI the local
market. However, even with the implementation oI new strategies, proIits still Iell.
Managing Change
Change management is very important to an organisation`s survival in their respective
market. It is important Ior organisation`s to realise that their market will not remain the same
all the time. With today`s competitive world, organisations are doing everything they can to
try and gain as much oI the market share as they possibly can. This means that the market is
constantly changing, with companies improving their services and their products. II an
organisation does not respond to these changes, they will inevitably become 'extinct. This
could be the case with Marks & Spencer, they are a good example oI a company that was
dominant in their market but Iailed to change with the 'changing times oI their market. Now
they Iind themselves in a position where they are struggling to keep their customers satisIied
or even keep their customers.
Marks and Spencer`s problems started in the late 1990`s. There was a shiIt in the market`s
preIerences. Marks and Spencer`s market was undergoing a change. Customers` preIerences
and expectations oI Marks and Spencer were changing. This was normal Ior many
companies, all you have to do is analyse the market, Iind out what your customers want, what
the current trends are, and just adjust your strategy to accommodate Ior these changes. The
problem was that Marks and Spencer did not analyse their market, or Iind out what the
current trends were, or what their customers wanted, and this is one oI the reasons they now
Iind themselves struggling to keep their customers.
There are a number oI contextual issues that need to be taken into account when analysing
Marks and Spencer`s problems. These contextual issues are Time, Scope, Preservation,
Diversity, Capability, Capacity, and Readiness. Each oI these sections is covered below.
Time
Marks and Spencer had plenty oI time to analyse their market`s trends, its not as iI their
market suddenly changed and they were leIt behind. The table in the case study showed a
decline in their customer`s expectations oI them. There was a steady decline Irom 1995 to
1999. This was enough time Ior Marks and Spencer to react to the changes in the market so
that they did not Iind themselves in a position where they were losing sales regularly to their
competitors. However this was exactly what happened to Marks and Spencer, they Iailed to
heed the warnings and were Iar too slow to make the necessary changes Ior them to stay
competitive.
Scope
There were several Iactors that drove the need Ior companies like Marks and Spencer to
change its strategy. One oI the main drivers Ior change in Marks and Spencer`s market was a
change in Iashion, appearance was everything. People started dressing loosely to work (eg.
Wearing jeans, Iormal shirt and tie). This clashed with Marks and Spencer`s successIul
Iormula. Marks and Spencer was Iounded on British values, they reIlected the British culture
very and understood the British culture very well. ThereIore they knew what the British
people wanted and they provided it, good quality products at a good price. Marks and
Spencer range was dull and boring, but their prices and quality oI goods attracted customers,
this was the success to their Iormula. However this Iormula worked well up until the 1990s.
Suddenly people became more Ilexible in terms oI what products they wanted, as was
mentioned above Iashion became a major market driver in the clothing industry. Marks and
Spencer Iailed to acknowledge this; being an established company they resisted the change
they needed to make in order to stay competitive. Being a British company (ie. very
traditional), they believed that their traditional strategy would continue to bring them success.
They were wrong, old Iashion trends (which Marks and Spencer were successIul in) changed.
Marks and Spencer`s clothing ranged was out oI date with the public, their competitors were
now oIIering more 'stylish clothing ranges and this took business away Irom Marks and
Spencer.
One oI the reasons why Marks and Spencer Iailed to adapt to their changing market, was
because they Ielt that the market trends at the tie would pass and customers would go back to
the types oI products Marks and Spencer oIIered. Again they were wrong, people now started
to dress a lot less Iormally to work; most oI them wore clothing like jeans to work. Marks and
Spencer`s clothing range did not cater Ior this; they did not diversiIy their products. This hurt
Marks and Spencer because their customers now went elsewhere to get the type oI clothing
they wanted.
Preservation
There was not much that was preserved Iorm the old Marks and Spencer. Since they Iailed to
embrace the changes that were needed to remain competitive, they Iound themselves in a
position where they had to revolutionise their image and strategy. The company`s image was
completely changed; Irom the downgrading oI their Iamous St Michael brand to the
restructuring oI the companies supply chain. When Vandevelde came to Marks and Spencer,
Marks and Spencer were struggling and needed some changes made to the company quickly.
Vandevelde chose to make wholesale changes to the company`s image like changing the
staIIs clothing and the symbol oI the marks and Spencer brand. The reason being is that he
Ielt that people conIused the St Michael and Marks and Spencer brand. These changes started
working to an extent, Vandevelde managed to slow down the decrease in the company`s
sales.
Diversity
Marks and Spencer did not diversiIy their products. They oIIered the same boring products
they used to oIIer beIore. Customers got tired oI seeing the same type oI clothing all the time,
so they eventually went to another store to get a more Iresher, up-to-date style oI clothing.
This was a clear indication that Marks and Spencer did not understand their customer or the
market anymore. They Iailed to realise that they needed to make changes to their clothing
range in order to remain competitive.
Capability
Marks and Spencer`s capability to recognise and enIorce changes in the way the company
went about doing its daily business, was severely hampered by the management style
adopted. Marks and Spencer adopted a top-down management style, which leIt little room Ior
the employees in the company to introduce new ideas into the company. People in the
organisation were told what to do by people above them. This could be seen when Marks and
Spencer used to allocate products to a store without researching whether those products were
needed in that store. This meant that some stores got products that did not suit that store
customers, and this resulted in those stores losing business. This type oI management did not
give people lower down in the organisation a chance to voice their opinions. People like the
store managers and store assistants would have been able to help Marks and Spencer review
and change their strategy in accordance with the market, since they would have been the ones
to know exactly what the customers wanted Irom the company.
Capacity
Marks and Spencer had the resources available to them to make the necessary changes
needed Ior them to stay ahead oI their competition. Firstly they were too slow to enIorce
changes in the company`s strategy, they were Iorced to make changes in order to survive.
Secondly and most importantly, Marks and Spencer were too conservative in the way they
implemented their changes to their strategy. Marks and Spencer tried changing one variable
at a time Iorm their original successIul Iormula. They did this because they believed that the
core oI their original Iormula was still successIul Ior the current market. All they had to do is
change one variable at a time and they would eventually Iind the variable that needed to be
changed or updated.
This was a big mistake, Marks and Spencer did realise that their market kept changing, so a
variable they thought was not problematic would later turn out to be problematic. Or there
may have been two variables that needed to be changed simultaneously.
With Marks and Spencer still trying to Iind the right Iormula by using their 'one variable at a
time method, the market continued to changed and eventually the market changed to such an
extent that Marks and Spencer`s original Iormula was completely outdated and needed to be
completed scrapped and restarted.
#eadiness
Marks and Spencer were never ready to implement changes to their strategy at any stage
during the late 1990s. Their British values could be seen quite clearly, when they resisted the
temptation to make changes to their strategy while their competitors did. Marks and Spencer
were rather old-Iashioned; they Ielt that the current trend would pass and that their customers
would return to the normal products that they used to purchase Irom Marks and Spencer.
Marks and Spencer were also aIraid to be the Iirst ones to change their strategy; they Ielt that
iI they changed their strategy in accordance with the markets current trends they would be
successIul Ior a period oI time. That period oI time, they Ielt was the period oI time the
market trends lasted. They Ielt iI the market trends Iaded away, they could not go back to
what they were, and customers might view them diIIerently. Marks and Spencer Ielt that it
was too big a risk Ior them to take.
The Future
In May 2000, despite the new measures and strategies there was still no visible improvement
regarding the company. However, what they had managed to do was slow the sales decrease.
Vandeveld wanted to look towards the Iuture instead oI concentrating on the past. His
detailed plan Ior restoring the Iortunes oI Marks and Spencer entailed mainly the objective oI
moving the business closer to the customer. His strategy Ior doing this was by mainly
creating clear proIit centres by allowing more eIIective inIormation Ilows and thereIore
responsiveness; creating a customer-Iacing organization which meant explicit Iocus on the
customer and giving him/her what they wanted; restoring overseas proIitability; and building
Iinancial services.
He also began to simpliIy the management structures and changed the way Marks and
Spencer bought goods by creating dedicated buying and selling teams. What Vandevelde did
Iirst was that he Iocused on the heart oI their business, i.e. their retail and Iinancial services
operations in the UK in order to get back to the Iundamental strengths that had made Marks
& Spencer great in the past. Together with this, he began to stop all activities which were
non-core or making a loss. He knew that they needed the right capital structure to make their
balance sheet more eIIicient and to generate greater value Ior their shareholders.
And this had to be accomplished rapidly as they were Iighting to recover in a harsh,
competitive marketplace.
AIter in-dept research regarding their customer Iocus, the company began to identiIy the
needs oI their customers as well as new initiatives. At the end oI 2000 Marks and Spencer
also made plans to oIIer clothes at a discounted price oI 30 per cent in Iactory outlet malls.
The malls were used to sell excess stock, something that its more aggressive competitors had
been doing Ior a number oI years. In September 2000 Salsbury retired Irom Marks and
Spencer and by the end oI March 2001, the company began to divest and close overseas
business as well as close direct catalogue business so that the company could Iocus more on
the core domestic clothing. To complement all this, Marks and Spencer also entered into a
strategic partnership with George Davies, renowned clothing designer.
The Outcome
AIter the major changes to the company, there has been a signiIicant turnaround in the
perIormance oI Marks and Spencer. The restructuring was complete and the changes to our
capital structure have increased our potential earnings per share. Best oI all, we`re seeing a
marked improvement in our perIormance. In the 12 months to 30 March 2002, sales Irom
continuing operations were up by 3.8 and corresponding Group operating proIits by 30.8.
During the 2001 calendar year, Marks & Spencer was the best perIorming share in the FTSE
100. Customers were coming back and buying more.
The company completed the changes to the capital structure allowing 2bn to be returned to
shareholders and leaving the company with the right capital structure to generate greater
value Ior our shareholders.
Marks and Spencer`s operating proIit Irom continuing operations in 2002 was 629.1m
compared to 2001`s 480.9m, an increase oI 30.8. The company`s total operating proIit had
also increased considerably Irom 471m in 2000 to 454.4m in 2001 to 629.1 in 2002. This
is exceptionally well considering their declining slump. So, in summary, at the end oI the
Iinancial year, Marks and Spencer have achieved a much improved proIit perIormance and a
much more eIIicient balance sheet.
Conclusion
ReIlecting on the company`s swiIt turnaround, we see that they had changed their
organisational and Iinancial structures. But more importantly, they had tapped into the values
and qualities that customers traditionally associated with their brand but which tended to be
obscured in recent years. They succeeded not by inventing a new Marks & Spencer, but by
rediscovering the Iundamental strengths oI the past and making them relevant to the present.
Their successIul perIormance was due to a powerIul combination oI people with past
experience oI Marks & Spencer and those who brought new skills and ideas to the
organisation. Their next imperative step was that they listened to their customers.
Marks & Spencer has a special place in the British way oI liIe. I have always believed, and
have oIten said publicly, that no other retailer in the world has such loyal customers. We may
have let them down and they may have punished us by staying away, but the vast majority
were waiting Ior the excuse to come back. They deIinitely even desperately wanted us to
succeed (Luc Vandeveld).
The past years had proved that returning to Iundamentals and reconnecting with the
company`s customers really did make a diIIerence. The vicious circle oI decline has now
become a virtuous circle oI recovery.
Looking ahead, Marks and Spencer`s task is to keep building on their Iundamental strengths,
oI making aspirational quality accessible to all. II phase one oI the plan Iocused their eIIorts
on the heart oI their business, phase two must address the Iuture growth oI the company. The
company must regain their leadership, build on their customer relationships and most
importantly reassert their position as a leading socially responsible business.
'Now that we have turned the corner, our task is to secure the recovery and to keep building
Ior our Iuture. There is much to do and we are not complacent. Phase one may be complete,
but the plan moves on as we set about growing the business and regaining our leadership in
the UK market. (Luc Vandeveld)