Consultancy Business Proposal for M&S

Introduction

M&S is currently undergoing various challenges; by the end of 2009, the company was suffering from a three-point seven percent drop in revenue from its food section, its clothing and apparel division also recorded a decline in sales by four point eight percent. Overly, profits were also down by a hundred and seventy-five points. A number of initiatives currently implemented by the company have the potential to get the company out of its current predicament but this is yet to be seen. The company’s competitors are also using their unique selling points to outdo M&S as some focus on specialist markets such as 18-30-year-olds. Besides, the company is battling with its corporate social responsibility agenda as well as its financials; its pension deficit currently stands at one point four billion pounds. Given such a scenario, there is need for an in-depth analysis of the root cause of these problems and a comprehensive plan on how the company can get itself out of such troubles.

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Current business structure at M&S

Ten years ago, M&S used to boast of such a strong position in the market especially because of the quality of goods offered, however, an analysis of its performance over the past few years reveals a totally different picture. First of all, M&S’ target market has often been the older generation. Consequently, this group tends to resist technological innovations such as online shopping. In fact, current figures indicate that less than ten percent of the company’s clientele shop online. This means that the firm is losing out on a substantial part of its revenue. Together with the latter problem, M&S must accept that its marketing and distribution strategies have been misguided. Since the company is in dire need of tapping into a different consumer base, then the location of its stores needs to reflect this. However, more often than not, it is difficult to find an M&S store at retail parks yet the latter area is a rich source of this new target market. (Chislett, 2010)

In the food section, the company has been witnessing intense competition from food specialist groups such as Waitrose who have dethroned M&S through their wide array of goods. It should be noted that the company had streamlined its operations in 2000 and 2001 by focusing on ready meals; however, this strategy is not working in today’s food environment. M&S also seems to be regarded as an expensive retail brand. Most consumers are resorting to other providers to save up. This scenario has especially been replicated after the economic downturn in 2007 – 2009. Although the company introduced a few popular brands in its stores, it is yet to fight this negative public opinion of the company.

In close association with the latter trend is the fact that M&S is now regarded as a traditional brand. This is a problem to its entire consumer base and mostly to younger retailers. Since there is a lot of competition in the market, the company is in dire need of refreshing its image in the eyes of the public. In 2006, it had carried out a series of ad campaigns that were designed to inject some new life into the company image. Although that may have worked for a while, it has ceased to do so currently as the firm failed to follow through on such innovative ideas. (Chislett, 2010)

Company growth has also been a problem in recent past, the rate at which international expansion has been implemented is quite slow. Its chief executive Stuart Rose had set targets of twenty percent by 2013 but this may be a problem to achieve if nothing is done today. In 2007 and 2006, massive problems occurred during European expansion especially because instances of vandalism occurred. In Asian markets, there are also problems with retail operations and stock keeping.

Over the past five years, the company has been trying to use the clothing section as an avenue for expanding its client base. It has attempted to do so by hiring well-known television personalities, actors and actresses. However, these efforts have not yielded much fruit going by recent figures on its biggest consumer share. A possible explanation for this could be the fact that the prices of its apparel and clothes are too high for young and fashion-conscious clients who would rather turn to other retailers for their ultimate designs. (Killgren, 2009)

The current economic climate in the UK and in the rest of the developed world has contributed to the company’s poor economic performance and slow growth especially from 2007 to 2009. The chief executive has frequently blamed the region’s poor economic performance for the company’s predicament. However, other stakeholders and analysts do not believe that this is actually true. The latter experts claim that the economic downturn has provided a platform for exposing deficiencies in the company’s operations.

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M&S problems

It should be noted that between 2005 and 2008, the company’s financial performance was definitely something to write home about. It had done this through a series of initiatives and strategies ranging from offering a strong support system to its employees to expansion strategies in other influential parts of the world such as Dubai (2007). It also made a series of market initiatives such as the use of designer brands from Zandra Rhodes. However, in mid-2008, things took a turn around and the company’s revenues started going down. (Fletcher, 2008) Shown below is a summary of some of the major financial indicators for M&S:

Financial indicators in millions of pounds 2005 2006 2007 2008 2009
Turnover 7490 7797 8588 9022 9062
Before-tax profit 505 745 936 1129 706
Net profit 355 520 659 821 506
Basic eps (points 29 36 39 49 32

As can be seen from the figures above, financial performance was relatively good over the past five years but this changed after the introduction of another retailer. Shown below is a summary of its main competitors; Waitrose in the food section and Next Plc in the clothing industry.

Waitrose’ financial performance

Financial indicators in millions of pounds 2005 2006 2007 2008 2009
Turnover 5, 300 5, 700 6,400 6,800 7,000
Before-tax profit 215 252 319 378 280
Net profit 176 215 263 320 580
Bonuses allocated to partners 106 120 155 181 125
Profits retained 70 95 164 199 146

Shown below is a summary of the financial performance at Next Plc:

Financial indicators in millions of pounds 2007 2008 2009
Turnover 5541 5756 5961
Net profit 468 470 551
Net change 2% 0.3% 1.7%

One of the most outstanding features about Next plc is its use of its own brand labels. Most of its consumers therefore identify the company with such kinds of traits. Also, this competitor frequently introduces new product types that are designed at attracting more consumers. For instance, the company boldly ventured into electrical and other related items in 2005. Nonetheless, the in-store brands do not compromise on famous brands known to UK clothes buyers. Its marketing strategy is also another force worth reckoning since the firm has a unique program i.e. its discount sales strategy; most consumers tend to anticipate its offerings with some reporting to its stores even in the middle of the night just so that they can get a share of the goods on offer.

Next is a strong clothing retailer because of its positioning strategy. Its largest market share comes from persons below the age of forty. Therefore, the company is known for its fashion consciousness. The problem with this issue is that M&S will have a hard time trying to convince buyers that it can do the same. Another area that gives Next an edge over M&S is the fact that the latter has a direct influence on the way their quality management is handled owing to their large in-store brands. However, M&S may not be able to respond as quickly as they should to consumer demands because they first have to liaise with suppliers and negotiate with them. Most M&S critics often complain that getting this retailer to change a small aspect of their products is a very difficult task owing to the fact that its producers have a large say in how their products are represented. Sometimes operational strategies such as cost-cutting can impede the manner in which these issues are carried out.(Next Plc, 2009)

Waitrose plc has established itself as a formidable force in the food retail sector. The first thing that comes to a consumer’s mind when asked about Waitrose is its operational practices. Most consumers know that this firm offers high-quality products through processes that reflect its corporate and social responsibility. The company (which falls under John Lewis partnership) treats its employees as partners who are often awarded bonuses for their contribution to the company’s profits. Additionally, the company offers them in-store discounts and favorable policies on training and health. Its emphasis on customer service has also made it quite reputable in the eyes of consumers especially because ethics has an important determinant of who purchases any items. (High fliers publications, 2009)

Waitrose is an expert in the food sector because it does not focus on any other aspect except that. Over the past five years, the company has been working on a series of innovations that have demonstrated how versatile the organization is. In 2009, it added onto its selection a series of food items that were available at very low prices to concerned parties. In order to add that extra touch to their customer service, Waitrose often places two specialists on a particular food category such as meat, cheese and wines so that staff members can be informed on unique selling points of their products. In the end, this organization has outdone M&S in food retailing because it does not compromise on its customer service. (Waitrose, 2010)

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Given the latter investigation of M&S’s environment, it can then be possible to carry out a SWOT analysis and hence determine where the company could be going wrong. Its main strength lies in the fact that it has a large size, has been around for many years and is a common household name to most UK retailers. Also, the firm has a diverse portfolio of commodities that cushion it against interference from external forces operating in a particular industry. The company’s stock turnover is quite high- in fact, it has the largest figures among the three companies under analysis between 2005 and 2009. In this regard, it commands a strong market position. M&S prides itself in its high-quality merchandise– an aspect that causes consumers to spend more in their stores than in other competitors’ premises. (Wearden, 2009)

Some of M&S’s positive attributes may often turn out to be the company’s greatest disadvantage. For instance, because it is a market leader, all its corporate activities have been subjected to scrutiny hence explaining why its top executive positions keep changing from time to time. What this does is that it creates confusion in the minds of consumers who may not predict how new management can cause change. Also the company is very bureaucratic. It does not respond immediately to consumer recommendations and this is driving them away. The firm has lost its appeal among buyers as its brand identity has been diluted.

Technology has revolutionized the way business is done especially in the retail industry. Waitrose offers delivery services through a framework of technologies. Also, online shopping has changed a series of retailers’ company fortunes. M&S was very slow in embracing this model of business and it needs to adjust accordingly.

Specialty firms are the biggest threat to M&S as seen through the Waitrose and Next analyses. The latter firms tend to have superior customer service and they also place a lot of emphasis on meeting needs. For instance, they are well known for their low prices. Also, the marketing strategies of its competitors are quite formidable and this has been the reason why consumers keep embracing them. M&S needs to borrow a leaf from these firms so as to maintain its position as a market leader.

Implementation of proposals

Before implementing change in M&S, it is critical to first identify what needs to be done and who will be responsible for doing it. The change being proposed in this paper is an incremental one where specific problems within the organization need to be addressed one after the other. If a quantum change involving an alteration of the entire culture and structure of the firm is done, this is likely to generate a lot of resistance from the affected parties. The company under analysis has not reached its full potential as a UK retailer because of its rigidity to change and poor response to consumer needs. Nonetheless, because the company operates in other parts of the world especially in Asia where hierarchy is treated very seriously, then there may be some difficulties carrying out this change in such locations. Given the high level of organization in the company, it would be favorable to loosen up M&S structures so as to make it more competitive than other non-retail leaders. (Worley & Cummings, 2005)

This change model will be done through a three-step model found in the planned change model. The first step will be identifying the problem. Values, practices and processes inherent in the organization will be studied by all stakeholders including employees so as to make a consensus on what needs change. Thereafter, all parties who will be involved in this change process will be selected with some of them coming from groups/ teams and individuals. Here some things such as group norms, absenteeism and job performance need to be investigated. A data analysis within the company will need to be done through interviews and all information will be analyzed and given to the company. The second aspect of this model will be the planning and execution of the change. Planning will be done in a manner that changes structural or cultural issues that will be needed in order to make this company more plausible. Here, specific details of what needs to be carried out will be done by all the concerned parties. The intervention will occur by first carving out a vision for the company’s strategy and by providing support by top-level management. A continual process of designing and implementation will have to be introduced. This should then be followed by instatement of learning processes through training and other methods. The third step of the planning change model is evaluation. Here, the company will collect data on all the interventions that it desired to achieve in the first place and then compare them with target. Any improvements or fallbacks will be communicated to the rest of the stakeholders in the company. (Millward, 2006)

Conclusion

M&S’s problems have been created by its rigidity to change and this implies that changes from within can alter the company’s results in the future. It needs to borrow ideas from its competitors Waitrose and Next which are specialty retailers. The proposal should be implemented incrementally through the planned change model as this guarantees a systematic way of altering the company’s operations without creating resistance in the firm.

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References

Chislett, H. (2010). 125 years of M&S. London, Wiedenfeld press

Fletcher, R. (2008). Is M&S the author of its problems? The telegraph.

High fliers publications (2009). Top 100 employers: Web. 

Killgren, H. (2009). An eye for retail. People management magazine.

Millward, L. (2006). Understanding organisational psychology. London, Sage

M&S (2010). Marks and Spencer overview: Web. 

Next plc. (2010). Annual report summary -Financial information: Web. 

Waitrose. (2010). About us Company website. 

Wearden, G. (2009). Boland appointed as new chief executive for M&S. Guardian.

Worley, G. & Cummings, T. (2005). Organisational change and development. Ohio, South west university press.

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