Rise and fall of marks and Spencer Essay Example

Rise and fall of marks and Spencer Essay Example Rise and fall of marks and Spencer Essay Rise and fall of marks and Spencer Essay Porters 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. MS 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 MS 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 MS 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 MS from his father. He introduced the St. Michael brand , a symbol of excellence and quality. In 1930s, MS flagship store was opened at Marble Arch, London. Afterwards, food departments, which sold canned products, were introduced into the company. Moreover, MS 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. 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 buyers 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. 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. Moreover there has been a increase in demand for convenient foods such as sandwiches and microwave meals. The impact of September 11th in conjunction with the rise of charity initiatives suggest that many people are likely to adopt a more sympathetic view to world problems and thus greater importance is likely to be placed on corporate responsibility and charity initiatives. Though Tesco and Gap practices in the past have been deemed irresponsible and yet their profit was not adversely affected. Technological The ever-increasing popularity of the Internet and the advent of broadband technology has resulted in many firms now offering online services allowing for home shopping. The use of intricate computer systems has enabled firms to automate and accelerate many procedures previously done by hand. Linked system have also enabled easier account collection, statistical analysis and identification of demographic data Porters Five Model Industry Analysis The widely accepted and commonly used Porters five model industry analysis rests upon the industry dynamics which in turn are influenced by the forces of macro and micro environments. This analysis is not one of activity alone but an on-going process. These forces exercise relative power at a point of time and it is really important to identify which of these five forces are the key forces at operation and evolve a strategy to position itself to take advantage of the opportunities and over come the threats. Because of the dynamic nature of these forces the analysis is to be repeated on an on-going basis so as to deprive of the potential competitors to overtake , regain , sustain and improve the market share and growth as the situation demands. The threats from the New entrants , buyers and suppliers bargaining power , substitutes and competitive rivalry are analyzed and shown in Appendix II Porters 5 forces model suggests that when buyers exert a high degree of choice and are able to choose from a variety of substitutes product quality, price, product differentiation and branding are likely to become prevalent factors as concerns the success of a firm. As such this is likely to be common within the market MS operates as there is a high degree of competition incurred in direct and indirect forms meaning buyers (customers) will have a high degree of choice thus firms must cater to this in the manners outlined above. Additionally the fickle nature of the fashion industry i.e. product life cycle is low due to ever changing fashion trends means that a quick and efficient response to customer demand can critically affect the degree of success a firm experiences. Additionally an awareness of future environmental conditions can be of vital importance to a firms success as the importance of price, product quality branding and differentiation can vary greatly within different cir cumstances. I.e. during a period of recession price becomes a prevailing factor, which is likely to dictate customer choice. Whereas during a period of prosperity quality and brand become dominant factors. The Core Competences Critical Success factors and Competitive Advantage Core competences arises from the unique and distinctive way that M S builds, develops , integrates and deploys its resources and competences. It can be evaluated like this. M S has a clear customer focus. Because of the inbuilt , robust competences the uniqueness of M S cannot be easily imitated. With regard to its flexibility this is one area in which M S did not respond timely in adequate measure. They lagged behind other competitors in adapting to the changes in the market or industry conditions. The company has paid a bitter price for this laxity. The extent to which value is added to the product/service is quite is good. Finally, with respect to sustainability M S could not retain the tempo of its momentum and march even though it is still the market leader. The critical success factors and core competences are pictorially depicted and is shown in Appendix III. Competitive Advantage M S could attain competitive advantage by developing and implementing these distinctive resources capabilities and competences. The strategies adopted after the great fall of 1998 enabled M S to regain its lost territory. The competitive advantage of M S can be explained in terms of its reputation for quality ,its special relationships with its suppliers and its customers. M S has a very exacting but mutually profitable relationship with the suppliers. It demands high quality at reasonable cost and flexibility in return for large volume of business. Its relationship with the customers is based upon its reputation for good service , refunds , exchange of goods and high quality value for money goods. Real competitive advantages take longer to build and last longer. M S has the best brands on high street. The customers associates with the company with dependability and value for money. The employees are always a privileged lot resulting in their high involvement and commitment. In the end result it has a performance that is superior to most of its high street competitors.