Marks & Spencers (M&S) Strategic Issue and Options
Marks & Spencers (M&S) is one of the largest multi-channel retailers in the world with over 120 years history. The company operates in 50 countries, including Western and Eastern Europe, Asia and Southeast Asia regions and employs over 82, 000 individuals worldwide. The company has been experiencing fast growth in all three segments, food, clothes and home products, based on its core strategic directions of organic growth in the UK and other European markets. Current strategy of the organization is based on five pillars: values, quality, service, innovation and trust (M&S, 2013). These founding values build on the organizational mission of bringing superior quality closer and making it more accessible. Annual report 2013 reflects a total revenue of £10 billion and net profit of £564, 3, where the UK market represents over 40% of the total income. The figures for 2013 represent 1. 3% growth and 14. 2% drop for the revenue and profit financial items respectively. This financial position allows arguing that the company has been experiencing strong internal financial pressure, based on the cost-side of the operations. Additional insight into the M&S strategic direction brings forward the goals under Plan A that outlines the shift from CSR-aware to CSR-driven strategy. The objective of this review is to identify the core strategic issue that the company faced in recent years and analyze potential strategic options that the company has to address its critical strategic challenges. The argument of this essay is that the major strategic issue of M&S over the period of 2010-2013 is the complexity of the supply chain management (SCM) outside the UK from system and logistics perspective that contributes towards increasing SCM costs and slows down the transformation into CSR-driven organization.
An insight into the internal capabilities of the company allows outlining several major strengths and some of the core focus areas that influence the company and have a direct impact on its strategic options. First of all, strong brand and supplier relationships, developed in the UK throughout the years, build on the strategic capabilities, providing robust quality control. Secondly, the company placed significant emphasis on development of in-house human capabilities through M&S talent programs and ongoing training and mentorship (M&S, 2013). This along with wide physical presence that gives scale and scope of operations and healthy financial equity position give M&S a solid ground for addressing its strategic issue through further integration of the SCM network through shared values approach and integrated CSR policies.
One of the core strengths of the M&S is the Brand and scale of its online and offline presence on the core markets. This strength comes along with solid financial base to support marketing and organic growth strategies that are incorporated into the “ click and brick” strategy and Plan A. Additionally, the company has developed a wide product portfolio that allow fast diversification and reduction of its dependency on the major external influences, such as floating exchange rates, the economic downturn and high variability and geographical disperse of sales in food and clothing. One of the critical weaknesses that was identified in the company is a lack of integration of the SCM in Europe and North America regions that resulted in the initial failure of the company to penetrate the markets. While M&S has developed strong supplier´s relationships in the UK, it could not replicate the approach with other countries due to smaller scale and strong strategic affiliation across the SC created by its major competitors. This lack of knowledge and technical expertise, such as ERP integration issues, outline the major challenges that the company should address in the future in view of its strategic issue.
With the above in mind, it is possible to outline in more details the scope of the strategic issue and possible benefits that some strategic options can give to the company as a way to address the challenges. It was identified that lack of supply chain integration from the system and commercial perspective outside the UK has created numerous challenges for the company in the past, such as failure to gain market share in North America and underperformance in the Netherlands and France, especially in online clothing retail segment. The same lack of coherency in the SCM jeopardizes the quality that builds on the major strategic pillars of the company. The reality demonstrates that the issue is generated first of all by the attempt of the company to replicate the strategy and operational layout of M&S UK to its international locations. The point is that M&S until today is a global company with the British mindset, whereas to fully succeed and unleash the opportunities in Europe and Asia it should be able to turn from the global player with universal the strategy to strategic player with globally personalized strategic portfolio. This situation can be called a strategic drift, where M&S has not yet developed a robust approach to handle fast-paced and constantly changing international business environment (Johnson, Scholes and Whittington, 2010). This transformation will be able to have more structural and innovative approach to the SCM management and will contribute towards the achievement of the 180 commitments outlined in Plan A.
As we have outlined the need of the strategic shift of M&S there are several elements that should be covered by the strategic options in order to address the issues, which create a stumble block in organizational development. First of all, the company has to ensure that the gap between current capabilities and resources and future organizational needs is addressed through effective internal strategies. As such, there is a clear lack of communication and SCM technology that can ensure cost-efficiency in overseas operations. Secondly, the company is yet to invest in further diversification of its organizational culture and to bring in new thinking into the cultural web that can address the particularities of each market, where M&S is present.
Taking into account the above considerations, it is recommended to look at three major strategic options available for the company: organizational growth through acquisitions, incorporation of the global franchising strategy and diversification of the product portfolio. When acquisitions come to play, M&S will be able to benefit from fast inorganic growth in target markets. The company will also be able to address the three challenges: a) diversification of cultural web b) acquiring technical and commercial skills that are necessary for its development and c) building on strategic affiliation with suppliers, based on the SCM capabilities of the acquired company. It should be considered, however, that any other option comes at a cost and in case of acquisition, M&S can face serious issues with the cultural clash, shareholders and stakeholders buy-in and financial pressure on operational cash flow. Second strategic option is the global franchising strategy that would bring, first of all, economies of scale on online as well as offline markets, fast entrance to new markets at a low cost and local knowledge of the new markets that help to reduce the risk of commercial failure. This local expertise acquired with franchises would become a great asset for the development of SCM expertise. At the same time, franchising strategy always bares high risk of relationship management, lack of vertical and horizontal integration and consequent quality issues and Brand damage. Additionally, the initial investment in building a franchise structure for the company, like M&S, is likely to be extremely high, as strategic ambitions and historical and cultural influence of 130 years of existence will challenge the franchise integrity. Finally, third possible option is to further diversify the product or even Brand portfolio. This will help to further leverage the risks of economic environment, create opportunities for cross-selling and build on a competitive edge by differentiation and one-stop-shopping. Additionally, it can help to address the issues of scale and volume in SCM relationships, generating new upstream relationship opportunities and bringing new suppliers into play. The challenges, associated with the diversification of the product range include lack of expertise and, thus, further pressure on the efficiency of SCM in general, potential lack of focus on the core products, such as clothing and food and clashes of interests among internal stakeholders.
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