Multinational Retail Chain Business: A Case Study Of Marks & Spencer

Inside the Organisation and Current Information

Describe about the Essay for Multinational Retail Chain Busines.

Marks & Spencer (M&S) is a multinational retail chain business founded in 1884. Over the years the business house has survived dramatic changes and has been able to retain its position as one of the leading brands in the global market. Born in United Kingdom (UK), M&S runs as many as 1382 stores globally out of which 914 outlets run in UK. The company caters products like clothing, home décor, gifts, and food. Nonetheless, the world goes gaga over the company’s food and clothing due to its valued quality, innovative designs and premium pricing rates. There are 83,069 numbers of lives employed worldwide under the business unit. Marks & Spencer’s food business is alone accountable for providing 58 % of the entire turnover while the other 42 % of the turnover is contributed by the clothing and home décor products (Campbell and Rahman, 2010).

Inside the Organisation and Current Information

A particular business enterprise functions in two environments- the internal and external. The business unit holds control over the internal environment as the factors related can be controlled by the organization. The factors upon which the internal environment of Marks & Spencer depends are the quality of products and services catered, corporate social responsibility and ethical considerations, employees, structure of the management committee, the company’s liabilities and the expenditures, set of policies, corporate culture, skill management, role management aspects, customer service and others. Among these there are factors that are strengths and weaknesses, which the business organisation deals with from time to time (Balmer, 2006). Nonetheless, Marks & Spencer has its own set of strengths and weaknesses which are as followed:

Strengths

The company focuses on catering innovative quality products to its consumers which makes the company ‘a favourite’ amongst its customers. Be it the food, apparel or home furniture, the consumers are satiated with the premium quality, innovation and labour that M&S puts (Hallbauer, 2008).

Marks & Spencer possess a strong corporate social responsibility (CSR) reputation as according to the Plan A (2015) Report of the company, it is noted that M&S performs “carbon neutral operations” (Bevan, 2007).

The organisational structure of M&S is somewhat flat which renders it unique characteristics of taking prompt decisions in demanding situations. Too much authoritative layers of the employees have been shed which has allowed the remaining workers to be more accountable than before thereby working in groups (Harris, 2008)

Strengths

Marks & Spencer always strives towards providing a class customer service to its targeted consumers. Staying at par with the tech savvy world, the company offers so many functional links and sites for its consumers, who can always shop online, give feedback, query regarding any products, find the store, earn loyalty points and rewards, and voice their complaints online, refunds of money, use M & S banks and others (Chang and Lee, 2007).

The employees are the assets to the organisation because not only the company trains its employees but also look after their needs through the implementation of training sessions, competitive remuneration, bonus schemes and work flexibilities (Campbell and Rahman, 2010).

Weaknesses

Though marks & Spencer employs innovation and quality on its line of clothing, but the company is observed to be suffering a great blow in case of its clothing business. The summer and spring collections exhibit a poor demand from its targeted consumers (Ruddick, 2015).

There is a loss in the market share of M&S thereby causing ‘lack of competitiveness” in pricing affairs. The company’s clothing prices compared to that of other brands like Next and Debenhams are almost 20% higher which has been a prime reason for market share shrinkage (Bevan, 2007).

BBC reported during 2013, the general merchandise sales shrunk to a 3.8 % though the company boomed in food business. Especially the 11 % market share that is occupied by the woman clothing line of M&S is noted as one of the weakest spots according to the financial analysts (BBC News, 2013).

The company’s research and development team is also put to question as it exhibits that M&S did not conduct effective market research prior to entering the foreign countries. For example, the venture encountered with D’Alliards did not prove fruitful as an international business activity resulting in sale of D’Alliards (1996) (Parry and Hansen, 2007).

M&S faced hurdles in the business due to their selection of partners. The company allied with diverse partners in different locations due to which the business house went through several shut down of stores’ phase. For example, during 1999, the agreement with Portuguese franchisee was discontinued (Hallbauer, 2008).

Performance

It is noted that the performance of a particular organisation depends on certain factors such as organisational structure, corporate culture, leadership qualities, corporate governance and others. M&S also shows similar trends and thus these factors will be discussed briefly (BBC News, 2013)

Weaknesses

Good/ Bad performance

Marks & Spencer is still acknowledged as one of the leading brands in UK as the company makes a commitment to “deliver sustainable value” towards their related stakeholders. Both the annual reports of 2000 and 2001 display the overall performance is disappointing. The equity ratio return as well as the per share earnings of the financial year 2000-2001 was almost zero due to very less profit (£ 1.3m) made by the company. Moreover, the sales in the general merchandise segment (women clothing, men clothing, children wear, home products, and lingerie and beauty products) of the company depicted a fall and thus the operating profit also exhibited a fall in the above mentioned year. It was further speculated that the selling price minimised by 2.5 % also was one of the reasons for the fall in sales (Campbell, 2000).

Nonetheless, the annual reports (2000) showed the company earned better profits in their international business segment except for the continental Europe segment. Marks & Spencer deals with the financial services like offering the account cards, personal loans, pensions and others. The sales transactions of the charge card as noted got reduced from 26 % to 22 % in the year (2000). Further the company proclaimed a steep cut in the dividends during may, 2000 which was a blow to the shareholders. Luc Vandevelde, the then executive chairman pleaded to the shareholders to hold on to their grounds without losing faith upon the company as it was a transitional phase since the traditional retail company was about to transform into a multi channel retail business enterprise (Buckler, 1996).

Leadership and Senior managers

When it comes to incorporating leadership strategies, the company possess a fine line of officers and executives who are harnessed with leadership skills, qualities and remarkable experiences. Michael Marks and Tom Spencer gave birth to this organization. Marks started selling products and items on a small stall in Leeds, London. Gradually within 6 years, it became a company which run 36 outlets all over the nation. However, during the period of 2^nd World War, many of the stores got highly damaged due to air raids. Marks’ son Simon Marks gave his place to Israel Sieff, his brother-in-law. Later in 1972, Marcus Sieff was appointed as the chairman during 1972. However, after 12 years, Derek Rayner was appointed as the chairman who did not belong to the Marks family tree (Gereffi, 1996).

Performance

It was Rayner who introduced the charge card and also came along the profits with the inception of the charge card concept. Richard Greenbury was the new CEO of the company in 1991 while Reyner retired. Nonetheless, Greenbury was not able to give profits and exhibited sluggish performance and thus was replaced by Peter Salesbury.  However, the poor performance persisted which resulted in 700 job cuts as well as closure of as many as 38 Canadian outlets. Due to such sluggish and underrated performance, the company faced with a sudden takeover bid from the Arcadia group headed by Philip Green. At this stage, the company appointed its new CEO, Belgian Luc Vandevelde. Under the leadership of new CEO, the company launched recovery plan that concentrated on shedding off its international operations (Spitzeck and Hnasen, 2010).

However this decision affected the traditional values of the old board members like David Sieff, Ralph Robins, and Michael Perry who resigned immediately in 2001. Leadership wise, Marks & Spencer previously possessed an authoritative leadership till 1970s as the members of the Marks family held the authoritative positions. Thus, the company started hiring its senior officials from outside thereby changing its authoritative approach to a transformational approach. It is speculated over the two decades, that the company has switched over to consultative leadership style which employs the consultation aspect before forming any decisions (Campbell, 2000). 

Corporate Culture

Previously Marks & Spencer used to follow the tall and the power culture which actually did not blend very well with the new innovative strategies incorporated by the company. The company focuses providing quality services to the consumers. The company at the beginning inculcated the original culture that is taken from the company’s founders and forefathers. Formerly, culture comprised aspects like fast turnover rates, putting in hard labour and being honest. Thus Marks & Spencer also focused on these typical attributes which are often considered as paternalistic in nature and fits well in family businesses. However, the outcome of this sort of corporate culture exhibits that one cannot attain the top unless and until the individual is from the family. However, it was speculated that after the World War II episode, especially during 1960s the corporate culture and structure of the company went through drastic transformation which focused on aspects like “capital mobility, acquisitions as well as mergers”. Hence, the stereotyped and conventional corporate methodology shattered into fragments thereby making ways for new transformational strategies (Buckler, 1996).   

Leadership and Senior managers

Corporate Governance

There have always been debates and discussions going around while it came to Marks & Spencer’s corporate governance. It was speculated that Sir Rick Greenbury who was once worshipped as the leader of M&S inserted certain recommendations pertaining to the salary structure of the directors in the report that was brought out by Sir Adrian Cadbury during 1992. Nonetheless, due to his authoritative governance, the company faced a sharp blow. These debates and hot discussions in the corporate governance used to occur because of the authoritarian and arbitrary salary packages drawn by the directors of the company. For example, the salaries drawn by Sir Stuart Rose as well as his fellow colleagues drew lots of negative attention and controversy. Moreover, Stuart Rose insistently held both the designations of Chairman as well as the chief executive that indicated offend to ‘corporate governance code’ followed by the company (Gereffi, 1996).

This kind of strategy pertaining to corporate governance did not support the business enterprise that made ways for transformational strategies by bringing in new ideas, concepts and hiring efficient managers (Korac-Kakabadse et al. 2001).

Conclusion

Thus to conclude, Marks & Spencer which is undoubtedly considered as one of the leading brands in UK as well as in the global market focuses on building and shaping a strong and effective internal environment so that the business enterprise in challenging situations always remain ready to combat with the external forces.

References

Armstrong, A. (2016). New Marks & Spencer boss Steve Rowe shakes up management. [online] The Telegraph. Available at: https://www.telegraph.co.uk/business/2016/05/12/new-marks–spencer-boss-steve-rowe-shakes-up-management/ [Accessed 26 Jun. 2016].

Balmer, J.M. (2006). Corporate brand cultures and communities. Brand culture, pp.34-49.

BBC News. (2013). Marks and Spencer food sales offset clothing weakness – BBC News. [online] Available at: https://www.bbc.com/news/business-22104228 [Accessed 26 Jun. 2016].

Bevan, J. (2007). The Rise and Fall of Marks & Spencer: And how it Rose Again. Profile Books Limited.

Buckler, B. (1996). A learning process model to achieve continuous improvement and innovation. The Learning Organization, 3(3), pp.31-39.

Campbell, D., & Rahman, M.R.A. (2010). A longitudinal examination of intellectual capital reporting in Marks & Spencer annual reports, 1978–2008.The British Accounting Review, 42(1), pp.56-70.

Campbell, D.J. (2000). March. Legitimacy theory or managerial reality construction? Corporate social disclosure in Marks and Spencer Plc corporate reports, 1969–1997. In Accounting Forum (Vol. 24, No. 1, pp. 80-100). Blackwell Publishers Ltd.

Chang, S.C., & Lee, M.S. (2007). A study on relationship among leadership, organizational culture, the .0.operation of learning organization and employees’ job satisfaction. The learning organization, 14(2), pp.155-185.

Gereffi, G. (1996). Global commodity chains: new forms of coordination and control among nations and firms in international industries. Competition & Change, 1(4), pp.427-439.

Korac-Kakabadse, N., Kakabadse, A.K. & Kouzmin, A. (2001). Board governance and company performance: any correlations?. Corporate Governance: The international journal of business in society, 1(1), pp.24-30.

Ruddick, G. (2015). Marks & Spencer ‘suffers clothing setback’. [online] Telegraph.co.uk. Available at: https://www.telegraph.co.uk/finance/newsbysector/epic/mks/11718182/Marks-and-Spencer-suffers-clothing-setback.html [Accessed 25 Jun. 2016].

Spitzeck, H., & Hansen, E.G. (2010). Stakeholder governance: How stakeholders influence corporate decision making. Corporate Governance: The international journal of business in society, 10(4), pp.378-391.