Case studyMarks and Spencer

Presented by:Tarang Baheti(3)Saumya Nair(25)

Anar Sheth(49)Shivang Thacker(52)

Pratyancha Suryavanshi(59)

Broadview

• This case is broadly divided into four parts:1)Initial success2)Decline3)Restructuring and re-organizing strategies4)Recovery and conclusion

Case-facts

• This case study is about why one of the world’s most famous retails, Marks & Spencer, ran into trouble at the end of the 1990s and how it attempted to manage a programme of change to overcome those problems.

• It deals with issues concerned with organisational culture, strategic drift, strategic choice and the management of change.

…cont • Michael Marks began by establishing a penny

bazaar in the late 1880s, it was a huge success with the majority of products costing only one penny.

• Marks needed a partner to help run the growing firm, Tom Spencer.

• M&S worked under a close-knit family atmosphere.

• Marks was renowned for his personal control over the business, his was a style of top-down management and centralized organizational structure.

The M&S formula for success

• “Applying a structured formula to all its operations and maintained it by establishing a set of fundamental principles which were held as core and used in all of its business activities.”

Signal of bad times

• In order to control costs there would be less full-time sales assistants. This led to an inability in stores to meet the service levels required by M&S.

• Customer satisfaction surveys showing decreasing satisfaction. Top management was not aware about this.

Strategic Drift• An organisation’s success is often the root of

its demise. • Over the years Marks & Spencer developed a

whole culture around the way it did things and how it built upon its competences. This was a tremendous strength for it and led to its success.

• However, it also led to a drift as Marks & Spencer did not introduce changing facilities for customers until the mid 1990s.

Problems• Turbulent competitive environment.• Misreading the target market.• Ignoring changes in the domestic market/

customers’ tastes.• Focus on the day-to-day operations of the firm

rather than long term strategy.• A large proportion of M&S customers were

women and much of the merchandise was womenswear, but top management was dominated by men.

. . . And more problems

• It was also accused of having an inward looking culture.

• Autocratic approach• Top officials resignations• Store layout• Large scale investment and diversification

Decline

• Deteriorating profits• Decrease in share prices• Rapid sell-off of M&S shares• Excess stock• Closing of most of the European stores• Changing the suppliers

The cultural web

• paradigm: we are the best; we set the standards; we know best; we occupy the middle ground; we are synonymous with high quality; people respect us and will always shop here

• power: centralized; male dominated• organisation: mechanistic, bureaucratic; top-

down; hierarchical

…cont

• rituals and routines: knowing your place; store layout; family atmosphere

• stories: history and legacy; power over suppliers; authoritarian, behaviour of top management

• symbols: the St Michael brand; Simon Marks and CEOs as father figures; identical store appearance

Restructuring

• Salsbury implemented a restructuring strategy, splitting the company into three: UK retail business, overseas business and financial services.

• Establishing a company-wide marketing department to adopt a customer-focused approach.

• M&S also launched new clothing and food ranges, reinforced by a large-scale promotional campaign.

• Salsbury also issued a memorandum explaining that he wanted to challenge the traditional ways that M&S operated, move M&S away from its bureaucratic culture.

…cont

• Then again splitting into seven business units: lingerie, womenswear, menswear, childrens wear, food, home, and beauty.

• January 2000 saw a new chairman for M&S, Luc Vandevelde. This was the first time anyone from outside M&S had been appointed to the position of chairman.

• He went for a major culture change of the organization. (supplier sources from UK to Asian, changed supply chain, stopped the famous green carrier bags, as a result customers were confused, So despite new measures and strategies there was no visible improvement.)

…cont

• Further restructuring of M&S into five operating divisions: UK retail; international retail; financial services; property and ventures.

• Creation of customer insight unit• Relocate the headquarters

Recovery

• Vandevelde never gave up.• Unveiled its Autumn-Winter fashion

collection, formally tailored range, evening wear and a new range entitled ‘Perfect’.

• A joint venture to design and source children’s clothing with one of its leading suppliers.

• The new range, named ‘Per Una’, targeted women aged 25–35, Per Una was well received by customers.

…cont• Employing Holmes to implement a store refurbishment

programme.• Holmes was seen as the driving force behind the

revitalisation of women’s clothing, the boys range was launched and also innovation in food ranges.

• As a result M&S saw successful christmas.• M&S was back in the rankings of the ‘World’s Most

Respected Companies’. It had regained its place because of the way it had restructured and refocused itself, and underlined the strength of the brand and culture.

• Rise in profits and an increase in the dividend.

Still failed

• But M&S saw only short term success.• Problems in womenswear and chidren wear

still continued.• In addition food and homeware also had

problems.• Total sales were down.

Reasons

• Absence of long term strategy• Complicated structure• Turf wars• Changing bosses

Analysis & Solutions• The main limitation of M&S was lack of long

term strategy. The chairman and CEOs should have formed long term strategies rather than short term restructuring plans.

• M&S did see success due to its strong culture but it remained adamant on it. They should have developed dynamic capabilities and changed its competences to meet the needs of rapidly changing customer tastes.

• M&S should have been liberal with getting outsiders in the decision making process.

…cont

• The shaken top management resulted into complete culture change leaving the customers confused, but they should have formed a strategy where new changes are adopted by not leaving their roots. They could have gone for a hybrid strategy.

• Also they should have allowed women to be at the authoritarian level, which would have given a more personal touch to their core womenswear products.

…cont

• They should have been more flexible in giving incentives and bonus and should have strict rules regarding employees leaving the organization. This would not result into top management running away from their responsibilities.

• Also store layout and store designing should be convenient to customers. This can be done by getting customer feedback and understanding their outlook.

…cont

• They diversifying into food items was an unrelated diversification which was beyond their current capabilities and value network.

• A flat, centralized, autocratic approach do not stand for long term. It has to be modified with changing times.

Conclusion

• Marks and Spencer became a household name internationally by the early 1990s.

• However, the last part of that decade began to see decline.

• This case examines successive attempts to reverse this decline, with many new initiatives and new managers over several years.

• But these efforts appeared inadequate to turning round the company and culminated in the 2004 resignation of Marks and Spencer’s chairman.