Marks And Spencer Narrative Essay Example

to address ten questions that are based on Kay John's architectural concepts and competitive advantage, as well as the information provided in the company's Annual Report in the given case study. According to the 1998 annual report and financial statement, M;S experienced a 5% growth in group turnover and a 6% increase in pre-tax profits. Additionally, there was a 10% rise in dividends for that year. However, it is worth noting that the company faced a crisis initially due to a decline in corporate profitability, which can be observed in table one.

According to the table displayed, each section experienced a notable increase from 1997 to 1998. Additionally, there was an extraordinary operating income addition in 1998, resulting in the operating profit reaching its highest point of 1,116.7 million. However, there was a significant decline in operating profit in the subsequent period, with it only amounting to 512 million, less than half of the 1998 figure. The decrease in operating profit can be attributed to a progressive increase in expenses while income remained stable.

In 1999, the cost of sales, staff costs, and other costs increased by over 100 million compared to 1998. Notably, the depreciation reached 300 million, which was twice the amount of the previous year. M;S focuses on two main businesses: clothing and food. The firm positions its products at the higher end of the mass market. Recently, M;S expanded into the financial services sector by offering its own store card, as well as insurance and unit trust management services.

I have already analyzed the operating margins of financial services and retailing businesses based on the data in table two. It is evident that the

operating margin of financial services was significantly higher than that of retailing businesses. Notably, even the lowest operating margin in financial services surpasses the highest margin in retailing business. The difference can be attributed to the emphasis on human resources in financial services. Regardless of the number of cases undertaken, stable wages still need to be paid.

The number of employees working was a determining factor, as well as the focus on raw materials, machines, and labor in the retail business. The distribution aspect was more complex compared to financial services. M;S retail business is known for its sale of high-quality chilled convenience foods, making it a pioneer in this industry. However, in recent years, other supermarkets like Tesco and Sainsbury have also started selling similar organic food products at slightly lower prices.

In the Greenbury contribution to the 1999 Annual Review and Summary Financial Statement, it was suggested that there should be a change in the way goods are purchased. This change would involve seeking cost savings and sourcing more goods from foreign countries. According to Kay (1993)'s concept of external architecture, this refers to the relationships that a company has with other enterprises, especially those that provide goods and services. These relationships are formed through the sharing of knowledge and the establishment of fast response times, often through relational contracts.

However, in this case study, M&S has been gradually decreasing its reliance on clothing suppliers from the UK. After 1999, they reduced their UK suppliers from 60% to 10%. Instead, M&S is actively searching for lower-cost suppliers overseas. This shift in strategy suggests that the company is moving away from high-cost UK suppliers. As a result,

if M&S requires immediate sourcing, they may encounter difficulties in obtaining as much as they need from UK suppliers and will have to pay a significantly higher price. Consequently, M&S is altering its supplier relationships and moving away from Kay's external architecture.