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Does Marks & Spencer have a future?

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Introduction

INSTITUTE OF MANAGEMENT TECHNOLOGY, NAGPUR Does Marks & Spencer have a future ? Managerial Economics Group Assignment - 1 Submitted by : Aishwarya Iyer 08FN007 Anjan Sethi 08FT012 Anchal Sharma 08HR010 Date of Submission : 01-09-08 Section A ABSTRACT This report analyses the impact of external and internal influences on the business strategies of Marks and Spencer (M&S) between 1996 and 2002, and evaluates the factors affecting them. The report basically identifies the main factors affecting the demand for M&S products by analyzing the weaknesses and threats faced by the company. It furthers the discussion by pointing out the changes, which the company tried to bring about in its marketing mix elements, branding strategy and value chain to enhance its market share and profitability. The major finding is that M&S had successful business strategies and marketing plans. However, the company could not maintain these advantages continuously, and faced a slowdown during the period 1998-2001. The main factors that contributed to the slowdown were the insularity shown by the company, which made it less responsive to the changing market conditions. TABLE OF CONTENTS 1. Introduction.......................................................................................4 2. Factors affecting the demand for M&S products.............................................6 3. Weaknesses and threats on the demand side of M&S.......................................8 4. Changes made to the Marketing mix elements.............................................10 5. Brand Management Strategy of M&S........................................................11 6. Changes made to the elements of the Value Chain.........................................12 7. Summary........................................................................................13 8. References.......................................................................................15 Introduction What was to become Britain's largest retailer began in Leeds in 1884 as a market stall. It was started by Michael Marks and later supported by Tom Spencer when they decided to set up permanent stores in UK. Together, Marks and Spencer raised 600 pounds and set up a network of shops in the surrounding area that came to be called 'Marks & Spencer's Penny Bazaars'. Until very recently M&S thrived by following a model that built upon Michael Marks and Tom Spencer's original concept. ...read more.

Middle

By the end of that financial year annual pre-tax profits halved from �1.2 billion to �546 million. Almost �400m of the decline was in the core UK retail business. There were a number of controllable and un-controllable factors working on the demand side, which affected the sales volume and the market share for M&S. Weaknesses (a consequence of controllable factors) * The management at M&S was so much in love with their traditional ways of working that they could hardly identify the need to change. The company managers simply rested on their past laurels and harked back to old glories. This left the company without any ability to innovate according to the prevailing market trends. * M&S became increasingly inward looking with regard to relying on traditional UK suppliers without looking at what customers wanted. This also made the company smug with regards to working with suppliers to improve. * There was a decline in the quality of the products offered, which dismayed the customers who were now not ready to pay a price premium for such poor quality clothes. * The company did not take up promotions before the decline in profits. But, in 2000 it released its first campaign to promote a clothing line for fuller women. This advertisement however, was highly criticised and further affected the fall in demand for its products. Threats (a consequence of un-controllable factors) * From a socio-environmental perspective, there were changes in demographics and spending patterns. An increasing share of consumer spending was now done by the affluent over 45s, who did not spend a considerable part of their incomes on clothing. * Also, there were changes in the tastes & preferences of the consumers in the market. The older customers now wanted more colour in their clothes, in contrast to the younger generation who preferred more of demure clothes during this period. * What made matters worse were the Economic factors like the growing strength of Sterling on global currency markets, making M&S products increasingly expensive. ...read more.

Conclusion

* Service M & S redesigned their store in ways that give space, convenience, and comfort to customers while they are browsing, fitting and shopping. They gave their shopping malls a facelift with modernist chrome and creamy marble floors. They replaced their dreary row after row of racks with roomy walkways and designer displays. They also had expansion plans to launch 26 other such stores in Britain. They also launched their own store cards. However during the course of time this strategy failed and they started accepting credit cards to adapt to the market requirements. A key for sustainability of all organization is to change and evolve continuously to match with its environment outside its window in which it operates. Until the late 1990s, M&S had been very successful. It worked to achieve this esteem by applying a structured formula to all its operations and maintained it by establishing a set of fundamental principles, which were held as core to the organization and used in all of its business activities since its birth. Their paradigm helped them in the past but the same paradigm didn't work from 1991 and they went through a strategic drift. Though the above changes were made by the company to foster growth by enhancing customer value, the results contradicted this. Marks & Spencer should have emphasized clients' satisfaction by delivering up-to-date, fashionable, high quality garments to the customer accompanied by affordable competitive prices. They should have focused on improving the procedures on their inbound logistics, operations, suppliers, and many more. Their warehouses should have been made clear of old stocks to give way to new up-to-dated stocks. The packaging of their products should have also been given due consideration. They should have considered purchasing supplies from overseas to save cost so as to provide the products at a lesser price. Conclusion Marks and Spencer were not proactive in their strategy making and were unable to keep up with the changing market pace and the pressure of competition. Lack of customer sensitivity and orientation lead to the decline through the 1998 to 2001. ...read more.

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