Marks and Spencer case study Essay Dissertation Help

Marks and Spencer case study Essay Dissertation Help


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You will be looking at the marks and spencer case study which i will provide, and by reading that and with additional resources gathered, you will be answering three main questions regarding their
business operations, leadership styles, management styles etc.

I will attach the required documents, and please do read them carefully, as I need an above average mark for this assignment. I will be checking with you during the writing process to see if its
all correct. PLEASE MAKE SURE YOU CHECK WITH THE RUBRIC AND THE GUIDELINES CORRECTLY. THE WORD COUNT IS 1500 but this does not include the introduction and the conclusion and executive summary etc.
the 1500 wordcount is only for the main body. In the briefing file, you will see how the assignment is meant to be structured please follow this carefully. The case study should be read before you
THank you.
Case Study on Marks and Spencer
Marks and Spencer became a household name, first in its country of origin, the UK, and later
internationally. However, the late 1990’s saw a reversal of fortune for 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 future of Marks and Spencer.
Business Environment
The environment encapsulates many different influences. The difficulty is to make sense of
this diversity. Identifying very many environmental influences may be possible, but it may not
be of much use because no overall picture emerges of the really important influences on the
organisation. Furthermore, there is the issue of the speed of change. Managers typically feel
that the pace of technological change and the speed of global communications mean more
and faster change now than ever before. There is also the issue of complexity. Managers like
other ‘normal’ individuals try to simplify what is happening by focusing on those few aspects
of the environment which have been important historically.
The strategy of an organisation is therefore, the result of decisions made about the
positioning and repositioning of the organisation in terms of its strengths in relation to its
markets and the forces affecting it in its wider environment. We find that Marks and Spencer
fell terribly short in revising its strengths within their wider environment, and this shortsightedness
contributed to their slump.
A changing and unpredictable environment will generate a diversity of ideas and innovations
because it will demand responses from 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 of ideas and more innovation than one that does not. On the
other hand, one that tries to insulate itself from its environment, like Marks and Spencer, by
trying to resist market changes or rely on a particular way of doing or seeing things –
sometimes known as ‘strong culture’ – will generate less ideas and innovation.
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 feared 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 of ideas and innovation would have probably
saved them from the fate they endured.
Similarly, high degrees of control and strict hierarchy are likely to encourage conformity 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 of this description. (For a
detailed explanation, see the section on ‘Culture’).
If we look at the PESTEL Framework (Political, Economic, Socio-cultural, Technological,
Environmental and Legal), we see that Economic, Socio-cultural, Environmental and
Technological factors are relevant to Marks and Spencer’s problem.
Marks and Spencer had the notion of that they did not and should not have to reduce prices,
either at end of range or during seasonal periods like Christmas. We see that although this
strategy worked initially for 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 from these other stores at times as mentioned above.
Marks and Spencer once again did not pay attention to this sentiment of the public.
In terms of socio-cultural factors that affected Marks and Spencer, we see that the public
became more fashion conscious in the 90’s than they had ever been in terms of what Marks
and Spencer provided them with, i.e. “classic, wearable fashions”. Hence people decided to
shop for clothing in trendier places. As a result we see that they employed George Davies
(founder of Next) and other haute couture fashion designers to design clothing exclusively for
Marks and Spencer.
In terms of 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 half of the
year, we were hit by falling sales, loss of market share and declining profitability.” (Peter
Salsbury, Marks and Spencer Annual Review, 1999)
This quote, by the then CEO of Marks & Spencer, sums up the lack of focus, direction and
foresight that existed at senior management level in terms of the environment.
A factor that haunted Marks and Spencer was their inability to keep up with technology.
Simple schemes like buying cards for 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 of the pack. However, in 1999, Marks
and Spencer announced the integration of a new information system called BizTalk. There
were three reasons for using BizTalk. Firstly and most importantly, the principles behind the
BizTalk framework, industry standard XML, and the opportunity to avoid writing custom
interfaces between each of our applications. Secondly, the BizTalk server product
architecture, and its use of core products, such as MSMQ, SQL Server and MTS. And thirdly,
its seamless integration into our strategic architecture based on Microsoft 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 information throughout the company. To create this, they
would have to manage new richer information more quickly, optimise our stock management,
and be more responsive to our retail business.
Firstly, in terms of managing information, they needed to maximize the availability of our
information throughout their business. The variety, volume and frequency of that information
was increasing. Using BizTalk, they were changing the way that sales information was being
delivered to central systems. Rather than aggregating sales and transferring 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 transfer event-driven information 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 of optimising stock management, they would improve their product
availability, whilst reducing costs by passing sales information in near real-time to their
suppliers, so that they could change what they manufacture 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 from the above that Marks and Spencer finally came to the realisation that
changing just slightly enough to try to keep up with the market was no way of doing business.
They needed radical change if they wanted to survive. As will be seen later in this paper,
thankfully for them, this change did take place.
Resource & 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 of
the organization. It is evident from the Mark’s and Spencer’s case that there was a decline in
the success of the company because it did not have adequate resources in some instances
and in other was not making efficient use of the resources available to the company.
There are different types of resources including physical, human, financial and intangible
resources. Human resources are the employees of 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 fresh ideas were brought into the
company. This hardly sends a positive signal to the market or to the customer and depicts
how inefficient use of human resources can lead to a company’s decline. Another example of
bad human resource management was inadequate staff. To reduce costs, floor staff was kept
to a minimal. This led to a decrease in customer service which is also a defining feature of the
manner in which inadequate human resources can reflect poorly on any retail store and
further added to the company’s decline.
With regard to financial resources, the company chose to purchase and refurbish 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 find where the department store was in fact
lacking. Inadequate physical resources such as the initial lack of change-rooms meant
customer dissatisfaction, as there was no way to try on clothing.
Customers voiced discontent at the arrangement of the clothing commenting that it was
difficult to see the difference between the work and casual clothing. In this way inadequate
positioning of their physical resources also led to customer dissatisfaction. 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 profitability. Further support for the importance of
resource-based strategies in retailing firms comes from the theory itself. Retailing companies
tend to be social and complex, employing many people at many levels all of whom have to be
well presented and pleasant and skilled in different areas (the food department, the makeup
counter). Such an environment provides incentive for the emergence of distinctive and difficult
to imitate intangibles (such as patented brands); the very stuff of establishing unique and
sustainable competitive advantages.
Generic resource identification and analysis methods can be refined by capturing more
reliably the value of resources and competences lying outside traditional company boundaries
through improved management of such relationships. This framework is based on the
resource-based view of the strategic management emphasising the significance of firm
resources in achieving a favourable position in the market. For the framework, a distinction is
made between two types of fundamental resources: 1) strategic core resources and 2) critical
supporting resources The resource-based view of strategic management emphasises the
significance of a firm’s unique or distinctive resources as sources of competitive advantage.
The focus of strategic management research as well as strategic thinking has evolved and
changed over time. According to this view, a firm should develop specific 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 failed to take
advantage of theirs. What Marks and Spencer’s had firmly established was its brand name
and perception of quality due to it’s British supply base yet when sales began to decline and
profits began to fall, the focus was placed on competition and instead of enhancing their
image and promoting their brand as one of quality.
They began to immediately restructure, changing CEOs and decreasing the efficient use of
their intangible resources. This unique resource, which critically underpins competitive
advantage, was underestimated. Having knowledge of the Marks and Spencer’s brand and
the distinction of quality it brings, one would have thought that dealing with improving
customer satisfaction and marketing, and promoting their brand would have proved more
effective than total restructuring. Practically all firms base their business objectives on
satisfying their customer needs. This is a valuable initial approach for aligning products,
services and objectives with existing markets. It is based on the Opportunities and Threats
half of a SWOT analysis. However, most firms neglect the other half of the analysis. They do
not identify the sources of their Strengths and Weaknesses. For example, Marks and
Spencer, by hiding problems about inadequate physical resources and a decline in profit only
paved the pathway for more problems. Why do firms 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 few
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 firm is in and more to do with the
company itself. What are they good at and not so good at? What are the important differences
between one firm and its competitors? We believe every firm is unique. And it is on the
peculiarities that make a firm unique that sustainable competitive advantages can be based.
The processes help to understand a firm’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 firm’s strengths and weaknesses. Improving these
resources and managing them more effectively will reinforce 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 identifying which resources
among a firm’s resource collection are such factors that differentiate a firm and its product
from principal competitors. The critical resources are not necessary rare for a firm. The critical
supporting resources, therefore, should be approached by identifying common resources the
lack of which in a firm makes it difficult to achieve or maintain a favourable 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.
Staff 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 of
the competitive advantage are cost advantage and differentiation. Marks and Spencer’s did
not exploit their core competency; their differentiation in terms of their image of “quality” to
their best advantage. Surely if one is promoting a product of quality one is appealing to the
middle to upper class market and therefore the initial blame placed on competition is
questionable. Surely discount stores are not appealing to this market nor promoting quality
products. While fashion had changed to become more trendy and less classical making the
likes of GAP and Oasis more competitive, Marks and Spencer’s had they been quick enough
to recognise the change in the fashion 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.
If one were to look locally, when the fashion scene changed to be more ‘trendy’ and youthful,
Woolworths, which can be viewed as the South African Marks and Spencer’s, also
experienced similar problems. Having similar values with regard to conservative clothing and
with a focus on quality, Woolworth’s realized that they were not the store of choice in the
wakening of the more vibrant fashion trends. However, Woolworths instead of totally
restructuring to combat this, began to promote their quality. They recognized their core
competence of quality, and targeted their market with Woolworths – “quality for life” as well as
“the Woolworth’s difference.”
It is evident therefore that Marks and Spencer’s decline can be attributed to inadequate usage
of resources and well as a null exploitation of their core competency.
Strategic Leadership
Leadership is the process of influencing an organisation in its efforts towards achieving an
aim or goal and thus, a leader is someone who is in a position to have influence. (Johnson &
Scholes 2002:549) A strategic leader is defined 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 identified with the organisation and are also central to the
strategy of the organisation. In terms of change management, it is found that the
management of change in an organisation is directly linked to the role of a strategic leader.
The leader plays a vital role in this process. The case of Marks & Spencer revolves primarily
on the management of change and thus focusing on how leadership affected this process is
Marks & Spencer was founded by Michael Marks and then subsequently run by his son
Simon Marks. For many years thereafter the business was seen to be largely a family
organisation. In a family contracted business the strategy of an organisation is usually
associated more symbolically with an individual like the founder. Further, in effect, the
strategy and the individual become embedded in the history and culture of that organisation
(Johnson & Scholes 2002:534). This is precisely the case with Marks & Spencer. Many of the
older values and traditions, as well as the strategies set by Michael and Simon Marks were
followed by the subsequent leaders. In fact until the late 1970’s the board comprised only of
family members and the thing to note about Marks & Spencer leaders was that all the CEO’s
were generally lifetime employees or part of the founding members family. We begin our
analysis of strategic leadership by looking at each of the leaders in the Marks & Spencer
business and discuss their management and leadership styles.
Simon Marks had taken over the business from his father. He had adopted an aggressive
attitude with regards to his ideas for the organisation. He was also responsible for founding
many of the procedures and strategies of the organisation by studying what firms in the US
were doing and then bringing many of those ideas to the UK. A strong sense of personal
control was exhibited by Marks and he was also described as meticulous, paying a great deal
of attention to detail. A large part of his success may also have been attributed to his keen
understanding of his customer’s preferences and trends. However his management style was
essentially top down and followed the organisation’s hierarchical nature. Marks was reported
to have been a leader who shouted and bullied his employees. He was the type of leader who
could be classified as instrumental in that his focus was on designing systems and controlling
the organisation’s activities.
Marks was succeeded by Richard Greenbury. Greenbury had followed a similar management
style to Marks and his leadership exhibited centralised authority. Many of the managers were
actually scared of him. Instead of focusing on long -term strategy a large part of his focus,
unlike Marks, was on the day to day operations of the organisation. Greenbury may be
regarded as an autocratic leader when we look at the approaches he followed. When the
organisation was not doing well he was quick to blame the failure on the competitive
After much controversy Salsbury succeeded Greenbury in 1998. Salsbury had adopted a
management style and approach far different from his pre-decessors. Rather than focusing on
the business processes, he shifted the focus on to the customer. His aim was to adopt a
customer centric approach and to restore the image of the company. Essentially this involved,
moving the organisation away from its bureaucratic culture and stripping away further layers
of the hierarchy. His leadership allowed for effective change management in trying to
implement a reorganisation strategy. He could be described as a charismatic leader, in that
he had a vision for 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 enforcing change management. He adopted a forward
looking approach and looked towards the future instead of the past. He was a huge driver of
change and implemented many new ideas in the organisation. Unlike many of the other
leaders, Vandervelde may be classified as an outsider as he was previously employed as a
managing director at the French food retailer, Promodes. Often it is the case that an outsider
may be introduced into an organisation to effect change. The idea is that they will bring a
fresh perspective on the organisation, not bound by the constraints of the past or the
everyday routine of doing things which can prevent strategic change. The introduction of such
new management from outside the organisation increases the diversity of ideas, views and
assumptions, which can help break down the cultural barriers to change and may help
increase the experience of and capability of 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 formed on the basis of individual
experience.(Johnson & Scholes 2002:66) The strategy advance by a long established CEO
may strongly reflect or be informed by his organisation’s paradigm (like Greenbury).
Alternatively a strategy advance by a CEO new to an organisation may be based on a
successful strategy followed in a previous organisation (like Vandervelde)
Although strategy is decided in terms of processes and decisions, it is only through people
that it is implemented. The way in which they behave cannot be predicted or controlled.
Therefore, 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 fail if the
right atmosphere and culture are not present.
From the beginning, we see that a very strong, autocratic culture prevailed at Marks &
“There was a feeling of camaraderie and close-knit family atmosphere within the stores, and
this was compounded by employing staff whom the managers believed would ‘fit in’ and
become part of that family. The staff were also treated better and paid more than sales
assistants in other organisations. The family nature of this firm dominated top management
too: until the late 1970s the board was made up of family members only.”
We can see that Marks and Spencer had always focused on their culture. Although it was
autocratic and hierarchy-based, was also “strong” and “close-knit”. The “family” atmosphere
that prevailed would always be a winner with their customers since most of the people that
frequented their stores shared these same “family” values and beliefs.
Looking back at this case in hindsight, many attribute Marks & Spencer’s failure during the
90s to a problem of culture. The problem may not have been that they had the wrong culture
– indeed it had done wonders for them throughout the years – but rather the fact 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 of its own
operations – “Store managers were severely restricted in how they could respond to the local
needs of customers and could do little that departed from central discretion.”
Managers followed decisions sent down from the top, regardless of 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 frustrated.
During Marks & Spencer’s growth period there were few changes in its methods of operation
or to its strategies. They felt that they knew what was right for their customers and this would
help them succeed. This is why they refused to change the way they were doing things.
In the meantime, their competitors were being praised for reacting quickly to changes in the
environment – and this proved to be the source of their success. Rather then force their own
culture onto their customers, they instead focused on what the customer wanted, and adapted
their strategy to meet those needs.
Even if we examine the expansion of Marks & Spencer, we will see that the primary reason
for their failure to succeed was that they tried to force their tried-and-tested strategy on a
market that had their own unique culture – and refused to change. As a result, Marks &
Spencer was forced to halt expansion plans and eventually pulled out.
In April 1999, after 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 from its bureaucratic culture. One way Salsbury felt 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, if only to curb losses. This transparent move by Marks & Spencer was not enough
– they needed to determine what their customers wanted before 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 of a
large, successful French food retailer.
“This was the first time that anyone from outside the organisation had been appointed to the
position of chairman at M&S, and many commented that it showed an indication that M&S
had plans to develop as more of an international retailer.” Furthermore, in March 2000, they
introduced a new corporate image, complete with new colours and logos – a new
Albert Einstein once said, “The significant problems we face cannot be solved at the same
level of thinking we were at when we created them.” Could Marks & Spencer’s current upturn
be attributed to this ‘out of the box’ thinking? Most probably.
Strategic options are concerned with decisions about an organisation’s future and the way in
which it needs to respond to the many pressures and influences in its environment. This is
particularly of great importance in the case of Marks and Spencer. Strategic choices are
grouped into three parts: Corporate strategy, competitive strategy and directions or methods
of development. The consideration of future strategies has to be mindful of the realities of
translating strategy into action which, themselves, can be significant 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 successful in terms of profit and market share.
It maintained a set of core principles which it used.
These were:
· To offer customers a selective range of 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 efficient production techniques;
· To work with suppliers to ensure the highest standards of quality control;
· To provide friendly, helpful service and greater shopping comfort and convenience to
· To improve the efficiency of the business, by simplifying operating procedures;
· To foster good human relations with customers, suppliers and staff and in the communities
in which trade takes place.
M&S always had a very conformed formula 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 different cultures to the British. They believed that customers thought that they received
higher quality from British suppliers. The failure of M&S began with a strategy that should
never have been applied to overseas markets. They had implemented their tried and tested
formula in various overseas markets. This resulted in a drastic fall in the share price and their
profits. However, the CEO at the time, Sir Richard Greenbury, insisted that the profit 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 formula and ignored the changes in the marketplace.
Why did the internationalisation activity of Marks and Spencer fail? With hindsight, it might be
said that there are a number of inter-connecting reasons. Firstly, analysts commented that
Greenbury focused too much on the day-to-day operations of the organisation rather than
their long-term strategy which needed to be altered. Secondly, many of the elements that
made Marks and Spencer successful in the UK, did not apply in the global arena. The longsustained
buy-British policy, the peculiarities of the retail operation, the emphasis on a British
brand alone and the lack of clear retail positioning and design, all presented problems in the
global situation. Thirdly, despite the length of time in international activities, there was no
experience of decentralised control of 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 different to their own
operation. When the crisis hit at home, the reaction was to quickly to distance themselves
from this global operation. If it had really worked, then this international dimension could have
been a source of strength in times of crisis.
M&S also had a peculiar aversion to marketing. It appeared to have such a total belief in its
offering as to negate the need to have marketers within the organization. Advertising in
newspapers, radio and television was confined 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 of trust. If the lines were unsuccessful, 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 financial
services. His plans also involved establishing an organisation-wide marketing department to
break down the power of the traditional buying fiefdoms. Salsbury wanted the marketing
department to adopt a customer-focused 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 food 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 of overseas sourcing while severing links with UK suppliers. Despite the
implementation of all these strategies, there was still a decrease in profits.
In January 2000, Luc Vandevelde was appointed as the new CEO- this marked a great
change as it was the first time someone from outside of 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 of
the local market. However, even with the implementation of new strategies, profits still fell.
Managing Change
Change management is very important to an organisation’s survival in their respective
market. It is important for 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 of the market share as they possibly can. This means that the market is
constantly changing, with companies improving their services and their products. If 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 of a company that was
dominant in their market but failed to change with the “changing” times of their market. Now
they find themselves in a position where they are struggling to keep their customers satisfied
or even keep their customers.
Marks and Spencer’s problems started in the late 1990’s. There was a shift in the market’s
preferences. Marks and Spencer’s market was undergoing a change. Customers’ preferences
and expectations of Marks and Spencer were changing. This was normal for many
companies, all you have to do is analyse the market, find out what your customers want, what
the current trends are, and just adjust your strategy to accommodate for these changes. The
problem was that Marks and Spencer did not analyse their market, or find out what the
current trends were, or what their customers wanted, and this is one of the reasons they now
find themselves struggling to keep their customers.
There are a number of 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 of these sections is covered below.
Marks and Spencer had plenty of time to analyse their market’s trends, its not as if their
market suddenly changed and they were left behind. The table in the case study showed a
decline in their customer’s expectations of them. There was a steady decline from 1995 to
1999. This was enough time for Marks and Spencer to react to the changes in the market so
that they did not find themselves in a position where they were losing sales regularly to their
competitors. However this was exactly what happened to Marks and Spencer, they failed to
heed the warnings and were far too slow to make the necessary changes for them to stay
There were several factors that drove the need for companies like Marks and Spencer to
change its strategy. One of the main drivers for change in Marks and Spencer’s market was a
change in fashion, appearance was everything. People started dressing loosely to work (eg.
Wearing jeans, formal shirt and tie). This clashed with Marks and Spencer’s successful
formula. Marks and Spencer was founded on British values, they reflected the British culture
very and understood the British culture very well. Therefore 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 of goods attracted customers, this was the
success to their formula. However this formula worked well up until the 1990s.
Suddenly people became more flexible in terms of what products they wanted, as was
mentioned above fashion became a major market driver in the clothing industry. Marks and
Spencer failed 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 fashion trends (which Marks and Spencer were successful in) changed.
Marks and Spencer’s clothing ranged was out of date with the public, their competitors were
now offering more “stylish” clothing ranges and this took business away from Marks and
One of the reasons why Marks and Spencer failed to adapt to their changing market, was
because they felt that the market trends at the tie would pass and customers would go back
to the types of products Marks and Spencer offered. Again they were wrong, people now
started to dress a lot less formally to work; most of them wore clothing like jeans to work.
Marks and Spencer’s clothing range did not cater for this; they did not diversify their products.
This hurt Marks and Spencer because their customers now went elsewhere to get the type of
clothing they wanted.
There was not much that was preserved form the old Marks and Spencer. Since they failed to
embrace the changes that were needed to remain competitive, they found themselves in a
position where they had to revolutionise their image and strategy. The company’s image was
completely changed; from the downgrading of their famous St Michael brand to the
restructuring of 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 staffs clothing and the symbol of the marks and Spencer brand. The reason being is that
he felt that people confused 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.
Marks and Spencer did not diversify their products. They offered the same boring products
they used to offer before. Customers got tired of seeing the same type of clothing all the time,
so they eventually went to another store to get a more fresher, up-to-date style of clothing.
This was a clear indication that Marks and Spencer did not understand their customer or the
market anymore. They failed to realise that they needed to make changes to their clothing
range in order to remain competitive.
Marks and Spencer’s capability to recognise and enforce 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 left little room for
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 of 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 from the company.
Marks and Spencer had the resources available to them to make the necessary changes
needed for them to stay ahead of their competition. Firstly they were too slow to enforce
changes in the company’s strategy, they were forced 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 form their original successful formula. They did this because they believed that the
core of their original formula was still successful for the current market. All they had to do is
change one variable at a time and they would eventually find 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 find the right formula 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 formula was completely outdated and needed to
be completed scrapped and restarted.
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-fashioned; they felt that the current trend would pass and that their customers
would return to the normal products that they used to purchase from Marks and Spencer.
Marks and Spencer were also afraid to be the first ones to change their strategy; they felt that
if they changed their strategy in accordance with the markets current trends they would be
successful for a period of time. That period of time, they felt was the period of time the market
trends lasted. They felt if the market trends faded away, they could not go back to what they
were, and customers might view them differently. Marks and Spencer felt that it was too big a
risk for 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 future instead of concentrating on the past.
His detailed plan for restoring the fortunes of Marks and Spencer entailed mainly the objective
of moving the business closer to the customer. His strategy for doing this was by mainly
creating clear profit centres by allowing more effective information flows and therefore
responsiveness; creating a customer-facing organization which meant explicit focus on the
customer and giving him/her what they wanted; restoring overseas profitability; and building
financial services.
He also began to simplify the management structures and changed the way Marks and
Spencer bought goods by creating dedicated buying and selling teams. What Vandevelde did
first was that he focused on the heart of their business, i.e. their retail and financial services
operations in the UK in order to get back to the fundamental strengths that had made Marks &
Spencer great in the past. Together with this, he began to stop all activities which were noncore
or making a loss. He knew that they needed the right capital structure to make their
balance sheet more efficient and to generate greater value for their shareholders.
And this had to be accomplished rapidly as they were fighting to recover in a harsh,
competitive marketplace.
After in-dept research regarding their customer focus, the company began to identify the
needs of their customers as well as new initiatives. At the end of 2000 Marks and Spencer
also made plans to offer clothes at a discounted price of 30 per cent in factory outlet malls.
The malls were used to sell excess stock, something that its more aggressive competitors
had been doing for a number of years. In September 2000 Salsbury retired from Marks and
Spencer and by the end of March 2001, the company began to divest and close overseas
business as well as close direct catalogue business so that the company could focus 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
After the major changes to the company, there has been a significant turnaround in the
performance of Marks and Spencer. The restructuring was complete and the changes to our
capital structure have increased our potential earnings per share. Best of all, we’re seeing a
marked improvement in our performance. In the 12 months to 30 March 2002, sales from
continuing operations were up by 3.8% and corresponding Group operating profits by 30.8%.
During the 2001 calendar year, Marks & Spencer was the best performing 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 for our shareholders.
Marks and Spencer’s operating profit from continuing operations in 2002 was £629.1m
compared to 2001’s £480.9m, an increase of 30.8%. The company’s total operating profit had
also increased considerably from £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 of the
financial year, Marks and Spencer have achieved a much improved profit performance and a
much more efficient balance sheet.
Reflecting on the company’s swift turnaround, we see that they had changed their
organisational and financial 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 fundamental strengths of the past and making them relevant to the present.
Their successful performance was due to a powerful combination of people with past
experience of 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 of life. I have always believed, and
have often 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 for the excuse to come back. They definitely – even desperately – wanted us to
succeed (Luc Vandeveld).
The past years had proved that returning to fundamentals and reconnecting with the
company’s customers really did make a difference. The vicious circle of decline has now
become a virtuous circle of recovery.
Looking ahead, Marks and Spencer’s task is to keep building on their fundamental strengths,
of making aspirational quality accessible to all. If phase one of the plan focused their efforts
on the heart of their business, phase two must address the future growth of 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
for our future. 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)
(Source Published February 22, 2011)

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