s Case Study: Marks and Spencer
Where now for an icon of British retailing?
History and background
Marks and Spencer (M&S) was founded by Michael Marks and Thomas Spencer in 1884 - he called his business 'penny bazaars' with signs reading "Don't ask the price, it's a penny" (the forerunner of stores like Poundland today?) The company went public in the 1920's and by the 1970's M&S had established itself as a British institution with locations in every major town and with 99% of products branded as M&S goods. By the late '80's the company had over 700 stores in the UK, 300 stores in over 40 countries and prided itself on offering high quality clothing, home decor products and premium quality food at premium prices. Over 21 million people visited M&S stores in the UK each week and it was the leading provider of women's clothing and lingerie in the UK. One executive said, "Our business model is that of a brand that doesn't own factories. We behave like a brand house, but one that has stores."
Rise and falls
However, attempts to expand the company further were not successful. In 1988, M&S acquired American retailers Brooks Brothers and Kings Supermarket but both were sold off by the mid 2000's. Historically, M&S had relied primarily on UK based clothing suppliers but found themselves struggling to compete against competitors increasingly sourcing low cost goods abroad. M&S recovered by 1994 thanks to drastic reductions in costs, improved operating efficiency, geographical expansion and an international franchise programme. Revenues peaked in 1998 at £8.2billion and an operating profit of £1.1 billion. However, profits declined once more due to: * the continuing cost of using primarily British suppliers and eroding customer loyalty torn between the British based company and the appeal of lower prices elsewhere * the feeling that M&S had lost touch with its core customers in terms of the style of clothing offered and was seen as old fashioned and dull * an out of touch 'top down' and over populated senior management - male dominated and with no experience outside M&S * an increasingly perceived arrogant approach to how consumers shopped, for example: M&S refused for a long time to accept credit cards and subsequently launched their own - accepting only these in store, making a virtue of not conducting consumer research on the basis that M&S 'knew best', undertaking no above the line advertising. "Marks's problem is that it is a very old-fashioned sort of company, which found a winning formula decades ago and failed to see the world changing round about it. We lost touch with our customers and forgot about the competition. Those are quite fundamental for a retailer". Peter Salsbury Former CEO (1999) By 2000 revenues had fallen to £8billion with operating profit at just £145million and a share price fall of 66%.
There followed a further period of turmoil for the store's performance and several changes of senior management culminating in an ultimately failed takeover by Philip Green owner of the Arcadia group. M&S then recruited Stuart Rose in 2004 as CEO and Chairman who set about rebuilding the company: * renewing the emphasis on value for money products, excellent customer service and friendly store environment. * renovating stores in 2005/6
* launching a marketing campaign "Look behind the Label" highlighting ethical and environmental aspects such as Fair Trade products, sustainable fishing and environmentally friendly dyes - the forerunner of Plan A (see below) * later in managers from outside such as CEO Marc Bolland from Morrisons supermarkets in 2010 and CFO Alan Stewart in 2011 from an aircraft leasing business, as well as outside ‘talent’ to run key departments of M&S’s clothing ranges, and reducing the executive team from 16 in the late '90's to just 3. * increased sourcing of goods from...
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