Marks & Spencers: The Downfall And Leadership Vacuum

Marks & Spencer: The Downfall and Leadership Vacuum

Word Count: 2,996 Strategic Management 1 : BSM 506

Contents

Contents 2

Executive Summary 3

Section I - Past Glory 4

Section II - Present Failure 6

Section III - The Value Chain...Demolished 8

Section IV - Back to the Future 10

Appendices 12

Appendix A - PESTLE Analysis 12

Appendix B - Porters 5 Forces 13

Appendix C - Value Chain 14

Appendix D - Cost Drivers and Value Drivers 15

Appendix E - Core Competences - M&S 16

Appendix F - Critical Success Factors & Competitor Position Profile - M&S vs. H&M 16

Appendix G - Ansoff Matrix 17

Appendix H - Barriers to Change 17

References 18

Executive Summary

M&S as an organisation has faced a number of challenges in its 124 year existence, but has successfully weathered each challenge as it presents itself with relative aplomb. The foundation upon which the whole business has rested since its inception in 1884 was "making life easy for [the] customer" (Bevan, pp13, 2001), which, in it's initial form, involved selling carefully chosen, good quality goods with low margins, and achieving volume sales (relatively speaking, at least) through Michael Marks' Penny Bazaars in the North West of England. This strategy was overwhelmingly successful, and continued to be the central tenet of M&S strategy for many years.

M&S sailed through the depression and several recessions, but at the end of the 1990's something went severely wrong. Profits were falling year on year and the footfall in the stores was lower than it had been for several years. This report sets out many of the reasons for that failure then concludes by suggesting and evaluating the strategic options open to the organisation going forward.

The report concludes that drawing on the substantial capital resources of M&S, brand and product development are the appropriate measures to take in order to put M&S back on the retail map.

Section I - Past Glory

M&S somewhat lost it's way towards the end of the 1980's, as the designer-dominated excesses of the decade resulted in M&S core product, women's clothing, being far too upmarket. As Sir Richard Greenbury took over as chairman of the company in 1991, according to Bevan "Customers let it be know that they did not expect to spend Ј100 on a dress in M&S" and a different direction was required.

A great deal happened during the early 1990's that reinforced M&S' ability to thrive and become one of the biggest retailers in the world. With the boom of the 80's giving way to the bust of the early 90's, Richard Greenbury's focus on high quality goods that represent excellent value for money enabled M&S to tap in to the attitude of the customer base and attract the value-hungry customers in their masses. Launching the "Outstanding Value" campaign in autumn 1992, Greenbury reduced the retail price of 25% of his goods, delivering a fall in price that robustly supported the company's image.

At the same time as the buyers at M&S were tasked with seeking out quality goods with simple, attractive styles, Greenbury was negotiating hard with the suppliers with whom he had forged a strong relationship during his year as COO and the two years as chief executive before that, urging them to make "a contribution" on the back of M&S' purchasing power. With the whole retail sector in decline, M&S suppliers were aware that, hard though it might be, achieving volume sales through M&S was their only option. Greenbury inspired confidence in his buyers, which allowed them to buy a selected number of styles in vast quantity, maximising the opportunity for discounts (ibid.). In addition, M&S was able to exploit the wide range of new, durable fabrics that were just emerging onto the market in the early 1990's, offering new and exciting products such as women's leggings that were soon to become an everyday, essential item.

It was not only in the area of clothing retail that M&S was able to attain substantial growth in the face of a biting recession. M&S was also the pioneer in the area of high-quality ready-made food, and was renowned for its tasty, nutritious offerings. The early 1990's marked the beginning of a sea change in customer's expectations with regard to good quality, healthy food. M&S image as a respectable retailer with its focus on providing a wide range of premium foods meant that the M&S brand, where food was concerned, became regarded as something of a luxury.

Greenbury made a number of structural changes to the look and feel of his stores during the 1990's that allowed M&S customers to make purchases in the type of environment and location that suited their changing lifestyles. Through carefully targeted investment, Greenbury invested heavily in already profitable stores, simplifying their product ranges, grouping products in similar categories together and providing a greater feeling of space and better lighting. This move away from drab, dreary and cluttered sales floor came in response to criticism from customers and, in response to the changes that Greenbury implemented, customers voted with their feet and came flocking into the new-look stores.

The mid 1980's also marked the beginning of the "out of town" shopping centres, offering massively increased floor space combined with ample parking and easy access by car. M&S was slow to take up this trend, but when Greenbury arrived in the early 1990's, one of his first decisions was to move to edge of town locations. Once again, the customers responded well to this change, and