M&S
Content
EXECUTIVE SUMMARY
Marks & Spencer is arguably the most recognized British retail brands having an estimated 1010 stores across more than 42 countries which was very successful in terms of profitability and market share until the early 2000 when its fortune turned to decline. This report looks into its present position in UK and International market with an analysis of its strengths & weaknesses. It also delves into the opportunities and threats the company has in store. Further the report presents a glimpse on the history of the M&S since its inception. It also focuses on its business structures & how M&S ensures the customer footfalls year after year. It also highlights the likely development in the short & medium term which can have any impact, either favourable or unfavourable, on the business of Marks & Spencer.
ABOUT Marks & Spencer
Marks & Spencer is one of the UK’s leading retailers, with over 21 million people visiting its stores each week. It offers stylish, high quality, great value clothing and home products, as well as outstanding quality foods, responsibly sourced from around 2,000 suppliers globally. It employs over 75,000 people in the UK and abroad, and have over 600 UK stores, plus an expanding international business. It is the number one provider of womens wear and lingerie in the UK, and is rapidly growing its market share in menswear, kids wear and home, due in part to its growing online business. Overall, its clothing and home ware sales account for 49% of its business. The other 51% of its business is in food, where it sells everything from fresh produce and groceries, to partly-prepared meals and ready meals. Now more than ever, it is known for its green credentials as a result of its fiveyear eco plan, Plan A, which will see it, amongst other things, become carbon neutral and send no waste to landfill by 2012.
Mission Statement
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Former times and still: Good Quality for the Penny Vision: To be the standard against which others are Mission: To make aspirational quality accessible to all
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Values: Quality value, service, innovation and trust
Objectives
M&S Objectives can be divided in : o Employee-focused Objectives Employee-Orientation Strategy : Marks & Spencer depends upon the skill and experience of motivated employees throughout all levels of the business. It is part of our strategy to have a range of alternatives to attract, motivate and retain high calibre individuals to accelerate the transformation of the business and deliver improved performance. The Board considers the principles of good governance when deciding the remuneration strategy, and recognizes that the level of remuneration and benefits we offer is key to supporting this objective and maintaining our market position as an employer of choice. o Organizational Objectives Regain its leadership in clothing and speciality food by translating its scale and authority into superior quality, value and appeal. Supply Chain Project Objective Better , faster , at lower cost Review strategic sourcing and logistics Benefits markdowns Customer improvement : quality, appeal & value Shorter lead times Reduced inventory / increased stock-turn / lower
o Sales Objectives The improvements in sales, together with the small reduction in general footage , are translating into stronger Returns per Foot in both Foods and Clothing
Target market.
Marks & Spencer operates in the following segments: clothing; food; furniture and financial services.
Products and services.
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Clothing: Marks & Spencer offers the following product range: womens wear; lingerie; menswear; childrens wear and footwear. Food: M&S has a range of fresh foods; ready meals, special-occasion foods and wine. Home: they sell designer furniture and have recently launched their first accessories/furniture store, ‘Lifestore’, successfully. Financial: they launched the ‘&more’ card which is both a credit card and a loyalty card. Online services: through M&S, you can also order and send flowers via the internet.
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M&S Locations
Head Office :
Its head office is located in central London at Waterside House, close to Paddington Station and the Heathrow Express. Marks & Spencer Waterside House 35 North Wharf Road London W2 1NW
UK Stores :
M&S has over 600 stores located throughout the UK, ranging from large out-oftown and flagship stores of over 100,000 sq ft, to Simply Food stores of around 7,000 sq ft. Its largest store is located at Marble Arch on London's Oxford Street and has around 170,000 sq ft of selling space.
International Stores :
M&S has over 300 stores in over 40 territories. Going forward it plans to expand its international business through both franchised operations and partnerships in some of the world’s most dynamic emerging economies like India & China.
HISTORY OF MARKS & SPENCER
The Beginning
Marks & Spencer started life more than 125 years ago when the Jewish immigrant Michael Marks came to the north of England. He arrived with little money and spoke poor English. Beginning as a pedlar , he soon owned a market stall in Kirkgate Market in Leeds. He classified everything by price, but quickly stopped selling more expensive items when the penny section thrived.
Michael decided to look for a partner to help manage his growing business. He initially approached Isaac Dewhirst , who had loaned money towards his original start up costs. Isaac declined but recommended Tom Spencer – his senior cashier . Tom agreed and on the 28th Sept 1884 Marks & Spencer was born. Tom Spencer invested £300 and brought considerable skills in administration and accounts , which complemented Michael Marks’ flair for merchandise , selling and dealing with people extremely well. Marks & Spencer called their new stores “Penny Bazaars”, keeping the penny price slogan and adding the words “Admission Free”. This was a successful marketing ploy , encouraging customers to browse without any obligation to buy . Whilst this is the norm now , it was unheard of then. By 1900 , Marks & Spencer had expanded to include 36 Penny Bazaars and 12 High Street shops.
1900 to 1920
This was a period of great change; M&S bought up a number of its competitors, as well as becoming a public company the original founders both died , and a legal battle ended with Simon Marks eventually regaining control of the company from Tom Spencer’s executor. In 1901, M&S built a warehouse at Derby Street, Manchester. It was the first property built to its specifications and became the company’s first registered address & headquarters. It was ready for a period of growth that let to M&S having 145 stores by 1915. Improving living conditions & rising incomes meant that people were able to buy more of the things they needed from emerging department stores and coops. M&S catered to this with open displays, browsing and self-selection. And its early stores offered shopping that was cheap, simple & friendly. It sold
biscuits, mending wools, pins, combs, needles, socks,- and in the days before TV or radio-sheet music. The penny pricing continue with great appeal until the First world war, when goods became expensive & hard to get. This changed the way M&S worked for good.
1920 to 1940
In the decades between the wars , Britain moved into Great Depression. There were shortages of goods, unemployment was at nearly 3 million and many companies closed. However it was the period that sharpened the business and helped it focus & strengthen its strong foundations. M&S was now facing competition from affordable variety stores. Adapting to keep ahead of the game, it changed its pricing system, now selling goods upto five shillings. It Also reduced dazzling array of items offered, placing emphasis on two departments; food , which M&S had always sold to some extent, and clothing, which was new for it. It made itself unique by offering clothing that was well made but affordable. M&S was the first retailer to have a research laboratory to pretest the quality of its goods & develop innovative new fabrics. Higher quality at lower prices proved very successful. As more houses were built the demand for affordable household goods grew. So it sold items like tea-sets, and domestic chores were jazzed up with its bright, art deco jumpsuits. This period really saw its products to blend in with the changing lifestyles of its customers.
1940 to 1950 :
The outbreak of war brought with it rationing, as well as enemy bombing which hit over 100 M&S stores, destroying 16 entirely. ‘M&S did its bit’ through practical innovations and the invaluable efforts of employees , who took part in
fire watching, raised money for a Spitfire , set up soup kitchens & helped to care for wounded soldiers. At the beginning of the war 70% of Britain’s food was imported from across the sea. U-boat attacks quickly cut-off this supply & by 1940 rationing was introduced for lots of food, beginning with bacon, butter and sugar. At M&S food was sometimes sold straight from the delivery trucks in order to keep hungry & impatient crowds calm. As rationing didn’t apply to restaurants, people began to eat out more & by 1942 M&S had created 82 Café Bars in store. Restrictions orders meant clothing was also designed to make the most of materials. Here M&S could share its skill at achieving the highest quality for the lowest price. Harry Atkinson who was a M&S technologist, helped the Government develop clothing standards. The result was utility clothing which could be brightly patterned but was very simple in design.
1950 to 1960 :
Rationing continued, but there was a positive side. It has shown people that fashion wasn’t just for the rich but was accessible to everyone. And it also had to be practical – to wash well and last longer. In response, M&S put a lot of effort into improving products as well as experimenting with new technologies & fabrics. M&S took a man-made fabric it had created in the war and made it into a popular line of dresses influenced by Parisian designers. This Fabric was known as Utility Schedule 1005 in wartime, but was now renamed Marspun. The new look dress was based upon the “Corolle” collection by Christian Dior , and became very popular. It used a lavish amount of material and went against all the utility clothing regulations. When he saw this new trend the President of the Board of Trade said “There should be a law against it”. In 1957, M&S decide to improve sizing for ready-to-wear clothes which it created through surveys of women’s bodies.
1960 to 1970 :
During this decade, customers wanted labour-saving products to improve and bring a modern touch to their lives. M&S not only created these modern new products but also got them from the laboratory to the store shelves rapidly. Its customers could have the very latest innovations on a bigger scale than ever before. M&S innovations included new products made from the man-made fabric Terelyne, a type of polyester. By the end of 1960s , M&S was also thinking up safe ways of selling dairy products and meats , beginning with chicken. Most stores at that time sold the poultry frozen because of the risks of bacteria causing food poisoning. But M&S believed customers wanted fresh products and began to explore safe ways of selling chilled, rather than frozen meat. In order to keep meat fresh, M&S invented the “cold chain process”. Chickens were chilled straight after slaughter, carried in refrigerated trucks, kept in refrigerated storage, and sold from refrigerated counters – all at 4 degree centigrade. The entire cold-chain process, developed with its suppliers, was specially made to its own design and was unique at that time.
1970 to 1990 :
By the early 1970s, home freezers were becoming cheaper and more easily available, so in 1972 M&S introduced frozen food including lasagnas and pizzas. By 1973 convenience food was being sold in 100 M&S stores and was a huge hit with the public, later helping to explain the popularity of the microwave. With each meal its Catering department decided on a recipe idea & then worked with its suppliers to create it. Also in 1973, M&S was the first major retailer to introduce sell-by dates as a guarantee of freshness. A year later Indian and Chinese ready mills were first trialed, although they didn’t really take off until the 1980s . M&S was the first
major British Retailer to provide these dishes, which are now a big part of the company’s national cuisine. From the mid 1970s suppliers slowly became more involved in design. M&S now gave guidelines on up-to-the-minute trends, and Design briefs were introduced in 1986. Lingerie became more fashionable in the 1980s and even thermals were given a fashion edge. Co-ordinated underwear sets created ‘looks’ inspired by catwalk trends.
1990 to Now :
This was the time when M&S had to create improved products & get them to its customers faster than its rivals. The melting middle chocolate pudding idea came from its food developer. Based on chocolate fondant, a classic French desert, no other big retailer have ever managed to make it before , and it took 3 times as long to create as usual. The Trouble was its liquid centre. It had to survive storage & transportation without soaking into the outside sponge. It took a lot of time, trials and chocolate to get it right but proved a massive success. In the clothes department new more exciting lines like per una and Autograph appeared with the help of famous names like Patricia Fields, George Davies and Paul Smith. And as it looks at the future, there is Plan A. The plan will affect every aspect of M&S from in-store heating to product labeling, and from waste-management to manufacturing. M&S principles of Quality, Value, Service, Innovation and Trust are now mirrored by the five points of Plan A that target climate change, waste, sustainable raw materials, fair partnerships and health.
Significant events & its impact on M&S during the last decade
M&S's profits peaked in financial year 1997/1998. At the time it was seen as a continuing success story, but with hindsight it is considered that during Sir
Richard Greenbury's tenure as head of the company, profit margins were pushed to untenable levels, and the loyalty of its customers was seriously eroded. The rising cost of using British suppliers was also a burden, as rival retailers increasingly imported their goods from low-cost countries, but M&S's belated switch to overseas suppliers undermined a core part of its appeal to the public. Another factor was the company's refusal until 2001 to accept any credit cards except its own store card. These factors combined to plunge M&S into a sudden slump, which took the company, its shareholders, who included hundreds of thousands of small investors, and nearly all retail analysts and business journalists, by surprise. The company's share price fell by more than two thirds, and its profits fell from more than a billion pounds in 1997 and 1998 to £145 million in the year ended 31 March 2001. In 2000, Marks & Spencer dropped the St Michael brand, and replaced it with the Marks & Spencer brand. The St Michael name was subsequently adopted as a 'quality guarantee' and appeared as the St Michael Quality Promise on the back of food products, on the side of delivery vehicles and on in-store ordering receipts. Marks & Spencer were selling clothes under the St Margaret and St Michael label by the mid-1950s and launched their school uniforms in the early 1950s, but was scrapped in the year 2000 as part of the corporate modernization plan, when brands such as Autograph were launched. In 2001, with changes in its business focus such as accepting credit cards, the introduction of the "Per Una" clothing range designed by George Davies, accompanied by a redesign of its underlying business model, profits recovered somewhat and M&S recovered some of its market share, but it was soon evident that problems remained. Per Una was launched on 28 September 2001 as a joint venture between M&S and Next founder George Davies.
The Per Una brand has been a major success for the company, and in October 2004, M&S bought the brand in a £125 million, two-year service contract with George Davies. Mr Davies was to stay on for at least two years to run the company, with 12 months notice required if he wished to leave. In 2004, M&S was in the throes of an attempted takeover by Arcadia Group & BHS boss, Philip Green. On 12 July a recovery plan was announced which would involve selling off the financial services business to HSBC Bank plc, buying control of the Per Una range, closing the Gates head Lifestore and stopping the expansion of its Simply Food line of stores. Philip Green withdrew his takeover bid after failing to get sufficient backing from shareholders. M&S's relatively successful interior design 'Home' brand was launched in 2005 and featured products like vases, furniture and beds. Boil-in-the-bag and sachet meals were first pioneered by M&S in 1972 and the award winning Gastropub food range was launched in 2004. The 'Melting middle chocolate pudding' campaign of 2005 has led to a remarkable 3,000% rise in chocolate pudding sales, something that has not recurred since. The Percy Pigs sweets were first created in 1995 sweet was sold by the October of 2007. In 2006, the Look Behind the Label marketing campaign was introduced. The aim of this campaign was to highlight to customers the various ethical and environmentally friendly aspects of the production and sourcing methods engaged in by M&S including: Fair-trade products, sustainable fishing and environmentally friendly textile dyes. and the billionth "Percy Pig"
On 15 January 2007, M&S launched an initiative, known as "Plan A", to dramatically increase the environmental sustainability of the business within 5 years and expected to cost £200 million. The plan covers "100 commitments over 5 years to address the key social and environmental challenges facing M&S today and in the future" with the tag-line "Because there is no Plan B". The commitments span five themes: climate change, waste, sustainable raw materials, 'fair partnership' and health, with the aim that, by 2012, it will:
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Become carbon neutral Send no waste to landfill Extend sustainable sourcing Help improve the lives of people in their supply chain Help customers and employees live a healthier life-style
Despite an 18% fall in the share price in January 2008, following publication of their latest trading statement, the company confirmed that they would be continuing with the plan, saying that there were 'compelling commercial — as well as moral — reasons to do so'. The now iconic brown, reusable, hessian bag was first introduced in 2007 as an early part of this plan. It is hope that this will reduce the use of plastic carrier bags over the next few years. In February 2007, M&S announced the opening of the world's largest M&S store outside the UK at Dubai Festival City. M&S was ranked 17 in The Times' "Top 100 Graduate Employers 2008". May 2008 saw the introduction of the 5p carrier bag scheme at M&S stores, with customers now paying 5p per standard sized vest carrier bag for food purchases. This implementation was brought about through the Plan A
scheme, to try to discourage use of the traditional plastic bag. All profits from the sale of food bags go to Groundwork UK. On 2 October 2008, M&S opened its first mainland China store in Shanghai. Problems with the supply chain for the first few months of opening led Stuart Rose, M&S chairman, to describe failures in "basic shopkeeping". After fostering significant growth in recent years, mid-2008 saw share prices plunge to well under half their value of twelve months before, as M&S struggled to cope with more conservative shoppers in the credit crunch. M & S made a £298,000,000 profit in the half year up to September 2009. M and S also showed a pre-tax profit of £632,500,000 for the 52 weeks to 27 March 2010. The up market Zandra Rhodes collection, modelled and made by the British fashion designer Zandra Rhodes, CBE/RDI was introduced in to the bigger stores by late 2009, but was discontinued in early 2010.
The 2008-9 restructuring plan
As part of the 2008-9 restructuring plan, 9 sub-brands that were deemed to be unprofitable, unnecessary or superfluous were either discontinued, merged or re- launched in 2008, with further activity, including some store closures, occurred in both 2009 and 2010. Line, sub-brand or brand involved. Floor 1 discount brands— women's discount fashion clothes Date of action. Early 2008/the festive season of 2008-2009 Fate of line, sub-brand or brand involved. Replaced by 'Designer discount' line in early 2008. It was relaunched in festive season 2008-09 as- By me
now or lose me for ever- limited editions. Romper-suit republic— baby clothes (was only available online) The Shirt-sleeve empire— boys' shirts (was only available online) Essential—up market skirts and t-shirts 2008 Discontinued
2008
Discontinued
Perfect—upmarket trousers, skirts and blouses Plus range maternity (large stores only). Limited Collection Maternity The Zandra Rhodes collection was a up market woolen clothes and t-shirts modeled and made by the British fashion designer Zandra Rhodes, CBE/RDI 'Party, Party, Party!' was a line of seasonal party clothes
'Katy Livingston' was an up market sports clothes and merchandise relating to the British athlete Katy Livingston.
'Frenchay' (was only available online)- French
Merged in to Portfolio, along with Perfect. 'Essential' now also 2009 continues as a seasonal line of the 'Autograph' brand. Merged in to Portfolio, along with Essential. Perfect still operates in men's rain coats and cookware. 2009 'Perfect' was relaunched in January 2010 as a seasonal sub-brand of 'Portfolio'. Merged with Limited Collection 2008 Maternity as 'M&S Maternity'. Merged with Plus Range Maternity 2008 as 'M&S Maternity' to simplify administration. It was launched in April 2009, but was let gradually run down in the festive season during December February 2010 2009 and January 2010. It was finally discontinued due to poor sales performance in February 2010. Discontinued in July 2010, but then July/October relaunched as 'Partyware' October 2010. 2010. It was launched in early 2009 and developed in to the 'Performance' brand. 'Performance' was the resulting line of serious sportswear Mid 2010 for dedicated female athletes that would merge with the feminine 'Sportswear' line in mid 2010 due to the need for administrative simplification. The Festive It was merged in to the other season of 'Kitchens' brands.
made, utilitarian/good value plastic home ware, clothes pegs, clothes hangers, etc. 'Fashion line'- babies' fashion clothes 'Ready to play' playwear 'Themed collection'Cartoon and story book character merchandised clothing 'Nightware'- Teen's night clothes B.C.A.M.- charitable merchandise aimed at raising awareness of breast cancer. B.C.A.U.K.- on line charitable T-shirts for the under 40's. 'Food to go' line
2008-2009. It merged with Babyware and Petite Babe. Discontinued, but some designs continued under the 'Casual line' Merged with Character shop
Early 2010 Early 2010
late 2008
Early 2010 The Festive season of 2009-2010. The Festive season of 2009-2010. The Festive season of 2010-2011.
Merged with the 'Sleepware' line Merged with B.C.A.U.K. as 'Love Pink'.
Merged with B.C.A.M. as 'Love Pink'. It was merged in to ’Lunchtogo’ during the festive season of 20102011
Store formats
Core stores
M&S core stores typically feature a selection of the company's clothing ranges and a M&S Food hall. The range of clothing sold and the space given to it depends on the store's location and customer demographic (an example would be that some London stores do not stock the Classic Collection, but stock Limited Collection and a full Autograph range). Most core stores feature a Food hall. In 2000, all the St Michael Food hall supermarkets were renamed M&S Food hall, when Marks & Spencer dropped the St Michael brand in 2000. Each M&S Food hall sells groceries, which are all under the Marks & Spencer brand. However, in 2009 the company began selling a limited range of other brands, such as Coca-Cola and Stella Artois,
without reducing the number of M&S goods they sold. This returns to the previous Marks & Spencer practice of selling branded food, before the company become solely-own-brand.
Hospitality
Most M&S stores feature some sort of hospitality offering, usually in the form of an M&S Café. These cafés were formerly known as Café Revive and many old format stores still brand them as such. The café offering typically includes coffees and teas (all fairtrade), pastries, toasted sandwiches, soups and cakes. The company also trialed the opening of an Espresso Bar in some stores, which specialized in drinks only, however these have subsequently been rebranded as M&S Cafés. Many large stores, such as Westfield, White City, Cribbs Causeway and Newcastle-upon-Tyne, also offer other hospitality outlets, such as a modern Deli Bar (champagne, canapés, seafood), Restaurant (table service—the first of which was opened in Newcastle) M&S Kitchen (traditional home cooking & lunches) or Hot Food To Go (burgers, chips, soups). Many of these outlets are run in conjunction with Compass Group and even in smaller stores they also partner up to offer readymade baguettes as part of the standard Food to go offering.
Home Stores
In 2007, M&S announced that new, dedicated stores for home furnishings were to be launched. Stores have now been opened in Cheltenham in Gloucestershire, Lisburn in Northern Ireland and in the Barton Square section of The Trafford Centre, Manchester. On 19 November 2009 Aberdeen became the first dedicated homeware store in Scotland and the biggest of all the M&S homestores in the UK.
Outlet Stores
As of 2010, M&S have 50 outlet stores and growth expansion plans for future. The Outlet division offers M&S products with the majority of them discounting at least 30% from the original selling price. The first of these stores opened at Ashford in Kent in 2000. Many of the Outlet stores are in locations such as retail parks and outlet centres, though some, including the stores in Woolwich, South London and Newton Abbot, Devon were previously main M&S stores which converted to the Outlet format. Meadow Bank Outlet Store in Edinburgh became the model store for all the Marks and Spencer Outlet Store in the early months of 2010. M&S is in the middle of a programme to open four hundred Simply Food stores selling predominantly food but with most also carrying a small selection of general merchandise, like birthday cards and pens. The first of the 'Simply Food' stores were in Twickenham and Surbiton. A number of these stores are run under franchise agreements:
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Select Service Partner (SSP) runs the stores at mainline railway stations and airports Moto has stores at several of its motorway service stations BP has 116 forecourts with a Simply Food offering
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Online services
Products could be ordered online since the mid 2000s, in response to some like Tesco launching their pioneering Tesco.com home shopping delivery service in the early 2000s. M&S TV is a online TV station to advertise goods. The John Lewis shopping chain beat M&S to the title of the U.K.'s best highstreet website by late 2010.[
Organizational structure
The changes within Marks & Spencer have created a business that now has a flatter organization structure. The business lost a number of layers of authority through a process of delayering. This means that employees throughout the business have more responsibility. This enables them to make quick decisions when required. At the same time, these employees have more accountability than before. This means that they must be prepared to explain and justify the decisions that they take. The Marks & Spencer Head Office in London employs around 3,000 people. These employees have specialist roles within the organization. There are the buyers of stock, people involved in managing stock and its layout within stores, and staff working in marketing or accounts. The changes within Marks & Spencer have created a business that now has a flatter organization structure.
More than 60,000 employees work in the Marks & Spencer stores, many in management roles where they lead and motivate a team of people. The company also has many franchise outlets overseas.
Competitive Rivalry
M&S is a retailer that sells food, clothing & home wares. Therefore it faces competition from both supermarkets such as Tesco, Asda and Sainsbury’s and clothes retailers such as Next and John Lewis. M&S prides itself as being a higher quality value-for-money brand. However, with the recent rebranding and cutting of prices for clothing , it risks devaluing the brand in the market where specialization is becoming increasingly important.
HOW M&S ENSURES SUSTAINABLE BUSINESS? M&S have a well defined strategy of ensuring sustainable business by focusing unrelentlessly on the “Priorities For Retailers” in terms of “Product” , “Service” & “Delivery”.
Priorities for Retailers
Product
Service
Delivery
Product
Competiti ve Price
Appropria te Quality
Reason to Buy
Service
Appropriate Communicati Minimum on Fuss Make it Easy
Delivery
On Time
Consisten t
Lead times
The Result?
Max Money in the Tills Minimum Risk
Happy Customers who will come back and buy MORE
Technology Development Procurement
M A R G I N
BCG MATRIX OF MARKS & SPENCER
M C
PRESENT POSITION OF M&S IN UK
With an annual turnover of £8.4bn, its UK business has a broadly even split between General Merchandise (clothing and home) and Food. General Merchandise £4.1bn sales Market Share by Value – 11% & Market Share by Volume – 11.2% With more than 1 in 10 clothing items bought from M&S, it remains the UK’s largest clothing retailer and the first choice for stylish, great value clothes for the whole family. It leads the market in womenswear, lingerie and menswear and have an expanding kidswear and home business. Food £4.3bn sales – Market Share – 3.8% We are the UK’s leading provider of high quality food, selling everything from fresh produce and groceries, to partly-prepared meals and ready meals and an award winning range of wines. Underpinning this is our commitment to healthy eating, ethical sourcing and innovation.
SELLING THROUGH MULTI-CHANNELS
Customers shop with M&S in many ways – in stores, online or over the phone. Its aim is that everyone receives the same consistently high level of service from purchase through to delivery. M&S UK stores M&S have 690 stores across the UK – in a wide range of convenient locations – from high streets to retail parks, train stations to airports. Over the past four years it has transformed these stores into bright and contemporary destinations with a range of hospitality options. The bifurcation of 690 UK Stores is as follows: 10 Premiere , 42 Major , 242 High Street ,46 Outlets ,156 Simply Food whollyowned 194 Simply Food franchises
M&S Direct £413m sales M&S Direct is key to improving customer convenience and service including via its website and its newly launched ‘Shop Your Way’ facility. The company is on target to achieve £500m in sales by 2010/11. The platform includes E-commerce website , Home catalogue , Flowers and wine delivery , Hampers, Food to Order , Lunchtogo, etc.
EVALUATING CURRENT POSITION OF M&S IN UK
Though M&S has reported much better than expected sales figures , there is already an apprehension that the coming months will be tough as the government's looming austerity measures – public spending cuts and planned increase in VAT – threaten to shake consumer confidence. M&S had been pulling in more customers, who are buying higher-quality items, and that the store is profiting from its aging shoppers. "Older customers are better prepared for tougher times," said the chief executive Marc Bolland, who replaced Sir Stuart Rose in May. "They have seen it before and they have more savings." Slow and steady recovery of the economy, together with rising commodity prices – such as cotton up 70% on this time last year – and "significantly tougher comparatives" will make sales gains harder to achieve in the coming weeks. M&S is spending more on marketing and advertising to attract customers as well as to ward off the competition. M&S’s clothing, homewares and food have put in strong performances over the most recent three months, as it won sales from rivals. The company as per his chief executive officer Bolland has hoped to absorb the impact of rising
commodity prices and VAT on some clothes, so opening price points – the cheapest products – will not have to go up. Like-for-like UK sales at M&S climbed 5.3% in the 13 weeks to 2 October, with clothes and homewares roaring 7% ahead and food up 3.7%. M&S cemented its position as Britain's biggest clothing retailer by increasing its share of the clothes market to 10.3% from 9.6%, helped by new products such as the "two sizes bigger" bra and "Miracle" crease-resistant linen. In the coming weeks it is hoping for bumper sales from new "front-enhancing" pants for men. Its latest advertising campaign, fronted by X-Factor judge Dannii Minogue, exfootballer Jamie Redknapp and Brazilian model Ana Beatriz Barros has been instrumental in driving more customers into its stores. The chain has just had a record autumn season for women's footwear, selling 300,000 pairs of boots – 50% more than last year. Knitwear and men's suits are benefiting from a return to quality: It is felt that with an uncertain environment people are choosing quality. They are choosing things that last, not just for a couple of days or a couple of months. In the foodhalls, about 370 products have been launched, including "In a Pot" ready meals, groceries and biscuits. International sales are up 6.2%, although trading remains difficult in Ireland and Greece. The better-than-expected figures suggest that be to its advantage.” M&S has been quite conscious of the fact that in clothing, shoppers are more interested in quality and are willing to trade up; while in food, lower inflation "To some extent, market
conditions are now much more favourable to M&S and consumer trends should
means a less price sensitive consumer who is willing to buy more premium product. They have managed these facts quite well & and, along with its development work over the past year, have helped to generate a set of positive numbers. The only spoiler for M&S can be the negative headwinds of government cuts which is on the horizon, , which in turn can make the consumer environment much tougher.
EVALUATION OF PRESENT INTERNATIONAL MARKET
POSITION
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M&S
IN
During 2009/10 sales in its International business grew by 5.7%, accounting for 10.2% of total Group revenues. This year the company has focused on developing its partnership in India and growing Central and Eastern European business. Over the last 12 months it has invested in its operational capabilities, resulting in a better product offer, tailored to meet the needs of specific markets, as well as building a platform for future growth. International revenues during the six months ended Oct-10 has grown to £m 462 , a growth of 3.8% from the last year six monthly revenue of £m 445.2. Its operating profit has witnessed a subdued performance with a drop of 2.3% to £m 64.4. The company owned operations have been facing severe cost pressures owing to higher rentals & interest expenses. M&S now has 327 stores in 41 territories (includes Republic of Ireland), with the average square footage of its international stores increasing from 10,773 to 11,129. Its International business model is made up of partly and whollyowned subsidiaries and franchises. This broad spread of ownership models and countries has enabled M&S to perform well throughout a difficult global economic environment even when individual markets have been impacted.
M&S is on its path to achieve its envisaged target of International revenue to be 15-20% of total Group revenue within next 5 yrs by focusing on four key elements viz Growing its Central and Eastern European partnerships; Building sustainable businesses in India and China; Accelerating growth with its franchise partners; and Continuing to explore new opportunities.
Operational efficiency is key to building a platform for growth. The introduction of its International Range Planner last year has improved its ability to tailor the product offer for individual markets. It enables M&S to plan for regional variations and accurately stock the right colours and sizes to meet the specific needs of ITS international customers, responding to seasonal requirements in Russia or greater colour variations in India for example. Improvements in its supply chain have enabled it to move products through its network faster and more efficiently. M&S now moves over 21% of its stock through its four international hubs in Hong Kong, Singapore, Sri Lanka and Istanbul direct to their destination, as opposed to shipping international stock via the UK.
SWOT ANALYSIS OF MARKS & SPENCER STRENGTHS :
1)Market leadership Marks and Spencer is the UK's largest clothing retailer and footwear by both value and volume. In the clothing market, M&S has 12% market share and, is sixth largest in the food market with a 3% share. In value terms, M&S has 10.5% market share in UK's women's wear market. It also has 9.5% of menswear, 24.1% lingerie and 4.1% of children's wear markets in the UK. M&S has over 600 stores located throughout the UK. In addition, the company has 327 stores worldwide, including over 170 franchise businesses, operating in 41 countries. Market leadership enhances its brand image and provides M&S with a competitive advantage. 2)Improved profitability Operating margins of M&S improved from 7.75% in 2005 to 8.86% in 2010. This was achieved through a continued tight control of costs, improved management of stock commitments and better buying. The company's average operating margin for the five year period ending March 2010 at 8.3% compares well with the industry average of 5.7%. Improved profitability indicates the efficient nature of the company's operations. 3)Strong brand image The M&S has been a strong brand for decades. It stands for high quality products at reasonable prices. Moreover, it is a well recognized brand in retailing in the UK and also in the international markets. In addition to the mother brand, M&S has a strong portfolio of private brands including: Autograph, Blue Harbour, Per Una, Body and Cellozione. The strong brand image of the company aids customer loyalty and helps promote repeat
purchases. In addition, the company leverages its brand strength to easily expand into new lines. 4) Large number of outlets and high street presence M&S has 690 stores across the UK – in a wide range of convenient locations – from high streets to retail parks, train stations to airports. Over the past four years it has transformed these stores into bright and contemporary destinations with a range of hospitality options. 5) Backward Integration – Integration with the suppliers One of the things that set M&S apart from other retailers is the way it works with its suppliers. This year it has helped its suppliers to set up 10 Ethical Model Factories to demonstrate how good employment practices can result in a more productive workforce and allow for higher wages. It also ensures financial monitoring of all suppliers and flexible payment terms for major suppliers during difficult economic conditions , Dialogue with suppliers and third party providers to identify any issues early on and ensure good working relationships, Review of its supply base to reduce reliance on key suppliers where appropriate 7) Wide variety of products It sells wide variety of products ranging from General Merchandise like womeswear, lingerie, menswear, kidswear, homebusiness , Food items like fresh produce, groceries, partly prepared meals, ready meals & wide range of wines 8) Geographically based divisions The stores of M&S have been strategically located as per different geographic divisions to cater to shopaholics.
WEAKNESSES : 1) Geographic concentration M&S derives a majority of its revenues from the UK market. The company derived 89.8% of its revenues from the UK in year ended March 2010. In contrast, competitors such as Wal−Mart have global operations, which provide them with a better revenue profile and economies of scale in purchasing. Geographic concentration of revenues makes M&S vulnerable to market conditions in the UK and makes the company relatively uncompetitive compared to global retailers such as Wal−Mart. 2) Low return on assets and equity M&S has recorded weak returns on assets and equity in the last few years. Its return on assets and return on equity for the five year period ending March 2010 were 6.5%, and 8.7%, respectively, lower than the industry averages of 6.9% and 10.4% for the same period. Weak returns reflect the inability of the management to deploy assets in profitable avenues, and this could result in decreasing investor confidence. 3) Limited online transactions Though M&S has had a transactional website for a few years now, its service is inferior to many other retailers in a number of respects. Food cannot be ordered online and delivered to home from its website. Only a selection of general merchandise product is available. M&S does not deliver to customers overseas. Limited online transactions could put the company at a competitive disadvantage.
4) Ageing customer base
One weakness that could be identified is the age of the main target customer; as the largest percentage of customers visiting the store are aged 55+. This means once this demographic is no longer consuming, there is a fear that a new, younger market will not be.
OPPORTUNITIES : 1) New acquisitions In January 2006 M&S expanded its already successful 'Simply Food' format with the acquisition of 28 stores on a leasehold basis from Iceland Foods for a consideration of £38 million. The stores, which average around 5,000 square feet, are all in prime locations for the 'Simply Food' brand throughout the UK. There are currently 143 Simply Food stores in the UK, Republic of Ireland and the Channel Islands. Following the acquisition, M&S will have 171 Simply Food stores throughout the UK. This acquisition would increase the company's presence in food market while boosting its revenues. 2) Competitive pricing M&S has implemented price restructuring across product categories and brands in fiscal 2009. As a result, about 38% of its products are now at 'Opening Price Points' (entry level pricing), as compared to 12% in 2004. In fiscal 2005, M&S was the most expensive when compared with its competitors such as Debenhams, Next, BHS and Matalan. It was marginally more expensive relative to the average of this group. After the implementation of price restructuring, M&S is now nearly 10% cheaper than Debenhams and a little cheaper than Next. In food pricing, M&S is 2% cheaper than Tesco's 'Finest'. Competitive pricing might help in generating more revenues. 3) Increasing online spending Online consumer spending worldwide is forecast to rise from $137 billion in 2004 to $300 billion in 2010. Significant growth in online sales is forecast for
all categories of consumer goods. The online market is the fastest growing sector of the UK retail at present, accounting for almost half the cash growth in retail spending in 2005. Though it has limited online service, it is expected that M&S' re−launched website will provide for a more engaging , interactive web experience which in turn could reduce the company's operating costs and further improve margins. 4) Internationalization – Increasing the global presence The international markets revenue is only 10.2% of the total global revenue for M&S. This clearly indicates the untapped potential for M&S to expand its international revenue. The company can leverage its retail expertise by expanding into developing markets like Brazil, Russia, India, China & Central & Eastern Europe economies. 5) Desire for labels / branded goods Today’s customers are highly aspirational & want to be associated with branded items. This opens up a great opportunity for quality retailer like M&S to push their market share of Branded goods & private labels. 6) Consumers more prepared to purchase a wider variety of products from one source. Now days customers are looking for one stop shopping. This means that big retailers like M&S stands in good stead if they can offer a wider variety of products at one location or store.
THREATS : 1) Intense competition
One major threat facing the company comes from the intense competition that exists in the UK food retailing market. Although the company has a 3.8% share of the UK food market, it remains a significant distance behind food retailers like Tesco, Sainsbury and ASDA. The intense rivalry that exists between such competitors has led to a price war within many areas of the food industry. The increasing dominance of Wal−Mart and companies like it are adding to the growing pressures facing the traditional supermarket channel and are also reshaping the interactions between manufacturers and retailers in all markets, including food, apparel and financial services. The continued expansion of such companies in 2010 and 2011 is likely to affect the operations of M&S. 2) Increasing labour wages in the UK Labour costs are rising in the UK. The UK government increased the adult minimum wage rate from £5.80 to £5.93 per hour in October 2010. The rate for those aged 18 to 21 years will be increased from £4.83 to £4.92 per hour and the rate for workers aged 16−17 years would increase from £3.57 to £3.64 per hour. The full year effect of this increase would be evident in fiscal year 2011. An increase in labour costs could adversely impact the company's margins. 3) Weak retail sales in the UK Consumer spending in the UK, in fiscal 2010, remained under pressure amid worries about sluggish economic recovery, house prices, taxes, interest rates and the sharp rise in utility and fuel bills. If the situation continues, it could adversely affect consumer spending which in turn could depress the revenues of M&S.
WHAT THE FUTURE HOLDS FOR MARKS & SEPNCER
SHORT TERM:
M&S has expressed its willingness to expand its online food offer beyond that of "chocolates and flowers". Though it is also expected that the chain will push more of its clothing and homewares online, it is felt that M&S can contribute more in terms of its grocery offer. Since the limited range will make it difficult for the retailer to offer a full online grocery shop to the same degree as that of Sainsbury's or Asda, it may be a good idea to drive the growth through enhanced offering of M&S's branded range. However, it sounds as though CEO Bolland is not so keen on branded products. He played down their role in the second quarter results. While it is not believed that he will scrap them completely, he may scale them back. M&S is not present in Western Europe. Since France is a big market it makes compelling sense to be present in France & at least in the short term there is much business to be done there. In the short term, due to sluggish economic recovery , M&S may have to scale back its investment in new stores, it should continue to invest its infrastructure, particularly its supply chain and IT systems.
MEDIUM TERM : M&S has a clear, coherent international strategy, given its brand power as a quintessentially English brand. The obvious concerns revolve around: implications to short-to medium-term group returns; the need for additional funding and the shape of funding; time involved to hit critical size and scale in key regions; planning permission and additional infrastructure spend in order to facilitate logistics; and whether an aggressive European expansion policy would take priority over 20/20 [strategic repositioning] commitments."
M&S has been charting out an aggressive entry into the developing markets like India & China. Any changes leading to increased FDI into these markets can open up galore opportunities for Marks & Spencer. Offering branding that appeals to culture within these countries to draw in future business and help to boost the brand once more.
Marks & Spencer is arguably the most recognized British retail brands having an estimated 1010 stores across more than 42 countries which was very successful in terms of profitability and market share until the early 2000 when its fortune turned to decline. This report looks into its present position in UK and International market with an analysis of its strengths & weaknesses. It also delves into the opportunities and threats the company has in store. Further the report presents a glimpse on the history of the M&S since its inception. It also focuses on its business structures & how M&S ensures the customer footfalls year after year. It also highlights the likely development in the short & medium term which can have any impact, either favourable or unfavourable, on the business of Marks & Spencer.
ABOUT Marks & Spencer
Marks & Spencer is one of the UK’s leading retailers, with over 21 million people visiting its stores each week. It offers stylish, high quality, great value clothing and home products, as well as outstanding quality foods, responsibly sourced from around 2,000 suppliers globally. It employs over 75,000 people in the UK and abroad, and have over 600 UK stores, plus an expanding international business. It is the number one provider of womens wear and lingerie in the UK, and is rapidly growing its market share in menswear, kids wear and home, due in part to its growing online business. Overall, its clothing and home ware sales account for 49% of its business. The other 51% of its business is in food, where it sells everything from fresh produce and groceries, to partly-prepared meals and ready meals. Now more than ever, it is known for its green credentials as a result of its fiveyear eco plan, Plan A, which will see it, amongst other things, become carbon neutral and send no waste to landfill by 2012.
Mission Statement
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Former times and still: Good Quality for the Penny Vision: To be the standard against which others are Mission: To make aspirational quality accessible to all
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Values: Quality value, service, innovation and trust
Objectives
M&S Objectives can be divided in : o Employee-focused Objectives Employee-Orientation Strategy : Marks & Spencer depends upon the skill and experience of motivated employees throughout all levels of the business. It is part of our strategy to have a range of alternatives to attract, motivate and retain high calibre individuals to accelerate the transformation of the business and deliver improved performance. The Board considers the principles of good governance when deciding the remuneration strategy, and recognizes that the level of remuneration and benefits we offer is key to supporting this objective and maintaining our market position as an employer of choice. o Organizational Objectives Regain its leadership in clothing and speciality food by translating its scale and authority into superior quality, value and appeal. Supply Chain Project Objective Better , faster , at lower cost Review strategic sourcing and logistics Benefits markdowns Customer improvement : quality, appeal & value Shorter lead times Reduced inventory / increased stock-turn / lower
o Sales Objectives The improvements in sales, together with the small reduction in general footage , are translating into stronger Returns per Foot in both Foods and Clothing
Target market.
Marks & Spencer operates in the following segments: clothing; food; furniture and financial services.
Products and services.
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Clothing: Marks & Spencer offers the following product range: womens wear; lingerie; menswear; childrens wear and footwear. Food: M&S has a range of fresh foods; ready meals, special-occasion foods and wine. Home: they sell designer furniture and have recently launched their first accessories/furniture store, ‘Lifestore’, successfully. Financial: they launched the ‘&more’ card which is both a credit card and a loyalty card. Online services: through M&S, you can also order and send flowers via the internet.
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M&S Locations
Head Office :
Its head office is located in central London at Waterside House, close to Paddington Station and the Heathrow Express. Marks & Spencer Waterside House 35 North Wharf Road London W2 1NW
UK Stores :
M&S has over 600 stores located throughout the UK, ranging from large out-oftown and flagship stores of over 100,000 sq ft, to Simply Food stores of around 7,000 sq ft. Its largest store is located at Marble Arch on London's Oxford Street and has around 170,000 sq ft of selling space.
International Stores :
M&S has over 300 stores in over 40 territories. Going forward it plans to expand its international business through both franchised operations and partnerships in some of the world’s most dynamic emerging economies like India & China.
HISTORY OF MARKS & SPENCER
The Beginning
Marks & Spencer started life more than 125 years ago when the Jewish immigrant Michael Marks came to the north of England. He arrived with little money and spoke poor English. Beginning as a pedlar , he soon owned a market stall in Kirkgate Market in Leeds. He classified everything by price, but quickly stopped selling more expensive items when the penny section thrived.
Michael decided to look for a partner to help manage his growing business. He initially approached Isaac Dewhirst , who had loaned money towards his original start up costs. Isaac declined but recommended Tom Spencer – his senior cashier . Tom agreed and on the 28th Sept 1884 Marks & Spencer was born. Tom Spencer invested £300 and brought considerable skills in administration and accounts , which complemented Michael Marks’ flair for merchandise , selling and dealing with people extremely well. Marks & Spencer called their new stores “Penny Bazaars”, keeping the penny price slogan and adding the words “Admission Free”. This was a successful marketing ploy , encouraging customers to browse without any obligation to buy . Whilst this is the norm now , it was unheard of then. By 1900 , Marks & Spencer had expanded to include 36 Penny Bazaars and 12 High Street shops.
1900 to 1920
This was a period of great change; M&S bought up a number of its competitors, as well as becoming a public company the original founders both died , and a legal battle ended with Simon Marks eventually regaining control of the company from Tom Spencer’s executor. In 1901, M&S built a warehouse at Derby Street, Manchester. It was the first property built to its specifications and became the company’s first registered address & headquarters. It was ready for a period of growth that let to M&S having 145 stores by 1915. Improving living conditions & rising incomes meant that people were able to buy more of the things they needed from emerging department stores and coops. M&S catered to this with open displays, browsing and self-selection. And its early stores offered shopping that was cheap, simple & friendly. It sold
biscuits, mending wools, pins, combs, needles, socks,- and in the days before TV or radio-sheet music. The penny pricing continue with great appeal until the First world war, when goods became expensive & hard to get. This changed the way M&S worked for good.
1920 to 1940
In the decades between the wars , Britain moved into Great Depression. There were shortages of goods, unemployment was at nearly 3 million and many companies closed. However it was the period that sharpened the business and helped it focus & strengthen its strong foundations. M&S was now facing competition from affordable variety stores. Adapting to keep ahead of the game, it changed its pricing system, now selling goods upto five shillings. It Also reduced dazzling array of items offered, placing emphasis on two departments; food , which M&S had always sold to some extent, and clothing, which was new for it. It made itself unique by offering clothing that was well made but affordable. M&S was the first retailer to have a research laboratory to pretest the quality of its goods & develop innovative new fabrics. Higher quality at lower prices proved very successful. As more houses were built the demand for affordable household goods grew. So it sold items like tea-sets, and domestic chores were jazzed up with its bright, art deco jumpsuits. This period really saw its products to blend in with the changing lifestyles of its customers.
1940 to 1950 :
The outbreak of war brought with it rationing, as well as enemy bombing which hit over 100 M&S stores, destroying 16 entirely. ‘M&S did its bit’ through practical innovations and the invaluable efforts of employees , who took part in
fire watching, raised money for a Spitfire , set up soup kitchens & helped to care for wounded soldiers. At the beginning of the war 70% of Britain’s food was imported from across the sea. U-boat attacks quickly cut-off this supply & by 1940 rationing was introduced for lots of food, beginning with bacon, butter and sugar. At M&S food was sometimes sold straight from the delivery trucks in order to keep hungry & impatient crowds calm. As rationing didn’t apply to restaurants, people began to eat out more & by 1942 M&S had created 82 Café Bars in store. Restrictions orders meant clothing was also designed to make the most of materials. Here M&S could share its skill at achieving the highest quality for the lowest price. Harry Atkinson who was a M&S technologist, helped the Government develop clothing standards. The result was utility clothing which could be brightly patterned but was very simple in design.
1950 to 1960 :
Rationing continued, but there was a positive side. It has shown people that fashion wasn’t just for the rich but was accessible to everyone. And it also had to be practical – to wash well and last longer. In response, M&S put a lot of effort into improving products as well as experimenting with new technologies & fabrics. M&S took a man-made fabric it had created in the war and made it into a popular line of dresses influenced by Parisian designers. This Fabric was known as Utility Schedule 1005 in wartime, but was now renamed Marspun. The new look dress was based upon the “Corolle” collection by Christian Dior , and became very popular. It used a lavish amount of material and went against all the utility clothing regulations. When he saw this new trend the President of the Board of Trade said “There should be a law against it”. In 1957, M&S decide to improve sizing for ready-to-wear clothes which it created through surveys of women’s bodies.
1960 to 1970 :
During this decade, customers wanted labour-saving products to improve and bring a modern touch to their lives. M&S not only created these modern new products but also got them from the laboratory to the store shelves rapidly. Its customers could have the very latest innovations on a bigger scale than ever before. M&S innovations included new products made from the man-made fabric Terelyne, a type of polyester. By the end of 1960s , M&S was also thinking up safe ways of selling dairy products and meats , beginning with chicken. Most stores at that time sold the poultry frozen because of the risks of bacteria causing food poisoning. But M&S believed customers wanted fresh products and began to explore safe ways of selling chilled, rather than frozen meat. In order to keep meat fresh, M&S invented the “cold chain process”. Chickens were chilled straight after slaughter, carried in refrigerated trucks, kept in refrigerated storage, and sold from refrigerated counters – all at 4 degree centigrade. The entire cold-chain process, developed with its suppliers, was specially made to its own design and was unique at that time.
1970 to 1990 :
By the early 1970s, home freezers were becoming cheaper and more easily available, so in 1972 M&S introduced frozen food including lasagnas and pizzas. By 1973 convenience food was being sold in 100 M&S stores and was a huge hit with the public, later helping to explain the popularity of the microwave. With each meal its Catering department decided on a recipe idea & then worked with its suppliers to create it. Also in 1973, M&S was the first major retailer to introduce sell-by dates as a guarantee of freshness. A year later Indian and Chinese ready mills were first trialed, although they didn’t really take off until the 1980s . M&S was the first
major British Retailer to provide these dishes, which are now a big part of the company’s national cuisine. From the mid 1970s suppliers slowly became more involved in design. M&S now gave guidelines on up-to-the-minute trends, and Design briefs were introduced in 1986. Lingerie became more fashionable in the 1980s and even thermals were given a fashion edge. Co-ordinated underwear sets created ‘looks’ inspired by catwalk trends.
1990 to Now :
This was the time when M&S had to create improved products & get them to its customers faster than its rivals. The melting middle chocolate pudding idea came from its food developer. Based on chocolate fondant, a classic French desert, no other big retailer have ever managed to make it before , and it took 3 times as long to create as usual. The Trouble was its liquid centre. It had to survive storage & transportation without soaking into the outside sponge. It took a lot of time, trials and chocolate to get it right but proved a massive success. In the clothes department new more exciting lines like per una and Autograph appeared with the help of famous names like Patricia Fields, George Davies and Paul Smith. And as it looks at the future, there is Plan A. The plan will affect every aspect of M&S from in-store heating to product labeling, and from waste-management to manufacturing. M&S principles of Quality, Value, Service, Innovation and Trust are now mirrored by the five points of Plan A that target climate change, waste, sustainable raw materials, fair partnerships and health.
Significant events & its impact on M&S during the last decade
M&S's profits peaked in financial year 1997/1998. At the time it was seen as a continuing success story, but with hindsight it is considered that during Sir
Richard Greenbury's tenure as head of the company, profit margins were pushed to untenable levels, and the loyalty of its customers was seriously eroded. The rising cost of using British suppliers was also a burden, as rival retailers increasingly imported their goods from low-cost countries, but M&S's belated switch to overseas suppliers undermined a core part of its appeal to the public. Another factor was the company's refusal until 2001 to accept any credit cards except its own store card. These factors combined to plunge M&S into a sudden slump, which took the company, its shareholders, who included hundreds of thousands of small investors, and nearly all retail analysts and business journalists, by surprise. The company's share price fell by more than two thirds, and its profits fell from more than a billion pounds in 1997 and 1998 to £145 million in the year ended 31 March 2001. In 2000, Marks & Spencer dropped the St Michael brand, and replaced it with the Marks & Spencer brand. The St Michael name was subsequently adopted as a 'quality guarantee' and appeared as the St Michael Quality Promise on the back of food products, on the side of delivery vehicles and on in-store ordering receipts. Marks & Spencer were selling clothes under the St Margaret and St Michael label by the mid-1950s and launched their school uniforms in the early 1950s, but was scrapped in the year 2000 as part of the corporate modernization plan, when brands such as Autograph were launched. In 2001, with changes in its business focus such as accepting credit cards, the introduction of the "Per Una" clothing range designed by George Davies, accompanied by a redesign of its underlying business model, profits recovered somewhat and M&S recovered some of its market share, but it was soon evident that problems remained. Per Una was launched on 28 September 2001 as a joint venture between M&S and Next founder George Davies.
The Per Una brand has been a major success for the company, and in October 2004, M&S bought the brand in a £125 million, two-year service contract with George Davies. Mr Davies was to stay on for at least two years to run the company, with 12 months notice required if he wished to leave. In 2004, M&S was in the throes of an attempted takeover by Arcadia Group & BHS boss, Philip Green. On 12 July a recovery plan was announced which would involve selling off the financial services business to HSBC Bank plc, buying control of the Per Una range, closing the Gates head Lifestore and stopping the expansion of its Simply Food line of stores. Philip Green withdrew his takeover bid after failing to get sufficient backing from shareholders. M&S's relatively successful interior design 'Home' brand was launched in 2005 and featured products like vases, furniture and beds. Boil-in-the-bag and sachet meals were first pioneered by M&S in 1972 and the award winning Gastropub food range was launched in 2004. The 'Melting middle chocolate pudding' campaign of 2005 has led to a remarkable 3,000% rise in chocolate pudding sales, something that has not recurred since. The Percy Pigs sweets were first created in 1995 sweet was sold by the October of 2007. In 2006, the Look Behind the Label marketing campaign was introduced. The aim of this campaign was to highlight to customers the various ethical and environmentally friendly aspects of the production and sourcing methods engaged in by M&S including: Fair-trade products, sustainable fishing and environmentally friendly textile dyes. and the billionth "Percy Pig"
On 15 January 2007, M&S launched an initiative, known as "Plan A", to dramatically increase the environmental sustainability of the business within 5 years and expected to cost £200 million. The plan covers "100 commitments over 5 years to address the key social and environmental challenges facing M&S today and in the future" with the tag-line "Because there is no Plan B". The commitments span five themes: climate change, waste, sustainable raw materials, 'fair partnership' and health, with the aim that, by 2012, it will:
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Become carbon neutral Send no waste to landfill Extend sustainable sourcing Help improve the lives of people in their supply chain Help customers and employees live a healthier life-style
Despite an 18% fall in the share price in January 2008, following publication of their latest trading statement, the company confirmed that they would be continuing with the plan, saying that there were 'compelling commercial — as well as moral — reasons to do so'. The now iconic brown, reusable, hessian bag was first introduced in 2007 as an early part of this plan. It is hope that this will reduce the use of plastic carrier bags over the next few years. In February 2007, M&S announced the opening of the world's largest M&S store outside the UK at Dubai Festival City. M&S was ranked 17 in The Times' "Top 100 Graduate Employers 2008". May 2008 saw the introduction of the 5p carrier bag scheme at M&S stores, with customers now paying 5p per standard sized vest carrier bag for food purchases. This implementation was brought about through the Plan A
scheme, to try to discourage use of the traditional plastic bag. All profits from the sale of food bags go to Groundwork UK. On 2 October 2008, M&S opened its first mainland China store in Shanghai. Problems with the supply chain for the first few months of opening led Stuart Rose, M&S chairman, to describe failures in "basic shopkeeping". After fostering significant growth in recent years, mid-2008 saw share prices plunge to well under half their value of twelve months before, as M&S struggled to cope with more conservative shoppers in the credit crunch. M & S made a £298,000,000 profit in the half year up to September 2009. M and S also showed a pre-tax profit of £632,500,000 for the 52 weeks to 27 March 2010. The up market Zandra Rhodes collection, modelled and made by the British fashion designer Zandra Rhodes, CBE/RDI was introduced in to the bigger stores by late 2009, but was discontinued in early 2010.
The 2008-9 restructuring plan
As part of the 2008-9 restructuring plan, 9 sub-brands that were deemed to be unprofitable, unnecessary or superfluous were either discontinued, merged or re- launched in 2008, with further activity, including some store closures, occurred in both 2009 and 2010. Line, sub-brand or brand involved. Floor 1 discount brands— women's discount fashion clothes Date of action. Early 2008/the festive season of 2008-2009 Fate of line, sub-brand or brand involved. Replaced by 'Designer discount' line in early 2008. It was relaunched in festive season 2008-09 as- By me
now or lose me for ever- limited editions. Romper-suit republic— baby clothes (was only available online) The Shirt-sleeve empire— boys' shirts (was only available online) Essential—up market skirts and t-shirts 2008 Discontinued
2008
Discontinued
Perfect—upmarket trousers, skirts and blouses Plus range maternity (large stores only). Limited Collection Maternity The Zandra Rhodes collection was a up market woolen clothes and t-shirts modeled and made by the British fashion designer Zandra Rhodes, CBE/RDI 'Party, Party, Party!' was a line of seasonal party clothes
'Katy Livingston' was an up market sports clothes and merchandise relating to the British athlete Katy Livingston.
'Frenchay' (was only available online)- French
Merged in to Portfolio, along with Perfect. 'Essential' now also 2009 continues as a seasonal line of the 'Autograph' brand. Merged in to Portfolio, along with Essential. Perfect still operates in men's rain coats and cookware. 2009 'Perfect' was relaunched in January 2010 as a seasonal sub-brand of 'Portfolio'. Merged with Limited Collection 2008 Maternity as 'M&S Maternity'. Merged with Plus Range Maternity 2008 as 'M&S Maternity' to simplify administration. It was launched in April 2009, but was let gradually run down in the festive season during December February 2010 2009 and January 2010. It was finally discontinued due to poor sales performance in February 2010. Discontinued in July 2010, but then July/October relaunched as 'Partyware' October 2010. 2010. It was launched in early 2009 and developed in to the 'Performance' brand. 'Performance' was the resulting line of serious sportswear Mid 2010 for dedicated female athletes that would merge with the feminine 'Sportswear' line in mid 2010 due to the need for administrative simplification. The Festive It was merged in to the other season of 'Kitchens' brands.
made, utilitarian/good value plastic home ware, clothes pegs, clothes hangers, etc. 'Fashion line'- babies' fashion clothes 'Ready to play' playwear 'Themed collection'Cartoon and story book character merchandised clothing 'Nightware'- Teen's night clothes B.C.A.M.- charitable merchandise aimed at raising awareness of breast cancer. B.C.A.U.K.- on line charitable T-shirts for the under 40's. 'Food to go' line
2008-2009. It merged with Babyware and Petite Babe. Discontinued, but some designs continued under the 'Casual line' Merged with Character shop
Early 2010 Early 2010
late 2008
Early 2010 The Festive season of 2009-2010. The Festive season of 2009-2010. The Festive season of 2010-2011.
Merged with the 'Sleepware' line Merged with B.C.A.U.K. as 'Love Pink'.
Merged with B.C.A.M. as 'Love Pink'. It was merged in to ’Lunchtogo’ during the festive season of 20102011
Store formats
Core stores
M&S core stores typically feature a selection of the company's clothing ranges and a M&S Food hall. The range of clothing sold and the space given to it depends on the store's location and customer demographic (an example would be that some London stores do not stock the Classic Collection, but stock Limited Collection and a full Autograph range). Most core stores feature a Food hall. In 2000, all the St Michael Food hall supermarkets were renamed M&S Food hall, when Marks & Spencer dropped the St Michael brand in 2000. Each M&S Food hall sells groceries, which are all under the Marks & Spencer brand. However, in 2009 the company began selling a limited range of other brands, such as Coca-Cola and Stella Artois,
without reducing the number of M&S goods they sold. This returns to the previous Marks & Spencer practice of selling branded food, before the company become solely-own-brand.
Hospitality
Most M&S stores feature some sort of hospitality offering, usually in the form of an M&S Café. These cafés were formerly known as Café Revive and many old format stores still brand them as such. The café offering typically includes coffees and teas (all fairtrade), pastries, toasted sandwiches, soups and cakes. The company also trialed the opening of an Espresso Bar in some stores, which specialized in drinks only, however these have subsequently been rebranded as M&S Cafés. Many large stores, such as Westfield, White City, Cribbs Causeway and Newcastle-upon-Tyne, also offer other hospitality outlets, such as a modern Deli Bar (champagne, canapés, seafood), Restaurant (table service—the first of which was opened in Newcastle) M&S Kitchen (traditional home cooking & lunches) or Hot Food To Go (burgers, chips, soups). Many of these outlets are run in conjunction with Compass Group and even in smaller stores they also partner up to offer readymade baguettes as part of the standard Food to go offering.
Home Stores
In 2007, M&S announced that new, dedicated stores for home furnishings were to be launched. Stores have now been opened in Cheltenham in Gloucestershire, Lisburn in Northern Ireland and in the Barton Square section of The Trafford Centre, Manchester. On 19 November 2009 Aberdeen became the first dedicated homeware store in Scotland and the biggest of all the M&S homestores in the UK.
Outlet Stores
As of 2010, M&S have 50 outlet stores and growth expansion plans for future. The Outlet division offers M&S products with the majority of them discounting at least 30% from the original selling price. The first of these stores opened at Ashford in Kent in 2000. Many of the Outlet stores are in locations such as retail parks and outlet centres, though some, including the stores in Woolwich, South London and Newton Abbot, Devon were previously main M&S stores which converted to the Outlet format. Meadow Bank Outlet Store in Edinburgh became the model store for all the Marks and Spencer Outlet Store in the early months of 2010. M&S is in the middle of a programme to open four hundred Simply Food stores selling predominantly food but with most also carrying a small selection of general merchandise, like birthday cards and pens. The first of the 'Simply Food' stores were in Twickenham and Surbiton. A number of these stores are run under franchise agreements:
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Select Service Partner (SSP) runs the stores at mainline railway stations and airports Moto has stores at several of its motorway service stations BP has 116 forecourts with a Simply Food offering
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Online services
Products could be ordered online since the mid 2000s, in response to some like Tesco launching their pioneering Tesco.com home shopping delivery service in the early 2000s. M&S TV is a online TV station to advertise goods. The John Lewis shopping chain beat M&S to the title of the U.K.'s best highstreet website by late 2010.[
Organizational structure
The changes within Marks & Spencer have created a business that now has a flatter organization structure. The business lost a number of layers of authority through a process of delayering. This means that employees throughout the business have more responsibility. This enables them to make quick decisions when required. At the same time, these employees have more accountability than before. This means that they must be prepared to explain and justify the decisions that they take. The Marks & Spencer Head Office in London employs around 3,000 people. These employees have specialist roles within the organization. There are the buyers of stock, people involved in managing stock and its layout within stores, and staff working in marketing or accounts. The changes within Marks & Spencer have created a business that now has a flatter organization structure.
More than 60,000 employees work in the Marks & Spencer stores, many in management roles where they lead and motivate a team of people. The company also has many franchise outlets overseas.
Competitive Rivalry
M&S is a retailer that sells food, clothing & home wares. Therefore it faces competition from both supermarkets such as Tesco, Asda and Sainsbury’s and clothes retailers such as Next and John Lewis. M&S prides itself as being a higher quality value-for-money brand. However, with the recent rebranding and cutting of prices for clothing , it risks devaluing the brand in the market where specialization is becoming increasingly important.
HOW M&S ENSURES SUSTAINABLE BUSINESS? M&S have a well defined strategy of ensuring sustainable business by focusing unrelentlessly on the “Priorities For Retailers” in terms of “Product” , “Service” & “Delivery”.
Priorities for Retailers
Product
Service
Delivery
Product
Competiti ve Price
Appropria te Quality
Reason to Buy
Service
Appropriate Communicati Minimum on Fuss Make it Easy
Delivery
On Time
Consisten t
Lead times
The Result?
Max Money in the Tills Minimum Risk
Happy Customers who will come back and buy MORE
Technology Development Procurement
M A R G I N
BCG MATRIX OF MARKS & SPENCER
M C
PRESENT POSITION OF M&S IN UK
With an annual turnover of £8.4bn, its UK business has a broadly even split between General Merchandise (clothing and home) and Food. General Merchandise £4.1bn sales Market Share by Value – 11% & Market Share by Volume – 11.2% With more than 1 in 10 clothing items bought from M&S, it remains the UK’s largest clothing retailer and the first choice for stylish, great value clothes for the whole family. It leads the market in womenswear, lingerie and menswear and have an expanding kidswear and home business. Food £4.3bn sales – Market Share – 3.8% We are the UK’s leading provider of high quality food, selling everything from fresh produce and groceries, to partly-prepared meals and ready meals and an award winning range of wines. Underpinning this is our commitment to healthy eating, ethical sourcing and innovation.
SELLING THROUGH MULTI-CHANNELS
Customers shop with M&S in many ways – in stores, online or over the phone. Its aim is that everyone receives the same consistently high level of service from purchase through to delivery. M&S UK stores M&S have 690 stores across the UK – in a wide range of convenient locations – from high streets to retail parks, train stations to airports. Over the past four years it has transformed these stores into bright and contemporary destinations with a range of hospitality options. The bifurcation of 690 UK Stores is as follows: 10 Premiere , 42 Major , 242 High Street ,46 Outlets ,156 Simply Food whollyowned 194 Simply Food franchises
M&S Direct £413m sales M&S Direct is key to improving customer convenience and service including via its website and its newly launched ‘Shop Your Way’ facility. The company is on target to achieve £500m in sales by 2010/11. The platform includes E-commerce website , Home catalogue , Flowers and wine delivery , Hampers, Food to Order , Lunchtogo, etc.
EVALUATING CURRENT POSITION OF M&S IN UK
Though M&S has reported much better than expected sales figures , there is already an apprehension that the coming months will be tough as the government's looming austerity measures – public spending cuts and planned increase in VAT – threaten to shake consumer confidence. M&S had been pulling in more customers, who are buying higher-quality items, and that the store is profiting from its aging shoppers. "Older customers are better prepared for tougher times," said the chief executive Marc Bolland, who replaced Sir Stuart Rose in May. "They have seen it before and they have more savings." Slow and steady recovery of the economy, together with rising commodity prices – such as cotton up 70% on this time last year – and "significantly tougher comparatives" will make sales gains harder to achieve in the coming weeks. M&S is spending more on marketing and advertising to attract customers as well as to ward off the competition. M&S’s clothing, homewares and food have put in strong performances over the most recent three months, as it won sales from rivals. The company as per his chief executive officer Bolland has hoped to absorb the impact of rising
commodity prices and VAT on some clothes, so opening price points – the cheapest products – will not have to go up. Like-for-like UK sales at M&S climbed 5.3% in the 13 weeks to 2 October, with clothes and homewares roaring 7% ahead and food up 3.7%. M&S cemented its position as Britain's biggest clothing retailer by increasing its share of the clothes market to 10.3% from 9.6%, helped by new products such as the "two sizes bigger" bra and "Miracle" crease-resistant linen. In the coming weeks it is hoping for bumper sales from new "front-enhancing" pants for men. Its latest advertising campaign, fronted by X-Factor judge Dannii Minogue, exfootballer Jamie Redknapp and Brazilian model Ana Beatriz Barros has been instrumental in driving more customers into its stores. The chain has just had a record autumn season for women's footwear, selling 300,000 pairs of boots – 50% more than last year. Knitwear and men's suits are benefiting from a return to quality: It is felt that with an uncertain environment people are choosing quality. They are choosing things that last, not just for a couple of days or a couple of months. In the foodhalls, about 370 products have been launched, including "In a Pot" ready meals, groceries and biscuits. International sales are up 6.2%, although trading remains difficult in Ireland and Greece. The better-than-expected figures suggest that be to its advantage.” M&S has been quite conscious of the fact that in clothing, shoppers are more interested in quality and are willing to trade up; while in food, lower inflation "To some extent, market
conditions are now much more favourable to M&S and consumer trends should
means a less price sensitive consumer who is willing to buy more premium product. They have managed these facts quite well & and, along with its development work over the past year, have helped to generate a set of positive numbers. The only spoiler for M&S can be the negative headwinds of government cuts which is on the horizon, , which in turn can make the consumer environment much tougher.
EVALUATION OF PRESENT INTERNATIONAL MARKET
POSITION
OF
M&S
IN
During 2009/10 sales in its International business grew by 5.7%, accounting for 10.2% of total Group revenues. This year the company has focused on developing its partnership in India and growing Central and Eastern European business. Over the last 12 months it has invested in its operational capabilities, resulting in a better product offer, tailored to meet the needs of specific markets, as well as building a platform for future growth. International revenues during the six months ended Oct-10 has grown to £m 462 , a growth of 3.8% from the last year six monthly revenue of £m 445.2. Its operating profit has witnessed a subdued performance with a drop of 2.3% to £m 64.4. The company owned operations have been facing severe cost pressures owing to higher rentals & interest expenses. M&S now has 327 stores in 41 territories (includes Republic of Ireland), with the average square footage of its international stores increasing from 10,773 to 11,129. Its International business model is made up of partly and whollyowned subsidiaries and franchises. This broad spread of ownership models and countries has enabled M&S to perform well throughout a difficult global economic environment even when individual markets have been impacted.
M&S is on its path to achieve its envisaged target of International revenue to be 15-20% of total Group revenue within next 5 yrs by focusing on four key elements viz Growing its Central and Eastern European partnerships; Building sustainable businesses in India and China; Accelerating growth with its franchise partners; and Continuing to explore new opportunities.
Operational efficiency is key to building a platform for growth. The introduction of its International Range Planner last year has improved its ability to tailor the product offer for individual markets. It enables M&S to plan for regional variations and accurately stock the right colours and sizes to meet the specific needs of ITS international customers, responding to seasonal requirements in Russia or greater colour variations in India for example. Improvements in its supply chain have enabled it to move products through its network faster and more efficiently. M&S now moves over 21% of its stock through its four international hubs in Hong Kong, Singapore, Sri Lanka and Istanbul direct to their destination, as opposed to shipping international stock via the UK.
SWOT ANALYSIS OF MARKS & SPENCER STRENGTHS :
1)Market leadership Marks and Spencer is the UK's largest clothing retailer and footwear by both value and volume. In the clothing market, M&S has 12% market share and, is sixth largest in the food market with a 3% share. In value terms, M&S has 10.5% market share in UK's women's wear market. It also has 9.5% of menswear, 24.1% lingerie and 4.1% of children's wear markets in the UK. M&S has over 600 stores located throughout the UK. In addition, the company has 327 stores worldwide, including over 170 franchise businesses, operating in 41 countries. Market leadership enhances its brand image and provides M&S with a competitive advantage. 2)Improved profitability Operating margins of M&S improved from 7.75% in 2005 to 8.86% in 2010. This was achieved through a continued tight control of costs, improved management of stock commitments and better buying. The company's average operating margin for the five year period ending March 2010 at 8.3% compares well with the industry average of 5.7%. Improved profitability indicates the efficient nature of the company's operations. 3)Strong brand image The M&S has been a strong brand for decades. It stands for high quality products at reasonable prices. Moreover, it is a well recognized brand in retailing in the UK and also in the international markets. In addition to the mother brand, M&S has a strong portfolio of private brands including: Autograph, Blue Harbour, Per Una, Body and Cellozione. The strong brand image of the company aids customer loyalty and helps promote repeat
purchases. In addition, the company leverages its brand strength to easily expand into new lines. 4) Large number of outlets and high street presence M&S has 690 stores across the UK – in a wide range of convenient locations – from high streets to retail parks, train stations to airports. Over the past four years it has transformed these stores into bright and contemporary destinations with a range of hospitality options. 5) Backward Integration – Integration with the suppliers One of the things that set M&S apart from other retailers is the way it works with its suppliers. This year it has helped its suppliers to set up 10 Ethical Model Factories to demonstrate how good employment practices can result in a more productive workforce and allow for higher wages. It also ensures financial monitoring of all suppliers and flexible payment terms for major suppliers during difficult economic conditions , Dialogue with suppliers and third party providers to identify any issues early on and ensure good working relationships, Review of its supply base to reduce reliance on key suppliers where appropriate 7) Wide variety of products It sells wide variety of products ranging from General Merchandise like womeswear, lingerie, menswear, kidswear, homebusiness , Food items like fresh produce, groceries, partly prepared meals, ready meals & wide range of wines 8) Geographically based divisions The stores of M&S have been strategically located as per different geographic divisions to cater to shopaholics.
WEAKNESSES : 1) Geographic concentration M&S derives a majority of its revenues from the UK market. The company derived 89.8% of its revenues from the UK in year ended March 2010. In contrast, competitors such as Wal−Mart have global operations, which provide them with a better revenue profile and economies of scale in purchasing. Geographic concentration of revenues makes M&S vulnerable to market conditions in the UK and makes the company relatively uncompetitive compared to global retailers such as Wal−Mart. 2) Low return on assets and equity M&S has recorded weak returns on assets and equity in the last few years. Its return on assets and return on equity for the five year period ending March 2010 were 6.5%, and 8.7%, respectively, lower than the industry averages of 6.9% and 10.4% for the same period. Weak returns reflect the inability of the management to deploy assets in profitable avenues, and this could result in decreasing investor confidence. 3) Limited online transactions Though M&S has had a transactional website for a few years now, its service is inferior to many other retailers in a number of respects. Food cannot be ordered online and delivered to home from its website. Only a selection of general merchandise product is available. M&S does not deliver to customers overseas. Limited online transactions could put the company at a competitive disadvantage.
4) Ageing customer base
One weakness that could be identified is the age of the main target customer; as the largest percentage of customers visiting the store are aged 55+. This means once this demographic is no longer consuming, there is a fear that a new, younger market will not be.
OPPORTUNITIES : 1) New acquisitions In January 2006 M&S expanded its already successful 'Simply Food' format with the acquisition of 28 stores on a leasehold basis from Iceland Foods for a consideration of £38 million. The stores, which average around 5,000 square feet, are all in prime locations for the 'Simply Food' brand throughout the UK. There are currently 143 Simply Food stores in the UK, Republic of Ireland and the Channel Islands. Following the acquisition, M&S will have 171 Simply Food stores throughout the UK. This acquisition would increase the company's presence in food market while boosting its revenues. 2) Competitive pricing M&S has implemented price restructuring across product categories and brands in fiscal 2009. As a result, about 38% of its products are now at 'Opening Price Points' (entry level pricing), as compared to 12% in 2004. In fiscal 2005, M&S was the most expensive when compared with its competitors such as Debenhams, Next, BHS and Matalan. It was marginally more expensive relative to the average of this group. After the implementation of price restructuring, M&S is now nearly 10% cheaper than Debenhams and a little cheaper than Next. In food pricing, M&S is 2% cheaper than Tesco's 'Finest'. Competitive pricing might help in generating more revenues. 3) Increasing online spending Online consumer spending worldwide is forecast to rise from $137 billion in 2004 to $300 billion in 2010. Significant growth in online sales is forecast for
all categories of consumer goods. The online market is the fastest growing sector of the UK retail at present, accounting for almost half the cash growth in retail spending in 2005. Though it has limited online service, it is expected that M&S' re−launched website will provide for a more engaging , interactive web experience which in turn could reduce the company's operating costs and further improve margins. 4) Internationalization – Increasing the global presence The international markets revenue is only 10.2% of the total global revenue for M&S. This clearly indicates the untapped potential for M&S to expand its international revenue. The company can leverage its retail expertise by expanding into developing markets like Brazil, Russia, India, China & Central & Eastern Europe economies. 5) Desire for labels / branded goods Today’s customers are highly aspirational & want to be associated with branded items. This opens up a great opportunity for quality retailer like M&S to push their market share of Branded goods & private labels. 6) Consumers more prepared to purchase a wider variety of products from one source. Now days customers are looking for one stop shopping. This means that big retailers like M&S stands in good stead if they can offer a wider variety of products at one location or store.
THREATS : 1) Intense competition
One major threat facing the company comes from the intense competition that exists in the UK food retailing market. Although the company has a 3.8% share of the UK food market, it remains a significant distance behind food retailers like Tesco, Sainsbury and ASDA. The intense rivalry that exists between such competitors has led to a price war within many areas of the food industry. The increasing dominance of Wal−Mart and companies like it are adding to the growing pressures facing the traditional supermarket channel and are also reshaping the interactions between manufacturers and retailers in all markets, including food, apparel and financial services. The continued expansion of such companies in 2010 and 2011 is likely to affect the operations of M&S. 2) Increasing labour wages in the UK Labour costs are rising in the UK. The UK government increased the adult minimum wage rate from £5.80 to £5.93 per hour in October 2010. The rate for those aged 18 to 21 years will be increased from £4.83 to £4.92 per hour and the rate for workers aged 16−17 years would increase from £3.57 to £3.64 per hour. The full year effect of this increase would be evident in fiscal year 2011. An increase in labour costs could adversely impact the company's margins. 3) Weak retail sales in the UK Consumer spending in the UK, in fiscal 2010, remained under pressure amid worries about sluggish economic recovery, house prices, taxes, interest rates and the sharp rise in utility and fuel bills. If the situation continues, it could adversely affect consumer spending which in turn could depress the revenues of M&S.
WHAT THE FUTURE HOLDS FOR MARKS & SEPNCER
SHORT TERM:
M&S has expressed its willingness to expand its online food offer beyond that of "chocolates and flowers". Though it is also expected that the chain will push more of its clothing and homewares online, it is felt that M&S can contribute more in terms of its grocery offer. Since the limited range will make it difficult for the retailer to offer a full online grocery shop to the same degree as that of Sainsbury's or Asda, it may be a good idea to drive the growth through enhanced offering of M&S's branded range. However, it sounds as though CEO Bolland is not so keen on branded products. He played down their role in the second quarter results. While it is not believed that he will scrap them completely, he may scale them back. M&S is not present in Western Europe. Since France is a big market it makes compelling sense to be present in France & at least in the short term there is much business to be done there. In the short term, due to sluggish economic recovery , M&S may have to scale back its investment in new stores, it should continue to invest its infrastructure, particularly its supply chain and IT systems.
MEDIUM TERM : M&S has a clear, coherent international strategy, given its brand power as a quintessentially English brand. The obvious concerns revolve around: implications to short-to medium-term group returns; the need for additional funding and the shape of funding; time involved to hit critical size and scale in key regions; planning permission and additional infrastructure spend in order to facilitate logistics; and whether an aggressive European expansion policy would take priority over 20/20 [strategic repositioning] commitments."
M&S has been charting out an aggressive entry into the developing markets like India & China. Any changes leading to increased FDI into these markets can open up galore opportunities for Marks & Spencer. Offering branding that appeals to culture within these countries to draw in future business and help to boost the brand once more.
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