Global and Transnational Business: M&S Market Withdrawal Analysis

This report examines the international market activities of Marks & Spencer, focusing on its withdrawal from various global markets, particularly China and France. It delves into the reasons behind these strategic decisions, including entry modes, market structure, demand conditions, and the lack of localization. The analysis incorporates Porter's Five Forces to assess the competitive landscape and obstacles faced by M&S. The report explores specific challenges related to design, store assortment, and the company's inability to adapt to local consumer preferences. It also discusses the impact of factors like the bargaining power of suppliers and buyers, the threat of new entrants and substitutes, and the level of rivalry among competitors. By examining these elements, the report provides a comprehensive understanding of the complexities of global business expansion and the critical importance of market adaptation. The report concludes with recommendations for potential re-entry strategies for M&S in the future.

Global And
Transnational Business

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Why Marks and Spencer withdrawing from international market..............................................1
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Global business is an economy activity which takes place across different countries. The
transnational business is also known as multinational corporation which has home base but it is
registered, operates and has is assets more than one country at a time. There is neck to neck
competition in the market so to overcome these competitors businesses are going global. But the
bitter truth is that, it is not easy for organisations to access and sustain in global market due to the
certain reasons like competition and cultural differences etc. But on the other hand, it can be said
that the transnational and global business gives an opportunity to businesses to grow
substantially and expand their market share. To better understand this concept, Marks and
Spencer case has been analysed. It is a British multinational retailer which deals in selling
clothes, home products and food products.
Analysis regarding withdrawing of Marks and Spencer from international market by
examining market structure and demand condition is being discussed in this report. Apart from
this, entry modes the company adopted, barriers which company faced, theoretical framework
and external and internal factor which affected business is also analysed and discussed in this
project. On the basis of above analysis, the recommendation has also been made for company
regarding re entry in this report.
MAIN BODY
Why Marks and Spencer withdrawing from international market
The Marks and Spencer was founded in 1884 in UK with aiming in textile retail sector. In
year late 1990's company planned to go global in order to expand their business and maximise
their revenues. It was the first British retailer which has made around GBP 1 billion pre tax profit
in 1998. But by year 2000's company has started closing its stores in international market due to
heavy losses.
Withdrawing from market is very tough for the companies as they invest huge amount in
for starting its operations. So it is very important for business organisations to outline their
strategy according to market needs so that company can survive for long time period in market
place. There can be various reasons for company to close down their store in such huge numbers.
As it is very difficult for the organisations to access and sustain in global market which can be
seen from action of Marks and Spencer which they have taken in previous years (Toffel, Short
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and Ouellet, 2015). The company is operating its business operations globally due to some
reasons Marks and Spencer is withdrawing from some of foreign markets like China, France and
Scotland. In these three countries, company was not performing up to the mark so management
head has taken the decision to shut down their stores. China is a big market from which Marks
and Spencer is closing the store. As there might be various reasons that company could not
sustain in the China market.
Reason of Marks and Spencer failure in China:
The Marks and Spencer entered in the China market in year 2008 and opened it first store
in China. After than it has expended their stores and opened 16 stores in 8 cities. The main
reason for entering in China, due to ample number of middle class population company looked
for better opportunity to grow (Stone and Ladi, 2015). And China had the rapid growth rate also
so company thought they could grab more market share. There were some reasons due to which
company withdraw from the market these are as follows:
Entry Modes adopted by Marks and Spencer in China:
The Marks & Spencer had entered in china market as wholly owned subsidiaries which
causes the biggest failure for company. As company was not able to attract local Chinese
consumer which leads to biggest failure and finally company had to withdraw from country.
Market structure:
The market structure refers to the various number of firms manufacturing same goods
and services in the market and whose structure is decided on basis of competition which is
available in market. There is four type of market structure which needs to be analysed by every
company before entering into new market. The China has perfect competition market and M&S
had to analyse this and than according to that planned their strategy. So the company could not
able to assess that which caused big failure for them and company had to withdraw from the
market.
Demand Condition:
The demand condition of a country make huge impact on the performance of company.
Marks and Spencer has faced several problems while entered in china market and this is one f
them. Company has experienced a dip in its performance which considerably lower than they
expected. The outlet opened in the Mainland China was not able to fulfil needs of Chinese
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customers and it could not identify customer preferences in market. As for example, company
could not able to deliver garments of smaller sizes which is preferred by the customers in china.
Lack of Localisation:
This is also an another reason for withdrawing from international market as company had
preferred to enter as wholly owned subsidiary in country due to which it has bear huge loss and
could not identify and fulfil customer needs. The lack of localisation is one of the biggest reason
for company which causes to loss. To attract and grab the local customers it is very crucial for
organisations either do a proper local market research or make tie up with local brands which
have knowledge about taste and preferences of local consumers (Robinson, 2015).
Assortment and size of store:
This is very important for company to do proper assortment according to the customer fit.
The Marks and Spencer was failed to tailor its apparel product to Chinese body shapes and style
preferences. So the customers of country did not fit the product according to their body shapes
and due to its uncomfortable fit customer of china did not adopt the company's product.
Company was stuck to their huge department store format similar like UK but it was not enough
to capture the enough traffic. And in the china company has opened its store far from town which
made trouble for the people to visit store and buy products. And company had also not strong
online presence in that market.
Porter Five Force Theory:
The theory states that there are five forces which determine the competitive magnitude
and attractiveness of a industry. Porter's five forces helps to recognise where ability lies in a
business condition. This is helpful in both understanding the strength of company's current
competitory position and the capability of a position which a organization may look to move
into. Porter's five force assist organisation to become aware about their competitors and than
according to that plan their strategy. This theory also enables business to understand where
power lies and can also be utilised for recognising areas of strength, to improve weakness and to
avoid mistakes. The Marks and Spencer could used this theory before entering into China market
and this could help them to better understand this market and plan their strategy for local market
according to their needs.
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An industry with low restriction to enter, having few buyers and suppliers but many
substitute products and competitors will be seen as very competitive is considered as unattractive
due to its low profitability (Prügl and True, 2014).
Attractive Industry Unattractive Industry
High barriers to enter in market Low barrier to enter
Supplier has weak bargaining power Strong supplier bargaining power.
Low competition high profits High competition low profits
Few substitute products Many substitute products.
(Source: Porter Five Force Model)
Threat of new entrants:
This force helps to determine that how easy or tough to get started in a particular
industry. When there is more number of organisations compete for the same market share than
profit of that industry start to fall. It is important for existing organisation to create high barriers
so that it can create barriers for new entries. There can be some reason due to which threat of
new entrant would be high, these are as:
 Low customer switching cost
 Identical products
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 Economies of scale can be achieved easily.
As it can be seen that there is high threat of new entrants in china market so this can be
one of that reason for the Marks and Spencer to withdraw from country.
Bargaining power of suppliers:
It depends on number of supplier of each essential input, uniqueness of their product or
service and cost of switching from one supplier to other supplier. The strong bargaining power of
suppliers enable supplier to sell the raw material at high prices to buyer. This makes direct
impact on the buying organisations as there profit will be less because they are paying more to
their suppliers.
Buyers bargaining power:
This states that to how much extent the buyers can bargain from organisation. The
customers of China has the strong bargaining power because there are many substitutes and
switching cost is low which ultimately led to losses for M&S in china (Hahn, Müller and
Wehrhahn,2013).
Threat of substitutes:
The theory helps business to identify threat of substitute which can make impact on
company's profitability. This force is threatening when buyers can easily find substitute products
at attractive price or better quality and customer switch to that product. As in china there is local
manufactures which provides low cost and fit products to their customers. So M&S had also
faced this threat of substitute from local supplier and which ultimately led to heavy losses.
Rivalry among existing competitors:
This is force which show the competitiveness and profitability of an industry. In the
competitive industry firms are supposed to compete very aggressively for the market share which
result in low profits. In china market, there were already many competitors and due to
competition customers were not loyal to M&S.
So with the adequate use of this porter five force theory company could came to know
regarding various things which could help organisation to frame their plan and policies
accordingly.
Obstacles faced by Marks and Spencer in China
Design:
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The Chinese customer thought that production of M&S in China was too English, old
fashioned clothes and size was not fitting to the local customers. Apart from this the company
was paying too much rent for its flagship store in West Nanjing Road, China due to which
company could not make its expected profit also. (Weidtmann, 2016).
Reason for withdrawing from France:
The Marks and Spencer is an international retailer which has its store around the world
and recently company has withdraw from China and after company has announce to withdraw
from many other countries and France is one of them. The company had opened their store in
Paris, France in 15000 square foot in most famous tourist streets of Paris and company had
expected huge amount sales but it could not achieve the pre set target. As company entered in
France due to significant purchasing power, large population and developed infrastructure and
expect to get growth in market. The various reasons for failure are discussed as below:
Market structure:
The market structure helps to identify the potential customer of company and than target
these customers with adequate strategies. Marketing structure of M&S in France was, they made
up their focus on the both clothing and food items which did not work well for them. The
company could not done proper customer segment due to which they faced heavy losses and
withdraw from the market.
Demand Condition:
Demand condition refers to the generally when a particular product is larger locally than
in foreign markets, the local firms are more able to give more attention to that product than
foreign firms. It is very important to understand local demand of particular product by the
company so that they can fulfil customer need and want accordingly. The Marks and Spencer
could not grab the luxury market of France due to gap in product demanded by customers and
supplied by company (Elias, 2013).
Entry mode adopted by company:
The entry mode refers to the medium which is used by companies to enter in new market
and to be more competitive in the market. In the France company went as sole proprietorship and
did not made any kind of tie up and acquisition which also a strong reason for its withdraw.
Lack of market survey:
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The market survey plays an important role for organisation while starting new venture as
it enables the business to become aware about latest trends, demographics of customers, taste and
preferences of customers etc. The France has strong GDP and sufficient purchasing power which
shows that consumer of country can spend on the quality products. It has been observed that
France has more old age customers in context to young age groups. The Marks and Spencer
could not understand customer needs and wants according to demographics so ultimately they
bear losses for their outlets. Apart from this, there were other brands like ZARA which were
targeting large number of population according to demographics.
Apart from this there are some external factors which made impact on the M&S business,
these are discussed as below:
Source : PESTLE Analysis, 2017.
Political factor:
Political factors are those factor which are related with political stability, tax policies of
country and other trade policies of country make directly impact on the business of
organisations. Recently BREXIT has bring the uncertainty in every business which were
operating in UK and Europe. So this exit has made division of public on countries and ultimately
it has made impact on the operations of Marks and Spencer in UK and Europe (Cho, 2012).
Economical Factors:
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Economical factors are those which are related with economic condition, growth rate,
unemployment rate, interest rate and economic stability of country. The recent economic outlook
was not so good of country which led to many brands to shut down and withdraw from the
country. As unfavourable economy of France was not suited the Marks and Spencer due to that
they have faced consecutive losses. The company was still tried to run their stores at losses but
continuous losses leading to high expenses for company which ultimately forced them to close
down their stores.
Social factors:
The social factors are those which are concerned with society taste and preferences,
demographics, gender and culture of country make direct impact on the business organisation.
The France has more population of old age group in compare to younger age group and Marks
and Spencer could not identify their focused group clearly which clearly made impact on their
business in France and led to losses in the business. It is very crucial to identify this external
factor as it is directly linked up with demographics and needs and wants of customers.
Technological factors:
Technology is very vital and with latest technology one can enhance their business and
maximise their profits. The Marks and Spencer could not adopt new technology and also did not
bring attractive online platform for their customers which dissatisfied customers of France and
company faced major losses. The social media was a better tool which attracted most number of
consumers but due to weak online presence company could not settle their foot in France
(Bartley, 2014).
Legal factors:
The laws and regulations are governed by the government of country which needs to be
followed by the every organisation in order to smooth functioning of their operations. The legal
case between Interflora and M&S has made direct impact on the business company and company
had also faced some losses.
Internal factors:
The strength and weakness of the Marks and Spencer in France is described below:
Strength Weakness
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The company had offered latest industry trend
to customers.
The company had poor financial performance
in the market.
Strong infrastructure As it did not undergone for market survey in
order to identify its targeted customers.
High effective corporate social responsibility Too much reliable on UK markets which made
it assailable for the local market.
Mainly focused in enhancing customer
experience
As company was frequently recalling its
product due to which customer lost the faith
from brand.
As from the above analysis it can be seen that company had various weaknesses which
could not identified by company.
Withdraw reasons from Scotland:
The Scotland is the third big foreign market from Marks and Spencer had withdraw from
market. As company was continuously facing losses in the region and due to weak logistic the
Scotland market did not turn well for company and finally it has withdraw from the country as
per their restructuring strategy. There is various reasons which forces company to withdraw form
particular country. These are discussed as below:
Demand condition:
The demand condition of country makes the direct impact on the business of
organisation. Before entering into new market, it is very crucial for the business to analyse the
present market condition and need and demand of customers so that company can make strategy
accordingly. The Marks and Spencer could not analyse Scotland market completely which
worked as loss for them and finally they had planned to withdraw from these markets
(Barkemeyer, Preuss and Lee, 2015).
Internet world:
Internet has made it very easy for the users to shop, compare prices and access fashion
around world. This internet world has made huge impact on the business of Marks and Spencer
and due weaker online presence company could not sustain in the market. As people of Scotland
accessing fashion and other apparel items from all around the world. So it has forced the
company to close their stores and withdraw from region as a part of their restructuring strategy.
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Too many shops:
There is huge competition in the fashion market and trends are changing everyday so
Marks and Spencer could not cop up with the customers taste and preferences which directly
made impact on profitability of company. And apart from this, the local stores were also
penetrating market by their low prices and better quality.
Weak logistics:
The weak logistic was a major concern for the Marks and Spencer in the particular
country so due to weak logistic the supply chain of company was disrupt and company was not
getting latest and sufficient material for their stores which ultimately led to not fulfilment of
customers need and want (Arnold, 2013).
Ansoff Matrix :
Ansoff growth matrix refers to the strategic planning tool which provides a framework to
assist company person for the future growth. The matrix is related with the Marks and Spencer
withdraw from the Scotland.
Source: Ansoff's Matrix, 2017
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The matrix talks about these four strategies and most difficult part is that to select the one
out of these four. The Marks and Spencer could not adopt the any one of them that is the reason
company went for withdraw.
Market Penetration:
The market penetration is strategy which is used by the company when the organisation
has an existing product with an existing market and company look for a growth strategy within
the market. The company could not able to penetrate in the Scotland market and could not able to
sold the product of company in the market which led to losses for company.
Market development:
The second and the important market expansion and growth strategy within the Ansoff
Matrix is known as market development. This method are basically used by company when they
wants to enter new market with the product that are already soled by them in other market or
countries. In case if company are not able to analyse the market condition and needs than it will
not be easy for them to develop in new market. There are various example such as Mark &
Spencer enter with their existing product and services in new developing country “Scotland”. So
manager of M&S are required to understand the taste and preferences of people living there and
develop market accordingly. As a result management of M&S are not able to analyse the market
condition they have to withdraw their plan of expansion business in Scotland.
Product development:
This method is related to developing and introducing new product with advanced feature
and innovative design that fulfil the needs of people. Company with good customer base needed
product development as they knew that old product have reached saturation. In case if company
are not able to produce new product then they may loss their customer base and reduce goodwill.
In case of Scotland the main reason of withdraw by Mark & Spenser is that people are
demanding goods with extra specific features and quality. In order to fulfil these demand M&S
require huge cost and large workforce to produce goods. Thus they decided to withdraw from
Scotland (Anseeuw and et.al, 2012).
Diversification:
This strategy of Ansoff matrix state that when company wants to enter in new market and
wants to introduced into new market is known as diversification. In case of Mark & Spenser if
they want to increase their market share and customer base. Management have to focus to
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produce new goods and introduced them in fresh market so that profitability can be increased.
But if M&S do not produce new good and keeps on selling same product then customer may
move to new company in order to get maximum satisfaction.
Based on the above analysis it can be said that Marks and Spencer could have done better
in international market. The company had recently withdraw from many foreign market due to
heavy losses. As company could not fulfil the customers needs and demand and apart from this
there was various reasons such as market structure, demand condition and poor strategy which
led to heavy losses for the company. The company could use the Ansoff's growth matrix,
PESTLE analysis and Porter's Five force model in order to be sustain in the foreign market.
These strategies could be very beneficial for the company in order to do better in the market and
grow their market share. As in China company was not able to identify its threats so with help of
generic strategy company could recognise their threat and according to that they can plan for
their strategy to satisfy customers.
Recommendation for Marks and Spencer for re entering in China
The Marks and Spencer had invested huge amount in china market and also expected the
better return from market. But due to various reasons this could not be achieved by the company.
There are various strategies which can be used by Marks and Spencer in order to get success in
future in china market (Abbott, Green and Keohane, 2016).
The big mistake which company had done in the china market was that they have not
made any tie up with local seller due to which they could not identify local customers need.
Mode of entry:
It is very important for big companies to select adequate mode of entry for their new
market in order to grab sustain in the new market. As previously company went as sole owner in
the market but if company re enter in this market than they should go for the joint venture with
local brand so that they can come to know regarding the customer preferences and serve better to
customers.
Better supply chain:
As previously company was lacking their supply chain which made negative impact of
the company in mind of China customers. The Marks and Spencer will use the Just in time
management system in order to cut their warehouse cost and increase their profits in the China
market.
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Proper analysis of the market:
This is very important for the company to proper analyse the market so that they can
know about the customers taste and preferences and provide the customer demanded product. As
previously company was not providing the product according to their fit. So in future company
will do the proper analysis of market so that the marketing need can be satisfied.
CONCLUSION
In the conclusion it can be said that the global and transnational business is trending now
a days and companies are going global in order to get more market share. The companies are
withdrawing from foreign market as due to various reasons such as improper market research
and other external factors. It is very important for organisation to adopt some theory or strategy
while they enter in the new market so that goals of organisation can be achieved efficiently. The
company can re enter in the market by use of proper strategy so that they can successfully stable
in future.
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Ansoff Matrix. 2019. [Online]. Available through:<https://www.smartdraw.com/ansoff-matrix/>
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