Marks and Spencer
Marks and Spencer (M&S) was founded by a Russian Refugee in 1884 by Michael Marks. M&S was floated on the stock exchange in 1926. M&S has become a worldwide trademark with 700 stores (294 in the UK) and 55,000 employees in the UK.
In 1997 they were given their fifth honourable Queens award for expert achievement, after over a hundred years of successful trading.
M&S consists of three areas – retail, financial services and International business. With an expected group turnover of £8.14bn for 2001, the retail, which accounts for 78% of the group’s sales and 76% of profitability, is therefore the most important part of the group. M&S has seen a steady decline in profits since 1998 due to the UK retail business and, in particular, the clothing division. Sales in this division have fallen by £500 million over this period. The consequent impact on profitability has been devastating for M&S – current operating margins of the clothing division are currently only at 4.2%, a quarter of the level achieved in 1998. If it is assumed that M&S leases all its assets (like most of its competitors), then its clothing margins are further reduced to about 2.5%, which is not far above Arcadia (1.9%). For a group that had profits exceeding £1bn, this year’s prediction of £330m seems almost inconceivable for a once-great company.
M&S has found trading in the last two years very difficult. Their Chairman, Luc Vandevelde, has recently announced a revitalised strategy. To create a more focused organisation, to enable the company to ‘get on with what we do best.’ They confirm that they are to restore an unquestioned reputation for quality, value, service and innovation. The Chairman is “confident that the changes we’ve made to reposition Marks and Spencer as a modern, customer facing business will achieve a sustainable recovery. These changes, together with the new growth opportunities we are pursuing, should result in an improved value for your shares and an exciting future for your Company”
M&S has always looked to improve upon the services offered to their customers including Quality and Value. They are committed to putting the customer first at all times, determined to sell only merchandise of the highest quality at outstanding value. M&S are determined to offer the highest standard of customer care in an attractive shopping environment and aims to improve standards continually throughout its operations, using the latest technology.
The marketing process
To be able to draw conclusions from the Internal and External audit, the marketing process needs to be addressed. The first step that M&S has identified is their current positioning within the women’s clothing market. This segment needs to be subdivided into External audit (see Appendix A) – factors that influence M&S that are outside of their control – and an Internal audit (Appendix B) – factors that M&S has control over.
SWOT analysis for Marks and Spencer
* Established name, trading since 1884
* Stores in large catchment area
* Good internal customer care
* High profits – £330m
* 700 hundred stores throughout the U.K
* Heavy investment in training and development
* High customer service standards
* Reputation to attract high standard of labour force
* Opportunity to produce well designed good quality clothes
* Current company position
* Unstable environment
* Decline in quality
* Product range not moving with the times
* Unclear target market
* Not moving with technologies
* Difficulty in recruitment
* Means to invest in technology and store refurbishment
* Capitalising on the current trend for ‘DIY’ by offering more homeware products
* Financial/insurance services
* Reputation to attract first-class suppliers
* Increased competition
* Declining number of customers
* Declining levels of loyalty of core customers
* Government intervention – new laws
While compiling the SWOT analysis and internal and external audits a number of issues have been highlighted. These issues must be tackled in order for M&S to improve their current standing in the market place.
At present, M&S’ mission statement is:
‘To be the most trusted retailer wherever we trade, by delivering leading standards of products, services and behaviour to our customers, communities and each other’
After reviewing their current objectives in relation to their mission statement, they do not require a new mission statement. As what they are trying to achieve has not changed – they simply need to tackle it in a more productive manner.
Current Key objectives
Similarly with the mission statement, the current objectives (see below) set by M&S do not need to be rectified. As they are business-orientated in that when achieved will help M&S keep their strong foothold on the clothing retail market.
* Provide first class customer service as a priority whenever it trades.
* To ensure that all products are the best that design technology and manufacture can achieve and that every item sold represents superb value.
* St Michael goods will always be made from high-quality raw materials to the company’s detailed specification.
* Operating efficiency and economics of scales will be translated into outstanding values from the customer.
* Suppliers of goods and services will be carefully chosen and work closely with M&S in long-term partnerships.
* M&S financial service customers will know they can depend on the same standards of quality, value and service that apply elsewhere in the business.
* Staff will benefit from the progression of personnel policies and the best remuneration package in the high street.
* The group’s commitment to social responsibility will be shown through the role it plays in the community and its concern for the environment.
However, these objectives are not being met to their maximum potential. The question now is, why?
The key issues preventing M&S from meeting these objectives are:
M&S’ product range, again, reflects their lack of customer understanding. Although they have introduced exclusive product ranges, for example, the Autograph collection; these are unavailable in the majority of stores and people remain unaware of their appeal. The majority of their lines are regarded as out-dated and unappealing.
Whilst tailoring the product range to the ‘core’ customers, M&S should fully commit to the exclusive Autograph range and be available in all clothing retail stores. The issue of out-of-date and unappealing clothes also needs to be addressed. Now the report has highlighted who the ‘core’ customers are, a fresh approach must be adopted in order to satisfy needs and perceptions.
M&S must identify exactly which segment they are targeting, as they seem to be confused as to which segment they are focusing on. This is illustrated by the chairman’s apparent strategy for tailoring the product range to women aged 35+, whilst at the same time employing a well-known designer who appeals to 25 to 35 year olds. A clear objective needs to be devised in order to have any direction. M&S need to target their ‘core’ customers, which are the 35 to 55-age range of women. With this clear objective in mind, M&S will attract and satisfy their primary customers which in turn will bring maximum profits.
Another area that needs to be looked into, whilst looking at this area, is the way M&S looks after its workforce. It is critical to achieve this as a motivated and educated workforce reflects well upon the company. This is passed onto the customer through improved service. M&S currently have class-leading levels of benefits for their employees and pay in the upper quartile, so this area does not need further rectification.
M&S where once regarded as producing high quality, ‘value for money’ products. In recent years, however, due to the perceived drop in the quality of their products, the overall opinion on the value for money has dropped. M&S’ clothes have always been regarded as competing with the upper end of the clothing market. Their price reflects this, however the standard of quality in recent years has dropped. In order to keep the standards high, quality is the issue that needs to be addressed, whilst keeping price consistent.
M&S need to re-establish their reputation as having a high standard. This can be achieved through working closely with suppliers, with more stringent quality checks.
Traditional belief that there was no need for advertising is no longer working for M&S. In order to remain competitive among an ever-increasing number of competitors, it is recommended that M&S invest in an intensive promotional campaign in order to help retain existing and attract new customers.
M&S have addressed this problem by releasing their recent ‘naked’ campaign, which was affective to the extent that it got it noticed, however, it received widespread negative criticism from the media. These shock tactics did not appeal to the market segment they were targeting. The report recommends that, to rectify this promotion setback, extensive market research needs to be conducted into what 35-55 actually perceive as their needs, wants and expectations are. Promotion is the key to re-establishing M&S’ brand image and justifying the price paid in return for an exceptional level of customer service and products. Once completed, M&S will be able to devise a more focused and thus effective advertising campaign.
The situation of current M&S stores is that they are situated in highly populated areas of above of over fifty thousand people. This is a highly affective way of attracting a maximum number of customers.
As customer service remains a primary concern at M&S, this must be continually monitored, as when customers purchase goods they expect a high level of service along with a high quality product. This level of service has not deteriorated through out M&S’ trading years and must be maintained through continuous training and development.
This issue is currently being addressed by M&S who are refurbishing all stores in an effort to make them modern and more appealing to customers.
With current operating margins at about a quarter (4.2%) of the level achieved in 1998, M&S must also look at reducing its operating costs at the front-end (production process). By reducing these costs, usually through improved quality, as previously discussed, multiple benefits can be gained:
o Lower costs – and thus higher operating margins
o Consistent quality
o Minimal rework
M&S were slow in implementing credit cards into their organisation, which not only lost them money but also affected their reputation. Striking a balance between adopting new technology too quickly (and consequently at high cost and usually with many technical problems) and too slowly (at the expense of lost profits and reputation damage) must be addressed. Competitive benchmarking needs be implemented, which would encompass a variety of issues, but would allow M&S to keep abreast of new developments, and incorporate them where necessary.
Control of monitoring
Now that the recommendations have been finalised, in order to be effective, they must be constantly monitored and be re-evaluated. By conducting this, it ensures an ever-increasing standard can be achieved at M&S. Throughout this stage, feedback is essential and any new ideas generated could be essential in reducing costs and retaining customers.
An effective way of monitoring is by implementing ‘Servqual’. When putting this into practice, it breaks down into the top five parameters for customers and what they perceive as good customer service. The five areas are:
* Reliability – this can be expressed through delivery of the product on time, products being in stock and the customer receiving quality product(s)
* Responsiveness – speed of service
* Assurance – communication and trustworthiness
* Empathy – did the salesperson really understand what the customer was explaining
* Tangibles – revolves around image in relation to M&S the quality of the building, the store layout, etc.
Whilst Servqual provides a useful aid, it must also be highlighted that it has become dated as it was constructed in 1988. Another possible area that can be looked into is access. Essentially this means whether a customer can get in contact with the person that they are looking for at M&S?
Another tool that M&S can use to help monitor their effectiveness of implementing their recommendations is to devise a customer questionnaire (see Appendix E). From this they are obtaining primary research, highlighting the true views and opinions of their customers and gaining a great understanding of their ‘core’ customer.
Should the recommendations that have been outlined above be implemented and monitored as suggested, and then the consequences would result in M&S retaining more of their customers and dominating the clothing retail market as they once did.