M And S Outline Strategic Plan

Published Date: 23 Mar 2015 Last Modified: 01 May 2017

Executive Summary

The new strategy, as revealed by Mark Bolland on 9th November 2010, suggests that M&S is moving back to its core philosophy. The strategy is focused on promoting the essence of the M&S brand (quality and trust), rather than trying to configure the company to be good at everything (all things to all people). Expanding in a measured manner is preferred to cyclical growth, which is prone to boom and bust tendencies.

Bolland is determined to make the stores more inspirational with fewer changes. The business is already successful and thus change will be in the form of: "Evolution not revolution". He plans to boost the company's growth by investing £300m a year for the next 3 years (total £900m) - an 80% increase in capital spending. One-third will go on International expansion and the online offering (£150m each) and the rest (£600m) on the UK market. At the heart of his strategy is the core UK business and the need to further build the strength of the M&S brand, for example by introducing the "Only at M&S" campaign and emphasising the uniqueness of many of M&S's products rather than copying others (Financial Times, 10 Nov 2010). For him the international expansion is simply additional but also vital as fashion retailing is becoming increasingly international (The Sunday Times, 14 Nov 2010).

He is seeking to add value to the business by adopting a parental developer role by employing the corporate parent's own competencies and skills as are appropriate to its portfolio of buisness units (ie divisions). This will cover branding and product development, clarifying the external image, investment, specialist expertise, all with a view to improving business and performance.

Introduction

[WORD COUNT FOR INTRO = 583 words - too many?]

With over 120 years' history Mark and Spencer is one of the biggest and well-known retailers in UK. The company started in Leeds in 1884 as an open-air stall of Michael Marks. In 10 years Marks started a partnership with Thomas Spencer and the company began to grow rapidly soon expanding to ready-to-wear clothes in 1920 and selling food in 1928. Its main brand St.Michael represented M&S's main principles of quality and value, and over years the name Marks & Spencer or M&S became a "British icon and household name" (Bell et all, 2009:2).

From 1980 till mid 90s the company had experienced a number of difficulties - it unsuccessfully tried to expand internationally, and on the home front it fought competitors who went for lower-cost imports while M&S steadfastly held onto its product tradition of being 100% " British made". Since 1994, M&S has made good ground in restoring its profitability but it has never regained its former glory (Bell et all, 2009:2).

With arrival of Stuart Rose as company CEO in 2004, M&S announced that it was going back to its core values: value-for-money products, a welcoming store environment and excellent customer service - the company has been following this strategy ever since (Rose, 2007; Strategic direction, 2007). At the moment M&S occupies the mid-market sector in clothing and the high-end in food (FT, 2010).

During recent years retail industry in UK has been characterised by strong competition. According to Porter's five forces it can be said that bargaining power of buyers is strong: customers have become more knowledgeable and sophisticated, they know how and where to shop and what kind of shopping experience they want (The Times 100; UK Business park). There are lots of alternative suppliers for customers to choose from, and retailers have adopted aggressive pricing strategies in an attempt to attract more customers. The rivalry among competitors is fierce as often there is little differentiation in the basic product (e.g. eggs and milk). The threat of substitutes is also high as there are many retailers of 'premium branded' foods such as John Lewis, Waitrose and Sainsbury's and there are even more competitors in the general merchandise sector such as Next, Debenhams and John Lewis. The technologies are easy to imitate too. However, new entrants come across significant entry barriers because the established firms' economies of scale, reputation and customer loyalty - factors that are important in the retail industry. In general, suppliers' bargaining power is low as retailers often have long-established relationships with them and can play suppliers against each other (Johnson et all, 2005; The Times 100; UK Business park).

(Conclusion on Porter)

In recognition of the ongoing threats such as new and existing competition, economic recession since 2008, takeover bids from Philip Green and the growing popularity of low-cost retailers (e.g. Asda for food and Matalan for clothes), M&S is understandably keen to emphasise its strengths - a powerful brand name and excellent customer service (Campbell, Rahman, 2009). This seems to pay off - in 2010 M&S's market share slightly increased in food and retail, and its pre-tax profits increased by 4.6% (M&S annual report 2010). Looking forward, the company sees considerable opportunities to grow its business overseas, particularly in India and China (Wood, 2010) - this will help to reduce its dependency of UK market which currently accounts for c.90% of its revenues (BBC, 2010). In terms of the Ansoff matrix M&S is looking to step up its 'market development' strategy (Johnson et all, 2007).

The Strategic Position for M&S

As depicted in the diagram below, the strategic position of a company is concerned with identifying the impact on strategy of the external environment, the company's strategic capability (resources and competences) and the expectations and infleunces of stakeholders. This section of the report examines each of these elements for M&S.

Environment

Capability

Purpose

Culture

The Strategic Position

Source: Johnson G et al.'The Strategic position model' Part of: Exploring Corporate Strategy model, from: Exploring corporate strategy, 8th edition, p.12, Exibit 1.3

Environment

Appendix 1 shows the macro environment factors that impact on M&S, factors that M&S as an organisation is not able to control by itself. These macro factors were analysed using the PESTEL framework, from which key drivers of change, the high-impact environmental factors likely to affect significantly the success or failure of our strategy for M&S, can be identified. In the case of M&S, the key drivers of change are-

Economic: Uncertainty about timing of the economic recovery (UK and international) leading to more conservative spending habits and greater price sensitivity

Socio-cultural factors: Shift-in-consumers demand - Customers have higher expectations as to quality and customer service, are increasingly busy and favour convenience (advantage for online firms and one-stop-shops) and are ever more focused on value for money

Technology factors: More closely integrated technology to help business improve performance: IT & supply-chain management, online and JIT delivery

Political/legal: Politicial and legal restrictions re operating in overseas markets, e.g. China

Environment: Infleunce of the Green lobby and greater all-round awareness of green issues (carbon footprint and responsible shopping, buy local / grow your own, recycling, etc)

These key drivers of change are important in formulating our strategy for M&S. Opportunities and threats as well as anticipated future scenarios can be identified, for example, with the aid of the technology and socio-cultural axis figure below.

Figure 1. M&S scenario: possible futures from key drivers of change

The above approach can help an organisation like M&S assess and rethink its strategies based on the likelihood of the occurrence of these keys drivers of change (Goodwin, P. and Wright, G., 2001).

Capability and Resource-base view

Resources and competences are the primary source of profitability and when combined with a market analysis offer a more secure basis for fomulating strategic choices than a pure market-focus approach. The aim is to form a view of the internal infleunces - and constraints - on strategic choices for the future.

Appendix 2 shows the threshold capabilities which M&S needs to operate in the UK food and GM (Clothing and Home) markets. It also shows M&S' unique competitive advantages which stem from its long-established brand and reputation for Quality, Value, Service, Innovation and Trust. These core values are as important today as they ever have been. They are all about doing the right thing which is, quite simply, how M&S aspires to do business.

M&S not only delivers high quality clothing but also high quality home and food products, all at affordable prices. No other retailer has this enviable brand positioning, a positioning that allows M&S to compete successfully in its chosen market segments. It is difficult for competitors to emulate this as it takes a lot of time to build a brand to match that of M&S.

Purpose

The strategic position of M&S is also influenced by its purpose, as encapsulated in its vision, mission and values. The company has a strong track record in corporate governance although it encountered some criticism when Stuart Rose assumed the combined role of CEO and Chairman. The company takes the issue of corporate social responsibility seriously and has implemented a number of initiatives in this regard (e.g. via Plan A, the company's eco and ethical programme). Our strategic choices below will build upon this.

Culture

The strategic position of M&S is further influenced by its culture and historical influences. The culture of M&S is well embedded and strategists need to be aware of this, for example when taking the company in new directions. Staff are knowledgeable about the inherent strengths of the company and can be sceptical about plans which are perceived as too radical. [Mention HR?]

The Strategic Choices for M&S

Marc Bolland revealed his new strategy for M&S on 9th November 2010. Having joined the company on 4th May 2010 he spent in excess of six months developing his strategy and was keen to get it right. For example, Bolland asked about 100 of his top staff to identify three things they would change about M&S, refusing to use any consultancy company as it would be an insult to the in-house M&S stategy team (Financial Times, 2010).

It is clear from this 'hands on' approach that he realises that if a corporate parent engages in a great deal of 'top-down' intervening (ivory tower approach) it is less likely to be seen by the managers as a helpful coach. In contrast, Bolland's consulative approach is a great way to motivate the business unit managers, to get their 'buy in' and to increase their performance and loyalty.

Having spent months formulating his new strategy, it would be wrong to ignore Marc Bolland's strategy. However, it is also worth noting that investors were unconvinced by Bolland's new strategy and the shares fell slightly the day after he revealed his new strategic plan (FT, 10 Nov 2010). Accordingly, in this section of the report we will set our own strategic choices for M&S. Where we agree with Marc Bolland we will seek to enhance his strategy. Where we disagree with him we will explain why and set out our alternative strategic choices.

Strategic choices involve the options for strategy in terms of both the directions in which the strategy might move and the methods by which strategy might be pursued. The strategic choices and methods can be grouped in accordance with the following diagram, which reflects the approach taken in this section of the report:

Source: Johnson G et al.'Strategic Choices model' Part of: Exploring Corporate Strategy model, from: Exploring Corporate Strategy, 8th edition, p.12, Exibit 1.3

Business-level

Corporate -level

International

Evaluation

Strategic choices

Innovation

Corporate level (ch 7) = overall scope/breath of company….the big things that matter to the corporate parent (Also which SBU's to keep and which to sell). Which portfolio of products, which markets, how the Parent can add value to its SBU's (Different roles for the Parent)

Business level (ch 6) = competitive strategy (for each SBU). Pricing (eg low price), differentiation (unique), how to compete/collobrate

Innovation (ch 9) - p348

International (ch 8) - p.316. Which markets, priority markets, how to enter (by export, licensing, joint ventures, alliances, foreign direct investment)

Evaluation (ch 10) - Tom….

1) Corporate-level Strategy

[Corporate level (ch 7) = overall scope/breath of company….the big things that matter to the corporate parent (Also which SBU's to keep and which to sell). Which portfolio of products, which markets, how the Parent can add value to its SBU's (Different roles for the Parent)

[Includes:

Brand

Multi-channel

How Parent can add value]

Corporate-level strategy deals with the highest level of strategy and is concerned with decisions of the corporate parent about (i) the products and market scope and (ii) how it seeks to add value to that created by its business units.

The new strategy, as revealed by Mark Bolland on 9th November 2010, suggests that M&S is moving back to its core philosophy. The strategy is focused on promoting the essence of the M&S brand (quality and trust), rather than trying to configure the company to be good at everything (all things to all people). Expanding in a measured manner is preferred to cyclical growth, which is prone to boom and bust tendencies.

He is seeking to add value to the business by adopting a parental developer role by employing the corporate parent's own competencies and skills as are appropriate to its portfolio of business units (ie divisions). This will cover branding and product development, clarifying the external image, investment, specialist expertise, all with a view to improving business and performance.

Brand

Bolland's number one priority from 2010 to 2013 is to improve the company's business capabilities in the UK. He we will do this by developing the M&S brand, improving its stores, and focusing on its Clothing, Home and Food businesses.

Bolland is planning to build on the strength of the M&S brand by launching 'Only at M&S', a brand position which encapsulates its special qualities and better communicates the extraordinary lengths to which the company goes to deliver innovative 'M&S only' products.

We agree with Bolland's plans to capitalise upon and promote the M&S brand. However, we feel that his focus is too UK-centric [1] and that he will not be exploiting the brand sufficiently to extend the company's reach internationally and online. In addition, we feel that he has got the timing wrong in pursuing the specialist retailer route (see below).

[2)] Multi-channel

Bolland sees M&S's multi-channel operations as a key growth area, as its customers increasingly shop with M&S via a range of different channels. His aim is for M&S to become the UK's leading multi-channel retailer, growing sales to between £800m and £1bn by 2013/14. (Interestingly, in response to this statement, the guardian retorted: "However, this means spending three years getting to where Next already is; Guardian 9 Nov 2010). He will offer a seamless, high quality shopping experience for M&S customers whatever way they shop with M&S - in M&S stores, online or over the phone.

In order to deliver this, he will build and manage a new platform for www.marksandspencer.com which will enable M&S to provide a customised multi-channel experience that links all M&S channels for its customers. He will ensure that M&S continues to work closely with Amazon to maximise performance of M&S's existing platform until the M&S-Amazon agreement expires in late 2013.

In Food, he plans to grow M&S's existing online wine, flower, and 'food to order' business from £80m today to £150m by 2013/14. He will continue to evaluate the online food offer but does not intend to build that capability at present.

Bolland believes that it is important for M&S to provide new opportunities for customers to shop with M&S. On the innovation front he will install, e.g. touch-screen, web-based ordering points in stores. He will start international online capability with one market in 2011.

Research shows that M&S currently lags behind its competitors in the online food space and we dis-approve of Bolland's intention not to build that capability at present. The trend towards web-shopping is clearly continuing apace (The Sunday Telegraph, 9 January 2011) and M&S needs to mover faster.

We think Ocado would be a good fit for M&S (premium food, better off shoppers, etc) and would recommend that M&S purchase Ocado, assuming that the acquisition could be secured at a reasonable price. This would allow M&S to catch up with Waitrose, its main competitor in the food sector. The intricacies of the existing Ocado-Waitrose relationship would need to be considered in any commercial deal.

In addition, M&S's multi-channel strategy could be further enhanced by:

exploiting Smart phone technology, especially for busy professionals and other 'time-poor' shoppers;

providing links to the white goods section to facilitate cross-selling.

2)Business-level Strategy

Business level (ch 6) = competitive strategy (for each SBU). Pricing (eg low price), differentiation (unique), how to compete/collobrate

Business-level or competitive strategy is concerned with seeking advantage in markets at the business level. Here the strategtic choices involve pricing and differentiation strategies, and decisions about how to compete or collobrate with competitors.

Competitive strategy needs to be considered and defined in terms of strategic business units (SBU's). In the case of M&S the primary SBU's are Food, Clothing and Home. Financial Services is a relatively new SBU within M&S, but has considerable potential (see below).

Food division

As illustrated in the diagram below, Bolland plans to take M&S a step back towards being an exclusive, innovative, speciality foods retailer, focusing on three core values: freshness, speciality and convenience.

Specialists

Supermarket

Current

New

Quality and Innovation are the drivers

(Source: M&S Mark Bolland's strategy presentation, 9 November 2010)

Branded foods will play a role only where the company cannot develop its own best in class M&S alternatives. Bolland will reduce the non-M&S branded lines from 400 to around 100 and will introduce another 100 exclusive international food brands, all with a view to establishing a clear position as a specialist-quality retailer.

[SPACE IN FOOD HALLS.....]

[Slide 41 = 240 cafes for latest innovative products; Grow sales through improved choice + better availability]

He will ensure that M&S continues to provide great value on core food lines, improving the quality without increasing prices. The focus however will be on developing the products unique to M&S and characterised by innovation and superb eating quality, inspired by Best of British and 'Flavours of the World'.

Whilst we think Bolland's food strategy is commendable we think that he has got the timing wrong given the current economic environment. Households are still struggling with difficult economic conditions. VAT was increased from 17.5% to 20% on 4 January 2011 and the Government is planning further tax increases and spending cuts (including redundancies) to rein in the Budget deficit. This is causing considerable uncertainty and anxiety in households (see Appendix 2).

We would prefer M&S to stick to where it is on the above line and focus more on adapting to the current economic conditions. It is worth noting in this regard that the company's market share in the food sector has recently been overtaken by Waitrose in the battle for Middle England's customers - Waitrose reacted quicker to the recession and introduced its cheaper own-label range and a burst of new stores. M&S now has 'wise buys' (reflecting price sensitivity) and is overhauling its logistics and IT systems and investing in new state-of-the-art distribution centres (eg in Bradford) to consolidate the number of such centres to four in total for the UK (The Times, 10 Nov 2010). We endorse these moves and would like to see even greater focus in these areas, particularly the 'Wise buys' initiative.

In addition, we would-

Increase promotional spend on the best selling products (to increase market share);

Run campaigns to drive home the quality of M&S products and the rich M&S heritage in the food space;

Further develop the fresh food counter to enhance the lunch time experience (Queues are invariably too long at present);

Further develop the larger stores into 'one-stop-stores'. Consumers like convenience, especially when their lives are increasingly busy. The recent snowfall also emphasised the importance of convenience. In the Sunday Telegraph (9 January 2011) it was observed that like the big four supermarkets and John Lewis, M&S [in its current format] has the advantage of being close to a one-stop-shop.

Clothing division

Bolland plans to step up the role of the M&S brand in the clothing division so that it becomes a brand destination of choice in its own right. He also plans to provide greater clarity on the positioning of the clothing sub-brands - turning them from labels to real brands - to make them more distinctive, for customers to desire and enjoy. This will include the dropping of the Portfolio sub-brand ('fashion-for-fiftysomethings'), which was launched in 2009, introducing brand managers to manage sub-brands individually, brand support and targeted marketing strategies, and improving the M&S style and fashion credentials (Financial Times, 10 Nov 2010).

We like the key elements of Bolland's clothing strategy. However, we feel that that the clothing strategy could be further enhanced as follows:

The sub-brands should at all times be prominently pre-fixed with M&S so that they can yield maximum benefit from the trusted M&S name. This includes the labelling on clothes.

There should be more thought given to sub-brands and their positioning in order to make the advertising message more coherent.

The 50+ customer segment is a key market for M&S. They should create a new M&S sub-brand for this segment which could be called: "M&S - Elegance" to distance itself from the failed Portfolio sub-brand. This time the market should be well researched and the findings from focus groups should be fully taken into account rather than ignored (as appears to have been the case with Portfolio - (guardian.co.uk, 9 Nov 2010, 'Farewell to floral, puff-sleeved dresses')).

They should develop their clothes offering for young professionals. At present, their offering lacks imagination and the quality is often lacking. Fashion coupled with quality is acutely important to young professionals, who want to look good to their peers.

There should be more coordination in design so that colours, fabrics, etc can be matched when cusotmers want to create a certain look.

The clothing ranges should be complemented by quality jewellery, an area where M&S underperforms at present. The quality associated with the M&S brand will be of considerable help in implementing this strategic choice.

Wedding services: M&S should extend its offering here by employing wedding planners to promote M&S products (reputation for quality - 'M&S will make your Big Day special'; capitalising on customer loyalty - 'M&S won't let you down'). Initially this service should be available only in the UK to allow the offering to be developed and enhanced in a familiar market.

Home division - UK

Currently only 20% of M&S customers shop in the M&S Home Dept. Bolland sees this as a real growth opportunity and plans to offer a wider choice and make the M&S core Home offer more accessible in the largest M&S stores and online. He will take a 'lifestyle' approach to Home, segmenting M&S's offer into three lifestyles: Classic, Contemporary and Design. The focus will be on growth departments such as kitchenware and dining, bedding and bath, personal care and fragance. He will create additional space by exiting Technology (TV's, iPods, etc).

On the whole we agree with Bolland's home strategy. However, we feel more needs to be done as follows:

He should provide a home design and consultancy service for customers spending over a certain threshold, e.g £5,000. This could include software allowing customers to see their ideas (supplemented by input from the M&S consultant) in 3-D format in colour.

In light of the ongoing recession and lack of mortgage credit, he should promote the 'improve rather than move' concept through clever advertising and promotion. Emphasis should be placed on innovation, quality and affordable prices.

There should be more thought given to sub-brands and their positioning in order to make the advertising message more coherent.

He should develop and promote the most popular collections (Windsor, Marie, etc) within each 'lifestyle' so as to build customer loyalty and design understanding.

Financial Services

Bolland did not have a lot to say about financial services when he announced his strategy for M&S.

However, we see this area as affording considerable opportunity for the company, particularly given the poor experience households have had with banks over the last two years. M&S should extend its financial services offering to cover a wider range of products, [perhaps even mortgages?] This could be 'sold' to investors as a natural progression given that the company already offers savings accounts and credit cards.

The "HOW" FACTOR....

[CHECK article in Mail on Sunday, 27 Dec 2010]

Space growth - UK

For the last two years M&S has lagged the UK retail market on space growth. Bolland's target is for 90% of the UK population to be within 30 minutes drive of a full-line M&S store by 2015. In order to do this, he will accelerate the pace of space growth to around 3% per annum until 2015/16. He will increase the number of Simply Food stores, ensuring they are tailored to meet the needs of customers in their local catchment area. This represents a reversal of the strategy of his predecessor Stuart Rose who decided to close 25 Simply Food stores less than two years ago (guardian.co.uk, 9 Nov 2010).

Bolland will refresh the look of the M&S stores and implement a programme of store relocations and openings to increase reach. He will maximise the opportunity presented by M&S's 'Shop Your Way' service by using its franchise partners' store network as customer collection points.

The above will involve capital expenditure of c.£600m over 3 years.

Apart from being too UK-centric, we endorse Bolland's space growth strategy. However, we would expand upon this strategy in the following key ways:

Space growth in key international markets where M&S already has a strong presence should be focussed on as well with a view to growing market share in those key markets. The 'look and feel' of the stores should be kept conistent across borders to avoid dilution of the M&S brand.

Some of the Simply Food stores should extend their offering to include 24-hours pharmacy. This applies especially to the strategic alliance with BP where M&S avails of the shopping opportunity presented at gas stations (Large part of BP gas station set aside for M&S, eg BP station at bottom of Egham Hill).

Online 'space growth' should also be focused on. Infrastructure is key in this regard and in the event of an acquisition of Ocado (see above) Ocado's principal distribution centre (plus second one on the horizon) would be a big help, although it needs to be aligned with the ongoing consolidation of M&S distribution centres [See below].

Stores

Customers currently find M&S stores diffcult to shop. Bolland will address this by segmenting M&S stores better (e.g. by affluence, region or local demographics), and by creating a more inspiring in-store environment. He will improve in-store navigation and present a more consistent packaging architecture across Food, Clothing and Home. He will focus on more cross-selling - migrating more of M&S customers between Food, Clothing and Home.

In our view, Bolland's stores strategy could be enhanced as follows:

More prominence should be given to the beauty products section as the M&S offering is not well known in this growing market. The company should prominently brand all its cosmetics with M&S in order to capitalise on the pulling power of the M&S brand.

There should be more 'bundling' of cosmetic products (Boots experience, etc).

More focus should be given to cosmetics for men as this area displays lots of growth potential as social attitudes towards male grooming evolve.

There should be clever and imaginative use of signage to significantly improve instore navigation.

There should be more consistency in store layout to breed familarity, whilst being mindful of the need to keep the look of stores fresh.

3)Innovation

Innovation choices involve issues such as being first-mover into a market, or simply a follower, and how much to listen to customers in developing new products/services.

Strategists face 3 fundamental dilemmas in innovation-

relative emphasis to put on technology push or market pull

whether to focus on product or process innovation

how far to concentrate on technological innovation as opposed to broader business model innovation

EXPAND..............

[4)] IT, Logistics and Supply Chain

Bolland plans to accelerate the benefits of 'Project 2020' - the plan to transform M&S' IT and logistics - and will increase the Project's original target cost savings from £250m to £300m (with no increase in capital investment as follows):

"Can 2020 be delivered faster / better?"

IT & Logistics

Previous 2020

Now

Investment

£1bn

£1bn

Gross recurring benefits

IT

£100m

£125m

Logistics

£150m

£175m

Total

£250m

£300m

Increased benefits

IRR of 15%

(Source: M&S Mark Bolland's strategy presentation, 9 November 2010)

In the Clothing and Home divisions, he will continue to reduce the dependency of M&S on full service vendor (FSV) suppliers, giving M&S greater control of its supplier chain. By 2015 he will aim to have a supplier base comprising 35% FSV suppliers (currently 43%) and 65% Direct. As a result of these actions he will deliver a 5% improvement in Food availability by 2013/14, and a 9% improvement in Clothing and Home by 2015/16. This should mean that Project 2020 will be largely delivered by 2015.

In our view, Project 2020 and the M&S Supply Chain strategy could be further enhanced as follows:

[International??]

cc

4)International

[3)]International

Bolland acknowledges that while M&S may have 337 stores in 41 countries, the company is essentially "a UK retailer that exports". M&S now has an opportunity to grow its international footprint to reduce its dependency on the UK economic cycle. Bolland is targetting international sales of £800m-£1bn by 2013/14.

He plans to continue to adopt the appropriate ownership model for different markets in which M&S operates. His emphasis will be on franchise operations, building stronger partnerships in each territory. He plans to use a JV or wholly-owned model in selected markets where it is appropriate.

Instead of 'planting flags' he aims to build a leadership position in priority markets. M&S has already built a strong presence in markets like Turkey and Czech Republic by opening a flagship store surrounded by a cluster of smaller, supporting stores. He will continue to build local leadership in core markets in this way.

He will develop a new organisational structure to enable M&S grow overseas, where necessary reshaping the M&S supply chain and building up M&S capabilities in international design, marketing and customer insight.

[Multi-channel: He will also enter selected countries with M&S online capability to complement M&S stores on the ground, setting up tailored websites for specific markets from 2013 [why the DELAY?].]

In our view, Bolland's international strategy could be enhanced as follows:

[The franchise model should be coupled with the introduction of the "International Range Planner", which allows for country-specific tailored product lines, such as expanded colour choices for the India market, shows strives to better understand each locality and adapt to individual market needs (M&S Annual, 2010).]

In the Far East, China is a simliar story, with M&S having gained a footprint with the first store in in Shanghai in 2008, the beginning of its push into the region using a partly-owned store model (M&S Annual, 2010).

Similar to the approach in India, careful product choices should be made to target the Chinese consumer. For example, in clothing, smaller sizes were introduced, such as an "Asian Fit" bra (M&S Annual, 2010).

Management should also continue to focus on local sourcing to build local market knowledge, competitive value chain configuration, not to mention positive standing with local clientele.

In terms of the value chain, the M&S' carefully placed sourcing operations in India, Bangladesh, Turkey, Hong Kong, and Sri Lanka, according to former CEO, Stuart Rose, "help us make better decisions about the entire chain of purchasing and distributing our products (Rose, 2007). M&S should continue to leverage this value chain expertise where it has gained local insight so as to foster regional expansion in those geographical areas.

Clearly, the decision to expand to up 16 stores in India with partner Reliance Retail offers an opportunity for building a synergy between local sourcing and a large local retailer. And indeed, M&S' plan to increase local sourcing in India from 38% to 60% by 2012 seems logical (M&S Annual, 2010).

Lastly, the expansion of online offering to foreign markets seems a necessary and obvious choice.

[3)] International

M&S International

Operating 337 stores in 41 countries, growing M&S' international footprint has been and remains a core, long-term initiative with aims of increasing scale while reducing home market risk. Indeed, M&S' global arm managed 5.7% year over year growth in 09/10, accounting for 10.2% of firm-wide revenue (M&S Annual, 2010). That said, recent success has come at the heels of a large international restructuring started nearly a decade earlier in March 2001. With hindsight as a guide from several past international failures and a solid multi-domestic/transnational plan of global expansion marked by market-tailored store buildouts, going forward, M&S can position itself for further international growth, helping to reducing UK market exposure and provide for more consistent and increasing top-line revenue firm-wide.

The March, 2001 restructure led to M&S selling off all wholly-owned US and European stores, and aligning its Hong Kong stores with the firm's, at the time, otherwise franchise-based global model (Jackson & Sparks, 2005). Additionally, M&S acknowlegdged difficulites faced by the aquisitions of Brooks Brothers, the oldest US clothing retailer and King's Supermarkets, a formerly family-owned food chain in New Jersey, and divested both as part of the shake up.

Since the restructure, M&S has adopted a classic approach in its reassessment of internationlization, preferring a targeted retail expansion into new markets, benefitting from local knowledge of each market and strategically placed sourcing facilities to enhance competitive and comparative advantage, a strategy that follows the Uppsala Model (Johanson & Vahlne, 1977).

The Uppsala Model

The global stores are now formed using wholly-owned, partly-owned, or franchise according to the needs of each market and have allowed M&S to "perform well throughout a difficult global economic downturn" (M&S Annual, 2010). That said, the firm acknowedges a greater focus franchising and building stronger partnerships in each territory (M&S Press Release, 2010). The franchise model, coupled with the introduction of the "International Range Planner", which allows for country-specific tailored product lines, such as expanded colour choices for the India market, shows strives to better understand each locality and adapt to individual market needs (M&S Annual, 2010).

In the Far East, China is a simliar story, with M&S having gained a footprint with the first store in in Shanghai in 2008, the beginning of its push into the region using a partly-owned store model (M&S Annual, 2010). Similar to the approach in India, careful product choices should be made to target the Chinese consumer. For example, in clothing, smaller sizes were introduced, such as an "Asian Fit" bra (M&S Annual, 2010). Certainly, management should also continue to focus on local sourcing to build local market knowledge, competitive value chain configuration, not to mention positive standing with local clientele.

In terms of the value chain, the M&S' carefully placed sourcing operations in India, Bangladesh, Turkey, Hong Kong, and Sri Lanka, according to former CEO, Stuart Rose, "help us make better decisions about the entire chain of purchasing and distributing our products (Rose, 2007). M&S should continue to leverage this value chain expertise where it has gained local insight so as to foster regional expansion in those geographical areas. Clearly, the decision to expand to up 16 stores in India with partner Reliance Retail offers an opportunity for building a synergy between local sourcing and a large local retailer. And indeed, M&S' plan to increase local sourcing in India from 38% to 60% by 2012 seems logical (M&S Annual, 2010).

Lastly, the expansion of online offering to foreign markets seems a necessary and obvious choice.

5)Evaluation

Strategic method and evaluation

Figure 1. Strategy methods and evaluation

M&S has pursued its growth using various strategic methods. Through organic (internal) development, M&S has added new product lines as well as new channels, modernized its stores, and expanded to other countries (M&S Annual review, 2010). M&S has also set up strategic alliance with many partners, for example, with Talkcast Corp to jointly develop and market telecoms products, with BP to provide 24-7 fresh-food and ready meals at some BP gas stations, and with SSP to deliver retail offer at the airports or train stations (Willey, 2010). Moreover, M&S has also used merger and acquisition through which 12 other companies have been acquired during these past 20 years (Telecomworldwire, 2000; www.alacrastore.com; www.marksandspencer.com).

To evaluate M&S's strategic options, Johnson et al. (2010) suggested that it must be evaluated against three key success criteria: suitability, acceptability, and feasibility.

Suitability is concerned with the assessment of the key issues and how well the strategic position addresses such issues. Appendix 1 shows the macro environment factors that impact and are not able to control by organisation itself. These macro factors were analysed using PESTEL analysis framework, from which key drivers of change, the high-impact factors likely to affect significantly the success or failure of our strategy, can be identified. In the M&S case, they are

Socio-cultural factors: Shift-in-consumers demand: ex. Food, customers are more price-sensitive because more competitors using price-war in this segment

Technology factors: More closely integrated technology to help business improve performance: IT & supply-chain management, online and JIT delivery

After key drivers of change are identified, some opportunities and threats as well as anticipated future scenarios can be as drawn as shown in the figure below. This implication can help M&S strategist to assess and rethink about their strategies based on the likelihood of the occurrence of this keys drivers of change (Goodwin, P. and Wright, G., 2001).

Figure 2. M&S scenario: possible futures from key drivers of change

Next criterion of strategy evaluation is acceptability. This criterion concerns with expected performance and outcome of the strategy: risk, return, and stakeholder reactions. The picture below shows the example of expected return of M&S implementation of new IT and supply-chain management as part of its strategy to drive operational excellence, manage the costs, and build multi-channel capability (M&S Full year results; Interims Results, 2010); The expected return of benefit clearly shows that M&S strategy is acceptable and expected to realize the benefit within short to medium term.

Figure 3 & 4. M&S's IT & supply-chain expenditure & expected benefits

Last but not least, feasibility concerns with resource and competencies that organization will use to deliver its strategy. Resources include funding, people, time and information. M&S has a strong track of its profit and as shown below (figure 5 & 6) M&S also have the internal resource to deliver its intended strategy (M&S Full year results; Interims Results, 2010), for example, M&S strategy is to distance from low margin market, its strong brand that correlate with high quality is a strong resource as well as its cash that will be used to redecorate its store are a strong example of this concept of feasibility.

Figure 5 & 6. Customer perceptions & Gross margin (%)

Appendix 1

Marco environment: PESTEL analysis for M&S

Political

- EU free trade make import/export easier than before

- Government (UK and international) measures to remedy Budget deficit(s)

Economic

- Recession or credit crunch: current climate makes customers more price-sensitive, putting pressure on high-margin players where perceived "higher quality" might have less infleunce than in a rising economy on a customer's decision to buy

- Globalization: influx of imported products from abroad, especially from lower cost countries

- Fuel prices and impact on sourcing decisions

- Growing infleunce of emerging markets, especially BRIC countries

Socio-cultural

- The shift in demand for more fashionable clothing

- People becoming ever more busy

- Important ethical issues, e.g. sale of organic food and the ethical treatment of animals. The growing importance of such issues means that retailers like M&S will have to cater to those consumers as well as to consumers governed by price.

- Demographic shifts, e.g. growing and ageing population

Technology

- Emergence of new channels, e.g. online

- Increasing role of Media in disseminating information to customers.

- Improving supply-chain management, e.g. nowadays modern transportation and improved logistics management facilitates shipment of goods from Asian countries in a matter of a few days compared to led times of months in the past.

- Self-life of new technology now much shorter as it can be quickly copied

Environment

- Increased demand/consumption raising the stakes on how best to use goods and dispose of waste in an environmentally-friendly manner.

- Increased awareness of green issues (e.g. carbon footprint and responsible sourcing, buy local / grow your own)

- Recycling initiatives and need to be compliant

- Concerns for the welfare of animals and militant animal rights groups

- Location of new stores - greenfield (and availability thereof) versus high street

Legal

- More stringent laws on food and drink (including standardised labelling of contents)

- Planning permission rules and regulations

- Competition authorities (acquisitions, joint ventures, etc)

- International legal systems - rigidity and lack of familarity

- Increased minimum wages in the UK

- More onerous health and safety rules

Appendix 2

Strategic Capabilities and Competitive Advantage: M&S

Resources

Competences

Threshold Capabilities

Threshold resources

Tangible

Stores (including their location, convenience and availability)

Functional and attractive fixtures and fittings

Online infrastructure

Transport vehicles

Skilled labour force

Good access to capital markets

Intangible

Good reputation

Knowledgeable staff

Innovative capacity

A selection of own brands

Electronic systems (including bar coding)

Threshold competencies

Stores in good locations and geographically linked to distribution centres

Regular store refurbishment for 'freshness'

Online / offline link up (distribution centres) and cross-selling

Fleet management

Staff training and knowledge exchange

Regular contact with financiers

Capabilities for competitive advantage

Unique resources

Tangible

Flagship stores in premier locations

Satellite stores to support flagship stores (cluster effect)

Distinctive fixtures and fittings (store ambience)

Online alliance with Amazon

Modern fleet of lorries

Skilled and loyal labour force

Well known in the financial markets - financial clout

Intangible

Long established and trusted brand

Range of sub-brands

Reputation - long association with high quality at affordable prices

Customer empathy - introduction of 'Wise buys'

Strong and loyal customer base

Long-established relationship with suppliers

Supportive culture

Knowledgeable staff and willingness to share knowledge

Core competencies

Stores kept up-to-date and distinctive

Brand promotion initiatives

Good use of advertising and PR

Customer focus groups

Sub-branding to enhance offering

Strong leadership and experienced management team

Innovative

Dissemination of knowledge and willingness to learn from past failures (e.g. overseas expansion)

Clever use of alliances (e.g. Amazon)

Good use of customer feedback

Employee satisfaction surveys

Model adopted from: Johnson, G., Scholes, K., Whittington, R., (2010) Exploring Corporate Strategy Text and Cases, 8th Edition, FT Prentice Hall; http://corporate.marksandspencer.com/investors/results_presentations/2010