Similarities between Strategic Choices and Strategic Positioning: Case Study of Marks and Spencer Plc

Similarities between Strategic Choices and Strategic Positioning: Case Study of Marks and Spencer Plc

Overview of Marks and Spencer Plc

Business strategy refers to the process of formulating, implementing, and monitoring decisions affecting the company’s operations. The strategic planning further entails allocation of resources to satisfy the unlimited needs of the company. Ideally, many organizations outline the opportunities and challenges they face during operation, design measures to address the challenges, and identify risks and threats affecting the business operation. Therefore, strategic planning is essential for business success. Marks and Spencer Plc has been doing business since 1990. The company has experienced both successful and tough times in the competitive market. In the past years, Marks and Spencer (M&S) realized success in the business world because it offered high quality and attractive merchandise for customers, encouraged supplies to apply modern technology in production, carried out quality control, provided comfort shopping centers for customers, and improved efficiency in its operation procedures (Collier, 2007). This formula enabled the company to increase its sales and profit which led to expansion and development of other stores in Canada and America.

However, in 1998, the company experienced a hitch in its expansion program in America and Europe. This is because of difficult financial trend, economic meltdown, and tough trading conditions across the world. M&S experienced a decline in its revenue from 71% to 45% between 1995 and 1999 (Collier, 2007). This affected its stock in the stock exchange market thereby resulting into loss of the market share. The major competitors produced quality products at a lower price thereby affecting M&S sales. Overall, M&S employed different strategies to leverage its image. This included employing experts to bring new ideas into business and opening more stores overseas. Therefore, strategic positioning and strategic choices was essential in determining the future success of the M&S. Strategic positioning refers to placing a company in a better place to cope with future changing business environment.  Therefore, the organization needs to devise methods that would foresee future development. This includes market positioning, survival tactics, customer retention, and developing competitive environment. Strategic choice is a holistic approach by the company’s leaders in determining the strategic direction. In other words, strategic choices facilitate the decision-making process which determines the strategic sustainability of the organization in the future. This paper would discuss the relationship between strategic positioning and strategic choice in relation to M&S Company.

The Relationship between Strategic Positioning and Strategic Choice in M&S Company

Overall, the strategic positioning affects both internal and external operations of the company. In the process of making strategic choices, the company ought to develop tools and techniques to overcome both micro and macro factors that affect the business operation (Hilb, 2012). At the same time, it would influence how the company relates to its customers, competitors, and suppliers. According to Banker, et al. (2011), there are six principles that are followed to achieve strategic positioning. It includes the establishing strong reputation, focusing on profitability, setting unique goods for customers, establishment of distinctive value chain, specialization, and ensuring that activities are interdependent. In 2000, M&S announced a decrease of £8.2 billion and £ 71.2 million in sales and profit respectively (Collier, 2007). Therefore, the company should carry out strategic choices and positioning to allow visible improvement in the future. The company’s grand plans included the creation of profit center, restoration of overseas profitability, creation of customer oriented organization, and building a strong financial service sector. However, Banker et al. (2009) argue that the strategic choices would depend on the information collected, analysis of the technique and tools, and the planning scheme devised by the leaders. In addition, the strategic choices depend on the availability of human, financial, and technological resources.

Creating a Customer Focused Organization

Overall, companies all over the world have recognized the importance of moving closer to customers. For instance, many organizations provide a variety of products through mobile and online buying for buyers to choose. Currently, the trading conditions have changed and customers do not hesitate to move from one company to another. Therefore, establishing cordial relationship with customers is essential for the company’s growth. The Customer Insight Unit carried a research about shopping habits, brand conception, and demographic purchasing power which influenced M&S strategic choice of (Collier, 2007). The M&S chairperson, Vandevelde decided to launch other international retail shops to cater for customers. The in-depth research indicated that some M&S stores offered clothes that did not match the customer’s preferences and taste. Nonetheless, inadequate customer services in an organization risk the public humiliation which affects the company’s profits (Cook, 2011). Therefore, the company needs to strive hard and provide goods and services that meet the customer’s expectation. Generally, today’s customers are educated, sophisticated, and informed which leads to greater choices. The chairperson (Vandevelde) made a strategic choice to further modernize the shopping techniques which was not used by major competitors in the market. This included launching customer advisors at each floor. The company further opened three other prototype stores to cater for high demand. Leland & Bailey (2011) assert that establishing numerous stores in different places facilitates the interaction with potential customers thereby enhancing growth.

Numerous stores further offered the opportunity for the organization to gather feedback. This would enable the organization to search for customers’ needs and implement the appropriate changes to boost sales. Cook, (2011) asserts that it is the consumer’s right to receive better services and quality products. In other words, the organization has a responsibility to listen to the customers’ needs and focus on delivering better services. This would win the customer’s loyalty and motivate the staff as well. Although M&S disclosed a strategic choice to sell its products at 50% cheaper, other competitors had applied the same approach. Therefore, the company’s strategic positioning was not appropriate for the company to compete well in the market. Unfortunately, the analysts argued that M&S did not produce good children’s clothes (Collier, 2007). As a result, the management decided to enter into a joint venture with George Davis. This strategy ensured that raw materials, resources, and design meet the children’s future specification. In addition, George Davis distributed M&S fashion clothes that were consumer oriented. This targeted the Italian women aged 25-35; who were potential buyers. Overall, the strategy produced good results and maintained the profitability index of the company. According to Galbraith (2011), increased competition in the world has broken the traditional purchasing trend of consumers. Therefore, customer relationship management and technology would allow the production of quality goods and achieve customer retention.

Restoration of Overseas Profitability

Ideally, every company’s main objective is to make a profit from its business activities and operations. It is the company’s’ obligation to identify strategic choices that are required to achieve the highest profits. Leland & Bailey (2011) stated that the strategies should aim at increasing employees’ productivity, assist in developing new products, search for new customers, provide favorable prices, and develop better customer services. The distribution of clothes through George Davis was important towards achieving high profit. The customers received the selling of Per Una (Italian cloth for women) through Davis well. The company had doubled the original target and realized an increase in share prices in two months (Collier, 2007). Analysts argued that despite the strategic positioning, a few investors were skeptical because the share prices kept on fluctuating (Beaver, 1999). The employment of Rogers Holmes ensured future profitability for the company. Rogers made the decision to refurbish the stores in order to acquire new design in the market. It involved changing of floors and lighting which cost the company £ 14 per square feet unlike the previous £ 70 (Collier, 2007). This measure enabled the company to save about £56 per square feet.

The M&S further streamlined its operation in the logistic sector to minimize cost and increase profitability. For instance, the organization decided to reduce the number of contractors from four to two (Beaver, 1999). This strategic choice saved the company over £ 20 million annually. In addition, the company decided to make a strategic choice to establish marketing department across the world in a bid to increase its sales volume. Collier (2007) cited that the M&S’s chairperson, Salsbury devised a strategic choice to implement custom-focused strategy that allowed customers to dictate what the company ought to produce. Moreover, the company launched new food and cloth ranges and launched a massive campaign in restoring its image. Nonetheless, the company closed six European stores and Canadian stores in an attempt to reduce the office overhead. Moreover, the company conducted interviews and promotion in overseas countries to raise awareness about the M&S products and profile. As such, investors and shareholders changed their negative perception about the company and decided to invest in M&S shares (Beaver, 1999). Although the market was competitive and competitors made rules to favor them, implementation of promotion strategy enabled the organization achieve profitability. The company further decided to initiate a strategy that allowed overseas stores to develop their own objective that align to company’s objectives.

Building Strong Financial Sector

Apparently, strategic choices and positioning affect financial stability both negatively and positively depending on implementation criteria. M&S decided to issue a memorandum that explained the creation of new decision-making environment. Although the strategy challenged the organization’s tradition and culture, it assisted in establishing financial stability at M&S. Therefore, strategic choices affect strategic positing of the company. For instance, the establishment of property division allowed managers to take charge of their department thereby becoming accountable for results (Collier, 2007). The development of home ware department and expansion of satellite outlets in overseas stores ensured steady cash flow and financial stability in the future. Moreover, the company made a strategic choice to review its acceptance of rival cards, which caused aloes of £1.2 million. As such, the organization decided to launch 5 million cardholders. This was a scheme to establish strong financial base and reward its loyal customers. The scheme was referred to as “& more”, which was presumed to be the largest issuers in UK. On the other hand, customers earned the points at the point of purchase. These points could be redeemed as “M&S voucher”. In the same year, the chairperson, Holmes, announced an increase in dividend and promised to maintain financial stability of the company (Beaver, 1999).

The alliance with Manchester United star-David Beckham was to promoted sales because the young children regarded David not only as exemplary, but also as one who promoted the company’s brand. However, this strategic positioning missed the future target because the company had lost the children’s market share. Kapferer (2012) asserts that strategic choices and strategic positioning require adequate market analysis. In other words, poor business management methods minimize the business’s profitability. Therefore, during peak and low economic times, the company should assess the source of business failures and opportunities affecting the organization’s profits. On the other hand, the leaders need to handle its financial information with care during low and high economic conditions to avoid business failure (Gummesson, et al., 2014). For instance, it was not good strategic choice to spend over 1.7million to attract Vittorio Radice for the position of chief executive. This is because; such money could be invested in other areas such as expansion of overseas stores and increasing the employees’ salary to better position itself in the future. Kato & Kruse (2013) argues that the management ought to make difficult strategic choices to acquire adequate positioning required for the organization to achieve future profitability.

The failure to schedule activities and plans in time affects the company’s future operations. Therefore, risk taking and budgeting is essential towards better performance. For instance, M&S Company decided to attract new talents in the market by offering huge packages. This bold step served as a sign of prosperity and recovery. The company achieved 6.7% rise in sales and outperformed the close competitors (Collier, 2007). The strategic choice to open extra 25 stores referred to as “Lifestores” enhanced cash flow through offering homeware products. The elite designers designed the houses thereby allowing customers to purchase more. Teece (2010) emphasizes that involving technology in business operation enhances financial stability. However, selecting technology and application that is appropriate is important for organization’s operation. This involves advertisement through online and better designs. Overall, Holmes took a tough decision to introduce a formula to cut overtime pay for employees. Although experts argued that this strategy would interfere with the employee’s morale, it saved cost and expenses for the company in the end (Beaver, 1999).

Creation of a Profit Centre

Overall, financial liberalization requires a company to secure lucrative market share; this ensures profit maximization. The company should consider positioning options that guarantee them product-service competitive space. Therefore, the creation of new market segment and integration of product supply chain were important in the creation of profit organization (Rothaermel, 2013). In 1999, the organization conducted a research on how to improve its supply chain. As a result, it linked with UK suppliers, streamlined its operations, and diversified internet and home shopping. Despite the identification of business strategies and opportunities, the company realized a decrease in profitability. The customers continued rising complaints concerning the range of clothes produced by M&S. However, analysts suggested restructuring of M&S management team to make the company become a profit-oriented (Collier, 2007). Therefore, the organization restructured the management by splitting the organization into business units to achieve customer focus. The business units included Lingerie, men wear, women wear, food, home, children wear, and beauty. The board further appointed various executives to monitor the units. From the analysis’ view, these methods were to turn M&S into a profit making organization (Collier, 2007). However, the strategic choice to employ new chairperson: Vandevelde at £2.2 million was not an appropriate strategic positioning for the company.

Although Vandevelde had helped Promodes Company to triple its stock exchange, it was not a guarantee that the same trend would be expected in M&S. However, Vandevelde revitalized the company’s expansion program and improved the product’s image. This was done through an overhaul of its brand and major cultural changes. Transforming the organization’s culture to accomplish the objectives may result into both positive and negative effect (Li & Toppinen, 2011). This is because by adjusting culture, employees should be willing to accept the change and embrace it. In February 2000, Vandevelde decided to employee additional 4, 000 staff to serve the customers (Beaver, 1999). The company further decided to enter into a deal with football clubs to promote its product’s brand as well as cover a wide geographical region; a move that increased the sales by 100%. . Although building and implementing the strategic positioning was a challenge, the integration of product centric method helped in achieving the strategic positioning. O’Guinn, Allen & Semenik (2009) believe that public relations often boost the company’s image and promote products brand. However, strategic choice to promote product’s image, the company ought to embrace the use of technology, update its online website, and choose articulate media for communication. As such, the company launched brands with different colors to differentiate its department.

Additionally, St Michael Logo was stitched inside the clothes to symbolize trust and quality. The restructuring process affected M&S’s supply chain. At the same time, the company adopted a strategic positioning whereby stores were grouped based on lifestyle pattern and demographic characteristics (Beaver, 1999). This method replaced the old system, which allocated space based on merchandise levels. The change in supply chain received positive welcome because it was a major strategy towards customer-focused services. On the other hand, M&S changed it’s headquarter as a measure to boost its image. Scholars argue that headquarters act as a cultural and nerve center of any organization (Harrison-Walker, 2011). The M&S relocated from Baker Street to Paddington in spring in 2004. This strategic choice would portray M&S’s new advancement and reflect on cultural changes towards profit generation.

Conclusion

Overall, strategic planning and management is essential for organizations to achieve their objectives. On the other hand, strategic choices and positioning assists the organization in anticipating future business environment thereby making a decision that would have a positive impact on overall operations. Normally, the drastic changes in trading terms, economic meltdown, and competitive environment affect profitability of most organization. Therefore, there is the need to establish strategies that assists in minimizing the effects. Strategic choice and positioning requires the availability of human, financial, and technological resources. The resources are important because it helps in the establishment of more business outlets, development of competitive advantage, and retention of skilled workforce. Although M&S’s chairpersons experienced challenges when implementing different strategies, the process enabled them devise better ways to achieve the organizational objectives. Therefore, making tough strategic choices result into better strategic positioning in the future and vice versa.

 

References

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Collier, N. (2007). Exploring corporate strategy. Bedford: Cranfield School of Management

Cook, S. (2011). Customer care excellence: How to create an effective customer focus. London: Kogan Page

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Gummesson, E., Kuusela, H., & Närvänen, E. (2014). Reinventing marketing strategy by recasting supplier/customer roles. Journal of Service Management, 25(2), 5.

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Hilb, M. (2012). New corporate governance: Successful board management tools. Berlin: Springer.

Kapferer, J. N. (2012). The new strategic brand management: Advanced insights and strategic thinking. London: Kogan Page Publishers.

Kato, T., & Kruse, D. (2013). Sharing ownership, profits, and decision-making in the 21st Century. Bradford: Emerald Group Publishing Limited.

Leland, K., & Bailey, K. (2011). Customer service for dummies. Hoboken: John Wiley & Sons, Inc.

Li, N., & Toppinen, A. (2011). Corporate responsibility and sustainable competitive advantage in forest-based industry: Complementary or conflicting goals? Forest Policy and Economics, 13(2), 113-123.

O’Guinn, T. C., Allen, C. T., & Semenik, R. J. (2009). Advertising and integrated brand promotion. Mason, Ohio: South-Western/Cengage Learning

Rothaermel, F. T. (2013). Strategic Management: Concepts. McGraw-Hill Irwin.

Teece, D. J. (2010). Business models, business strategy and innovation. Long Range Planning, 43(2), 172-194.

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