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Report: Financial performance of Marks & Spencers

Company Background
With 520 stores in UK , 219 worldwide franchise stores, 13 company stores in Republic of Ireland, and 8 company stores in Hong Kong and seventy five thousand employers for 11 million shoppers a week, Marks and Spencer is a respected organisation and amongst one of the High Streets big brand names. Marks and Spencer group was founded as Marks and Spencer group plc in a partnership in the late 19th century. With 7.1% of the international business turnover of the group. Marks and Spencer is today UKs one of the top brands trading in retail, clothing and financial services. Marks and Spencer made its position in the market in its early days with the slogan and quality of using only British made products. Marks and Spencer group plc has been listed in the London stock exchange with approximately 230,000 shareholders. In 2006/07 Marks and Spencer recorded with the sales of eight and a half billion and a profit of nine hundred and sixty five millions therefore In means of size Marks and Spencer holds the market share of up to 11% as the leading cloth retailer and food share of 4.3% in UK. In its annual report of 2007 Marks and Spencer published its report entitled How do we do Business, In this fourth edition of the Marks and Spencers annual report addressing environmental, social and ethical performance of the company in which the company brought a light on to the problems regarding to the corporate social responsibility with the companies launch of plan A which was a 200m environmental eco friendly plan for the next 5 consecutive years brought forward in Jan 2007.

However, the days when Marks and Spencer used to rule over the market and was unchallenged from its competitors have gone long back as the market in the clothing sales have taken over by Next and ASDA and the food retail section has been captured by TESCO. The last five years were the years of drop down of its economy steadily because of the changes in management and corporate structure behind the substantial turn down in sales. The company which used to be a worldwide leader in food and clothing quality and was known for its boycott products is now a comparatively blurred in the UK stock market. This fall down of the company began in 1990s because of the renaissance, westernisation and economical demand. The How do we do Business publication is well addressed in this report, and the managing accounting of Marks and Spencer is assessed with regards to the corporate responsibility matters, ethics in business, benchmarking opposite to similar companies and within the retail sector.

Role of Management Accounting


The main principle of management accounting in any company is to sustain competitive decision making by processing, collecting and communicating information that aids in management plan, evaluate and control company strategy and business processes. Management accounting does not needs specialization as there no actual person with the designation of management accountant in any company except in very rare cases, mostly the financial accountants acts as management accountants and also sometimes seen by cost accountants, tax accountants and internal auditors. To cover more share than product costing is the necessity for a good management accounting as it an important ability for many company executives and professionals including finance professionals, marketing and operational managers, information technologists and top level executives. The controller is the individual in most of the large scale company who is responsible for the much of the management accounting comes under the leadership of this top accountant in the company known as the controller. The chief financial officer (CFO) is the president of all the management accounting operations in the company who is reported by the divisions vice president who is again followed by the controller. All these accounting managers are the people who are responsible for the flow of good accounting information and controls planning, control and evaluation work that is done in the organisation.

Analysis of Marks and Spencers

Information needs: The company Marks and Spencers is suffering a loss in its sales because of coming of the new competitors with new strategies and westernisation for its customers, but on the other hand Marks and Spencers are running through their old marketing plans and strategies and not summing up the information collected as feedbacks or customer satisfaction reviews in betterment of their condition. The main loophole in M&S is has the less variety of products and have a common perception among the people of having expensive items. M&S also needs to work out for its environmental degradation which is the headache for the government, for reducing the smoke emission tax paid by the company and making some profits. M&S needs the information from its customers to improve its services and the only way of getting it is through is organising open days, camps and taking feedbacks and reviews about its products and services.

Management accounting techniques: Some of the management accounting techniques which should be used by M&S to get a financial and economical benefit to the company through changing its plans and strategies. Are: The make or buy decision: A decision which address about that a the company has the profit in producing the product internally or outsourcing it. As M&S have the rule for producing everything with the items made only with the British material, it is not able to grow and expand its scales beating its competitors like TESCO and Sainsbury which can only happen of M&S starts buying some of the intermediate products from outside supplier. Just in time method: This is an inventory system in which production tends to 2|Page

equal sales. Therefore the difference between variable and absorption tends to disappear. Inventory method: The overall aim of the inventory method is to minimise total inventory costs, In this method the product chain starts from the supplier which is then passed on to the distributer and finally to the customer the distributer in between does the other operations in between as purchasing operations and sales. The benefits from the inventory method are quantity discounts on purchasing the products in bulk, avoid disturbances, hedge against inflation, meet unexpected demands as like it is very difficult for M&S meet the special demands of the customers in the particular products while producing it for the others and marketing it, while some of the reviews to be kept in mind while ordering may be when and how much to order, buffer stock, maximum inventory and how often to have a review in stock. Budgeting: The plans which may help M&S the most if have been reviewed by experts and future plans of the company may be defining goals and objectives of the future marketing, means of allocating resources, uncovering potential bottlenecks, coordinate activities or communicating plans. Budget planning by the expert management accountants may result for the company to make profits and holding up power and a larger share in the market. Variance analysis: variance analysis is the measure of of the capital expenditures in the different stages of the manufacturing of product. They are generally of three types the first is the material variances this is the amount measure by the management accountants on money spent on purchasing the products, the second is the labour variance and the last one is the factory overhead variances is the amount which is spent in maintenance and development of the factory. Activity based costing(ABC): This is designed to provide managers with cost information for strategic and other decisions which potentially affects capacity and therefore fixed costs. Enterprise cost management: Cost is the major entity in product design state, the maximum part of the products cost is calculated early in the design process, optimising design by sharing technical manufacturing, and financial information, it also does encourages product design decision making. Includes processes, methods, tools to help the production of the product definition to process during all phases of the program.

Strengths and Weakness


Strengths: M&S has a good variety in food items, clothing, wines and financial products, in past it has also been the largest retailer in UK to hold the largest share in the class of retail and home based products, of course M&S is expanding its company turnover and profit ratio year by year since its decline in the late 19th century by the coming of the TESCOs and Sainsbury. The most important entity of the company for the running of the company products was its boycott policy of using only British made products, and concentrating on the quality of the product more than its quantity. M&S in the past also did believed in innovation and new products and items. Weakness: The reason for the companys failure in the market these days is only because of the presence of the more effective competitors like TESCO and Sainsbury which have comparatively vary large variety in retail market and because of their reasonable prices. Moreover, M&S also has a very common perception among people regarding its products high prices, and the difference in customer hospitality. Another weakness of the company is the threatening from the government because of its very large production and share of pollution in atmosphere. The company has also been penalized several times because of spreading pollution in the environment because of its not using the renewable sources of energy.


Annual report and financial statements 2010 (Report). Marks and Spencer. 2010. 2010. Retrieved 26 December 2010. The History of Marks and Spencer". BBC News. Retrieved 18 April 2011. Time Magazine - Business: Marks & Sparks Trades Up, 28 November 1977 Marks & Spencer: A Recent History Telegraph. Sunday Business Post | Irish Business News". 2 November 2008. Retrieved 7 November 2009. News : Lewis, Heikki and M&S take over Westfields in London". Lewis 19 September 2009. Retrieved 18 April 2011. Rachael Worth (2007), Fashion for the people: a history of clothing at Marks & Spencer, berg editorial offices, oxford, UK. cture=335557023&index=0.