Marks and Spencer

Analysis of the Case Study

Submitted to: Sheikh Morshed Jahan Course Instructor Business Strategy

Submitted by: Nazika Nazmin Choudhury Sa"rina Afroz #rina Samanta Sarni %ira %anzia Sira' Nazia )e"in

RH ! RH $$ RH !& RH ($ RH *++

Institute of Business Administration ,ni-ersity of .haka January /0 &+*1

%a"le of Contents
Background22222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222* Case Chronology22222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222* *3Initial Success222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222* &3.ecline4 Signal of "ad times2222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222& /3Restructuring and re5organizing strategies4 Strategic .rift222222222222222222222222222222222222222222222222222& 13Reco-ery6 yet Reoccurrence of .ecline22222222222222222222222222222222222222222222222222222222222222222222222222222222/ Identification of Core Issue222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222221 Identification of the Central Role 7layer222222222222222222222222222222222222222222222222222222222222222222222222222222222222222221 Supporting Issues222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222221 Rigid organizational culture2222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222221 Complicated structure222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222 %urf 8ars2222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222 %he 9Core: of M;S 222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222$ Customer Range222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222$ Changes in leadership or management22222222222222222222222222222222222222222222222222222222222222222222222222222222222222222$ Internal and #<ternal conte<ts of decision5making2222222222222222222222222222222222222222222222222222222222222222222222222! Strategic Roadmap 22222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222222!

Background
%his case study is a"out =hy one of the =orld:s most famous retails0 Marks ; Spencer0 that ran into trou"le at the end of the *((+s and ho= it attempted to manage a series of change to o-ercome those pro"lems2 It is therefore useful to e<plore issues concerned =ith organizational culture0 strategic drift0 strategic choice and the management of change2 %he case co-ers "oth the history of Marks ; Spencer throughout the last century and0 in more detail0 from *((> to &++10 the period =hen it mo-ed from a position of market dominance to one in =hich it =as deemed to "e a take5o-er target2 %he case charts the attempts "y its different chief e<ecuti-es to address the pro"lems during this time and0 therefore0 the -arious change initiati-es that =ere mounted2

Case Chronology
%his case is "roadly di-ided into four parts4 *3 &3 /3 13 Initial success .ecline Restructuring and re5organizing strategies Reco-ery6 yet reoccurrence of decline

1) Initial Success Michael Marks "egan "y esta"lishing a penny "azaar in the late *>>+s0 it =as a huge success =ith the ma'ority of products costing only one penny Marks needed a partner to help run the gro=ing firm0 %om Spencer2 M;S =orked under a close5knit family atmosphere2 Marks =as reno=ned for his personal control o-er the "usiness0 his =as a style of top5do=n management and centralized organizational structure2

It is not any one characteristic "ut a mi< of characteristics that0 as a set of linkages0 =ould "e -ery difficult to imitate4

2) Decline: Signal of bad times In order to control costs there =ould "e less full5time sales assistants2 %his led to an ina"ility in stores to meet the ser-ice le-els re?uired "y M;S2 .eteriorating profits .ecrease in share prices Rapid sell5off of M;S shares #<cess stock Closing of most of the #uropean stores Changing the suppliers Customer satisfaction sur-eys sho=ing decreasing satisfaction2 %op management =as not a=are a"out this2

3) Restructuring and re organi!ing strategies: Strategic Drift An organization:s success is often the root of its demise2 @-er the years Marks ; Spencer de-eloped a =hole culture around the =ay it did things and ho= it "uilt upon its competences2 &

%his =as a tremendous strength for it and led to its success2 Ho=e-er0 it also led to a drift as Marks ; Spencer did not introduce changing facilities for customers until the mid5*((+s2 7eter Sals"ury implemented a restructuring strategy0 splitting the company into three4 ,A retail "usiness0 o-erseas "usiness and financial ser-ices2 #sta"lishing a company5=ide marketing department to adopt a customer5focused approach2 M;S also launched ne= clothing and food ranges0 reinforced "y a large5scale promotional campaign2 Sals"ury also issued a memorandum e<plaining that he =anted to challenge the traditional =ays that M;S operated0 mo-e M;S a=ay from its "ureaucratic culture2 %hen again splitting into se-en "usiness units4 lingerie0 =omen:s =ear0 men:s =ear0 children:s =ear0 food0 home0 and "eauty2 January &+++ sa= a ne= chairman for M;S0 Buc Cande-elde2 %his =as the first time anyone from outside M;S had "een appointed to the position of chairman2 He =ent for a ma'or culture change of the organization Durther restructuring of M;S into fi-e operating di-isions4 ,A retail6 international retail6 financial ser-ices6 property and -entures2 Creation of customer insight unit Relocate the head?uarters

") Reco#ery$ yet Reoccurrence of Decline Cande-elde ne-er ga-e up2 ,n-eiled its Autumn58inter fashion collection0 formally tailored range0 e-ening =ear and a ne= range entitled 97erfect :2 A 'oint -enture to design and source children:s clothing =ith one of its leading suppliers2 %he ne= range0 named 97er ,na:0 targeted =omen aged & E/ 0 7er ,na =as =ell recei-ed "y customers2 #mploying Holmes to implement a store refur"ishment program2 Holmes =as seen as the dri-ing force "ehind the re-italization of =omen:s clothing0 the "oys range =as launched and also inno-ation in food ranges2 As a result M;S sa= successful Christmas2 M;S =as "ack in the rankings of the 98orld:s Most Respected Companies:2 It had regained its place "ecause of the =ay it had restructured and refocused itself0 and underlined the strength of the "rand and culture2 Rise in profits and an increase in the di-idend2 But M;S sa= only short term success2 /

7ro"lems in =omen:s =ear and children:s =ear still continued2 In addition food and home =are also had pro"lems2 %otal sales =ere do=n2

Identification of Core Issue

%he core issue for the decline of M;S can "e identified as the a"sence of a long term strategy2

Identification of the Central Role %layer

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Su&&orting Issues
Rigid organizational culture Complicated structure %urf =ars %he GcoreH of M;S Customer Range Changes in leadership or management

Rigid organi!ational culture

An organization:s success is often the root of its demise2 @-er the years Marks ; Spencer de-eloped a =hole culture around the =ay it did things and ho= it "uilt upon its competences2 %his =as a tremendous strength for it and led to its success2 Ho=e-er0 it also led to an entrenched and em"edded =ay of doing things0 together =ith a degree of certainty E e-en arrogance E in so doing0 =hich =as e<tremely difficult to change2 It appears that no one sa= the need for any change6 indeed the strategy of the organization =as0 in effect0 a function of the certainty of =ays of doing things2 Dor the most part and for many years this =orked2 Ho=e-er0 there =ere early signs of it not doing so2 %he manifestations came in the late *((+s0 "ut decline in performance lagged2 By the early *((+s commentators =ere critical of the arrogant attitude of Marks ; Spencer to=ards customers2 @ther retailers had mo-ed to credit card facilities6 Marks ; Spencer had not2 Marks ; Spencer did not introduce changing facilities for customers until the mid5 *((+s2 Research had sho=n that people =ere tolerant of inefficiencies in Marks ; Spencer0 such as lines "eing out of stock0 =hen they =ould not "e in other retailers2 Moreo-er it had "ecome clear that the culture =as not only dri-ing the strategy0 "ut also dri-ing the appointment of senior personnel in the firm2 ,p to and including Ireen"ury0 there had ne-er 1

"een a chief e<ecuti-e of Marks ; Spencer =ho had not "een a mem"er of the family0 or =ho had =orked =ith the firm for the =hole of his career2 %hese strategic leaders came to em"ody the Marks ; Spencer =ay of doing things6 so it =as hardly surprising that they could see fe= other =ays of doing things0 or the threats of competition that =ere looming2 #-en though Cande-elde0 and then Holmes0 had =anted to update M;S:s culture0 many of the old "eliefs and -alues that had "een instilled for decades =ere still "elie-ed and per-aded the organization2 %here had "een some changes0 for e<ample the remo-al of the 9St Michael: sym"ol2 In addition "ecause of the poor financial performance there =as less of a feeling that 9=e are the "est:2 In spite of this0 though0 much of the old culture remained0 for e<ample M;S still =anted to "e synonymous =ith high ?uality0 and to ha-e respect from customers2 %here also remained many of the old elements of tradition and formality0 much of =hich =as felt =ould not alter until M;S mo-ed into its ne= head?uarters2 %here continued to remain a feeling that employees kne= their place and role2 %he structure0 =hich had "een su"'ect to many reorganizations o-er the years0 =as felt to "e too complicated0 =ith too many mem"ers2 %his resulted in pro"lems =ith lengthy and con-oluted decision making2

Com&licated structure
%he internal =orkings of Marks ; Spencer had also "ecome highly deferential0 male oriented0 =ith layers of management and considera"le "ureaucracy2 %hese =ere all symptoms of an organization remo-ing itself from immediate contact =ith customer need2

'urf (ars
In addition the market =as changing2 Increasingly customers -alued higher le-els of ser-ice0 and =ere seeking no-elty and difference2 %he core clothing ranges remained determinedly middle of the road2 At the same time other retailers =ere "eginning to target the traditional Marks ; Spencer market0 "ut =ith more focused fashion ranges2 @n top of this0 lo=er5priced clothing retailers "egan to impro-e their ?uality2 So Marks ; Spencer found itself in a pincer mo-ement0 =here traditional lo=5priced retailers and higher priced retailers =ere entering its markets2 It is0 perhaps0 important to note that many of these changes took place o-er many years2 %his =as not a sudden occurrence2 Most retail o"ser-ers =ould agree that the changes =ere e-ident from the late *(>+s on=ards2 %he point that can "e emphasized again is the e<tent to =hich there is a lag effect in terms of performance2

'he )Core* of +,S

%hroughout the early &+++s Cande-elde attempted a num"er of different strategies to impro-e the flagging performance of its core ranges4 food and clothing2 Both ranges had "een performing poorly and for the most part underperforming the market2 %o attempt to stem these pro"lems ne= inno-ati-e food solutions =ere created to impro-e the food range0 and colla"orations =ith .esmond and Sons and Ieorge .a-ies =ere undertaken in the clothing range2 After these measures =ere put in place there =as an immediate increase in profits and share price2 @nce this had occurred Cande-elde focused on his three pronged progression plan6 this resulted in the focus shifting a=ay from the core ranges and mo-ing to=ards home =are0 financial ser-ices and the Simply Dood motor=ay outlets2

Customer Range
8ith clothing M;S continued to hang on to the traditional idea of its customers2 It =anted to restore the confidence of its core customers and so returned to classically styled clothing6 this =as targeted at the traditional shoppers2 %o attempt to attract younger shoppers into the stores M;S used 7er ,na2 %his resulted in many different looks0 in terms of style ranges0 all trying to find a place in the store2 M;S =as attempting0 in accordance =ith the strapline its ad-ertisements =ere carrying0 to "e 9e<clusi-ely for e-eryone:6 to achie-e this it =anted to offer things to all its customers2 It =as again accused "y commentators of lacking focus in its operations2 @ffering different products to all of its customers resulted in the neglect of the core ranges0 and ultimately the food range =as deemed to "e performing 9ade?uately:0 "ut "elo= market le-els2 %he clothing range0 "oth =omen:s5 and children:s =ear predominantly0 had taken a se-ere set5"ack0 =ith sales0 profits and market share ha-ing decreased2

Changes in leadershi& or management

In late spring &++10 "oth Buc Cande-elde and Roger Holmes =ere remo-ed from Marks ; Spencer:s management2 Stuart Rose0 a former Marks ; Spencer e<ecuti-e0 "ut one =ho had =orked e<tensi-ely outside0 "ecame the ne= Chief #<ecuti-e @fficer2 .uring May and June0 Rose successfully fought off a hostile takeo-er "id "y the retail entrepreneur 7hilip Ireen0 o=ner of British Home Stores and other high street chain stores2 Dor the moment0 at least0 shareholders seemed confident that Marks ; Spencer could fi< itself under its ne= leadership2

Internal and -.ternal conte.ts of decision making

%he main limitation of M;S =as lack of long term strategy2 %he chairman and C#@s should ha-e formed long term strategies rather than short term restructuring plans2 M;S did see success due to its strong culture "ut it remained adamant on it2 %hey should ha-e de-eloped dynamic capa"ilities and changed its competences to meet the needs of rapidly changing customer tastes2 M;S should ha-e "een li"eral =ith getting outsiders in the decision making process2 %he shaken top management resulted into complete culture change lea-ing the customers confused0 "ut they should ha-e formed a strategy =here ne= changes are adopted "y not lea-ing their roots2 %hey could ha-e gone for a hy"rid strategy2 Also they should ha-e allo=ed =omen to "e at the authoritarian le-el0 =hich =ould ha-e gi-en a more personal touch to their core =omen:s =ear products2 %hey should ha-e "een more fle<i"le in gi-ing incenti-es and "onus and should ha-e strict rules regarding employees lea-ing the organization2 %his =ould not result into top management running a=ay from their responsi"ilities2 Also store layout and store designing should "e con-enient to customers2 %his can "e done "y getting customer feed"ack and understanding their outlook2 %hey di-ersifying into food items =as an unrelated di-ersification =hich =as "eyond their current capa"ilities and -alue net=ork2 A flat0 centralized0 autocratic approach do not stand for long term2 It has to "e modified =ith changing times2

Strategic Roadma&

Add a roadmap if possi"le