Marks and Spencer
The case covers both the history of Marks & Spencer throughout the last century ND, in more detail, from 1998 to 2004, the period when it moved from a position of market dominance to one In which it was deemed to be a take-over target. The case charts the attempts by Its deferent chief executives to address the problems during this time and, therefore, the various change Initiatives that were mounted. 2.
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Position of the case The case study relates, in particular, to the problems and means of managing strategic change in Marks & Spencer.
So it is particularly related to the coverage of strategic inertia and strategic drift in chapter 1 and programmatic design and hang in chapter 10. With this In mind it might be taught at the end of the strategy course. However, It could also be used as a case to require students to analyses the reasons for the problems of Marks & Spencer, not only In terms of organizational culture, but also in terms of the market and competitive position of the firm.
In this sense it could be used as a strategic analysis case earlier in the course. It also poses the question of the strategy that should be followed to regain competitive advantage, and Is therefore also concerned with strategic choice. 3. Learning objectives The case study requires an understanding by students of some important concepts and tools.
In particular: ; the concept and the causes of strategic drift (chapter 1) Instructor’s Manual 504 Pearson Education Limited 2005 ; how this links to organizational culture, and therefore the cultural web and its relevance (chapter 4) ; the concept of differentiation: what It means and what It does not mean (chapter 5) ; incremental versus transformational change in organizations: and the challenges associated with each (chapter 10). ; the feasibility and practicalities of designed strategic change in organizations chapter 10) ; the role and style of strategic leaders (chapter 10). 1 en teaching process One of the benefits of this case is that almost all students (UK at least) will have heard of Marks ; Spencer, and very likely will have personal experiences of it. They may well also have personal views about the reasons for its demise. However, care must be taken that it does not override a reasoned understanding of the background of Marks ; Spencer and some of the documented rather than personal evidence to do with the organization. Nonetheless, the personal experience an be useful in generating discussion in class, and even as data in relation to some of the problems experienced by customers.
It is useful to begin the case discussion by getting students to recognize the huge success of Marks ; Spencer for most of its history, and to try and account for that success. This might be done by raising the question of why and how it achieved a position of competitive advantage in relation to other retailers. The class session can then move on to discuss the reasons for the problems it faced in the late sass; what strategy it should follow to overcome these; and finally the attempts to manage change that the management undertook in the sass. 5. Questions 1 .
Why was Marks ; Spencer so successful? 2. What was its basis of competitive advantage? 3. Why did Marks ; Spencer suffer its downturn in performance in the late sass? 4. What competitive strategy should Marks ; Spencer seek to follow? 5. Evaluate the change initiatives mounted since the departure of Richard Greenberg. Instructor’s Manual 505 6. Why was Evenhanded initially seen as successful, and what led Marks & Spencer to once again perform badly? 7. What are the underlying problems at Marks & Spencer in the early sass? 6. Case analysis 6. The years of success A useful way of running the class here is to ask for contributory explanations as to the reasons for success of Marks & Spencer. These are likely to vary quite a lot in terms of both the time period being talked about, and also the characteristics of the organization that led to success. For example: ; in the early days price clearly played a part ; as did consistency of quality and service ; as did the caliber of staff recruited and their training. Certainly the last two characteristics were carried forward throughout the century: but others came to be important too.
For example: the consistency of quality of merchandise insisted upon by top management, closely monitored in suppliers ; direction from the head office for identical store operations, for example in items of layout, merchandising and training of staff, which further ensured consistency ; the prime location of stores ; the middle of the road appeal of the shops and merchandise ; the no questions asked returns policy, which was a guarantee to customers of quality acceptable to ; the strongly embedded sense of family, which permeated throughout the entire organization; this meant that for much of the century employees felt care for and, in urn, adopted the same feelings to the organization ; the successful development of new product ranges (e. G. Food) with a similar emphasis on quality/value. The important point to get students to understand is that all of these may well be relevant: that the reasons for the success are not based on single characteristics, but rather on the mix of characteristics and how they fit together. Instructor’s Manual 6. 2 Bases of competitive advantage This last point leads nicely onto a discussion about bases of competitive advantage.
Why did Marks ; Spencer achieve the advantage it enjoyed over so many decades? This should provide a useful discussion in class, which might conclude: ; It is not any one characteristic but a mix of characteristics that, as a set of linkages, would be very difficult to imitate. Any one of the characteristics may be possible to imitate, but the mix would not. ; Marks ; Spencer had identified a market that had the benefits of being large, middle of the road with weak competitors in it. (Of course the competitors were in part weak because Marks ; Spencer was strong.) Most of the niche retailers concentrated on younger market segments or more fashion-conscious market segments.
There remained a large percentage of the population who looked for more conservative clothing, and durable merchandise and consistency. ; It was the quintessential British store, and had been like this since its establishment. The price of its products was always reasonable, and the quality was always assured to be high. Furthermore, traditionally it used only a few dedicated British suppliers, and was proud to do so. The same debate may be used to illustrate what is meant by differentiation. Differentiation here is based not on a product or service, so much as on a mixed set of competences and resources. . 3 Strategic drift and the problems of the sass Marks ; Spencer provides an excellent vehicle by which to discuss the issue of strategic drift.
Recall the Circus Paradox (see chapter 11 of Exploring Corporate Marks ; Spencer store monitors quality identical garments sent to every store direction for identical store operations enhanced customer service location on every main high street no questions asked return policy middle of the road appeal sense of family Head Office Suppliers Extemporaneousness’s Manual 507 Strategy): namely that an organization’s success is often the root of its demise. Over he years Marks ; Spencer developed a whole culture around the way it did things and how it built upon its competences. This was a tremendous strength for it and led to its success. However, it also led to an entrenched and embedded way of doing things, together with a degree of certainty – even arrogance – in so doing, which was extremely difficult to change. It appears that no one saw the need for any change; indeed the strategy of the organization was, in effect, a function of the certainty of ways of doing things. For the most part and for many years this worked. However, there were early signs of it not doing so.
The manifestations came in the late sass, but decline in performance lagged. By the early sass commentators were critical of the arrogant attitude of Marks ; Spencer towards customers. Other retailers had moved to credit card facilities; Marks ; Spencer had not. Marks ; Spencer did not introduce changing facilities for customers until the mid sass. Research had shown that people were tolerant of inefficiencies in Marks ; Spencer, such as lines being out of stock, when they would not be in other retailers. Moreover it had become clear that the culture was not only driving the strategy, but also driving the appointment of senior personnel in the firm.
Up to and including Greenberg, there had never been a chief executive of Marks ; Spencer who had not been a member of the family, or who had worked with the firm for the whole of his career. These strategic leaders came to embody the Marks ; Spencer way of doing things; so it was hardly surprising that they could see few other ways of doing things, or the threats of competition that were looming. The internal workings of Marks ; Spencer had also become highly deferential, male oriented, with layers of management and considerable bureaucracy. These were all symptoms of an organization removing itself from immediate contact with customer need. In addition the market was changing. Increasingly customers valued higher levels of service, and were seeking novelty and difference.
Paradoxically Marks ; Spencer malign nave enumerators tens Ana Its consolable Its range, since It was a leader in providing novelty in prepared food. However, the core clothing ranges remained determinedly middle of the road. At the same time other retailers were beginning to target the traditional Marks ; Spencer market, but with more focused fashion ranges. On top of this, lower-priced clothing retailers began to improve their quality. So Marks ; Spencer found itself in a pincer movement, where traditional low- priced retailers and hagiographer retailers were entering its markets. It is, perhaps, important to note that many of these changes took place over many years. This was not a sudden occurrence.
Most retail observers would agree that the changes were evident from the late sass onwards. The point that can be emphasized again is the extent to which there is a lag effect in terms of performance. Instructor’s Manual 6. 4 Competitive strategy It is no easy matter to resolve the question as to what the competitive strategy of Marks & Spencer should be. Students will probably recognize the need for greater clarity on bases of differentiation. However, encourage the students to think in terms of who they see the customers as, and what their needs are. This is not straightforward given the past ‘middle of the road’ customer segment occupied by Marks & Spencer.
For example, would students suggest that Marks & Spencer should substantially reduce the size of the market segment it is targeting, or that it should target multiple segments? Should it be more focused in terms of merchandise? Should it try to remain focused on a middle range market? ; Given any of the above what would they see as the proposition for the Marks & Spencer offering? ; Who would they see Marks & Spencer competing against, and on what basis? ; How does this compare with the current strategy for clothing? ; What would the consequences be? For example, a tighter range of merchandise would require a change in store size presumably, as well as reduced market presence and turnover expectations. 6. 5 The change initiatives
The case shows the almost frenetic activity in trying to manage change and turn around the organization since the departure of Richard Greenberg. It might be useful to encourage the students to use the diagnostic approach suggested at the beginning of chapter 10 as a basis by which to evaluate these initiatives. Specifically they might be asked to: ; Use the cultural web as a basis for identifying the main features of the culture of Marks & Spencer. ; Perhaps do a re-webbing analysis similar to that in illustration 10. 2 to identify required change and draw up a force field analysis. Use the checklist in section 10. 2. 2 and exhibit 10. 3 to consider the contextual features of Marks & Spencer which might inform required change.
Marks & Spencer culture The characteristics of the Marks & Spencer culture identified through a cultural web exercise might include: Instructor’s Manual ; paradigm: we are the best; we set the standards; we know best; we occupy the middle ground; we are synonymous with high quality; people respect us and will always shop here ; power: very top-heavy with deference to top management; male dominated ; origination: mechanistic, bureaucratic; top-down; hierarchical ; control: top-down control in detail both of the stores and of suppliers; insistence on conformity ; rituals and routines: deference; knowing your place; store layout; family atmosphere ; stories: history and legacy; Simon Marks; power over suppliers; authoritarian behavior of top management; staff welfare benefits ; symbols: the SST Michael brand; Simon Marks and Coos as father figures; identical store appearance The picture that emerges is one of tradition, formality, set ways of doing things and huge self-confidence bordering on arrogance. It is an internalized system where everyone knows their place and their role.
In times of success it would ensure the continued delivery of that success. In terms of threat or downturn it would be very difficult to change and would insulate the firm from seeing the problems. If the students undertake a re-webbing exercise, encourage them to identify what the competitive strategy would need to be, and then what the cultural web would need to be like to deliver it. This is no straightforward matter, especially as there is likely to be considerable debate about what the strategy should be. For example, students might suggest that there needs to be a great deal more sensitivity to market needs, and perhaps identification and selection of target markets and action based on target market needs.
If so, encourage the students to think through what this would mean culturally, in terms of routine behavior, power structures, organizational structures, etc. The change context Using the checklist in exhibit 10. 3 students may arrive at the following conclusions. ; Time: Just how much time does Marks ; Spencer have? The chief executive has set a fairly tight timescale. Is it realistic or does it have longer – or perhaps shorter? What would determine this? Students may believe for example that, unless success is evident within a relatively short period of time, acquisition may be a serious possibility. Instructor’s Manual 510 ; Scope: It is transformational change or realignment that is necessary?
Students are likely to arrive at the view that in cultural terms at least it is transformational change that is required. If the time period is short and transformational change is required then in terms of exhibit 10. 2 it is ‘revolution’ that is needed. So students should valuate the current change initiatives in that light. ; Preservation: Clearly there are aspects of Marks & Spencer that should be preserved: its brand name; perhaps its store locations; perhaps many aspects of the logistics of the organization. However, it is equally important to ask what should not De preserved: students may rater Deck to ten cultural wed to Intently many aspects there that need to be replaced or changed. Diversity: There has been a high degree of homogeneity within the firm. Students are likely to argue that this is not appropriate to the current situation; but is the sort f new experience brought in to the organization appropriate? Students may argue that it has introduced new blood. Others might point to worrying aspects of appointments, such as fashion designers totally unused to the traditional Marks & Spencer customer. Others may observe that diversity is beneficial if there is a clear overall purpose or mission: but is there for Marks & Spencer? ; Capability: The vast majority of managers at Marks & Spencer are not used to change.
Where is the evidence that experienced change managers have been introduced to the organization? If they were to be introduced, is there any evidence that middle management and supervisory management have any expertise or experience in this area? What are the implications? ; Capacity: Marks & Spencer does not lack the financial resource to change: but does it have the systems facilities to change; or are these so embedded in the organization that it would be difficult to change them? ; Readiness: By the time of the case study, presumably the workforce recognized, at least intellectually, the need for change: is it possible there was more readiness here Han at middle or top levels of management? Power: Marks & Spencer has traditionally been a top-down organization with very authoritarian control from the centre. However, this has been used to maintain the status quo rather than implement change. Could that tradition of top-down control be used as a basis for managing change? Or would that be inappropriate? In the context of all this, how do the initiatives described in the case study look? Conclusions that students may come to might be: ; There is a lot of activity, but a great deal of it is at an operational level. It is not clear hat the future strategy of the organization is to be, or if there is a clear purpose/ mission.
Instructor’s Manual 511 ; New managers have been brought in but, without a clear strategy for the future, they are likely to contribute their own individual endeavourers, which could lead too fragmentation of strategy. ; What efforts are being made to transform the embedded culture of the organization as it affects those throughout the organization? What more could be done here? 6. 6 The success and failure of Vendible’s strategies Throughout his time at M&S Evenhanded implemented a number of different traceries. Many of the first strategies he implemented were seen as successful, and after some initial criticism by the press, City, analysts and shareholders, he became quite favored and was rumored to be the ‘savior of Marks ; Spencer’.
However, after this initial success many of M&G’s strategies were not very successful. Some of Vendible’s successful strategies were: ; A rebind and update of the corporate image thus avoiding the confusing ‘Marks ; Spencer’ and ‘SST Michael’ symbols. ; A restructuring AT ten supply canal winner stores were stock demographic patterns. EAI oases on Evenhanded also implemented a strategy that attempted to gain knowledge from the overseas stores, each of which had established its own locally orientated strategies. However, Vendible’s overarching priority was to stabilize M;S in the I-J, so before the overseas knowledge could be gained he announced his plans to withdraw from all European and American markets.
This was one of his first failures, because although analysts could see that the disposals were necessary to bring focus to operations, it was not a success in terms of how it was managed and the damage it did to M;G’s reputation. There were a series of problems associated with the retrenchments across Europe including strike action, trade union negotiation, and the French Government taking M&S to court. Headlines describing these occurrences shocked the UK public, especially since angry picket line photographs often accompanied the articles. Another prominent strategy of Evenhanded was his announcement that M&S would be moving from its headquarters in Baker Street, London. This was heralded as a massive change for the organization and a huge step away from its old culture.
As the move was set for Spring 2004, analysts tit with baited breath to see what effect the move will have on the deeply ingrained culture at M&S. This is an area that the students could discuss: would the move to a new headquarters change M&G’s culture? Chapter 4 on culture could be used to support this discussion. Over time Evenhanded continually stressed the importance of restoring confidence to M;G’s ‘core customers’, the primary aim being to make women once again feel that they could rely on the organization. To achieve this Evenhanded implemented several strategies in tandem. M&G’s fashion collections were designed for traditional shoppers Instructor’s Manual 512 ND described as ‘classically-styled’; it also launched the more youthful range ‘Per Nun’.
Initially these strategies were successful, with figures showing the first quarter on quarter sales increase for three years; its shares also rose by 10%. Shortly after this positive impact on the figures, Evenhanded presented his three pronged approach to expand in the I-J: development of homeward; expansion of ‘Simply Food’ and leveraging of financial services. He also streamlined M&G’s logistics; this again led to stronger financial results and Evenhanded being praised for successful, appropriate, strategies. Yet the praise came too quickly and soon turned to problems and failure, as there still remained strong concern regarding the clothing and food ranges. After originally making some headway into M;S clothing recovery, Evenhanded shifted the focus to his three pronged approach.
However, a number of problems had persisted in the clothing range, significantly with womanlier and childlessness, the traditional ‘core’ of M;S. The problems came from overstocking and markdowns for sale items. Clothing was also losing a lot of market share. Evenhanded also stepped down as CEO (remaining as Chairman), and took up the session of non-executive director in a number of organizations. Commentators felt it was too soon Tort Venezuela to make sun moves, as teen Dell eye off the ball’. en was taking Till M&S also launched ‘;more’, which, in addition to some of its other successful strategies, led too rise in profits and an increase in dividend. It also allowed M&S to begin to generate a relationship with some of its customers; this was heralded as a success.
By November 2003, however, there was concern that M&G’s recovery had faltered significantly. Much of this was blamed on the remaining problems in the ore areas of food and clothing, which the implemented strategies had failed to address. Although the Simply Food outlets were performing well, food in the stores was underperforming the market. Problems in clothing were worse, products were in the wrong places, ranges were weak and clothes were severely discounted. Finally, although from his early employment commentators had felt that Evenhanded would be addressing M;G’s culture, they agreed that he had failed to make an impression on changing it. The answer to question 6. (below), which discusses the underlying problems at M&S, can also be used to understand why the majority f its strategies were ultimately unsuccessful. 6. 7 The underlying problems of M&S in the early sass There were a number of underlying problems in M&S throughout the early sass. These can broadly be separated into two areas, culture and core products. Many of the underlying problems experienced in the sass echo the problems that had occurred in Instructor’s Manual 513 the past. As is shown below many of the problems were not addressed by M;S when they first surfaced and so continue to remain problems for the organization today.
Culture Even though Evenhanded, and then Holmes, had wanted to update M;G’s ultra, many of the old beliefs and values that had been instilled for decades were still believed and pervaded the organization. There had been some changes, for example the removal of the ‘SST Michael’ symbol. In addition because of the poor financial performance there was less off feeling that We are the best’. In spite of this, though, much of the old culture remained, for example M;S still wanted to be synonymous with high quality, and to have respect from customers. There also remained many of the old elements of tradition and formality, much of which was felt would not alter until M;S moved into its new headquarters.
There continued to remain a feeling that employees knew their place and role. The structure, which had been subject to many reorganizations over the years, was felt to be too complicated, with too many members. This resulted in problems with lengthy and convoluted decision making. At this point a further re-webbing exercise might be useful to identify what the cultural web would need to be like to address the problems which remain at M;S. The ‘Core’ of M;S Throughout the early sass Evenhanded attempted a number of different strategies to improve the flagging performance of its core ranges: food and clothing. Both ranges had been performing poorly and for the most part underperforming the market. 0 attempt to stem tense problems new Innovative T solutions were created to improve the food range, and collaborations with Despond and Sons and George Davies were undertaken in the clothing range. After these measures were put in place there was an immediate increase in profits and share price. Once this had occurred Evenhanded focused on his three pronged progression plan; this resulted in the focus shifting away from the core ranges and moving towards homeward, financial services and the Simply Food motorway outlets. With clothing M;S continued to hang on to the traditional idea of its customers. It wanted to restore the confidence of its core customers and so returned to classically styled clothing; this was targeted at the traditional shoppers.
To attempt to attract younger shoppers into the stores M;S used Per Nun. This resulted in many different looks, in terms of style ranges, all trying to find a place in the store. M;S was attempting, in accordance with the strapping its advertisements were carrying, to be ‘exclusively for everyone’; to achieve this it wanted to offer things to all TTS customers. It was again accused by commentators of lacking focus in its operations. Instructor’s Manual 514 Offering different products to all of its customers resulted in the neglect of the core ranges, and ultimately the food range was deemed to be performing ‘adequately, but below market levels.
The clothing range, both women’s- and childlessness predominantly, had taken a severe set-back, with sales, profits and market share having decreased. As a footnote to the case, it should be noted that in late Spring 2004, both Luck Evenhanded and Roger Holmes were removed from Marks & Spence’s management. Stuart Rose, a former Marks ; Spencer executive, but one who had worked extensively outside, became the new Chief Executive Officer. During May and June, Rose successfully fought Off hostile takeover bid by the retail entrepreneur Philip Green, owner of British Home Stores and other high street chain stores. For the moment, at least, shareholders seemed confident that Marks ; Spencer could fix itself under its new leadership.