Strategic Management: Analysis of M&S Case Study - MBA 7002

This case study examines the problems faced by Marks and Spencer (M&S) in the early 2000s, focusing on leadership failures and turnaround strategies. The report analyzes the decline of M&S, attributing it to an inability to adapt to changing customer preferences and competition, along with a lack of innovation and a centralized management structure. The case study explores the leadership styles of Roger Holmes and Stuart Rose, comparing their approaches to revitalizing the company. Holmes focused on internal changes and product innovation, while Rose implemented more comprehensive strategies, including cost-cutting, store revamps, and brand building. The analysis highlights the challenges faced by M&S in a dynamic market and the importance of adapting to customer needs and fostering innovation to achieve success. The study illustrates how Rose's transformational leadership helped M&S overcome a potential takeover threat and regain market share. The case emphasizes the critical role of leadership in aligning organizational culture and strategy to achieve desired outcomes.

Case Study – Marks and Spencer

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Contents
Analysis and evaluation of problems at M&S in the early 2000s..........................................................2
Comparison of Turnaround styles of Holmes and Rose.........................................................................4
Conclusion.............................................................................................................................................7
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Running Head: Report
Analysis and evaluation of problems at M&S in the early 2000s
Leadership is the process of influencing people to align systems, organisational culture, and
its structure to ensure consistency with its strategy. It enhances the organisation by
empowering employees through partnering the decision making, thus helping the
organisation to achieve the desired outcome.
Until the 1990s, M&S was a successful business with substantial market share and profits.
The business was run on the remarkable lines of giving best to the customers, attractive
product line, quality control and well-knitted management –employee partnership. But by the
late 1990s, things started getting derailed for M&S with the coming of more ambitious
competitors like an oasis, who were bringing out better quality at the comparatively same
pricing. M&S could not sustain as it could no longer understand the needs of the customers. It
was more involved in the day to day operations rather than planning for long term strategy to
overtake the competitors. The result was that its competitors succeeded in overshadowing it.
New entrants were using technological advancements to their advantage, whereas M&S
depended upon the old methods of operations and management, which had an impact on their
effectiveness and efficiency. (Mellahi et al 2002, p23). In the global markets also, M&S
failed to use its brand name and could not establish its image. For instance, it did not change
the names of the US chains like Brooks Brothers and Kings Supermarket and carried on its
operations under their name, hence the company failed to create an impact on the customers
through its brand name, whereas the brand image is vital for businesses in terms of
marketing. Moreover, M&S could not perceive the overseas customer's needs and misread
the target markets. They continued on their formula of selling hi-end British fashion to the
customers who were now preferring casual clothes, as a result, M&S was losing its
marketplace. The CEO‘s at that time were more focused on the day to day operations rather
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than planning a long term strategy to overtake the competitors. The formula that worked in
the UK could not hold fast in the international markets. Hence, due to lack of experience and
more of a centralised management system, Marks & Spencer had to call back its overseas
expansion plans.
At home also, M&S proved to be insensitive to the customer’s tastes; it continued selling
products in the hope that the customers would buy them merely on the basis of brand loyalty.
When the women section failed completely, the company used a pricing strategy to sell
clothes on heavy discounts with the result of increased sales but only for some time. The
overall situation was still grave. On analysing the crises of M&S, the fact comes out that the
company failed to understand and timely respond to certain issues. For instance, M&S had
plenty of time to analyse the changing market trends. The reduced share prices between the
periods 1999 to 2004, show that they had enough time to read the markets and react to the
changes but they were slow to realise that and make the required changes that were
imperative for them to stay competitive. The company strongly believed in their British
values. They understood and reflected British culture very well. They provided what people
wanted, good quality products with reasonable price, this held true only until the 1990s. But
now, the M&S range was getting dull and boring. Suddenly people became more fashion
conscious as the trends changed from formal clothing to more casual .M&S failed to
acknowledge this, instead of flowing with the change, they resisted it whereas the
competitors were offering more stylish clothing ranges at the same price, as a result, the
business began to slip away from them.
In 2001, when Luc Vandevelde was appointed the new CEO, he was the first outsider to join
M&S. The company was struggling and needed some changes. His strategy to create a new
corporate image and to open stores outside the UK with a focus on local market needs was a
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remarkable effort. However, the profits still fell. The reason being that he focused more on
internal changes than looking at the externalities of the business. The successive CEO, Roger
Holmes tried to counter the situation by strategies like restructuring and introducing new
ranges with product diversification, overseas expansions etc, but all these strategies could not
work out. Roger Holmes focussed on the refurbishment of existing stores and introducing
new women clothing line. With new designs, M&S started showing an increase in profits and
share price. The company started showing signs of recovery, though Holmes saw that the
company was still dependent on traditional ways and did not encourage innovation among its
employees as the management still focussed inwardly and did not believe in open workplace
culture. The markets in which the Marks and Spencer operated were complex and dynamic
and encouragement of new ideas and innovations would have worked wonders for them.
Holmes decision to get back to the ‘passion for product’ and innovation in food ranges
worked to an extent but the major problem of ideas and innovations was still not catered to,
as is evident from the case that in 2003, most of the higher and middle management were not
happy with the progress .M&S had a complex business structure that was creating potential
problems despite many efforts from Holmes. By the end of 2004, the company gained some
market share but still, the clothing and food presented problems especially women and
children section. The company was still failing to understand the choice of customers. The
problems were also encountered in the idea of life stores, which too failed miserably, as the
products were perceived to be too contemporary and expensive. Even Holmes successor
Stuart Rose, made his top priority to reach out to cater to the requirements of the core
customers but he focused his efforts on improving organisational culture, its structure,
products, and costs and worked on values, which helped M&S to win back the lost
confidence and to come out of the quagmire by mid 2000s.
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Comparison of Turnaround styles of Holmes and Rose
Marks and Spencer had a tall structure with a customer-driven culture that worked towards
meeting customer needs. This management style was effective only until the late 1990s when
M&S started lagging behind in understanding the changing customer tastes and failed in their
analysis of market trends. A leader with insights of marketing and competition was required
to save M&S from the fate that it met by the end of the 1990s.Management or leadership
style within the organisation always plays an important role in order to make important
decisions, collaborating and consulting while implementing changes. The structure and
organisational culture together with management style help improve the way a company
works towards meeting its objectives. In the present case, it can be observed that even though
the management styles of the leaders of M&S were quite focussed and result oriented, but
due to traditional organisational culture and bureaucratic top management, it became difficult
for them to make quick decisions so as to respond to fast-changing external environments.
Roger Holmes had joined M&S in 2001 as Head, UK retailing. Though he did not have any
experience in retailing, he brought substantial profits and changed the image to the company
to a large extent. He started off as an aggressive leader, revamping and refurbishing the
stores. In the clothes section introducing, ‘Per Una’, a trendy women’s wear, proved to be a
hit. It boosted the women customer’s confidence and hiring talents like Yasmin Yousuf and
George Davis (Creative directors) was indeed a turnaround step. In Non –clothes section, he
showed an equally aggressive attitude by opening new several simply food branches, whereas
the already existing ones were revamped. He was showing ‘passion for products' and stuck to
the value-based management working hard to win the core customers back. In his first year as
head, M&S was already showing profits. He was described as being personable, bright and
intelligent as he had realised that the company had been more inwards oriented rather than
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being customer oriented. Taking a step further, Holmes introduced credit/loyalty cards to
leverage the financial services of the company that had been neglected so far. Another
evidence of aggressiveness and confidence of Holmes came with the hiring of Vitorrio
Radice of Selfridges to head the furnishings division.
Holmes demonstrated emotional intelligence when despite so many efforts, the profits
remained low. He had realised that the customers were not turning back to M&S because
their trust had been damaged as they were not getting what they wanted; hence they turned to
other retailers. To counter this situation, Holmes promised to improve, products, supply
chain, stores and operations, demonstrating contingency style of leadership. Hence he started
including people in idea creation, participation and involving them in decision making. Thus,
M&S started innovating again with new products ranging from seam-free underwear to more
fashionable women's wear. New ways were adopted in which clothes were presented, where
customers were encouraged to buy the entire outfit instead of a single piece. Many similar
initiatives were also taken in non- clothing section too but due to underlying problems in the
management, Holmes could not bring M&S to the path of full recovery.
Stuart Rose, on the other hand, came to M&S with a track record of turning around the
fortunes of struggling retailers like the Arcadia Group. As soon as he entered M&S, profits
started to show an increasing trend. His approach right from the beginning was of that of
contingency in order to uplift the deteriorating situation of the company. His style of
management was mixed as a task-oriented leader and ethical which is highlighted in his plan
for 100 per cent commitment to achieve in five years along with waste reduction and ethical
trading. Rose proved to be the master of ‘turnaround’ and with his policies which provided a
competitive advantage to M&S through cutting up prices, revamping the stores, and building
the brand image through advertising and media involving the celebrities. Thus, Rose
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displayed being a transformational leader by bringing about so many changes in the
organisation. Stuart rose can be viewed as the instigator of M&S's remarkable revival which
was a symbolical event when the company was under a threat of potential takeover from
Philip Green, a billionaire whose final biding on shares was 400 pence, but under Rose's
dynamic leadership the share price had been lifted high above this amount. This risk-taking
quality and authentic management understanding helped Rose to steer M&S from the
takeover threat. Green had also done a huge favour for Rose by bringing up the take- over
crises as Rose could demonstrate autocratic leadership qualities when most of the members of
the board were unhappy with his remarks to bring about changes in the organisational culture.
He cut down on management tiers, making the decision-making process faster and smoother.
He had the ability to take on the criticism openly as the critics still described the clothes drab,
unappealing and confusing. He confessed that innovation was still missing as the
communication was absent with the employees who did not understand or associated with
M&S and hence failed to deliver or participate. In order to encounter this, Rose spent a huge
amount on employee training to inculcate the ‘can-do' attitude among them. Moreover, being
an authentic leader, he knew what he wanted, what he believed and what values he needed to
percolate down to the employees. With, this he could manage to act on his values and beliefs
openly and honestly. Rose by his efforts thus showed that he was passionate about making
M&S a success again.
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Conclusion
Though the leadership styles of both Roger Holmes and Stuart Rose were different, they were
successful in bringing M&S out of the situation it faced in the late 1990s and early 2000 as is
reflected by the company’s swift turnaround. They both changed the organisational and
financial picture of M&S and more significantly they worked on values and qualities that
customers associated with their brand. Their success was due to the combination of skills of
existing experienced employees of M&S and the new talents and ideas they brought in.
Another factor that corresponded to their revival plans was to listen to their customers and
responding to it. Marks & Spencer has always had a special place among the British buyers
and the customers also tend to be loyal with the brand name. No matter, how M&S failed to
deliver and the customers punished them by turning away, but the vast majority were waiting
for the excuse to come back and desperately wanted M&S to succeed.
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