February 21, 2008
III- SWOT Analysis6
This case study presents two companies, Marks & Spencer and Zara, which are active in the apparel industry, and examines supply chains and the product-process linkages of both companies. Marks & Spencer, originally named Penny Bazaars, was founded by Michael Marks in 1884 in Northern England as a clothing sales company. Ten years after its startup, Thomas Spencer joined Michael Marks and became co-owner of the company. From 1894, the company has continued to work under the name of “Marks & Spencer (M&S).” Influenced by American chain stores, M&S started to sell both food and clothes in the 1920s. The company experienced a rapid growth from 1894 to 1939, expanding its 234 stores. In order to reach the highest quality in its products, M&S concentrated its strategy on the close cooperation with suppliers and the use of new technologies. In addition, the company added internationalization and product diversification to its strategy in the late ’80’s. On the other hand, despite this promising strategy, M&S started to undergo a gradual decline in its sales; consequently, in its profits in the 1980’s. A decrease in market share followed this drop. Moreover, in the late 1990’s, the share prices of the company decreased dramatically. By contrast, Zara, another clothing company founded in Spain in 1963, achieved a remarkable success in the textile market in short period by its brand new supply chain and correct business philosophy, including creativity, innovation, and fast market response. This case study will analyze the sources of the decline of the company by analyzing its chain value. This section will be followed by a SWOT analysis. Then, it’ll present solutions and provide recommendations to prevent similar problems in the future.
The success story of M&S, lasted almost a century after its foundation, seemed to end at the beginning of the 1980’s. While a new, promising era was starting for the apparel industry in the early 1980’s, M&S started to experience its first disruptions in sales and in company’s profit. When we look closely at the M&S business model, its marketing strategy and its supply chain choices are the main causes for the deterioration of this company’s sales and its profits. M&S marketing strategy is based on its buying team’s decisions. Unlike Zara, which defines a portfolio of models at the beginning of each season and adapts it to latest fashion trends during the season, M&S defines specifications of clothes one year before launching them in its stores. In fact, the definitions of clothes are frozen, and any trend changes cannot be taken into account during that one-year period. In addition, unlike Zara, the buying team of M&S has no contact with customers. In other words, M&S defines its new creations completely blindly from its customers’ or its potential customers’ expectations and demands. This strategy is not misguided if the demand is constant and predictable in the market. If the demand is unpredictable, like in the textile industry, following this strategy represents a tremendous risk. For example, in the 1998/1999 Fall Winter collection, M&S’s economy was deeply injured by misidentifying the color of its entire collection one year before. Another weakness in the marketing strategy of M&S can be observed in its advertisements. Because new collections were created without customers’ opinions, M&S had to spend huge amount of money to impose new collections on clients. For example, in 2000, £20 million was spent on television advertisements. Another main reason that led M&S to financial decline was inaccurate supply chain strategy. M&S, with a well-defined warehouse, supplier, and store network, had a cost-efficient supply chain. Although a cost-efficient model...