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Topics: Marks & Spencer, Stock market, Stock Pages: 19 (5218 words) Published: June 11, 2011
CASE STUDY
Marks & Spencer (B)
Nardine Collier
stocked generic ‘essential’ clothing, and priced its
products at a ‘reasonable’ level, while emphasising
their high quality, a claim based on its insistence of
using British suppliers.
M&S’s problems crescendoed in 1998 when
it halted its European expansion programme,
announced a 23 per cent decline in profits, and
suffered decreasing customer satisfaction. Richard
Greenbury (CEO) blamed this on a loss of market
share to ‘top-end’ competitors such as Oasis, which
offered more fashionable, but similarly priced
goods, and at the bottom-end with competition
from discount stores and supermarkets, which
offered essential clothing, but at lower prices.
Analysts felt M&S no longer understood its customers’
needs, was preoccupied with its traditional
risk-averse formula thus ignoring changes in the
marketplace, focused on day-to-day operations
rather than long-term strategy, and had an inwardlooking
culture, as executives were promoted
internally, after immersion in M&S’s routines and
traditions.
To counter these problems successive CEOs
implemented many strategies, including refurbishments,
store acquisitions, restructuring, new ranges,
overseas sourcing, European expansion followed
by complete withdrawal, diversification into homeware,
and moving from the corporate headquarters.
However, these measures made little impact,
and profits warnings and falling share prices
(2503/4p at its lowest) followed.
Michael Marks began one of the world’s most
recognised brands by establishing a penny bazaar
in 1884. The phenomenal success of the business
led Marks to seek a partner; he chose Tom Spencer.
From this partnership Marks & Spencer (M&S)
steadily grew, but by the early twenty-first century
its success was running out.
Hitch in the formula1
Until the late 1990s M&S was highly successful
in terms of profit and market share. This was
achieved by applying a fundamental formula to its
operations, which included: simple pricing structures,
offering customers high-quality, attractive
merchandise under the brand name ‘St Michael’,
working with suppliers to ensure quality control,
and providing a friendly, helpful service. This was
enhanced by a close-knit family atmosphere in the
stores, which was compounded by employing staff
whom M&S believed would ‘fit in’.
Throughout most of the 1900s M&S was led
by family members, who favoured close control
and meticulous attention to detail. Central edict
was given for purchasing, merchandising, layout,
etc., hence every M&S was identical, resulting in a
consistent image and guarantee of standards. M&S
The case study continues the story of Marks & Spencer, the previously successful British retailer which had run into a series of strategic and financial problems in the late 1990s and early 2000s. This case examines the attempts of two CEOs, Roger Holmes and Stuart Rose, to turn around the company’s fortunes with very different approaches.

● ● ●
This case was prepared by Nardine Collier, Cranfield School of Management. It is intended as a basis of class discussion and not as an illustration of good or bad practice. © N. Collier 2007. Not to be reproduced or quoted without permission. Marks & Spencer (A) case is held in the Classic Cases collection on the website and is accessible for reference. 1 For full details of M&S’s success and problems throughout the 1990s to 2004 refer to Marks & Spencer (A).

832 MARKS & SPENCER (B)
New style
In 2001 Luc Vandevelde (CEO) head-hunted
Roger Holmes, aged 40, to be Head of UK retailing.
Holmes started his career as a consultant for
McKinsey, moving to Financial Director of DIY
chain B&Q, Managing Director of retailers Woolworths,
and finally Chief of Electricals for the
Kingfisher group. At M&S he began by implementing
a store refurbishment, creating ‘shops within
shops’, to show customers how different styles
worked together. In implementing...
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