Marks and Spencer
Global Sourcing and its Effects on Marketing Effectiveness
Table of Contents
Introduction
Overview of the Topic
Discussion
Global Expansion and Sourcing
Advantages
Methods of Global Expansion
Corporate Social Responsibility
Ethical Issues
Efficacy of Global Expansion and its Relation to Marketing
Effectiveness
Conclusion
Recommendations
Appendices
References
Marks and Spencer
Global Sourcing and its Effects on Marketing Effectiveness
Introduction
Marks and Spencer has been regarded by many as a legendary retailing organization both their management style and its individual leaders have been acknowledged as exemplars of practice (, 2002). (1974) described Marks and Spencer as a managerial giant in the western world and that (1985) noted that Marks and Spencer has been widely recognised as one of the best managed companies in Europe as far as management excellence of the firm is concerned along with the consensus being almost total in the trade and specialist circles.
During the year 1998, the situation had somewhat altered and that the company began to experience a decline in its sales, profits and market share. Its once legendary reputation has been reduced at both home and abroad as it has been fined by the French courts and severely criticised for its attitude and behaviour towards its workers and that Marks and Spencer’s effective management faced major problems and adhere failure in the business as the issue of the problem address directly to their management and that such effectiveness in the business are amiably in question.
Marks and Spencer, otherwise known as M & S, is one of the largest British retailers with 150 stores in 30 countries, including about 130 franchise businesses operating worldwide. It is one of the most popular and noted clothing chains in the United Kingdom. It also caters to the food industry, being a multi-million pound food retailer as well. Other than food and clothing, they also sell footwear, gifts and home furnishings. Under the trademark, St. Michael, it has a chain of 294 across the United Kingdom, but it has 450 stores in Britain as well. Most of the company’s overseas branches and chains are franchised locally, or franchised by the local businessmen from the locality. The United States of America’s Brooks Brothers and King Super Markets are owned by Marks & Spencer. Direct mail assists the company greatly in meeting the demands of many of the customers both locally and abroad. Direct mail meets the company’s core objective of giving consumers easier and better access to a broader list of products. Financial services for customers are provided through the help of the group’s financial services that may comprise of amount cards, life insurances and unit trust management. Retailing, in 2000, accounted 96% of the fiscal revenues (., 2007).
International retailing form of the defining factors that contribute to the success of Marks & Spencer. International retailing business includes 3 major areas, the Far East, North America and Europe. Around 2001, Marks & Spencer operated around 125 franchise stores located in 26 countries.
Marks and Spencer’s past was characterised by a long and continued success, which led to an overwhelming belief in the company’s management paradigm (., 2002) of management was of fundamental importance and had bred a culture, which was resistant to change. Further a study by (2002) revealed that interviewees reported that past success bred arrogance, conceit and a sense of invincibility. Top management tended to underestimate the effect of the external changes in the industry landscape and at times disbelieve external reports and studies ( and , 2002) .Centralized management systems combined with complex and bureaucratic reporting structures not only resulted in poor communication but more importantly the management board became distanced from external environment and the emerging realities of changes in consumer needs, wants and shopping habits.
Sustaining advantage is the key to the survival of the organisation, Marks and Spencer had developed culturally embedded core competencies that ranged across the value chain. Due to the company’s ethos as well as the increased rates of pay, the company attracted a higher calibre of sales staff which was deep rooted into the psyche of the organisation. All of these competencies were extremely difficult to imitate and were key to the company sustaining its advantage ( and 1996).
Marks and Spencer considered growth as another essential element in sustaining competitive advantage. The risk aversive company did not diversify greatly and concentrated on its core values, competencies and principles. It had been extremely successful providing generic essential products without the need to try to match what other retailers were offering. Growth was therefore confined to the quantity of the market share and the number of retail outlets and by continuing to increase the number of shops, the company was able to build barriers against competition through geographical strongholds and that by staying close to its core competencies it was then able to sustain the advantage in business and effective management.
Topic Overview
This paper shall delve into the success of Marks & Spencer’s marketing effectiveness, through global sourcing.
Competition, typically the most powerful external force, is increased by the advent of globalization. The number of companies and the number of countries where these companies operate and the way governments are dealing with the impacts of globalization is accelerating. The interaction of changes in government policy and business innovation has actually made globalization even faster. If a company does not become a global, it would simply be shut out of new markets. This is what pushed firms around the world to adopt Corporate Governance. Also, a company must be able to make contact with its consumers. According to most theories on strategic management, the customer is the ultimate judge of competitiveness; that is, by buying the products of a firm, the customer indirectly decides which firms will continue to exist and which firms will go bankrupt. (, 2002). The reasons for the turmoil are numerous: a sputtering economy, increased global competition, the implementation of new technologies that displace jobs, the deregulation of certain industries, and the general consolidation of other industries, such as banking and health care. Observers will see a continuing progression in the ruinous steps which have forced the industry into a socio-politico-economic corner. The industry is likewise linked closely to the policies of governments, the earnings of banks. The industry’s approach to dealing with political institutions has not always been brilliant. It tends to be good on technical issues, although it has not always fully presented the longer-term options, in order to make the choices and their implications clear.
Global sourcing is defined as a strategy which aims to utilize and effectively use the world’s efficiencies in production (, 2007). It is a standard step for the globalization of a firm. Global sourcing possesses a number of advantages. One, it aims to locate product sources at a cheaper cost. A firm can be given a multitude of choices of product suppliers who compete with cheap prices. Another aspect of global sourcing can be referred to as outsourcing. This process is the same as global sourcing; only it focuses on the services a specific international location may offer, at a cheaper cost. An example of this is the booming industry of Call Centers.
Marks & Spencer was able to take in this strategy and has continued expansion in a number of countries.
The international Retail Division of Marks and Spencer comprises of three areas, the Far East, Europe (excluding the UK) and North America. Currently, Marks and Spencer has franchise stores in 34 different countries (, 2007). European International retail can be divided into the Continental Europe and the Republic of Ireland and European franchise businesses. In North America the franchise business can be divided between the Brooks Brothers and Kings Super Markets. In 2001 Brooks Brothers comprised of 221 stores and Kings Super Markets comprised of 27 stores. The Far East group consists of 10 retail stores in Hongkong and few others in nearby eastern countries. In the near future, M & S plans to open a franchising store in Shanghai, which hopefully, would become its gateway onto mainland China (., 2002).
The international business scene has given Marks & Spencer an edge over competition in the age of global expansion.
Discussion
Global Expansion and Sourcing
Global expansion, as was afore mentioned a strategy which aims to utilize and effectively use the world’s efficiencies in production (, 2007). It aims to utilize the global resources in order to increase its financial input while lessening by a degree its financial output (on products and services). Global expansion is a stepping stone in a firm’s dream of global expansion. Many companies take on global expansion as an entry to the international market. This strategy can greatly help a company’s marketing effectiveness.
Three Methods for Global Expansion
Global expansion is being adapted by a majority of businesses and firms around the globe. According to database, there are three methods for global expansion and these are:
Ø Plant Flags – According to the database, the first method in launching global expansion is to plant flags. This pertains to the idea of meeting with different broadcast networks and advertising industries of the country. According to the same author, this method is highly complicated and may take a long time to find the most suitable business partner.
Ø Buy a Partner – The next method is to find a company and purchase it. There may be a company that has the potential but lacks the proper guidance and management skill. This company may give one an edge in local competition in that country. Also, it is imperative that the buying party leave a share for the former owner.
Ø Take the Plunge – the third method is to establish an overseas subsidiary of the company (, 2007).
Advantages of forming a global strategy and expansion
Forming a well rounded global strategy can help gain a complete advantage against competition. The following, taken from database, forms the sources of advantages for global strategies:
Ø Efficiency- this includes the aspects of:
· Ability to access a number of potential customers and markets
· Easier access to another countries labor and production resources (relatively cheaper than local materials)
· Extension of “product life cycle”- increase the number of sales for older products in underdeveloped areas
· “Operational flexibility- shift production as costs, exchange rates, etc. change over time”
Ø Strategic- this includes:
· As the first foreign company in a specific market, one gains the upper hand in being the sole provider of a certain product in a given market
· Cross subsidization between countries
· Transfer price
Ø Risk
o Diversify the macroeconomic risks (business cycles not perfectly correlated among countries)
o Diversify operational risks (labor problems, earthquakes, wars)
Ø Learning
o Broaden learning opportunities due to diversity of operating environments
Ø Reputation
o Crossover customers between markets- reputation and brand identification ( , 2007)
Corporate Social Responsibility
Corporate Social Responsibility is one of the leading topics in the issue of corporate governance and even marketing effectiveness. Corporate Social Responsibility is a theory on corporate governance which states that the firm has a great responsibility upon his shareholders, comprising mainly of the employees, the consumers, the environment, the stockholders and other people who are, in one way or another, part of the whole business process.
Corporate Social Responsibility entails with it the idea of corporate citizenship. Being a corporate citizen, a firm must include in its steps the welfare and well-being of its shareholders. In essence, it is the idea of “not compromising the well-being of the environment and others for the sake of profit”.
Corporate Social Responsibility can bring a bounty of benefits to a firm.
Ø By reducing risks
Ø By enhancing brand value
Ø By opening doors and creating goodwill with host governments or in the local community.
Ø And by improving staff efficiency and morale (, 2007)
In the theory of Corporate Social Responsibility, it is stated the organization has the responsibility of taking into consideration the interests of its stakeholders. It must incorporate in its goals the needs of its stakeholders. Family firms are said to follow the theory of Corporate Social Responsibility, taking into consideration not only the profit to be made, but also the best things for its stakeholders. Corporate Governance as was mentioned is the method of regulating and monitoring the behaviour and practices of the company. This idea may relate in many ways in the aspect of corporate social responsibility. Corporate Social Responsibility or CSR is one of the leading theories relating to corporate governance. The theory talks about the responsibility of the corporation, or any organization for that matter, to all its stakeholders, which comprises mainly of its customers, employees, etc. The theory mainly states that the organization should keep in mind the interests of their shareholders and not only the possibility of making higher profit. The following is made to compare and illustrate the differences between the publicly owned companies and the family firms.
Another aspect is to adopt the Theory of Corporate Social Responsibility. Corporate Social Responsibility deals with the responsibility of the firm to put the best interests of its stakeholders before any profitable step. Corporate Governance is the action taken in order to help regulate and monitor the behavioural aspects and practice of the company. It also helps keep in check the needs and the interests of the shareholders. Corporate governance is adopted into many aspects of the corporate world. This strategy should be adopted by publicly owned corporations. The stakeholders, which comprises of the employees, the customers, the environment and the shareholders, should be the main focus of the company.
Ethical Issues
Today, the business world faces huge challenges across the globe but the challenges are no greater today than in the past as life moves on and business with it. It’s a cliché, but the only certainty in business is uncertainty. The most successful companies are those that react to change or even pre-empt it. They’re constantly learning. They assume nothing to be permanent. They realize that what holds good today may not be relevant tomorrow. They evolve constantly as conditions around them change. Corporate Social Responsibility is now in the vocabulary. It simply wasn’t talked about a few year’s ago. So is it merely a passing fashion? At Marks & Spencer, we believe that CSR is more than a changing fashion. Instead we view it as an instrument for fashioning change and that is my theme for today. Marks & Spencer and its decline in fortune are well documented.
Corporate Social Responsibility and sustainability are often used interchangeably such as in Marks & Spencer as there were views on CSR as the management process by which they move towards a more sustainable business model. CSR helps to secure investment because investors will increasingly reward companies that can demonstrate that they are able to make long term, sustainable returns. Responsible business practice helps the company to attract and retain employees because they are proud that they have a responsible business and secures the right business partners whether they be suppliers or franchise owners. Marks & Spencer has a strong heritage and in many ways we’ve always been involved in CSR and is convinced that CSR is both a fundamental strength and an important strategy for fashioning change which gives it the highest priority as Marks & Spencer continues to get fit for growth and its effective management.
Efficacy of Global Expansion and its Relation to Marketing
Effectiveness
The different strategies in different markets helped the company have an initial feel of the different markets. The different strategies also helped the company have a better understanding of how the market works. The different markets help in introducing to the company the cultures and characteristics of the markets thus it became educated with how to adjust in the different setting. Lastly the different strategies helped in making sure that the company encounters lesser problems while starting up a new market. By using different strategies the company has not committed anything that will give it more problems. In developed countries it is somewhat easier to enter because they usually have fully developed communications, distribution and transportation systems, to name but a few facilitating factors. In contrast, developing countries require a more flexible approach, since they tend to be more jealous of their national prerogatives and less advanced in their infrastructure. But their sales potential is, nevertheless, quite substantial. It can be tapped successfully, if the MNE is willing to adapt.
According to and (2006), the most successful global businesses are aggressively building their global strategies around these themes: (1) increased market access because of the opening up of markets in China, Central and Eastern Europe; (2) increased market opportunities because of the deregulation of many markets, such as the financial market and privatisation of state-owed utilities; (3) greater uniformity pf industry standards, encouraged, for example, by the European Union; (4) sourcing of products and components initially, but more recently services, too, from a wider range of countries, particularly those emerging markets with a high ratio of skills to cost; (5) more globally standardised products and services, particularly in areas of new technology, but increasingly in more culturally sensitive product areas, such as food; (6) common technology used in many more markets, particularly in areas of information technology, when there is a high cost of research and development that must be recovered through sales in many countries; (7) similar customer requirements leading to transnational customer segments, resulting from increased communication and travel; (8) competition from the same organisations in each major market and thus interdependence of markets; (9) global organisation strategies that increasingly treat the world as one market, among several other themes.
Marketing is a universal activity that is widely applicable, regardless of the political, social and economic systems of a country. However does it nor mean that consumers in all parts of the world must or should be satisfied in exactly the same way ( & ). This is largely the effect of globalisation to the formulation of international marketing strategies, the insertion of the adaptation of such strategies to the particular country in which the MNE operates. Consumers from various countries are significantly different due to varying culture, income, level of economic development, and so on. Therefore, consumers may use the same product without having the same need or motive, and in turn may use different products to satisfy the same need. () addressed the issue of globalisation suggesting that the quality of management processes explains why some global marketing strategies fail while others succeed, contrary to conventional wisdom that management processes for global marketing should not be highly centralised and standardised since not enough attention is paid to the inputs of local management and the learning process across the different markets. Some studies investigate the linkages between standardisation of marketing and other functions such as sourcing, manufacturing, research and development, and find such linkages to be important. The ability to carry out global marketing strategies also depend upon comparative management attributes.
Conclusion
A competitive market system creates incentives for firms to vie for large market shares. Sometimes one firm is so successful in this fight, it acquires a dominant position in a market. From the firm’s point of view, a large market share is good. After all, dominance implies power and control. It creates a real potential to increase profits. From society’s point of view, however, dominance may not be quite so desirable. For the power that goes with dominance can be acquired and used in a number of ways. While some of these ways may promote economic welfare, others might reduce it. If the reductions are large and long-lived, people may want to reconsider whether dominance should be affirmed in all cases ( 1998). In the case of Marks & Spencer, it has successfully gained the upper hand on the race for global dominance. By utilizing the many factors and the pro’s and con’s of the theory, Marks & Spencer was effectively making a good marketing strategy.
Recommendations
Marks and Spencer has become extra selling space and opening out-of-town stores to shift surplus stock. It is a tough time for the company and also the right time for a new broom. Marks and Spencer should get lessons from past and look at more about what is happening in the market place and change itself from the old way of doing things to a brand-new image in order to sustain its competitive advantage and regain its leading position in terms of management effectiveness.
Marks and Spencer should had used a much better and thorough strategy in managing and handling their supply chain process in making their business more accountable and open to profit and sales stabilization and should have not focus more on their old merchandise strategies. Marks and Spencer should have used a better approach and a more idealistic strategic planning that will gradually change the basic structure of their business that had caused a lot of problems in the later years of their business.
Marks and Spencer should have made use of a more suitable strategic planning to be able to maintain a good standing position in dealing to their business. There are a variety of perspectives, models and approaches used in strategic planning and the way that a strategic plan is developed will have to depend on the nature of the organization’s leadership, culture of the organization, complexity of the organization’s environment as well as the size of the organization and the expertise of planners. Marks and Spencer need have applied any appropriate and useful strategies that will contribute to the growing and steady success of their business they should have given the business a chance to apply other ways rather than focusing on a structured formula to cater the needs of their customers and to lead an advantage in any rival competitors.
Reference:
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