Managing the Global Supply Chain to Sustain Business Strategy: the case of Marks & Spencer (M&S)
This paper aims to answer the question: what are M&S’s main organisational challenges of managing the global supply chain necessary to sustain their business strategy?
Introduction
As various operating industries are aiming for competitive advantage and sustainable development among its management and operations, there are numerous actions that are being implemented and directed to the eventual success and growth of the company’s assets. Similarly, globalization issues increases the pressure among the industries and intensifies market competition. In competition, there is motivation in every business to improve and develop their objectives. For an enterprise to succeed in local or global competition, hence, there is a continuous plan to develop management and marketing techniques such as change and innovation of new products with higher quality than its competitors, efficient management of critical success factors, and others.
Company Background
According to the company website, it was in 1894 when Michael Marks created a joint venture with Tom Spencer to enter the retailing business. The first shop opened in 1904 at Cross Arcade in Leeds, West Yorkshire. In 2004, the organization celebrates their 120th anniversary, appoints as the Chief Executive of Marks & Spencer (M&S) and the head office staff started to move into their new registered office at Waterside House, Paddington, originally headquartered in Baker Street, London for many years. At present, they have over 600 stores worldwide, 450 of which are located in UK and the remaining 150 outlets operating in 30 countries around the globe, with sales amounting to U.S.$ 14.6 billion and a market value of U.S.$ 11.6 billion and profits posted at U.S.$ 1.1 billion and assets totaling to U.S.$ 8.1 billion ( 2005).
Main Organisational Challenges in Managing Global Supply Chain
The acquirement of customer loyalty is a corporate challenge that every organisation today is facing. As this increasingly competitive and crowded marketplace expand, the profitability that customers will provide works towards the advantage of the host organisation. Meanwhile, the varying business conditions allowed customers to change too. To address the changing demands and behaviours of consumers, organisational administration had shifted their attention on their customers for the purposes of being successful in business. The need to entirely reformulate their predictable business outlook and purposes from process-focused to customer-centred is s significant leap towards service efficiency and competitive edge. With the advent of technological innovations, logistical decisions about delivery operations, stockholding, warehousing and economies of scale get more complex solutions in today’s business environment. The following are considered as main organisational challenges in managing the global supply chain.
Product Innovations and Development. To sequentially sustain the growing market of the business, the efforts exerted in searching for potential opportunities and creation of new products for the target market is valuable. Generally, before a profit-oriented company start to operate, there should be product/s that is being offered. The various changes in the lifestyle and preferences of the consumers prompted every company worldwide to improve and to innovate their traditional product offerings. The term innovation means the development of something new from its beginning to its completion and from its initial idea until it becomes a viable business (1992). Innovation plays a great role in creation and development of new products of M&S. This is evident as shown in the launching new products and expanding the traditional product line. However, it must be considered that proper culture throughout the business setting is maintained as it will support the product and business development processes ( 1995;1995). Thus, innovation and development in the product line must be a product of knowledge and culture (Zangwill 1993) within the immediate jurisdiction of the company’s operations. With M&S, the management should exhaust R&D programmes and consumer feedback system in order to identify the existing culture of the target market.
Effective Implementation of Marketing Mix. Marketing mix, according to (1990, pp. 43-44), is the standardised set of fitting marketing variables that every business and any other profit-motivated industry implements, in order to come up with a desirable outcome or answer on the target market they choose to penetrate. The marketing mix is composed of product, price, place, and promotion, or popularly known as 4Ps. M&S and its management perfected the application of the marketing mix. It is notable to restate that with the constant research and development in their product, pricing, placement and distribution, as well as promotion, their products remain as the leader in the UK retailing market. In their product, high quality is maintained. The fact that their products exceed the customers’ requirement, the price is also fair and reasonable. In terms of distribution, their strategic placement of the products contributes to the increase numbers of production and sales. Their products are highly prominent due to the different marketing communication tools used in promoting to the target market. M&S’s continuous integration of all the elements of the marketing mix and the appropriate marketing and management of the internal organization also serves as a powerful weapon in combating the rapid and stiff competition in the global marketplace.
Competition. Adverse competition in every business environment is the most if not the first problem encountered. Companies have always taken a competitive product and dismantled it to examine each part to compare with their own. If a part made by a competitor has some advantage, then the advantage is copied or adapted. Benchmarking extends this concept to every business process. Competitive benchmarking is comparing performance between competitors, whereas process benchmarking is comparing performance of a business or production process, not necessarily among competitors ( 1994). If another company has a better operation or process, then a benchmarking company either copies or adapts it to its own needs.
Benchmarking includes the tasks of comparing and assessing the capabilities of any similar business that operates in a given line of industry. It allows business leaders to accumulate significant facts and other useful and related information that will work to their own benefit particularly in the operations of the business. Information may come from global sources and these are utilised in the improvement of business productivity and overall organisational performance ( 1994). For example, M&S has complemented its rapid response to customer orders with rapid replenishment of small quantities of components from suppliers. Being in retailing for over a hundred years, one of M&S’s competitive advantages over their counterparts in the business is the reputation that they have established with their customers, employees and suppliers. M&S customers have long associated the business with optimum dependability and high value for money; the internal architecture of the company was focused around stable employment relations, well-built and supported organizational routines, as well as a collective idea that there was an M&S own way of doing things, which the employees benefit from. The suppliers’ relationship with the firm or the external planning of M&S was built around a harmonious relationship with various international suppliers. Complete influence on product requirement and design was present and maintained as an essential component of relationships that is sustained over the period of several years (Kay 1999). They also have strong environmental and community responsibilities, (as cited in 1994) part of their corporate responsibility. As stated by (1985), ‘Marks and Spencer have pioneered and excelled themselves in a whole range of ‘modern’ management methods, notably strategic marketing, consumer research, product innovation and development, personnel management, staff training and management development, quality assurance and technological-oriented purchasing’ Overall, the strong and identifiable corporate culture of M&S that operates to get the best out of relatively ordinary employees have continued to produce exceptional corporate results over many years and through many changes in the economic environment ( 1995). Their financial performances from the previous years are shown below:
Marks & Spencer Financial Performance
Year ended
Turnover (£ M)
Profit before tax (£ M)
Net profit (£ M)
Basic eps (p)
1 April 2006
7,797.70
745.7
520.6
31.4
2 April 2005
7,490.50
505.1
355
29.1
3 April 2004
8,301.50
781.6
552.3
24.2
29 March 2003
8,019.10
677.5
480.5
20.7
30 March 2002
8,135.40
335.9
153
5.4
31 March 2001
8,075.70
145.5
2.8
0
1 April 2000
8,195.50
417.5
258.7
9
31 March 1999
8,224.00
546.1
372.1
13
31 March 1998
8,243.30
1,155.00
815.9
28.6
31 March 1997
7,841.90
1,102.10
746.6
26.7
31March 1996
7,233.70
965.8
652.6
455.8
Source: /Marks_and_spencer#Financial performance
Although there have been downfalls for the hardy retailing perennial over the years largely due to economic crises, they have managed to surmount all the stumbling blocks through an resilience that their competitors view as unnerving. With taking over the M&S helm, he is unveiling sales figures for the quarter to 1 April of more than double analysts’ expectations, predicting full-year profits ahead of City projections and paying a bonus to shop floor staff, on top of an incentive already announced, in lless than two years when he first took charge ( 2006). Apparently, the summary of financial performance of the company for 2005 and 2006 are also illustrated:
Source:
From the figures, there are distinctive differences to the 2006 productivity and performance of the company in contrast to the 2005 performance. This result was verified by ANOVA analysis presented below:
The significance level of less than 0.05 indicates that at least one of the regions varies from the others. It means to say that the performance of M&S from year 2005 with respect to financial variables is statically different to year 2006 business performance.
Technology. Today, various technologies are utilized and serve competitive advantage to the organisation. Rethinking and reformulating the organization’s use of innovative technologies entail the consideration of several factors such as various processes, type of technology, the environment as well as the success factors of people ( 2000).
In the traditional supply chain management used by businesses that import materials for production, a lot of people, time and money are invested upon to guarantee that the demands of the manufacturers will be handled in the specified date and time required. According to and colleagues (2001), supply chain management is considered as another determinant of organizational success and among the most important premeditated aspects of any commercial venture where decisions about coordinating of production of goods and services, store inventory, list of suppliers, and cost-effective and timely distribution are made. Supply chain management functions in order to design and manage the processes, assets and flows of material and information to answer the needs and demands of the customers and clients ( 2002; 1995). Before being able to place an order of shipment of raw materials, several transactions are consulted between the supplier and the manufacturer that eats up their valued time. The supply flow normally includes the intention of order, quotation, confirmation, delivery, payment and handling of receipts as great amount of time is consumed in the mere planning of the purchase orders of a manufacturing company (2001; 1996). And since most of the time the transactions involve not only a single supplier, especially in the case of huge international producers, manufacturers deal with sub-suppliers with several forwarders from which a number of consolidations are exchanged. The workload and time that the inventory managers handle defines the proceeding business processes that will follow that predicts and maintains the success and profit of the whole business organization. Technology improvement is linked with the environmental-friendliness of the brand. Innovations are also designed in the manufacturing, distribution and research mobile. The improved integration combines the expertise of local associates into global spectrum that will hasten improvement of technology.
In this regard, Supply Chain Management (SCM) has become a key strategic initiative for companies, like M&S, particularly in improving service and reducing costs in order to remain competitive in today’s global economy ( 1998). SCM is business strategy focusing on the quick response to ever-changing market needs and shortened purchasing lead time, also adding value to increasingly demanding customers at the least cost and time ( 2002). Today, we cannot rely on a single party to fulfil the sophisticated needs of customers; we need a total commitment and full collaboration, integration and synchronization among all business partners (Bowman 1999).
Marks & Spencer, as a profit-oriented organisation is dedicated to providing products in ways that help protect the environment, their employees and the people who use them. The competitive advantages, the external and internal environment in which they operate show evidence that the firm is striving to maintain their dedication. In building and sustaining supplier relationships, M&S and its management can easily refer to the existing culture of supply chain management being utilized by their company throughout the long years of operations. Integration and acquisition are potential methods to retain good supplier relationship. Also, increase awareness to the conditions of affiliates and subsidiaries will somewhat determine the potency of the company. With this, training and retention are deemed crucial to international success of subsidiaries (2003,). Granted that there are critics to the company, as there is always the presence of groups who are not very satisfied with the business’ performance, available figures and statements from business experts give evidence to M&S’s continuing commitment in making sure that they are will be the better if not best and works above the standards of its major competitors. Every managerial decisions made will work towards the company’s stated vision. M&S’s distinctive competence in terms of technical expertise, applications, and managerial aptitude are vital foundations of heterogeneity that will eventually become an element of sustainable competitive advantage. According to (1995), “corporate success is based on the distinctive capabilities of the firm – those things, often the product of its particular history, which competitors cannot reproduce even after others realize the benefits these capabilities bring to the company that enjoys them” Therefore, with the effective implementation of the mentioned concepts, competitive advantage in an organisation is not beyond reach.
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