10BSP028 Strategic Management

Marks and Spencer Group plc: Strategic Changes

B016178 C H LIU 8/19/2011

Marks and Spencer Group plc: Strategic Changes

CONTENTS 1 Introduction .................................................................................................................... 2 1.1 1.2 1.3 2 2.1 Amis & Objectives ................................................................................................... 2 M&S profile ............................................................................................................. 2 Identification of strategic change ............................................................................. 2 About Plan A.......................................................................................................... 3 Climate change ................................................................................................ 3 Waste............................................................................................................... 4 Sustainable raw materials ................................................................................ 5

CSR stretegy Plan A Suitability analysis ................................................................... 3 2.1.1 2.1.2 2.1.3 2.2 2.3

Suitability analysis ................................................................................................... 6 Environmental analysis PESTEL .......................................................................... 6 Political & Legal................................................................................................ 6 Economy .......................................................................................................... 7 Social ............................................................................................................... 8 Technology ...................................................................................................... 8 Environment ..................................................................................................... 9 Strength ........................................................................................................... 9 Weakness .......................................................................................................10 Opportunitie ....................................................................................................11 Threat .............................................................................................................11

2.3.1 2.3.2 2.3.3 2.3.4 2.3.5 2.4 2.4.1 2.4.2 2.4.3 2.4.4 2.5 2.6 3 3.1 3.2 3.3 3.4

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

Expectation of stakeholder .....................................................................................12 Evaluation Plan A ..............................................................................................12 About M&S Direct .................................................................................................13 Direction of Strategy development Product development ....................................14 Method of Strategy development Strategy alliance ..............................................14 Feasibility analysis .................................................................................................15 Internal issues to the organisation ...................................................................15 External issues to the organisation ..................................................................16

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

3.4.1 3.4.2 4 5

Conclusion ....................................................................................................................16 Reference .....................................................................................................................17 Bibliography ......................................................................................................................19

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Marks and Spencer Group plc: Strategic Changes

1 1.1

NTRODUCTION 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 1880s. 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 companys 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 Roses era in 2006 up until the present time. Firstly, Plan A, a campaign introduced to consolidate M&Ss position to become the most sustainable retailer in the world through corporate social responsibility will be study. Secondly, M&S Direct, ecommerce with the multi-channel business will be analysis.

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Marks and Spencer Group plc: Strategic Changes

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&Ss 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 companys 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.

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Marks and Spencer Group plc: Strategic Changes 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 companys 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.

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Marks and Spencer Group plc: Strategic Changes 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 retails 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 companys 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.

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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 organizations 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&Ss internal environment and its external environment. Internal environment consists of companys goals and value, resources and capabilities. In other word, SWOT analysis builds on the result of PEST analysis for the purpose of identifying a companys 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.

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Marks and Spencer Group plc: Strategic Changes 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

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Marks and Spencer Group plc: Strategic Changes 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)

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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 companys 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 companys 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,

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Marks and Spencer Group plc: Strategic Changes 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&Ss 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 companys overall revenues adversely. Weak cash position: M&S had difficulty from the recorded weak chase position in recent years. The companys 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 companys ability to meet its commitments towards its capital expenditures. A decline in operating cash flow could negatively impact M&Ss 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.

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Marks and Spencer Group plc: Strategic Changes

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 todays 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 1213%, 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 companys 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 valueorientated food and general merchandise offerings, which impact the companys sales adversely.

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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.

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E-COMMERCE STRATEGY M&S DIRECT FEALSIBILITY ANALYSIS

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&Ss website, as well and companys customer services systems and in-store and telephone ordering in the multichannel. 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 UKs most userfriendly 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 launchedShop 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)

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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 Market Existing New Protect/Build Market development New Product 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)

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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 Turnover (ex. Tax) Group profit before tax
Source: Adapted from M&S annual report

2005/06 7,797.7 m 745.7 m

2006/07 8,588.1m 936.7 m

7,490.5m 505.1m

Analysis M&Ss 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 multichannel 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 M&S Direct Sales Increase rate
Source: Adapted from M&S annual report

2007/08 220m +60%

2008/09 324m +19%

2009/10 413m +27%

2010/11 543m +31%

140m

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Marks and Spencer Group plc: Strategic Changes 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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