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Michael Marks Penny Bazaar in the 1880s. Partnership with Tom Spencer to form M&S In 1998, it became the first British retailer to make a pre-tax profit of over 1 billion A few years later it plunged into a crisis which lasted for several years.
Simon Marks Used ideas from the American market for layout and design of stores St. Michaels Logo = Sign of Quality Culture = Family Leadership Style: Top-Down, Centralized
Example:
He always used the
same UK-based suppliers and meticulously ensured that goods were exactly to specification; a relationship designed to build reliance of the suppliers and ensure high and consistent quality.
To offer our customers a selective range of high quality, well designed and attractive merchandise at reasonable prices under the brand name St Michael. To encourage suppliers to use the most modern and efficient production techniques. To work with suppliers to ensure the highest standards of quality control. To provide friendly, helpful service and greater shopping comfort and convenience to our customers. To improve the efficiency of the business, by simplifying operating procedures. To foster good human relations with customers, suppliers and staff and in the communities in which we trade.
Until the late 1990s M&S was hugely successful both in terms of profit and market share. Standardized and structured formula applied everywhere. Specialist buyers operated from a central buying office. Store managers followed central direction on merchandising, layout, store design, training and so on.
Disadvantages
High centralization
means low flexibility for store managers. Local needs of customers could not be fulfilled
Product
High Quality Classics with wide appeal to the public
trends
Pricing
Reasonable Pricing
No sales or discounts
Customer Service
Continued into the 1990s. The top management followed principles of the business religiously. Commitment to the M&S Way.
Buyers only brought styles that they thought the top management would approve of: no cutting edge fashion. Problems with centralized authority.
unchallenged.
Early 1990s: expansion into US and Europe 1998: admitted to having financial difficulties world wide due to tough trading conditions Profits and share prices declined significantly
It was seen to have been too complacent and ignoring changes in the domestic market which have now caught up with it. (Financial Times, 16 January 1999)
Traditional Risk Averse Formula Focus of top management on day to day vs. long term strategy. Did not understand target market. Could not tailor its products to the target segment.
November 1998: Greenbury steps down. After a lot of infighting and publicized coverage of who would successed Greenbury: Peter Salsbury takes over. Not received well by public Share prices Need for an outsider
Lack of foresight:
Acquisition of Littlewoods department stores Refurbishment At the same time, M&S stores were being
refurbished.
January 1999: Second profits warning Rapid sell off of M&S shares Christmas period Problems with European Operations
Restructuring of Company Company-wide marketing department Customer focused decisions on what should be stocked New clothing and food ranges New marketing campaign Change in bureaucratic culture
Property division that charged shops individual rents: more accountability Closed 6 European stores, all Canada stores, reduction in head office size cost cutting Employed design consultants to give UK stores a more modern ambience.
September 1999
Overseas sourcing Streamlining international operations Home and internet shopping Department to explore new business
opportunities.
Well received new fashion line, better customer service. Complaints about organization of store.
Profits continue to plummet. Other companies talk about acquiring M&S. More management restructuring followed.
First outsider Chairman: Luc Vandevelde High salary Successful at MD role at Promodes Revitalise the domestic brand Go overseas with an expansion programme. Become a multi-format retailer
Aimed for better customer service Aimed to provide high fashion garments Sourcing done almost 100% from Asia 2000
there were no improvements in sales or profits. But sales decrease was slowed down
Vandeveldes strategy:
objective of moving the business closer to the customer
Restructuring into 5 divisions Dedicated buying and selling teams Customer Insight Unit Experimentation with stores
March 2001: M&S began to close stores in Europe and America. Focus on domestic core stores. Problems in France Public sentiment against chairman Main problems were high competition, price deflation, poor performing clothing range
Relied on heavy discounts to clear stocks better supply and inventory management Change in HQ that showed a commitment to change in culture Employee motivation Back to Basics, in Fall-Winter 2001
More time needed to turn around M&S To accomplish this he asked shareholders to double the share options available for key executives, to three times annual salary. JV to design and sell children's range Partnerships with famous designers to develop fashionable ranges for young women.
Recovery on track
Low cost store redesign Best performing stock on the FTSE100 for 2001 Strongest Christmas sales Step away from corporate paternalism: closing of its final salary pension scheme Continued efforts to keep recovery on track
Though there were minor glitches, sales continued to rise. M&S outperformed competitors It had regained its place because of the way it had restructured and refocused itself, and underlined the strength of the brand and culture New Ventures: small food stores
November 2003: Growth faltered Top Leadership became complacent Designers had turf wars Severe discounts Finally introduced a loyalty card, &more 2004: Sales down, Profits down. Chairman resigns.
Pre 1990s
M&S competitive advantage eminated from its concentration on a product differentiated basis by supplying a product of high quality, manufactured in the UK and carrying the brand name of
ST MICHAEL which it built over a long period of time and marketed to a loyal consumer base.
They
followed a global strategy of market development into other countries when they didnt even understand their own home countries operating environment.
Same branding, marketing and stores for food and clothing: when one brand was affected, the other also went down. Moved away from core competency with home and e shopping
Tried to become more customer focused. Decentralize buying stock to satisfy customer needs.
Focus on UK market by withdrawing from foreign turf. Use international suppliers New chairman who was an outsider More sales assistants hired. Flatter organizational sturucture. Re-branding exercise.
Research and define the target market Needs of consumers: how to add value? Brand clothing and food seperately Withdraw from international arena until UK operations are strong Keep on track with external and internal environment. Move with the times. Fashion industry: Fast paced