History and Culture
It was very common to read about Marks and Spencer as ‘one of the best managed and admired businesses in the world’ (Mellahi et al 2002). The company had enjoyed a great success in the retail sector. Marks and Spencer commenced its business activity in Leeds in the late 19th century, as a family-run shop, with strong values. Since then and for many years after, it became popular for its alternative way of business, in comparison to other British retailers (Mellahi et al 2002). It established a good relationship with customers based on loyalty and trust. The firm also gained high respect from the British people; it was considered the biggest corporate charity donor within the UK (Mellahi et al 2002). Not only consumers, but staff and shareholders could share this great success. According to Wallop (2012) the company has been the most important British clothing retailer for decades, and also the first retailer in the UK to publish annual profits of £ 1bn. Lately Marks and Spencer has undergone a difficult period. The latest management changes have once again disrupted stability. In July 2012, M&S announced widespread changes across the company, including a new head of general merchandise, style director and a new head of food. A number of external and internal factors explain these changes.
Consumer spending & Competition
External factors can be described as things affecting the company beyond its control. Firstly, the retail industry in which M&S operates has weakened as a result of low consumer spending. Research by Ernst & Young (2012) suggests growth in consumer demand in 2012/2013 will be only half the level expected 12 months ago. According to Iqbal and Sharma (2012), spending power of consumers has resulted in aggressive competition among retailers. Retail expert Nick Bubb (2012) claims ‘it is hard for M&S to keep moving forward, with so many eager rivals, from Primark, to Zara, from Debenhams to ASOS’. Management must be seen as reacting to these external factors. This dynamic business environment requires management to align internal interdependencies to the external environment to achieve organizational goals effectively (Iqbal and Sharma, 2012).
In recent years sales have worsened, profit has dropped and market share has reduced. In addition, share-price fell and dividends to shareholders reduced (Mellahi et al 2002). However, in growing international markets such as India and China the company performed well. Within the UK, where Marks and Spencer owns 730 stores from which it generates the majority of profits, sales are decreasing (BBC News 2012). For instance, pre-tax profits for the year 2011/12 up to the end of March were £658m, 16% less from the previous year’s £781m, and targets for growth are also not encouraging (BBC News 2012). General merchandise and clothes are not performing as they were in the past, only the food department is keeping the business hopeful (BBC News 2012).
Internal factors can be described as challenges that exist and affect the company from the inside. Poor management decisions and internal inadequacies in dealing with external threats have lead Marks and Spencer to further uncertainty (Mellahi et al 2002). Moreover, strengths and strategies that were successful in the past need now to be re-arranged, or they will become weaknesses and opportunities for others. Old advantages have to be earned again (Mellahi et al 2002). Recent bad business decisions and unhappiness among senior managers in the company’s headquarters induced a management shake-up and a change of strategy. During September 2012, Marks and Spencer announced changes to the general merchandise management team (Wallop 2012). Chief executive Marc Bolland appointed John Dixon as new head of the department, after a number of poor management decisions made by Kate Bostock who has now left...