Rise and fall of marks and Spencer

Introduction

When Michael Marks established a penny bazaar in mid 1880's, it was the beginning of a British success story that no one could have predicted. Marks & Spencer Group (M&S) has been a legendary organisation for over a century. However, after years of success, the retailing giant showed an alerting signal.

This study provides a comprehensive and critical evaluation of the changes at M&S from mid 1980s to 2002 and the results of its management's endeavours. This is undertaken by scanning through the history of M&S and its background. Strategic tools like SWOT analysis, PEST analysis , Porter's five model industry analysis , BCG Matrix and the Value Chain analysis are used to evaluate the whole spectrum of factors that contributed to the rise and decline of Marks and Spencer. An attempt is also made to suggest future strategies to be adopted to regain the lost ground.

M&S Background

The company was started in Leeds in 1884 by Michael Marks , a Russian immigrant. Ten years later , Tom Spencer joined partnership with Marks and M&S was born (Beaver, 1999). Their partnership had all the components of success, uniting entrepreneurial flair with the commercial expertise required to create a string of 'Penny Bazaars' (Christopher, 2001). In the 1920s, the business exercised a revolutionary policy of buying directly from manufacturers rather than going through wholesalers. These unique relationships with suppliers gave the business an advantage and convenience that few of its competitors could match. The growth of M&S was fast and in 1926 it was listed in the London Stock Exchange as a public company (Whitehead, 1994). Two years later, Simon Marks took over the reins of M&S from his father. He introduced the "St. Michael" brand , a symbol of excellence and quality. In 1930s, M&S' flagship store was opened at Marble Arch, London. Afterwards, food departments, which sold canned products, were introduced into the company. Moreover, M&S started to made forays into the foreign markets in 1970s and had a mixed success in its foreign operations. It opened its first overseas store in Canada in 1973 and then the expansion continued in Europe (Daniels, 1995). It also exported its St. Michael brand merchandise to franchised stores in seventeen countries.

SWOT ANALYSIS

This environmental analysis generates information which is structured and directed in a meaningful way for marketing and strategic planning process with respect to the present and anticipated situations. The internal environments are explored using the strength and weaknesses where as the opportunities and threats are analyzed for the external.

The detailed factors that characterizes the strengths , weaknesses , opportunities and threats are listed as Appendix I.

PEST Analysis

Through the PEST analysis the external macro environment is explored.

Here factors pertaining to the political, economical socio-cultural and technological aspects are looked into.

Political

The stability of the present labour government, its taxation policies, anti monopolistic policies, the employment laws and the formation of the competition commission so on are having a direct impact on the retail industry as well as M & S. Mergers and acquisitions are not encouraged and hence thoroughly investigated. Because of the presence of the strong trade unions the companies are not in a position to introduce " operation simplification " just as the legendary Marks could introduce it in Marks and Spencer, immediately after the Second world war.

As such firms have had to adapt to wage rises and have been forced to find other ways to lower costs. Supermarkets such as Tesco have in the past reduced costs by exploiting suppliers by taking advantage of their strong buyer's bargaining power. Farmers in particular have been the subject of such exploitation though the governments competition commission has since attempted to rectify the situation by introducing a code of practice (BBC online 2001, Supermarkets code 'too weak' )

Economic

Corporation tax is currently 30% for large firms. Tax credit is allowed for research and development. Inflation and interest rates are at reasonable level with positive indicators in GNP growth rate. Even though recessionary trends are speculated about its drastic effects are not yet perceptibly seen in the economy. Of course the economy show signs of weakening.

The underlying rate of inflation was 2.3% for March 2002. The Bank of England is attempting to keep inflation below 2.5% and hopes to prevent a rise in interest rates. A rise in interest rates will complicate any financing decisions and may hinder any long-term investments as it will increase the cost of debt as such alternative forms of investment such as equity become a more desirable form of investment though historically equity finance is seldom used for financing long term objectives due to the fact that it can be very costly and will dilute shareholder control.
Join now!


For the past two years the prediction of an impending recession has loomed large though this has not happened. Many economists predict an imminent recession. If that prediction is proved correct , history dictates that , in times of recession , consumers will be more price sensitive and less likely to purchase high priced goods due to a lack of disposable income.

Socio-cultural

Current trends suggest that over the last 10 years there has been a large rise in the popularity of bulk buying , with food items in particular being bought in bulk. ...

This is a preview of the whole essay