Marks and Spencer; An analysis of the change process.

University Degree Business and Administrative studies

CASE STUDY BY MAME BOAMAH ASANTE

MARKS AND SPENCER; AN ANALYSIS OF THE CHANGE PROCESS

Marks and Spencer became a household name, first in its country of origin, the UK, and later internationally. However, the late 1990’s saw a reversal of fortune for this company. We will look at the relevant issues such as triggers to change and the role of the change agent in implanting the changes and how these barriers to change were overcome.

There are a couple of problems that triggered the change at Marks and Spencer.

Firstly, in terms of managing information, they needed to maximize the availability of information throughout their business. The variety, volume and frequency of that information was increasing. Using BizTalk, they were changing the way that sales information was being delivered to central systems. Rather than aggregating sales and transferring these back to the centre overnight, they would pass sales as they happen to the central systems that could act upon them. They would use the same technology to transfer event-driven information out to their stores, such as short-term promotions or red alerts. On the Internet side, they would use BizTalk to link their customer web sales into their existing back-end systems, and ultimately through to their suppliers.

Marks and Spencer recognised that they needed a global supply chain to compete, and radical changes in the way they use information throughout the company. To create this, they would have to manage new richer information more quickly, optimise stock management, and be more responsive to retail business.

Secondly, in terms of optimising stock management, they would improve their product availability, whilst reducing costs by passing sales information in near real-time to their suppliers, so that they could change what they manufacture and what they distribute. BizTalk would, over time, replace their existing batch EDI links to their 500-plus supply chain.

Thirdly, regarding being more responsive to their business, internally they leveraged their existing application developments by using BizTalk to enable true application cooperation and business process integration.

It is evident from the above that Marks and Spencer came to the realisation that they needed radical change if they wanted to survive.

A company’s resources are able to dictate its success. The resources available to a company underline strategic capability, as it is these resources that are deployed into the activities of the organisation. It is evident from the Mark’s and Spencer’s case that there was a decline in the success of the company because it did not have adequate resources in some instances and in other instances it was not making efficient use of the resources available to the company.

There are different types of resources including physical, human, financial and intangible resources. Human resources are the employees of the company as well as the knowledge and skills they possess. By 2000 it was reported that almost all Marks and Spencer’s managers were promoted internally meaning that no fresh ideas were brought into the company. This hardly sends a positive signal to the market or to the customer and depicts how inefficient use of human resources can lead to a company’s decline. Another example of bad human resource management was inadequate staff. To reduce costs, floor staff was kept to a minimal. This led to a decrease in customer service which is also a defining feature of the manner in which inadequate human resources can reflect poorly on any retail store and further added to the company’s quest for change.

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With regard to financial resources, the company chose to purchase and refurbish the Littlewoods stores at the same time as the existing Marks and Spencer’s stores. This decreased available capital, which it could have used elsewhere to revive the company, such as marketing. Financial resources seemed to be deployed in the wrong areas such as home and Internet shopping, streamlining international relations in 1999 rather than to improve the existing stores or research existing markets to find where the department store was in fact lacking. Inadequate physical resources such as the initial lack of change-rooms meant customer dissatisfaction, as there ...

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Customers voiced discontent at the arrangement of the clothing commenting that it was difficult to see the difference between the work and casual clothing. In this way inadequate positioning of their physical resources also led to customer dissatisfaction. With regard to its intellectual capital or its intangible resources such as the knowledge that has been captured in brands, business systems, customer databases and relationships with partners there were also discrepancies leading to a decline in profitability. Further support for the importance of resource-based strategies in retailing firms comes from the theory itself. Retailing companies tend to be social and complex, employing many people at many levels all of whom have to be well presented and pleasant and skilled in different areas (the food department, the makeup counter). Such an environment provides incentive for the emergence of distinctive and difficult to imitate intangibles (such as patented brands); the very stuff of establishing unique and sustainable competitive advantages.

In April 1999, after realising that they needed to change, Salsbury issued a memorandum explaining that “he wanted to make changes to Marks & Spencer which would move the organisation away from its bureaucratic culture. He began to implement a reorganisation strategy, splitting the company into three parts: UK retail business, overseas business and financial services. His plans also involved establishing an organisation-wide marketing department to break down the power of the traditional buying fiefdoms. Salsbury wanted the marketing department to adopt a customer-focused approach, rather than allowing the buyers to dictate what the stores should stock. Salsbury tried to restore M&S’s image as an innovative retailer by launching new clothing and food ranges. In the UK, Marks & Spencer implemented a costly change strategy as it wanted to create a new store image. Another strategic change, was the use of overseas sourcing while severing links with UK suppliers. Despite the implementation of all these strategies, there was still a decrease in profits.

One way Salsbury felt this could be achieved was by creating a decision-making environment that wasn’t burdened by hierarchy. Staff were increased by 4000 members, the supply chain was changed, physically the store was restructured. But still their problems continued. One possible reason this did not work was that the public saw ‘through’ them and realised that even though they knew they needed to change, they did so reluctantly, if only to curb losses. This transparent move by Marks & Spencer was not enough – they needed to determine what their customers wanted before giving it to them.

Finally, in January 2000, Marks & Spencer made a bold move and appointed Belgian-born Luc Vandervelde as executive chairman which marked a great change as it was the first time someone from outside of the organisation was appointed as CEO. Luc played the role of the change agent in Marks and Spencer. Vandevelde’s strategy was to create a whole new corporate image by changing the original St Michael brand and the M&S supply chain. Also, a great strategic change was that the stores outside the UK developed their own strategies which were tailored to the needs of the local market. Furthermore, in March 2000, they introduced a new corporate image, complete with new colours and logos – a new organisation. Luc Vandervelde declared a complete overhaul to the Marks and Spencer. He downgraded the once acclaimed and seemingly invaluable, St Micheal, which was relegated to inside clothing labels as a symbol of quality and trust something that the founders and past CEO’s would never have done. The whole image of staff was changed with the introduction of new uniforms and products packaging and labelling were also changed. He developed a new distinctive brand which everyone could understand, which displayed in a range of colours each indicating different departments.

He changed the supply chain and grouped the store s on the basis of demographic characteristics and lifestyle patterns. Instead of operating the new system whereby stores were allocated merchandised dependant on floor space. Under the old system stores of the same size were sent the same clothes regardless of location or customer profiles. This new move was widely accepted positively as being one of the first major steps of becoming customer focused.

There are a number of contextual issues that need to be taken into account when analysing Marks and Spencer’s . These contextual issues are Time, Scope, Preservation, Diversity, Capability, Capacity, and Readiness.

Time

Marks and Spencer had plenty of time to analyse their market’s trends, its not as if their market suddenly changed and they were left behind. The table in the case study showed a decline in their customer’s expectations of them. There was a steady decline from 1995 to 1999. This was enough time for Marks and Spencer to react to the changes in the market so that they did not find themselves in a position where they were losing sales regularly to their competitors. However this was exactly what happened to Marks and Spencer, they failed to heed the warnings and were far too slow to make the necessary changes for them to stay competitive.

Scope

There were several factors that drove the need for companies like Marks and Spencer to change. One of the main drivers for change in Marks and Spencer’s market was a change in fashion, appearance was everything. People started dressing loosely to work (eg. wearing jeans, formal shirt and tie). This clashed with Marks and Spencer’s successful formula. Marks and Spencer was founded on British values, they reflected the British culture very and understood the British culture very well. Therefore they knew what the British people wanted and they provided it, good quality products at a good price. Marks and Spencer range was dull and boring, but their prices and quality of goods attracted customers, this was the success to their formula. However this formula worked well up until the 1990s.

Suddenly people became more flexible in terms of what products they wanted, as was mentioned above fashion became a major market driver in the clothing industry. Marks and Spencer failed to acknowledge this; being an established company they resisted the change they needed to make in order to stay competitive. Being a British company (ie. very traditional), they believed that their traditional strategy would continue to bring them success. They were wrong, old fashion trends (which Marks and Spencer were successful in) changed. Marks and Spencer’s clothing ranged was out of date with the public, their competitors were now offering more “stylish” clothing ranges and this took business away from Marks and Spencer.

Preservation

There was not much that was preserved form the old Marks and Spencer. Since they failed to embrace the changes that were needed to remain competitive, they found themselves in a position where they had to revolutionise their image and strategy. The company’s image was completely changed; from the downgrading of their famous St Michael brand to the restructuring of the companies supply chain. When Vandevelde came to Marks and Spencer, Marks and Spencer were struggling and needed some changes made to the company quickly. Vandevelde chose to make wholesale changes to the company’s image like changing the staffs clothing and the symbol of the marks and Spencer brand. The reason being is that he felt that people confused the St Michael and Marks and Spencer brand.

Diversity

Marks and Spencer did not diversify their products. They offered the same boring products they used to offer before. Customers got tired of seeing the same type of clothing all the time, so they eventually went to another store to get a fresher, up-to-date style of clothing. This was a clear indication that Marks and Spencer did not understand their customer or the market anymore. They failed to realise that they needed to make changes to their clothing range in order to remain competitive. Vandevelde thereby saw this as an opportunity for change.

Capability

Marks and Spencer’s capability to recognise and enforce changes in the way the company went about doing its daily business, was severely hampered by the management style adopted. Marks and Spencer adopted a top-down management style, which left little room for the employees in the company to introduce new ideas into the company. People in the organisation were told what to do by people above them. This could be seen when Marks and Spencer used to allocate products to a store without researching whether those products were needed in that store. This meant that some stores got products that did not suit that store customers, and this resulted in those stores losing business. This type of management did not give people lower down in the organisation a chance to voice their opinions. People like the store managers and store assistants would have been able to help Marks and Spencer review and change their strategy in accordance with the market, since they would have been the ones to know exactly what the customers wanted from the company.

Capacity

Marks and Spencer had the resources available to them to make the necessary changes needed for them to stay ahead of their competition. Firstly they were too slow to enforce changes in the company’s strategy, they were forced to make changes in order to survive. Secondly and most importantly, Marks and Spencer were too conservative in the way they implemented their changes to their strategy. Marks and Spencer tried changing one variable at a time form their original successful formula. They did this because they believed that the core of their original formula was still successful for the current market. All they had to do is change one variable at a time and they would eventually find the variable that needed to be changed or updated.

This was a big mistake, Marks and Spencer did realise that their market kept changing, so a variable they thought was not problematic would later turn out to be problematic. Or there may have been two variables that needed to be changed simultaneously.

With Marks and Spencer still trying to find the right formula by using their “one variable at a time” method, the market continued to changed and eventually the market changed to such an extent that Marks and Spencer’s original formula was completely outdated and needed to be completed scrapped and restarted.

Readiness

Marks and Spencer were never ready to implement changes to their strategy at any stage during the late 1990s. Their British values could be seen quite clearly, when they resisted the temptation to make changes to their strategy while their competitors did. Marks and Spencer were rather old-fashioned; they felt that the current trend would pass and that their customers would return to the normal products that they used to purchase from Marks and Spencer. Marks and Spencer were also afraid to be the first ones to change their strategy; they felt that if they changed their strategy in accordance with the markets current trends they would be successful for a period of time. That period of time, they felt was the period of time the market trends lasted. They felt if the market trends faded away, they could not go back to what they were, and customers might view them differently. Marks and Spencer felt that it was too big a risk for them to take.

Marks and Spencer curbed these barriers to change by training staff and briefing them on the need for change. Staff were offered incentives and packages to encourage them to work harder. The whole image of M&S was changed even staff uniforms were changed and new product ranges were introduced.