Marks and Spencer's business strategy and competitive differentiation

Business Strategy

Marks and Spencer - Business Strategy

Marks and Spencer was established in the 1880s in Leeds, Great Britain, in the form of a bazaar selling a diversified product palette, each item costing only one penny. The name was adopted only some years later, when initial founder Michael Spencer transformed his cashier Tom Spencer into his business partner. The strategic approach at the basis of the international success registered by the giant retailer was based on six sets of actions: first of all, clients would receive the highest quality products, under the corporate brand name and at competitive prices; suppliers were encouraged to use the most efficient production techniques; company officials would closely collaborate with suppliers as to ensure the best control; customers would be treated with the utmost respect and the quality of the services would be impeccable; operations would be simplified as to increase the efficiency; and finally, they would create a pleasant atmosphere and maintain good relationships with all stakeholders (Collier).

The company's vision remains unchanged up to present days and it revolves around being "the standard against which all others are measured." Their mission is to "make aspirational quality accessible to all" and their core values are "quality, value, service, innovation and trust" (Marks and Spencer Shop Online)

2. External Analysis

Relative to the external environment, Marks and Spencer initially conducted market research in order to identify the trends and adapt to them. For instance, Simon Marks (CEO and son of founder) even went to America to learn for the corporate strategies implemented there. Then, they also offered their staff members more incentives, generally materialized in the creation of a pleasant work environment and the offering of higher salaries that the competitors in the industry.

But as time passed and the population became increasingly needy of newer and better things, the competition in the industry began to increase drastically. However, most competitors were focused on offering their customers the latest items, the most modern and most fashionable ones. The primary disadvantage of this strategy was that as the season ended, the remaining unsold items constituted loss; they would not be sold in the following season as they would be out of fashion, comparative to the new pieces produced. Marks and Spencer on the other hand implemented a different approach - however they also sold fashionable and modern items, they were primarily focused on presenting their customers with classic designs that would stand the test of time and could be worn regardless of the latest fashion trends. From this standpoint, the British retailer was able to differentiate themselves from the competition.

And the strategy was not only implemented nationwide, but it also helped them register international success. The reduction of trade barriers, the increasing and changing needs of the populations, the fashionable trend of purchasing foreign made clothes alongside with other macroeconomic forces opened Marks and Spencer's door to America and Canada. They register tremendous success here, but as time went by and the company began to struggle with financial shortages, the expansion programs to Europe and other regions of the American continent were halted.

The reasons promoted for the income decline in Marks and Spencer's operations was stated to have been the highly fierce competition, due to the creation of more and more retail chains. And what was worse was that these new retail stores would compete against M&S on both top and bottom levels, generally stealing M&S' customers, or forming new customers, that would have fitted the description of a Marks and Spencer client. "Competitors at the top end of the market were niche organizations such as the Gap, Oasis and Next, offering similarly priced goods, yet more design focused with up-to-date fashions, and from which obvious comparison could be made against the more traditional M&S merchandise. [...] at the bottom end of the market there was competition from discount stores, such as Matalan, and supermarkets such as the 'George' range at Asda. These stores were competing against M&S by offering essential and basic clothing, but at significantly lower prices" (Collier).

But the increased competition was not only a matter of concern for the officials at Marks and Spencer, as it also offered new insights and new development opportunities. To better explain, M&S was now able to follow the successful strategies implemented by competing companies and adapt them to the unique features of Marks' organization. The most relevant example in this sense is given by an enlargement of the product offering, based on the models from Tesco and Sainsbury, which also offered foods, idea adopted by Marks and Spencer as well.

Even so, the company failed to implement major strategies that would help the company recover from the difficulties encountered. The competitors were continuing to further develop and adapt to the growing and changing market requirements and implemented newer strategies, such as loyalty cards.

4. Current Problem Diagnosis

The problems within Marks and Spencer began in the 1990s, starting with financial difficulties, aggravated by fierce competition in the industry and consequently decreased sales and profits. Market analysts blamed the occurrence of the problems on a poor quality of the management. M&S was accused of not having paid enough attention to the changes affecting the market and as such, they had failed to adapt to the new requirements.

Also, another cause leading to the issues raised was that of an increased focus on the daily operations, generally low risk activities. The approach had been successful on the short-term as it ensured high quality of products and services through a high attention to details, but it had generated negative implications on the long-term.

Then, a third force generating the problem was that of the internal structure of the leading positions. All managerial seats were occupied by Marks and Spencer employees, who had started on low paid and qualified jobs and had gradually promoted. "Almost all M&S managers and executives were promoted internally, starting at the bottom of the organization and becoming immersed in the routines and established traditions of M&S, a culture that had been established, and continually reinforced, since its creation. There had never been a CEO of M&S who had not been a member of the founder's family or a lifetime employee" (Collier). The advantage of the strategy was that the leaders had already been formed into the corporate culture and knew the characteristics of the businesses run better that any outsider. However, it also meant a limitation of creativity and innovation as the same individuals occupied various positions at different times and no new manager was able to introduce elements of novelty that would help M&S better adjust to the new market conditions.

When Richard Greensbury resigned as CEO, his position was taken by Peter Slasbury, who had the ambition to turn Marks and Spencer around. He divided the organization in three, based on the operations conducted: financial services, retail business in the U.K. And international operations. He also aimed to reinvent the corporate culture and implement a customer-based orientation; his strategies, continued by his followers, had some success and in early 2000s, the company began to revive. Today however, their stability and growth is once again being challenged.

5. Generation of Strategic Options

In order to resolve the impending problems at Marks and Spencer, the managers would have to develop a wide set of strategies, all adapted to the market demands and the unique corporate capabilities and features. These strategies would be developed within the given resource limitations and would basically target the revival of the British retailer. A specification that must be made here is that the company should develop several alternative strategies, and based on an evaluation of these courses of action and their possible outcome, choose the one that best meets the demands. Also, it could be highly probably for a single course of action to be insufficient; therefore, the organization might have to combine two or more strategic approaches. This would eventually ensure a reduction in the risks generated by each alternative and a maximization of the beneficial outcomes. This being said, the executives at Marks and Spencer should focus on the following strategies:

a) Implement a customer-oriented approach - this would basically mean that the organization would place more emphasis on the requirements forwarded by the customers and potential customers. They would no longer produce whatever items they desired and hope to sell them, but would inquire the clientele as to the products they need and then sell those particular items. The strategy is expected to revive M&S through an increased customer satisfaction, increased sales and consequently higher profits.

A b) Separate the operations - what this means is that the executives and Marks and Spencer should establish clear distinctions between departments and retail locations. In other words, financial services should only be sold in one place; then, food products should not be sold near the clothes shelves - this would once again increase customer satisfaction.

A c) Diversify the product palette - the diversification of the offering does not necessarily refer to adding more items on the shelves, but to offering products for all pockets; in other words, the M&S stores should come to represent a viable alternative for the individuals coming from all socio-economic backgrounds; the strategy would most likely give a sense of belonging to all customers and would increase their satisfaction and purchases.

A d) Reshape the target market - M&S' primary target market is formed from women, but the once highly profitable sector was declining; therefore, the need for a new approach become obvious. Marks and Spencer should first strengthen this target market by offering more diversified products, manufactured with more modern designs and with numerous features that satisfy various needs. Then, they should also place increased emphasis on the children and menswear, sectors generally neglected. These products should also be fashionable, high quality and price accessible.

A e) Internal strategies - the success of the proposed market strategies is not possible without strong support from within the organization. In this order of ideas, the company should hire newer managers that add more value and support the concepts of innovation. Then, they should make increased efforts to reduce their reticence to change, engage in riskier operations with more positive outcomes and decide based on the long-term benefit.

6. Evaluation of Strategic Option

Each of the alternatives proposed is characterized by possible losses and gains. Therefore, a need for an evaluation is imposed.

A a) Implement a customer-oriented approach - this strategy is risky in the meaning that it implies additional expenditures with researching the market and changing the production process. The possible gains on the other hand are quite high as through offering the products desired, the British retailer could strengthen their market position. Also, the losses would be quite high if the company continues to disregard the demands of the customers, and the finality of such negligence could easily be bankruptcy.

A b) Separate the operations - the potential gains and losses are quite reduced in the meaning that no major changes would occur from the implementation of this strategy; it could at most lead to a better customer satisfaction, but it would unlikely materialize in increased sales c) Diversify the product palette - the diversification of the offering in terms of prices accessible to everyone would imply additional efforts with contracting more suppliers or changing the contracts with the present partners. Then, it would also pose the risks of financial losses provided that the public does not respond favorably to the enlarged price offering. However, if it is properly implemented, the success could materialize in increased customer satisfaction, increased sales and accordingly higher corporate revenues.

A d) Reshape the target market - this strategy has the main risk of once again investing large sums of money and failing to properly attract the right audience; this risk can however be minimized if the executives require the assistance of marketing specialists. The potential gains on the other side are quite favorable as the customer base would increase significantly, leading once again to increased sales and higher organizational revenues.

A e) Internal strategies - two risks occur with this strategy: operational risks and financial risks. The financial ones revolve around the necessity to invest additional funds into an uncertain course of action. Then, the operational risks refer to the possibility that the staff members will be unable to adapt to the new requirements, slowing as such the operational processes. However, if the strategy is properly implemented, it will materialize in a higher efficiency of corporate actions and even cost reductions, superior product and service quality, all leading to more purchases and more revenues.

7. Description of Selected Strategy

As previously mentioned, it may not be sufficient to implement a single strategic approach, but the company may have to simultaneously consider more courses of action. In this order of ideas, it becomes obvious that the retail giant has to work on both its internal environment, but also its market position. As such, they will reshape their entire business perception. They will no longer sell the items they have on stock, but the items desired by the customers. In other words, they will implement a customer-oriented approach.

Then, they will increase their customer base and enlarge their target market. However it will imply additional costs, they could also offer promotional purchases so to attract more clients. Finally, they will diversify the product offering, enlarging it with items accessible to all income levels. Otherwise put, they will implement the product diversification and market reshaping strategies.

In terms of internal approaches, they will undoubtedly have to implement a different approach. They will have to make a swift from short-term to long-term measures and they will have to adopt change as an ongoing process, necessary for survival and future success.

8. Action Plan for Implementation

In order for all strategies to work, the company should contract the services of a specialized consultancy team. It is generally unlike Marks and Spencer to allow outsiders into their corporate affairs, but given the dramatic circumstances, their general difficulties in implementing change, and also the praised results of specialized organizations, the British retailer should request additional services.

These organizations would help M&S train and motivate their employees as to increase their on the job satisfaction and consequently their performances, which would then materialize in higher quality products and services and even more efficient operations.

Then, in terms of market strategies, Marks and Spencer, aided by the contracted marketing specialists, would continuously prospect the market for the latest trends and demands and would search for newer and better ways to satisfying these demands. They should eventually come to a point where they are able to identify and satisfy customer needs even before the clients become aware of the existence of the respective needs - at this point, the future success and strength of Marks and Spencer would be guaranteed.

9. Conclusions

Marks and Spencer is a long standing British organization, currently operating at international levels. The company has registered impressive results in its beginnings, but as time went by, the society and the market changed and the competition intensified, the retailer found itself in severe difficulties. In later years, the executives at M&S have implemented numerous strategies for the revival of the organization, and however some of them worked, the company still has to work in order to regain their status.