MARKS & SPENCERS

MARK & SPENCERS (case study)

Q1: what are the factors which lead m&s to internationalize?

ANS: Company had worked upon the two factors to be in international

Internal factors & external factors.

1- company moved to the international market due to the prevailing saturation in the
domestic market . Hence company decided to move to the overseas market for further
expansion

2- the labour party suggestion is also one of the reason for the m&s to move internationally

3-In order to meet the need for diversification company also moved to global market

4- In order to meet the franchisisng relationship in the global market, since franchising was
allowing the company to achieve the global presence with minimal economic and political
risks

5-In order to acquire the global customers along with domestic customer in to meet the
expansion of the m&S.

6-In order to target the customers at global level so that the company can also move to the
the global market all together in order to widen the scope of the m&S.

7- The internationalization of M&S is also due to the explanations of service firm

internationalization

Q2-What is the sequence of country entry & why was that sequence selected ?

ANS:- M&S entered the countries through acquisitions and franchising but the company
did that in sequence, M&S saw Canada as a good country to invest in because of its high
incomes, solid infrastructure , large middle class , low political risk, and use of English
language but that did not last for long, than came after the entry into Europe ( France )
exactly after two years from the entry into Canada and entered after the lot of market
research adapt the store French life styles and from there after went to Belgium than after
the company entered into the usa in1988 using a similar strategy it used in canadathrough
 MARKS & SPENCERS

acquisitions than after the company enetered in tha market of the far eastv through the
purchase of brooks brothers (1988), which co owned in affiliates in japan.

Q3- What are the modes of entry used in the various countries aqnd why?

ANS- The internationalization of M&S resembles the theoretical explanations of service

Firm internationalization .These theories suggest that service firm become increasingly
international as they gain experience, willing to commit more company resource and take
additional risks. Retailers used relatively less risky modes of entry, such as exporting and
Franchising, in markets where market and political risk are high, Retailers shared
Ownership where sole ownership was prohibited or restricted. In markets, such as the
US and the EU, with significant purchasing power, large population and developed
infrastructure, retailers enter through high-control high-risk modes of
Entry, such as sole-ownership and acquisition. The company believed in opening its own
stores and expanding through acquisitions in major economies. On the other hand, M&S
expanded through franchise agreements into countries where a partner’s local expertise is
viewed as beneficial (M&S Annual Report 1998). The company owns stores in Belgium,
Canada, France, German,Hong-Kong, Ireland, Spain and Netherlands; and franchises in
the rest of the countries including the Bahamas, Bermuda, Canary Islands, Cyprus, The
Czech
Republic, Gibraltar, and Israel (De Nardi-Cole 1998). Whitehead (1991) proposed
That the company had used franchising in countries that have relatively small population
size or low per capita incomes, but sufficiently large to support a small number of stores.

Q4-Which host country factors M&S seems to value and which do they don’t?
ANS- When entering into a market the M&S sees following factors as favorable ones:

1. High income
2. Low political risk
3. Culture affinity
4. Large middle class population
5. Investment friendly policies
 MARKS & SPENCERS

The unfavorable conditions are:

1. High political unrest

2. Low income
3. Low investment friendly policies
4. Less culure affinity
5. Less presence of organized retailers

Q5- Describe and explain the adaptations to M&S business model in different countries?
ANS- The first major round of acquisitions M&S made was in 1973 of Canadian People’s
Department Stores and Walker’s store, Since they perceived little cultural distance, they
transferred their business formula almost unchanged from the United Kingdom to Canada.
They quickly found that even Canada requires some modifications. The Canadian stores
required customization to local needs including the use of Canadian merchandise,
enlargement of food departments, restructuring of inner city store, and opening of
suburban stores much of which the company had little experience with. M&S entered the
European market in 1975. This was two years after the less than successful Canadian
acquisition. France was chosen as the gateway country, and Paris the gateway city, to the
rest of Europe. The Europe report of M&S includes Eastern and Western Europe
including some states in the Middle-East. The company hoped to have 60 stores in
Continental Europe by year 2000, It was taken as increase customization to local and
ational tastes by establishing additional brand names to the already successful St. Michael
brandstil but about 80% of the stock sold in continental Europe was the same as the UK
home market, while the other 20% reflects differences in culture, size, climate and local
preferences, M&S entered the US in 1988 using a similar strategy it used in Canada,
trough acquisitions. It bought Brooks Brothers. To market its clothes and Kings
Supermarket to sell its food line. Unlike M&S ,which bought its supplies, these companies
owned manufacturing facilities. Brooks Brothers and Kings Supermarkets are similar in
format to M&S two store formats. The entry into the Far East was twofold. M&S first
exposure to business in the Far East occurred indirectly through the purchase of Brooks
Brothers (1988), which coowned affiliates in Japan. In recent years, Brooks Brothers Japan
was adversely affected by recessionary conditions in the economythe 1997 Asian crisis has
 MARKS & SPENCERS

seriously stalled retail sales in the region, and M&S stores were not an exception. Both
franchised and non-franchised outlets have been adversely affected by the crisis. The
company’s expansion coupled with the adverse conditions created by the Asian crisis have
hampered sales and profitability in asiatherefore, no new development is planned in the
near future.

6 Is M&S multinational or global retailer? Explain and defend your answer.

M&S is a multinational company as it it is customizing its merchandise as per the need of

the country in which they enter. For example it enters into Canada transferred their
business formula almost unchanged from the United Kingdom to Canada and then they
quickly recognize that even Canada requires some modification. The Canadian stores
required customization to local needs including the use of Canadian merchandise whereas
global retailers have their standardized merchandise all over the globe.

7 Where is M&S on the internationalization life cycle? Explain how you formed your
answer.

M&S is in the growth stage on the internationalization life cycle. As we can see that in this
case study M&S has its evolution from Britain and going abroad to be multinational with
customizing its merchandise according to the country it is entering. As the company is
entering in the markets of different countries, it is finding that how it can retain in the
market and satisfies the needs and wants of the customers of that particular country.

Q8 Should the company standardize more of their international operations?

Compare Europe and Asia.

 MARKS & SPENCERS

No, the company should not be standardized, it should be multinational. As we can see that
M&S entered the European market in 1975. This was 2 years after the less than successful
Canadian acquisition. France was chosen as the gateway country, and Paris the gateway
city, to the rest of the European.
M&S believes that Asia will be a major market for Brooks Brothers because of the region’s
receptiveness to US culture and brand’s aspirational value.

Q9. What should be the future strategy of the firm?

The company should adapt the multi nationalization because in multi nationalization the
company should customize its merchandise according to the need of the customers of the
country in which the company is entering. If the company will adapt globalization then it
should have to adapt the standardization all along the globe which is difficult for the
company as compared to the multi nationalization.
Q10. Evaluate top management’s response to crisis?

ANS: M&S was reorganized into three profit centers:

(1) UK retailing.
(2) overseasretailing,
(3) financial services.

Stores were reclassified from geographi division to four store types:

(1) department stores,
(2) regional centers,
(3) high street,
(4) small stores.

This the firm hopes will help it

(1) develop specific management skill associated with different store types,
(2) tailor merchandise more accurately,
(3) reduce administration,
(4) improve staffing and training. The total cost of restructuring is estimated at about L40
million, leading to a L40 million cost savings associated with redundancies starting fiscal
Year 2000-2001

A new marketing department was set up to help create improved

(1) competitive
Analysis,
 MARKS & SPENCERS

(2) information gathering,

(3) proactive communication, (4) advertising
Clarity,
(4) customer targeting .

The department will increase marketing research, develop a coherent brand strategy, and
increase
The level of advertising. Its marketing thrust will be to cut prices, put more staff on
The shop floor and improve visual merchandising . The company will
Attempt to develop a more balanced sourcing policy to its domestic and

International outlets and will review global logistics to streamline distribution and
Lower costs .
The company will continue to develop their e-commerce web site. A property
Division has been set up to assess use of real estate. Market cost of assets will be
Charged to individual stores to better assess performance. Accountability has
Increased as each profit center is judged individually against its cost of capital,
And resources will be allocated to increase shareholders equity value.

Q11:Evaluate M&S CROSS-CULTURAL Skills.

Ans: The M&S do not master in cross cultural skills but they have shown on various
occasions that they have got the cross cultural skills for example:
They effectively used the experience of Brooks Brother with their entry in Asia. As we have
read the Brooks Brother had 19 years of business experience with Japan

Secondly as we can see in every market which they enter, they try n find an experience
retailer by which they are able to gain foothold in the market, we can easily see this by
seeing the example of Australia, China and India.

Thirdly they maintain a good quality of their product worldwide , due to this they are able
to make good image and goodwill among the customer.

But in part of working they lack cross cultural skills as:

1. They have prevalent European culture
2. They do not go by local manufacturing method
3. Due to their top down hierarchy they are less able to get the exact ground situation of the
real time customer
4. Due to their dependence on European market they are resistant to the other markets for
their needs which leads their goods to be higher priced
MARKS & SPENCERS