Analyzing business performance encompasses various factors such as society, economics, politics and history. These factors are rarely incorporated in organisational studies. Organisational analysis is usually a technical matter. Modern business trends emphasise on maximising shareholder value (Gray 2009, p. 52). In most cases, companies exploit cheap labour from offshore countries to maximise returns. In a rapidly changing business environment, garment industries face numerous economic challenges that force companies to modify their organisational structure (Schein 2010, p. 24).
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Moreover, some companies have been forced to move their manufacturing segments offshore in a bid to minimise expenses. Recession has also increased challenges facing garment industries across Europe. Nonetheless, decreasing cost of technology has enabled companies in garment industry to improve quality of services. This paper will examine Marks and Spencer (M&S) retail store. The paper also will explore factors that have led to the company’s revitalisation.
M&S Company profile
Marks and Spencer is a departmental store that deals with retail of garments. Michael Marks and Thomas Spencer founded the company in 1884. The company began in Leeds as a retail shop for clothing products. Since then, the company has grown into a multinational corporation with branches across Europe and other parts of the world (Marks and Spencer [M&S] 2015, p. 1). The company has presence in about 40 countries with more than 300 stores. It has expanded its services to include home and food products in addition to clothing. The company made record sales in 1998 when it made a profit of more than one billion pounds before tax. M&S is a listed company, which trades in the London stock exchange as MKS. It’s current chair is Robert Swannell who took over from Stuart Rose in 2011.
The company has its headquarters in London, the British capital. M&S employs more than 83000 people according to its 2015 records. Moreover, it had an operating income of 762.5 million pounds in 2015. The company’s revenue and profit were 10.3 billion and 481.7 million respectively. Since the restructuring, it has experienced moderate improvements despite many economic upheavals (Miller 2007, p. 57-74).
M&S Organisational Structure
According to the company’s new management structure, the board and management committee currently run M&S. The board consists of 14 members. The 14 board members include the chair, the chief executive, the company’s independent, executive and non-executive directors as well as the group secretary. The group secretary also acts as the head of corporate governance (Applegate, Austin & Soule 2009).
M&S has a corporate structure, which conforms to company’s act. It has many head offices apart from its headquarters in London. They are spread across the UK. The company is structured such way that the head offices act as departmental heads for other stores. For instance, the company has its head office for IT services at Stockley Park. In addition, it has its head office for finance administration and human resources at the greater Manchester. Moreover, customer service has its head office at Chester. It should also be noted that M&S has various offshore sourcing offices around the world. These offices are present in Asia and Europe.
The company’s financial performance peaked in 1998 when they earned more than one billion pounds in profit. However, M&S could not cope with untenable profit margins since cost of local supply was increasing at an alarming rate. This became more difficult because rival retailers imported goods cheaply from low-cost countries. The company’s move to import overseas also undermined its initial public appeal. In addition, its inability to implement new technologies also lowered its appeal to customers. For instance, the company would only accept its charge card for payments. These factors made M&S reorganize its organisational structure to become competitive again. Its plunge was heavy; this prompted the company to accept technology and to change its management style (Kapul 2005, p. 21).
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The recovery plan was achieved moderately after restructuring although some problems remained. In its recovery plan, the company sold its businesses that dealt with financial services. It closed some of the stores to remain financially competitive. However, the company’s ‘per una’ brand remained successful. M&S implemented new technologies as well as incorporating new marketing plans to boost sales in its restructuring plans. In essence, streamlining saved the company from becoming bankrupt but also affected its appeal locally. Restructuring meant cutting jobs as well as moving offshore for cheap supply; this did not go well with locals (Judge & Robbins 2011). In essence, changes had both their advantages and disadvantages to the company. Consequently, M&S still struggled to match its former glories.
As noted above, economic, socio-cultural, technological and environmental factors were vital to M&S’s financial woes. For instance, the company would not offer its customers discount even during holidays. In addition, M&S had a strong culture, which did not allow it to change its clothing design with the needs of customers. Moreover, it could not keep up with the dynamics of business environment that required lowered cost of supply. Besides, the company was slow to integrate technological advances that would improve supply chain. In essence, M&S was not maximising use of its resources thereby falling short of efficiency.
However, restructuring of operations and use of resources gave the company a lease of life in a dynamic business environment. To achieve competitiveness, the chief executive resorted to create three main divisions namely financial services, overseas and retail business. In addition, the company also created a marketing strategy to improve the its brand (Cottrell 2010).
M&S tried to implement cost-cutting measures to revitalise the company. However, it did not implement customer-based approach effectively. New designs of clothing and new food products were also introduced. Moreover, the company severed its link with local UK supplier to focus on offshore suppliers. This strategy in operations helped M&S to cut cost of supply but it also made customers hesitant because the company was changing quality and originality of goods. Moreover, oversees stores were given powers to create their own strategies based on prevailing market conditions.
This strategy helped to extend M&S’s branches further thereby improving its planning process. The company put in place a plan to restore its profits. First, the it was moved closer to customers than before. This was aimed at establishing profit centres through the flow of information (Cadle & Yeates 2004). This strategy ensured that the company gave customers the ability to choose their needs. In fact, M&S became customer friendly. Its other plans were to keep overseas branches profitable. Moreover, the company changed its supply chain by incorporating dedicated teams to deal with buying and selling of its products.
The focus was moved to financial engineering by doing away with non-core activities. The company researched customers’ needs and started offering discounts to increase sales. In this regard, excess stock could be sold at a discount to counter its rivals. In addition, M&S restructured to focus mainly on the core business of clothing through strategic partnership. These plans made it possible for the company to become profitable again.
M&S Leadership Style
Leadership is essential in any business. It ensures good organisation of the team to maximise productivity. It enhances group dynamics as well as improves communication between members. The portfolio on personal learning and skills for success provides an individual with the ability to perform self-assessment. Leadership is important in embracing accountability, building trusts, achieving commitment and managing conflicts. Leadership helps in creating and implementing strong business strategy. Moreover, it promotes strategic planning within the company. Strategic planning is very important in promoting an organisation’s competitive edge (Hitt, Ireland & Hoskisson 2013).
Furthermore, it ensures that the company accomplishes its set goals in a systematic manner. Positive changes were possible due to strategic leadership. In M&S’s case, strategic leadership was lacking, especially when it achieved peak performance. As mentioned earlier, M&S was founded as a partnership between Mark and Spencer. Naturally, the company’s leadership style was based on its two founders (Kouzes & Posner 2011).
Leadership style in M&S before its fall was mainly based on the founder’s family. In this regard, family members were given the power to offer strategic planning and objectives. In this regard, the company was embedded on the culture and history of its founders. Subsequent leaders who took charge at M&S followed into the footsteps of their founders. Moreover, the company’s board was mainly composed of family members or trusted senior employees.
M&S had a top-down approach to leadership that did not offer creativity and innovation (Lencioni 2002). This explains why the company could not change even when it was clear that it would not survive with top-down style of leadership. However, after acquisition of chief executive from external environment, new leadership styles were embraced, which brought creativity and innovation. The new leadership was inclusive; it encouraged participation of both employees and customers. Moreover, it was backed by a democratic system through the board that ensured decisions were made in the best interest of the business (Rath & Conchie 2013).
M&S was founded in Leeds in 1884. Its founders Marks and Spencer oversaw rapid growth of their investments. The company achieved peak financial performances in the late 20th century. However, that was the last time it saw huge profits. The peak figures in 1998 could not be emulated again as the company saw a surprise fall in stocks as it ushered in the 21st century. The main contributing factors to the M&S failure were strong culture, poor technology, competition, marketing strategy and organisational structure. However, its restructuring brought a lease of life to the company as it embraced technology and new marketing strategies. It became customer focused and innovative in its planning process. In addition, M&S emphasised on its core business products thereby cementing its place. Nonetheless, the company could not achieve its former glories due to the challenging market.
List of References
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Cadle, J & Yeates, D 2004, Project Management for Information Systems, 4th edn, Prentice Hall, New Jersey. Web.
Cottrell, S 2010, Skills for Success, Basingstoke, Palgrave Macmillan, Hampshire. Web.
Gray, J 2009, False Dawn: The Delusions of Global Capitalism, Granta Books, London. Web.
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Hitt, M, Ireland, D & Hoskisson, R 2013, Strategic Management: Competitiveness & Globalization: Concepts and Cases, 10th edn, Cengage Learning, Ohio. Web.
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