The company will reinforce the Marks & Spencer brand which had become diluted by too many sub-brands and a lack of focus. The company has a wide range of age customers which is from 33 to 65. They sell 35% of the UK lingerie market, 25% of menswear and 50% of chilled ready meals. They will also create a new brand of products for younger customers.
Finance Management
The group made a turnover of £8bn on 2002. Their UK business contributes 90% turnover while their international franchises business are also increasing rapidly. The company has reduced unacceptably high stock commitments, as well as the cost of goods from suppliers by renegotiating supplier terms. In addition, the financial service was sold to HSBC and M&S entered into an agreement which will allow the company to continue to share in the success of the business by 50%.
Human Resources:
For high efficiency decision making and best performance, the head office has reduced the size of Executive Board to three people, they will be in charge of product and customer-facing operations; IT, Logistics and Property; and Finance respectively. The company has also had a 650 employees downsizing from head office to keep the workforce more product and service driven.
The company is committed to an active Equal Opportunities Policy for every member of the M&S team. It’s involved not only in recruitment and selection, but also in training and development, appraisal, promotion opportunities and finally retirement. The company sets a high emphasis on creating discrimination, harassment and victimization free environment, ensures all the employees have equal opportunities and treatment in all aspects of employment policies and working practice. Employs a workforce that reflects the diverse community it serves and maximises personal and commercial opportunities. Monitors and reports the composition of the workforce and reviews changes in attitude and application of internal policy. Raises staff awareness by designing and delivering training programmes that support the Equal Opportunities aims. Complies with the law and communicate to stakeholders the responsibility to protect both individuals and the company.
The employees in M&S are rewarded for their efforts and they enjoy benefits packages which include: competitive rates of pay and performance related rewards, staff discount, pension, etc.
Research and Development
The research and development function is essential for any organisation nowadays as environment is continuously changing. Thus M&S needs to analyse large amounts of data in order to be able of identifying changes in buyers behaviour and market trends.
In the same way retailers need to use research and development structures to design new products and processes which will lead to generate competitive advantages for the organisation.
It is very important for Marks and Spencer the research which involves the development of own brands as they have become critical in clothes and food markets.
Customer Service
Offering new services and possibilities to customers is essential in the retail business. Customers expect to find high quality service and it is fundamental for the purchase decision. This aspect is also important for suppliers and therefore a critical factor to generate differentiation and competitive advantages in the retail market.
2. ENVIRONMENTAL FACTORS
The principal effect that politicians have on the sector that Marks & Spencers belongs is their power over location through the levers of the land-use planning system. National government can intervene to provide directions and guidance on the assessment of development opportunities and proposals. Whilst land-use planning towards retailing in the 1980s allowed decentralised activity, in the 1990s there has been a growing trend to control and restrict on off-centre and green field development. Therefore it has become much difficult to obtain planning permission for develop newer forms of retailing.
In addition, businesses such as Marks & Spencers are affected by a battery of public policy which attempts variously to regulate competition, safeguard consumer interests and to regulate trading conditions. Essentially, this means ensuring that retailers do their jobs properly. Moreover big retailers will be created on a pan- European level and will be subjected to standard operating conditions across for example Europe, which safeguard consumer interests.
The European dimension has another political effect: the Euro. Retailers as a key service sector will have to deal with its introduction or not. Overall, there will be costs in implementation, as well as potential trading disruption depending on timing of introduction.
Finally, other issues in which governments have an important effect are those ones related with taxation such a Vat rates, fuel tax and so on.
It is likely that the broad economic structures will remain in place and that in the future Britain will be economically approximately ranked similarly to where it is now in the world, so we can expect that the current trends will continue. There will be developers wishing to invest in the UK in commercial property.
British retail sector is dominated by large corporate chains, many of which are head-quartered outside the country. Whilst there is in a sense a requirement to improve local knowledge to meet consumer needs, large retailers have demonstrated that computing power can be used to understand markets. Knowledge management becomes a key element in the future economy.
The market structure is likely to remain dominated by big global players. There is another issue that has becoming in a worry: the future of the personal disposable income. This can be explained with the next figures: National Statistics show 127 billion pounds of consumer credit outstanding in 2000, 30% of which is via credit cards. Comparable figures for 1991 were 54 billion and 18%. In general, this means that British people is in a culture of spending rather than saving, therefore the overall message is that they have to save more and be less prepared to spend on immediate gratification and desires. This situation, definitely will have an impact in the retail sector.
The variable socio-cultural and lifestyle considerations have encouraged much of the change in shopping and retailing in recent years. Attitudes and beliefs as well as wants and needs have been transformed. They will continue developing and further change should be expected. Specifically, attitudes to work and leisure are worth so they are potentially really important.
A significant change that has arisen in the social level is the proportion of women working. With this trend still rising and knowing the impact that it has on much of basic shopping, there remains a clear stimulus to retailers to accommodate variable patterns of shopping, work and behaviours. Shopping behaviour is likely to be segmented by behaviour, mood and product dimensions.
Another important issue that has to be considerate is population. Changes in the population structure and the location of this population, as well as the features of the households in which people live are fundamentally important to retailers such as Marks and Spencer. For example, the growth of children as consumers and the recognition of the spending power of the people in their twenties represent new opportunities for the organisation. In the same way, the breakdown of the nuclear family and the rise of single person households changed the consumption landscape.
Finally, population estimates for the UK suggest that there will be in the next twenty years an extra four million people in the country. It is forecast that current trends will continue leading to a substantially older composition of the population than at present. There will be significant growth in the 45+ age groups, many of whom will be young in body and mind and will be able to finance their consumption. There will be also an increase in the 75+ age group which will present significant issues for the delivery of shopping opportunities.
The most important change that the rapid development of the digital revolution has brought is the Internet and as a result most large retailers have a web site and are implementing and taking advantage of the opportunities of this new channel. Internet can be seen as a new way of shopping and retailing or as additional channel of limited impact, this will be depend of the developing of the sector. There are some possible developments associated with miniaturisation, communications and digitisation.
Another key factor is the current implementation of e-retailing which has changed the nature and cost structures of retail activities, the model in which the costumer via self service undertakes most of the shopping tasks and bears the costs changes and transfers the costs to the retailer. In the same way the facilities of the e-commerce and its low prices allow the retailers to practice direct marketing techniques.
The environmental aspects of the retail sector are particularly important given that the sector is a large user of land and the costumers are travellers to and from locations. Companies such as Marks & Spencer use lands and locations for its physical activities, consumers tend to travel to the store or shop. Space use by retailers has changed dramatically with broad trends towards the polarisation of shop size. The principal idea is nowadays is that there is not going to be a dramatic increase in space needs but rather that it is the quality of the space that will be most important..
Another ecological aspect is that retailers are also large consumers of energy therefore the rising costs of energy is a concern that needs to be addressed in terms of energy efficiency and use reduction.
Pressures on the supply chain will continue and indeed seem likely to increase, issues such as transport, storage, recycling, reuse of materials and packaging will ensure that this is one area that can not be overlooked. Fuel tax and energy costs of transport add to the pressures to obtain an effective supply chain system. There will also be a need for encourage systems to enable reuse and recycling.
3. SWOT ANALYSIS
A large quantity of information will result from the external and internal audit. These facts must be organized in to a format which allows them to be understood by managers in order to aid their decision making. A SWOT (Strengths, Weaknesses, Opportunities and Threats) diagram is the most widely adopted method used for presentation purposes.
We will present the SWOT analysis to summary the results of internal and external auditing in Marks & Spencer.
Marks & Spencer is the UK's leading clothing retailer. It has 375 UK stores selling clothing, food and household furnishings. It also has 43 company-owned stores abroad, mainly in the USA and Hong Kong, and 155 franchise stores in various countries. It accounts for almost 10.8% of UK clothing and footwear sales. The company employs 69,000 employees, trades in 30 countries world-wide.
One of Marks & Spencer's strengths lies in lingerie, where it accounts for over a quarter of the UK market. Another lies in selling clothes for over 45 year olds.
The Company's business in the Republic of Ireland is growing fast and profitably. Marks & Spencer remains firmly committed to these businesses, recognizing the importance longer term of international development.
Marks & Spencer's performance in the food sector is a strength, food chains such as Tesco and Sainsbury’s have accelerated their competition by taking advantage of internet technology which enables consumers to shop from home through the internet and hence food shopping in conveniently delivered to home.
Another important strength of M&S is its profit/turnover ratio compared to other retail stores which gives to the company an important advantage in order to invest in the development and implementation of new technologies as well as improvement of the added value on its products.
As it was explained before the European markets offer a great opportunity to the business expansion, the knowledge and experience in the franchise scheme gives the company the possibility of penetration in new economies taking low risk and therefore minimizing the amounts of required investments.
Finally the growth in their finance division creates a wide range of opportunities to generate differentiation in the services the company provides to its customers
Its food sales are almost as important as clothing but its market share of this segment in the UK is smaller.
Since the late 1990s its sales and profits have fallen, albeit with some recovery, and it has lost market share. At one time Marks & Spencer was renowned for its steady progress, and for being the UK's most profitable retailer. But it lost that standing. It gained a reputation for high prices, partly as a result of its policy of sourcing mainly within the UK. The stores became unattractive, the supply chain was inefficient, and the company was complacent. Discount clothing retailers gained ground, supermarkets became a major force in clothing retailing, and smaller chains offered more stylish clothing. Marks & Spencer also withdrew from most of its non-UK company-owned operations.
The Company is only focusing their clothing market on adults, and is forgetting about the bigger clothing market in these moments that are the teenagers.
Also the company does not have any recognized product, it means that when a person is thinking about Marks & Spencer they never make a relationship between the brand and the product that they are offering, and that is why the company is losing their reputation.
Marks & Spencer, once one of the most venerated names in European retailing, is again losing ground to smaller, more nimble rivals. The main beneficiaries include specialist retailers such as Next, which sells clothing for young up market men and women.
.
Marks is "losing market share in many areas to companies that have been experiencing recoveries," said Paul Kavanagh, a partner at the London stockbroker Killik & Co. "There is a general perception that Next took market share from M&S," Kavanagh said. "On the clothing side for children, Mother care had strong sales. That almost implies they took share from M&S." Those two are by no means the only rivals trying to usurp Marks's leadership in British retailing, said Neil Mason, senior retail analyst at the London research firm Mintel International Group. "Competition on the high street is a lot more intense now than it has ever been," Mason said. "There's H&M, Zara, Mango, the Gap. Because there's more choice, if consumers don't like your Christmas range, they can go next door."
Because Marks & Spencer is focusing in clothing and food, they are leading to their competitors to focus in one specific product or service and gain their market. For example: Tesco and Sainsburys are just focus on the food market, and that is why they are becoming better on what they do, and the Company is losing ground with these two main competitors. Also in the clothing market, the company is leading that their competitors gain their ground because they are offering more products for different ages, and lower price products.
The clothing industry itself apposes a few threats, this being that the clothing industry is mature and the market is not saturated, therefore people always need new clothes and due to this new clothing stores are always opening which means more competition for Marks & Spencer.
Another threat to the company is the stock market. The company should closely watch their share price. If the share price falls too low, then people would be reluctant and nervous about investing substantial amounts of money into the shares of the company. After all, Marks & Spencer do not want to be another victim of a 'take over', even becoming the subject of one would give out a bad message to the public that the company is doing bad business.
Marks & Spencer will concentrate first on regaining the loyalty of core customers, who prefer classically stylish clothes. This is the priority. As part of its plan to segment its products across different lifestyles, the Company is working with known designers to develop and supply a collection of women's clothing for the fashion-conscious woman.
The Company has plans to regain the confidence of its customers in the quality and fit of its clothing. It will sharpen pricing by rebalancing the price architecture, extending the range of entry-price merchandise and communicating this clearly to customers.
The Company is now launching a preview catalogue before the collections to increase flexibility in buying, improve availability and reduce product markdowns.
Marks & Spencer Foods continues to perform well and has earned customers' trust for providing quality, innovation and convenience. The business is a key platform for future growth and the Company is considering opportunities to expand its reach through new locations and selling channels.
Marks & Spencer will accelerate the rollout of the successful elements of its new concept format under a plan to refurbish more stores faster and at lower cost. This will benefit the company’s customers.
The Company's 10 stores in Hong Kong will be sold to become a franchise. Their franchise business, spanning 30 countries and operating with appropriate formats and strong local partners, continues to be successful.
4. INFORMATION REQUIREMENTS AT EACH LEVEL OF MANAGEMENT
For the Marks and Spencer’s case we are going to analyze the information requirements for three types of decisions made by the three levels of management, according to Anthony (1965) as shown in the following table:
Based on the information requirements of each Management Level, the information system for Marks and Spencer should have the following characteristics to accomplish with the actual needs of the company:
Operational Control: For the lowest level of management the information system must be able to manage lots of detailed information of the dairy processes such as quantity of goods sold, price, place, date and time, number of orders, channel of distribution, etc.
Management Control: For the middle managers the systems must generate reports I in which information such as goods profitability, customers preferences, goods availability, stock usage, and the possibility of producing cross information.
Strategic Planning: The information system must be able to handling large amounts of information for long term periods. It is necessary to generate reports useful to decide the direction of the company. These reports should indicate a general overview of the performance of each division also interrelating them with the seven business units defined in the key business.
Recommended Information System
When retailers depend for their success on a deep understanding of customer behaviour and requirements, they need information about those customers and the products that they buy, in an easily understandable and readable format.
Therefore it is essential for Marks and Spencer to create a data base as big as it is possible containing as much information about customers and products which further is going to be used to identify customers´ preferences, purchase determinants, future trends and so on.
In the same way the effectiveness of the negotiations with suppliers relies in grand part in the information that the firm has and handle about their products and performance.
The information must be based on only one source of data, centralized to minimise the cost of administration and maintenance, easily accessible and unified so relevant and consistent information to support business decision-making is available for the three management levels identified in the organisation, worldwide. The information system must be flexible and administrable to generate several changeable reports according to new needs and trends identified by marketing and research and development departments.
For every part of the key processes previously identified for M&S different types of information and analysis should be done to make the right decisions.
The aim of the information system is to provide efficient communication through the different departments of the company such as Finance, Human Resources, Research and Development and Customer Service.
The data should include all the transactions realized in the three business divisions: the UK retail division, the international retail division and the financial services division including the type of transaction, date and hour and product characteristics. In the same way for all the divisions it is necessary to create customers data bases including name, gender, age, location among others in order to be able to identify groups and to facilitate segmentation. In relation with suppliers, the purchases department has to unify and generate data bases which will support the suppliers management which is a key element of the value chain of M&S. The company should be able to ensure effectiveness in its global stock management, so that users can analyse systems to see how much stock is in each part of the global supply chain. This will make it easier to plan and to make more effective decisions about merchandising across the world including local sourcing, currency rates, government restrictions, supplier’s performance, quality, customer’s response, negotiation terms and conditions, etc. The operational level is responsible of the data collection, processing and organisation to supply relevant information to the tactical level, where management will be able to analyse it and make decisions according to their objectives.
This information will reach the tactical level, in form of reports which will be used to make decisions about suppliers, product availability, product distribution, quantity, quality, customer’s orientation and purchase determinants, etc in the marketing department. Cost of capital employed, sources of financing, cash requirements, financial strengths and weaknesses, investment opportunities, etc for the finance department, human capital requirements, training needs, employees performance among others for the human resources management and improvement opportunities, claims and grievance on the customer service department.
This information must be evaluated and presented to the executive level which will evaluate the reports to conclude how the performance is now in comparison with the past and then make any necessary adjustments to the strategic plan to improve the company’s performance in the future.
5. RECOMMENDED INFORMATION SYSTEM
BIBLIOGRAPHY AND REFERENCES
-
Competitive Analysis – The UK Retail Sector 2003. Retrieved: September 20, 2005, from
-
Edwards, C, Ward, J & Bytheway, A 1995, The Essence of Information Systems, Second Edition, Prentice Hall.
-
Flynn, D 1998, Information Systems Requirements: Determination & Analysis, Second Edition, McGraw-Hill.
-
Lucey, T 1997, Management Information Systems, Eighth Edition, DP Publications.
