1. Introduction
In this essay, in scope of the subject Organizational Management I, we will study the case of one of UK’s leading retailers that is Marks & Spencer.
We are proposed to answer 3 given questions regarding the firm, specifically its strategy. Not only will we answer these given questions, we intend to further develop the concept of corporate strategy taught in class and relate it to M&S case in order to better understand it. During this case study we will also explore the history of this company, explaining the firm’s organization problem, the crisis that happened within the firm and also it’s strategies to overcome this crisis.
We are also going to focus on the brand and in the ranges that M&S has available in the clothing market. There will be presented in this report aspects such as the market segments that M&S products ranges serve, the order winners and qualifiers for them and, finally, the different logistics performance objectives for the different ranges.
Operations Management I
2. Development
2.1. History
Marks & Spencer (M&S) is one of UK’s leading retailers with over 21 million people visiting their stores per week. M&S offer stylish, high-quality, great value clothing and home products, as well as outstanding quality food and financial services. The company was started in 1884, when Michael Marks (a Russian-born Police refugee) opened a stall at Leeds Kirkgate Market. M&S have over 700 UK stores and currently the firm finds itself in the process of expanding its business internationally: the company is already present in over 43 countries. Marks & Spencer employees over 78,000 people in the UK and abroad (as M&S site has published).
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2.2. Marks & Spencer pre reorganization
Focusing in clothing segment, M&S presented severe problems in their strategy department and, consequently, in their development and survival, due to massive mistakes. Seeing that M&S is a retailer type of firm, meaning that they only sell products, they don’t produce them: one of their main problems was the supply chain from the source to the consumer.
This route was very expensive because they had a lot of suppliers, mostly at the UK. Overall, the company had several problems about the supply chain, like:
All these problems made their supply chain really slow and time-consuming, not evaluating the suppliers nicely, not having a good balance between quantity and mix. Meanwhile, the marketing section had some issues too. They weren’t able to predict sales, they only made two sales seasons (while the others made four) and their product development was very slow and expensive. This enterprise only had one brand – St. Michaels – leaving few options of choice to the customer, being the only target women between 35 to 55 years old. This brand was focused on classic style clothes and some times out of fashion.
Operations Management I
In short, the notorious problems in the company were:
2.2.1. Crisis
All these problems triggered the 1998 crisis, where Luc Vandevelde came as 4th CEO and responsible to change the company with some strategic measures.
2.3. Marks & Spencer after reorganization
2.3.1. Strategy changes
To create, choose and implement their strategy, all the companies should have in consideration external and internal factors, social responsibility and the values of the company. On one hand, the internal factors explain the strengths and weaknesses of the company. On the other
Operations Management I
hand, the external factor relates the opportunities and the threats of the company, showing how that it influences the activity. These two are important in strategy creation, only if they are aligned with social responsible and company values.
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Marks & Spencer relied on its strong points (e.g. quality), trying to improve their weaknesses (e.g. slow response system).
As stated above, the company also had high regard for social responsibility, as well as the company’s values.
To implement strategy changes, we need to considerate these five philosophies:
M&S
The Total Quality Management is, as the name implies, oriented to increase the quality in the processes of the organization, by creating quality consistency;
Just in time is a production management system that determines that nothing should be produced, transported or purchased before
the exact time;
Simultaneous Engineering acts on the development of products and is based on the use of engineering processes, manufactures, among other ones;
The Compression Management is about to reduce processes time cycles;
Reengineering helps manage through the increased efficiency and effectiveness. M&S based their strategy mainly on the first four points above.
2.3.2. Brand
Nowadays, market segmentation is an absolute requirement for the market realities. Market Segmentation is related with a marketing concept and its objective is to enhance a company’s ability to understand and know its core customers as well as whom its core customers will be in the future. Most segments are formed by looking at certain characteristics such as demographic, geographic, and physiological, amongst others. These segments help the marketer identify very important consumption patterns. Therefore, the customers are treated accordingly to the firms view regarding what the customers wants or needs and its (the firms) ability to reach those needs in a profitable way. In Mark & Spencer specific case, it uses mostly a demographic segmentation to select its targets market for its products, targeting the customers by age, income, social class and lifestyle. There are 3 different ranges of M&S for Autumn 2001, including The Perfect and Classic Collection, The Autograph and per una.
2.3.2.1 The Perfect and Classic Collection
Marketers are progressively more concerned in the outcome of the consumers lifestyle on demand. The market segments serve at this range, targets of those consumers who have busy lifestyles, therefore intend to save time and feel opportune when buying. This segment is for those customers that find themselves on a more price-orientated basis where they look for value at the lowest price. This is why, this range is targeted more on the middle social class and it’s a timeless collection (and not just the latest fashion) on any body size of both female and male customers. 2.3.2.2. The Autograph
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This range is a more specific, fashion-orientated designed for more mature upper class consumers who seek the “good life”. The collection in this range is designed by some of the best designers in the business, names such as Julien Macdonald, Philip Treacy and Sonja Nuttall. They have the capability to acquire it with a high street prices which are sold only in luxurious
department stores. This range will normally target on those customers who prefer quality and the best design rather than the actual cost of the product.
This range is targeted on female customers who have a keen sense of fashion, therefore it isn’t design for all ages nor all types of women. Per Una has concentrated its costumers to an age group between 25 and 35 with sizes from 8 to 18 (UK sizes) since the women that find themselves within these criteria nowadays do not want to be behind the latest fashion trends. They seek out fresh/new fashion and dress smartly and more importantly differently from another, therefore existing the Limited Edition, with that exact purpose. per una offers a better design and price to target young and middle-class women.
2.4. Order winners and qualifiers
The different ranges that Marks & Spencer have available in the market presents competitive characteristics that make a costumer feel interested to buy a specific product. There are order qualifiers and order winners for these different ranges: The Perfect and Classic Collection (that we assumed that serve essentially the same range segment), The Autograph and the per una. The first order that we mentioned makes reference to the competitive aspects of a product that allows it to be considered by the costumers. On the other hand, order winners relates to the competitive characteristics that makes a product be chose by the interested in a specific product.
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Therefore, for the three ranges that M&S has available in the market and by the document we were presented to, we found some order qualifiers and winners for them.
To The Perfect and Classic Collection we realized that size availability is a very important aspect to the costumers, which means that this factor is an order qualifier. In fact, there is a costumer that answered (to the questions that were made to her) that when “larger sizes have sold out” she gets “annoyed”. Thereby, some customers will have to go look in other stores to find what they need. About the order winners, in this range, costumers identify quality, price and variety of colors are three important aspects as they get interested in a product. Briefly, the item must be value for money and cannot require specialist washing as it has to wash well.
In reference to The Autograph range, as it is defined to bring “cutting-edge design”, it is easy to understand that the most important order qualifier is the exclusive design of a certain item: the costumers want to buy a cloth that is “one of a kind”. Quality is the order winners in this range. When clients are looking for this products, they do not give so much importance to the price.
Finally, the per una, a high-quality range, the attractive competitive aspect is the same as in The Autograph range: exclusity of design. The order qualifier is the rarity of a product and is difference . However, the segment of the market that looks for per una has a more concern about the price and, consequently, gives more importance to the value of a certain product. Even they care about the quality (as it must be well made and expected to last), the order winner in this range is the price that they are up to pay for the item.
2.5. Logistics performance objectives
The planning and control of the organization will allow it to coordinate all the different operations that the organization has. It will grantee that all the materials are in the right place at the right time (just-in-time).
Managers must control the operations to make sure that all runs like planned and finds the consumer needs.
M&S changed the way to work with their suppliers and it provided a new approach to the market, principally the segment of clothes where they have done massive adjustments to get better performances. They created new divisions, and we will talk about those changes. Logistical department intends the enterprise to adapt itself to the market, so they created a new distribution of products by store and category. In other words, The Perfect and Classic ranges are located in almost all M&S stores because it is a product for the middle class, “for core customers”, with a low and viable price. The Autograph range, is into selected stores for the reason that its high prices can’t beat the most competitive brands in the common market and, finally, the per una collection is also in selected stores – despite its competitive price it’s a series that is very uncommon to find because the production has no repeats and so there is no piece like the other. This decision, to enter in the fashion business with a bigger offer then before, led the company to improve and presented a more efficient distribution of their products to the customers. In an organized way, each one of these brands according to their objective went to a shop strategically placed near to the right target. Like this they would have a faster response to the market resulting in the increase of the competitiveness of M&S.
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3. Conclusion
Marks & Spencer had several problems with the development of their company, having a huge crisis in 1998. To overcome this crisis, the company made some changes in their strategy in order to return to success.
Changes in the supply chain, the marketing department and the increase of sub-brands, for example, led to: the increasing of quality, transparency, flexibility and the response of production cycle, elimination of duplication and gaining of more costumers. Nowadays, the company has a faster supply line, a more efficient marketing department and a huge variety of products, covering a larger number of customers which led to, generally, a better performance of the company.
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4. Bibliography
1. CHASE, Richard B.; JACOBS, F. Robert; AQUILANO, Nicholas J.; Operations Management for Competitive Advantage; McGraw-Hill Irwin, 11th edition.
2. http://corporate.marksandspencer.com/aboutus/company_overview
