BSP025 - Strategic Analysis

10BSP028 – Strategic

Management Marks and Spencer Group plc:

Strategic Changes

B016178 – C H LIU

8/19/2011

Marks and Spencer Group plc: Strategic Changes

10BSP028 – Strategic Management Page 1

CONTENTS

1 Introduction .................................................................................................................... 2

1.1 Amis & Objectives ................................................................................................... 2

1.2 M&S profile ............................................................................................................. 2

1.3 Identification of strategic change ............................................................................. 2

2 CSR stretegy – Plan A – Suitability analysis ................................................................... 3

2.1 About ‘Plan A’.......................................................................................................... 3

2.1.1 Climate change ................................................................................................ 3

2.1.2 Waste ............................................................................................................... 4

2.1.3 Sustainable raw materials ................................................................................ 5

2.2 Suitability analysis ................................................................................................... 6

2.3 Environmental analysis – PESTEL .......................................................................... 6

2.3.1 Political & Legal ................................................................................................ 6

2.3.2 Economy .......................................................................................................... 7

2.3.3 Social ............................................................................................................... 8

2.3.4 Technology ...................................................................................................... 8

2.3.5 Environment ..................................................................................................... 9

2.4 Strategic capability analysis - SWOT Analysis ......................................................... 9

2.4.1 Strength ........................................................................................................... 9

2.4.2 Weakness .......................................................................................................10

2.4.3 Opportunitie ....................................................................................................11

2.4.4 Threat .............................................................................................................11

2.5 Expectation of stakeholder .....................................................................................12

2.6 Evaluation – ‘Plan A’ ..............................................................................................12

3 E-commerce strategy – M&S Direct – Fealsibility analysis ............................................13

3.1 About ‘M&S Direct’ .................................................................................................13

3.2 Direction of Strategy development – Product development ....................................14

3.3 Method of Strategy development – Strategy alliance ..............................................14

3.4 Feasibility analysis .................................................................................................15

3.4.1 Internal issues to the organisation ...................................................................15

3.4.2 External issues to the organisation ..................................................................16

4 Conclusion ....................................................................................................................16

5 Reference .....................................................................................................................17

Bibliography ......................................................................................................................19



1 NTRODUCTION

1.1 AMIS & OBJECTIVES

The aim of this study will focus on the strategic changes that Sir Stuart Rose created these

main strategic changes since he became chairman of the Marks & Spencer Group plc in

2006. The M&S company profile and the chosen strategies description, follow by the analysis

and evaluation of the changes of these strategies.

1.2 M&S PROFILE

Marks and Spencer (M&S or “the company”), is one of the leading retailers of clothing, foods

and home ware in the UK market for approximately 125 years starting back in the 1880’s.

One of the key feature of M&S is up to 99.5% of their products are in M&S own labels or

brands. This action can deliver high level of customer satisfaction the loyalty.

M&S has gone through lots of changes in last century and has still maintained the brand

ethos it started from day one. However, company suffered from a main downfall through the

years of 1990. Soon after a new chairman Stuart Rose took over, who made the M&S revival

happen and created a successful vision bring back the company on track. He helped the

company to recover from a difficult time.

At present, the company has regained its initial position in the retailing market. The company

has reported to have more than 600 stores across the UK, with 21 million people visiting the

stores each week and thus a revenue growth of 4.0% from 2009/10 to 2010/11. Apart from

the company’s primary market in, UK, M&S also operates in 41 countries all of the world, and

employs about 76,000 people in 2010.

1.3 IDENTIFICATION OF STRATEGIC CHANGE

This report will investigate and evaluate the two main strategic changes introduce from M&S.

from the beginning of Stuart Rose’s era in 2006 up until the present time. Firstly, ‘Plan A’, a

campaign introduced to consolidate M&S’s position to become the most sustainable retailer

in the world through corporate social responsibility will be study. Secondly, ‘M&S Direct’, e-

commerce with the multi-channel business will be analysis.



2 CSR STRETEGY – PLAN A – SUITABILITY ANALYSIS

Each business unit or corporation develop their own corporate social responsibility (CSR)

strategy based around the brand value of trust. It is identified from a combination of customer

research, understanding within the business and by communicating with other key

stakeholders, government, etc. For each issue an action plan is developed which balances

customer and stakeholder expectations and other commercial pressures. (Article 13, 2005)

2.1 ABOUT ‘PLAN A’

The founders of M&S believed that building good relationships with employees, suppliers and

publics was the best guarantee of long-term success; and this became the backbone of its

approach to CSR strategy. Therefore, M&S launched and ushered a £200 million five years

eco-plan, 'Plan A’ – a strategy to reduce its environmental and social impacts and become a

more sustainable business – in January 2007 to acclaim by campaign groups Greenpeace

and WWF for its ambition and comprehensiveness. M&S has aimed their company at cutting

energy consumption, stop using landfill sites and stock more products with packaging from

recycled materials. (BBC, 2007) The project covers over 100 commitments aims to improve

performance and working with customers and suppliers in order to make a change to the

impact on five pillars, including: Climate change, Waste, Sustainable raw materials, Fair

partner and Health, by 2012; and were raised to 180 commitments in 2010, which expected

to be achieve in 2015. (M&S, 2011)

2.1.1 CLIMATE CHANGE

M&S’s performance against the 29 ‘Plan A’ commitments on Climate change, there are few

major goals which M&S aims to achieve under this pillar: To make the operation more

efficient; to reduce company’s and customers’ emissions among the supply chain; and

improving the efficiency of our energy use in stores and fuel use in transport reduces

company operation costs. As these resources will become more expensive in the future, then

the savings will continue to grow.

Carbon trust helps to estimate the carbon footprints and how efficiency of the actions to

reducing carbon footprints. General speaking, estimations of approximately total 7mt of Co2

are produced from the overall carbon footprint, 4.3mt from the supply chain, 0.7mt from M&S

operations, and remaining 2mt from customer and disposable use of products. Thus M&S

have then managed to identify key areas to change in supply chain to reduce carbon

footprint and other greenhouse gases, such as: energy use in building, logistics, food

manufacturing and gases in refrigeration units.



Energy use in buildings: The energy usage in M&S stores, warehouse, and offices account

for 70% of the total operational carbon footprints. ‘Plan A’ target to improve 25% by 2012;

with an additional 10%, which mean 35% overall, by 2015; by testing a hand full of selected

stores with energy efficiency innovation is the start and expanding nationwide if successful.

(M&S, 2010)

Fuel use in logistics: Fuel efficiency for deliveries has achieved the aim of 20% with a new

aim of 35% by 2015. Bio fuels are not so readily available and put on hold, but the change

will be monitored and change if it becomes more available. At the same time, M&S are

converting delivery fleets with cleaner engines by 2012, their EURO IV and V-engines. Since

2006/07 21% or conversions were available, 2009/10 risen to 84%. (M&S, 2010)

Refrigeration gas: HFC, hydro-fluorocarbons, is the gas currently used for refrigeration and

accounts for 20% of carbon footprints potent greenhouse gas. M&S aim to reduce their

carbon footprints in refrigeration systems by 50% by 2015, and by 2030 emitting zero gases

with the installation of HVAC systems in their units. (M&S, 2010)

2.1.2 WASTE

M&S classified their performance against 18 ‘Plan A’ commitments on waste, sending no

waste to landfill from the company’s operations, reducing packaging and carrier bag usage

and to help the customers recycle used M&S clothing.

Packaging : It is the largest single sector of plastics use in the UK as it is necessary on

product protection and customer attraction purpose. The sector accounts for 35% of UK

plastics consumption and plastic is the material of choice in nearly half of all packaged goods.

(Waste Online, 2006) Therefore, using less packaging and materials whilst still maintaining

quality saves costs. On the other hand, improving recycling rates and reduces the waste in

M&S own operations and productions process. It has been cost neutral but will avoid future

expense.

M&S target to reduce non-glass product packaging by 25% and use only recyclable

packaging by 2012. Moreover, use more sustainable raw materials in product packaging and

putting recycle label on to show is recycles. Between April 2007 and May 2008, company

managed to save 1402 tons of packaging. Enhancing and creating much more of a recycling

platform, May 2008 had reached to 74% with further 17% on food packaging. (M&S, 2011)

Waste & Resource Action Programme (WRAP), a government body, helps individual or

organization to reduce waste and recycle more. M&S labels all their products’ packaging with

the WRAP and ‘Recycle Now’ symbols.



Reduce waste from M&S: M&S aimed to ensure that their stores, offices and distribution

centre would send no waste to landfill. To achieve this, reduce and give alternative disposal

to the food waste that generate from the food production, by sending to compost and

anaerobic digestion; and to recycle the construction waste.

Helping customer to recycle: M&S introduces a range of recycling services for customers

including a project for used clothing, the M&S and Oxfam Clothes Exchange colleting 900

tons of clothing and home-ware products in 2010. (M&S, 2011)

Carrier bag: This is one of the major in retail’s expense but also cause lots of pollution to the

environment. Food packaging of major food retailers only 60% is recyclable, according to the

Local Government Association. M&S then launched a ‘No a Bags’ campaign and began to

charge 5p for their plastic carrier bags, due to the amount of waste that plastic is used and

produced, and an estimated 1,000 years to fully decay. But now the money gained from

every bag charged goes to an environmental charity called Groundwork, and also included

sending no waste to landfill by 2012. (BBC, 2008) At the same time, M&S making its

remaining carrier bags from recycled polythene which is biodegradable standard.

2.1.3 SUSTAINABLE RAW MATERIALS

Producing and harvesting raw material can damage the environment, therefore to ensure the

sustainability of natural resources will help to ensure the availability of high quality supplies

for M&S and future generations. This pillow will focus on several aspects: farming, harvesting

natural material, man-made material, animal welfare and water use, which are advices by the

expert stakeholder, e.g.: Rainforest Alliance (RA), Greenpeace, RSPCA, etc. As a result,

expect to make further improvements to the traceability of raw materials in company’s supply

chains and extend the range of food commodities covered by sustainability standards.

To work on sustainable farming : M&S engages their producers of fresh meat, dairy,

produce and flowers in the M&S Sustainable Agriculture Programme by 2012; furthermore,

by 2015, engaged farmers producing agricultural raw materials for M&S Food in the

programme. In addition, to work with RA to ensure wood is sourced responsibly; and by 2012,

all of our wild fish will come from the most sustainable sources available, working with WWF

to ensure that all company other fisheries have sustainable practices in place that respect

the natural environment.



2.2 SUITABILITY ANALYSIS

Suitability is chosen to be the criteria to evaluate ‘Plan A’ strategy. ‘Suitability is concerned

with whether a strategy addresses the circumstances in which an organisation is operate –

the strategic position.’ It need analyse if a company deals with organization’s key issue

underpinned by its strategic position. (Johnson, 2005)

In this process, environment, capabilities and expectation all have to be assessed ensuring

the evaluation avoids bias. PESTEL analysis will be view a plausible tool to assess macro

environment facing a company. SWOT analytical tool will pay more attention on addressing

and evaluate strategic fit between M&S’s internal environment and its external environment.

Internal environment consists of company’s goals and value, resources and capabilities. In

other word, SWOT analysis builds on the result of PEST analysis for the purpose of

identifying a company’s strength and weakness, opportunities and threat to evaluate the

suitability of strategies and changes.

2.3 ENVIRONMENTAL ANALYSIS – PESTEL

In order to maintain successful and profitable business, is it key to investigate and

understand the changes and complexity of the business, especially in UK retail industry

market which is constantly changing the commercial regulation and other environment issue

As to the macro-environment of the company, a PESTEL framework is utilized to list the

influence from the external.

2.3.1 POLITICAL & LEGAL

Political issues are concerned with the role of government, any retailers in UK or EU have to

follow and obey. When company set and adjust their strategies, political issues need to take

into consideration, as they will affect the economy, taxation, employment and public health.

This is closely link with the legal because is the base of setting rules and regulations.

Waste is one of the major problems that every city is suffering from, and also very concern

by the government. The amount of household waste generated per person per year in

kilograms in 2009-10 was 457 kg, of which 181 kg was recycled and 275 kg was not recycled.

(DEFRA, 2011) Therefore, taking a responsible approach to the packaging M&S use is a

fundamental part of Plan A. Responsible packaging is all about looking at the total picture:

not over- or under-packaging, and using the right materials from sustainable source, also

clearly identifying recycling process; aiming to product packaging by 25% and generate zero

waste.



Food safety is under the government law regulation, General food law, covers the main EC

and UK legislation on food imports and exports, safety, traceability, labelling and product

withdrawals and recalls, in order to provide the highest level of the safety and to minimised

the risk of food poisoning. Furthermore, fresh produce may have a stricter policy for selling

and storing. (FSA, 2011)

2.3.2 ECONOMY

Retail industry is the third largest employer in UK, generates around 8% of the country GDP.

The UK economy is recovering after recession. The rate of growth of the UK economy has

slowed dramatically, with GDP increasing by only 0.7% in 2008, and decreasing by an

estimated 2.6% in 2009. Quarter-on-quarter growth for the second quarter of 2010 was

comparable with the book times, though in part that reflected the impact of the bad weather

in the first quarter. In absolute terms GDP is still some 4.7% below the peak level of early

2008, having recovered about a quarter of its decline. And the GDP is closely and direct

proportion linked with the consumer expenditure. (Mintel, 2010)

Figure 1: Trends in GDP, PDI and consumer expenditure at 2009 prices, 2004-14

Source: Adapted from Office for national Statistics

Raising VAT up to 20% in January 2011, together with the high unemployment rate, 7.9%.

(Inspiresme, 2011) This lead to the people not spending money, tend to watch what they

spend and managing their money more efficiently. Beside, many stores had to close or shut

down from the low sales, evens large companies. M&S closed 27 stores because the

company having the worst sales performance for a decade, with sales approximately down



by 7.1% during the run up to Christmas. Within the closure of the stores there were also job

losses to 800 staff members. (Poulter. S, 2009)

2.3.3 SOCIAL

The population is ageing and over 65s become a fast growing proportion of the population.

That is bad news for retailers as the old eat less and spend less on food and drink.

Figure 2: UK: Over 65s as % total UK population, 1991-2020

Source: Adapted from Office for Population and census/Mintel

After recession, people tend to manage their spending more careful, become more price

sensitive in their shopping behaviour. Furthermore, customers try to seek or compare the

price of the products they want via Internet. Also customers may do their weekly shop

through the online shore instead of going into actual store, in order to save their travel

expense and getting more convenience.

2.3.4 TECHNOLOGY

Technology is vital in the retail industry nowadays. More elements are involves on the brand

positioning and the product, not only the core product, for example: advertising, promotion,

store layout and design, communication channels. M&S set out there revival of advertising

campaign by introducing key names and figureheads that ease to recognise on clothing and

food product, with eye catching and persuasive slogans and creative concepts to capture

consumers. (Sweney, M. 2006)



2.3.5 ENVIRONMENT

Global climate change: This is considered as an unstoppable disaster to the earth. The

1990s was the warmest decade in the past 1000 years. Unusual rapid warming increase the

average surface air temperature by 0.74oC globally and by almost 1oC in Europe over the

last 100 years. (EL, 2011) Increased concentrations of greenhouse gases especially carbon

dioxide can cause global warming. Therefore, reduce carbon footprint play a very important

role on slowing down the global warming.

2.4 STRATEGIC CAPABILITY ANALYSIS - SWOT ANALYSIS

M&S is one of the leading retailers of clothing, foods and home ware in the UK and all over

the world. M&S enjoys market leadership in clothing due to factor like range and quality.

However, the cost pressure due to absorption of increase costs of cotton and VAT hikes can

adversely affect the company’s margin. SWOT analysis is a use to specify internal and

external factors to achieve objectives

2.4.1 STRENGTH

Strong market position: M&S has a strong market position in the UK and is as a counted

among the leading in the general merchandise sector in the country. M&S saw increase in

market share in both value and volume. Biggest volume increase in sales recorded in

FY2008 in eight years’ time; in clothing and footwear with volume market share at 11.2% and

value market share at 11%. (Datamonitor, 2009) Its large networks of shores in the UK and

international markets support market leadership; 665 stores are operating in the UK and 291

stores internationally. (M&S, 2010)

Strong brand equity: M&S has been a strong brand for decades. It stands for high quality

products at reasonable prices with five key values: quality, value, service, innovation and

trust. M&S was ranked fifth in the list of Top Performing European Retail Brands for 2008,

had 5,100 million euro brand value, and is the third in general retailer sector. (Interbrand,

2008) By offering a wide range of private brand, the company’s brand image has been

strengthening. The strong brand image of the company aids customer loyalty and helps

promote repeat purchases, plus the company leverages its brands strength to easily expand

into new lines.

M&S etched a highly effective CSR strategy: M&S has to its credit an effective corporate

social responsibility (CSR) strategy, which gaining prominence among the stakeholder,

government and also customers. The successful of ‘Plan A’ helps M&S gives a responsible

retailer image to the public. The high profile presence of Plan A in advertising campaigns,



product labeling and store signage that gives M&S one of the best consumer perceptions of

a retailer for social responsibility and positive coverage.

‘Plan A’ has seen CSR become core to M&S’ principles in the eyes of the consumer and it

has reaped the benefits of this, gaining shoppers as a result and reportedly saving £50

million in efficiencies gained. (Datamonitor, 2010) M&S have introduced a store setup that is

sustainable to the environment. This is a key strength due to being the first retailer to being

sustainable and M&S have made their mark and carried the theme on with their product

packaging and fair trade goods.

The sustainability issues increasingly guide customer choices, M&S will benefit due to its

reputation of a responsible retailer.

2.4.2 WEAKNESS

Declining sales in UK: In the first two quarters of FY2009, M&S’s sales declined 1.1% in UK,

also recorded decrease of 5.7% in overall sales, 6.2% in general merchandise and 5.3% in

food. The UK being the major market for the company for the company with 92% share of

total revenues, declining sales would affect the company’s overall revenues adversely.

Weak cash position: M&S had difficulty from the recorded weak chase position in recent

years. The company’s operating activities cash declined from £1,435.1 million (FY2005) to

£1,069.8 million (FY2008), which may lead to short term liquidity problems, also affect the

company’s ability to meet its commitments towards its capital expenditures.

A decline in operating cash flow could negatively impact M&S’s liquidity and bottom line.

Limited online transaction: M&S online service is inferior to many other retailers in a

number of respects. Food cannot be ordered online and delivered to home from its website.

Only a section of general merchandise product is available. M&S does not deliver to

customers oversea. Delivery is either via the Royal Mail, or White Arrow courier service,

rather than by independent couriers, which offer higher service levels. Limited online

transactions could put the company at a competitive disadvantage.



2.4.3 OPPORTUNITIE

Competitive pricing: In order to increase the market share and attract a boarder ranger of

customers, M&S has reviewed its pricing architecture across product categories and brands

in FY2008. Competitive pricing might help in generating more revenues, since M&S respond

to changing customer demand and alter in economic situation, to offering products in various

quality ranges.

Growth in online retail spending: Online retailing plays an important role and grown at a

fast pace in today’s market; a figure was recorded in 2010 showing increased by 16% to

£57.8 billion from 2009. Online sales growth continues to outstrip high street sales by 12-

13%, according to the British Retail Consortium. Online channel become more popular as the

most preferred channel for several customers. M&S direct, the company e-commerce

campaign, was re-launched in 2007; together with the new ordering services, ‘Shop Your Way’

facility, allowing consumers to place orders in store, via internet or telephone. The growing

online channel will help the company’s revenues and targets.

2.4.4 THREAT

Intense rivalry and competition: UK food retailing industry in one of the most competitive

market, M&S remains a relatively low share compare with Tesco, ASDA and Sainsbury. The

intense rivalry between the players led to a price war in the industry. Moreover, the

expansion of some key players, such as increasing dominance of Wal-Mark in ASDA, brings

a growing pressure to the traditional supermarket channel, which may affect the operation of

M&S.

Increase minimum wage in UK: The adult minimum wage rate rose to £5.73/hour in

October 2008 from £5.52/hour in October 2007. The increase in labor costs would give

directly and adversely impact on M&S’ operating margins.

Increase in Value Added Taxed and cost inflation: VAT increased from 17.5% to 20%, as

a result, forcing the retailers to absorb the increased margin pressure from the high

production cost. A VAT rate of 20% would cut retail sales growth by 0.64%. (Datamonitor,

2009) The effect of raise VAT and cost inflation will conduct a squeeze to household cash

flow and discretionary spending, lower the consumer confidence. Consequently, M&S

consumers will cut back on discretionary spending and downgrade to a more value-

orientated food and general merchandise offerings, which impact the company’s sales

adversely.



2.5 EXPECTATION OF STAKEHOLDER

Owners, shareholders, boards, employees, suppliers, customers and the general public are

those who have stake and in touch with the organization. Therefore, the expectation of the

stakeholder is considered as a complex issue due to various stakeholder groups and the

organization ought to fulfill the groups satisfy as much as possible.

M&S needs to take the benefit and drawback of every stakeholder groups, also the

expectation, in the deep consideration. First of all, general public and customers will gain

benefit as this campaign would help to save the earth and community, hence lower their

accept barrier. No doubt it helps the company to earn more in long-term, shareholders and

owners will agree for further development. It benefits the employees by reducing their work

load in certain way and increases their satisfaction on working.

2.6 EVALUATION – ‘PLAN A’

The macro-environment, PESTEL, is uncontrollable factors, M&S then has to develop their

strategy base these factors. Then SWOT gives external and internal factors, where strengths

and weaknesses are internal; opportunities and threats are external. Base on this information,

the strategy has to stick together with the PESTEL and SWOT, to identify the strategic

change position as well as the modification along the process of the strategy. ‘Plan A’ is a

corporate level strategic change, not just for one store, it is for the whole group to operate.

Until FY2011, M&S achieved 95 commitments while 77 are on target in just over 4 years time.

(M&S, 2011) It proves that ‘Plan A’ is in a good progress and better than expectation.

Suitability evaluation is suitable for ‘Plan A’ because it analysis the environment which can

relate to them rather or not to expanse into more sustainable company. The evaluation

creates background researches which give them the reason to take forward.



3 E-COMMERCE STRATEGY – M&S DIRECT – FEALSIBILITY A NALYSIS

Electronic commerce is a about buying or selling of products or services via Internet network.

It enables company to attract wider target audiences who have different demographic, e.g.:

age, location and shopping habit It allowing M&S to sell its products to a whole new market

of potential customers rapidly. There is no limitation on geographic, accessibility and time on

customer shopping activities unless there is Internet access. Beside, M&S can also target

international customers.

3.1 ABOUT ‘M&S DIRECT’

The M&S first drove into e-commerce in 1999, tried to throwing off its old-fashion image

through selling product online. (BBC, 2000) However, the first launched considered as

unsuccessful due to low sales and limited online products catalogue, M&S then decided to

re-launch in March 2007, the ‘M&S Direct’, which has the widest selections of online clothing

in the UK – over 15,000 items – as well as 10,000 home-ware and technology products,

flowers, wines and exclusive online ranges, including jewellery. It was developed by the

company in-house IT team in partnership with Amazon.com, a successful online retailer,

provide the hosting and e-commerce technology behind M&S’s website, as well and

company’s customer services systems and in-store and telephone ordering in the multi-

channel. However, M&S will remain responsible for the management of the site, customer

services, and warehouse; and distribution operations. (Evans R, 2010)

In October 2009 M&S renew their website, responding to customer demands for a more

engaging, interactive web experience, including catwalk video, rotating image and the more

powerful search engine. Following the upgrade, the site was ranked the UK’s most user-

friendly retail website in the 2009 Webcredible survey, up from eighth in 2008. (M&S, 2010)

‘M&S Direct’ is key to improving customer convenience, service not just via website and also

the company newly launched‘Shop Your Way’ facility. The campaign focus on E-commerce

website, Home catalogue, Flowers & wine delivery, Hampers, Food to Order and lunch-to-go.

(M&S, 2009)

In order to make multi-channel more successful, as traditional online retail matures, mobile is

trend to become the growth area for online retailing. In May 2010, M&S become the first

major UK high street retailer to launch a mobile shopping site. Customers are able to search,

browse and buy their smartphones. The site is always in sync with the main M&S website so

that customers can log into their regular online account and manage their shopping basket

from their mobile. (M&S, 2010)



3.2 DIRECTION OF STRATEGY DEVELOPMENT – PRODUCT DEVELOPMENT

In order to strategic goal, strategy development needs to be determinate. Development

directions are the strategic options available to an organisation, in term of the

products/services and market coverage. To develop new e-commerce platform, it is

considers as ‘Product development’ section, which is about deliver new product to existing

market, in the Ansoff matrix. (Johnson G, 2005) The new product would be the M&S direct

which developed with Amazon.com from the old website; the existing market is the online

shopping customers.

Figure 3: Ansoff Matrix

Product

Existing New

Market Existing Protect/Build Product development

New Market development Diversification

Source: Adapted from H.Ansoff, Corporate Strategy, Penguin, 1988, Chapter 6.

3.3 METHOD OF STRATEGY DEVELOPMENT – STRATEGY ALLIANCE

Development method is the means by which any strategic direction will be pursued. There

are three types of methods: internal development, acquisition and joint development (or

alliances). (Johnson G, 2005) M&S had decided to choose to joint alliance with Amazon.com

to pursue the e-commerce strategy, hence to minimise the risk of failure, which the company

experienced from the first launched. The motive of alliances for M&S would be learning the

skills, technologies and management from Amazon and developing competences that may

be more widely exploited elsewhere, in a much shorter-term intention than internal

development.

The deal between Amazon and M&S is considered as a non-equity joint alliance. The

Amazon pact will allow M&S to remain more focused on its core operations. They cited the

fact that their website already attracts more than 24 million visits every year as proof that the

company is already successful online. (Hines M, 2005)



3.4 FEASIBILITY ANALYSIS

Feasibility means that the proposed strategies are capable of being carried out. In this

evaluate criteria, usually lack feasibility in three areas have to study: (1) constraints internal

to the organisation, such as company internal culture, skills financial, resource deployment

and other resource; (2) constraints external to the organisation, such as competitive reaction;

(3) lack of commitment from managers and employees. (Lynch. R, 2006)

To construct and set up an e-retailing channel is the trend of the retail industry and not

consisting huge among of investment. It is relatively low compare with the other channel. It

can also benefit M&S of doing internationalization in a faster pace. However, it is importance

to determine clearly whether an organization has the strategic capability to compete through

e-commerce, if not, the company unable to provide better service than the competitors and to

gain market share. Or company better staying off it and concentrate care competencies on

its traditional business model.

3.4.1 INTERNAL ISSUES TO THE ORGANISATION

According to M&S financial report from 2005 to 2007, M&S recorded positive rate of increase

on group profit and revenues. It has good and healthy financial support to invest on ‘M&S

direct’ campaign partner with Amazon.com.

Table 1: M&S turnover and profit 2005-2007

2004/05 2005/06 2006/07

Turnover (ex. Tax) £ 7,490.5m £ 7,797.7 m £8,588.1m

Group profit before tax £ 505.1m £ 745.7 m £936.7 m

Source: Adapted from M&S annual report

Analysis M&S’s multi-channel business continues to grow from the company introduced new

and more convenient ways to shop in 2007. Table 2 shows the figure of M&S direct multi-

channel sales, once the M&S Direct launched, the online sales boosted up 60% to £220m.

M&S reached and even excess £500m target sales by the end of 2010/11.

Table 2: M&S Direct sale since e-commerce launched and the end-of-year sales 2007-2011

2006/07 2007/08 2008/09 2009/10 2010/11

M&S Direct Sales £140m £220m £324m £413m £543m

Increase rate +60% +19% +27% +31%

Source: Adapted from M&S annual report



The improvements of the new design website in 2009 have also increased revenues, with

conversion rates up 9% since launch. Online clothing market share has also increased from

5.3% to 5.6%. (M&S, 2011)

The resource deployment level is low. As the technical skills was already ‘outsource’ to

Amazon, in-house technology and human resource requirement is become low and flexible.

The resources that M&S require were to enhance the delivery services and geographic

network; extra distribution centre might be needed as the company gain more market share,

expanse their business.

3.4.2 EXTERNAL ISSUES TO THE ORGANISATION

Customer acceptance can be seen is high level, from the high ranking of most user-friendly

retail website survey. For the Amazon, M&S e-commerce services provider is happy to work

with M&S as this is an opportunity for their company to develop Europe market and become

the foundation of base in Europe in the near future. However, e-commerce puts M&S into

competition of the online retail market. Players inside the market will try to perform as best as

possible to beat the competitors and gain more market share, since this is a price ordinary

market, for example: M&S renewed their website in 2009 to against competitor reactions.

4 CONCLUSION

There is not an ideal set of evaluation methods of strategies, simply because different

organization has different characteristics in terms of their size, management style, problems

and strength. (David, 2005) Different strategies in the company have to process smoothly

with each others, minimize the conflict between them.

To conclude, ‘Plan A’ strategy changes successfully lead M&S walking towards becoming

the most sustainable retailer in the world. It is working along with the environment factors,

without changing it strategic position. For e-commerce strategy, it shows a lot successful

than the first time launch, and have impressive profit was generated. The factors would be

the company learnt from the fail and the campaign fit the environment, to give the optimum

result.

Both strategies have the similar ultimate goal and direction. They react and coordinate with

each other, give a win-win effect and causal relationship between them. The more

sustainable the corporate is, the more profit they earn, and more they can do to save the

environment.



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Documents

BSP025 - Strategic Analysis