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Summary
Bower’s case study focuses on the measures that the management of Marcs & Spencer took to restore the company’s image as a retail power. Founded in 1884, the firm has had numerous periods of decline and growth. For example, despite its progress at the beginning of the 20th century, M&S faced major challenges in the 1970s. This was mainly due to various socio-economic tensions in the UK. During that period, M&S decided to expand their chain to Canada, which brought unsatisfactory results at first; in turn, bringing the chain to the Continent was more successful. In 2001, the company recruited a new CEO, Luc Vandevelde, who took a number of crucial steps to recover this premium retail brand. These measures included building a stronger team by hiring a new managing director, design director, a new CEO of the financial service group, a new director of women’s clothing. In addition, it was decided to shift focus entirely to the UK retail, close loss-making businesses, cut costs, and improve capital structure.
Analysis of Business Practices
Shifting its focus to the UK retail market exclusively, M&S developed a recovery plan for Clothing while expanding to new areas, such as Food, Home, and Beauty. The company sharpened its pricing for clothes through rebalancing its price architecture and increasing the variety of entry-price merchandise. In addition, new campaigns and clothing lines, such as an extremely successful Per Una line, were launched to increase the customers’ confidence, allowing the company to earn their trust again. M&S Food performed well, giving the company new opportunities to grow, reach new locations and establish new selling channels. As for the Home business, furnishings and gifts have been the most successful products areas.
The company’s management applied different models and concepts to further introduce positive changes, such as the value realization frameworks and cost reduction techniques. As part of its cost cutting strategy, the company closed loss-making businesses in Continental Europe, reduced costs for administrative purposes at the headquarters, and began renting more property for its operations instead of owning it. To improve its capital structure, the company decided to reduce its working capital by cutting the investments in inventories.
Another major business practice implemented by M&S to restore its image was the initiative to improve its financial services. Thus, the company introduced changes to the M&S cards, launching the M&S and More card, which combined the usual M&S card with a credit card, allowing customers to earn M&S loyalty points. This did not only significantly impact the company’s profits, but also helped it improve relationships with the customers.
Problems and Suggestions
It can be suggested that some of the major weaknesses the company had prior to the changes introduced by Vandevelde’s management were based on its inability to compete in foreign clothing markets. Suggestion for remedies that would be appropriate in this case is to analyze competition in the markets that the company plans to expand to and close the businesses that cause severe losses. Another weakness observed was the lack of tight relationships between the company and its customers; to tackle this problem, M&S developed new financial services and expanded in the new product areas. As a measure to prevent this problem in the future, the company can be recommended to apply its resources to introducing further changes focused on improving the quality of its products and increasing customer satisfaction.
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