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Profex Publishing Limited 2008
ii
Contents
Preface
iv
Strategic issues
4
12
16
19
24
29
33
10
37
11
International markets
42
12
44
47
14
50
15
52
16
International sourcing
58
17
Agile/responsive supply
61
18
64
67
20
Management succession
74
21
Change management
76
22
Corporate governance
80
23
83
24
Risk management
87
25
Financial aspects
91
26
Marketing
93
27
Other issues
95
Further reading
28
iii
96
Preface
CIPS has now published the pre-seen material for Novembers Case Study exam, featuring the
history of strategic management and leadership at UK retail icon Marks & Spencer plc. If you
have registered for the exam and have not managed to access the pre-seen material, you should
contact CIPS as a matter of urgency.
The exam is on 19th November 2008, so you need to work fast to maximise your chances of
success. This Case Study Analysis is designed to help.
You should use the text to assist your study of the pre-seen material, and to focus your
revision and preparation in the run-up to the exam.
You should take the text with you into the exam room. Its sections may provide a useful
structure for the solutions you will be required to produce, as well as offering a memoryjogger for the key issues and a way of navigating quickly to areas of the case study crossreferenced to issues in the text.
Throughout this text, we support statements made by referring to the relevant page and line of
the case. References take the following form.
You should take the time to number every fifth line on every page of the case study now, so you
can follow these references. We include all headings and short lines in our line numbering but
not footnotes (which can be referred to easily by page and number).
We also include cross-references to other pages and sections within this text, which appear as
follows:
[>> page 9.] This means refer to page 9 of this text. Similarly, [>>Section 15] means refer
to Section 15 of this text.
For further assistance, our Case Study Workbook offers detailed discussion on how to tackle
case study questions, fully-worked examples based on past CIPS exams, and detailed summary
notes on the main syllabus areas typically required in the exam. Note that CIPS advises you not
to over-burden yourself by taking too many reference texts into the exam room: we have tried
to include the most essential information in the space of a single A4 text.
Good luck in your examination!
Profex Publishing
October 2008
iv
SECTION 1
Introduction to the Case
THE STYLE OF THE CASE STUDY
It is difficult to know exactly how to get to grips with this case study because:
You are not told what role you will be asked to adopt in order to answer questions: we
assume you will be asked to evaluate or propose strategies on behalf of M&S.
It surveys the history of an organisation: you might have to evaluate strategic options or
decisions or leadership styles at any point in that history or to compare them.
It is difficult to see what new analysis could be required of you, given the amount of analysis
already presented in the case study and supplementary reading!
Fortunately, the case does raise some major issues which lend themselves to exam questions: we
will suggest the types of questions that might be possible as we proceed through this text.
THE STORY OF THE CASE
Marks & Spencer Group plc (M&S) is an iconic British retailer, one of the largest retailers in the
world and the largest clothing retailer in the UK.
It started in general merchandising (clothing and household goods) and then added fresh foods,
developing a focused department store format (4, line39ff). By 1950, all goods were sold under
the St Michael own-brand label, which became synonymous with British-made goods,
conservative taste, quality, customer service and fair value for money, available in the high
street of every large town (4, line 42ff). From the beginning, M&S bought merchandise direct
from UK manufacturers, and developed close, long-term partnership relations with major firsttier suppliers (4, line 5ff). Domestic and cautious international expansion led to steady year on
year growth for many decades.
Rise
The economic recession of the early 1990s slowed growth, raising fears that customers no longer
perceived the M&S quality premium as fair value for money (6, line 15). New chairman and
chief executive Richard Greenbury immediately put in place a recovery plan: reducing costs
and launching an outstanding value range (6, line 18ff). As sales recovered, he led the company
into increasingly ambitious strategies for domestic and international growth (7, line 1ff, 33ff),
encouraged by strong financial results: M&S profits peaked in the financial year 1997/1998. It
was a major retail success story (6, line 41).
In hindsight, however, the successful growth strategies were being undermined, and rendered
increasingly risky, by underlying problems: Greenburys increasing isolation and autocratic
style as leader (7, line 25; 8, line 5ff), mounting pressures and over-commitments (line 9, 13ff), an
outmoded fashion brand (14, line 20), excessive bureaucracy (13, line 10), a rigid supply chain (9,
line 25ff), emerging board room tensions (10, line 10), eroding customer loyalty (10, line 14) and a
push for untenably high short-term profit margins (10, line 3).
And fall
Distracted, overconfident and overstretched, M&S was unprepared for a dramatic down-turn in
sales which, combined with massively overbought stock and large capital investment, saw
profits and share price plummet in 1999 (10, line 11ff). Sir Richard Greenbury resigned.
The following years saw M&S struggle to respond to the crisis. The new chief executive Peter
Salsbury searched for fresh strategic direction, using multiple management consultancies.
Despite cost-cutting exercises, which traumatised supply chain relations (10, line 30ff), sales,
profits and share price continued to fall (11, line 2). In 2002, Salsbury was replaced by Roger
Holmes (11, line 1-5), who brought some direction (11, line 5-11). However, in 2004, M&S
became the target of a takeover bid by the owner of BHS, (11, line 16): panic set in.
And rise again
In May 2004, Stuart Rose became chief executive (12, line 8), and, like Greenbury before him,
took responsibility for recovery. Rose was able to fight off the takeover bid by securing
stakeholder support (12, line 23ff). He then set about introducing a turnaround strategy. A
focus phase (13, line 16) reduced stock inertia (13, line 21ff) and sharpened the M&S brand (13,
line 35). A subsequent drive and broaden (growth) phase included new marketing initiatives
(15, lines 6, 20) and a major new CSR focus (15, line 36ff). By 2006-7, sales, profits and share price
were soaring (15, line 31ff). M&S was a retail success story all over again. (3,line 39ff).
In January 2008, however, Rose sought to dampen further growth expectations, claiming that
the market was slowing down and retailers were due for a tough year: M&Ss share price
plunged to 400 pence from a peak of 800p in the summer of 2007. (Beyond the case study time
period, Roses predictions have proved correct, with the US-led credit crunch increasingly
eroding consumer confidence and taking global share markets into meltdown in
September/October 2008.)
In March 2008, a proposal that Rose become both chairman and chief executive raised concern
about too much executive power being centred in one individual: has M &S learned anything
from the years leading up to the 1999 crisis? (16, line 27ff)
ISSUES RAISED BY THE CASE
In no particular order, here are some of the major issues that the case seems to give rise to, any
of which could be the subject of an exam question.
The different strategic directions and measures pursued by different leaders in M&Ss
history: the rationale for their strategic priorities; evaluation of their effectiveness; the
underlying factors in their strategic failures and successes; and the impact of changes of
leader on overall strategic direction and unity of purpose.
Critical incident analysis: how underlying problems during the golden years contributed
to the sudden financial crisis of 1999; the factors which caused these problems to remain
ignored or unaddressed; what M&S learned (or should have learned) from the crisis; how
effectively the crisis was managed; and whether M&S has put in place measures to ensure
that it does not happen again.
The benefits, risks and challenges of the various recovery and growth strategies pursued by
M&S at various periods, and the effectiveness with which they were planned and
implemented; international market entry (market globalisation); growth by acquisition
(often followed some years later by divestment); M&S strategies for market penetration,
product development, market development and diversification; what strategic directions
M&S might now pursue, given the renewed threat of global recession; and how it can avoid
repeating the mistakes of previous recession-recovery planning (eg under Greenbury).
The tradition of positive, partnership and co-destiny supplier relationships at M&S; the
problems it presents in regard to dependency and power, the risk and ethics of supplier
exploitation and termination, and potential rigidity in the face of pressures for change; the
way in which M&S manages suppliers; and how positive supplier relationships currently
are (from the point of view of the supplier as well as M&S).
Emerging competitive pressures on M&Ss supply chain and SCM approach to become
more agile/responsive in dynamic markets such as fashion and food, and to become
increasingly globalised (against M &Ss buy British tradition and brand) in order to take
advantage of low-cost offshore supply; the difficulties of achieving this with a
comparatively rigid supply chain and SCM approach; reasons for the rigidity and how it
can be changed.
The nature of retail supply chains: the strategic importance of the supply chain; the
demands of retail distribution and logistics planning (particularly in fresh food retail); the
potential for technology leverage in areas such as barcoding, RFID, EPOS and EDI; the
potential for backward integration to control sources of supply; the organisation and
marketing orientation of buying roles in a retail environment; and how effectively M&S is
meeting all of these challenges.
The recurring pressures for cost reduction to maintain profit margins; how (and how
effectively) cost reduction is achieved at M&S under various leaders; the impact of
economies of scale on supply chain agility; the impact of rationalisation on service levels;
the risks and challenges of low-cost sourcing; the impact of squeezing supplier margins on
supplier relationships and supply risk; and other methods M&S might consider for securing
cost savings.
The recurring issue of overstocking, and the underlying problems of demand forecasting,
order cycles, lead times and logistics management; the impact of overstocking on M&S
financial results; how (and how effectively) M&S has attempted to solve or mitigate the
problem in the past; and what further action it may need to take.
The leadership culture at M&S and the styles of strategic and interpersonal leadership and
influence exercised by the major figures highlighted by the case (eg Sir Richard Greenbury,
Peter Salsbury, Sir Stuart Rose and Kate Bostock): how, and how effectively, they motivate
people and secure stakeholder buy-in for strategic change; the benefits and drawbacks of
strong centralised/personalised leadership; and how M&S (as an organisation/brand)
exercises influence in relation to suppliers and other stakeholders.
Corporate governance: the arguments for and against the roles of chairman and chief
executive being separated or held by the same individual; the regulatory framework
(Cadbury report) and compliance issues; the risks of executive power being held by one
individual, as illustrated by Sir Richard Greenbury; the extent to which the same risks may
apply in the case of Sir Stuart Rose; and what M&S should do in the current case.
Corporate social responsibility: the content, importance and impact of Plan A; methods of
measuring CSR attainment; whether CSR is genuinely important or just marketing, and its
justification for M&S as a major strategic thrust; how stakeholders can be supported in
buying in to Plan A; and ethical concerns arising from M&S policies and practices.
Risk management: the apparent appetite for risk under different leaders; what risks M&S
faces on an ongoing and current basis; the extent to which some of M&Ss strategies appear
to have been unacceptably risky in hindsight, and what concerns this may raise about
companys risk management processes; and what M&S can do to ensure that risks are better
identified and managed in future.
The financial performance and stability of M&S at various snapshot points in its history;
the implications of the financial data given in the case (including overinvestment and
vulnerability to takeover); and potential problems of focusing solely on financial indicators
(including pressure for short-termism, and positive financial results hiding underlying
business problems).
A number of issues less prominently featured in the case (although likely to be encountered
in your background reading), such as: operations management (in areas such as quality
management, and store location, network expansion and development); human resource
management (in areas such as staff involvement, training and development and downsizing
management); and conflict and negotiation handling (in relation to issues such as board
tensions and succession battles, the way various leaders confront or fail to confront
divergent views, and the way in which suppliers are encouraged or pressured to raise
their discounts).
We will unpack all these issues in more detail in the relevant sections of this text.
4
SECTION 2
Tackling the Case Study Exam
Before digging more deeply into the facts of the case, it is worth making some important points
about how you should tackle the exam. The case study is a very different type of assessment
from the normal three-hour exam, and specialised exam techniques can be used to help you do
yourself justice.
BEFORE THE EXAM
Prepare a ring binder to hold your notes (including this analysis text). Include dividers to
mark off the main sections. Your objective should be to make your own notes sufficiently
detailed to carry you through with only minimal use of textbooks (see next point).
Take in any textbooks you think appropriate, but expect to use them only as a last resort.
If you own a copy of the Profex Workbook for this subject, this should certainly go with
you into the exam room, because it contains handy revision notes on the main syllabus
areas that are examinable.
You are not provided with a new copy of the case in the exam room, so you must
remember to take in the copy you already have.
Read all four questions carefully to ensure you understand what is required.
Begin on the question where you feel most confident of the material.
Attempt all four questions. You will greatly enhance your chances of passing by doing so.
Be very careful about time management. Spend only the allotted time on any one question
and then move on: do not risk leaving yourself short of time for your final question.
Under each heading, write your ideas clearly, leaving a line or two after each substantial
point. This lays out your material in a professional manner. (The use of paragraphs also
forces the marker to recognise that you have finished a point and deserve a mark for it!)
Include carefully drawn and labelled diagrams where appropriate (eg when using
strategic analysis tools) but only where they add something to the clarity of your answer.
Do not use any of the text in this or any other book word for word or point for point.
The exam rubric states clearly that copying or plagiarism will not be tolerated and could
result in no marks being awarded and in particular that prepared notes may not be
included as part of the answer.
Underline any authorities you cite, such as a statute or legal case, or the title of a reference
work. If you quote from a published text, you must acknowledge your source.
Avoid waffle: keep your answers short and punchy. The examiner is more concerned with
quality than quantity. Avoid writing a general essay on the topic suggested by the
question: this doesnt get you marks. You need to apply relevant theoretical concepts and
techniques to the context and details of the case study, in order to develop whatever
analyses, decisions or recommendations are required by the question.
Be careful when using fashionable jargon and models. In this case study, unusually,
there are no acronyms (RFID, EDI, ESI, JIT): dont be tempted to squeeze them into your
answer unless justified! Dont rush to put labels on what you see in the case study: M&S
attempts to increase the responsiveness of its supply chain but is this really agile
supply? Be aware that there is plenty of jargon in strategy as well as in supply chain
management: define your use of terms such as focus.
Question everything stated in the case, other than simple, objective facts. You arent
expected to take M&Ss public statements at face value, for example: the case study points
out that key stakeholders have opposing views on M&Ss leadership, supplier
management approaches and corporate governance and these divergent perspectives
could well be the basis of an exam question. Note where there are conflicting views, or
where the evidence is two-sided on issues.
Everything you state in the exam must be supported by evidence given in the case.
Distinguish between what is stated in the case and what you may be tempted to assume
particularly where (as we highlight in this text) the implications of the case material are
unclear.
SECTION 3
An Overview of the Business
MARKS & SPENCER (M&S)
(www.corporate.marksandspencer.com)
Marks & Spencer Group plc (M&S) is an iconic British retailer, one of the largest retailers in the
world and the largest clothing retailer in the UK. The following are the key things we find out
about the company and its general strategic direction from the case study plus some
supplementary research of our own.
Standing
M&S is a national institution and one of the worlds most admired companies. (3, line 12). It
has been voted Britains Most Admired Company and Company of the Year (3 line 39), as well
as being a textbook case for enlightened human resource management. It was the first British
retailer to make a pre-tax profit of over 1 billion, and in the 1990s was the 2nd largest retailer in
the world (13, line 18): currently 43rd (Wikipedia). This gives it considerable influence within the
UK retail sector (3, line 14).
Brand
Its origins in the early 1900s established the organisations development as a department store
focusing on clothing and household (general merchandise) items, in 1931 supplemented by
fresh foods: by 1960 all sold under the St Michael brand.
The original brand became identified with British-made goods (5, line 12), understated quality,
good customer service, fair value for money and high-street presence (4 line 42, 5, line 24). The
brand, product range and merchandising techniques eventually began to be perceived as
outmoded: since 2004, product lines have been modernised (14, line 15ff), stores are being
revamped, and the brand sharpened under a unifying Your M&S brand in 2005 (13, line 33ff).
Product/service range
M&Ss range of merchandise, products and services (www.marksandspencer) includes:
Womenswear, lingerie, accessories, toiletries and cosmetics. Womens clothes are currently
marketed under brand names including Autograph, Classic Collection and fashion brand
Per Una (a joint venture with Next founder George Davies), and niche brands such as Plus
(large size), Petite (small size) and Maternity which may only be available from larger
stores or online.
Menswear: currently marketed under brand names including Blue Harbour, Autograph,
Collezione and Stormwear, plus niche brand Big & Tall (only available online or via in-store
ordering)
Other general merchandise: including childrenswear, schoolwear, toys and games, home and
furniture and (launched in 2006) technology products (home entertainment, personal
electronics, computers and computer services, currently offered online and at a limited
number of stores).
Food and wine: a wide range of fresh and pre-packaged food products from fresh produce to
ready-prepared recipe dishes (7, line 31), with a niche market driven by high quality,
chilled specialty and convenience items (Bower & Matthews, p 10).
Financial services: under the brand M&S Money. M&S Financial Services was founded in
1985, initially to manage the M&S charge card (then the only credit card accepted in M&S
stores). It was sold to HSBC in 2004 and now operates as a 50: 50 profit sharing partnership,
offering: M&S credit card and charge card, insurance, travel money, savings and investment
products and car/personal loans.
Simply Food (launched 2002: 11, line 7) stores sell predominantly food, with a small selection
of general merchandise. Some of these stores are franchises run, for example, by Moto at its
motorway service stations and by BP in petrol station forecourts.
Home Stores (launched 2007) sell predominantly home furnishings, currently in a few select
locations.
Outlet Stores (launched 2000) offer overstock and end-of-season items at substantial
discounts on high-street retail prices.
In addition, M&S Direct offers direct sales via e-commerce (marksandspencer.com: 15, line 20),
home and e-catalogue sales, in-store ordering services, food ordering services, and flower and
wine delivery (M&S annual report 2008).
Supply chain management
M&S pioneered a policy of buying merchandise direct from manufacturers rather than using
wholesalers (Bower & Matthews, p 5), allowing it to simplify and specify its own range of
products. It developed a tradition of long-term, mutually-dependent partnership relationships
(5, line 4ff) with a core group of large UK-based first-tier suppliers, highly integrated with M&S
buying and product development (Bower & Matthews, p 11).
The culture of co-destiny (5, line 34) and domestic supply was initially a source of competitive
advantage (5, line 7, 37), but eventually caused problems with uncompetitive cost and rigidity
(9, line 25ff). Since 2000, there has been a more adversarial-co-operative approach to supplier
relations (15, line 13), and efforts to increase supply chain responsiveness and global supply (9,
line 36; 14, line 18).
International markets
M&S has pursued the development of international markets, starting cautiously (5, line 2) in
Europe, North America and Asia and accelerating through the 1990s (8, line 7ff). Despite
subsequent financial and branding difficulties, necessitating rationalisation and divestment (11,
line 6), this strategy continues. International business now accounts for 7.9% of group turnover
and has grown to 278 stores in 39 territories (mostly operated on a franchise basis): during
2007/8 a number of new ventures were announced in India and central and eastern Europe
(M&S How We Do Business Report 2008) and M&Ss first mainland China store opened in
October 2008 (Times Online).
A buyer of finished products for sale, direct from first-tier manufacturers. This raises a
number of sourcing and supply chain management issues, including: the nature of retail
buying (which adds a marketing orientation to the buying task); the challenge of (belatedly)
developing agile/responsive supply chains to cope with dynamic fashion and food markets;
the challenges of (belatedly) developing global sourcing to take advantage of low-cost
supply; and the corresponding strain on long-established supplier relations.
A retailer of a wide range of consumer goods. This raises a number of marketing and
distribution issues, including: the need to refresh and stretch the core brand without losing
its identity and focus; the need for market-sensitive merchandise portfolio and store location
planning; the need to maintain availability while minimising inventory; and the potential
for direct distribution (eg through catalogues and e-commerce).
From 2004, under Stuart Rose, the culture appears to have shifted to one of renewed
commitment to modernising the brand (13, line 6; 13, line 42); a willingness to take on new blood
and new ideas (13, line 33; 14, line 2, 12); a new commitment to moving with the times (13, line
36ff; 14, line 20; 15, line 20); and a major new-found focus on CSR and sustainability (15, line 39).
Leadership
Leadership issues and styles are a major feature of this case, and will be explored in detail in
Section 19. The strategic direction of the firm is clearly divided into eras of leadership, and
there are further issues to do with management succession planning (or lack thereof) and
corporate governance (in particular, the recommended separation of roles between the chief
executive and chairman of a firm).
It may therefore be helpful to view a clear time-line of the M&S chief executive/chairman
partnerships and tenures relevant to the case study (Table 2, page 19). The leaders mentioned in
the case study in a given period are italicised:
1991-1998
1998-1999
1999-2000
2000-2002
2002-2004
2004-2006
2006-2008
2008 -
Chairman
Sir Richard Greenbury
Sir Richard Greenbury (1991-1999)
Brian Baldock (1999-2000)
Luc Vandevelde
Luc Vandevelde (2002-2004)
Paul Myners (2004-2006)
Sir Terence Burns (2006 2008)
Sir Stuart Rose (2008 - ?)
Chief executive
Sir Richard Greenbury (1991 1998)
Peter Salsbury
Peter Salsbury
Peter Salsbury (1998 2002)
Roger Holmes (2002-2004)
Stuart Rose
Stuart Rose
Sir Stuart Rose (2008 - ?)
11
SECTION 4
Strategic Planning: An Overview
A systematic process of strategic planning includes the following steps.
Strategic analysis: you may need to select and use a range of tools to analyse the internal
and external situation and challenges of M&S, and identify potential solutions either
currently, or at different stages of the companys development.
Strategic choice: you may need to evaluate a range of strategic options for M&S and
recommend that which is most suitable (supportive of corporate objectives), feasible
(capable of implementation given available resources and constraints) and acceptable (to
key stakeholders) either currently, or at different stages of the companys development:
in other words, what strategies did it adopt, and were these the right ones?
Strategy implementation: you may need to present a coherent plan for implementation of
a recommended strategy, including financial and non-financial resource implications or,
perhaps more likely, comment on the effectiveness with which a chosen strategy was
implemented in practice by M&S.
We assume that M&S will be the focus of any strategic planning question, as it is the only player
about whom we have sufficient information to use many of the tools of analysis. However, it
might be possible to set a more specific (and less analytical) strategy question in regard to other
players: eg evaluating relationship strategies for M&Ss suppliers.
STRATEGIC ANALYSIS
The case study exam often requires candidates to use appropriate tools of strategic analysis. In
the following sections, we attempt to do this using the main tools that appear to be useful in the
circumstances of this case. As a general guide:
If the question specifies use of a particular tool, use the one specified!
If it asks you more generally to use appropriate tools, then use as many (relevant ones) as
you can without overrunning the time limit.
If you are asked to justify the use of certain tools, the points made in the following
sections should enable you to do so.
Our analyses in the following sections are not the only possible ones that could be made. For
example, though we have tried to analyse a good range of points in our SWOT analyses for
M&S, you may well be able to think of some that we have omitted. Equally, you may not agree
with all our classifications of strengths/weaknesses. The analyses we provide are meant to help
you to identify and think clearly about issues: they cannot be a definitive answer.
STRATEGIC CHOICE
Bear in mind that this kind of analysis is not done for its own sake: it is intended to help in
identifying and justifying options, or evaluating the companys choice of option. If you are
asked to evaluate or recommend strategic options, a useful framework for evaluating options
(Johnson & Scholes) is:
12
Suitability: Does the strategy fit the organisations situation and objectives? Does it solve
identified problems or exploit identified opportunities? Does it fit the organisations stated
cultural values and traditions (particularly strong in the case of M&S)?
Feasibility: Practical (can we make this happen and sustain it?); Economic (do we have
the financial resources? will the returns be worth the risks?); Social (will it be accepted or
resisted?); and/or Technical (do we have the equipment, systems and processes?)
The exam rubric says that you will be expected to make sound decisions: get into the habit of
evaluating any options you identify in the case or might propose in the exam
THE PROCESS OF STRATEGY FORMULATION
We arent explicitly told much about M&Ss approach to strategy formulation, but it is worth
noting the following.
M&S appears to have a strong set of guiding values, expressed in various ways. Values
flow down to employees, supply chain partners and other stakeholders, through
mechanisms such as informal ethos/tradition (4, line 29); formal programmes such as Plan A
(15, line 39); interpersonal values selling by leaders (eg 6, line 40; 12, line 17); and published
statements and guidelines (How We Do Business Report, Code of Ethics, Quality, Value,
Service, Innovation, Trust motto) etc. Values shape strategy: eg quality/value/service
proposition (6, lines 17, 23), human relations and marketing based on trust (5, line 18; 13, line
35), a new focus on CSR leadership (16, line 3), the desire to maintain or recover M&Ss
largest/most-respected profile (7, line 33; 12, line 29).
The innovation value is a noticeable change from the previous emphasis on tradition and
predictability, and the tendency to lag behind competitors (9, line 29; 15, line 22): you might
like to think where this might lead strategically.
It is unclear from the case to what extent M &S carries out systematic strategic planning
prior to the major shifts in strategic direction outlined in the case: the emphasis seems to be
on the chief executive or chairmans vision and decisions (eg 7, line 39; 13, line 15ff).
According to Bower & Matthews, under Greenburys leadership, the board met for a major
strategic conference every two years. Extensive analysis was performed and detailed study
papers were prepared by members prior to these conferences. The June 1994 conference was
to focus on international issues.
This seems a relatively flexible approach to strategic planning, which raises the question:
why were strategic decisions, in hindsight, risky, apparently ill-thought through, or poorly
applied? The case appears to attribute some blame to strong, unchecked leadership (7, line 9,
26), implementation problems (9, line 41; 10, line 10), a failure of risk management (10, line
12) and, under Peter Salsbury, excessive use of management consultants (10, line 25; 13, line
12). You may identify other problems.
13
There appears to have been some failure of strategic alignment and the cascade of strategic
planning: Rose found a lack of strategic cohesion and unity of direction at the divisional
level (13, line 3) and Kate Bostock found a total absence of planning at the product
management level, even for M&Ss core product (14, line 9).
In its early history, M&S appears to have had a primarily resource-based approach to
strategy, focusing on the companys existing core competencies and brand strengths and
identifying business structures and approaches to protect and exploit these (4, line 42). M&S
appears to have lost sight of this under Greenbury and Salsbury, adopting a more
positioning-based approach, focusing on environmental opportunities for growth (eg
globalisation, acquisition, diversification), and adapting business structures and approaches
to exploit these (eg 8, line 12). The risks of this approach are highlighted by the case: M&Ss
finding that it lacks core capabilities for new strategies (9, line 40), constant restructuring (11,
line 9), too many product lines (13, line 9) and too many unrelated initiatives (13, line 13).
Resource-based strategy is regarded as the best source of long-term competitive advantage
in volatile markets, because it focuses on hard-to-imitate and flexible competencies: this
appears to be the renewed view under Rose, with a recognised need for M&S to return to
the business it knew best (13, line 14): to focus before driving and broadening.
It is arguable whether a business like M&S should rely on long-term formal planning, given
the complexity and dynamism of its market. Of the alternative approaches to strategy
formation (Mintzberg), the case illustrates:
o
Imposed strategy: the case spotlights M&S in periods of crisis (1991 recession, 1999
crash, 2002-2004 transition) when recovery or turnaround or crisis management
strategies have to be put in place (a) in a hurry and (b) with strong central leadership (6,
line 18; 12, line 14). Strategies such as cost cutting and price/value positioning were
imposed by recession or financial pressure (6, line 15 ff; 10, line 30); growth strategies
were imposed by market expectations (9, line 12).
14
The introduction of Plan A makes an interesting mini case study in strategy formation. A
charismatic strategic leader, carrying out informal environmental scanning, chances upon
an interesting idea (15, line 45). He gains buy-in from a guiding coalition (16, line 1).
Research, analysis and thought was, presumably, then put into devising and launching a
substantial five-year strategic plan (16, line 4: note the atypically long time horizon,
appropriate to forward-looking and transformative strategic change). Resources were
allocated to the plan (16, line 3) and all stakeholders informed and involved (eg M&S How
We Do Business report)
Appraise the rationale, risk and effectiveness or otherwise of particular strategies (eg
globalisation, acquisition, supply chain agility) or general strategic direction (eg focus,
differentiation or expansion).
Identify and discuss the strategies and general strategic direction pursued by M&S under
different leaders.
Discuss the apparent risk appetite and vulnerability of M&S in pursuing some of its
strategies: identify particularly risky strategies, explain why they were pursued, and
suggest how risk could have been better managed.
Appraise M&Ss ability to learn from its strategic mistakes: how can it ensure that it does
not repeat strategies that have previously been unsuccessful or led to problems?
Analyse the critical incident of M&Ss sales, profit and share-price collapse in 1999,
exposing it to the threat of takeover. What were the immediate and underlying causes of
this fall? How was it turned round? In your opinion, were the underlying causes
addressed? What can M&S do to ensure that such a crisis will not happen again?
15
SECTION 5
External Environmental Analysis: PESTLE
PESTLE analysis is a classification of external environmental factors into political, economic,
socio-cultural, technological, legal and ecological factors. (This is an expansion of the PEST
model which covers political/legal, economic, socio-cultural and technological factors.) The
objective is to identify all the external factors that may have an impact on the organisation. In
some cases there will be overlaps and ambiguities: this is not important, as the categories are
simply there to help you focus on the full range of possibilities.
PESTLE analysis may be an appropriate tool for this case because:
It provides a framework for identifying a wide range of environmental factors (eg a May
2007 Case Study question asked you to analyse the key factors affecting supply).
It utilises the various data in the case which directly address environmental issues
It forms a basis for the analysis of opportunities and threats, as part of a corporate
appraisal or SWOT analysis for M&S.
Our list of the kind of PESTLE factors which may be relevant to M&S is as follows. We have
included factors highlighted by M&Ss history in the case. You may need to carry out a PESTLE
analysis for a particular era (eg 1991 when Greenbury took over, or 2004 when Rose took over):
well leave it to you to select the points that are relevant.
Political factors
Government policy: eg fear of impact of Labour government, in the 1970s, was Lord Sieffs
rationale for M&Ss first entry into overseas markets (Bower & Matthews, page 5); support
for local sourcing
Political factors in the choice of Greenbury to chair the executive remuneration committee
with a knock-on effect on M&S leadership effectiveness (8, line 24ff, 44)
International trade policy (eg liberalisation of trade in China, EU incentives to trade with
Eastern European members, setting up opportunities for new outlets)
International political upheavals, local wars, or risk of unrest (eg experienced by M&Ss
major textile supplier Courtaulds when shifting production overseas: Christopher & Peck, p
22)
Economic factors
Threat of national, global or sector recession (6, line 15; 3, line 17) eroding consumer
confidence and spending, and eroding customer willingness to pay quality premiums.
Currency fluctuations: eg the strengthening of the pound in 1999, increasing the costs of
M&S merchandise in overseas markets (forcing M&S to position itself much further upmarket overseas than its middle-market positioning in the UK Christopher & Peck, p 11)
16
and not offering lower costs of imports (as for competitors) because of M&Ss
predominantly UK supply base.
The collapse of Asian markets and currencies in 1997 (9, line 15), damageing markets
The EU imposition of import textile/clothing import quotas (eg from China and Sri-Lanka
in 2005), affecting M&S and the suppliers it encouraged to move production off-shore.
The eroding potential for low-cost offshore production eg in China: Supply Management
(13 December 2007) reported forecasts that the over-supply of cheap Chinese labour will
not last much beyond 2010: annual wage increases of 15% are expected to erode its cost
advantage over other countries. The introduction of new labour laws at the beginning of
2008 (outlawing poor employment practices) is also likely to increase costs.
Inflation pushing up buying costs; attempts to protect or enlarge profit margins squeeze
either supplier margins or customer value proposition.
Potential for increased competition (eg through global supply chains 9, line 3 or online
sales 15, line 22) and new market entrants eg international niche retailers (US Gap or
Spanish high-fashion chain Zara).
Socio-cultural factors
Demographic and lifestyle factors shaping the needs of M&Ss core market segments: eg
fashion trends, body size/shape trends, maternity niches
Demographic trends in consumer retailing: boutique style department store displays; outof-town retail locations (7, line 43); online retail (15, line 22)
Shortening product lifecycles for fashion clothing (rising customer expectations of range
turn-round: 14, line 20): pressure for supply chain agility, short time-to-market, efficient
logistics and adaptable manufacturing capability by suppliers
Cultural trends: clothing (eg exposure to catwalk fashion: 14, line 29) and food
tastes/eating habits (eg pre-packaged convenience foods and global cuisine: 7, line 32);
retail outlet design
Increasing consumer empowerment and fickleness: erosion of brand loyalty and barriers
to switching eg due to internet exposure to global brands, price comparisons (Lewis &
Bridger)
Increased consumer and pressure group interest in issues of ethical sourcing and
corporate social responsibility, creating demand/support for Plan A (16, line 20, 22).
Socio-cultural convergence opening global markets (8, line 14) but at the same time,
differences creating difficulties for cross-cultural marketing and sourcing (eg the failure of
M&S operations in Canada due to failure of cultural cross-over: perception of the brand as
stodgy and only for expats: Wikipedia)
17
Technological factors
Comparatively high use of technology and information sharing within the retail sector (eg
EDI, EPOS, barcoding/RFID, joint inventory and planning systems with suppliers)
ICT and transport technologies (eg speed and refrigeration in food supply chains) making
global marketing and sourcing possible (8, line 14)
Legal factors
Employment law (including equal opportunities, employment protection and health &
safety) in countries of operation and differences in legal regimes (eg on health and
safety, design and patent protection) in overseas markets.
Company law and corporate governance regulation (eg the Stock Exchange Combined
Code providing for the separation of the role of chairman and chief executive: a key
compliance issue for M&S in 1992 and 2008: 7, line 12ff; 16, line 41)
Ecological/environmental factors
Emerging hot environmental issues eg climate change (15, line 45) and carbon footprints
Climate, weather, disease (eg foot and mouth disease or BSE affecting meat products in
Britain) affecting food supply chains
18
SECTION 6
Stakeholder and Competition Analysis
STAKEHOLDER ANALYSIS
Stakeholders are individuals and groups who have an interest or stake in the strategies or
activities of an organisation. Stakeholder analysis is used to identify potential conflicts and/or
synergies of interest with potentially influential stakeholders, in order to develop strategies for
stakeholder communication, marketing, issues and relationship management.
A previous Case Study exam has asked you to analyse the interests of stakeholders (in that case,
in food safety): something similar might be asked here, given the high influence/impact of
M&Ss actions on its sector and supply network.
Stakeholder mapping
Mendelows Power/Interest Matrix is often used to position identified stakeholder groups
according to the extent of their interest and the extent of their potential influence.
You may identify different stakeholder groups, or position them differently, but our analysis for
M&S is as follows.
M&Ss stakeholder map
Level of interest
Low
Low
Power/influence
High
Quadrant A
Society/community
Industry bodies
Quadrant C
Consumers
Market analysts/media
19
High
Quadrant B
Non-core suppliers
Employees
Quadrant D
Directors/managers
Shareholders
Core suppliers
M&S directors and managers have high power, because of their legitimate authority for
strategic decision-making and their interpersonal influence as leaders and champions of
initiatives. They have high interest because of their responsibility for M&Ss current and
future performance. The company is therefore vulnerable to issues arising from: conflict
among them (9, line 45; 10, line 10); their failure to take responsibility or confront risk (7, line
6); loss of confidence (11, line 22).
Stuart Rose makes it a first priority to unite and motivate this group (12, line 14ff), and to
involve them in strategic change (eg 16, line 1).
Shareholders have high power, because of their legitimate authority to vote at AGMs, their
resource power to sell their shares (potentially damageing the companys marketing
standing 3, line 23), and their rights under corporate governance provisions. Shareholders
may vary in their interest according to size of shareholding: large institutional investors
may have high interest in M&Ss performance, which affects the value of their shares and
dividends. It may also vary as issues arise: at the moment, it is likely to be high for those
with an opinion on the corporate governance issue, or managements plans to weather
recession.
Stuart Rose made it a priority to reassure and manage the expectations of this group (12, line
31; 14, line 38), although his proposed tenure as chief executive and chairman may create a
further issue. (Beyond the scope of the case, at the July 2008 AGM, 22% of M&S equity
abstained or voted against the move, and a major institutional investor announced its
intention to file a shareholder resolution at the 2009 meeting, calling for the appointment of
an independent chair, if the company had not split the roles by then: Times Online.) You
might like to think about how this issue should be (or should have been) handled to
minimise conflict.
Suppliers vary in their power and interest, depending on size, status and circumstances:
core long-term suppliers have a high degree of power through M&Ss investment in asset
specificity, but many will have low power due to their dependence on M &S for a high
proportion of their turnover. All suppliers will have a high specific interest in M&Ss supply
chain, cost reduction and logistics strategies.
M&S has traditionally taken care to manage its core suppliers, through a high degree of
integration and involvement (5, line 6ff, 41), but the push to increase or shore up profitability
has created conflict requiring issues and occasionally crisis management. Short notice,
imposed decisions eg on price cuts (especially under Peter Salsbury) resulted in relationship
breakdown and reputational damage. Stuart Rose gave priority attention to this stakeholder
group, making an effort to persuade and negotiate constructively (12, line 26ff), although in
the short-term conflict between supplier and customer/shareholder interests, suppliers
came second (15, line 13).
Consumers may have little power individually, but high power collectively (eg in consumer
organisations or by buying power) to affect policy and performance: they are increasingly
demanding and ready to switch brands (Lewis & Bridger). Although they have little direct
interest, M&S is everybodys business as a British retail icon (13, line 35). M&S itself place a
high priority on customer retention and involvement (eg via Plan A customer pledges).
Stuart Rose made it a priority to re-engage with this stakeholder group via brand reengagement marketing (13, line 34, 42; 15, line 5ff).
20
Market analysts and media have high power by virtue of their influence on market
confidence and M&Ss share price. They may have low specific interest in M&S (although it
will always arouse attention by virtue of its status), unless aroused by issues such as
depressed profit forecasts (3, line 20ff) or recovery (15, line 33).
Stuart Rose made it a communications and strategic priority to manage the expectations of
this group and secure its confidence on taking over (12, line 31ff; 14, line 38; 15, line 18).
However, issues and expectations management was insufficient to prevent market panic at
the threat of recession in 2008 (3, line 22).
Employees are not featured in the case (despite M&S being a textbook favourite for its
enlightened, non-unionised employee relations and priority on staff welfare). They may be
at the higher-power end of Quadrant B, in an organisation that prides itself on CSR and
human relations, and they also have influence as the implementers of strategic change (eg
Plan A) and controllers of resources (especially consumer contact). They have a high interest
in strategy as implementers (or subjects, in the case of downsizing: 6, line 18) and in business
performance, which potentially affects their rewards and livelihoods.
Stuart Rose made buying staff a priority in initiating his turnaround plans (12, line 23), but
we also see a certain ruthlessness in regard to staff culls (14, line 12ff).
Industry bodies are not highly featured. M&S is a member of trade associations such as the
British Retail Association and Confederation of British Industry, and such bodies may have
some influence for a company that aspires to values leadership and exploits industry
contacts and partnerships. They will generally have low specific interest, although M&S will
be a focus of attention and interest may be aroused currently by M&Ss challenge to the
corporate governance code, the shared threat of recession and M&Ss power to influence the
market.
Note that if you are asked to do a stakeholder analysis for Plan A (16, line 1ff), you might come
up with a slightly different set of stakeholders, including government and pressure/interest
groups such as Greenpeace (16, line 21), and silent stakeholders such as future generations
Stakeholder analysis
A question in a previous Case Study exam asked you to advise an organisation, following a
critical incident, on how stakeholders should be involved in manageing issues in future: a
similar question could be applicable here in relation to periods of poor performance or
leadership transition. More likely, perhaps, would be questions about:
How effectively Stuart Rose managed stakeholder communication and relationships, as part
of his turnaround plan (see our comments above)
What conflicts of interest you can identify between the interests of key stakeholder groups
(eg shareholders, customers and suppliers) and how M&S can manage these (or could have
managed these better)?
21
Stakeholder management for Plan A. Who are the stakeholders in Plan A? What is the
nature of their influence and interest in the strategy (eg using a power/interest matrix)?
How can Stuart Rose and his team use stakeholder communication and involvement to
make a success of Plan A, given its wide-ranging impact on all stakeholders? (We will look
at some of these aspects further in Section 23.)
Whether M&S needs a more proactive approach to issues management (eg in regard to the
current corporate governance controversy), so that it can anticipate stakeholder sensitivities,
communicate proactively (to establish networks of trust and support), sound less defensive
(7, line 23; 16, line 38, 43) and learn from past issues to improve recurring issue handling.
COMPETITOR/INDUSTRY ANALYSIS
The Five Forces model developed by Professor Michael Porter is a tool for analysing the
competitive forces within an industry. The five forces are: threats from potential new entrants to
the market (given the strength of barriers to entry), threats from substitutes, suppliers
bargaining power, buyers (customers) bargaining power, and the general degree of
competitive rivalry in the industry.
Although this would be a highly relevant tool for M&S, we have too little information about its
retail competitors and competition to conduct the analysis or to regard this as an issue raised
by the case. You might like to think about the following brief comments, however, as you do
your background reading.
Threats from substitutes: constant, requiring strong branding and customer retention
Plenty of direct substitute merchandise (ie other brands of clothes, food and household
items) and retailers (ie other department stores, boutiques, e-shopping etc). Supermarkets
and hard discounters (eg Aldi) may be particularly competitive food provider substitutes in
a tough financial climate.
Threats from suppliers bargaining power: moderate for core suppliers, requiring management.
Supplier power is generally low, given the proportion of turnover and relationship-specific
adaptation represented by a large customer like M&S. On the other hand, M&S is locked in
to relationship with core long-term suppliers (whether by ethics, contract or relationshipspecific adaptation and integration). Large suppliers with other major customers or
transferable production capacity may use their power to stop supplying M&S (10, line 42) or
to resist price reductions, however.
22
Threats from consumers bargaining power: collectively fairly high, requiring management
Consumer bargaining power is high, due to the vulnerability of the retail market in times of
recession, and strengthened by consumer organisations and regulatory bodies which
enforce consumer rights. In particular, it places pressure on M&S to maintain its value
proposition (6, line 24). Consumers are growing increasingly demanding in their
expectations, and prepared to switch brands for better offers elsewhere (Lewis & Bridger)
Supply chain agility and responsiveness advantage for competitors in 1990s (9, line 31)
Store locations (and related property value) traditional advantage for M&S (4, line 43),
eroded by demographic shift to edge-of-town (7, line 42) and e-commerce (15, line 21)
Brand positioning on quality/value traditional advantage for M&S (4, line 42); lost due to
loss of focus, outmoding of brand, alienation of core customers (10, line 14; 13, line 36ff; 14,
line 7; in 1999, only 45% of customers rated M&S positively on service and 43% on value for
money Christopher & Peck, p 20); recaptured again under Stuart Rose (13, line 36ff; 15, line 6).
In the face of competition from lower-price/quality retailers (eg warehouse clubs and
discounters) and higher-price/quality retailers (eg high-fashion labels): you might like to
consider whether M&S should roll out more outstanding value/outlet and
premium/catwalk brands or hold the middle line.
Brand positioning on buying British traditional advantage for M&S (5, line 12; 5, line 37),
but became a disadvantage as competitors moved to low-cost overseas sourcing M&S was
slow to do so due to UK-centric supply base and distribution organisation (9, line 29, 40ff)
CSR/environmental leadership new potential source of advantage for M&S (16, line 4, 20)
Profitability, allowing capital investment (7, line 48) without high gearing costs and/or
enhanced value proposition to customers (6, line 23). In 1993, M&Ss operating profit
percentage was 12.4% significantly higher than its primary UK competitors (Bower &
Matthews, p 21). (Note that Greenburys pushing of profit margins eventually backfired,
however, by alienating suppliers while not adding value for customers.)
23
SECTION 7
Organisation Structure, Culture and Resources
ORGANISATION STRUCTURE
We dont really know enough about M &Ss structure from the case study to justify a detailed
analysis (although there is plenty of information accessible from your wider reading). In any
case, it is difficult to imagine what kind of question could be asked in the exam that would not
be highly speculative or redundant (eg recommending an approach to structuring the
company). Just in case, here are some key points, focused on strengths and weaknesses for
strategic development.
A century of tradition, growth in size, and product and market development has created an
increasingly complex and rigid structure, characterised by long decision-making paths (13,
line 10): a classic bureaucracy. The 1980s saw major attempts to simplify, delayer and
streamline (Bower & Matthews, p 5), and further delayering and downsizing was carried out
to cut costs under Greenbury (6, line 19).
Having been structured primarily along product lines, the business was fundamentally
reorganised under Peter Salsbury (with the aim of creating clear profit centres with simpler
management structures, faster decision-making and distinct targets for shareholder value:
M&S annual report 1999) into five operating divisions: UK Retail, International Retail,
Financial Services, Property and Ventures. Central management was to be streamlined,
devolving greater control over operating decisions to store and regional managers, but with
a single central marketing group to address the key issue of restoring customer focus.
(Christopher & Peck, p 16).
You might like to think about ways in which Marks & Spencer can make its structure more
flexible and responsive or how it can use its existing structure more flexibly and
responsively (eg through multi-directional communication, team working and so on). Note,
however, that M&S found constant restructuring destabilising (11, line 9).
Stuart Rose found that the divisional structure was creating a defensive and dis-integrating
mindset among executives (13, line 2ff). The case does not tell us what was done about this,
but the current M&S Executive Committee (corporate.marksandspencer.com) is organised along
a mix of product and functional lines: marketing (Steven Sharp: 13, line 33); finance and
operations (Ian Dyson: 16, line 36); human resources; property and store development; store
marketing and design; general merchandise merchandising and planning; clothing (Kate
Bostock: 16, line 32); food; international, home and M&S Direct; retail; and IT and logistics.
You might like to think further about the (theoretical) advantages and disadvantages of
divisionalisation for a large organisation operating in diverse regions and distinct product
areas but seeking to maintain a single umbrella brand, and struggling to maintain unity
of purpose and strategic direction
24
The acquisition of Brooks Brothers (an upscale specialty clothing chain in the US,
with a small joint venture in Japan) and Kings Super Markets, in order to break into
the north-western US market, learn about the Japanese retailing market and establish
links with Far Eastern suppliers (Montgomery, p 2, 3). However, this was not a
success, and the businesses were sold in 2001 and 2006 respectively.
The use of the franchise format for most international outlets (8, line 9)
The sale of the M&S Financial Services division to HSBC in 2004 (12, line 34): now
run as a 50: 50 profit sharing partnership as M&S Money (marksandspencer.com)
Partnering is clearly a strength of M&S, and if asked, you might like to recommend that it
explore further such opportunities to enter new markets, capitalising on its brand identity
and trust. (M&S is clearly thinking this way: beyond the range of the case study, it
announced in October 2008 that it is preparing to expand into the household gas and
electricity supply market, having partnered with Scottish and Southern Energy.)
In the absence of information in the case, you might want to think about how M&S might
structure its buying: eg on a regional basis (to take account of demand variations eg
different clothing sizes and food tastes/availability in different nations); or on a category
basis (to take account of specialist buying, while consolidating purchasing for potential
economies of scale); or perhaps, given the high degree of consolidation of the supply base,
on a supplier/account basis.
At one layer of the matrix, we do know that it is partly structured by role/function:
Selectors (merchandise and supplier selection), Merchandisers (buyers) and Technologists
(design/production expediters) (6, line 27ff). Under Greenbury, these roles were built into
head-office multi-disciplinary buying teams for each product category (eg ladies
undergarments: Bower & Matthews, p 10 and Exhibit 6). We dont know from the case
whether these teams also handle buying for overseas franchises and outlets (to standardise
the range), or whether that responsibility is devolved to local buying teams (to adapt the
range): you might want to recommend one or the other.
ORGANISATION CULTURE
Organisation culture is defined as a pattern of beliefs and expectations shared by the
organisations members, and which produce norms which powerfully shape the behaviour of
individuals and groups in the organisation. (Schwartz & Davies). Positive, dominant, widelyshared values (strong culture) has been argued to be a powerful source of corporate direction
and competitive advantage.
If asked to analyse M&Ss culture, you might note that we hear a lot about statements of culture
(values, mottoes, brand artefacts) but are not given evidence of how far this shapes actual
behaviour or the perceptions of its staff. However, from the strength and reach of its value
statements, we can assume that M&S aspires to a strong culture model.
Applying Johnson & Scholes cultural web model:
Paradigm: M&Ss stated values include the importance of quality, value, service, innovation
and trust. Tradition, heritage and reputation are also a strong part of its underlying selfidentity (12, line 39). M&S is also highly committed to community and charitable projects,
www.corporate.marksandspencer.com) linked to its new values focus on environmental and
social sustainability (Plan A): Stuart Rose has united stakeholders around this part of the
paradigm to give new cultural focus and direction (16, line 19).
25
Stories: M&S has a long history, which it promotes as part of its self-identity. The origins of
the firm form a corporate mythology to live up to (12, line 18), together with heroic
leadership to glory years (6, line 7) and remarkable revivals (3, line 33), and corporate
anecdotes eg about how Stuart Rose stumbled on the idea for Plan A (15, line 45). Stuart
Rose has creatively exploited the dominant story to reinvigorate the board, employees,
consumers and the market (12, line 17, 39; 15, line 4))
Routines and rituals: we arent given enough detail to apply these aspects but every
company has them.
Control systems: again, we arent given enough detail to apply this aspect but the
demands of strong central leadership and the need for consistency of quality and branding
suggest that bureaucratic and managerial control over day-to-day operations would be
fairly high (8, line 46). Control systems in regard to quality, hygiene and safety in suppliers
seem particularly strong (5, line 43).
Symbols: M&Ss brands and logos represent strong cultural symbols and corporate selfidentity. Again, Stuart Rose has notably re-engaged stakeholders with these symbols (13,
line 36, 42, 45). Further symbols include knighthoods, accolades and other forms of public
recognition which create pride in M&S (3, line 39ff). The attainment of the 1 billion profit
mark (9, line 10) was a symbolic moment, as less happily was the 2004 takeover bid by
Bhs (11, line 19) and the 2008 fall back to the 400p share price (3, line 27).
If you had to pick an overall cultural type for M&S, based on the information we have, it
would arguably be (in Harrisons classification):
A power culture (power centred in a key figure or founding family; control through direct
personal communication) at the strategic apex; and
This is an uneasy mix, because (a) the operational levels of the organisation need greater
flexibility to cope with local conditions and customer demands; (b) a power culture at the top
does not easily devolve authority or initiative to lower levels, in order to break the rigidity of
the role culture; and (c) a power culture can cause a lack of questioning/challenging of strategic
decisions, perhaps contributing to M&Ss problems under Greenbury.
There may also be issues of national culture and cross-cultural management for M&S, a
quintessentially British brand and organisation, in moving into international retail and supply
markets [>> Sections 11, 16]
RESOURCE ANALYSIS
A resource audit is an assessment of the resources that the organisation owns, controls or can
access to support its competitive position and strategies. Resources are strategically significant
if they are scarce (and competed for by the organisations rivals); vulnerable to supply
fluctuations or disruption; critical to the organisations business or processes; and/or a source
26
Unique long-lived, value-laden brand with high generational consumer loyalty, trust and
reputational capital (3 line 12)
Traditionally very strong and loyal relationships with core suppliers, which can be
exploited at seasons of high demand: strong control over suppliers due to backward
integration, dependency, buying power or loyalty (5, line 8)
Strong, visionary leadership (at many periods of history) with high-level retail (and/or
broad M&S) experience (6, line 36ff; 11, line 25ff)
Financial strength and stability, with strong investment in assets (eg owned high-street
property); a tradition of year on year sales and profit growth (Appendix 1); and support for
major capital expenditure (7, line 48)
Strong industry and market contacts and relationships (competitive architecture) and a
willingness to exploit them by networking and collaboration eg in inter-organisational
partnerships (5, line 41; 7, line 45; 11, line 7 [George Davies was the founder/designer of Next]; 15,
line 23] including the ability to co-opt customers and other stakeholders into Plan A.
One feature of this analysis is that M&S appears to have taken an effective positional approach
to developing its core resources, and could now use a resource-based approach in order to
exploit them further and in new ways (eg through brand extension).
27
Another point to note is that some of M&Ss core resources have, at various points, been put at
risk. For example:
Loss of brand strength due to quality/value/image problems (10, line 14; 13, line 38), brand
fragmentation (13, line 5), alienation of core customers (14, line 7) and general decrease in
consumer brand loyalty (Lewis & Bridger)
Loss of financial strength due to recessionary pressures (3, line 23) and poor decisionmaking (10, line 13)
Loss of leadership resource through distraction (8, line 42), in-fighting (9, line 6), transition
(10, line 29), lack of confidence (11, line 24) and lack of planned succession (12, line 3ff; 16, line
30)
Loss of supply relationship and buyer power strength, by forcing suppliers to squeeze
margins (6, line 20; 30, line 10; 15, line 13), forcing them into risky off-shoring (9, line 39), and
subsequently terminating (10, line 31) or alienating (10, line 42) major core first-tier suppliers.
This raises concerns about M&Ss risk management, which was/is needed both to shore up
existing core resources and to consider developing new ones (eg CSR leadership). You might
like to think which of the at-risk resources has been effectively secured under Stuart Rose, and
which remain at risk.
28
SECTION 8
Corporate Appraisal: SWOT Analysis
SWOT ANALYSIS
A SWOT analysis (or corporate appraisal) is a listing of the businesss strengths, weaknesses,
opportunities and threats. Opportunities and threats relate to the external environment
(analysed in Sections 5 and 6), while strengths and weaknesses are internal to the business
(analysed in Section 7).
SWOT analysis is often an appropriate tool because:
It is a flexible framework, which can be applied to whatever data is provided in the case
2.
3.
Ownership of an extremely strong core brand, with high standing and reputational
capital, generational consumer trust/loyalty and brand extension potential (eg new
technology products)
4.
Strong property asset portfolio and retail outlet network (among other barriers to
competitor entry)
5.
Direct, relational contact with consumers, through brand loyalty, retail outlets, loyalty
programmes, e-commerce accounts, Plan A pledges etc
6.
Strong community profile and links, through community projects and partnerships:
strong partnership links for causal marketing (eg with Oxfam, WWF)
7.
Strong, loyal and motivated supplier network and a tradition of positive, collaborative
supply relationships (now modified)
8.
9.
Capacity for creative product/market strategies through core resources and partnering
contacts/skills eg entry into financial services market
10.
11.
12.
Strong, values-laden culture of quality and service, and (now renewed) customer focus
13.
14.
Systems in place for agile, responsive supply, supporting high-fashion items (under
Bostock)
29
Weaknesses
1.
Immediate reputational damage and loss of shareholder trust resulting from financial
results crises, leadership transitions and corporate governance issues (variable)
2.
Dependence on consumer confidence and disposable incomes for retail growth, given the
recurring threat of recession (1991, 1998-9, 2008)
3.
4.
5.
Lack of questioning of underlying corporate health, when financial results are good; lack
of ability to diagnose and learn from mistakes (eg recurring corporate governance/
leadership issue?)
6.
7.
8.
Rigid supply network, geared to long lead times, long-run production, economies of scale;
possibly also complacency by virtue of long relationship (until Bostock)
9.
Ageing retail outlet dcor, merchandising techniques, merchandise range, image (prior
to Rose, Smart and Bostock), alienating core customers
10.
Lack of consistent market research and product range planning in core product areas, eg
womens clothing (prior to Bostock)
11.
Little appetite for change in some areas; tendency to lag behind and react to competitor
strategy (arguably, until Rose)
12.
Recurring over-stocking problems, caused by buying ahead (13, line 20), long-run
production, economies of scale, poor demand management
13.
14.
Lack of focus: too many product lines, too many unrelated initiatives (at 2004)
Opportunities
1.
Potential to build on renewed brand trust, status, reputational capital and consumer
loyalty, for brand extension eg move into financial services (at the time); roll-out of Simply
Food and other concept store outlets; partnership in fashion brands (eg Per Una)
2.
Further potential for growth (and possibly diversification) by acquisition (at times of
strong financial health)
3.
4.
Potential cost savings and agility gains from encourageing domestic suppliers to off-shore
(Greenbury: 9, line 39)
5.
Potential value gains from more adversarial-co-operative relations with suppliers, greater
supplier diversity, local overseas sourcing (rather than off-shoring by UK suppliers)
6.
7.
Growing activism re climate change and sustainability: potential brand strength through
Plan A green leadership
8.
9.
Demographic and lifestyle changes creating opportunities for niche clothing (highfashion, small/large size, maternity) and food (global gourmet, convenience, lunch to go)
products
10.
Chance opportunities from encounters (eg meeting with Twiggy: 14, line 46), weather
(creating explosive demand for summer T shirt range: 14, line 26).
Threats
1.
Sector, national or global recession: loss of consumer and investor confidence, depressed
sales/profits/share price (recurring)
2.
3.
4.
5.
Other general environmental threats and risks (PESTLE factor changes) eg imposition of
import quotas, exchange rate fluctuations, weather/disease disrupting food supply,
collapse of international economies, increasing consumer demands/fickleness [>> Section
5].
How to build on strengths and/or minimise weaknesses to exploit (or create) opportunities
and cope better with identified threats
How to convert threats into opportunities by developing strengths to counter them (more
effectively than competitors) and learn from them.
31
Opportunities
(O)
Threats (T)
Strengths (S)
Weaknesses (W)
S/O strategies
Use strengths to exploit
opportunities
S/T strategies
Use strengths to avoid
threats
W/O strategies
Overcome weaknesses to
exploit opportunities
W/T strategies
Minimise weaknesses to
avoid threats
32
SECTION 9
Generic Strategic Options: Ansoff, Porter
DIRECTIONAL STRATEGIES: ANSOFF MATRIX
Ansoffs matrix is a two-by-two grid which attempts to classify the directional options
available to an organisation. The model was originally intended as a marketing model, but was
later adapted for use in wider strategic choice.
It depends heavily on the protection and exploitation of its existing core brands, in the
face of recessionary pressures
It has shown a willingness to develop new products and markets in order to maintain
growth.
relationship marketing (in order to maximise customer loyalty in a tough market); rolling
out current initiatives (eg new Simply Food and Outlet stores, and the store modernisation
programme [70% complete at the 2008 Annual Report]); bedding in existing change
programmes (eg Plan A); and perhaps also strengthening leader development and
succession (given the current period of transition: 16, line 27ff). Arguably, M&S should have
considered such strategies under Greenbury, rather than pursuing multiple market and
product development initiatives at once.
Market penetration is a growth strategy, based on gaining (or recapturing) greater market
share in an existing market with an existing product. Domestically, it may involve more
aggressive marketing and promotion (eg M&Ss re-penetration campaign under Stuart
Rose: 13, line 33ff, following loss of market share), price discounting (eg through sales, or
M&S Outlet stores), or different methods of marketing and distribution (eg through Simply
Food stores or M&S Direct). Many of M&Ss markets were considered mature in 1994, but
gains were still to be made from increases in market share in low-market-share areas such as
home furnishings and childrens wear (Bower & Matthews, p 2). Currently, M&S Direct sales
are growing faster than the market (2008 Annual Report): clearly another potential growth
area.
It may also involve further franchise and brand development in some of M&Ss overseas
markets, focusing on those with substantial potential for growth eg in Asia and Eastern
Europe although this is potentially more risky, in times of global recession.
Market development
A strategy of market development concentrates on finding new markets for existing products.
M&S may wish to research any overseas markets not currently being sold to. This would be
seen as an extension of its existing market development strategies, and the resources and skills
developed to pursue them (eg brand strength, regional beachheads and contacts, franchise
development and joint venture expertise, financial strength to enter markets by acquisition).
The 2008 Annual Report announced expansion into Central and Eastern Europe, via existing
franchise partners, and the opening of a first (wholly-owned) venture in China. However, M&S
needs to be cautious in selecting its markets, given a track record of failure to transfer brand
success to other cultures: the closure of operations in Canada; the sale of previously acquired
US retailers (Brooks Brothers and Kings Super Markets); the closure of unprofitable
international outlets (6, line 6). [>> Section 11]
M&S may also seek to develop new target market segments: for example, the UK youth market
eg by extending its technology products range, creating youth-oriented clothing sub-brands
and so on.
Product development
Product development strategies involve introducing new (or modified or complementary)
products to existing markets. This allows the organisation to utilise its existing logistics
channels, retail outlets and market/customer knowledge, and to exploit current brand strength.
M&S appears to have been pursuing such a strategy, when it added financial services, starting
with the store charge card, to its core product portfolio: this is still a part of its offering through
M&S Money (though the business itself was sold to HSBC in 2004). Similarly, it has added
technology products departments to some of its stores, the Per Una fashion sub-brand (11, line
6; 12, line 35); and so on.
34
The rolling out of different store formats (such as Simply Food and Outlet stores) may also be
seen as a modified offering to existing customers (different focus, pricing, locations).
In any case, the range of merchandise being sold by M&S is constantly being refreshed through
seasonal buying and branded product development. The 2008 Annual Report mentions some
plans for brand stretching: featuring Plus Sizes online; offering bespoke Made to Measure
shirts for men; expanding in-store hospitality options. M&S is also trialling the adoption of a
select range of guest brands that complement M&S values (eg Sony and Apple in consumer
electronics, and Marmite and Heinz in food: regarded as branded must-haves) in a small
number of stores, with a view to rolling the programme out if successful.
A cautionary note should be added to product development recommendations, however:
unrestrained, under Greenbury, it led to a fragmented brand, too many product lines and
massive overstocking (13, line 9, 37).
Diversification
A strategy of diversification refers to the development of new products for new markets. It is
the most high-risk strategy, as the organisation faces an initial learning curve with product and
market.
In order to minimise risk and exploit existing resources, M&S may consider new product
markets within the same industry (related diversification). It may, for example, consider
further backward integration: acquiring or developing manufacturing businesses to supply its
own-brand products.
It may be argued that M&Ss entry into financial services represented diversification rather than
product development, as it sought to reach a market beyond its core constituency. Beyond the
case, you may like to know that M&S has similarly announced its entry into the household gas
and electricity supply market, in partnership with Scottish & Southern Energy : M&S shoppers
will be able to buy power in-store and online (Times Online, 15 October 2008).
M&S has significant challenges manageing and focusing a dual food and clothing/homeware
brand, however, and you might be cautious about recommending diversification
A product/market strategy mix
The 2008 Chief Executives Statement (annualreport.marksandspencer.com) reflects a mix of
strategies. As we take the business forward, we are broadening the plan for long-term growth.
This will be achieved by continuing to invest in our core UK retail business, introducing new
goods and services; strengthening our UK property portfolio; driving our M&S Direct business;
expanding our international business; and ensuring Plan A or eco plan is integrated in
everything we do.
COMPETITIVE OPTIONS: PORTERS GENERIC STRATEGIES
Professor Michael Porter suggested that a firm may seek two basic kinds of competitive
advantage over its rivals in a market: low cost (providing comparable value to customers, more
efficiently than competitors) or differentiation (providing more or distinctive value for
customers than competitors, permitting a premium price). At the same time, an organisation
can apply these strategies either to a broad market or to a narrow-focused or targeted market.
35
Competitive advantage
Competitive scope
Broad (industry wide)
Narrow (market segment)
Lower cost
Differentiation
Cost leadership
Differentiation
Cost focus
Differentiation focus
This model is designed to be used at the business (SBU or product) level, rather than at the
corporate level, so it may not be an ideal model in this case. However, some general points may
be useful in relation to M&S, using the information we have.
M&S has traditionally relied on differentiation: developing core brands and sub-brands
that are distinctive and valued in the market (4, line 19). This is an effective defensive
response for an organisation faced by strong low-cost competitors. The strategy is to gain
advantage by differentiating the product from lower priced ones (such as supermarkets
and discount outlets) on the basis of non-price factors (such as brand identity, quality and
cultural icon status). Arguably, M&S allowed some key points of difference to be eroded
(eg by brand fragmentation, failure to modernise and refresh outlets and ranges, lapses in
quality and service, following rather than leading competitors). However, the
differentiation strategy was recovered under Stuart Rose (13, line 35, 39, 42), mostly
notably perhaps with a ground breaking eco-strategy in Plan A (16, line 19-20).
M&S doesnt appear to aspire to cost leadership, but it works hard at keeping its costs
down (eg 15, line 13) and aspires to offer consumers fair perceived value (eg 6, line 24). It
has worked recently to change customers perception of value: We have reviewed our
pricing architecture in order to attract a broad range of customers. We are now achieving a
wider price span staying in touch with the supermarkets at entry levels, while
improving better and best products for the more aspirational shopper. (Annual Report
2008).
M &S may look for further cost reductions (particularly in the face of the 2008 downturn),
but this may be difficult in the short term, with ongoing quality commitments, new CSR
and change costs through Plan A, suppliers squeezed almost to breaking point, and
gradually rising costs of doing business in overseas markets such as China.
36
SECTION 10
Strategic Direction at Different Periods of M&S History
The case study approach lends itself to exam questions such as: the identification, discussion
and comparison of strategies pursued by M&S under different leaders; and analysis of the
causes and handling of the 1999 crash in M&Ss fortunes, and how effectively the company has
learned from them. (Strategy is not really formulated by individual leaders in isolation, but we
will follow the style of the case study in attributing strategic direction to the strategic leaders of
the time.)
AT A GLANCE
Pre-case
Greenbury
Salsbury
Holmes
Rose
Strategic
direction
Steady
growth
Expansion
Maximise profit
Search for
new direction
Focus = cut
costs
Financial and
brand
consolidation
Focus = return to
roots/brand
Drive/broaden =
focused growth
Key
initiatives
Display
Add food
division
Develop
offering
Pare down
New products
Edge of town
stores
Retail space
expansion
International
markets
Management
consultants
Restructuring
Rationalise
network
New brands (eg
Per Una)
Concept stores
(eg Simply
Food)
Growth
strategy
Brand/
network
development
Expansion of
products, retail
space,
international
network
Capital invest
Market repenetration
by promotion
Withdrawal/
consolidation
Brand
development
Market re-penetration
Focused product
development
Focused international
expansion
Eco-leadership
Supply chain
relations
Co-destiny
UK supply
Margin squeeze
Reduce order sizes,
lead times
> more adversarialco-operative style
Economies
of scale
Overstock
discounting
Divestment
Supplier squeeze
Clear overstock
Marketing
Brand
positioning
Margin
squeeze
Push for offshoring
Key supplier
divorces
Cost cuts
Supplier
squeeze
(But increase
in spend)
Promotion to
bolster sales
Costs
Co-destiny
UK-centric
(some supplier
off-shoring)
Margin
squeeze
Downsize,
streamline
Supplier
squeeze
Focused
product/
market devlpt
Re-branding
Fresh ad campaigns
Direct marketing
Rapid product/
market
development
37
Strategic
direction
Key
strategic
initiatives
Positives
Negatives
Over-ambitious (9, line 14); pushing too hard on too many fronts (7, line 33)
Creating shareholder/market pressure (9, line 12)
Eventually diluting/fragmenting the brand (9, line 21; 13, line 9)
Counter-productive (eg over-rationalising: 7, line 35-40)
Margin-greedy short-term thinking (10, line 2-3): alienating suppliers, customers,
as margin benefits passed on only to shareholders (9, line 10)
Capital over-commitment (with over-confident forecasts: 8, line 3; 9, line 17)
Inadequately planned (eg ability to transfer brand to foreign cultures; lack of
expertise/organisation for global sourcing 9, line 40)
Suppression of challenge/questioning: risk of over-confidence (8, line 5ff)
Failure to address underlying demand-risk issues, eg: outmoded brand, stores
and merchandise portfolio; falling quality/service positioning; alienation of core
market; risky long-range demand forecasting (10, line 12)
Failure to address underlying supply-risk issues, eg: UK-centric supply; rigidity
Failure to address underlying board conflict issues (10, line 11)
38
Driven by desire to move away from Greenbury methods/processes (10, line 20)
perhaps due to personal dislike, frustration (10, line 8, 9)?
Imposed strategy of crisis recovery but search for direction (10, line 24)
Multiple management consultants to advise (10, line 25)
Strategic
direction
Focus (10, line 25). How defined? Recurring theme: rationalisation and cost
cutting
Key
strategic
initiatives
Positives
Negatives
No genuine focus: consultants > too many unrelated initiatives (13, line 12)
Despite cost-cutting, net impact > increased expenditure (10, line 28)
Tight stock controls > availability issues, alienating customers
Boutique style merchandising trials failed for lack of expertise
Ineffective advertising/marketing > market share/sales decrease (10, line 28)
Constant restructuring > destabilising (11, line 9)
Cost reduction through suppliers > supplier difficulties, alienated suppliers, loss
of several major core suppliers at the same time (10, line 30ff, 39ff)
Strategic
direction
Key
strategic
initiatives
Positives
Negatives
39
Strategic
direction
Decisive leadership, using crisis to unite and energise (12, line 13; 14, line 13)
First priority: vision articulation and stakeholder buy-in (12, line 14ff; 13, line 15)
Outsiders eye > diagnose entrenched problems of business (13, line 1ff)
Support talent, emergent and opportunistic strategy (13, line 33; 14, line 1, 44, 45)
Strategic planning: 5 year horizon re Plan A (16, line 3ff)
Focus: clearly defined as return to roots(12, line 37ff). Reduce product lines,
restore unity of vision (13, line 3), re-focus brand (12, line 34, 36; 13, line 37)
Drive/broaden: market re-penetration initiatives, launch of e-commerce
platform, launch of eco-leadership strategy (15, line 6, 20, 42)
Key
strategic
initiatives
Positives
Negatives
Sale of Financial Services and closure of Lifestore outlets (12, line 34, 36)
Purchase of growing/directional Per Una brand (12, line 35)
Pressure on suppliers to increase discounts (12, line 25; 15, line 13)
Your M&S re-branding and modernisation (13, line 33ff)
Clearing of overstock (13, line 30)
Fresh marketing campaigns (13, line 40ff; 14, line 44ff)
Launch integrated e-commerce platform for online sales/ordering (15, line 20ff)
Launch eco-leadership transformation plan: Plan A (16, line 1ff)
United and motivated board and staff (12, line 24; 13, line 11)
Smart cultural change: building on tradition/values > new future (12, line 17ff)
Divestment of inertia-creating, unprofitable assets (businesses, outlets,
overstocks)
Focus on leveraging growth areas eg Per Una, womenswear (14, line 10ff, 44)
Restored profitability (15, line 31), but realistic growth expectations (eg 14, line 40)
Brand, product and store refreshment > create excitement (12, line 38)
Re-brand: customer re-engagement, modernisation, sharper image (13, line 33ff)
Co-opting and supporting new talent eg Sharp and Bostock as change agents
Clever marketing: audience appeal, strong brand messages, targeted placement
Reinforcement/clarification of new less cosy relationship with supply chain
(Belated) engagement with competitors, exploitation of potential for e-commerce
Willingness to seek sector leadership in a strong consumer-valued area: Plan A
Using Plan A to re-unite and re-excite stakeholders, after years of trouble
Possibly:
Over-ambitious transformation re Plan A (16, line 7-8, 14), given years of
troubled transitions and threat of recession
Failure to address underlying supply-side issues: eg supplier dependency,
rigidity and global sourcing issues, costs of Plan A changes
Short-lived impact of brand/store modernisation: need to ensure ongoing
market sensitivity and responsiveness to changing/fickle consumer demand
Failure to address management succession and governance issues: potential risk
of unchecked leadership eg under Greenbury (16, line 43)
Expectations management backfire > loss of market confidence (3, line 20)
40
Underlying
causes
Why were
causes not
identified?
How crisis
was handled
What could be
done to
prevent
recurrence?
SECTION 11
International Markets
This is perhaps not very likely to come up as a question in its own right, since not very much
information is given about M&Ss strategy, other than as one example of potential risky or
simplistic strategic thinking under Greenbury. However, as you are doing your background
reading, you might like to make some notes on the following areas just in case.
What are the drivers for entry into international markets? In the 1980s, M &S sought to
secure a foothold in the US and Far East because competitors would inevitably globalise,
and M&S had to get on the learning curve (Montgomery, p 1). The case study also suggests
(8, line 7-17) that in the 1990s:
o
o
o
o
International markets made room for growth ambitions, given a mature core UK market
Global economic markets were opening up, reducing barriers to market entry
Travel, media and ICT were making global business networks possible
Travel, media and ICT created global culture, so iconic UK brands could transfer
successfully to foreign cultures. (How far can this assumption be relied on?)
Note that this seemed obvious to the essentially UK-based shareholders of M&S (8, line
15): what might this say about pressure, motivation and limited strategy evaluation?
It first entered international markets in the 1970s, starting cautiously (5, line 2) in
Canada, western Europe and Asia (with a base in Hong Kong). Expansion accelerated
under Greenbury, through a mix of wholly-owned outlets and franchise agreements
with local partners. Europe was favoured due to its closeness and similarity (in
seasonality and dressing styles) to the UK: however, M&S found that even Europe
required adjustments for profile, fit, size and climate (Bower & Matthews, p 17). Asia was
more of a challenge: M&S focused on developing local distribution infrastructure, and
carried out careful planning for entry timing and potential partners for entry into China.
A number of unprofitable European and all Canadian operations later had to be closed
down (11, line 6): in Canada, the M&S brand had been seen as irredeemably oldfashioned and only for British expats; while European sales were hit by the pounds
strength against the Euro. What does this say about internationalisation risk?
In 1988, M&S sought to secure a foothold in the US and Japan by acquiring Brooks
Brothers (an American institution, selling high-quality, conservatively-styled own-label
menswear, which also had a small joint venture in Japan and sourced merchandise
partly from the Far East) and Kings Super Markets (an upmarket, quality/serviceoriented fresh food chain) (Montgomery). Despite apparent brand synergy and
opportunities, barriers to entry, the need for investment in modernisation, a non-existent
market for pre-packed refrigerated foods and other problems proved difficult to solve:
Brooks Bros was sold in 2001 and Kings in 2006 and M&S does not have a presence in
the US or Japan as of 2008.
Apart from Hong Kong/China and the Republic of Ireland, all M &Ss international
network expansion is now done on a franchise basis, using existing regional franchise
partners where possible. International business now accounts for 7.9% of group
42
turnover and has grown to 278 stores in 39 territories: during 2007/8 a number of new
franchise ventures were announced in India and Central and Eastern Europe (M&S How
We Do Business Report 2008) and M&Ss first (wholly owned) mainland China store
opened in October 2008 (Times Online).
What are the implications of market globalisation for supply chain management? You
might like to consider the challenges of:
o
Supplying Asian and Pacific outlets, initially at least, from a wholly UK-based supply
base (9, line 28) particularly in the market for foods, which demands local sourcing
Supplying Asian and Pacific outlets from off-shored UK suppliers (9 line 39), who may
have to import goods to the UK for finishing (eg to maintain a buy British brand for
domestic consumption) and/or for breaking bulk and distribution before exporting
them back overseas to international outlets. Think inefficiency, delay, cost, risk
Under Greenbury, M&S recognised the need for localised sourcing and distribution
particularly for food. On the other hand, it also recognises the need to maintain and control
the quality, consistency and identity of its global brand. The case doesnt tell us how
international buying is now structured: what might you recommend?
What are the general risks and challenges of international market entry?
If you havent studied the optional Marketing for Purchasers model, think about:
o
Risks of direct investment entry by subsidiary set up or acquisition (eg high entry/exit
costs) or joint venturing (potentially incompatible partners; joint control)
Deciding whether managers should be indigenous or UK-exported, and how crosscultural learning and best-practice sharing can occur. (Under Greenbury, M&S used
international manager secondments, rotations and exchanges: Bower & Matthews, p 19)
The research paper by Bower & Matthews, cited in the sources list, has a clear section on The
Challenge of International Operations and Expansion (in the Greenbury era) on pages 17-20.
43
SECTION 12
Current Strategic Issues and Options for M&S
Having used appropriate tools of strategic analysis to identify some key issues facing M &S,
what conclusions can we come to about possible strategic directions and options for the future?
Bear in mind that the examiner will not expect you to come up with a single correct answer: in
the case, as in the real world, there is no such thing besides which, much more information is
needed to select and evaluate viable options. (Besides, this is a real company, not a fictional one:
you arent expected to know more, or see more clearly, than its directors and consultants!) What
the examiner would expect, though, is a balanced evaluation of the issues, coupled with
reasoned argument in favour of one or more plausible possibilities, always allowing for
realism in the resources and timescales required to implement your recommendations!
It is perhaps more likely that you will be asked to evaluate the strategic directions taken by
M&S in the past, and to suggest what could have been done to avoid or mitigate resulting
problems. [See Sections 10 & 11]
Some options are examined below. Note that these are not the only ones and that they
represent alternatives: no organisation would attempt to adopt them all, let alone all at once!
KEY STRATEGIC THEMES & OPTIONS
One point to note is that the company is likely to be constrained in its strategic thinking,
onward from the case study, by: (a) the need to consolidate to protect profits and share price in
the face of the threat of recession (since confirmed by global market meltdown); (b) possible
reduced risk appetite and investment capital, as a result of the downturn; (c) uncertainties about
leadership continuity and succession; (d) the possibility of further conflict with shareholders
over this issue; and (e) massive existing transformational commitments related to Plan A.
1
Competitive strategy
[>> Section 9]
As we noted in Section 9, M&S has long pursued a differentiation strategy. It may seek:
To maintain and strengthen its re-found differentiation points (eg by emphasising its
more fashionable range, modernised stores, refreshed brand and eco leadership
efforts).
To maintain price competition with existing competitors for basic and price-sensitive
products, and to continue to emphasise the quality/value offering of its better and
best level offerings
To apply some of the measures explored for achieving cost focus (eg low-cost sourcing,
direct sales, process streamlining) across the business, enabling it to achieve
differentiation more profitably. Given the threat of recession, M&S is unable to
increase its prices (3, line 19), which may as ever put pressure on cost reductions to
protect profitability.
Product/market strategies
[>> Section 9]
and market penetration and even withdrawal, if recession takes hold. However, market
and product development are still realistic possibilities which may be explored further.
3
Marketing Strategy
The syllabus for the case study exam does not explicitly embrace the optional Marketing
paper, so it will be a little unfair if the examiner sets a question substantially focusing on
this area. However, many of the issues facing retailers (including buying) are marketingfocused so pull out your notes for the Marketing for Purchasers module if you have them.
Marketing issues M&S might look at include:
o
The need to maintain focus on the rediscovered core market segment (middle aged
British women) in order to protect the flagship womenswear range. And in general,
ensuring that buyers maintain market awareness and utilise market/customer
research and feedback.
Product portfolio planning (BCG matrix), to build on core profitable lines, and fill
product gaps to maximise reach and establish cross-selling (eg from maternity to
childrenswear); and to continually renew the portfolio for new growth potential and
brand freshness with particular challenges of short-cycle fashion trends and
seasonal food/clothing cycles.
The need to consolidate and extend the newly-updated brand (My M&S), without
falling back into brand rigidity or dilution.
The ongoing challenges of entering and operating in international markets, and the
decision of whether to standardise/globalise or adapt brand, promotion and
merchandise for international outlets.
45
At this point, M&S is deeply committed to its five-year plan for Plan A (to 2012). Its
strategy will be to continue to pursue and monitor progress against Plan A targets, and to
engage and support stakeholders in contributing to them.
6
Human resource management is a major area of strategy for organisations, but it is not an
area that is raised by the case study except for the recurring issue of succession planning
and management development. As at 2008, the important thing may be to establish a clear
succession strategy, given adverse comment (16, line 43), shareholder opposition,
compliance issues and the memory of traumatic leadership transitions in 1999-2004.
M&S may articulate its preference for internal promotion (6, lines 8-12); define the
characteristics and experience it looks for in its leaders; and be intentional about potential
assessment and management development (16, line 34).
Cautionary note!
Past the time-frame of the case study, an article M&S to cut costs as sales slide (Times Online, 3
October 2008) announced the following moves in response to the tougher economic climate:
M&S plans to cut its capital expenditure in half in 2009 to avoid having to cut dividends.
The groups much-lauded store refurbishment programme will grind to a halt. We are
being prudent about expectations for the trading climate. You cant sell lousy product in
great-looking stores, but you can still sell fantastic product in rather tired stores. (Rose)
M&S has been particularly hard hit by the fierce competition between supermarkets and the
hard discount chains such as Aldi and Lidl. The food business will now step up cost savings
to put more money into cheaper prices.
Sir Stuart said: If, two years down the road, things are still tough, we will have to have a
think.
46
SECTION 13
Procurement and Supply Chain Issues: Overview
WHAT KIND OF QUESTIONS MIGHT BE SET?
Since the case study specifically surveys various leaders approaches to supply chain
management, it raises a number of issues which may be the topic of specific or general exam
questions. For example:
M&S has a reputation for a positive, co-operative and fair partnering approach to supply
chain relationships. To what extent has this been true in practice, at various periods of the
companys history, or how has it changed?
What competitive and environmental pressures have caused M&S to alter its supply chain
strategies over time, and why has it been comparatively slow to do so?
Explain and evaluate M&Ss move towards a more agile supply chain.
How has M&S approached the need to reduce supply costs? How might it aim to achieve
cost savings without sacrificing supply chain relationships, agility or service levels?
Appraise M&Ss purchasing and supply chain management activities and suggest how
they might be (or might have been) improved.
2.
What are the features of buying and SCM for retailers? What challenges do they create
for M&S, particularly in the clothing and food retail sectors?
How is M&Ss procurement function structured and managed, and how effective is this
approach?
What potential, if any, is there for M&S to reposition itself in the supply/value chain, eg
by backward integration (controlling sources of supply)?
What kind of relationship approach does M&S now use with its suppliers? What
alternative relationship style(s) might be more appropriate for its procurement needs
(and what models could be used to determine this)?
What is the current balance of power between M&S and its suppliers? How does M&S
use its power, and with what results? How might the balance of power change?
47
3.
4.
5.
6.
At a more tactical level, how effective is M&Ss approach to: supplier performance
management; supplier leadership and negotiation; supplier development; and
termination of supply contracts?
What is likely to be the suppliers viewpoint on all of the above? How attractive a
customer has M&S been and how attractive is it now?
International sourcing
What have been the benefits and drawbacks of UK domestic sourcing for M&S?
What have been the drivers, benefits, risks and challenges of international sourcing?
How has M&S approached international sourcing, and with what results?
What alternative approaches might it consider adopting to pursue the benefits of local
and low-cost sourcing?
Agile/responsive supply
Why and how did M&Ss supply chain become rigid and unresponsive over time?
What are the drivers, benefits and challenges of more agile/responsive supply?
How has M&S approached supply chain responsiveness, and with what results?
How has M&S dealt with the need to reduce costs, and how effective have these
approaches been?
What alternative or further approaches might M&S use to reduce costs, while still
maintaining service, merchandise quality and supply chain responsiveness?
How has M&S attempted to deal with over-stocking, and what alternative or further
methods could it consider?
Other issues
Less likely to come up, because not significantly covered by the case study. As you do some
background reading, however, you might like to bear in mind:
Logistics. What logistical challenges are posed by: (a) international sourcing, (b) a wide
network of retail outlets, (c) the need to minimise redundant stock and (d) the sale of
fresh food products? How has, or how might, M&S tackle these challenges?
Technology. How, and how effectively, has M&S applied and leveraged available
technologies in its procurement, supply chain and logistics management? Review your
notes on ICT as a strategic tool (eg e-commerce, virtual organisation,
intranet/extranets), e-sourcing and e-procurement, and planning systems (eg ERP).
48
Winning a contract to supply M&S (previously) the holy grail for manufacturers:
predictable lead times, high volume/value (5, line 39), collaborative relationship and
supplier development (5, line 41), investment in R & D, promise of long-term business,
support through lean times (5, line 17)
Downside: suppliers were expected to cut margins to contribute to the success of the supply
chain as a whole (5, line 20). This became increasingly exploited by M&S (6, line 20; 30, line
10; 15, line 13) and it was not always apparent that it was passing on value gains to
customers: under Greenbury, for example, suppliers were squeezed simply to support
higher and higher profit margins for M&S (10, line 3)
When M&S decided to globalise supply under Greenbury and Salsbury, it appears to have
transferred substantial risks (eg the unforeseen logistics problems, textile import quotas,
political unrest and costs of change experienced by Courtaulds: Christopher & Peck, p 22) to
its UK suppliers by encourageing (9, line 39) in effect, pressuring them to off-shore
production, and to progressively shift additional capacity overseas. At the same time, M&S
insisted that quality and ethical employment practices should be maintained (Global
Sourcing Principles).
M&Ss drive for greater responsiveness has disadvantages for some suppliers, as it means
shorter (less profitable) production runs and investment in changing processes for shorter
lead times (14, line 25). The impact of this may have been lessened where M&S worked with
suppliers to support the change (14, line 18).
Mutual dependency: M&S relies heavily on its core first-tier suppliers but they also rely on
it. The termination of William Baird under Peter Salsbury caused the closure of 16 factories
and the loss of 4,500 jobs (10, line 31): Baird had 21 factories in the UK, 20 of them dedicated
to supplying M&S, and one of them newly-opened (a 4.2 million bra factory) at the time of
termination. Other suppliers were also rendered insolvent by the squeezing of margins or
reduced orders as a result of switching to international suppliers. Some suppliers (eg Coats
Viyella) had to face huge losses, by deciding to stop supplying M&S (10, line 42).
Most of M&Ss longest standing suppliers had no formal contract with it their key
customer. In June 2000, William Baird sued M&S for breach of contract, when terminated,
on the basis that 30-year trading constituted an implied long-term contract: the High Court
ruled against the claim. (Christopher & Peck, p 23) Suppliers who invested in plant, processes
and integration specifically for M&S production (high asset specificity) may be badly
exposed.
Now there is a call for further process transformation and investment, to support M&S in its
Plan A (16, line 14; 19): what is the incentive to buy in?
49
SECTION 14
Retail Buying and Supply Chain Strategy
The case study gives us very little detailed information about M&Ss overall supply chain
strategy, supply chain and distribution structure, buying structure or procurement systems.
This should mean that such topics are unlikely to feature highly in an exam question but you
might like to make some notes as you do your background reading, just in case. We will just
draw out some key points from the case and relevant syllabuses.
RETAIL SUPPLY CHAINS & BUYING ROLES
Direct relationship between the retailer and the final consumer: buyers in a retail
environment have to stay much closer to customers, because merchandise selection is
crucially related to expectations of what will sell. This requires marketing-oriented
competencies in addition to purchasing competencies: reflected in the recognised strategic
importance of good buying at M&S (6, line 26), and the role of selector within the buying
team (6, line 27).
Buying is carried out by multi-functional buying teams for a product category (eg womens
underwear), reporting to a category executive. Teamwork is essential (6, line 38).
You might ask how M&S buying teams became divorced from market trends and the core
customer (14, line 7).
o
Were they distracted or pressured by too many new products, branding initiatives,
structural changes and staff cuts (under Salsbury: 10, line 35) and the shift to
international supply? (In your further reading, you may find that buying was radically
re-organised under Salsbury, integrating buying, marketing, selling teams, together with
IT and finance, within each customer group. How might this have helped or hindered?)
Was team priority placed on the Merchandisers role as profit margin managers?
Were buyers skills outdated as market change quickened and sourcing was
internationalised (9, line 41-42) and not updated by training and development (14, line 12,
27)?
Retail SCM focuses on securing the timely availability of a wide variety of products in
response to customer demand. You might like to consider how M&Ss tradition of mass
50
forward buying, and its later product proliferation/rationalisation, stock reduction and
supply agility initiatives meet each of these criteria.
Supplier relations are typically less durable in resale than in manufacturing, but as a
wholly own-brand retailer, M&S illustrates the opposite: long-term partnership relations in
order to specify and control its product ranges (5, line 5ff). How has this been a source of
competitive advantage for M&S and how has it become a liability? [>> Section 15]
Technological integration between retailers and suppliers has become widespread in the
form of EDI purchasing links, automated inventory control and replenishment, and demand
management via EPOS systems: the case doesnt say so, but a glance at the literature
suggests that M&S put these systems in place under Greenbury.
Small, highly consolidated supply chain: small core group of (first-tier) suppliers, whose
size allowed them to invest in people and machinery as required. The 1990s showed
increasing consolidation, with the top 20 general merchandise suppliers taking an 80% share
of M&S business (Bower & Matthews, p 11). You might like to think about the implications of
this for mutual dependency and supply risk as well as its support for relationship-specific
adaptation and mutually-beneficial collaboration. We will explore supply chain
relationships in Section 15.
Shift from domestic to global sourcing: from UK supply base > international sourcing
through UK-based suppliers off-shoring production facilities (early 1990s) > investigation of
less UK-centric sourcing and distribution, including localised sourcing of items for
international operations, global procurement systems. [>> Section 16]
Cost reduction: M&S appears to regard suppliers as its first resort for cost reductions, by
negotiating higher discounts (squeezing margins) and encourageing off-shoring to enable
price-competitiveness. You might like to think of the effect of this strategy on supplier
relations, supplier risk and M&Ss ethical positioning [>> Section 18]
51
SECTION 15
Supply Chain Relationships and Supplier Management
This is quite likely to be a focus of the examiners attention, with potential for a question about
how, how far, and why M&Ss supplier relationships have changed from its traditional codestiny culture. This is fairly straightforward territory: we will just give you some extra tools.
PROCUREMENT POSITIONING
Procurement positioning models are used to determine what kind of supply relationships
buyers should seek, in relation to purchased items. It is not known whether M&S carried out
such analysis, when broadening its supply base or moving to different types of relationship.
One relevant model here is Coxs relational competence model. The greater a buyers reliance
on its suppliers for the provision and development of distinctive, non-replicable, value-adding
(core) competencies, the greater the depth of the supply relationship will need to be: the buyer
is effectively locked in to relationship by the need to secure access to significant
complementary competencies, and the costs of finding them elsewhere. For M&S, suppliers
used to offer core competencies (eg competitive advantage, development of materials,
establishment of quality: 5, line 7, 41ff). With supply chain rigidity increasingly a disadvantage,
however, there is arguably only medium asset specificity (cost of re-sourcing): M&S can reap
efficiencies from a more adversarial style (eg on discount negotiation), while seeking to exercise
some control over risk (through partnership relations). This appears to be an emerging view at
M&S.
The Kraljic matrix is more suited to manufacturing contexts, but may be used as follows.
Complexity of the supply market
High
Low
Low
Importance of item
to the organisation
High
Routine or
non-critical items
Require systems contract
approach to purchasing
Bottleneck items
Require continuity of supply
Leverage items
Require competitive bidding
Strategic items
Require a partnership and
alliance approach
M&S has traditionally regarded all merchandise as strategic, because of its quality/brand
standards: this has been the driver for partnership relations, and will still be the case for
core, flagship fashion (eg Per Una) and premium-quality brands.
However, some core merchandise may now be seen as leverage items, because M&Ss
power allows it to control the supply market, and because it needs to be price-competitive
for entry level products (competing with supermarkets, say): it needs a more adversarial
approach (negotiating best prices and terms) in order to maximise its leverage.
52
M&S must also have routine items (eg clothes hangers, light bulbs, business stationery), and
should adopt a more transactional approach (if it does not do so already) for these.
SUPPLIER PREFERENCING
Supplier preferencing is the flip side of supply positioning, examining the suppliers
perspective on the desirability of collaborative relationships with a given buyer. The PMMS
model plots the attractiveness of the buying organisation (in terms of its profile, fair dealing,
efficient processes, willingness to collaborate and share gains) and the value of its business.
High
Attractiveness of
buyer
Development
Core
Nuisance
Exploitable
Low
High
Value of buyers business
M&S is likely to be a core customer for any supplier, as a high-value customer which would
probably score well on most indicators of attractiveness (5, line 9). However, it will need to give
attention to maintaining its attractive status, in order to avoid becoming exploitable: suppliers
will do what is required under the supply contract, to protect the business, but will not go out
of their way to provide extras or goodwill. Any extras that are demanded will be charged at
extra cost where possible.
M&S has risked its status by squeezing supplier margins (even in good times: ie not gainsharing), forcing suppliers off-shore (9, line 39), reducing order volume and predictability (10,
line 33; 14, line 25), and terminating loyal suppliers (10, line 31). The alienation became severe
enough to reduce M&S to nuisance status for Coats Viyella, who terminated the relationship: it
took more effort and cost to service than even the high value of the business justified (10, line
40). M&S will now have to be careful that it does not tip a significant number of its core
suppliers over the edge at once, eg if:
Its new Plan A targets (on top of existing quality and ethical standards) are perceived to
place too high a managerial and economic burden on suppliers
Its response to recession leads it to squeeze supplier margins still further, or to seek
extended payment terms (12, line 26-30)
53
High degree of organisational integration at all levels (5, line 45; 6, line 2ff). Executive board
members of M&S and large suppliers met for joint strategy formation. Suppliers were
required to have dedicated teams to interact with M&S buying departments.
Mutual dependency. We [suppliers] cannot do without them [M&S], but they cannot
replace us quickly either. Other new suppliers cannot bring the M&S culture on board
rapidly enough to survive the first few crises. There are important nods and winks between
us.
Electronic integration increasing: eg shared stock availability data and interactive computeraided design links > faster product development, easier late customisation
Doing business with M&S perceived as demanding, but a prize to be treasured: smaller
innovative suppliers constantly competing for contracts.
54
Greenbury encourages suppliers to off-shore production, with incentive of future pricecompetitiveness but costs and risks substantially borne by the suppliers (9, line 39)
Salsbury informs UK suppliers that orders will decrease (10, line 34),
Salsbury decides to terminate William Baird security of tenure (and implied long-term
contract) disappears (10, line 31)
Salsbury demands further price reductions to the point where Coats Viyella stops supply
(10, line 20). Note the implication of the case study phrasing that decision-making has
become unilateral and communication deteriorated.
2004: Rose calls in main suppliers (face to face meeting?) and re-negotiates discount levels
from 3.75% to 7.5% (12, line 26). More constructive negotiated approach? Rationale
(risks/costs to suppliers if M&S taken over) and quid pro quo 7-day payment terms: intention
to maintain good relationships (12, line 27-30).
2005: Bostock stipulates dramatically shorter lead times, but works with the suppliers to
achieve this (14, line 17ff). Some suppliers lost out on fewer/shorter production runs (14, line
25), however many were apparently on board for more responsive supply of more
fashionable designs (14, line 30) perhaps because of regained confidence that the future for
M&S and its supply chain were looking up?
2006: Rose increases the pressure (this time in writing) to increase discounts to 10.5%:
arguing that suppliers now benefiting from higher volumes should contribute towards costs
of advertising (15, line 13). This is seen as controversial (risking squeezing suppliers too
far?), but interpreted by markets as a show of determination.
You may want to see this in terms of a move towards adversarial-collaborative relationship: the
buyer works collaboratively with suppliers at operational level to increase value but competes
commercially to appropriate as much of value as possible eg in discount negotiation. Cox et al:
Way of working
Arms length
Collaborative
Favouring
buyer
Adversarial Collaborative
(buyer dominant)
Balanced
Non-adversarial Collaborative
(interdependent)
Favouring
supplier
Adversarial Collaborative
(supplier dominant)
55
On the other hand, you may also identify risks of alienating core suppliers. In this context, you
may see the launch of Plan A in 2007 as:
A further stress on supplier relationships, creating pressures for transformation and costsharing at a time when their margins are already squeezed and M&S already an increasingly
unattractive customer.
A brilliant way of uniting and involving suppliers in an inspiring strategy which will lead to
significant competitive advantage and capabilities for the supply network as a whole, to
everyones long-term benefit.
Consider how M&S uses its power: fairly, with equitable gain sharing or exploitatively for
its own profit maximisation?
Consider the nature of M&Ss dependency on its suppliers: how great is its exposure if one
or more core suppliers terminate the relationship or become insolvent? What can it do to
manage the risk?
SUPPLIER MANAGEMENT
A number of supplier management issues are raised by the case study, and although these are
of a rather tactical or operational nature, they may form part of an appraisal of M&Ss supply
chain practices.
Supplier selection and evaluation is not part of the case but review your notes in case you
are given the scenario of M&S having to seek new international suppliers, say.
Supplier performance measurement and management is not featured either, but you might
like to think about supplier KPIs suggested by the case, including:
o
o
o
o
o
o
o
o
You should be able to draw on your studies for Improving Supply Chain Performance in these
areas: review your Passnotes if you need to.
57
SECTION 16
International Sourcing
This could well be the focus of an exam question, given the marketing and supply chain issues
it poses for M&S, and the few but focused mentions of the topic (5, lines 37-40; 9, line 25-44; 10,
line 33-34; in the case study. We arent given enough information in the case to indicate exactly
how M&S structures its international sourcing: to what extent its Selectors and Merchandisers
deal direct with overseas suppliers, or continue to work with core UK suppliers who have been
encouraged to off-shore production to low-cost economies. (This obviously impacts on the
extent to which M&S bears, shares or transfers the risks of international sourcing.) In order not
to rely too heavily on background reading, we will assume (as the case allows) a bit of both.
Advantages of Buying British
Marketing advantage of buying British brand positioning (5, line 11) and ethical brand
positioning in supporting local suppliers/industry (5, line 15)
No cost disadvantage, as predictability, long lead times, large volumes, preferential supply
allowed suppliers to offer value (5, line 39)
Competitive price and cost savings (scale economies, low-cost skilled and semi-skilled
labour, favourable foreign exchange rate, liberal tax rates). This is likely to have been the
major consideration for M&S, as for its competitors: allowing both mass-production and
more innovative/flexible manufacturing at low cost (9, line 29ff)
The logistical, cost and marketing advantages of sourcing merchandise close to international
outlet/franchise centres.
Availability of required materials and/or skills, not available locally (eg sourcing and
production closer to sources of foreign-origin materials such as silk or cotton, or food
ingredients such as spices; unique manufacturing capability)
Less onerous constraints and costs re environmental protection, labour conditions etc.
athough M&S seeks to drive both areas eg via Global Sourcing Principles
(corporate.marksandspencer.com) and Plan A targets (including purchase of Fair Trade coffee,
cotton etc), and this may add costs of supplier monitoring and development
Leveraging available technologies for virtual organisation, e-sourcing etc (although it is not
known from the case to what extent M&S uses these)
58
We dont know from the case to what extent M&S has been able to share these risks with
suppliers. (Courtaulds, a major UK textile supplier of M&S, experienced major difficulties
shifting production overseas in the 1990s, due to political unrest, shortage of freight capacity,
textile import quotas and change management pressures: Christopher & Peck p 20). You might
like to think what risk management measures M&S and/or its UK first-tier or off-shoring
suppliers should have taken in order to minimise their exposure.
You might also like to consider the article 10 Tricky Decisions (for overseas sourcing), Supply
Management 16 February 2006. (We list eight of them below.)
59
Lead times
(Global sourcing increases lead times. To compensate for this, purchasers often increase
their minimum order quantity, but financing and carrying extra inventory is expensive.)
Flexible supply chain
(Delays can be disastrous especially for companies with limited options to re-route
goods.)
Intellectual property
(Fighting counterfeiting is complex and expensive, and it can be difficult to prosecute in
emerging markets.)
Evaluating M&Ss global sourcing strategy
Struggle to get a UK-led international supply chain to compete effectively (9, line 42).
Nevertheless, steadily increasing proportion of products sourced outside the UK (9 line 26,
43; 10, line 34)
Where next?
The case doesnt tell us exactly where M&S has got to in this area, but you might think about:
The need to develop M&S in-house expertise (perhaps building on contacts through
regional retail operations) to widen direct international sourcing from smaller suppliers for
short-run, non-core merchandise (eg seasonal fashion items)
The need for systematic risk management in regard to direct international sourcing
The need to develop localised buying for international outlets (under Greenbury, still
predominantly supplied from the UK: Bower & Matthews, p 19). This is especially important
for food products (for freshness, seasonality, local varietals): lack of food supplier
relationships in Europe and Hong Kong was identified as a constraint on the growth of
M&Ss food business abroad. However, it is also important so that Hong Kong retailers, for
example, who have their own operating plan, have authority over their own buying (Bower
& Matthews, p 20).
The need to develop procurement systems that will allow Merchandisers to buy goods in
any country in any currency
The need to develop logistics/transport planning systems that will get internationallysourced merchandise distributed to required retail destinations on a minimum-stop (now,
presumably, minimum carbon-footprint) basis
The need to develop more economical ways to transport goods (eg vacuum packing clothing
to reduce freight costs)
The need to support UK core suppliers who have off-shored at M&S request and/or to
encourage them to utilise off-shore production capacity for other customers
60
SECTION 17
Agile/Responsive Supply
LEAN SUPPLY
Does M&S practise lean supply?
M&Ss traditional supply orientation might generally be identified as lean, with a focus on:
Meeting (what was assumed to be) predictable demand efficiently (5, line 49) through
economies of scale and standardisation (7, line 37)
The use of long-term relationships with a small supply base to reduce costs of transaction,
sourcing and quality (5, line 8ff; 10, line 39)
The use of customer-pull merchandise flow (introduced under Greenbury): real-time stock
monitoring and replenishment via barcoding/EPOS; at-need ordering by sales assistants
from the stores stock allocation held at the regional warehouse facility; and systems for instore ordering by customers (transferring goods from anywhere else in the merchandise
stock system). (Bower & Matthews, p 13)
Progressively attempting (although with varying success) to streamline the product range
(22, line 6); streamline processes (eg paperless transactions, minimising non-selling activities
in store by preparing stock in warehouses); reduce inventory levels (12, line 24); and increase
stock throughput (13, line 30)
However, M&S has struggled to become genuinely or successfully lean, particularly in the
reduction of inventory: over-ordering and poor stock turn is a recurring problem (10, line 13; 13,
line 20). Overstocking was identified as both a waste and a source of inertia, because of massive
forward commitments (13, line 21, 27).
Waste also appears to have been an entrenched problem in:
The product range, with streamlining in times of recession giving way to increasingly
unfocused product development (7, line 35; 13, line 9)
Benefits of lean
Lean low-cost mass production is well adapted to:
Traditional push retailers such as department stores, which mainly stock only popular and
profitable lines (less worry about high inventory), and use regional distribution centres
(RDCs) to break large-batch, long-cycle deliveries from suppliers.
Core brands (predictable demand, high volume), which do not require innovation and can
be produced at mass volume for year round sale.
Conditions where cost and quality are key (Cox) as they have traditionally been for M&S
61
Drawbacks/limitations of lean
May drive weaker suppliers out of the market (10, line 32): social/ethical cost (New &
Ramsay)
RESPONSIVE/AGILE SUPPLY
Drivers for agile supply
M&S has traditionally released two clothing collections per year (4, line 45), using very
large-scale forward planning to place orders with core suppliers about nine months ahead
of the season. However, emerging fashion-niche competitors of the late 1990s (eg Gap, Zara
and H & M) used quick-turn systems: Gap had 14 seasons per year with stock changes
every three weeks (9, line 31; Christopher & Peck, p 19)
However, as a retailer, M&S faces a dual need to reduce inventory (reduced inertia, tied up
capital, costs of obsolescence and discounting) and to maintain service levels (avoiding
stockouts, enabling goods to be swiftly sourced on demand): unlike lean, agile supply
tolerates sufficient inventory to enable swift response.
Under Greenbury, M&S tried to shift up from two to four seasons for its main clothing
collections, and to reduce lead times to around three months. Were speeding up how we
buy. Rather than ordering just twice a year and well before each season, we now buy
throughout the year distinguishing between core and non-core merchandise, and ordering
up to a third of more fashion-driven lines during the season itself (M&S Annual Report
2000).
62
Attempts were also made to increase flexibility of buying decisions, despite forward
commitments to suppliers: eg making up garments, using IT to track colour preferences and
delaying dyeing until the selling season: customising the flow of high volume
manufacturing to subtle shifts in consumer taste (Bower & Matthews, p 11). This is one
example of late customisation, and you might like to think what others might be possible.
Under Rose, fashion-driven responsiveness became a high priority (13, line 19ff), since
womenswear was believed to be key to M&Ss revival (14, line 6). Bostock aimed for new
ranges to be introduced to stores every seven weeks, worked with suppliers to reduce lead
times and introduced fast-track systems for high-fashion items (15, line 17ff).
A HYBRID APPROACH?
The most effective option may be a hybrid lean/agile model:
Identify dynamic fashion items and source more responsively: trend monitoring, fast-track
development, shorter/fewer production runs, reduced lead times
Use late customisation where possible: eg mass making-up, demand-pull finishing (eg
dyeing, detailing)
Agile supply
Rapid response to unpredictable
demand
Lean supply
Meeting predictable demand
efficiently: eliminating waste
Most powerful
when (Cox)
Inventory strategy
Supplier
relationships
Work organisation
Self-management, flexibility
Performance
measures
63
SECTION 18
Cost Reduction and Stock Management
These are tactical, rather than strategic, themes, but just in case, we have provided some
thoughts.
STOCK MANAGEMENT
Overstocking is a recurring problem within the case:
Traditionally, M&S had resigned itself to the discounted sale of over-stocked items,
tolerated perhaps as enhancing perceived value for money: enabling customers to pick up
bargains (4, line 47). (Outside the case, we may see the same orientation in the M&S Outlet
stores, launched in 2000 to sell discounted over-stock and redundant items.)
One of the key causes of the 1999 crisis was that M&S had massively overbought stock
and was caught by surprise by a downturn in sales. (10, line 14)
Stuart Rose found the level of stock at 2004 still overwhelming and worked to increase
stock turn (12, line 24; 13, line 19) and reduce buying cycles (14, line 17ff).
The problems with overstocking include: large amounts of capital tied up in stock, costs of
clearing excess stock (eg by discounting), commitment to old stock creating lack of
responsiveness and lack of freshness (13, line 19-29).
Causes of overstocking
Overstocking may be attributed to factors such as:
Processes geared to predictable, long lead-time, infrequent, large-volume orders, bought ten
months in advance of demand to secure volume discounts (4, line 45; 5, line 9; 13, line 20)
The need to preserve retail service levels, in the face of consumer expectations (and
availability of substitutes) if goods are out of stock at a given outlet
Poor demand forecasting (10, line 13-15), perhaps due to: overconfidence and the need to
stock massively increased retail space (8, line 3); buying teams surprising lack of market
sensitivity (14, lines 9-10); and buying so far ahead in a potentially fast changing market (10,
line 14; 15, line 26)
Product proliferation, especially under Greenbury (7, line 35; 13, line 9)
Temporarily freezing buying, faced with high stocks and collapsed demand (12, line 24).
Consider the longer-term effects of this: popular goods sold out, less popular goods taking
over the shelves, no injection of fresh goods; less enticing offering, higher cost of clearance?
Reduce supplier lead-times, enabling more frequent, shorter-run ordering (14, line 17ff)
Develop more accurate demand tracking systems via EPOS, store feedback monitoring,
market research and share demand information/systems with suppliers
Train and develop buying teams in demand tracking systems, demand-pull buying,
selecting and working with suppliers to reduce lead times etc (14, line 27)
Increase stock turn by marketing incentives: seasonal sales (4, line 47), special 20% sales
days (13, line 30), the launch (and further roll-out, if necessary) of Outlet Stores (aiding
clearance by year-round sale of slow-moving and recent season stock) and improving
offering (range, value, service, quality), branding and promotion to increase sales (eg 13, line
44; 15, line 6)
COST REDUCTION
Drivers for cost reduction
Threat of recession: need to reduce costs to protect profitability (given depressed sales) and
to pass savings on to consumers to maintain sales (6, line 16-17)
Need to cover costs (eg of new IT systems, store network development, re-branding
programmes and Plan A commitments), without eroding value proposition by raising
consumer prices
Desire to increase profit margins: ambition to reach sector profit milestones (7, line 34-35; 9,
line 9ff), pressure for profit growth from shareholders and market analysts (9, line 12); desire
for sector profit leadership?
Competitive need to improve price positioning and offer outstanding value, without
eroding profitability.
Economies of scale, via long lead time, large-volume purchasing (5, line 39) but at the
expense of overstocking and lack of responsiveness (13, line 20)
Closure of smaller, less profitable stores, often located in less prosperous parts of the
country (7, line 50) at the expense of local communities and unprofitable international
operations (11, line 6)
Withdrawal of less profitable lines (eg childrens clothing removed from smaller stores,
niche ranges only available online or by in-store/catalogue ordering) potentially at the
expense of customer alienation (Christopher & Peck, p 9) and future sales growth
Downsizing, delayering and reorganisation for greater efficiency (6, line 18; 10, line 35):
duplication of effort and layers of management and supplier interface but at the cost of
redundancy benefits, destabilisation (11, line 9) and management consultancy fees (10, line
25, 29)
You might like to think what other methods of cost reduction M&S might have considered, or
might now consider, or whether it just needs to do the above but more effectively.
66
SECTION 19
Leadership and Influence
There are lots of strong possibilities for questions on leadership and influence arising from this
case study. For example:
What styles of leadership and influence are demonstrated by Richard Greenbury, Stuart
Rose and Kate Bostock in the case?
Use an appropriate (or specified) theoretical model to explain and appraise the leadership
style of one or more parties in the case.
What are the benefits and risks/drawbacks of a strong central leadership culture, as
demonstrated by the case?
Appraise the leadership effectiveness of one or more parties described in the case (perhaps
most probably Richard Greenbury and/or Stuart Rose).
What forms of influence are exercised by M&S within its sector and British business as a
whole? (A May 2007 case study question asked you to appraise the vision and strategy of
[the case study organisation] in influencing [its industry].)
You might like to review your notes (or our Passnotes) for Leading and Influencing in Purchasing
in some of the following areas, and take into the exam any material you think you may require.
THE CULTURE OF LEADERSHIP AT M&S
In general, the M&S leadership culture is distinguished by:
A high degree of deference for the leader (eg 7, line 6) and identification of the leader with
the company: strong followership factor
A highly personal bond between leader and company, based on experience and loyalty (6,
line 36; 11, line 38), and passion for the companys success (7, line 2; 12, line 19)
A high value on leadership tradition and dynasty through history (6, line 8; 12, line 17)
High personal investment/cost in leadership (eg 8, line 35ff; 14, line 22) and perhaps an
expectation that others will be similarly invested: demanding leadership.
Their strategic role (the strategy approach). Leaders take personal responsibility for
articulating mission, scanning the environment and formulating strategic plans: day-to-day
operations are delegated to other managers. This appears to be typical of M&S chief
executives in general. Greenbury increasingly took responsibility for strategy (7, line 25ff),
while Rose is a clear example of articulating mission (eg 12, line 17, 37), environmental
scanning (15, line 46) and strategy formulation (13, line 16)
Developing people (the human assets approach) who can add value and take responsibility
for developing and manageing corporate strategy locally. Greenbury arguably lost sight of
67
this (7, line 4ff), but Rose demonstrates the empowerment and development of managerial
potential (13, line 35; 14, line 2, 13, 44; 16, line 34).
Their role as change champions or drivers (the change approach), taking personal
responsibility for initiating and championing continual cultural and strategic change: the
role of other managers is to act as supportive change agents. We see a post-recovery shift
towards this orientation in Stuart Rose, with the introduction of the transformational Plan A
change programme (16, line 1ff, 19)
Interpersonal roles
Figurehead (3, line 42)
Leader (eg 12, line 14ff;
13, line 11)
Liaison (12, line 23, 26)
Decisional roles
Entrepreneur (13, line 30; 15, line 20)
Disturbance handler (12, line 43;
13, line 12)
Resource allocator (12, line 34; 16, line 3)
Negotiator (12, line 25)
LEADER BEHAVIOUR
NG
LIN
EL
Share ideas
and facilitate
in decisionmaking
AT
I
IN
S4
Provide
specific
instructions
and closely
supervise
performance
LL
Turn over
responsibility
for decisions
and
implementation
S2
TE
NG
S3
D ELE
Explain
decisions
and provide
opportunity for
clarification
PART
ICIP
AT
(HIGH)
(Supportive Behaviour)
RELATIONSHIP BEHAVIOUR
Informational roles
Monitor (15, line 46)
Spokesperson (12, line
31; 14, line 38)
Disseminator (16, line 1)
S1
TASK BEHAVIOUR
(Guidance)
FOLLOWER READINESS
(LOW)
MODERATE
HIGH
(HIGH)
LOW
R4
R3
R2
R1
Able and
Willing
or
Confident
Able but
Unwilling
or
Insecure
Unable but
Willing
or
Confident
Unable and
Unwilling
or
Insecure
FOLLOWER
DIRECTED
LEADER
DIRECTED
Rose inherited an executive team R3 at best: disunited, fighting, defensive and failing to
diagnose or tackle fundamental problems (eg 13, line 3ff). This suggests a selling strategy
for dealing with problems (high support to rebuild confidence, but high direction to reestablish control) and a participating style to re-unite and re-empower the team. Rose
demonstrates selling (eg 12, line 37; 15, line 13; 16, line 1) and participating (12, line 14).
For exceptional R4 team members like Bostock, he uses delegating (14, line 13). And for
under-performing teams, in problem areas, he uses telling (12, line 24; 13, line 12).
Bostock inherited a womenswear buying team at R1: lacking basic market awareness
and portfolio planning competencies (14, line 10) and lacking confidence (14, line 36).
This requires a task-focused telling style and we assume this is initially Bostocks
appraoch (15, line 15ff) although the situation was so critical that she brought in R3/R4
team members (14, line 10), presumably allowing a selling/participating style for the
mixed team. We assume a more supportive style from her staff training (14, line 27) and
Roses reference to her teams growing motivation and confidence (14, line 35).
Leadership styles
You may have your own preferred style models, and should make your own notes on which
styles are used (and how effectively) by Greenbury, Rose and Bostock. For example:
o
Blake & Moutons managerial grid. You might identify Greenbury, at the later stages of
his leadership, as a high-task, low-people leader (9, 1) in some respects: overbearing,
unilateral, pushing for profits, prizing good financial indicators over team morale (8, line
5-6) and so on. In contrast, Bostock and Rose are high-task, high-people (9,9) leaders
illustrating Blake and Moutons contention that the two are not incompatible. Both
believe that the motivation, unity and confidence of their teams are necessary for good
task results, and use both directive/task-focused and supportive/people-focused
behaviours as required. (For examples, see our Situational Leadership analysis above.)
Ashridge model: tells, sells, consults, joins. The culture of leadership at M&S has
historically been autocratic/tells. Greenbury was initially concerned about the
excessively autocratic style of the business and sought to change the culture (Bower &
Matthews, p 4) by encourageing board communication, openness and involvement (7,
line 4): a consults/joins style appropriate to an executive committee. However,
Greenburys impatience and M&Ss culture of deference led him to fall back to a frankly
autocratic/tells style (7, line 5, 25). Rose uses a tells style only when necessary to fix
critical problems decisively (eg on overstocking 12, line 25; the use of consultancies 13,
line 12) and otherwise prefers a sells/persuasive style (12, line 26; 13, line 11) and where
possible a consults/participative style (12, line 15; 14, line 13; 16, line 1). We dont really
know to what extent genuine consensus is sought for decisions: it may be safer to
assume a consults than a joins approach
You might also like to think about what kinds of influencing Rose and his colleagues will now
need to exercise in order to get key stakeholder support for and involvement in Plan A.
LEADER EVALUATION
You should be able to use the above comments and models to rate individual leadership
effectiveness. Broadly:
Greenbury was strong on crisis leadership, passion and drive, and ability to keep most
external and internal stakeholders on board through a steady programme of change (quiet
revolution). However, his leadership style grew increasingly autocratic, isolating him,
causing risky decision making, and inhibiting the development and functioning of his
executive team. He was focused on results with an insensitivity to people and culture, and
this led him to push too far too fast for the capabilities and stability of his team.
Salsbury arguably lacked genuine vision (reacting against Greenburys strategies and using
too many consultants) and his leadership style alienated key external and internal
stakeholders although it should be remembered that he inherited a crisis situation.
Holmes arguably had potential as a visionary and steadying leader, but was undermined by
the lack of confidence of others in the face of the takeover bid: he had failed to manage
upwards where the chairman and non-executive directors were concerned.
71
Has traditionally given M&S unity of purpose and direction, and preserved core brand
values (quality, service, trust) and a focused/controlled brand identity, when these were
strategic priorities. (Both during brand development in the early years and when needed
to recover focus under Rose.)
Is effective in bureaucratic cultures where deference, stability, security and followership are
valued (and often entrenched in the type of people the organisation employs).
Is effective in conditions of crisis, when people look for decisive leadership to steady the
ship (cf 11, line 24; 12, line 2) and when swift, unquestioned decisions are required to stem
problems (6, line 28; 12, line 24; 13, line 12, 38; 14, line 13).
Prevents the development of initiative and decision-making skills at lower levels, distancing
the company from customers (14, line 7), creating indecisiveness and lengthening decisionmaking (13, line 10)
Prevents the development of senior management skills and confidence, creating ongoing
problems of management succession planning (10, line 7; 12, line 4; 16, line 30) and political
in-fighting (9, line 46).
It fosters groupthink (Janis): blinkered thinking (in the absence of new information), a
sense of invulnerability and rightness (in the absence of challenge), aggressive defence
of the groups decisions/views (eg 7, line 20) and increasingly unquestioned, risky
decision-making. We see this effect in M&S over Greenburys reign, contributing to the
1999 crisis (10, line 13ff) and the question is whether it is occurring again under Rose
(16, line 41ff).
It hampers organisational learning and change, because it does not encourage divergent
thinking or critical appraisal of leadership effectiveness. This is exacerbated by the
tradition of internal leadership appointment: no fresh eyes on the organisation and its
leadership (until Stuart Rose). Note Roses leadership acumen in affirming past
leadership in such a way as to nevertheless create impetus for change (12, line 17).
Gives unchecked authority to leaders who are poor strategic thinkers: arguably the case
with Salsbury (10, line 24ff; 11, line 2ff).
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LEADERSHIP BY M&S
In relation to suppliers
M&S generally appears effective in its leadership of suppliers, through:
Intentional monitoring and reporting on quality and ethical compliance (5, line 43)
A mixture of direction and support (5, line 41ff; 14, line 17ff)
Using its buying power strongly (eg to persuade suppliers to raise discounts, off-shore
production) although you may find Salsburys approach somewhat risky and counterproductive (if not less ethical), terminating or alienating key suppliers (10, line 31ff, 39ff).
Using commercial incentives to motivate suppliers (12, line 29)
Using interpersonal contact, leadership and influence (eg by Greenbury and Rose)
In relation to customers
In relation to consumers, M&S uses high market mediation influencers through the marketing
mix: advertising (13, line 40ff; 14, line 45ff), branding (particularly strong: 13, line 33ff); sales
promotions (13, line 30) and customer loyalty programmes; web advertising and sales (15, line
20); and so on. This influence is used to secure sales and customer loyalty, and also commitment
to eco goals: Plan A includes customer pledges of commitment.
Customer communication typically uses a wide range of influencing tactics: rational
persuasion (eg 16, line 5, 9); inspirational appeal (eg engageing branding 13, line 38, 42;
celebrities 14, line 48; Plan A 16, line 19); consultation (eg customer feedback, market research 14,
line 20); and exchange (eg sales promotions 13, line 30 and loyalty incentives).
Note that not all M&Ss influencing attempts are successful (eg 10, line 14, 27), and that
influencing consumers may be increasingly difficult, due to growing consumer empowerment
and the erosion of brand loyalty (Lewis & Bridger).
In relation to business and the retail sector
M&S exercises referent power (French & Raven) as a leading retail brand, employer and
organisational success story: other players may seek to emulate it.
M&S now intentionally seeks industry leadership in CSR/eco values (16, line 4, 23): see our
discussion of CSR for details, since this could well form an exam question in its own right.
As an icon, major player and market leader in some segments (eg womenswear), M&Ss
performance affects market confidence and share prices throughout the sector (3, line 20ff)
M&S leaders are influential experts in their own right: eg Greenburys appointment to chair
the corporate governance report that bears his name.
You might like to contemplate a possible exam question such as: How can M&S use its
influence with key stakeholders to gain support for and involvement in its Plan A initiative?
73
SECTION 20
Management Succession
Management succession is perhaps too narrow an area of focus for a question on its own, but it
is identified as a recurring issue in the case study, with ramifications for leadership and
corporate governance. So you might like to think about the following.
Succession planning means having a process for identifying potential leaders and
grooming them through career, skill and personal development so that when the current
leader is ready to leave/retire, there is an appropriate candidate to replace him (or her).
This is a form of risk management or contingency planning, minimising the risk of:
Traumatic, adversarial leadership transition (eg Greenbury > Salsbury: 10, line 14ff, 21)
Hurried/unevaluated appointments (M&S was lucky with Stuart Rose! 12, line 4)
Difficulty under a poor or unpopular leader, while searching for a successor (11, line 2)
Uncertainty over succession, leading to political in-fighting (eg under Greenbury 9, line
46 but possibly a risk now, under Rose 16, line 31ff) or loss of confidence
Leaders taking over insufficiently prepared or developed (perhaps the case with
Salsbury?) or with insufficient internal support (perhaps the case with Holmes?)
Note also that lack of planned succession creates corporate governance problems. Rose
became chairman to guarantee leadership continuity, but there was no obvious director to
replace him as chief executive breaching the code of corporate governance by leaving him
in both positions [>> Section 22]. This creates the risk of one individual having too much
power, which contributed to disaster under Greenbury (16, line 39ff).
In the early years, shrewd succession planning (4, line 34) had ensured continuity of
leadership, with a particular view to retaining family ownership (valued by the corporate
culture) and brand/values continuity.
Greenbury was an internal promotee, with broad experience in buying roles. One would
probably argue that he was a good choice, although he could perhaps have benefited from
grooming in areas (eg international markets and strategic leadership) the challenges of
which he perhaps underestimated. Without plans to develop a successor (8, line 19), there
was uncertainty and political conflict: despite the identification of an heir apparent in
deputy chairman Keith Oates, which itself created tensions (8, line 21; 10, line 1), Greenbury
gave the chief executive role to Salsbury (possibly in an attempt to retain control, 10, line 7).
This resulted in further tensions and distraction (10, line 9ff), and a traumatic and hostile
leadership handover (10, line 19ff).
The period 2000 2004 was arguably too short to allow coherent development planning:
there was a need for leadership and strategic continuity to recover from the 1999 crisis,
restore stability and establish new direction. However, continuity was impossible to
establish, due to Salsburys poor performance (10, line 44) and lack of confidence in Holmes
(11, line 21, 44). Note the role of the chairman and non-executive directors in these decisions:
a potentially reactive and subjective influence, which would be checked by clearer
succession processes.
74
M&S appears to have relied on happy coincidence to find Stuart Rose in a hurry (once it
was decided that Holmes had to go: 12, line 1-7). You might argue that the period 2004-2008
is again too short for meaningful succession planning, given the need to recover from
traumatic leadership transitions and undigested change. However, Rose clearly recognises
that future successors need to be identified early, leaving time for grooming and career
development path planning (16, line 29-26). (This is a matter of report and rumour: we dont
know if there is greater clarity within M&S.) You might also note that Rose personally
worked hard to avoid a hostile or defensive leadership handover: unlike Salsbury, he
neither criticised nor sought deliberately to overturn the strategies of his predecessor.
(Compare 10, line 20ff with 12, line 17ff.)
The rationale for internal promotion is explained in the case: the need for leaders to
understand the company and its culture (and the lead time for an outsider to develop this
understanding); the security of having a known entity leading the company (and the risk
of incompatibility with an outsider); the benefit of continuity, allowing the company to
build on past success, preserve its brand values and maintain stability (the companys
cultural preference) (6, line 8-12)
The potential drawbacks of internal promotion, however, can also be seen from the case.
The organisation has low appetite and capabilities for change and learning, perhaps because
its leaders have grown up within the prevailing culture and skills sets. There is no
opportunity for fresh blood: fresh viewpoints, perceptions and competencies arising from
exposure to other markets or organisations. This may have hampered M&Ss ability to move
beyond its UK-centric supply chain, long-cycle/high-volume purchasing, increasingly oldfashioned brand and merchandising techniques. It lacked leadership expertise in
international market entry, agile/global supply.
Stuart Rose is a break from tradition. Although he had a 17-year career with M&S, he had
also obtained wider experience in other retail organisations (including niche fashion brands)
and experience of executive/strategic leadership (as CEO of Argos and Arcadia) (11, line 2737). He therefore brought fresh eyes, as well as familiarity, to the business, which enabled
him to: establish trust for initiating change (12, line 18); identify and tackle entrenched
problems (13, line 2ff, 33); exploit fresh talent from outside the company (Steve Sharp and
Kate Bostock); and explore new options such as internet sales and Plan A.
75
SECTION 21
Change Management
The case highlights change over M&Ss history (and particularly the difficulties of change for a
traditional bureaucracy), and major change programmes initiated by Greenbury and Rose. You
may well get a question asking you to evaluate the drivers of change, or the methods and
effectiveness of change management, at some of the key periods of change for the organisation.
(If youve been inclined to recommend any strategic changes for M&S, you should also be
prepared to recommend a change management plan for introducing them: such questions have
been set in recent case study exams.)
FORCEFIELD ANALYSIS
You might start with a forcefield analysis (Kurt Lewin) to identify factors in the situation which
will support or resist change: driving forces (for change) and restraining forces (against change
or for the status quo). Strategic and tactical options can then be selected to add or strengthen
driving forces and remove or weaken restraining forces.
Our analysis of the key elements of M&Ss overall forcefield is as follows. You may be asked to
focus on the forces for a particular change (such as Plan A, supply chain change or international
market entry) or a particular period of M&Ss history (eg the drivers for change faced by
Greenbury or Rose when they took leadership). Add or select forces accordingly
Current state
Preferred state
Driving forces
Restraining forces
Identified ageing/vulnerability
of core brand(s)
76
From this analysis, we can see that in general, M&S has had a greater balance of restraining
forces than drivers accounting for its slowness to change and follow competitors in changing.
We know from the case that M&Ss general appetite for change is low (eg 7, line 17), and that
tradition is a recurring rationale for many of its policies and practices. The stronger driving
forces are fairly reactive: that is, they drive change through disruption or dissonance to the status
quo (the identification of problems or crises), rather than representing proactive forces for
change (such as a new or visionary leader). Note in particular that the burning platform of
crisis is explicitly seen as a positive force for change under Roses leadership: preventing M&S
from relying on past solutions, and forcing people to unite and act decisively in order to
survive. (You might like to think why it did not represent such a positive force under Salsbury.)
However, some of the restraining forces are amenable to manipulation from within the
company: lack of competencies can be addressed by training; stakeholder support can be
obtained; PESTLE analysis can be instituted; and so on. M&S should be able to increase the
forces for whatever particular change it contemplates.
You might also use a numerically scored technique, giving each force a score (on a scale of 15,
say). You could then more accurately evaluate the balance of the forces for and against change.
If you were analysing the proposed investigation of new retail markets, say, you might add +2
to the score for cost but reduce the score for cultural unknowns and increase the score for
emerging supply markets. This would add to the total driving score and lower the
restraining score giving preference to change.
MODELS OF CHANGE MANAGEMENT
You might also use a model to structure your recommendations for change management, or
appraisal of M&Ss change processes or change agents (filling in the details as appropriate).
Eight-step model of transformational change (Kotter). You might prefer to use this
model. You might like to try apply this framework to recommending a change
programme for the roll out of Plan A, for example.
1
Establish a sense of urgency and prioritise change objectives based on market and
organisational imperatives (12, line 14, 37)
Form a guiding coalition of influential stakeholders (12, line 15; 16, line 1)
77
Plan to create short-term wins which foster momentum and buy-in: eg recognition
for participants (eg 13, line 45; 14, line 35), visible improvements (eg 12, line 44; 13, line
32, 38; 14, line 30)
What are the risks and challenges of transformational change, and how will M&S
need to take these into account in proceeding with Plan A (16, line 5ff)?
78
Crainers seven skills for manageing change: manageing processes (not just content);
manageing strategy; manageing personal development; project management;
interpersonal skills; leadership balanced with flexibility; and manageing conflict. What
skills and attributes do Greenbury, Salsbury, Rose and Bostock have for driving change?
How effectively do they tackle change tasks such as vision articulation, stakeholder
communication and influence, confronting resistance, risk management, perseverance,
and consolidation/reinforcement?
A number of different groups may have strategic change roles: strategic leaders, middle
managers, change agents (individuals or teams appointed and empowered to drive a
change project) and external change agents. To what extent has M&S availed itself of
these various change resources?
Collaborative/
Consultative style
Directive/
Coercive
style
Incremental change
Participative evolution strategy
Use when:
Transformative change
Charismatic transformation strategy
Use when:
Major adjustments required
Little time for participation
There is support for radical change
The use of external change agents: whether newly appointed directors (like Sharp and
Bostock) or external consultants (as under Salsbury). What are the advantages and
disadvantages as illustrated by the case of using such change agents?
79
SECTION 22
Corporate Governance
Corporate governance doesnt explicitly appear in the syllabuses covered by the Case Study
paper, as far as we can see, but it is an issue clearly raised by the case (7, line 11-24; 10, line 6; 16,
line 27ff). An obvious area for a question here is to argue the case for and against keeping the
roles of CEO and Chairman separate, using examples from the case study. Just in case
CORPORATE GOVERNANCE
Corporate governance is the system by which organisations are directed and controlled
(Cadbury Report). It provides a framework for an organisation to pursue its strategies in an
ethical and effective way from the perspective of all key stakeholder groups, and particularly
addresses the need to ensure that directors use their power in the interests of shareholders, as
agents appointed to run the business on their behalf.
The Cadbury Report (7, line 11ff; 10, line 6; 16, line 40ff)
The Cadbury Committee made recommendations and created a Code of Best Practice, based on
openness, integrity and accountability, in a number of areas, including:
Board of directors. The report stressed the importance of the board meeting on a regular
basis, retaining full control over the company and monitoring executive management. There
should be a clear division of responsibilities at the head of a company, with no one person
having complete or unfettered power. Generally this would mean the posts of chairman and
chief executive being held by different people. (Chairmen are primarily responsible for the
working of the board and should be able to stand sufficiently back from the day-to-day
running of the business to ensure that their boards are in full control of the companys
affairs and alert to their obligations to their shareholders.)
Executive directors. The report contained provisions about the length of service contracts
and disclosure of remuneration, which were developed further in the Greenbury Report.
The separation of chairman/chief executive roles is clearly of most relevance to the case.
The Greenbury Report (8, line 31ff; 9, line3)
The Greenbury Committee considered the issue of rewarding executive directors, and made
recommendations to improve accountability, transparency and performance, including: the
setting up of a remuneration committee of non-executive directors to determine reward policy
and awards; reporting on remuneration policy (and notification of directors service contracts
with notice periods longer 12 months) within the annual accounts; ensuring that performancerelated incentive schemes should balance the interests of directors and shareholders. It is
difficult to see the relevance of these recommendations to the case.
80
www.annualreport.marksandspencer.com/governance/relations
www.annualreport.marksandspencer.com/governance/board
These are sections of M&Ss 2008 Report and Accounts which declare how M&S has complied
with each of the corporate governance provisions, and a link to a special Corporate Government
Statement on why it has departed from the Code. (We will summarise its arguments in
presenting a more general case, below.)
ARGUMENTS FOR ROLE SEPARATION
The importance and particular role of the chairman in manageing and empowering the
board, and the need to stay separate from the day-to-day running of the company in order
to do this effectively.
The need to avoid placing unfettered power in the hands of any single individual (16, line
42), which may result from a combined chair/chief executive (unless there is a strong nonexecutive element on the board, to balance power).
M&Ss own experience of the disadvantages of overly strong, unchecked power in the
hands of Greenbury (16, line 39): development of groupthink, risky decision making, lack of
board development, lack of divergent/new views for strategic change [>> Section 19 for
details]
Potential for an individual with unchecked power to exploit that power unethically to the
detriment of shareholders and other stakeholders (although there is no suggestion that this
is the case at M&S)
Compliance with the Stock Exchange Combined Code, avoiding reputational damage and
shareholder conflict for failure to do so. (This has surfaced, beyond the case study period,
with significant shareholder opposition to the proposal to re-elect Rose as chief executive at
the 2008 AGM.)
Demonstration that M&S is able to learn from past mistakes (16, line 43), take on board
divergent information and confront changes to strongly held beliefs (eg that the division of
roles is business school rubbish: 7, line 24.)
81
There is no necessary difference in the role of chairman and the role of chief executive: the
division between long-term/strategic and short-term/day-to-day is not borne out in
organisational practice (7, line 20ff). There is no reason not to have an executive chairman
(which is what M&S has proposed).
There is a need for continuity of leadership to consolidate after recent leadership changes,
carry through crucial recovery strategies and push forward strategic plans (such as Plan A)
at the point at which the governance issue arises (for both Greenbury and Rose).
The primary concern of the board is the success of the enterprise. Focus during periods of
significant trading uncertainty (such as the wake of the 1991 recession and the threat of the
2008 recession) should be on business performance, rather than leadership issues.
The combined role is a way of streamlining executive management structure and saving
extra remuneration costs.
There is no available successor in the chief executive role in the immediate future (for either
Greenbury or Rose): a combined role buys time to groom an internal successor (which is
M&Ss preference for various sound reasons: 6, line 8ff).
Exceptional circumstances:
o
Greenbury was an example of a combined chairman and chief executive already in place
and securing a remarkable turnaround in the companys fortunes (6, line 25, 42) at the
time when the Cadbury recommendations were made in 1992: it would have been
disruptive and counter-productive to separate his role, given the need for leadership
continuity to see the recovery strategy through, and the lack of time to have developed a
succession plan.
Similarly, CEO succession was not a priority issue in the early years of Stuart Roses
tenure, with the need to implement a profound recovery programme. So options for
board succession are now constrained: no available candidate would be ready to take
over soon, and the challenges M&S now faces (with the threat of recession) make it
reluctant to undergo the risk and disruption of recruiting a CEO from outside. For
continuity of leadership, and to see through major strategic initiatives such as Plan A,
Roses appointment needs to be secured for the next few years (16, line 28) but with a
change in the emphasis of his responsibilities (ie by making him chairman) in order to
clear a path (make headroom: 16, line 33) for a future chief executive appointment.
A limit put on the combined chairman/chief executive appointment eg until July 2010
The appointment of a Deputy Chairman and a clear specification of the duties of Chairman
and Deputy Chairman, to ensure balance of power
SECTION 23
CSR, Ethics and Sustainability: Plan A
This is quite likely to be the subject of a question, given the importance of Plan A as a strategic
initiative. It may feature in connection with other topic areas, eg:
Plan A as a differentiating strategy, focusing on one key area in which consumers may not
be cynical, demanding and driven by short-term wants, but which might act as a magnet for
increasingly rare brand loyalty (Lewis & Bridger)
However, it may also be the focus of a question in its own right, taking an angle such as:
What impact Plan A is having (or is likely to have) on all areas of M&Ss operations, (and/or
on its supply chain management and/or on its suppliers and other stakeholders), and how
this impact can be managed.
You should be prepared to make introductory remarks about the definition of CSR, ethics,
sustainability and environmental responsibility; and about their growing profile in the public
and private sectors, in terms of both regulation and stakeholder awareness. You should also be
ready to state the business (and marketing opportunity) case for ethical and environmental
responsibility. This should all be familiar from your studies in Strategic Supply Chain
Management and other modules.
GENUINE IMPORTANCE OR MARKETING PLOY?
Key business case points:
You might also like to think about this specifically in relation to the retail food and clothing
sectors. In addition to the above business case arguments, you might add:
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The lack of legal protection given to workers in low-cost countries, where mass market
clothing is typically manufactured, placing ethical and public opinion pressure on retailers
to use their influence with manufacturers
Demonstrations outside the M&S stores by Unite trade union members, arguing that buying
and importing meat cheaply from countries such as Thailand and Brazil is affecting labour
conditions for low-paid workers in the UK (Supply Management, 28 Feb 2008)
The responsibility for public health and hygiene arising in relation to food products
The potential for Fair Trade branding in relation to both clothing and food/drink products
(eg Fair Trade cotton and coffee 16, line 17), and the underlying ethics of Fair Trade (fair
prices to small rural suppliers).
Public and consumer group scrutiny about the way food animals are reared (eg free range,
cruelty free, hormone-free 16, line 19), crops are grown (eg genetic modification, use of
pesticides, clearance of rainforest for agricultural land, monoculture crops destroying soil)
and so on.
Note that there is a challenge of communicating genuine CSR and ethical values widely, to
secure stakeholder buy-in and co-operation and using consumer approval to help invest in
your efforts to save the planet! without looking as if you are only doing it as a marketing ploy.
M&S tackles this by demonstrating:
Integration of changes through all areas of the business (15, line 39, 43; 16, line 6) not just
marketing, branding and communications
Willingness to be accountable for performance: reporting regularly (via the website and
annual How We Do Business report) on progress against Plan A targets.
However, the marketing opportunity is still there to be exploited. Note the following comments
in an article in Supply Management, 2 March 2006 (Ethics and the purchaser, by Rosey Hurst).
According to a 2006 survey commissioned by Marks & Spencer, 90% of consumers think retailers should
ensure their products are manufactured in a fair and humane way and 31% said these considerations
had actively influenced a purchase decision.
Companies aware of these trends have been keeping ahead of the game for many years by working on
monitoring and improving conditions in their supply chains. But this has been done mainly behind the
scenes with the focus on brand protection rather than promotion. The M&S Look Behind the Label
campaign marks a fundamental change. It informs customers about how products are made, not in the
recesses of its CSR report, but in the national media, and in store windows. The way its products are
made is now a central part of its brand.
The shift presents purchasers with several challenges. They need to develop the core competencies of
supply chain professionals to include ethical considerations in purchasing. They also need to develop the
capacity of the supply base Will adherence cause costs to rise? Will consumers pay more for their
ethics?
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What kinds of changes M&S would need to make to its operations and supply chain
management
Climate change: eg reducing energy-related CO2 emissions from stores and offices;
supporting farmers who are investing in small-scale renewable energy production; piloting
eco-stores; monitoring the carbon footprint of the food business; and encourageing
consumers in more eco-friendly washing of clothing products.
Waste: eg engageing customers in reducing carrier bag usage and recycling clothing;
reducing use of packageing, increasing use of recycled materials; improving recycling rates
for construction waste and coat hangers. (The target is to send zero waste to landfill from
M&S operations.)
Sustainable raw materials: eg promoting animal welfare in fashion and food production (eg
implementing lower stocking densities for chicken); increasing use of Fairtrade and organic
cotton and recycled polyester; increasing sales of organic food.
Health: eg removing artificial colourings and flavourings from 99% of food products;
reducing salt levels; introducing front-of-pack FSA traffic lights; and training employees as
healthy eating assistants.
M&S is appointing and training Plan A Champions in stores and offices. It is involving
stakeholders, including employees, suppliers and customers (using pledges of commitment to
each of the five pillars) in Plan A.
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The closure of unprofitable stores in less affluent areas (7, line 50), which might be a social
access and equity issue
Profit margins: given profits rising by 87% on sales increases of 35%, one wonders which
stakeholder group was forced to subsidise shareholders windfall (9, line 10). Were cost
savings passed on to customers? Were gains shared with supply partners?
Staff cuts (6, line 18; 10, line 35). This is a justified business practice (particularly in a large
bureaucracy in a time of recession), but it puts pressure on ethical and responsible
management of redundancies. (Outside the case, The Times reported in August 2008 that
M&S had cut the redundancy benefits available for staff by up to 25%.)
Supplier margin squeezing and short-notice termination (10, line 30ff): to what extent might
this be seen as a social responsibility or fair partner issue, beyond the commercial
rationale?
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SECTION 24
Risk Management
In this Section, we give an outline risk assessment for M&S, and suggest some general methods
by which identified risks could be managed or mitigated. This is potentially a major underlying
area of the case study, and lends itself well to an exam question. Some of the strategies pursued
by M&S over the years seem to have been particularly risky, raising questions about its risk
assessment and management. You might be asked to assess M&Ss risk appetite, identify
particularly risky strategies and suggest how those risks might have been more effectively
assessed and managed.
Ensure that you take relevant notes/texts with you into the exam: the Profex Passnotes for Risk
Management and Supply Chain Vulnerability contain useful checklists on the risk management
cycle, specific categories of risk and mitigation options, for example.
THE RISK MANAGEMENT CYCLE
IDENTIFY
key risks
MONITOR/
REVIEW
Identify/manage
INFLUENCES
on the risk
outcome
ASSESS
probability and
impact of risks
Formulate
STRATEGIES
to manage the
risks
Allocate
ACCOUNTABILITIES
Monitoring,
reporting &
adjustment
Identification of
responses to risk
(4Ts & contingency
plan)
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Over-investment in stock and capital renewal projects on the basis of overconfident sales
projections (which failed to materialise), causing the collapse of 1999
Termination or alienation of core suppliers, under Salsbury, which exposed M&S to supply
risk and re-sourcing risk
RISK ASSESSMENT
Again, rather than devise our own risk assessment and mitigation options, you might like to
look at M&Ss own assessment of principal risks and uncertainties for its business:
(annualreport.marksandspencer.com/governance/accountability). We reproduce the essentials here.
PRODUCT: We aim to provide a wide choice of great value, high quality clothing, food and home products,
which are all sourced and made responsibly.
Risk
Impact
Clothing
We fail to maintain clothing
market share through
growth of space and focus
on product in the face of
increased competition in
tougher trading conditions
Adverse effect on
financial results
Lost market share
and customer
loyalty
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Risk
Impact
Food
We fail to deliver profitable
sales growth while
maintaining an innovation
gap over competitors
Adverse effect on
financial results
Lost market share
and customer loyalty
PEOPLE: As we continue to grow our business and invest for the future, its important we keep strengthening our
team at every level from shop floor through to management.
Risk
We fail to attract, develop and
retain talent with the correct
skills and capability for
succession
Impact
Inability to develop
and execute
business plans
Competitive
disadvantage
succession
Competitive reward packages
Buying Academies in head office and coaches in stores
Graduate recruitment and development
Employee communication
Tracking of employee satisfaction surveys
Tracking of customer perceptions of service
M&S DIRECT: We are further developing our M&S Direct business as an important part of our commitment to
becoming a multi-channel retailer.
Risk
We fail to deliver sales
growth by failing to meet
customer expectations
Impact
Adverse effect on
financial results
Lost market share
and customer loyalty
INTERNATIONAL:
INTERNATIONAL We have ambitious plans to grow our International business through expanding our franchise
operation, entering into partnerships and developing wholly-owned businesses in emerging economies.
Risk
We fail to grow our
International business
successfully through
franchise operations,
partnerships or wholly-owned
businesses
Impact
Adverse effect on
financial results
Damage to brand
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PLAN A: We launched our five-year eco plan in January 2007 to address challenges across five areas: climate
change, waste, sustainable raw materials, fair partner and health
Risk
We fail to deliver, measure or
communicate performance
against our Plan A
commitments
Impact
Lost stakeholder trust
and confidence
Damage to brand
You might classify these (and additional) risks differently. For example, as:
Financial risks: eg exchange rate risks, fluctuating commodity prices, investment risk,
loan/gearing risk
International sourcing risks: exchange rate risks; transport risk; cultural/legal differences;
quality/ethical standards; political risks; barriers to trade (eg clothing import quotas);
supplier learning curve; supplier selection, evaluation and monitoring
International market entry risks: exchange rate risks; transport risk; cultural/legal
differences; product/consumption differences; barriers to trade; learning curve; franchise
development risks (selection, relationship compatibility, control issues); direct investment
risk (entry/exit costs of set-up or acquisition)
Marketing risks: competitor initiatives and price/focus competition; new market entrants;
consumer switching; brand outmoding; product portfolio gaps; e-commerce risks (inability
to fulfil delivery expectations; entry investment cost; technology breakdown; impact on
store retail)
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SECTION 25
Financial Aspects
It is most unlikely that you will face a question on the financial performance of M&S. Such
questions have never been a feature of the Case Study exam, and the Level 6 module on Finance
for Purchasers is not part of the underpinning knowledge for this unit. Moreover, the case does
not provide enough detail for a sensible analysis. However, Table 1 in the Appendices to the
case contains some financial figures, so we have thought it worthwhile to probe a little more
deeply: see the table below. You may find it useful to refer to the data presented here in order to
make a point while discussing a question on strategic issues.
Year
Pre-tax
profits (m)
Sales revenue
(m)
Number of
UK stores
Net profit
percentage
Revenue per
UK store (m)
1975
81.8
721.9
252
11.3
2.86
1980
173.6
1,667.9
252
10.4
6.62
1985
303.4
3,213.0
265
9.4
12.12
1990
604.2
5,608.1
272
10.8
20.62
1995
924.3
6,806.5
283
13.6
24.05
1996
965.8
7,211.3
284
13.4
25.39
1997
1,102.0
7,841.9
286
14.1
27.42
1998
1,168.0
8,343.3
294
14.0
28.38
1999
628.4
8,224.0
294
7.6
27.97
2000
557.2
8,195.5
300
6.8
27.32
2001
480.9
8,075.7
303
6.0
26.65
2002
335.9
7,619.4
324
4.4
23.52
2003
677.5
8,077.2
336
8.4
24.04
2004
781.6
8,301.5
375
9.4
22.14
2005
745.3
7,942.3
399
9.4
19.91
2006
751.4
7,797.7
508
9.6
15.35
2007
965.2
8,588.1
520
11.2
16.52
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The table takes the later years of Table 1 from the Appendices to the case and adds a couple of
columns to show the profitability of the company and its sales revenue generated per UK store.
By comparing this with the M&S timeline on page 11 of this text you can see how profitability
and revenue per store have varied during the leadership of different chairmen and chief
executives.
The Greenbury years show a steady increase in both net profit percentage and revenue per
store, climaxing in 1998 with a 14% net profit and more than 28m of revenue per store. This, as
it soon proved, was not sustainable: the disaster of 1999 shows net profit plummeting to just
7.6% of sales while revenue per store begins to show a steady decline.
This disappointing pattern continues and reaches its lowest point in 2002, when net profit was
just 4.4% of sales. At this point, under the leadership of Roger Holmes, the company was
looking very vulnerable to takeover. From then on, however, and most noticeably after the
appointment of Stuart Rose, there is a marked improvement. By 2007 net profit had climbed
back to 11.2% of sales. This is despite the fact that revenue per store has continued to decline. In
fact it is clear from the figures that Rose has thought it more important to extend the stores
network (from 336 UK stores in 2003 to 520 in 2007) than to maximise the revenue earned per
store.
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SECTION 26
Marketing
It would be rather unfair to have a marketing question, since Marketing isnt a compulsory
module of Level 5 and therefore isnt, strictly speaking, underpinning material for this
module. However, just in case, the following are some pointers to think about.
MARKETING ORIENTATION
In the 1950s and 1960s we were a production-led business, where the product was pushed
and manufacturing was king. In the 1970s and early 1980s it was a product business where
the retailer was king. Now we always say: Buy what we sell, not sell what we buy because,
as we move through the 1990s, the customer is king. (Greenbury, quoted in Bower &
Matthews, p 13).
How far is this borne out by subsequent perceptions that M&S had (a) massively
overbought stock and not foreseen a dramatic downturn in sales (10, line 13); (b) alienated
its core customer segment (14, line 7); and (c) failed to identify customer needs (14, line 10,
21, 31)?
MARKETING PLANNING
How was there no current plan for the crucial Womens Clothing division, when Bostock
took over? ( (14, line 8ff) What kinds of planning should have been carried out?
PRODUCT/MARKET STRATEGY
See our Ansoff matrix analysis and identification of M&Ss product/market strategy
options: [>> Section 9]
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PRODUCT PORTFOLIO
The product portfolio (or mix) is all the items or lines/ranges a company offers for sale.
Products may play different roles within the mix: profit provider, niche filler, innovation
leader, flagship brand and so on.
What weaknesses are demonstrated in M&Ss product portfolio planning? Think about:
Maintaining sales and profitability of mature, flagship or cash cow products (14, line 7)
Identifying gaps in the portfolio, where there is untapped consumer demand (eg Petite
sizes, Plus sizes, fashion items: 14, line 10)
Identifying products which can be leveraged to capture market segments (eg a maternity
range establishing a market for childrenswear, toys etc: 14, line 31ff).
DIRECT/ONLINE MARKETING
What are the advantages (to the customer and to the retailer) of marketing online? What are
the marketing uses of a website? What makes an effective retail website and how effective
is the M&S Direct site?
RELATIONSHIP MARKETING
Relationship marketing is a shift of focus from customer acquisition to customer retention
and loyalty. It uses relationship building techniques (multiple contacts, personalisation,
customised offers, two-way dialogue, loyalty incentives) to induce repeat purchases, higher
value purchases (up-selling) and additional purchases (cross-selling) over time, in order to
increase the lifetime profit potential of customers. How might M&S exploit such techniques?
How might M&S Direct (the consumer e-commerce site) help in this?
INTERNATIONAL MARKETING
[>> Section 11]
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SECTION 27
Other Issues
Just in case, and if you have time, you might like to think about the following topics.
SECTION 28
Summary of Ancillary Background Reading
BEVAN: THE RISE AND FALL OF MARKS & SPENCER AND HOW IT ROSE
AGAIN
We presume that this has been cited to show where the examiner derived the material for
the case, rather than as a suggestion for further reading. In its 2007 edition the book runs to
336 densely printed pages of text, and it would be quite impossible for most students to
think of reading it with the limited time available before the exam. It is best to assume that
the pertinent details are those that have been extracted by the examiner and presented in the
case, though we have occasionally referred to extracts from the text in this Analysis.
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