Marks & Spencer (M&S) is a major British retailer, which has more than 895 stores in over 40 territories around the world and more than 600 domestic and 295 international stores. M&S head office is in the city of Westminster, London, England. It is also considered as the largest clothing retailer in the United Kingdom and 43rd largest retailer in the world as of 2008 according to its official website. M&S was founded in the year 1884 by Michael Marks and Thomas Spencer.

Looking back at its history in the 1950s almost all the goods at that time were sold under the “St Michael” label and M&S lingerie, women’s clothes and girls’ school uniform were branded under the “St Margaret” label until the whole range of general merchandise became St Michael.

        The company has always kept its main emphasis on differentiation strategy where the quality and the unique attributes were valued by the customers, this value added by the uniqueness of the product had allowed M&S to charge a premium price, where M&S hoped that the higher price will more than cover the extra costs incurred in offering the unique product, however on the other side it also had a reputation for offering fair value for money.  Later, the reputation that M&S had been offering which was quality and price began to waver it encountered serious difficulties. M&S had the uncompromising attitude towards the customer relations that no other companies were even close to them, therefore in 1953 M&S came out with a new strategy to develop a new slogan that summarized the customer relations which was “The customer is always and completely right” in fact this slogan somehow gradually build confidence on customers attitude to shop and choose the product confidentially.

Since, 1958 M&S sold Christmas cakes and Christmas puddings it was introduced as a strategy to improve the quality of their Swiss roles, they also hired food expert of that era Nat Goldberg, who made a major improvement across their entire cake range, which had lost the public favour few years earlier. As a result, measure to improve the quality of food; food labelling was improved by phasing “sell by dates” in between 1970 and 1972.

Again in 1959 smoking was banned from all M&S shops because of the fire hazards it posed. Later it became a permanent rule after serious concerns were raised by health conscious people and customers having health problem like asthma.

        M&S again adopted a new strategy for market growth by applying market development. It’s a name given to a growth strategy where the business seeks to sales existing products into new markets by exploring new geographical markets or in other ways exporting the product to a new country.

M&S gradually opened its stores in continental Europe in 1975 and in Ireland after four years. All the international stores are operated under franchise, the reasons M&S operate as a franchise in different countries were probably it was less risky, and would cost less as setting up from scratch themselves and needed less overseas knowledge however it also proved to have disadvantages like it may be less profitable then setting up their own operation in the long run and the important thing is to make sure that the franchisee doesn’t damage the image of the company, on the other hand with the exception of the stores in the Republic of Ireland and Hong Kong which remain in company ownership. The first M&S store in Central Asia was built in Kabul, Afghanistan in the 1960s however it was later shut down.

In 1973 M&S expanded into Canada and at one stage it developed so widely that it had 48 stores all over Canada. As it was growing rapidly at the same time it was obvious that it was also facing huge threats from its competitors. The weaknesses that the Canadian outlets faced were that it was smaller than British Outlets and on top of that it did not carry the same selections. The huge mistake M&S carried out on market segmentation was that it targeted senior citizen and expatriate British people. On the other hand Canadian youngsters and teenagers found the retailers to be very boring and regard the products as stodgy and unfashionable. M&S had struggled to grow against its competitors in that phase of time as other stores were providing discounts and also the arrival of “big box” had big impact to cut its sales. In the late 1990s efforts were made to modernize the stores and expand the customer base and unprofitable locations were closed, despite various efforts to improve its image the Canadian Operations continued to lose money and the last 38 stores in Canada were closed in 1999 as stated by CBC news November 10, 2000 on their website.

The strategy of market development was not only carried out in North America and Asia but also in European markets too. Expansion into France began with stores opening at Boulevard Haussmann in Paris and another city in France called Lyon in 1975, followed by another opening of a store in Paris at Rosny 2 in 1977. Later further expansion into other French and Belgian cities followed into the 1980s. Although the Paris stores remained popular and profitable, M&S was taken over by the French retailer Galeries Lafayette SA whereas the whole of the western European operation from countries like Belgium and Germany did not show much profit and eighteen stores were closed down in 2001.

Acquisitions by M&S began in 1988 when they took over American clothing company called Brooks Brother and Kings super market, a food chain of USA. They were sold off respectively in 2001 and 2006; The Fiscal year of 1997-1998 was the period of boom for M&S. Analysts had predicted profits to be somewhere between £ 1.17bn ($ 1.9bn) – up from £ 1.102bn. During the time of continuous success the tenure headed by Sir Richard Greenbury, profit margins were pushed on shaky ground levels, and slowly the loyalty of its customers were seriously eroded. The other reasons were the rising cost of using British suppliers seemed to be a bit burden, as the competitor retailers increasingly imported their goods from low cost countries which proved to be competitive advantages to the competitors but M&S’s belated switch to the suppliers overseas weakened a core part of its demand to the public. Another important factor was not accepting any credit cards from the customers rather developing its own store card and accepting only M&S card. The problem with the card itself was there were no real bonuses or loyalty discounts for members instead the members only got hold of a complimentary copy of the M&S magazine and later gradually started to offer £5 off vouchers off clothing only if you spend “at least £50” on clothing this strategy proved to be less advantage to the customers compared with other store cards which offer 10% off on as little as £20 minimum spend. Later in 2001 M&S started to accept all credit cards and introduced “per una” clothing range designed by George Davies, which accompanied by a redesign of its basic business model, profits started to recover fairly and M&S recovered some of its market share, but it was soon observable that problems remained.

M&S was ranked 17 in The Times “Top 100 Graduate Employers 2008”. In February 2007, M&S announced the opening of the world’s largest M&S store outside the UK at Dubai Festival City and again in October 2008, M&S opened its first mainland China store in Shanghai. The up market Zandra Rhodes collection, which was modelled and made by the British fashion designer Zandra Rhodes, was introduced in to the bigger stores by late 2009.

In the year 2006 M&S introduced a new marketing campaign called “Look behind the Label” which was aimed to highlight the various ethical and environmentally friendly aspects, of the production and sourcing methods engaged in by M&S which included fair-trade products, sustainable fishing and environmentally friendly textile dyes. All the coffee and tea sold in M&S stores were in Fair-trade moreover the company offered clothing lines made from Fair-trade cotton in selected departments.

2 Current Strategic Situations

Today, M&S is one of the leading retailers in the UK with over 21 million people visiting the stores each week. Overall, clothing and home ware sales accounts for 49% of the business and the other 51% of the business is in food, where they sell everything from fresh produce and groceries, to partly prepared meals and ready meals.

M&S made mistakes on the subject of important marketing variables such as the target market segment, the merchandise mix, promotional needs, the degree to which products would need to be altered for the markets, and distributional differences however, M&S has altered operations based on its understanding and is now doing well in most of the foreign locations in which it operates.

Market Segmentation – It allows M&S to treat similar customers in similar ways, whereas distinguishing between dissimilar customer groups. M&S uses demographic segmentation to select its target markets for its products also known as the focus strategy. M&S targets its customers by age, income, social class and occupation. M&S targets the 30 plus age group with high income and executive profession. M&S also bases its market segmentation through value. Many products in M&S’s clothing range have a finest priced, high quality segment, a mid priced segment (M&S, Clarks, Faith), a mid priced segment (Top shop, River Island) and low price segment (Barratts) e.g. In such a market, fashion and quality differences can be more important than price variations.

Strengths & Weaknesses: M&S strengths are their attention to detail in terms of supplier control, merchandise and store layout. The success of M&S under Simon marks was often attributed his understanding of customer preferences and trends. M&S provides the highest standards of quality. The suppliers use the most modern and efficient production techniques, however M&S need to focus on their weaknesses too which are basically stocked generic clothing range with wide appeal to the public, buyers often have to make choices, which would outlast the fashion and trends seen in other high street retailers, this lagging behind in case of introducing up to dated fashionable clothing to keep pace with the environment actually made them vulnerable to their competitors. They always used British suppliers believing that it would give them highest quality with low costs but actually sometimes make them weak to challenge its competitors. Some competitors are using overseas suppliers to keep the costs down.

The Five Forces Model: As explained by Porter that there are five forces inherent in a market, which will jointly decide the strength of competition and profitability of M&S and the food retailing industry. New entrants are the first threat, the high capital expenditure and confidence of customers represent significant barriers to entry and the market is also sensitive to reputation however, the emergent of low cost manufactures pose an important threat. Since, there is opportunity in low price sector, Top Shop or ASDA and Morrison could consider introducing low cost home products. The second is the threats from substitutes, as there are many retailers of other premium branded food, such as Sainsbury, John Lewis, and Rackham’s etc. The third force is the threats from the bargaining power of buyers, this may be strong for M&S and all the other similar food retailing industry having large number of suppliers the result is a very strong competitive rivalry in the industry. Finally the treats from the suppliers bargaining power is relatively low in the food industry, due to the dual sourcing strategies, using a range of alternative sources of supply for products.

Macro Environment Analysis

Political- After the free trade agreements and the European integration, the market has opened up for British Companies to invest in Eastern Europe likewise more companies will be looking to set up their stores in the U.K which may be a threat to M&S.

Economic- The retail industry is fairly prawn to recession and also sensitive to changes in interest rates. After the recent economic recession, many of the countries are out of the recession and many are on the road to recovery. Consumers are optimistic and the retail industry like M&S is once again booming.

Technical- Changes in retailing methods as such clothes sales via the internet is now a common place in retailing. Paperless operation, the management and administration of the company are undertaken on IT systems;

Using the Internet to sell Using the internet for information and to sell its products proved to be fruitful for M&S, some of the advantages for M&S are it has become convenient for customers to shop online which attracted more customers who didn’t have enough time to shop, the other benefits were it also attracted customers from areas which have no M&S stores nearby and above all this strategy proved to be very low cost. M&S launched online shopping since 1999 and today has attracted customers from all over the place including the customers who do not have access to M&S stores easily.

Environmental – M&S in now working on “Plan A” strategy. In January 2007, M&S launched an initiative know as “Plan A” to increase the environmental sustainability of the business within 5 years and expected to cost £200 million. The plan covers 100 commitments over 5 years to address the key social and environmental challenges facing M&S today and in the future with the tag-line “Because there is no Plan B”. The commitments span five themes: Climate change, waste, sustainable raw materials, fair partnership and health.

Some of the examples are M&S and Oxfam Clothes Exchange and Prostate Cancer Charity.

Marketing Mix – The marketing mix includes all the essentials related with the products that affect whether the consumer decides to buy or not. There are clearly many factors which influence a consumer’s decision to buy something and these are all part of the marketing mix (the 4Ps)

Price- M&S charges premium prices through its differentiation strategy

Product- M&S markets its products based on superior quality and dependability

Place- M&S products are sold through its large number of stores in city and town centres. More recently M&S has extended its sales distribution channels through the internet visa its website (online shopping)

Promotion- M&S incorporated marketing communication is delivered through media in various forms, advertising, TV, national newspaper and magazines as well as through the web site.

M&S has endowed extremely on internal and external resources some of the internal resources are the well trained staffs or organised human resources, strong balance sheets, diverse ranges of products ranging from clothing, financial products, furniture, wine and home, strong cash flow position and strong leadership. The external resources include strong supply chain, new infrastructure at new locations and strong corporate social responsibility.

The stakeholders at M&S play an important role for the strategic choices for present and for the future; each stakeholder plays a significance role as

Employees: Employees will want secure jobs, good pay and fair treatment.

Customers: Customers want high quality, good service, and good choices of products.

Shareholders: Shareholders want profit and growth.

Supplier: Suppliers want secure contracts and fair prices

Local communities: Local communities want jobs and good shopping choices.

Pressure Groups: Pressure groups want M&S to listen and be ethical.

Local and national governments: Government wants jobs and taxes paid.

For example a good story to link this up may help us understand better how to summarize the issues which are linked between the public, external pressure groups, stakeholders and use of ICT. In 2009 M&S introduced a policy of price discrimination in the lingerie department, they charged an extra £2 for over sized bras called DD plus bras and pressure group “Busts 4 Justice” has been set up on Face book with a member over 110,000 who were campaigning for this surcharge to be removed. The group’s founder, Beckie Williams, who is also the company’s shareholder campaign against the price and believe all the sizes, should be of same price. This battle was finally won at last by Busts 4 Justice group.

3 Strategic Directions for the Future

The important element of M&S is to focus the entire organisation on the UK business, with a mission to make aspiration quality accessible to all because this is the heart of the company and it’s very vital.

Each and every one of the products must and will exhibit quality, value and improvement for which M&S are famous for. That’s quality reinterpreted for the times in which we live. In the past, quality meant the clothes which you could wear for a long time and years. Today’s customers are more complicated more demanding. They want quality clothes that last, but they also stress other criteria such as style and vigorous. M&S must satisfy these objective as well as the more traditional demands.

Opportunities

To survive in today’s world globalization is important. M&S have a wide opportunity to go more global to improve and expand its business. They also have the opportunity to consider more overseas supplier which will actually give them cost advantage, rather than suppliers available on a local level. They also have the opportunity to maximize the use of available technology to improve their functioning and to gain competitive advantage.

Threats

They are in strong competition with Gap, Oasis and next, who are offering similarly priced products yet more fashionable. M&S is also in competition from discount stores like Matalan, and George range at Asda. M&S is also in threat from Tesco and Sainsbury’s who moved into offering added value foods, which has been pioneered by M&S.

By 2012 its aim is to become carbon neutral, send no waste to landfill, extend sustainable sourcing, help improve the lives of people in their supply chain and help customers and employees live a healthier life style.

In restoring these fundamentals, M&S must make the stores more attractive and easier to shop in, while focusing more sharply on its classically stylish, core customers. At the same time, reinforcement the retail business by building on the great asset which they have in marks & Spencer Financial services.

How has M&S diversified in recent years?

M&S have diversified by opening stores overseas and UK franchises, it diversified into the financial sector into the 1980s

M&S wants to continue its differentiation strategy by delivering freshness, quality and innovation

Recommendations-

M&S continues to carry out well and has earned customers’ trust for providing quality, innovation and convenience. The business is a key platform for potential development and the company is taking into consideration opportunities to enlarge its reach through new locations and selling channels.

Improve the supply chain: M&S continues to see significant benefits from the reframing of the supply base, being shown in a clothing primary margin that is rising strongly. The priorities now are to get rid of duplication and increase transparency. By re-building closer working relationships with its supply partners, historically a unique strength, Marks & Spencer will achieve further improvements in quality, value, product appeal and accessibility.

Financial Services: Another future plans include developing M&S store card as an important partner for development of retail sales which is a stronger existence for financial services in stores may result in continues growth of the credit business and faster rates of growth of non credit areas, which may involve bringing in external partners.

Build on food chains: M&S foods has shown positive results from its customers and the area continues to perform very well and has earned customers trust for providing quality, improvement and convenience. The business is a key stage for the future growth and the company should consider increasing its reach through new locations and selling channels.

Cost Cutting: In order to focus all its efforts on the recovery of the UK business, M&S must close its noncore businesses and assets, with consultation with its employees.

In conclusion, I think that even though the future is unpredictable, and there is no one solid theory for strategies, undergoing the process of strategic planning is vital for the continued existence of any organisation, it is not there to develop specific action plans, but to act as a medium for well-organized organisational growth. Strategic planning has an overall positive result on any organisation; it increases productivity as a result of increased efficiency and effectiveness of decision making.

Strengths:

What do we do well?

How are we better than our competitors?

Weaknesses:

What could be done better?

What is being done badly?

Opportunities:

What are the opportunities that can be exploited?

What are the interesting trends?

Threats:

What obstacles are being faced?

What is the competition doing?

Are the specifications for the products or services changing?

Is changing technology threatening our business?

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