Marks and Spencer

International Business Management

2133 words

26.01.2007

"M&S has been widely recognized as one of the best-managed companies in Europe" (Tse, 1985, p.1). This statement from 1985 shows the excellent reputation, M&S once enjoyed. Today, however, people frequently associate the term "failure" to this company.

This essay is to examine the origins of M&S's success and show the basis of their competitive advantage. The question why they suffered the downturn in performance in the late 1990s arose is to be answered and their competitive strategy analysed. Afterwards the change in initiatives mounted since the departure of Richard Greenbury, a former chief executive officer of M&S's, will be evaluated and the main problems of the start of the 2000s described.

In 1884 Michael Marks founded the "Penny Bazaar" in Leeds from which no item was more expensive than a penny. About a decade later Tom Spencer joined Marks in a partnership. In 1926 they changed the status of the company to a public one (Whitehead, 1994). Today fashion, which was M&S's core business, food, financial services and home furnishings are the fields they are active in.

M&S had three major concerns about the management. Those were "Quality", "Value for Money" and "Human Relations" (Tse, 1985, p. 6). So they managed to establish a reputation for high reliability and good quality at a reasonable price. Furthermore M&S were renowned for the way they treated their staff. Staff were employed only after certain special criteria had been met. Not only high salaries but also a variety of services offered to M&S employees contributed to a real family atmosphere. This company culture was absolutely unique. From the three general concerns M&S developed a number of principles they sought to follow. All in all it can be said that M&S focused on the costumers and understood and responded to their demands. They thus created a solid external costumer image. (Tse, 1985).

Michael Porter's five forces help understanding of the competitive advantage M&S had (Johnson and Scholes, 1993).

When it comes to the threat of entry, one of the most important strengths can be seen. M&S was simply unique in its nature. Copied from concepts Simon Marks, the son of Michael Marks, observed in the United States, M&S were the first ones to sell a variety of products from different fields under one roof (Collier published in Johnson et al., 2006). This differentiation connected with the reliability and quality the company was famous for, probably deterred potential competitors from entering the market.

Concerning the bargaining power of the costumers, it can be said that although there were competitors for the individual products M&S's costumers trusted on the brand St Michael. M&S's service was also unique. Their refund policy allowed customers to bring back items they were not happy with without mentioning a reason. The bargaining power of the suppliers was of equal importance. Up to 90% of the suppliers were British, and British products were perceived to be high quality products. M&S chose their suppliers carefully and in the case of delays or inferior quality they ended the cooperation immediately. The suppliers were to work exclusively for M&S, which on the one hand was a very important deal for the individual supplier and on the other hand sets M&S in a very powerful position (Collier published in Johnson et al., 2006).
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M&S were not free of a threat of substitutes, however their reputation for quality made people buy St Michael products. As far as competitive rivalry is concerned it has to be stressed that there were competitors, mainly in specialised fields, but M&S benefited from their good reputation and did thus not fear them.

One theory that can be applied on the example of M&S is the "Wheel of Retailing". In accordance with it new retail businesses often enter the market as "low cost/low price businesses". During their growing process they improve and expand their services and consequently ...

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