Case Study Analysis: Marks & Spencer (M&S)

CIPS
Professional Stage
CASE STUDY ANALYSIS

Marks & Spencer (M&S)
November 2008
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ii
Contents
Preface
iv
Introduction to the case
Tackling the case study exam
An overview of the business
Strategic issues
4
Strategic planning: an overview
12
External environmental analysis: PESTLE
16
Stakeholder and competition analysis
19
Organisation structure, culture and resources
24
Corporate appraisal: SWOT analysis
29
Generic strategic options: Ansoff, Porter
33
10
Strategic direction at different periods of M&S history
37
11
International markets
42
12
Current strategic issues and options for M&S
44
Procurement and supply chain management issues

13
Procurement and supply chain issues: overview
47
14
Retail buying and supply chain strategy
50
15
Supply chain relationships and supplier management
52
16
International sourcing
58
17
Agile/responsive supply
61
18
Cost reduction and stock management
64
Other key issues raised by the case study

19
Leadership and influence
67
20
Management succession
74
21
Change management
76
22
Corporate governance
80
23
CSR, ethics and sustainability: Plan A
83
24
Risk management
87
25
Financial aspects
91
26
Marketing
93
27
Other issues
95
Further reading
28
Summary of ancillary background reading
iii
96
Preface
CIPS has now published the pre-seen material for Novembers Case Study exam, featuring the
history of strategic management and leadership at UK retail icon Marks & Spencer plc. If you
have registered for the exam and have not managed to access the pre-seen material, you should
contact CIPS as a matter of urgency.
The exam is on 19th November 2008, so you need to work fast to maximise your chances of
success. This Case Study Analysis is designed to help.
You should use the text to assist your study of the pre-seen material, and to focus your
revision and preparation in the run-up to the exam.
You should take the text with you into the exam room. Its sections may provide a useful
structure for the solutions you will be required to produce, as well as offering a memoryjogger for the key issues and a way of navigating quickly to areas of the case study crossreferenced to issues in the text.
Throughout this text, we support statements made by referring to the relevant page and line of
the case. References take the following form.
(3, line 2ff)
This means Page 3, lines 2 and following.
You should take the time to number every fifth line on every page of the case study now, so you
can follow these references. We include all headings and short lines in our line numbering but
not footnotes (which can be referred to easily by page and number).
We also include cross-references to other pages and sections within this text, which appear as
follows:
[>> page 9.] This means refer to page 9 of this text. Similarly, [>>Section 15] means refer
to Section 15 of this text.
For further assistance, our Case Study Workbook offers detailed discussion on how to tackle
case study questions, fully-worked examples based on past CIPS exams, and detailed summary
notes on the main syllabus areas typically required in the exam. Note that CIPS advises you not
to over-burden yourself by taking too many reference texts into the exam room: we have tried
to include the most essential information in the space of a single A4 text.
Good luck in your examination!
Profex Publishing
October 2008
iv
SECTION 1
Introduction to the Case
THE STYLE OF THE CASE STUDY
It is difficult to know exactly how to get to grips with this case study because:
You are not told what role you will be asked to adopt in order to answer questions: we
assume you will be asked to evaluate or propose strategies on behalf of M&S.
It surveys the history of an organisation: you might have to evaluate strategic options or
decisions or leadership styles at any point in that history or to compare them.
It is difficult to see what new analysis could be required of you, given the amount of analysis
already presented in the case study and supplementary reading!
Fortunately, the case does raise some major issues which lend themselves to exam questions: we
will suggest the types of questions that might be possible as we proceed through this text.
THE STORY OF THE CASE
Marks & Spencer Group plc (M&S) is an iconic British retailer, one of the largest retailers in the
world and the largest clothing retailer in the UK.
It started in general merchandising (clothing and household goods) and then added fresh foods,
developing a focused department store format (4, line39ff). By 1950, all goods were sold under
the St Michael own-brand label, which became synonymous with British-made goods,
conservative taste, quality, customer service and fair value for money, available in the high
street of every large town (4, line 42ff). From the beginning, M&S bought merchandise direct
from UK manufacturers, and developed close, long-term partnership relations with major firsttier suppliers (4, line 5ff). Domestic and cautious international expansion led to steady year on
year growth for many decades.
Rise
The economic recession of the early 1990s slowed growth, raising fears that customers no longer
perceived the M&S quality premium as fair value for money (6, line 15). New chairman and
chief executive Richard Greenbury immediately put in place a recovery plan: reducing costs
and launching an outstanding value range (6, line 18ff). As sales recovered, he led the company
into increasingly ambitious strategies for domestic and international growth (7, line 1ff, 33ff),
encouraged by strong financial results: M&S profits peaked in the financial year 1997/1998. It
was a major retail success story (6, line 41).
In hindsight, however, the successful growth strategies were being undermined, and rendered
increasingly risky, by underlying problems: Greenburys increasing isolation and autocratic
style as leader (7, line 25; 8, line 5ff), mounting pressures and over-commitments (line 9, 13ff), an
outmoded fashion brand (14, line 20), excessive bureaucracy (13, line 10), a rigid supply chain (9,
line 25ff), emerging board room tensions (10, line 10), eroding customer loyalty (10, line 14) and a
push for untenably high short-term profit margins (10, line 3).
And fall
Distracted, overconfident and overstretched, M&S was unprepared for a dramatic down-turn in
sales which, combined with massively overbought stock and large capital investment, saw
profits and share price plummet in 1999 (10, line 11ff). Sir Richard Greenbury resigned.
The following years saw M&S struggle to respond to the crisis. The new chief executive Peter
Salsbury searched for fresh strategic direction, using multiple management consultancies.
Despite cost-cutting exercises, which traumatised supply chain relations (10, line 30ff), sales,
profits and share price continued to fall (11, line 2). In 2002, Salsbury was replaced by Roger
Holmes (11, line 1-5), who brought some direction (11, line 5-11). However, in 2004, M&S
became the target of a takeover bid by the owner of BHS, (11, line 16): panic set in.
And rise again
In May 2004, Stuart Rose became chief executive (12, line 8), and, like Greenbury before him,
took responsibility for recovery. Rose was able to fight off the takeover bid by securing
stakeholder support (12, line 23ff). He then set about introducing a turnaround strategy. A
focus phase (13, line 16) reduced stock inertia (13, line 21ff) and sharpened the M&S brand (13,
line 35). A subsequent drive and broaden (growth) phase included new marketing initiatives
(15, lines 6, 20) and a major new CSR focus (15, line 36ff). By 2006-7, sales, profits and share price
were soaring (15, line 31ff). M&S was a retail success story all over again. (3,line 39ff).
In January 2008, however, Rose sought to dampen further growth expectations, claiming that
the market was slowing down and retailers were due for a tough year: M&Ss share price
plunged to 400 pence from a peak of 800p in the summer of 2007. (Beyond the case study time
period, Roses predictions have proved correct, with the US-led credit crunch increasingly
eroding consumer confidence and taking global share markets into meltdown in
September/October 2008.)
In March 2008, a proposal that Rose become both chairman and chief executive raised concern
about too much executive power being centred in one individual: has M &S learned anything
from the years leading up to the 1999 crisis? (16, line 27ff)
ISSUES RAISED BY THE CASE
In no particular order, here are some of the major issues that the case seems to give rise to, any
of which could be the subject of an exam question.
The different strategic directions and measures pursued by different leaders in M&Ss
history: the rationale for their strategic priorities; evaluation of their effectiveness; the
underlying factors in their strategic failures and successes; and the impact of changes of
leader on overall strategic direction and unity of purpose.
Critical incident analysis: how underlying problems during the golden years contributed
to the sudden financial crisis of 1999; the factors which caused these problems to remain
ignored or unaddressed; what M&S learned (or should have learned) from the crisis; how
effectively the crisis was managed; and whether M&S has put in place measures to ensure
that it does not happen again.
The benefits, risks and challenges of the various recovery and growth strategies pursued by
M&S at various periods, and the effectiveness with which they were planned and
implemented; international market entry (market globalisation); growth by acquisition
(often followed some years later by divestment); M&S strategies for market penetration,
product development, market development and diversification; what strategic directions
M&S might now pursue, given the renewed threat of global recession; and how it can avoid
repeating the mistakes of previous recession-recovery planning (eg under Greenbury).
The tradition of positive, partnership and co-destiny supplier relationships at M&S; the
problems it presents in regard to dependency and power, the risk and ethics of supplier
exploitation and termination, and potential rigidity in the face of pressures for change; the
way in which M&S manages suppliers; and how positive supplier relationships currently
are (from the point of view of the supplier as well as M&S).
Emerging competitive pressures on M&Ss supply chain and SCM approach to become
more agile/responsive in dynamic markets such as fashion and food, and to become
increasingly globalised (against M &Ss buy British tradition and brand) in order to take
advantage of low-cost offshore supply; the difficulties of achieving this with a
comparatively rigid supply chain and SCM approach; reasons for the rigidity and how it
can be changed.
The nature of retail supply chains: the strategic importance of the supply chain; the
demands of retail distribution and logistics planning (particularly in fresh food retail); the
potential for technology leverage in areas such as barcoding, RFID, EPOS and EDI; the
potential for backward integration to control sources of supply; the organisation and
marketing orientation of buying roles in a retail environment; and how effectively M&S is
meeting all of these challenges.
The recurring pressures for cost reduction to maintain profit margins; how (and how
effectively) cost reduction is achieved at M&S under various leaders; the impact of
economies of scale on supply chain agility; the impact of rationalisation on service levels;
the risks and challenges of low-cost sourcing; the impact of squeezing supplier margins on
supplier relationships and supply risk; and other methods M&S might consider for securing
cost savings.
The recurring issue of overstocking, and the underlying problems of demand forecasting,
order cycles, lead times and logistics management; the impact of overstocking on M&S
financial results; how (and how effectively) M&S has attempted to solve or mitigate the
problem in the past; and what further action it may need to take.
The leadership culture at M&S and the styles of strategic and interpersonal leadership and
influence exercised by the major figures highlighted by the case (eg Sir Richard Greenbury,
Peter Salsbury, Sir Stuart Rose and Kate Bostock): how, and how effectively, they motivate
people and secure stakeholder buy-in for strategic change; the benefits and drawbacks of
strong centralised/personalised leadership; and how M&S (as an organisation/brand)
exercises influence in relation to suppliers and other stakeholders.
The recurring issue of management/leader succession planning at M&S: the tradition of

internal promotion and its benefits and limitations for strategic direction; the effectiveness
of succession planning from Greenbury to Rose; the impact on strategy, unity of direction of
inadequately planned leader transition; and the implications for corporate governance (in
the case of Rose being forced to occupy the role of chairman and chief executive, in the
absence of a pre-groomed successor).
3
Corporate governance: the arguments for and against the roles of chairman and chief
executive being separated or held by the same individual; the regulatory framework
(Cadbury report) and compliance issues; the risks of executive power being held by one
individual, as illustrated by Sir Richard Greenbury; the extent to which the same risks may
apply in the case of Sir Stuart Rose; and what M&S should do in the current case.
Change management: historical contributors to M&Ss low change appetite and

comparative rigidity; the approach and effectiveness of each of the major leaders as change
agents, and the varied results of change programmes (commitment, compliance, resistance);
and how M&S might go about improving its change management in future.
Corporate social responsibility: the content, importance and impact of Plan A; methods of
measuring CSR attainment; whether CSR is genuinely important or just marketing, and its
justification for M&S as a major strategic thrust; how stakeholders can be supported in
buying in to Plan A; and ethical concerns arising from M&S policies and practices.
Risk management: the apparent appetite for risk under different leaders; what risks M&S
faces on an ongoing and current basis; the extent to which some of M&Ss strategies appear
to have been unacceptably risky in hindsight, and what concerns this may raise about
companys risk management processes; and what M&S can do to ensure that risks are better
identified and managed in future.
The financial performance and stability of M&S at various snapshot points in its history;
the implications of the financial data given in the case (including overinvestment and
vulnerability to takeover); and potential problems of focusing solely on financial indicators
(including pressure for short-termism, and positive financial results hiding underlying
business problems).
Performance measurement: what financial and non-financial measures M&S uses to

evaluate its performance; potential KPIs in key areas; whether targets should be ambitious
for motivation, as under Greenbury, or realistic for expectations management, as under
Rose; why performance measures failed to identify underlying problems during the golden
years; and whether M&S might benefit from moving towards a more balanced scorecard
approach.
Marketing: identification and evaluation of the marketing strategies pursued under

Greenbury and Rose/Sharp/Bostock; the strength of the traditional M&S brand and the
challenges and drivers of brand change; how M&S lost touch with its core customers and reengaged them again; the M&S marketing mix, especially product portfolio and
quality/price positioning; the impact of internet/direct sales; the challenges of international
marketing, including the question of standardisation or adaptation; and potential future
directions for M&S marketing.
A number of issues less prominently featured in the case (although likely to be encountered
in your background reading), such as: operations management (in areas such as quality
management, and store location, network expansion and development); human resource
management (in areas such as staff involvement, training and development and downsizing
management); and conflict and negotiation handling (in relation to issues such as board
tensions and succession battles, the way various leaders confront or fail to confront
divergent views, and the way in which suppliers are encouraged or pressured to raise
their discounts).
We will unpack all these issues in more detail in the relevant sections of this text.
4
THE STRUCTURE OF THIS TEXT

It is important not to ramble around all these issues, but to present your arguments in a logical
and coherent way. We try to help with this by the structure of our coverage:
Sections 13 are introductory in nature
Sections 412 deal with strategic issues, and the tools of strategic analysis, choice and
implementation
Sections 13-18 focus on procurement and supply chain management issues
Sections 19-27 deal with a range of other issues raised by the case
Section 28 summarises the bibliographical material cited in the case study.
FURTHER READING
You could seek to broaden your understanding of the issues in the case by background reading
Several articles, books and websites are cited by the examiner as Ancillary Background
Reading for Students (also the source material used to develop the case study). We have
provided a summary of the sources we consider most useful in Section 28 at the end of this text.
(We have also incorporated relevant points in our coverage of particular issues in the main
body of the text.)
The examiner emphasises the need to read widely around the issues raised by the case study.
You may need a closer understanding of issues such as corporate governance or leadership
succession, say. Wider reading in the quality press may also enable you to introduce authentic
detail into your answers which is valued by the examiner. Look in particular in:
The Times
The Financial Times
The Economist
Supply Management (Again, we cite some useful articles in our coverage.)
You should also access the CIPS website to have a look at the Chief Examiners reports on
recent case study exams.
A friendly student has directed us to an interesting public access article on the web: a case
study on M&S prepared by Martin Christopher and Helen Peck of Cranfield School of
Management (undated), giving a brief survey of the Greenbury and Salsbury eras. Unlike the
Harvard Business School discussion papers mentioned in the Ancillary Background Reading,
this is free to download and focuses specifically on supply chain management issues. Moving
Mountains at Marks & Spencer can be found at:
http://cscmp.org/downloads/public/resources/casestudy/ms.pdf.
We have cited information gleaned from this source in the text.
SECTION 2
Tackling the Case Study Exam
Before digging more deeply into the facts of the case, it is worth making some important points
about how you should tackle the exam. The case study is a very different type of assessment
from the normal three-hour exam, and specialised exam techniques can be used to help you do
yourself justice.
BEFORE THE EXAM
Prepare a ring binder to hold your notes (including this analysis text). Include dividers to
mark off the main sections. Your objective should be to make your own notes sufficiently
detailed to carry you through with only minimal use of textbooks (see next point).
Take in any textbooks you think appropriate, but expect to use them only as a last resort.
If you own a copy of the Profex Workbook for this subject, this should certainly go with
you into the exam room, because it contains handy revision notes on the main syllabus
areas that are examinable.
You are not provided with a new copy of the case in the exam room, so you must
remember to take in the copy you already have.
DURING THE EXAM
Read all four questions carefully to ensure you understand what is required.
Begin on the question where you feel most confident of the material.
Attempt all four questions. You will greatly enhance your chances of passing by doing so.
Be very careful about time management. Spend only the allotted time on any one question
and then move on: do not risk leaving yourself short of time for your final question.
Use frequent headings, underlined neatly with a ruler.
Under each heading, write your ideas clearly, leaving a line or two after each substantial
point. This lays out your material in a professional manner. (The use of paragraphs also
forces the marker to recognise that you have finished a point and deserve a mark for it!)
Include carefully drawn and labelled diagrams where appropriate (eg when using
strategic analysis tools) but only where they add something to the clarity of your answer.
Do not use any of the text in this or any other book word for word or point for point.
The exam rubric states clearly that copying or plagiarism will not be tolerated and could
result in no marks being awarded and in particular that prepared notes may not be
included as part of the answer.
Underline any authorities you cite, such as a statute or legal case, or the title of a reference
work. If you quote from a published text, you must acknowledge your source.
Avoid waffle: keep your answers short and punchy. The examiner is more concerned with
quality than quantity. Avoid writing a general essay on the topic suggested by the
question: this doesnt get you marks. You need to apply relevant theoretical concepts and
techniques to the context and details of the case study, in order to develop whatever
analyses, decisions or recommendations are required by the question.
Be careful when using fashionable jargon and models. In this case study, unusually,
there are no acronyms (RFID, EDI, ESI, JIT): dont be tempted to squeeze them into your
answer unless justified! Dont rush to put labels on what you see in the case study: M&S
attempts to increase the responsiveness of its supply chain but is this really agile
supply? Be aware that there is plenty of jargon in strategy as well as in supply chain
management: define your use of terms such as focus.
Question everything stated in the case, other than simple, objective facts. You arent
expected to take M&Ss public statements at face value, for example: the case study points
out that key stakeholders have opposing views on M&Ss leadership, supplier
management approaches and corporate governance and these divergent perspectives
could well be the basis of an exam question. Note where there are conflicting views, or
where the evidence is two-sided on issues.
Everything you state in the exam must be supported by evidence given in the case.
Distinguish between what is stated in the case and what you may be tempted to assume
particularly where (as we highlight in this text) the implications of the case material are
unclear.
SECTION 3
An Overview of the Business
MARKS & SPENCER (M&S)
(www.corporate.marksandspencer.com)
Marks & Spencer Group plc (M&S) is an iconic British retailer, one of the largest retailers in the
world and the largest clothing retailer in the UK. The following are the key things we find out
about the company and its general strategic direction from the case study plus some
supplementary research of our own.
Standing
M&S is a national institution and one of the worlds most admired companies. (3, line 12). It
has been voted Britains Most Admired Company and Company of the Year (3 line 39), as well
as being a textbook case for enlightened human resource management. It was the first British
retailer to make a pre-tax profit of over 1 billion, and in the 1990s was the 2nd largest retailer in
the world (13, line 18): currently 43rd (Wikipedia). This gives it considerable influence within the
UK retail sector (3, line 14).
Brand
Its origins in the early 1900s established the organisations development as a department store
focusing on clothing and household (general merchandise) items, in 1931 supplemented by
fresh foods: by 1960 all sold under the St Michael brand.
The original brand became identified with British-made goods (5, line 12), understated quality,
good customer service, fair value for money and high-street presence (4 line 42, 5, line 24). The
brand, product range and merchandising techniques eventually began to be perceived as
outmoded: since 2004, product lines have been modernised (14, line 15ff), stores are being
revamped, and the brand sharpened under a unifying Your M&S brand in 2005 (13, line 33ff).
Product/service range
M&Ss range of merchandise, products and services (www.marksandspencer) includes:
Womenswear, lingerie, accessories, toiletries and cosmetics. Womens clothes are currently
marketed under brand names including Autograph, Classic Collection and fashion brand
Per Una (a joint venture with Next founder George Davies), and niche brands such as Plus
(large size), Petite (small size) and Maternity which may only be available from larger
stores or online.
Menswear: currently marketed under brand names including Blue Harbour, Autograph,
Collezione and Stormwear, plus niche brand Big & Tall (only available online or via in-store
ordering)
Other general merchandise: including childrenswear, schoolwear, toys and games, home and
furniture and (launched in 2006) technology products (home entertainment, personal
electronics, computers and computer services, currently offered online and at a limited
number of stores).
Food and wine: a wide range of fresh and pre-packaged food products from fresh produce to
ready-prepared recipe dishes (7, line 31), with a niche market driven by high quality,
chilled specialty and convenience items (Bower & Matthews, p 10).
Financial services: under the brand M&S Money. M&S Financial Services was founded in
1985, initially to manage the M&S charge card (then the only credit card accepted in M&S
stores). It was sold to HSBC in 2004 and now operates as a 50: 50 profit sharing partnership,
offering: M&S credit card and charge card, insurance, travel money, savings and investment
products and car/personal loans.
The case study focuses mainly on the clothing (womenswear) range.

Store formats
M&S retails its products through a number of store formats, in addition to the basic high-street
department stores and edge-of-town stores despite past problems (eg the closure of the
struggling Lifestore shops in 2004: 12, line 36). Current concept stores include:
Simply Food (launched 2002: 11, line 7) stores sell predominantly food, with a small selection
of general merchandise. Some of these stores are franchises run, for example, by Moto at its
motorway service stations and by BP in petrol station forecourts.
Home Stores (launched 2007) sell predominantly home furnishings, currently in a few select
locations.
Outlet Stores (launched 2000) offer overstock and end-of-season items at substantial
discounts on high-street retail prices.
In addition, M&S Direct offers direct sales via e-commerce (marksandspencer.com: 15, line 20),
home and e-catalogue sales, in-store ordering services, food ordering services, and flower and
wine delivery (M&S annual report 2008).
Supply chain management
M&S pioneered a policy of buying merchandise direct from manufacturers rather than using
wholesalers (Bower & Matthews, p 5), allowing it to simplify and specify its own range of
products. It developed a tradition of long-term, mutually-dependent partnership relationships
(5, line 4ff) with a core group of large UK-based first-tier suppliers, highly integrated with M&S
buying and product development (Bower & Matthews, p 11).
The culture of co-destiny (5, line 34) and domestic supply was initially a source of competitive
advantage (5, line 7, 37), but eventually caused problems with uncompetitive cost and rigidity
(9, line 25ff). Since 2000, there has been a more adversarial-co-operative approach to supplier
relations (15, line 13), and efforts to increase supply chain responsiveness and global supply (9,
line 36; 14, line 18).
International markets
M&S has pursued the development of international markets, starting cautiously (5, line 2) in
Europe, North America and Asia and accelerating through the 1990s (8, line 7ff). Despite
subsequent financial and branding difficulties, necessitating rationalisation and divestment (11,
line 6), this strategy continues. International business now accounts for 7.9% of group turnover
and has grown to 278 stores in 39 territories (mostly operated on a franchise basis): during
2007/8 a number of new ventures were announced in India and central and eastern Europe
(M&S How We Do Business Report 2008) and M&Ss first mainland China store opened in
October 2008 (Times Online).
SUPPLY/VALUE CHAIN POSITIONING

M&S is positioned at the downstream end of the supply/value chain in this case study, as:
A buyer of finished products for sale, direct from first-tier manufacturers. This raises a
number of sourcing and supply chain management issues, including: the nature of retail
buying (which adds a marketing orientation to the buying task); the challenge of (belatedly)
developing agile/responsive supply chains to cope with dynamic fashion and food markets;
the challenges of (belatedly) developing global sourcing to take advantage of low-cost
supply; and the corresponding strain on long-established supplier relations.
A retailer of a wide range of consumer goods. This raises a number of marketing and
distribution issues, including: the need to refresh and stretch the core brand without losing
its identity and focus; the need for market-sensitive merchandise portfolio and store location
planning; the need to maintain availability while minimising inventory; and the potential
for direct distribution (eg through catalogues and e-commerce).
THE RETAIL SECTOR

Unlike in previous case studies, we are not given a large amount of data about the sector or
industry within which the core firm operates: in this case, the retail sector. Since the size,
structure and competition within this sector, and the nature of its supply chain issues, are not
raised directly by the case, other than in the specific context of M&S, it is unlikely that a
question would be set on this area.
ORGANISATION STRUCTURE, CULTURE AND LEADERSHIP
Structure
A century of tradition, growth in size, and product and market development has created an
increasingly complex and rigid structure, characterised by long decision-making paths (13, line
10): arguably, a classic bureaucracy. Since the 1980s, the company has attempted to simplify,
delayer and streamline (6, line 19) and to increase the speed and flexibility of decision-making,
with only partial success.
Having been structured primarily along product lines, the business was fundamentally
reorganised under Peter Salsbury into five operating divisions: UK Retail, International Retail,
Financial Services, Property and Ventures. (Christopher & Peck, p 16). However, this structure
created a defensive and dis-integrating mindset among executives (13, line 2ff) and a glance at
the M&S website suggests that a more matrix style mix of product (eg clothing, food, M&S
Direct) and functional responsibilities (eg marketing, finance and operations, IT and logistics;
merchandising and planning, store marketing and design, human resources) is now in place.
Culture
M&Ss 2008 key stated brand values are quality, value, service, innovation, trust
(corporate.marksandspencer.com) little changed in essence from the companys core reputation
(4, line 52) and founding familys guiding principles (5, line 22ff). It is a corporate culture which
values its heritage and tradition (12, line 17), shows deference for senior leadership figures (7,
line 18), is highly concerned to protect the companys public image (16, line 33), and is slowchanging and bureaucratic in orientation (9, line 32; 13, line 10)
10
From 2004, under Stuart Rose, the culture appears to have shifted to one of renewed
commitment to modernising the brand (13, line 6; 13, line 42); a willingness to take on new blood
and new ideas (13, line 33; 14, line 2, 12); a new commitment to moving with the times (13, line
36ff; 14, line 20; 15, line 20); and a major new-found focus on CSR and sustainability (15, line 39).
Leadership
Leadership issues and styles are a major feature of this case, and will be explored in detail in
Section 19. The strategic direction of the firm is clearly divided into eras of leadership, and
there are further issues to do with management succession planning (or lack thereof) and
corporate governance (in particular, the recommended separation of roles between the chief
executive and chairman of a firm).
It may therefore be helpful to view a clear time-line of the M&S chief executive/chairman
partnerships and tenures relevant to the case study (Table 2, page 19). The leaders mentioned in
the case study in a given period are italicised:
1991-1998
1998-1999
1999-2000
2000-2002
2002-2004
2004-2006
2006-2008
2008 -
Chairman
Sir Richard Greenbury
Sir Richard Greenbury (1991-1999)
Brian Baldock (1999-2000)
Luc Vandevelde
Luc Vandevelde (2002-2004)
Paul Myners (2004-2006)
Sir Terence Burns (2006 2008)
Sir Stuart Rose (2008 - ?)
Chief executive
Sir Richard Greenbury (1991 1998)
Peter Salsbury
Peter Salsbury
Peter Salsbury (1998 2002)
Roger Holmes (2002-2004)
Stuart Rose
Stuart Rose
Sir Stuart Rose (2008 - ?)
STRATEGIES AND STRATEGIC DIRECTION

Assuming that you may be asked to evaluate or suggest changes to M&Ss strategies, it will be
helpful to identify in detail what its core strategies appear to have been so far, from the data
given: we will do this in Section 9 (using generic strategy classification models) and Section 12
(current strategies and options).
Given the historic story line of the case study, it will also be helpful to trace the shifts in M&Ss
strategic direction over time, and to evaluate and compare the strategies pursued by different
leaders. We will do this in Section 10.
FURTHER READING
For a general snapshot of M&S without the depth of browsing the corporate website you
could do worse than checking out the Wikipedia article on M&S (search: Marks and Spencer).
The research paper by Bower & Matthews, cited in the sources list, also gives a clear overview of
structure, culture, buying, supply chain relationships, international expansion and store
operations in the Greenbury era. Good background information and perhaps an antidote to
the rather negative portrait painted by the case study
11
SECTION 4
Strategic Planning: An Overview
A systematic process of strategic planning includes the following steps.
Strategic analysis: you may need to select and use a range of tools to analyse the internal
and external situation and challenges of M&S, and identify potential solutions either
currently, or at different stages of the companys development.
Strategic choice: you may need to evaluate a range of strategic options for M&S and
recommend that which is most suitable (supportive of corporate objectives), feasible
(capable of implementation given available resources and constraints) and acceptable (to
key stakeholders) either currently, or at different stages of the companys development:
in other words, what strategies did it adopt, and were these the right ones?
Strategy implementation: you may need to present a coherent plan for implementation of
a recommended strategy, including financial and non-financial resource implications or,
perhaps more likely, comment on the effectiveness with which a chosen strategy was
implemented in practice by M&S.
We assume that M&S will be the focus of any strategic planning question, as it is the only player
about whom we have sufficient information to use many of the tools of analysis. However, it
might be possible to set a more specific (and less analytical) strategy question in regard to other
players: eg evaluating relationship strategies for M&Ss suppliers.
STRATEGIC ANALYSIS
The case study exam often requires candidates to use appropriate tools of strategic analysis. In
the following sections, we attempt to do this using the main tools that appear to be useful in the
circumstances of this case. As a general guide:
If the question specifies use of a particular tool, use the one specified!
If it asks you more generally to use appropriate tools, then use as many (relevant ones) as
you can without overrunning the time limit.
If you are asked to justify the use of certain tools, the points made in the following
sections should enable you to do so.
Our analyses in the following sections are not the only possible ones that could be made. For
example, though we have tried to analyse a good range of points in our SWOT analyses for
M&S, you may well be able to think of some that we have omitted. Equally, you may not agree
with all our classifications of strengths/weaknesses. The analyses we provide are meant to help
you to identify and think clearly about issues: they cannot be a definitive answer.
STRATEGIC CHOICE
Bear in mind that this kind of analysis is not done for its own sake: it is intended to help in
identifying and justifying options, or evaluating the companys choice of option. If you are
asked to evaluate or recommend strategic options, a useful framework for evaluating options
(Johnson & Scholes) is:
12
Suitability: Does the strategy fit the organisations situation and objectives? Does it solve
identified problems or exploit identified opportunities? Does it fit the organisations stated
cultural values and traditions (particularly strong in the case of M&S)?
Feasibility: Practical (can we make this happen and sustain it?); Economic (do we have
the financial resources? will the returns be worth the risks?); Social (will it be accepted or
resisted?); and/or Technical (do we have the equipment, systems and processes?)
Acceptability: Will the strategy be acceptable to key stakeholders (shareholders, directors,

employees, consumers, suppliers and allies, pressure groups, the press and public) and
future stakeholders (eg potential customers/suppliers perhaps even future generations)?
The exam rubric says that you will be expected to make sound decisions: get into the habit of
evaluating any options you identify in the case or might propose in the exam
THE PROCESS OF STRATEGY FORMULATION
We arent explicitly told much about M&Ss approach to strategy formulation, but it is worth
noting the following.
M&S appears to have a strong set of guiding values, expressed in various ways. Values
flow down to employees, supply chain partners and other stakeholders, through
mechanisms such as informal ethos/tradition (4, line 29); formal programmes such as Plan A
(15, line 39); interpersonal values selling by leaders (eg 6, line 40; 12, line 17); and published
statements and guidelines (How We Do Business Report, Code of Ethics, Quality, Value,
Service, Innovation, Trust motto) etc. Values shape strategy: eg quality/value/service
proposition (6, lines 17, 23), human relations and marketing based on trust (5, line 18; 13, line
35), a new focus on CSR leadership (16, line 3), the desire to maintain or recover M&Ss
largest/most-respected profile (7, line 33; 12, line 29).
The innovation value is a noticeable change from the previous emphasis on tradition and
predictability, and the tendency to lag behind competitors (9, line 29; 15, line 22): you might
like to think where this might lead strategically.
It is unclear from the case to what extent M &S carries out systematic strategic planning
prior to the major shifts in strategic direction outlined in the case: the emphasis seems to be
on the chief executive or chairmans vision and decisions (eg 7, line 39; 13, line 15ff).
According to Bower & Matthews, under Greenburys leadership, the board met for a major
strategic conference every two years. Extensive analysis was performed and detailed study
papers were prepared by members prior to these conferences. The June 1994 conference was
to focus on international issues.
This seems a relatively flexible approach to strategic planning, which raises the question:
why were strategic decisions, in hindsight, risky, apparently ill-thought through, or poorly
applied? The case appears to attribute some blame to strong, unchecked leadership (7, line 9,
26), implementation problems (9, line 41; 10, line 10), a failure of risk management (10, line
12) and, under Peter Salsbury, excessive use of management consultants (10, line 25; 13, line
12). You may identify other problems.
13
There appears to have been some failure of strategic alignment and the cascade of strategic
planning: Rose found a lack of strategic cohesion and unity of direction at the divisional
level (13, line 3) and Kate Bostock found a total absence of planning at the product
management level, even for M&Ss core product (14, line 9).
In its early history, M&S appears to have had a primarily resource-based approach to
strategy, focusing on the companys existing core competencies and brand strengths and
identifying business structures and approaches to protect and exploit these (4, line 42). M&S
appears to have lost sight of this under Greenbury and Salsbury, adopting a more
positioning-based approach, focusing on environmental opportunities for growth (eg
globalisation, acquisition, diversification), and adapting business structures and approaches
to exploit these (eg 8, line 12). The risks of this approach are highlighted by the case: M&Ss
finding that it lacks core capabilities for new strategies (9, line 40), constant restructuring (11,
line 9), too many product lines (13, line 9) and too many unrelated initiatives (13, line 13).
Resource-based strategy is regarded as the best source of long-term competitive advantage
in volatile markets, because it focuses on hard-to-imitate and flexible competencies: this
appears to be the renewed view under Rose, with a recognised need for M&S to return to
the business it knew best (13, line 14): to focus before driving and broadening.
It is arguable whether a business like M&S should rely on long-term formal planning, given
the complexity and dynamism of its market. Of the alternative approaches to strategy
formation (Mintzberg), the case illustrates:
o
Opportunistic strategy: eg taking advantage of opportunities to acquire other retailers

(9, line 17), or enter into partnerships (7, line 45; 14, line 45). It is noticeable that some of
the most successful moves made, particularly in the Rose era, are attributed to exploiting
chance (12, line 4; 14, line 45; 15, line 27, 46).
In previous eras, M&S appears to have been slow to identify or exploit such
opportunities and not all its opportunistic strategies have proved effective. Since its
pioneering days of sector innovation and leadership (eg 4, line 22), M&S strategy in
major areas appears to have been reactive rather than proactive, belatedly following
competitors (7, line 42; 9, line 29, 15, line 21). This raises questions such as: how the
strategic apex may need to change to become more entrepreneurial about
opportunities; and what strategy evaluation and risk management measures might be
necessary to avoid poor strategic decisions in future. There are signs that M&S now
aspires to sector innovation and leadership, eg in CSR (16, line 24).
Bottom-up or emergent strategy: eg Kate Bostocks successful buying mantra Every

woman, every time being adopted as a major promotional strategy (14, lines 15, 44).
Emergent strategy may be a double-edged sword, however, resulting in too many
divergent initiatives without unity of direction (13, line 3, 9, 13)
Imposed strategy: the case spotlights M&S in periods of crisis (1991 recession, 1999
crash, 2002-2004 transition) when recovery or turnaround or crisis management
strategies have to be put in place (a) in a hurry and (b) with strong central leadership (6,
line 18; 12, line 14). Strategies such as cost cutting and price/value positioning were
imposed by recession or financial pressure (6, line 15 ff; 10, line 30); growth strategies
were imposed by market expectations (9, line 12).
14
M&S apparently argued, in defence of controversial strategies, that it had no choice eg

about seeking financial co-operation from its suppliers, or terminating William Baird
with the closure of UK factories, if it was to deliver value to customers and shareholders
( Christopher & Peck, p 20, 23). Might there have been other options for doing this, or
different ways of doing this, however, with better strategic decision-making in place?
The introduction of Plan A makes an interesting mini case study in strategy formation. A
charismatic strategic leader, carrying out informal environmental scanning, chances upon
an interesting idea (15, line 45). He gains buy-in from a guiding coalition (16, line 1).
Research, analysis and thought was, presumably, then put into devising and launching a
substantial five-year strategic plan (16, line 4: note the atypically long time horizon,
appropriate to forward-looking and transformative strategic change). Resources were
allocated to the plan (16, line 3) and all stakeholders informed and involved (eg M&S How
We Do Business report)
TYPES OF QUESTIONS THAT MIGHT BE SET ON STRATEGIC THEMES

Some of the types of strategy questions raised by the case study approach include:
Appraise the rationale, risk and effectiveness or otherwise of particular strategies (eg
globalisation, acquisition, supply chain agility) or general strategic direction (eg focus,
differentiation or expansion).
Identify and discuss the strategies and general strategic direction pursued by M&S under
different leaders.
Discuss the apparent risk appetite and vulnerability of M&S in pursuing some of its
strategies: identify particularly risky strategies, explain why they were pursued, and
suggest how risk could have been better managed.
Appraise M&Ss ability to learn from its strategic mistakes: how can it ensure that it does
not repeat strategies that have previously been unsuccessful or led to problems?
Analyse the critical incident of M&Ss sales, profit and share-price collapse in 1999,
exposing it to the threat of takeover. What were the immediate and underlying causes of
this fall? How was it turned round? In your opinion, were the underlying causes
addressed? What can M&S do to ensure that such a crisis will not happen again?
15
SECTION 5
External Environmental Analysis: PESTLE
PESTLE analysis is a classification of external environmental factors into political, economic,
socio-cultural, technological, legal and ecological factors. (This is an expansion of the PEST
model which covers political/legal, economic, socio-cultural and technological factors.) The
objective is to identify all the external factors that may have an impact on the organisation. In
some cases there will be overlaps and ambiguities: this is not important, as the categories are
simply there to help you focus on the full range of possibilities.
PESTLE analysis may be an appropriate tool for this case because:
It provides a framework for identifying a wide range of environmental factors (eg a May
2007 Case Study question asked you to analyse the key factors affecting supply).
It utilises the various data in the case which directly address environmental issues
It forms a basis for the analysis of opportunities and threats, as part of a corporate
appraisal or SWOT analysis for M&S.
Our list of the kind of PESTLE factors which may be relevant to M&S is as follows. We have
included factors highlighted by M&Ss history in the case. You may need to carry out a PESTLE
analysis for a particular era (eg 1991 when Greenbury took over, or 2004 when Rose took over):
well leave it to you to select the points that are relevant.
Political factors
Government policy: eg fear of impact of Labour government, in the 1970s, was Lord Sieffs
rationale for M&Ss first entry into overseas markets (Bower & Matthews, page 5); support
for local sourcing
Political factors in the choice of Greenbury to chair the executive remuneration committee
with a knock-on effect on M&S leadership effectiveness (8, line 24ff, 44)
International trade policy (eg liberalisation of trade in China, EU incentives to trade with
Eastern European members, setting up opportunities for new outlets)
Government responses to restore consumer confidence and support economic activity in

the face of threats of national or global recession (6, line 15; 3, line 17)
International political upheavals, local wars, or risk of unrest (eg experienced by M&Ss
major textile supplier Courtaulds when shifting production overseas: Christopher & Peck, p
22)
Economic factors
Threat of national, global or sector recession (6, line 15; 3, line 17) eroding consumer
confidence and spending, and eroding customer willingness to pay quality premiums.
Currency fluctuations: eg the strengthening of the pound in 1999, increasing the costs of
M&S merchandise in overseas markets (forcing M&S to position itself much further upmarket overseas than its middle-market positioning in the UK Christopher & Peck, p 11)
16
and not offering lower costs of imports (as for competitors) because of M&Ss
predominantly UK supply base.
The collapse of Asian markets and currencies in 1997 (9, line 15), damageing markets
The EU imposition of import textile/clothing import quotas (eg from China and Sri-Lanka
in 2005), affecting M&S and the suppliers it encouraged to move production off-shore.
The eroding potential for low-cost offshore production eg in China: Supply Management
(13 December 2007) reported forecasts that the over-supply of cheap Chinese labour will
not last much beyond 2010: annual wage increases of 15% are expected to erode its cost
advantage over other countries. The introduction of new labour laws at the beginning of
2008 (outlawing poor employment practices) is also likely to increase costs.
Inflation pushing up buying costs; attempts to protect or enlarge profit margins squeeze
either supplier margins or customer value proposition.
Potential for increased competition (eg through global supply chains 9, line 3 or online
sales 15, line 22) and new market entrants eg international niche retailers (US Gap or
Spanish high-fashion chain Zara).
Socio-cultural factors
Demographic and lifestyle factors shaping the needs of M&Ss core market segments: eg
fashion trends, body size/shape trends, maternity niches
Demographic trends in consumer retailing: boutique style department store displays; outof-town retail locations (7, line 43); online retail (15, line 22)
Shortening product lifecycles for fashion clothing (rising customer expectations of range
turn-round: 14, line 20): pressure for supply chain agility, short time-to-market, efficient
logistics and adaptable manufacturing capability by suppliers
Cultural trends: clothing (eg exposure to catwalk fashion: 14, line 29) and food
tastes/eating habits (eg pre-packaged convenience foods and global cuisine: 7, line 32);
retail outlet design
Consumer/public ownership of M&S as a cultural icon, leading to expectations, scrutiny,

influence (3, line 10, 14; 16, line 20ff)
Increasing consumer empowerment and fickleness: erosion of brand loyalty and barriers
to switching eg due to internet exposure to global brands, price comparisons (Lewis &
Bridger)
Increased consumer and pressure group interest in issues of ethical sourcing and
corporate social responsibility, creating demand/support for Plan A (16, line 20, 22).
Socio-cultural convergence opening global markets (8, line 14) but at the same time,
differences creating difficulties for cross-cultural marketing and sourcing (eg the failure of
M&S operations in Canada due to failure of cultural cross-over: perception of the brand as
stodgy and only for expats: Wikipedia)
17
Technological factors
Comparatively high use of technology and information sharing within the retail sector (eg
EDI, EPOS, barcoding/RFID, joint inventory and planning systems with suppliers)
Technology development creating potential to retail new technology-based products (eg

M&Ss new technology product line: marksandspencer.com)
ICT supporting different distribution methods, eg internet, home-shopping, in-store

ordering (15, line 24)
ICT and transport technologies (eg speed and refrigeration in food supply chains) making
global marketing and sourcing possible (8, line 14)
Legal factors
Employment law (including equal opportunities, employment protection and health &
safety) in countries of operation and differences in legal regimes (eg on health and
safety, design and patent protection) in overseas markets.
Business and contract law (impacting on buyer-supplier relationships, consumer

protection); competition law (impacting on acquisitions and mergers)
Company law and corporate governance regulation (eg the Stock Exchange Combined
Code providing for the separation of the role of chairman and chief executive: a key
compliance issue for M&S in 1992 and 2008: 7, line 12ff; 16, line 41)
Changes in any or all legal areas, raising change/compliance issues.
Ecological/environmental factors
Government policy, legislation and consumer pressure re environmental impacts and

sustainability: opportunity for brand differentiation and market leadership (eg via Plan A)
Emerging hot environmental issues eg climate change (15, line 45) and carbon footprints
Weather impacting demand for clothing products (15, line 26)
Climate, weather, disease (eg foot and mouth disease or BSE affecting meat products in
Britain) affecting food supply chains
18
SECTION 6
Stakeholder and Competition Analysis
STAKEHOLDER ANALYSIS
Stakeholders are individuals and groups who have an interest or stake in the strategies or
activities of an organisation. Stakeholder analysis is used to identify potential conflicts and/or
synergies of interest with potentially influential stakeholders, in order to develop strategies for
stakeholder communication, marketing, issues and relationship management.
A previous Case Study exam has asked you to analyse the interests of stakeholders (in that case,
in food safety): something similar might be asked here, given the high influence/impact of
M&Ss actions on its sector and supply network.
Stakeholder mapping
Mendelows Power/Interest Matrix is often used to position identified stakeholder groups
according to the extent of their interest and the extent of their potential influence.
Low-power/low-interest stakeholders (Quadrant A) are low priority: minimal effort will be

expended on them, although they will need to be monitored for change in power or interest.
Low-power/high-interest stakeholders (Quadrant B) need attention because they may

acquire or mobilise power to protect their interests. Mendelows recommended strategy is
consultation and information, co-opting the group as supporters rather than resisters.
Supporters from this group may be repositioned to Quadrant D, by enhancing their power.
High-power/low-interest stakeholders (Quadrant C) need attention because they may use

their power if their interest is aroused. Mendelows recommended strategy is to keep
satisfied, to avoid arousing detailed interest or active opposition. Supporters from this
group may be repositioned to Quadrant D, by enhancing their motivation.
High-power/high-interest stakeholders (Quadrant D) are key players. They should be the

target of ongoing stakeholder management, proactive consultation and involvement.
You may identify different stakeholder groups, or position them differently, but our analysis for
M&S is as follows.
M&Ss stakeholder map
Level of interest
Low
Low
Power/influence
High
Quadrant A
Society/community
Industry bodies
Quadrant C
Consumers
Market analysts/media
19
High
Quadrant B
Non-core suppliers
Employees
Quadrant D
Directors/managers
Shareholders
Core suppliers
M&S directors and managers have high power, because of their legitimate authority for
strategic decision-making and their interpersonal influence as leaders and champions of
initiatives. They have high interest because of their responsibility for M&Ss current and
future performance. The company is therefore vulnerable to issues arising from: conflict
among them (9, line 45; 10, line 10); their failure to take responsibility or confront risk (7, line
6); loss of confidence (11, line 22).
Stuart Rose makes it a first priority to unite and motivate this group (12, line 14ff), and to
involve them in strategic change (eg 16, line 1).
Shareholders have high power, because of their legitimate authority to vote at AGMs, their
resource power to sell their shares (potentially damageing the companys marketing
standing 3, line 23), and their rights under corporate governance provisions. Shareholders
may vary in their interest according to size of shareholding: large institutional investors
may have high interest in M&Ss performance, which affects the value of their shares and
dividends. It may also vary as issues arise: at the moment, it is likely to be high for those
with an opinion on the corporate governance issue, or managements plans to weather
recession.
Stuart Rose made it a priority to reassure and manage the expectations of this group (12, line
31; 14, line 38), although his proposed tenure as chief executive and chairman may create a
further issue. (Beyond the scope of the case, at the July 2008 AGM, 22% of M&S equity
abstained or voted against the move, and a major institutional investor announced its
intention to file a shareholder resolution at the 2009 meeting, calling for the appointment of
an independent chair, if the company had not split the roles by then: Times Online.) You
might like to think about how this issue should be (or should have been) handled to
minimise conflict.
Suppliers vary in their power and interest, depending on size, status and circumstances:
core long-term suppliers have a high degree of power through M&Ss investment in asset
specificity, but many will have low power due to their dependence on M &S for a high
proportion of their turnover. All suppliers will have a high specific interest in M&Ss supply
chain, cost reduction and logistics strategies.
M&S has traditionally taken care to manage its core suppliers, through a high degree of
integration and involvement (5, line 6ff, 41), but the push to increase or shore up profitability
has created conflict requiring issues and occasionally crisis management. Short notice,
imposed decisions eg on price cuts (especially under Peter Salsbury) resulted in relationship
breakdown and reputational damage. Stuart Rose gave priority attention to this stakeholder
group, making an effort to persuade and negotiate constructively (12, line 26ff), although in
the short-term conflict between supplier and customer/shareholder interests, suppliers
came second (15, line 13).
Consumers may have little power individually, but high power collectively (eg in consumer
organisations or by buying power) to affect policy and performance: they are increasingly
demanding and ready to switch brands (Lewis & Bridger). Although they have little direct
interest, M&S is everybodys business as a British retail icon (13, line 35). M&S itself place a
high priority on customer retention and involvement (eg via Plan A customer pledges).
Stuart Rose made it a priority to re-engage with this stakeholder group via brand reengagement marketing (13, line 34, 42; 15, line 5ff).
20
Market analysts and media have high power by virtue of their influence on market
confidence and M&Ss share price. They may have low specific interest in M&S (although it
will always arouse attention by virtue of its status), unless aroused by issues such as
depressed profit forecasts (3, line 20ff) or recovery (15, line 33).
Stuart Rose made it a communications and strategic priority to manage the expectations of
this group and secure its confidence on taking over (12, line 31ff; 14, line 38; 15, line 18).
However, issues and expectations management was insufficient to prevent market panic at
the threat of recession in 2008 (3, line 22).
Employees are not featured in the case (despite M&S being a textbook favourite for its
enlightened, non-unionised employee relations and priority on staff welfare). They may be
at the higher-power end of Quadrant B, in an organisation that prides itself on CSR and
human relations, and they also have influence as the implementers of strategic change (eg
Plan A) and controllers of resources (especially consumer contact). They have a high interest
in strategy as implementers (or subjects, in the case of downsizing: 6, line 18) and in business
performance, which potentially affects their rewards and livelihoods.
Stuart Rose made buying staff a priority in initiating his turnaround plans (12, line 23), but
we also see a certain ruthlessness in regard to staff culls (14, line 12ff).
Wider society is recognised as a legitimate stakeholder by M&Ss own emphasis on

corporate social responsibility, via its published statements, community charitable projects
and, most notably, Plan A (16, line 1ff): this gives it power to influence M&Ss operations (15,
line 43). The community otherwise has fairly low collective power in its own right (although
it may mobilise pressure groups and consumers on its behalf). It would usually have fairly
low interest (unless aroused by specific issues), although a national icon such as M&S tends
to attract public focus.
Industry bodies are not highly featured. M&S is a member of trade associations such as the
British Retail Association and Confederation of British Industry, and such bodies may have
some influence for a company that aspires to values leadership and exploits industry
contacts and partnerships. They will generally have low specific interest, although M&S will
be a focus of attention and interest may be aroused currently by M&Ss challenge to the
corporate governance code, the shared threat of recession and M&Ss power to influence the
market.
Note that if you are asked to do a stakeholder analysis for Plan A (16, line 1ff), you might come
up with a slightly different set of stakeholders, including government and pressure/interest
groups such as Greenpeace (16, line 21), and silent stakeholders such as future generations
Stakeholder analysis
A question in a previous Case Study exam asked you to advise an organisation, following a
critical incident, on how stakeholders should be involved in manageing issues in future: a
similar question could be applicable here in relation to periods of poor performance or
leadership transition. More likely, perhaps, would be questions about:
How effectively Stuart Rose managed stakeholder communication and relationships, as part
of his turnaround plan (see our comments above)
What conflicts of interest you can identify between the interests of key stakeholder groups
(eg shareholders, customers and suppliers) and how M&S can manage these (or could have
managed these better)?
21
Stakeholder management for Plan A. Who are the stakeholders in Plan A? What is the
nature of their influence and interest in the strategy (eg using a power/interest matrix)?
How can Stuart Rose and his team use stakeholder communication and involvement to
make a success of Plan A, given its wide-ranging impact on all stakeholders? (We will look
at some of these aspects further in Section 23.)
Whether M&S needs a more proactive approach to issues management (eg in regard to the
current corporate governance controversy), so that it can anticipate stakeholder sensitivities,
communicate proactively (to establish networks of trust and support), sound less defensive
(7, line 23; 16, line 38, 43) and learn from past issues to improve recurring issue handling.
COMPETITOR/INDUSTRY ANALYSIS
The Five Forces model developed by Professor Michael Porter is a tool for analysing the
competitive forces within an industry. The five forces are: threats from potential new entrants to
the market (given the strength of barriers to entry), threats from substitutes, suppliers
bargaining power, buyers (customers) bargaining power, and the general degree of
competitive rivalry in the industry.
Although this would be a highly relevant tool for M&S, we have too little information about its
retail competitors and competition to conduct the analysis or to regard this as an issue raised
by the case. You might like to think about the following brief comments, however, as you do
your background reading.
Threats from potential new entrants: low-to-moderate, requiring monitoring.

Entry opportunities may come from niche retailers (eg high-fashion, organic foods), online
retailers, lower-cost retailers (eg Aldi for foods), or more responsive supply chains (eg Gap):
most likely established retailers in overseas markets entering the UK or a particular niche.
M&S and other major retailers have erected substantial barriers to entry, however, eg:
strong established brands and customer loyalty; control of the supply market (often on an
exclusive basis); high set-up costs (including purchase/lease and outfitting of stores). M&S
also has the capability to imitate any new initiatives (eg e-commerce, high-fashion agility) so
it will be difficult for entrants to sustain competitive advantage.
Threats from substitutes: constant, requiring strong branding and customer retention
Plenty of direct substitute merchandise (ie other brands of clothes, food and household
items) and retailers (ie other department stores, boutiques, e-shopping etc). Supermarkets
and hard discounters (eg Aldi) may be particularly competitive food provider substitutes in
a tough financial climate.
Threats from suppliers bargaining power: moderate for core suppliers, requiring management.
Supplier power is generally low, given the proportion of turnover and relationship-specific
adaptation represented by a large customer like M&S. On the other hand, M&S is locked in
to relationship with core long-term suppliers (whether by ethics, contract or relationshipspecific adaptation and integration). Large suppliers with other major customers or
transferable production capacity may use their power to stop supplying M&S (10, line 42) or
to resist price reductions, however.
22
Threats from consumers bargaining power: collectively fairly high, requiring management
Consumer bargaining power is high, due to the vulnerability of the retail market in times of
recession, and strengthened by consumer organisations and regulatory bodies which
enforce consumer rights. In particular, it places pressure on M&S to maintain its value
proposition (6, line 24). Consumers are growing increasingly demanding in their
expectations, and prepared to switch brands for better offers elsewhere (Lewis & Bridger)
Competitive rivalry: moderate must keep pace

Existing competition is stable, with leading players established in their brand positioning.
The Burton Group is a primary UK general merchandise competitor, and Sainsbury and
Tesco are primary UK food competitors (Bower & Matthews, p 21). M&S is able to partner
with indirect competitors such as Tesco (7, line 45), Next (11, line 7), Amazon (15, line 23).
However, we also hear of several takeovers and acquisitions: no room for complacency. As
recession sharpens, there will be increasing competition for consumer spend.
Some key sources of competitive advantage in M&Ss market
Strong supplier relationships and supply partnership development skills (transferable to

building franchise network) traditional advantage for M&S
Supply chain agility and responsiveness advantage for competitors in 1990s (9, line 31)
Expertise in international or global sourcing cost/flexibility advantage for competitors in

1990s (9, line 29, 40ff)
Store locations (and related property value) traditional advantage for M&S (4, line 43),
eroded by demographic shift to edge-of-town (7, line 42) and e-commerce (15, line 21)
Retail footage/space (revenue-earning capacity, profile) an increasing advantage for

M&S under Greenbury (8, line 1), but only an advantage if leveraged effectively, and
manageing the risk of capital investment in expansion (8, line 3; 10, line 13)
Brand positioning on quality/value traditional advantage for M&S (4, line 42); lost due to
loss of focus, outmoding of brand, alienation of core customers (10, line 14; 13, line 36ff; 14,
line 7; in 1999, only 45% of customers rated M&S positively on service and 43% on value for
money Christopher & Peck, p 20); recaptured again under Stuart Rose (13, line 36ff; 15, line 6).
In the face of competition from lower-price/quality retailers (eg warehouse clubs and
discounters) and higher-price/quality retailers (eg high-fashion labels): you might like to
consider whether M&S should roll out more outstanding value/outlet and
premium/catwalk brands or hold the middle line.
Brand positioning on buying British traditional advantage for M&S (5, line 12; 5, line 37),
but became a disadvantage as competitors moved to low-cost overseas sourcing M&S was
slow to do so due to UK-centric supply base and distribution organisation (9, line 29, 40ff)
CSR/environmental leadership new potential source of advantage for M&S (16, line 4, 20)
Profitability, allowing capital investment (7, line 48) without high gearing costs and/or
enhanced value proposition to customers (6, line 23). In 1993, M&Ss operating profit
percentage was 12.4% significantly higher than its primary UK competitors (Bower &
Matthews, p 21). (Note that Greenburys pushing of profit margins eventually backfired,
however, by alienating suppliers while not adding value for customers.)
23
SECTION 7
Organisation Structure, Culture and Resources
ORGANISATION STRUCTURE
We dont really know enough about M &Ss structure from the case study to justify a detailed
analysis (although there is plenty of information accessible from your wider reading). In any
case, it is difficult to imagine what kind of question could be asked in the exam that would not
be highly speculative or redundant (eg recommending an approach to structuring the
company). Just in case, here are some key points, focused on strengths and weaknesses for
strategic development.
A century of tradition, growth in size, and product and market development has created an
increasingly complex and rigid structure, characterised by long decision-making paths (13,
line 10): a classic bureaucracy. The 1980s saw major attempts to simplify, delayer and
streamline (Bower & Matthews, p 5), and further delayering and downsizing was carried out
to cut costs under Greenbury (6, line 19).
Having been structured primarily along product lines, the business was fundamentally
reorganised under Peter Salsbury (with the aim of creating clear profit centres with simpler
management structures, faster decision-making and distinct targets for shareholder value:
M&S annual report 1999) into five operating divisions: UK Retail, International Retail,
Financial Services, Property and Ventures. Central management was to be streamlined,
devolving greater control over operating decisions to store and regional managers, but with
a single central marketing group to address the key issue of restoring customer focus.
(Christopher & Peck, p 16).
You might like to think about ways in which Marks & Spencer can make its structure more
flexible and responsive or how it can use its existing structure more flexibly and
responsively (eg through multi-directional communication, team working and so on). Note,
however, that M&S found constant restructuring destabilising (11, line 9).
Stuart Rose found that the divisional structure was creating a defensive and dis-integrating
mindset among executives (13, line 2ff). The case does not tell us what was done about this,
but the current M&S Executive Committee (corporate.marksandspencer.com) is organised along
a mix of product and functional lines: marketing (Steven Sharp: 13, line 33); finance and
operations (Ian Dyson: 16, line 36); human resources; property and store development; store
marketing and design; general merchandise merchandising and planning; clothing (Kate
Bostock: 16, line 32); food; international, home and M&S Direct; retail; and IT and logistics.
You might like to think further about the (theoretical) advantages and disadvantages of
divisionalisation for a large organisation operating in diverse regions and distinct product
areas but seeking to maintain a single umbrella brand, and struggling to maintain unity
of purpose and strategic direction
A number of inter-organisational structures have been fruitfully exploited by M&S, often

for entry into new markets, including:
o
Joint-venturing with Tesco to develop edge-of-town stores (7, line 45)
Partnering with Amazon to build an e-commerce platform (15, line 23)
24
The acquisition of Brooks Brothers (an upscale specialty clothing chain in the US,
with a small joint venture in Japan) and Kings Super Markets, in order to break into
the north-western US market, learn about the Japanese retailing market and establish
links with Far Eastern suppliers (Montgomery, p 2, 3). However, this was not a
success, and the businesses were sold in 2001 and 2006 respectively.
The use of the franchise format for most international outlets (8, line 9)
The sale of the M&S Financial Services division to HSBC in 2004 (12, line 34): now
run as a 50: 50 profit sharing partnership as M&S Money (marksandspencer.com)
Partnering is clearly a strength of M&S, and if asked, you might like to recommend that it
explore further such opportunities to enter new markets, capitalising on its brand identity
and trust. (M&S is clearly thinking this way: beyond the range of the case study, it
announced in October 2008 that it is preparing to expand into the household gas and
electricity supply market, having partnered with Scottish and Southern Energy.)
In the absence of information in the case, you might want to think about how M&S might
structure its buying: eg on a regional basis (to take account of demand variations eg
different clothing sizes and food tastes/availability in different nations); or on a category
basis (to take account of specialist buying, while consolidating purchasing for potential
economies of scale); or perhaps, given the high degree of consolidation of the supply base,
on a supplier/account basis.
At one layer of the matrix, we do know that it is partly structured by role/function:
Selectors (merchandise and supplier selection), Merchandisers (buyers) and Technologists
(design/production expediters) (6, line 27ff). Under Greenbury, these roles were built into
head-office multi-disciplinary buying teams for each product category (eg ladies
undergarments: Bower & Matthews, p 10 and Exhibit 6). We dont know from the case
whether these teams also handle buying for overseas franchises and outlets (to standardise
the range), or whether that responsibility is devolved to local buying teams (to adapt the
range): you might want to recommend one or the other.
ORGANISATION CULTURE
Organisation culture is defined as a pattern of beliefs and expectations shared by the
organisations members, and which produce norms which powerfully shape the behaviour of
individuals and groups in the organisation. (Schwartz & Davies). Positive, dominant, widelyshared values (strong culture) has been argued to be a powerful source of corporate direction
and competitive advantage.
If asked to analyse M&Ss culture, you might note that we hear a lot about statements of culture
(values, mottoes, brand artefacts) but are not given evidence of how far this shapes actual
behaviour or the perceptions of its staff. However, from the strength and reach of its value
statements, we can assume that M&S aspires to a strong culture model.
Applying Johnson & Scholes cultural web model:
Paradigm: M&Ss stated values include the importance of quality, value, service, innovation
and trust. Tradition, heritage and reputation are also a strong part of its underlying selfidentity (12, line 39). M&S is also highly committed to community and charitable projects,
www.corporate.marksandspencer.com) linked to its new values focus on environmental and
social sustainability (Plan A): Stuart Rose has united stakeholders around this part of the
paradigm to give new cultural focus and direction (16, line 19).
25
Stories: M&S has a long history, which it promotes as part of its self-identity. The origins of
the firm form a corporate mythology to live up to (12, line 18), together with heroic
leadership to glory years (6, line 7) and remarkable revivals (3, line 33), and corporate
anecdotes eg about how Stuart Rose stumbled on the idea for Plan A (15, line 45). Stuart
Rose has creatively exploited the dominant story to reinvigorate the board, employees,
consumers and the market (12, line 17, 39; 15, line 4))
Routines and rituals: we arent given enough detail to apply these aspects but every
company has them.
Control systems: again, we arent given enough detail to apply this aspect but the
demands of strong central leadership and the need for consistency of quality and branding
suggest that bureaucratic and managerial control over day-to-day operations would be
fairly high (8, line 46). Control systems in regard to quality, hygiene and safety in suppliers
seem particularly strong (5, line 43).
Organisational and power structures: traditionally, strong strategic, charismatic leadership

by the chief executive, chairman and executive team (occasionally undermined by political
power struggles: 9, line 45; 10, line 7; 11, line 12), with a complex (and traditionally
bureaucratic) structure for delegation of operational responsibilities.
Symbols: M&Ss brands and logos represent strong cultural symbols and corporate selfidentity. Again, Stuart Rose has notably re-engaged stakeholders with these symbols (13,
line 36, 42, 45). Further symbols include knighthoods, accolades and other forms of public
recognition which create pride in M&S (3, line 39ff). The attainment of the 1 billion profit
mark (9, line 10) was a symbolic moment, as less happily was the 2004 takeover bid by
Bhs (11, line 19) and the 2008 fall back to the 400p share price (3, line 27).
If you had to pick an overall cultural type for M&S, based on the information we have, it
would arguably be (in Harrisons classification):
A power culture (power centred in a key figure or founding family; control through direct
personal communication) at the strategic apex; and
A role culture (classical, rational organisation or bureaucracy; authority based on position,

function; conformity to rules and procedures) at operational levels.
This is an uneasy mix, because (a) the operational levels of the organisation need greater
flexibility to cope with local conditions and customer demands; (b) a power culture at the top
does not easily devolve authority or initiative to lower levels, in order to break the rigidity of
the role culture; and (c) a power culture can cause a lack of questioning/challenging of strategic
decisions, perhaps contributing to M&Ss problems under Greenbury.
There may also be issues of national culture and cross-cultural management for M&S, a
quintessentially British brand and organisation, in moving into international retail and supply
markets [>> Sections 11, 16]
RESOURCE ANALYSIS
A resource audit is an assessment of the resources that the organisation owns, controls or can
access to support its competitive position and strategies. Resources are strategically significant
if they are scarce (and competed for by the organisations rivals); vulnerable to supply
fluctuations or disruption; critical to the organisations business or processes; and/or a source
26
of competitive advantage (eg by differentiating the companys product/service, protecting its

cost structure or enabling it to innovate).
Resources are a key variable in strategic planning.
A positioning-based approach to strategy seeks to identify product/market opportunities

within a given environment (eg using the Ansoff matrix or SWOT analysis) and then to
develop and deploy the organisational resources required to get there. So, for example, M&S
has needed to develop technological capability and partnerships in order to exploit the
opportunities in internet distribution (15, line 20), in the same way that it needed to develop
international marketing and buying expertise in order to move into international markets
(42, line 9) and more responsive supply systems in order to exploit the high-fashion market
(14, line 19). It is now transforming its business processes in order to achieve CSR-leader
positioning (16, line 4, 19).
A resource-based approach to strategy seeks to identify the organisations distinctive

(unique and hard to imitate) internal resources and competencies and then to set strategic
objectives that will enable it to exploit these to best competitive advantage. So, for example,
M&S identified trust as one of its core brand resources, and exploited this by entering the
financial services market (Bower & Matthews, p 16). Similarly, strong supplier relationships
have influenced its marketing (4, line 12), product development (6, line 3) and cost reduction
strategies (6, line 20; 30, line 10; 15, line 13).
M&Ss RESOURCE ANALYSIS

Some of the distinctive, value-adding resources and capabilities of M&S are as follows.
Unique long-lived, value-laden brand with high generational consumer loyalty, trust and
reputational capital (3 line 12)
Traditionally very strong and loyal relationships with core suppliers, which can be
exploited at seasons of high demand: strong control over suppliers due to backward
integration, dependency, buying power or loyalty (5, line 8)
High power in the supply market, as an extremely attractive (high-volume, traditionally

loyal) potential customer
Strong, visionary leadership (at many periods of history) with high-level retail (and/or
broad M&S) experience (6, line 36ff; 11, line 25ff)
Financial strength and stability, with strong investment in assets (eg owned high-street
property); a tradition of year on year sales and profit growth (Appendix 1); and support for
major capital expenditure (7, line 48)
Strong industry and market contacts and relationships (competitive architecture) and a
willingness to exploit them by networking and collaboration eg in inter-organisational
partnerships (5, line 41; 7, line 45; 11, line 7 [George Davies was the founder/designer of Next]; 15,
line 23] including the ability to co-opt customers and other stakeholders into Plan A.
Ownership of strategic assets, including property/premises in high-street locations in major

towns and cities.
One feature of this analysis is that M&S appears to have taken an effective positional approach
to developing its core resources, and could now use a resource-based approach in order to
exploit them further and in new ways (eg through brand extension).
27
Another point to note is that some of M&Ss core resources have, at various points, been put at
risk. For example:
Loss of brand strength due to quality/value/image problems (10, line 14; 13, line 38), brand
fragmentation (13, line 5), alienation of core customers (14, line 7) and general decrease in
consumer brand loyalty (Lewis & Bridger)
Loss of financial strength due to recessionary pressures (3, line 23) and poor decisionmaking (10, line 13)
Loss of leadership resource through distraction (8, line 42), in-fighting (9, line 6), transition
(10, line 29), lack of confidence (11, line 24) and lack of planned succession (12, line 3ff; 16, line
30)
Loss of supply relationship and buyer power strength, by forcing suppliers to squeeze
margins (6, line 20; 30, line 10; 15, line 13), forcing them into risky off-shoring (9, line 39), and
subsequently terminating (10, line 31) or alienating (10, line 42) major core first-tier suppliers.
This raises concerns about M&Ss risk management, which was/is needed both to shore up
existing core resources and to consider developing new ones (eg CSR leadership). You might
like to think which of the at-risk resources has been effectively secured under Stuart Rose, and
which remain at risk.
28
SECTION 8
Corporate Appraisal: SWOT Analysis
SWOT ANALYSIS
A SWOT analysis (or corporate appraisal) is a listing of the businesss strengths, weaknesses,
opportunities and threats. Opportunities and threats relate to the external environment
(analysed in Sections 5 and 6), while strengths and weaknesses are internal to the business
(analysed in Section 7).
SWOT analysis is often an appropriate tool because:
It is a flexible framework, which can be applied to whatever data is provided in the case
It provides a useful foundation for generating and evaluating strategic options.
M&SS SWOT ANALYSIS

Our assessment of M&Ss key SWOT factors is as follows. (You may have identified more, or
others, or grouped them differently. It is also worth noting that a different SWOT will have
applied at different eras of the companys history, and you might conceivably have to adapt
your answer to the issues faced in different eras)
Strengths
1.
Uniquely long experience in the UK retail sector
2.
Strong market leadership in some product sectors (eg womens clothing)
3.
Ownership of an extremely strong core brand, with high standing and reputational
capital, generational consumer trust/loyalty and brand extension potential (eg new
technology products)
4.
Strong property asset portfolio and retail outlet network (among other barriers to
competitor entry)
5.
Direct, relational contact with consumers, through brand loyalty, retail outlets, loyalty
programmes, e-commerce accounts, Plan A pledges etc
6.
Strong community profile and links, through community projects and partnerships:
strong partnership links for causal marketing (eg with Oxfam, WWF)
7.
Strong, loyal and motivated supplier network and a tradition of positive, collaborative
supply relationships (now modified)
8.
Strong, experienced strategic leadership by chairman/chief executive (variable)
9.
Capacity for creative product/market strategies through core resources and partnering
contacts/skills eg entry into financial services market
10.
Existing technology and communications infrastructure: EDI, EPOS, e-commerce, website
11.
Beachheads in international markets, with potential for network expansion
12.
Strong, values-laden culture of quality and service, and (now renewed) customer focus
13.
Strong CSR/sustainability profile: an area of increasing consumer awareness and demand
14.
Systems in place for agile, responsive supply, supporting high-fashion items (under
Bostock)
29
Weaknesses
1.
Immediate reputational damage and loss of shareholder trust resulting from financial
results crises, leadership transitions and corporate governance issues (variable)
2.
Dependence on consumer confidence and disposable incomes for retail growth, given the
recurring threat of recession (1991, 1998-9, 2008)
3.
Lack of adequate leadership succession planning, new blood (because of tradition of

internal promotion), leader development and leader transition management; political
conflict and loss of confidence at board level (variable at different eras)
4.
Lack of open questioning/challenge of strong leaders, leading to groupthink and risky

decision making (especially under Greenbury, with excessive power vested in one
individual as chairman and chief executive)
5.
Lack of questioning of underlying corporate health, when financial results are good; lack
of ability to diagnose and learn from mistakes (eg recurring corporate governance/
leadership issue?)
6.
Lack of strategic direction, fragmentation of strategic initiatives, over-reliance on external

consultants and de-stabilising restructuring (under Salsbury)
7.
Over-dependence on UK supply base (particularly in earlier eras): high sourcing costs,

lack of responsiveness compared to competitors; lack of development of international
sourcing/production expertise
8.
Rigid supply network, geared to long lead times, long-run production, economies of scale;
possibly also complacency by virtue of long relationship (until Bostock)
9.
Ageing retail outlet dcor, merchandising techniques, merchandise range, image (prior
to Rose, Smart and Bostock), alienating core customers
10.
Lack of consistent market research and product range planning in core product areas, eg
womens clothing (prior to Bostock)
11.
Little appetite for change in some areas; tendency to lag behind and react to competitor
strategy (arguably, until Rose)
12.
Recurring over-stocking problems, caused by buying ahead (13, line 20), long-run
production, economies of scale, poor demand management
13.
Apparent lack of risk management eg re management succession, over-investment in

stock and capital projects (10, line 13), multiple high-risk initiatives (9, line 15), loss of key
suppliers (eg 10, line 42), vulnerability to takeover (11, line 19)
14.
Lack of focus: too many product lines, too many unrelated initiatives (at 2004)
Opportunities
1.
Potential to build on renewed brand trust, status, reputational capital and consumer
loyalty, for brand extension eg move into financial services (at the time); roll-out of Simply
Food and other concept store outlets; partnership in fashion brands (eg Per Una)
2.
Further potential for growth (and possibly diversification) by acquisition (at times of
strong financial health)
3.
Growth of internet penetration: potential to extend M&S Direct for relationship

marketing, added value, improved customer research
30
4.
Potential cost savings and agility gains from encourageing domestic suppliers to off-shore
(Greenbury: 9, line 39)
5.
Potential value gains from more adversarial-co-operative relations with suppliers, greater
supplier diversity, local overseas sourcing (rather than off-shoring by UK suppliers)
6.
Globalisation of culture: potential for international expansion (Greenbury: 8, line 12) or

further international market development (now eg in China and Eastern Europe)
7.
Growing activism re climate change and sustainability: potential brand strength through
Plan A green leadership
8.
Demographic changes creating opportunities for moving to edge-of-town stores

(Greenbury: 7, line 43)
9.
Demographic and lifestyle changes creating opportunities for niche clothing (highfashion, small/large size, maternity) and food (global gourmet, convenience, lunch to go)
products
10.
Chance opportunities from encounters (eg meeting with Twiggy: 14, line 46), weather
(creating explosive demand for summer T shirt range: 14, line 26).
Threats
1.
Sector, national or global recession: loss of consumer and investor confidence, depressed
sales/profits/share price (recurring)
2.
Shareholder backlash as result of corporate governance compliance issues (2008)
3.
Competitor advantage/leadership through initiatives such as globalisation of supply

chains, supply chain agility, move into e-commerce, entry to the market through niche
exploitation
4.
Supplier insolvency or supplier-side termination, with potential to disrupt supply,

especially if among core first-tier suppliers and especially if affecting a number of
suppliers at once. (2000 saw the termination of William Baird, Coats Viyella ceasing to
supply M&S and Courtaulds becoming a takeover bid target after turning in poor end of
year results 10, line 32, 40; Christopher & Peck, p 20)
5.
Other general environmental threats and risks (PESTLE factor changes) eg imposition of
import quotas, exchange rate fluctuations, weather/disease disrupting food supply,
collapse of international economies, increasing consumer demands/fickleness [>> Section
5].
USING THIS INFORMATION

We will discuss the strategic issues and options facing M&S at different periods in its recent
history in the following sections. However, you might map some of the above factors in a
SWOT grid, and begin to consider:
How to build on strengths and/or minimise weaknesses to exploit (or create) opportunities
and cope better with identified threats
How to convert threats into opportunities by developing strengths to counter them (more
effectively than competitors) and learn from them.
31
You might even have a go at a TOWS matrix (Johnson & Scholes):
Opportunities
(O)
Threats (T)
Strengths (S)
Weaknesses (W)
S/O strategies
Use strengths to exploit
opportunities
S/T strategies
Use strengths to avoid
threats
W/O strategies
Overcome weaknesses to
exploit opportunities
W/T strategies
Minimise weaknesses to
avoid threats
32
SECTION 9
Generic Strategic Options: Ansoff, Porter
DIRECTIONAL STRATEGIES: ANSOFF MATRIX
Ansoffs matrix is a two-by-two grid which attempts to classify the directional options
available to an organisation. The model was originally intended as a marketing model, but was
later adapted for use in wider strategic choice.
This may be an appropriate tool to use in relation to M&S because:
It depends heavily on the protection and exploitation of its existing core brands, in the
face of recessionary pressures
It has shown a willingness to develop new products and markets in order to maintain
growth.
Our analysis of M&Ss strategic possibilities in Ansoffs generic categories is as follows.

Protect/build
A protect/build strategy should certainly be the core of M&Ss strategy, because the company
depends heavily on the performance of its core brands, and will need to work on consolidation
in the face of reduced consumer spending. It is relatively low-risk, following periods of
leadership transition and shaky results. There are in any case significant potential gains for
M&S in simply doing what it currently does better, leveraging its strengths to consolidate
consumer loyalty, and absorbing the costs/risks of transformational strategies such as Plan A.
Withdrawal is a strategy to free up capital and divest the organisation of under-performing

assets. M&S has not hesitated to sell off parts of its business (eg US acquisitions, Financial
Services: 12, line 34) and property portfolio (ie outlet premises); or to withdraw from
unprofitable outlets and products (11, line 6). It may consider further such moves as part of
its recession recovery planning.
Consolidation is a strategy of protecting and strengthening the organisations position in

existing markets, which may be required to recover from the 2008 downturn and the
transformative effects of Plan A. This may involve: reinforcing new Your M&S brand
messages; purchasing or rationalising the property portfolio (outlet premises); pursuing
33
relationship marketing (in order to maximise customer loyalty in a tough market); rolling
out current initiatives (eg new Simply Food and Outlet stores, and the store modernisation
programme [70% complete at the 2008 Annual Report]); bedding in existing change
programmes (eg Plan A); and perhaps also strengthening leader development and
succession (given the current period of transition: 16, line 27ff). Arguably, M&S should have
considered such strategies under Greenbury, rather than pursuing multiple market and
product development initiatives at once.
Market penetration is a growth strategy, based on gaining (or recapturing) greater market
share in an existing market with an existing product. Domestically, it may involve more
aggressive marketing and promotion (eg M&Ss re-penetration campaign under Stuart
Rose: 13, line 33ff, following loss of market share), price discounting (eg through sales, or
M&S Outlet stores), or different methods of marketing and distribution (eg through Simply
Food stores or M&S Direct). Many of M&Ss markets were considered mature in 1994, but
gains were still to be made from increases in market share in low-market-share areas such as
home furnishings and childrens wear (Bower & Matthews, p 2). Currently, M&S Direct sales
are growing faster than the market (2008 Annual Report): clearly another potential growth
area.
It may also involve further franchise and brand development in some of M&Ss overseas
markets, focusing on those with substantial potential for growth eg in Asia and Eastern
Europe although this is potentially more risky, in times of global recession.
Market development
A strategy of market development concentrates on finding new markets for existing products.
M&S may wish to research any overseas markets not currently being sold to. This would be
seen as an extension of its existing market development strategies, and the resources and skills
developed to pursue them (eg brand strength, regional beachheads and contacts, franchise
development and joint venture expertise, financial strength to enter markets by acquisition).
The 2008 Annual Report announced expansion into Central and Eastern Europe, via existing
franchise partners, and the opening of a first (wholly-owned) venture in China. However, M&S
needs to be cautious in selecting its markets, given a track record of failure to transfer brand
success to other cultures: the closure of operations in Canada; the sale of previously acquired
US retailers (Brooks Brothers and Kings Super Markets); the closure of unprofitable
international outlets (6, line 6). [>> Section 11]
M&S may also seek to develop new target market segments: for example, the UK youth market
eg by extending its technology products range, creating youth-oriented clothing sub-brands
and so on.
Product development
Product development strategies involve introducing new (or modified or complementary)
products to existing markets. This allows the organisation to utilise its existing logistics
channels, retail outlets and market/customer knowledge, and to exploit current brand strength.
M&S appears to have been pursuing such a strategy, when it added financial services, starting
with the store charge card, to its core product portfolio: this is still a part of its offering through
M&S Money (though the business itself was sold to HSBC in 2004). Similarly, it has added
technology products departments to some of its stores, the Per Una fashion sub-brand (11, line
6; 12, line 35); and so on.
34
The rolling out of different store formats (such as Simply Food and Outlet stores) may also be
seen as a modified offering to existing customers (different focus, pricing, locations).
In any case, the range of merchandise being sold by M&S is constantly being refreshed through
seasonal buying and branded product development. The 2008 Annual Report mentions some
plans for brand stretching: featuring Plus Sizes online; offering bespoke Made to Measure
shirts for men; expanding in-store hospitality options. M&S is also trialling the adoption of a
select range of guest brands that complement M&S values (eg Sony and Apple in consumer
electronics, and Marmite and Heinz in food: regarded as branded must-haves) in a small
number of stores, with a view to rolling the programme out if successful.
A cautionary note should be added to product development recommendations, however:
unrestrained, under Greenbury, it led to a fragmented brand, too many product lines and
massive overstocking (13, line 9, 37).
Diversification
A strategy of diversification refers to the development of new products for new markets. It is
the most high-risk strategy, as the organisation faces an initial learning curve with product and
market.
In order to minimise risk and exploit existing resources, M&S may consider new product
markets within the same industry (related diversification). It may, for example, consider
further backward integration: acquiring or developing manufacturing businesses to supply its
own-brand products.
It may be argued that M&Ss entry into financial services represented diversification rather than
product development, as it sought to reach a market beyond its core constituency. Beyond the
case, you may like to know that M&S has similarly announced its entry into the household gas
and electricity supply market, in partnership with Scottish & Southern Energy : M&S shoppers
will be able to buy power in-store and online (Times Online, 15 October 2008).
M&S has significant challenges manageing and focusing a dual food and clothing/homeware
brand, however, and you might be cautious about recommending diversification
A product/market strategy mix
The 2008 Chief Executives Statement (annualreport.marksandspencer.com) reflects a mix of
strategies. As we take the business forward, we are broadening the plan for long-term growth.
This will be achieved by continuing to invest in our core UK retail business, introducing new
goods and services; strengthening our UK property portfolio; driving our M&S Direct business;
expanding our international business; and ensuring Plan A or eco plan is integrated in
everything we do.
COMPETITIVE OPTIONS: PORTERS GENERIC STRATEGIES
Professor Michael Porter suggested that a firm may seek two basic kinds of competitive
advantage over its rivals in a market: low cost (providing comparable value to customers, more
efficiently than competitors) or differentiation (providing more or distinctive value for
customers than competitors, permitting a premium price). At the same time, an organisation
can apply these strategies either to a broad market or to a narrow-focused or targeted market.
35
Competitive advantage
Competitive scope
Broad (industry wide)
Narrow (market segment)
Lower cost
Differentiation
Cost leadership
Differentiation
Cost focus
Differentiation focus
This model is designed to be used at the business (SBU or product) level, rather than at the
corporate level, so it may not be an ideal model in this case. However, some general points may
be useful in relation to M&S, using the information we have.
M&S has traditionally relied on differentiation: developing core brands and sub-brands
that are distinctive and valued in the market (4, line 19). This is an effective defensive
response for an organisation faced by strong low-cost competitors. The strategy is to gain
advantage by differentiating the product from lower priced ones (such as supermarkets
and discount outlets) on the basis of non-price factors (such as brand identity, quality and
cultural icon status). Arguably, M&S allowed some key points of difference to be eroded
(eg by brand fragmentation, failure to modernise and refresh outlets and ranges, lapses in
quality and service, following rather than leading competitors). However, the
differentiation strategy was recovered under Stuart Rose (13, line 35, 39, 42), mostly
notably perhaps with a ground breaking eco-strategy in Plan A (16, line 19-20).
M&S doesnt appear to aspire to cost leadership, but it works hard at keeping its costs
down (eg 15, line 13) and aspires to offer consumers fair perceived value (eg 6, line 24). It
has worked recently to change customers perception of value: We have reviewed our
pricing architecture in order to attract a broad range of customers. We are now achieving a
wider price span staying in touch with the supermarkets at entry levels, while
improving better and best products for the more aspirational shopper. (Annual Report
2008).
M &S may look for further cost reductions (particularly in the face of the 2008 downturn),
but this may be difficult in the short term, with ongoing quality commitments, new CSR
and change costs through Plan A, suppliers squeezed almost to breaking point, and
gradually rising costs of doing business in overseas markets such as China.
M&Ss competitive scope may be perceived as comparatively wide compared to

dedicated and niche clothing, food or homeware retailers (given its general merchandise
and food ranges) but it is narrow and deep (ie fairly focused) in department store terms
(6, line 39). At times when it has seemed to try to widen its competitive scope (with new
products, sub-brands and departments), it has been in danger of fragmenting and diluting
its differentiating advantage: focus (or re-focus) was foundational to Stuart Roses
recovery strategy.
36
SECTION 10
Strategic Direction at Different Periods of M&S History
The case study approach lends itself to exam questions such as: the identification, discussion
and comparison of strategies pursued by M&S under different leaders; and analysis of the
causes and handling of the 1999 crash in M&Ss fortunes, and how effectively the company has
learned from them. (Strategy is not really formulated by individual leaders in isolation, but we
will follow the style of the case study in attributing strategic direction to the strategic leaders of
the time.)
AT A GLANCE
Pre-case
Greenbury
Salsbury
Holmes
Rose
Strategic
direction
Steady
growth
Expansion
Maximise profit
Search for
new direction
Focus = cut
costs
Financial and
brand
consolidation
Focus = return to
roots/brand
Drive/broaden =
focused growth
Key
initiatives
Display
Add food
division
Develop
offering
Pare down
New products
Edge of town
stores
Retail space
expansion
International
markets
Management
consultants
Restructuring
Rationalise
network
New brands (eg
Per Una)
Concept stores
(eg Simply
Food)
Divest: focus, recoup

Consolidate new
brands
Re-brand, re-image
Unify sub-brands
Store/stock revamp
Appoint new talent
Internet sales
Eco-plan
Growth
strategy
Brand/
network
development
Expansion of
products, retail
space,
international
network
Capital invest
Market repenetration
by promotion
Withdrawal/
consolidation
Brand
development
Market re-penetration
Focused product
development
Focused international
expansion
Eco-leadership
Supply chain
relations
Co-destiny
UK supply
Margin squeeze
Reduce order sizes,
lead times
> more adversarialco-operative style
Economies
of scale
Overstock
discounting
Divestment
Supplier squeeze
Clear overstock
Marketing
Brand
positioning
Margin
squeeze
Push for offshoring
Key supplier
divorces
Cost cuts
Supplier
squeeze
(But increase
in spend)
Promotion to
bolster sales
Costs
Co-destiny
UK-centric
(some supplier
off-shoring)
Margin
squeeze
Downsize,
streamline
Supplier
squeeze
Focused
product/
market devlpt
Re-branding
Fresh ad campaigns
Direct marketing
Rapid product/
market
development
37
SIR RICHARD GREENBURY (pages 6-10)

Approach
to
strategy
formation
Decisive leadership in recovery mode (6, line 18)

Understanding of (traditional) buying/supply (6, line 36ff) possible limitation?
Belief in team strategy (7, line 4ff) but impatience, power, increasing isolation >
solo leadership (7, line 7, 25ff)
Driven by personal passion/beliefs (7, line 2, 26), symbolic targets? (7, line 34)
Strategic planning: 2 year horizons (Bower & Matthews) plus some opportunistic
strategy (eg acquisition of Littlewoods 9, line 17)
Strategic
direction
Recovery: initial phase consolidation via cost reduction, rationalisation, sales

recovery (6, line 18ff)
Expansion: more product lines (7, line 35), increase in retail space (8, line 1ff),
international market entry (8, line 7ff), capital investment (property portfolio,
store modernisation, acquisition: 7, line 48; 9, line 17).
Margin maximisation (9, line 10: 10, line 3): rationalisation (7, line 35ff), closure of
less profitable stores (7, line 50), encourage supplier off-shoring (9, line 39)
Key
strategic
initiatives
Positives
Negatives
In hindsight (and via murmurings at the time), however:
Recovery plan: Outstanding value range (6, line 23)

Product range extension: initially focused, then less so (7, line 28; 13, line 9)
Move to edge-of-town stores (joint venture with Tesco) (7, line 41ff)
Massive expansion of store network and retail space (footage) (8, line 1ff)
Move into Asian and European markets (8, line 7ff)
1991 recovery, restoring customer trust (6, line 24)
Maintaining UK market share (and leadership in womenswear: 9, line 7)
Profit increase 87%; EPS increase 98%; sales increase 35% (9, line 10)
Some successful new product development (7, line 29ff)
(Belated) attempt to engage competition, eg re edge-of-town, global sourcing
Potential footholds for future international growth, given UK market maturity
Over-ambitious (9, line 14); pushing too hard on too many fronts (7, line 33)
Creating shareholder/market pressure (9, line 12)
Eventually diluting/fragmenting the brand (9, line 21; 13, line 9)
Counter-productive (eg over-rationalising: 7, line 35-40)
Margin-greedy short-term thinking (10, line 2-3): alienating suppliers, customers,
as margin benefits passed on only to shareholders (9, line 10)
Capital over-commitment (with over-confident forecasts: 8, line 3; 9, line 17)
Inadequately planned (eg ability to transfer brand to foreign cultures; lack of
expertise/organisation for global sourcing 9, line 40)
Suppression of challenge/questioning: risk of over-confidence (8, line 5ff)
Failure to address underlying demand-risk issues, eg: outmoded brand, stores
and merchandise portfolio; falling quality/service positioning; alienation of core
market; risky long-range demand forecasting (10, line 12)
Failure to address underlying supply-risk issues, eg: UK-centric supply; rigidity
Failure to address underlying board conflict issues (10, line 11)
38
PETER SALSBURY (pages 10-11)

Approach
to
strategy
formation
Driven by desire to move away from Greenbury methods/processes (10, line 20)
perhaps due to personal dislike, frustration (10, line 8, 9)?
Imposed strategy of crisis recovery but search for direction (10, line 24)
Multiple management consultants to advise (10, line 25)
Strategic
direction
Focus (10, line 25). How defined? Recurring theme: rationalisation and cost
cutting
Key
strategic
initiatives
Restructuring (including move to five operating divisions) (11, line 10)

Cost-cutting programmes: tight stock controls, reduced supply base (>
economies of scale per supplier), downsize buying (10, line 30, 35)
Reducing UK sourcing to 50%: forcing large UK suppliers off-shore (10, line 33)
Closing unprofitable international stores (including all Canadian operations)
Major advertising campaign (10, line 26)
Trial modern merchandising techniques: eg boutique-style displays
Cutting of shareholders dividends (Vandevelde: 10, line 36)
Much needed attention to refreshing display
Continued pressure/learning towards less UK-centric supply
Attempt to control overstocking, inefficiency
Correction of excessive shareholder profit/dividend demands
Positives
Negatives
No genuine focus: consultants > too many unrelated initiatives (13, line 12)
Despite cost-cutting, net impact > increased expenditure (10, line 28)
Tight stock controls > availability issues, alienating customers
Boutique style merchandising trials failed for lack of expertise
Ineffective advertising/marketing > market share/sales decrease (10, line 28)
Constant restructuring > destabilising (11, line 9)
Cost reduction through suppliers > supplier difficulties, alienated suppliers, loss
of several major core suppliers at the same time (10, line 30ff, 39ff)
ROGER HOLMES (page 11-12)

Approach
Imposed strategy of consolidation, given difficult period (2, line 11)

Some opportunistic: eg partnering with George Davies > Per Una brand
Strategic
direction
Consolidation: rationalisation, stopping restructuring

Focused product development to establish future direction
Key
strategic
initiatives
Positives
Negatives
Closing unprofitable international stores (11, line 6)

Launch new brand: Per Una (11, line 7)
Introduce Simply Food concept stores
New fashion brand, with growth potential (confirmed by Rose: 12, line 35)
Stabilised organisation structure (11, line 9)
New concept stores: clarify food/clothing focus, new brand, franchise
development (confirmed by later roll-out under Rose)
Beginnings of recovery (11, line 10)
Undermined by Vandevelde: unsolved leadership issues (11, line 12)
Undermined by board and non-executive director panic (11, line 21, 44ff)
39
SIR STUART ROSE (page 3, pages 12-16)

Approach
to
strategy
formation
Strategic
direction
Consolidation via stakeholder support; restore profitability via immediate

divestment, securing core assets, initiating cost reductions (pages 12, 13)
Decisive leadership, using crisis to unite and energise (12, line 13; 14, line 13)
First priority: vision articulation and stakeholder buy-in (12, line 14ff; 13, line 15)
Outsiders eye > diagnose entrenched problems of business (13, line 1ff)
Support talent, emergent and opportunistic strategy (13, line 33; 14, line 1, 44, 45)
Strategic planning: 5 year horizon re Plan A (16, line 3ff)
Focus: clearly defined as return to roots(12, line 37ff). Reduce product lines,
restore unity of vision (13, line 3), re-focus brand (12, line 34, 36; 13, line 37)
Drive/broaden: market re-penetration initiatives, launch of e-commerce
platform, launch of eco-leadership strategy (15, line 6, 20, 42)
Key
strategic
initiatives
Positives
Negatives
Sale of Financial Services and closure of Lifestore outlets (12, line 34, 36)
Purchase of growing/directional Per Una brand (12, line 35)
Pressure on suppliers to increase discounts (12, line 25; 15, line 13)
Your M&S re-branding and modernisation (13, line 33ff)
Clearing of overstock (13, line 30)
Fresh marketing campaigns (13, line 40ff; 14, line 44ff)
Launch integrated e-commerce platform for online sales/ordering (15, line 20ff)
Launch eco-leadership transformation plan: Plan A (16, line 1ff)
United and motivated board and staff (12, line 24; 13, line 11)
Smart cultural change: building on tradition/values > new future (12, line 17ff)
Divestment of inertia-creating, unprofitable assets (businesses, outlets,
overstocks)
Focus on leveraging growth areas eg Per Una, womenswear (14, line 10ff, 44)
Restored profitability (15, line 31), but realistic growth expectations (eg 14, line 40)
Brand, product and store refreshment > create excitement (12, line 38)
Re-brand: customer re-engagement, modernisation, sharper image (13, line 33ff)
Co-opting and supporting new talent eg Sharp and Bostock as change agents
Clever marketing: audience appeal, strong brand messages, targeted placement
Reinforcement/clarification of new less cosy relationship with supply chain
(Belated) engagement with competitors, exploitation of potential for e-commerce
Willingness to seek sector leadership in a strong consumer-valued area: Plan A
Using Plan A to re-unite and re-excite stakeholders, after years of trouble
Possibly:
Over-ambitious transformation re Plan A (16, line 7-8, 14), given years of
troubled transitions and threat of recession
Failure to address underlying supply-side issues: eg supplier dependency,
rigidity and global sourcing issues, costs of Plan A changes
Short-lived impact of brand/store modernisation: need to ensure ongoing
market sensitivity and responsiveness to changing/fickle consumer demand
Failure to address management succession and governance issues: potential risk
of unchecked leadership eg under Greenbury (16, line 43)
Expectations management backfire > loss of market confidence (3, line 20)
40
CRITICAL INCIDENT: 1999

The crisis
(10, line 10-17)
Underlying
causes
Why were
causes not
identified?
How crisis
was handled
What could be
done to
prevent
recurrence?
Huge overinvestment in stock (especially for Christmas season) +

commitment to major capital investment programme (including huge extra
retail space), based on confidence in sales/profit forecasts
Unforeseen dramatic downturn in sales
Cash flow and profit crisis
Loss of investor confidence > share price collapse
Governance issue: unchecked power of Richard Greenbury (7, line 6, 25)
Greenbury lacking executive support when distracted by directors
remuneration committee proposals (8, line 42ff)
Greenbury put under strain by personal difficulties (8, line 35ff)
Greenbury pressing too hard on too many fronts in personal drive for
profit maximisation (10, line 2) > lack of risk management
Shareholders led to expect/press for higher profits, EPS (9, line 10, 12)
Profit maximisation goal encouraged short-term thinking (10, line 3)
Over-confident demand forecasting, given far-forward buying
Supply rigidity and traditional buying practices, creating far-forward
buying and insensitivity to demand changes
Pressure to overstock, given massive increase in retail space (8, line 3)
Lack of attention to underlying demand factors: ageing brand, stores,
products, falling quality/service ratings etc eroding sales
Over-confident leap to obvious strategic options, possibly without
adequate research/resources: eg global markets (8, line 15), global supply
(9, line 40)
Board room tensions > distraction, loss of unity of purpose (10, line 9)
Overconfidence, due to great financial results
Over-deference to a powerful leader: lack of questioning, divergent views
Over-reliance on single leader, when distracted/stressed/ill
Lack of compliance with recommendations/code of corporate governance
Power of tradition: doing things as they have always been done (7, line 18)
Little new blood in leadership: no outside eyes on brand, practices
Lack of or failure to use customer feedback, market research indicating
loss of engagement with customers (especially in core market)
Lack of or failure to use risk assessment and management disciplines eg
re strategic initiatives, capital investment, supply/demand
See appraisal of Peter Salsburys strategic leadership above
Note how few of the underlying problems have been really addressed
Address underlying problems of risk management and organisational
learning > enable similar tendencies to be identified and checked in future
Governance compliance and succession planning
Reduce supply rigidity, move to continuous replenishment,
production/logistics postponement where possible
Manage shareholder/market expectations > long-term health
Encourage culture of questioning/challenge rather than deference
Check/develop systems for environment scanning and strategy evaluation;
ongoing market/customer research; accurate demand forecasting etc
41
SECTION 11
International Markets
This is perhaps not very likely to come up as a question in its own right, since not very much
information is given about M&Ss strategy, other than as one example of potential risky or
simplistic strategic thinking under Greenbury. However, as you are doing your background
reading, you might like to make some notes on the following areas just in case.
What are the drivers for entry into international markets? In the 1980s, M &S sought to
secure a foothold in the US and Far East because competitors would inevitably globalise,
and M&S had to get on the learning curve (Montgomery, p 1). The case study also suggests
(8, line 7-17) that in the 1990s:
o
o
o
o
International markets made room for growth ambitions, given a mature core UK market
Global economic markets were opening up, reducing barriers to market entry
Travel, media and ICT were making global business networks possible
Travel, media and ICT created global culture, so iconic UK brands could transfer
successfully to foreign cultures. (How far can this assumption be relied on?)
Note that this seemed obvious to the essentially UK-based shareholders of M&S (8, line
15): what might this say about pressure, motivation and limited strategy evaluation?
What has been M&Ss approach to international market entry?

o
It first entered international markets in the 1970s, starting cautiously (5, line 2) in
Canada, western Europe and Asia (with a base in Hong Kong). Expansion accelerated
under Greenbury, through a mix of wholly-owned outlets and franchise agreements
with local partners. Europe was favoured due to its closeness and similarity (in
seasonality and dressing styles) to the UK: however, M&S found that even Europe
required adjustments for profile, fit, size and climate (Bower & Matthews, p 17). Asia was
more of a challenge: M&S focused on developing local distribution infrastructure, and
carried out careful planning for entry timing and potential partners for entry into China.
A number of unprofitable European and all Canadian operations later had to be closed
down (11, line 6): in Canada, the M&S brand had been seen as irredeemably oldfashioned and only for British expats; while European sales were hit by the pounds
strength against the Euro. What does this say about internationalisation risk?
In 1988, M&S sought to secure a foothold in the US and Japan by acquiring Brooks
Brothers (an American institution, selling high-quality, conservatively-styled own-label
menswear, which also had a small joint venture in Japan and sourced merchandise
partly from the Far East) and Kings Super Markets (an upmarket, quality/serviceoriented fresh food chain) (Montgomery). Despite apparent brand synergy and
opportunities, barriers to entry, the need for investment in modernisation, a non-existent
market for pre-packed refrigerated foods and other problems proved difficult to solve:
Brooks Bros was sold in 2001 and Kings in 2006 and M&S does not have a presence in
the US or Japan as of 2008.
Apart from Hong Kong/China and the Republic of Ireland, all M &Ss international
network expansion is now done on a franchise basis, using existing regional franchise
partners where possible. International business now accounts for 7.9% of group
42
turnover and has grown to 278 stores in 39 territories: during 2007/8 a number of new
franchise ventures were announced in India and Central and Eastern Europe (M&S How
We Do Business Report 2008) and M&Ss first (wholly owned) mainland China store
opened in October 2008 (Times Online).
What are the implications of market globalisation for supply chain management? You
might like to consider the challenges of:
o
Supplying Asian and Pacific outlets, initially at least, from a wholly UK-based supply
base (9, line 28) particularly in the market for foods, which demands local sourcing
Supplying Asian and Pacific outlets from off-shored UK suppliers (9 line 39), who may
have to import goods to the UK for finishing (eg to maintain a buy British brand for
domestic consumption) and/or for breaking bulk and distribution before exporting
them back overseas to international outlets. Think inefficiency, delay, cost, risk
UK-based buying teams developing/selecting/ordering merchandise on behalf of

international outlets. Think about clothes sizing and climate differences between UK
and Asian fashion, for example, or differences in cuisine or the frustration of outlet
managers responsible for sales, but not in control of merchandise buying (especially
given head office buyers lack of international expertise (9, line 42).
Under Greenbury, M&S recognised the need for localised sourcing and distribution
particularly for food. On the other hand, it also recognises the need to maintain and control
the quality, consistency and identity of its global brand. The case doesnt tell us how
international buying is now structured: what might you recommend?
What are the general risks and challenges of international market entry?
If you havent studied the optional Marketing for Purchasers model, think about:
o
Risks associated with socio-cultural differences (including language) affecting branding,

advertising and staff management; and ethical/CSR differences, given M&Ss Global
Supply Principles, membership of Ethical Trading Initiative and Plan A targets
Financial and business risk: unknown market, learning curve costs
Risks of direct investment entry by subsidiary set up or acquisition (eg high entry/exit
costs) or joint venturing (potentially incompatible partners; joint control)
Risks of direct export entry via franchising: difficulty of finding/developing suitable

franchise partners; high legal/contract management costs; risk of creating future
competitors (need to protect intellectual property!); loss of full control
Alternative approaches to market entry: eg direct sale via e-commerce?
Deciding whether managers should be indigenous or UK-exported, and how crosscultural learning and best-practice sharing can occur. (Under Greenbury, M&S used
international manager secondments, rotations and exchanges: Bower & Matthews, p 19)
Deciding whether to standardise/globalise or adapt the brand, marketing and

merchandise. (Again, think about clothing sizes, climate/season and cultural differences
in the clothes market, say) Think global, act local?
The research paper by Bower & Matthews, cited in the sources list, has a clear section on The
Challenge of International Operations and Expansion (in the Greenbury era) on pages 17-20.
43
SECTION 12
Current Strategic Issues and Options for M&S
Having used appropriate tools of strategic analysis to identify some key issues facing M &S,
what conclusions can we come to about possible strategic directions and options for the future?
Bear in mind that the examiner will not expect you to come up with a single correct answer: in
the case, as in the real world, there is no such thing besides which, much more information is
needed to select and evaluate viable options. (Besides, this is a real company, not a fictional one:
you arent expected to know more, or see more clearly, than its directors and consultants!) What
the examiner would expect, though, is a balanced evaluation of the issues, coupled with
reasoned argument in favour of one or more plausible possibilities, always allowing for
realism in the resources and timescales required to implement your recommendations!
It is perhaps more likely that you will be asked to evaluate the strategic directions taken by
M&S in the past, and to suggest what could have been done to avoid or mitigate resulting
problems. [See Sections 10 & 11]
Some options are examined below. Note that these are not the only ones and that they
represent alternatives: no organisation would attempt to adopt them all, let alone all at once!
KEY STRATEGIC THEMES & OPTIONS
One point to note is that the company is likely to be constrained in its strategic thinking,
onward from the case study, by: (a) the need to consolidate to protect profits and share price in
the face of the threat of recession (since confirmed by global market meltdown); (b) possible
reduced risk appetite and investment capital, as a result of the downturn; (c) uncertainties about
leadership continuity and succession; (d) the possibility of further conflict with shareholders
over this issue; and (e) massive existing transformational commitments related to Plan A.
1
Competitive strategy
[>> Section 9]
As we noted in Section 9, M&S has long pursued a differentiation strategy. It may seek:
To maintain and strengthen its re-found differentiation points (eg by emphasising its
more fashionable range, modernised stores, refreshed brand and eco leadership
efforts).
To maintain price competition with existing competitors for basic and price-sensitive
products, and to continue to emphasise the quality/value offering of its better and
best level offerings
To apply some of the measures explored for achieving cost focus (eg low-cost sourcing,
direct sales, process streamlining) across the business, enabling it to achieve
differentiation more profitably. Given the threat of recession, M&S is unable to
increase its prices (3, line 19), which may as ever put pressure on cost reductions to
protect profitability.
Product/market strategies
[>> Section 9]
We reviewed various strategies using Ansoffs product/market matrix as part of our

strategic analysis in Section 9. Given its need to consolidate (and re-establish healthy riskmanagement processes), M&S may look first at low-risk strategies, such as consolidation
44
and market penetration and even withdrawal, if recession takes hold. However, market
and product development are still realistic possibilities which may be explored further.
3
Strategic SCM and operations management themes
[>> Sections 13-18]
Supplier relationships: the need to manage supply risk by rebuilding co-operative

and mutually beneficial relationships with suppliers and to recover core customer
status with suppliers alienated by cost-cutting exercises but on a more realistic
adversarial-competitive basis.
Continued pursuit of global supply, increasingly via smaller overseas-based suppliers

(for short-run, short-cycle fashion items and the supply of overseas outlets) rather than
core UK-based suppliers off-shored facilities. This will place strategic importance on
supplier selection and management; the establishment of e-procurement and logistics
planning systems; quality and ethical monitoring and management; and possibly
devolution of purchasing to overseas franchise partners or (in Hong Kong and China)
regional managers of wholly-owned outlets.
Continued pursuit of more agile/responsive supply: improving demand tracking

systems, working with suppliers to shorten lead times, and exploring potential for
postponed finishing/logistics to maximise flexibility.
Store location and development strategy: continuing to develop the property

portfolio; maximise market coverage through store location; modernise stores and
merchandising techniques; and roll out successful store formats (eg Simply Food)
Marketing Strategy
[>> Section 25]
The syllabus for the case study exam does not explicitly embrace the optional Marketing
paper, so it will be a little unfair if the examiner sets a question substantially focusing on
this area. However, many of the issues facing retailers (including buying) are marketingfocused so pull out your notes for the Marketing for Purchasers module if you have them.
Marketing issues M&S might look at include:
o
The need to maintain focus on the rediscovered core market segment (middle aged
British women) in order to protect the flagship womenswear range. And in general,
ensuring that buyers maintain market awareness and utilise market/customer
research and feedback.
Product portfolio planning (BCG matrix), to build on core profitable lines, and fill
product gaps to maximise reach and establish cross-selling (eg from maternity to
childrenswear); and to continually renew the portfolio for new growth potential and
brand freshness with particular challenges of short-cycle fashion trends and
seasonal food/clothing cycles.
The need to consolidate and extend the newly-updated brand (My M&S), without
falling back into brand rigidity or dilution.
The potential for relationship marketing strategies to leverage consumer loyalty
The ongoing challenges of entering and operating in international markets, and the
decision of whether to standardise/globalise or adapt brand, promotion and
merchandise for international outlets.
45
CSR, ethics and sustainability strategy
[>> Section 23]
At this point, M&S is deeply committed to its five-year plan for Plan A (to 2012). Its
strategy will be to continue to pursue and monitor progress against Plan A targets, and to
engage and support stakeholders in contributing to them.
6
Leadership and succession management strategy
[>> Section 20]
Human resource management is a major area of strategy for organisations, but it is not an
area that is raised by the case study except for the recurring issue of succession planning
and management development. As at 2008, the important thing may be to establish a clear
succession strategy, given adverse comment (16, line 43), shareholder opposition,
compliance issues and the memory of traumatic leadership transitions in 1999-2004.
M&S may articulate its preference for internal promotion (6, lines 8-12); define the
characteristics and experience it looks for in its leaders; and be intentional about potential
assessment and management development (16, line 34).
Cautionary note!
Past the time-frame of the case study, an article M&S to cut costs as sales slide (Times Online, 3
October 2008) announced the following moves in response to the tougher economic climate:
M&S plans to cut its capital expenditure in half in 2009 to avoid having to cut dividends.
The groups much-lauded store refurbishment programme will grind to a halt. We are
being prudent about expectations for the trading climate. You cant sell lousy product in
great-looking stores, but you can still sell fantastic product in rather tired stores. (Rose)
The pace of international expansion could slow.
M&S has been particularly hard hit by the fierce competition between supermarkets and the
hard discount chains such as Aldi and Lidl. The food business will now step up cost savings
to put more money into cheaper prices.
There were no immediate plans for job cuts.
Sir Stuart said: If, two years down the road, things are still tough, we will have to have a
think.
46
SECTION 13
Procurement and Supply Chain Issues: Overview
WHAT KIND OF QUESTIONS MIGHT BE SET?
Since the case study specifically surveys various leaders approaches to supply chain
management, it raises a number of issues which may be the topic of specific or general exam
questions. For example:
M&S has a reputation for a positive, co-operative and fair partnering approach to supply
chain relationships. To what extent has this been true in practice, at various periods of the
companys history, or how has it changed?
What competitive and environmental pressures have caused M&S to alter its supply chain
strategies over time, and why has it been comparatively slow to do so?
Explain and evaluate M&Ss move towards a more agile supply chain.
Explain and evaluate M&Ss move towards global sourcing.
How has M&S approached the need to reduce supply costs? How might it aim to achieve
cost savings without sacrificing supply chain relationships, agility or service levels?
Appraise M&Ss purchasing and supply chain management activities and suggest how
they might be (or might have been) improved.
M&SS PROCUREMENT & SUPPLY CHAIN ISSUES

There are several P&S and SCM issues facing M&S, some of which we have already identified
in our strategic analyses. These (and perhaps others) should have occurred to you as you read
through the case, and we have classified them in the following sections as follows.
1.
2.
Retail buying and supply chain strategy
[>> Section 14]
What are the features of buying and SCM for retailers? What challenges do they create
for M&S, particularly in the clothing and food retail sectors?
How is M&Ss procurement function structured and managed, and how effective is this
approach?
What potential, if any, is there for M&S to reposition itself in the supply/value chain, eg
by backward integration (controlling sources of supply)?
Supply chain relationships and supplier management
[>> Section 15]
M&S has a reputation/tradition of positive partnership relations with its suppliers. To

what extent is this now, in reality, the case? How and why has it changed?
What kind of relationship approach does M&S now use with its suppliers? What
alternative relationship style(s) might be more appropriate for its procurement needs
(and what models could be used to determine this)?
What is the current balance of power between M&S and its suppliers? How does M&S
use its power, and with what results? How might the balance of power change?
47
3.
4.
5.
6.
At a more tactical level, how effective is M&Ss approach to: supplier performance
management; supplier leadership and negotiation; supplier development; and
termination of supply contracts?
What is likely to be the suppliers viewpoint on all of the above? How attractive a
customer has M&S been and how attractive is it now?
International sourcing
[>> Section 16]
What have been the benefits and drawbacks of UK domestic sourcing for M&S?
What have been the drivers, benefits, risks and challenges of international sourcing?
How has M&S approached international sourcing, and with what results?
What alternative approaches might it consider adopting to pursue the benefits of local
and low-cost sourcing?
Agile/responsive supply
[>> Section 17]
Why and how did M&Ss supply chain become rigid and unresponsive over time?
What are the drivers, benefits and challenges of more agile/responsive supply?
How has M&S approached supply chain responsiveness, and with what results?
What alternative and further approaches might it consider to achieve greater

responsiveness to customers?
Cost reduction and stock management
[>> Section 18]
What have been the drivers for cost reduction at M&S?
How has M&S dealt with the need to reduce costs, and how effective have these
approaches been?
What alternative or further approaches might M&S use to reduce costs, while still
maintaining service, merchandise quality and supply chain responsiveness?
What are the causes of M&Ss recurring over-stocking problems?
How has M&S attempted to deal with over-stocking, and what alternative or further
methods could it consider?
Other issues
Less likely to come up, because not significantly covered by the case study. As you do some
background reading, however, you might like to bear in mind:
Ethical sourcing. How effectively are M&Ss forward-looking ethical/CSR/fair partner

objectives reflected in its supplier management, as described by the case?
Logistics. What logistical challenges are posed by: (a) international sourcing, (b) a wide
network of retail outlets, (c) the need to minimise redundant stock and (d) the sale of
fresh food products? How has, or how might, M&S tackle these challenges?
Technology. How, and how effectively, has M&S applied and leveraged available
technologies in its procurement, supply chain and logistics management? Review your
notes on ICT as a strategic tool (eg e-commerce, virtual organisation,
intranet/extranets), e-sourcing and e-procurement, and planning systems (eg ERP).
48
SUPPLIER-SIDE PROCUREMENT AND SUPPLY CHAIN ISSUES

Perhaps less likely to form the main substance of a question, given that we have little detailed
information but you never know! Some of the SCM issues seen from the retail buyers side
may be as follows.
Winning a contract to supply M&S (previously) the holy grail for manufacturers:
predictable lead times, high volume/value (5, line 39), collaborative relationship and
supplier development (5, line 41), investment in R & D, promise of long-term business,
support through lean times (5, line 17)
Downside: suppliers were expected to cut margins to contribute to the success of the supply
chain as a whole (5, line 20). This became increasingly exploited by M&S (6, line 20; 30, line
10; 15, line 13) and it was not always apparent that it was passing on value gains to
customers: under Greenbury, for example, suppliers were squeezed simply to support
higher and higher profit margins for M&S (10, line 3)
When M&S decided to globalise supply under Greenbury and Salsbury, it appears to have
transferred substantial risks (eg the unforeseen logistics problems, textile import quotas,
political unrest and costs of change experienced by Courtaulds: Christopher & Peck, p 22) to
its UK suppliers by encourageing (9, line 39) in effect, pressuring them to off-shore
production, and to progressively shift additional capacity overseas. At the same time, M&S
insisted that quality and ethical employment practices should be maintained (Global
Sourcing Principles).
M&Ss drive for greater responsiveness has disadvantages for some suppliers, as it means
shorter (less profitable) production runs and investment in changing processes for shorter
lead times (14, line 25). The impact of this may have been lessened where M&S worked with
suppliers to support the change (14, line 18).
Mutual dependency: M&S relies heavily on its core first-tier suppliers but they also rely on
it. The termination of William Baird under Peter Salsbury caused the closure of 16 factories
and the loss of 4,500 jobs (10, line 31): Baird had 21 factories in the UK, 20 of them dedicated
to supplying M&S, and one of them newly-opened (a 4.2 million bra factory) at the time of
termination. Other suppliers were also rendered insolvent by the squeezing of margins or
reduced orders as a result of switching to international suppliers. Some suppliers (eg Coats
Viyella) had to face huge losses, by deciding to stop supplying M&S (10, line 42).
Most of M&Ss longest standing suppliers had no formal contract with it their key
customer. In June 2000, William Baird sued M&S for breach of contract, when terminated,
on the basis that 30-year trading constituted an implied long-term contract: the High Court
ruled against the claim. (Christopher & Peck, p 23) Suppliers who invested in plant, processes
and integration specifically for M&S production (high asset specificity) may be badly
exposed.
Constant new initiatives, changes of leadership and restructuring of buying operations

presumably also creates uncertainty and loss of established (closely integrated)
organisational contacts.
Now there is a call for further process transformation and investment, to support M&S in its
Plan A (16, line 14; 19): what is the incentive to buy in?
49
SECTION 14
Retail Buying and Supply Chain Strategy
The case study gives us very little detailed information about M&Ss overall supply chain
strategy, supply chain and distribution structure, buying structure or procurement systems.
This should mean that such topics are unlikely to feature highly in an exam question but you
might like to make some notes as you do your background reading, just in case. We will just
draw out some key points from the case and relevant syllabuses.
RETAIL SUPPLY CHAINS & BUYING ROLES
Direct relationship between the retailer and the final consumer: buyers in a retail
environment have to stay much closer to customers, because merchandise selection is
crucially related to expectations of what will sell. This requires marketing-oriented
competencies in addition to purchasing competencies: reflected in the recognised strategic
importance of good buying at M&S (6, line 26), and the role of selector within the buying
team (6, line 27).
Buying is carried out by multi-functional buying teams for a product category (eg womens
underwear), reporting to a category executive. Teamwork is essential (6, line 38).
Selectors: market-oriented role, focused on determining consumer tastes and trends;

product development and creation of seasonal range; monitoring of fashion trends;
responsible for the look of the product (together with central Design team).
Merchandisers: day-to-day financial planning and operational responsibilities for buying

departments; management of selling price and cost structure; management of store
stocks and communication of layout and display; buying role (worldwide)
Technologists: direct liaison with suppliers on technical matters, eg innovation, raw

material specifications, audit of supplier systems and quality.
You might ask how M&S buying teams became divorced from market trends and the core
customer (14, line 7).
o
Were they distracted or pressured by too many new products, branding initiatives,
structural changes and staff cuts (under Salsbury: 10, line 35) and the shift to
international supply? (In your further reading, you may find that buying was radically
re-organised under Salsbury, integrating buying, marketing, selling teams, together with
IT and finance, within each customer group. How might this have helped or hindered?)
Was team priority placed on the Merchandisers role as profit margin managers?
Was there a lack of higher planning, or a lack of communication and co-ordination

between different category teams, preventing an overview of range requirements (14,
line 9ff)?
Were buyers skills outdated as market change quickened and sourcing was
internationalised (9, line 41-42) and not updated by training and development (14, line 12,
27)?
Retail SCM focuses on securing the timely availability of a wide variety of products in
response to customer demand. You might like to consider how M&Ss tradition of mass
50
forward buying, and its later product proliferation/rationalisation, stock reduction and
supply agility initiatives meet each of these criteria.
Supplier relations are typically less durable in resale than in manufacturing, but as a
wholly own-brand retailer, M&S illustrates the opposite: long-term partnership relations in
order to specify and control its product ranges (5, line 5ff). How has this been a source of
competitive advantage for M&S and how has it become a liability? [>> Section 15]
Technological integration between retailers and suppliers has become widespread in the
form of EDI purchasing links, automated inventory control and replenishment, and demand
management via EPOS systems: the case doesnt say so, but a glance at the literature
suggests that M&S put these systems in place under Greenbury.
ELEMENTS OF SUPPLY CHAIN STRATEGY
Small, highly consolidated supply chain: small core group of (first-tier) suppliers, whose
size allowed them to invest in people and machinery as required. The 1990s showed
increasing consolidation, with the top 20 general merchandise suppliers taking an 80% share
of M&S business (Bower & Matthews, p 11). You might like to think about the implications of
this for mutual dependency and supply risk as well as its support for relationship-specific
adaptation and mutually-beneficial collaboration. We will explore supply chain
relationships in Section 15.
Logistics and distribution: outsourced to a small group of specialist logistics service

providers, which carried goods from suppliers to 14 regional distribution centres (RDCs),
transported goods from RDCs to stores, and managed the RDCs. For UK logistics, they
developed dedicated facilities and M&S-liveried fleets. For international deliveries, they
collaborated with M&S on ways to improve delivery speed (eg move from sea to
predominantly air-based transport) and cut freight costs (eg by consolidating freight at M&S
regional hubs, enabling them to act as a single freight buying group to secure best fares).
(Christopher & Peck, p 11-12, 15)
Supply chain positioning: M&S showed a willingness to backward integrate, eg by taking

over provision of its Chargecard services (initially run by a banking partner) and forming
M&S Financial Services in 1985 (subsequently sold to HSBC 12, line 34, but still a 50: 50
profit-sharing partnership). M&S already has significant control over sources of supply and
logistics services through its power in partnership relations. Might there be potential for
further backward integration by taking over an at-risk supplier?
Shift from domestic to global sourcing: from UK supply base > international sourcing
through UK-based suppliers off-shoring production facilities (early 1990s) > investigation of
less UK-centric sourcing and distribution, including localised sourcing of items for
international operations, global procurement systems. [>> Section 16]
Pursuit of greater supply chain responsiveness/agility: from high-volume forward buying

(for economies of scale) > short-run, short-lead time, demand-pull ordering (to reduce overstocking, increase responsiveness to fashion trends). [>> Section 17]
Cost reduction: M&S appears to regard suppliers as its first resort for cost reductions, by
negotiating higher discounts (squeezing margins) and encourageing off-shoring to enable
price-competitiveness. You might like to think of the effect of this strategy on supplier
relations, supplier risk and M&Ss ethical positioning [>> Section 18]
51
SECTION 15
Supply Chain Relationships and Supplier Management
This is quite likely to be a focus of the examiners attention, with potential for a question about
how, how far, and why M&Ss supplier relationships have changed from its traditional codestiny culture. This is fairly straightforward territory: we will just give you some extra tools.
PROCUREMENT POSITIONING
Procurement positioning models are used to determine what kind of supply relationships
buyers should seek, in relation to purchased items. It is not known whether M&S carried out
such analysis, when broadening its supply base or moving to different types of relationship.
One relevant model here is Coxs relational competence model. The greater a buyers reliance
on its suppliers for the provision and development of distinctive, non-replicable, value-adding
(core) competencies, the greater the depth of the supply relationship will need to be: the buyer
is effectively locked in to relationship by the need to secure access to significant
complementary competencies, and the costs of finding them elsewhere. For M&S, suppliers
used to offer core competencies (eg competitive advantage, development of materials,
establishment of quality: 5, line 7, 41ff). With supply chain rigidity increasingly a disadvantage,
however, there is arguably only medium asset specificity (cost of re-sourcing): M&S can reap
efficiencies from a more adversarial style (eg on discount negotiation), while seeking to exercise
some control over risk (through partnership relations). This appears to be an emerging view at
M&S.
The Kraljic matrix is more suited to manufacturing contexts, but may be used as follows.
Complexity of the supply market
High
Low
Low
Importance of item
to the organisation
High
Routine or
non-critical items
Require systems contract
approach to purchasing
Bottleneck items
Require continuity of supply
Leverage items
Require competitive bidding
Strategic items
Require a partnership and
alliance approach
M&S has traditionally regarded all merchandise as strategic, because of its quality/brand
standards: this has been the driver for partnership relations, and will still be the case for
core, flagship fashion (eg Per Una) and premium-quality brands.
However, some core merchandise may now be seen as leverage items, because M&Ss
power allows it to control the supply market, and because it needs to be price-competitive
for entry level products (competing with supermarkets, say): it needs a more adversarial
approach (negotiating best prices and terms) in order to maximise its leverage.
52
M&S must also have routine items (eg clothes hangers, light bulbs, business stationery), and
should adopt a more transactional approach (if it does not do so already) for these.
SUPPLIER PREFERENCING
Supplier preferencing is the flip side of supply positioning, examining the suppliers
perspective on the desirability of collaborative relationships with a given buyer. The PMMS
model plots the attractiveness of the buying organisation (in terms of its profile, fair dealing,
efficient processes, willingness to collaborate and share gains) and the value of its business.
High
Attractiveness of
buyer
Development
Core
Nuisance
Exploitable
Low
High
Value of buyers business
M&S is likely to be a core customer for any supplier, as a high-value customer which would
probably score well on most indicators of attractiveness (5, line 9). However, it will need to give
attention to maintaining its attractive status, in order to avoid becoming exploitable: suppliers
will do what is required under the supply contract, to protect the business, but will not go out
of their way to provide extras or goodwill. Any extras that are demanded will be charged at
extra cost where possible.
M&S has risked its status by squeezing supplier margins (even in good times: ie not gainsharing), forcing suppliers off-shore (9, line 39), reducing order volume and predictability (10,
line 33; 14, line 25), and terminating loyal suppliers (10, line 31). The alienation became severe
enough to reduce M&S to nuisance status for Coats Viyella, who terminated the relationship: it
took more effort and cost to service than even the high value of the business justified (10, line
40). M&S will now have to be careful that it does not tip a significant number of its core
suppliers over the edge at once, eg if:
Its new Plan A targets (on top of existing quality and ethical standards) are perceived to
place too high a managerial and economic burden on suppliers
Its response to recession leads it to squeeze supplier margins still further, or to seek
extended payment terms (12, line 26-30)
A TRADITION OF PARTNERSHIP RELATIONS

This is fairly well-covered territory in your studies. You should be able to enumerate the
advantages and disadvantages of close partnership relations, from the buyer and supplier side.
To refresh your memory, here are some notes. Think how each point might apply to M&S.
53
Benefits for the buyer

Development of trust
Knowledge of requirements allows better
service, collaborative improvement
Co-operation on added value forward planning,
product development, quality improvement
Reduced supplier evaluation/selection,
contracting, transaction and dispute costs
Preferential treatment in event of materials
shortages, crisis demand etc
Suppliers motivated to invest in R&D, low-cost
solutions, quality improvements
Systems can be progressively integrated for
greater efficiency, reduced transaction costs
Disadvantages for the buyer

Risk of complacent performance by the supplier
Dependence on supplier may erode bargaining
power
Dependence increases vulnerability to supplier
failure or supply disruption
Vulnerability to reputational damage by association
(eg re supplier ethical failure)
Investment in integration raises cost of switching
where this may be necessary or advantageous
Risk tied by integration/loyalty to a partner unable
or unwilling to adapt to strategic change
Investment in partnership may not be warranted by
(new) priority/frequency of purchases
Benefits for the supplier

Development of trust
Buyer knowledge of capabilities allows
managed expectations
Knowledge of buyer requirements reduces risk
of disputes, misunderstandings, rejects etc.
Sharing of data/plans allows forward planning,
joint product/capability development
Supplier development enhances value-adding
capabilities for wider development, competition
Lower costs of selling + reduced production
costs over time due to learning effect
Security of tenure enables better
revenue/cashflow and capacity planning
Systems can be progressively integrated for
greater efficiency, reduced transaction costs
Disadvantages for the supplier

Complacent conduct by buyer (eg re payment)
Dependence may enhance buyer power to
squeeze margins, force change
Dependence increases vulnerability to reduced
orders, termination etc.
Collaboration risks loss of control over confidential
data, intellectual property etc.
Investment in collaboration may not be warranted
by reduced priority/frequency of purchases
Collaborative gains may not be equitably shared
RELATIONSHIPS UNDER GREENBURY

Bower & Matthews (p 11-13) characterise supplier relations at M&S under Greenbury as follows.
High degree of organisational integration at all levels (5, line 45; 6, line 2ff). Executive board
members of M&S and large suppliers met for joint strategy formation. Suppliers were
required to have dedicated teams to interact with M&S buying departments.
Mutual dependency. We [suppliers] cannot do without them [M&S], but they cannot
replace us quickly either. Other new suppliers cannot bring the M&S culture on board
rapidly enough to survive the first few crises. There are important nods and winks between
us.
Electronic integration increasing: eg shared stock availability data and interactive computeraided design links > faster product development, easier late customisation
Suppliers paid within 21 days of receipt of goods
Doing business with M&S perceived as demanding, but a prize to be treasured: smaller
innovative suppliers constantly competing for contracts.
Personal understanding, appreciation and involvement of Greenbury (6, line 40)
54
RELATIONSHIP SHIFT FROM 1990s ONWARDS

There is a noticeable hardening of M&Ss stance over time, as the rigidity and UK-centricity of
the supply network becomes a problem, and as M&S profit maximisation or protection goals
put pressure on suppliers to become price-competitive or to squeeze their margins.
Greenbury personally requests suppliers to reduce margins to contribute to ongoing success

of both businesses (6, line 20) but once profits soaring, might this not have been seen as
margin-greedy, or a failure of gain-sharing?
Greenbury encourages suppliers to off-shore production, with incentive of future pricecompetitiveness but costs and risks substantially borne by the suppliers (9, line 39)
Salsbury informs UK suppliers that orders will decrease (10, line 34),
Salsbury decides to terminate William Baird security of tenure (and implied long-term
contract) disappears (10, line 31)
Salsbury demands further price reductions to the point where Coats Viyella stops supply
(10, line 20). Note the implication of the case study phrasing that decision-making has
become unilateral and communication deteriorated.
2004: Rose calls in main suppliers (face to face meeting?) and re-negotiates discount levels
from 3.75% to 7.5% (12, line 26). More constructive negotiated approach? Rationale
(risks/costs to suppliers if M&S taken over) and quid pro quo 7-day payment terms: intention
to maintain good relationships (12, line 27-30).
2005: Bostock stipulates dramatically shorter lead times, but works with the suppliers to
achieve this (14, line 17ff). Some suppliers lost out on fewer/shorter production runs (14, line
25), however many were apparently on board for more responsive supply of more
fashionable designs (14, line 30) perhaps because of regained confidence that the future for
M&S and its supply chain were looking up?
2006: Rose increases the pressure (this time in writing) to increase discounts to 10.5%:
arguing that suppliers now benefiting from higher volumes should contribute towards costs
of advertising (15, line 13). This is seen as controversial (risking squeezing suppliers too
far?), but interpreted by markets as a show of determination.
You may want to see this in terms of a move towards adversarial-collaborative relationship: the
buyer works collaboratively with suppliers at operational level to increase value but competes
commercially to appropriate as much of value as possible eg in discount negotiation. Cox et al:
Share of value gains
Way of working
Arms length
Collaborative
Favouring
buyer
Adversarial Arms length

(buyer dominant)
Adversarial Collaborative
(buyer dominant)
Balanced
Non-adversarial Arms length

(interdependent)
Non-adversarial Collaborative
(interdependent)
Favouring
supplier
Adversarial Arms length

(supplier dominant)
Adversarial Collaborative
(supplier dominant)
55
On the other hand, you may also identify risks of alienating core suppliers. In this context, you
may see the launch of Plan A in 2007 as:
A further stress on supplier relationships, creating pressures for transformation and costsharing at a time when their margins are already squeezed and M&S already an increasingly
unattractive customer.
A brilliant way of uniting and involving suppliers in an inspiring strategy which will lead to
significant competitive advantage and capabilities for the supply network as a whole, to
everyones long-term benefit.
POWER AND DEPENDENCY ISSUES

Some suppliers will be heavily dependent on M&Ss business. You might identify the sources of
M&Ss power, using French & Ravens classifications, as: legitimate (ownership, contract,
appeal to regulations and standards); expert (ownership of designs, market expertise, support
for supplier development); reward (high-volume/value, secure-tenure business); and referent
(market-leading retailer, leader in CSR standards).
Consider how M&S uses its power: fairly, with equitable gain sharing or exploitatively for
its own profit maximisation?
Consider the nature of M&Ss dependency on its suppliers: how great is its exposure if one
or more core suppliers terminate the relationship or become insolvent? What can it do to
manage the risk?
Buyers usually seek to avoid over-dependency by a supplier, partly due to ethical

obligations and partly to improve suppliers contact with the market. Dependence issues
should form part of M&Ss communication with heavily dependent but now vulnerable
suppliers (eg those slow to change for responsiveness, international sourcing, Plan A). It
might advise them to diversify, and may be able to recommend possible (non-competing)
customers.
SUPPLIER MANAGEMENT
A number of supplier management issues are raised by the case study, and although these are
of a rather tactical or operational nature, they may form part of an appraisal of M&Ss supply
chain practices.
Supplier selection and evaluation is not part of the case but review your notes in case you
are given the scenario of M&S having to seek new international suppliers, say.
Supplier performance measurement and management is not featured either, but you might
like to think about supplier KPIs suggested by the case, including:
o
o
o
o
o
o
o
o
Quality assurance and process capability (dependability) (5, line 43)

Delivery performance and quality conformance (5, line 43)
Hygiene and safety (5, line 44) and ethical labour policies (Global Sourcing Principles)
Plan A targets for environmental responsibility improvement (Table 3, page 20)
Lead time (v sector norms) for development and delivery (14, line 19)
Co-operation and capability for late customisation and other agile techniques
Proportion of suppliers produced in the UK or internationally (10, line 34)
Cost/price competitiveness and willingness to negotiate on margins (15, line 14)
56
Supplier development: activity to assist in improving supplier capabilities, eg through

training, advice, financial support or joint investment, provision of equipment and so on.
The aim is to raise supplier competence to a predetermined level (eg for M&Ss suppliers, in
relation to reduction of lead times, 14, line 19, innovation and quality management, 5, line 42,
or Plan A targets) and to support suppliers to self-sustain the required performance through
a process of continuous improvement.
We dont know in detail what forms of support M&S offers in these areas. Some options, if
you had to recommend some, include: management training; visits or secondments to
model factories; auditing/reporting mechanisms eg on Plan A targets; the establishment of
Plan A improvement circles facilitated by M&S advisers; setting KPIs for continuous
improvement; or financial support (eg accepting lower discounts on the basis of guaranteed
improvement or standard attainment).
You should be able to draw on your studies for Improving Supply Chain Performance in these
areas: review your Passnotes if you need to.
57
SECTION 16
International Sourcing
This could well be the focus of an exam question, given the marketing and supply chain issues
it poses for M&S, and the few but focused mentions of the topic (5, lines 37-40; 9, line 25-44; 10,
line 33-34; in the case study. We arent given enough information in the case to indicate exactly
how M&S structures its international sourcing: to what extent its Selectors and Merchandisers
deal direct with overseas suppliers, or continue to work with core UK suppliers who have been
encouraged to off-shore production to low-cost economies. (This obviously impacts on the
extent to which M&S bears, shares or transfers the risks of international sourcing.) In order not
to rely too heavily on background reading, we will assume (as the case allows) a bit of both.
Advantages of Buying British
Tradition (and supply network) established when international logistics limited/costly
Marketing advantage of buying British brand positioning (5, line 11) and ethical brand
positioning in supporting local suppliers/industry (5, line 15)
Advantages of UK supply base: short lines of communication; no currency exchange risks;

easy supplier management and quality enforcement (5, line 37)
No cost disadvantage, as predictability, long lead times, large volumes, preferential supply
allowed suppliers to offer value (5, line 39)
Developed relationships, contacts, integration and expertise centred on UK supply base:

disincentive to change (9, line 40)
Health, freshness, sustainability and branding advantages of local sourcing of foods.
Drivers of international sourcing or supplier off-shoring
Loss of competitive advantage: competitors already reaping benefits of cost, enabling

shorter production cycles and faster response times (9, line 29)
Competitive price and cost savings (scale economies, low-cost skilled and semi-skilled
labour, favourable foreign exchange rate, liberal tax rates). This is likely to have been the
major consideration for M&S, as for its competitors: allowing both mass-production and
more innovative/flexible manufacturing at low cost (9, line 29ff)
The logistical, cost and marketing advantages of sourcing merchandise close to international
outlet/franchise centres.
Availability of required materials and/or skills, not available locally (eg sourcing and
production closer to sources of foreign-origin materials such as silk or cotton, or food
ingredients such as spices; unique manufacturing capability)
Less onerous constraints and costs re environmental protection, labour conditions etc.
athough M&S seeks to drive both areas eg via Global Sourcing Principles
(corporate.marksandspencer.com) and Plan A targets (including purchase of Fair Trade coffee,
cotton etc), and this may add costs of supplier monitoring and development
Leveraging available technologies for virtual organisation, e-sourcing etc (although it is not
known from the case to what extent M&S uses these)
58
Leveraging supply relationships, by encourageing UK-based suppliers to off-shore

production (9, line 39) in order to remain price-competitive.
Risks and challenges of international sourcing
Lack of expertise and experience in markets, buying processes (9, line 1)

Potentially long lead times for delivery: partly due to mass-production volumes, but also
long distance to market and logistical complexity
Exchange rate risk and currency management issues
Costs of identifying, evaluating, developing and manageing suppliers at a distance
(difficulties of monitoring etc)
Different legal frameworks, intellectual property protection, quality standards (and issues of
jurisdiction over trade disputes)
Different language and culture: eg ethical values, business customs, approaches to
negotiation/conflict management
Political risk: instability, policy change
Transport risks, costs and delays: time/distance > higher exposure
Tariff and non-tariff barriers to trade (eg EU textile import quotas, causing a clothing retail
crisis in 1995)
Local opposition and reputational damage due to off-shoring jobs
We dont know from the case to what extent M&S has been able to share these risks with
suppliers. (Courtaulds, a major UK textile supplier of M&S, experienced major difficulties
shifting production overseas in the 1990s, due to political unrest, shortage of freight capacity,
textile import quotas and change management pressures: Christopher & Peck p 20). You might
like to think what risk management measures M&S and/or its UK first-tier or off-shoring
suppliers should have taken in order to minimise their exposure.
You might also like to consider the article 10 Tricky Decisions (for overseas sourcing), Supply
Management 16 February 2006. (We list eight of them below.)
Do you really want to go overseas?

(Global sourcing for cost reasons alone may not be sustainable in the long term, and closing
down more local options may lead to sourcing problems later on Sourcing globally will
also bring new requirements for the business for example in compliance, traceability and
financial reporting.)
Crossed wires
(Assuming there is a common understanding with suppliers from different cultures can
result in misunderstanding and dissatisfaction.)
Costs
(Companies can fail to consider all the financial implications of sourcing from abroad: low
labour prices are only a small element of the total outlay.)
Yet more regulations
(Service agreements are always sensitive but the global dimension, with different legislation
in various nations, adds its own twist of complexity.)
Inspections
(Incorrect assumptions may be made about the ability of a given country to produce quality
goods or services.)
59
Lead times
(Global sourcing increases lead times. To compensate for this, purchasers often increase
their minimum order quantity, but financing and carrying extra inventory is expensive.)
Flexible supply chain
(Delays can be disastrous especially for companies with limited options to re-route
goods.)
Intellectual property
(Fighting counterfeiting is complex and expensive, and it can be difficult to prosecute in
emerging markets.)
Evaluating M&Ss global sourcing strategy
Benefits of using UK-supplier off-shoring: retaining buy-British branding; retaining buying

organisation, relationships and arrangements, rather than having to develop international
expertise/contacts; transferring the risks of international sourcing to (or sharing them with)
suppliers; and benefiting from suppliers passing on cost advantages
Drawbacks of using UK-supplier off-shoring: risk of learning curve; supplier exposure

creating supply risk for M&S; failure to develop in-house expertise in international markets
and buying; logistical complexity
Struggle to get a UK-led international supply chain to compete effectively (9, line 42).
Nevertheless, steadily increasing proportion of products sourced outside the UK (9 line 26,
43; 10, line 34)
Where next?
The case doesnt tell us exactly where M&S has got to in this area, but you might think about:
The need to develop M&S in-house expertise (perhaps building on contacts through
regional retail operations) to widen direct international sourcing from smaller suppliers for
short-run, non-core merchandise (eg seasonal fashion items)
The need for systematic risk management in regard to direct international sourcing
The need to develop localised buying for international outlets (under Greenbury, still
predominantly supplied from the UK: Bower & Matthews, p 19). This is especially important
for food products (for freshness, seasonality, local varietals): lack of food supplier
relationships in Europe and Hong Kong was identified as a constraint on the growth of
M&Ss food business abroad. However, it is also important so that Hong Kong retailers, for
example, who have their own operating plan, have authority over their own buying (Bower
& Matthews, p 20).
The need to develop procurement systems that will allow Merchandisers to buy goods in
any country in any currency
The need to develop logistics/transport planning systems that will get internationallysourced merchandise distributed to required retail destinations on a minimum-stop (now,
presumably, minimum carbon-footprint) basis
The need to develop more economical ways to transport goods (eg vacuum packing clothing
to reduce freight costs)
The need to support UK core suppliers who have off-shored at M&S request and/or to
encourage them to utilise off-shore production capacity for other customers
60
SECTION 17
Agile/Responsive Supply
LEAN SUPPLY
Does M&S practise lean supply?
M&Ss traditional supply orientation might generally be identified as lean, with a focus on:
Meeting (what was assumed to be) predictable demand efficiently (5, line 49) through
economies of scale and standardisation (7, line 37)
The use of long-term relationships with a small supply base to reduce costs of transaction,
sourcing and quality (5, line 8ff; 10, line 39)
The use of customer-pull merchandise flow (introduced under Greenbury): real-time stock
monitoring and replenishment via barcoding/EPOS; at-need ordering by sales assistants
from the stores stock allocation held at the regional warehouse facility; and systems for instore ordering by customers (transferring goods from anywhere else in the merchandise
stock system). (Bower & Matthews, p 13)
Progressively attempting (although with varying success) to streamline the product range
(22, line 6); streamline processes (eg paperless transactions, minimising non-selling activities
in store by preparing stock in warehouses); reduce inventory levels (12, line 24); and increase
stock throughput (13, line 30)
However, M&S has struggled to become genuinely or successfully lean, particularly in the
reduction of inventory: over-ordering and poor stock turn is a recurring problem (10, line 13; 13,
line 20). Overstocking was identified as both a waste and a source of inertia, because of massive
forward commitments (13, line 21, 27).
Waste also appears to have been an entrenched problem in:
The logistics structure: eg internationally-produced merchandise travelling through France

to UK distribution centres before being distributed back into France; suppliers buying in
virtually-finished goods from overseas (to low-cost source), shipping them to the UK for
finishing (to maintain M&Ss buy British marketing stance) and returning some finished
goods to the region of origin for sale with significant delay and added cost. (Christopher &
Peck, p 11, 14)
The product range, with streamlining in times of recession giving way to increasingly
unfocused product development (7, line 35; 13, line 9)
Benefits of lean
Lean low-cost mass production is well adapted to:
Traditional push retailers such as department stores, which mainly stock only popular and
profitable lines (less worry about high inventory), and use regional distribution centres
(RDCs) to break large-batch, long-cycle deliveries from suppliers.
Core brands (predictable demand, high volume), which do not require innovation and can
be produced at mass volume for year round sale.
Conditions where cost and quality are key (Cox) as they have traditionally been for M&S
61
Drawbacks/limitations of lean
Reduced capability to respond flexibly to contingencies and changing customer demands

(eg for fashion items), due to forward commitments, long lead times, inventory inertia
Short-term cost-reduction focus (may reduce investment in innovation, alienate squeezed

suppliers: 10, line 41)
May drive weaker suppliers out of the market (10, line 32): social/ethical cost (New &
Ramsay)
RESPONSIVE/AGILE SUPPLY
Drivers for agile supply
M&S has traditionally released two clothing collections per year (4, line 45), using very
large-scale forward planning to place orders with core suppliers about nine months ahead
of the season. However, emerging fashion-niche competitors of the late 1990s (eg Gap, Zara
and H & M) used quick-turn systems: Gap had 14 seasons per year with stock changes
every three weeks (9, line 31; Christopher & Peck, p 19)
Through the 1990s, consumers were becoming increasingly fashion-conscious, shortening

product lifecycles, and creating pressure for short-run, short-lead time supply to meet
demand for fashion items and to maximise the sales window (9, line 37; 14, line 21).
Consumers are increasingly demanding and ready to switch brands in pursuit of the latest
products and trends (Lewis & Bridger).
However, as a retailer, M&S faces a dual need to reduce inventory (reduced inertia, tied up
capital, costs of obsolescence and discounting) and to maintain service levels (avoiding
stockouts, enabling goods to be swiftly sourced on demand): unlike lean, agile supply
tolerates sufficient inventory to enable swift response.
Developing greater agility

To refresh your memory of the principles:
Streamline the physical flow of products to customers

Accept inventory, where necessary to add value (eg allowing fast in-store ordering)
Late customisation: final make-up, finishing, packageing on demand
Final finishing/packageing close to the customer: relocate (eg for overseas outlets, given
M&Ss current UK-focused distribution structure)
Streamline the bilateral flow of information (eg through EDI)
Ensure adaptability in responding to changing market needs through robust integrated
information systems, collaborative contingency planning and innovation processes
Ensure speed of response to customer queries, requests, delivery expectations
M&S attempts so far
Under Greenbury, M&S tried to shift up from two to four seasons for its main clothing
collections, and to reduce lead times to around three months. Were speeding up how we
buy. Rather than ordering just twice a year and well before each season, we now buy
throughout the year distinguishing between core and non-core merchandise, and ordering
up to a third of more fashion-driven lines during the season itself (M&S Annual Report
2000).
62
Attempts were also made to increase flexibility of buying decisions, despite forward
commitments to suppliers: eg making up garments, using IT to track colour preferences and
delaying dyeing until the selling season: customising the flow of high volume
manufacturing to subtle shifts in consumer taste (Bower & Matthews, p 11). This is one
example of late customisation, and you might like to think what others might be possible.
Under Rose, fashion-driven responsiveness became a high priority (13, line 19ff), since
womenswear was believed to be key to M&Ss revival (14, line 6). Bostock aimed for new
ranges to be introduced to stores every seven weeks, worked with suppliers to reduce lead
times and introduced fast-track systems for high-fashion items (15, line 17ff).
A HYBRID APPROACH?
The most effective option may be a hybrid lean/agile model:
Continue long-cycle, high-volume forward buying of core stock, non-fashion items
Identify dynamic fashion items and source more responsively: trend monitoring, fast-track
development, shorter/fewer production runs, reduced lead times
Use late customisation where possible: eg mass making-up, demand-pull finishing (eg
dyeing, detailing)
REFRESHER NOTES: LEAN & AGILE

The following revision notes may help you to add flesh to your arguments.
Dimension
Focus
Agile supply
Rapid response to unpredictable
demand
Lean supply
Meeting predictable demand
efficiently: eliminating waste
Most powerful
when (Cox)
Service and customer value

enhancement are key
Cost and quality are key
Inventory strategy
Work-in-progress stock > late

finishing in response to actual
demand
Minimal inventory, high stock turn;

pull systems (eg JIT)
Lead time strategy
Invest aggressively in shortest

possible lead times
Shorten lead time where compatible

with cost reduction
Supplier
relationships
Fluid ICT-integrated (virtual)

network
Long-term partnerships with smaller

supply base
Work organisation
Self-management, flexibility
Standardisation for efficiency
Performance
measures
Customer-facing metrics (eg ontime-in-full deliveries)
World class measures (eg quality,

productivity)
63
SECTION 18
Cost Reduction and Stock Management
These are tactical, rather than strategic, themes, but just in case, we have provided some
thoughts.
STOCK MANAGEMENT
Overstocking is a recurring problem within the case:
Traditionally, M&S had resigned itself to the discounted sale of over-stocked items,
tolerated perhaps as enhancing perceived value for money: enabling customers to pick up
bargains (4, line 47). (Outside the case, we may see the same orientation in the M&S Outlet
stores, launched in 2000 to sell discounted over-stock and redundant items.)
One of the key causes of the 1999 crisis was that M&S had massively overbought stock
and was caught by surprise by a downturn in sales. (10, line 14)
Stuart Rose found the level of stock at 2004 still overwhelming and worked to increase
stock turn (12, line 24; 13, line 19) and reduce buying cycles (14, line 17ff).
The problems with overstocking include: large amounts of capital tied up in stock, costs of
clearing excess stock (eg by discounting), commitment to old stock creating lack of
responsiveness and lack of freshness (13, line 19-29).
Causes of overstocking
Overstocking may be attributed to factors such as:
Processes geared to predictable, long lead-time, infrequent, large-volume orders, bought ten
months in advance of demand to secure volume discounts (4, line 45; 5, line 9; 13, line 20)
The need to preserve retail service levels, in the face of consumer expectations (and
availability of substitutes) if goods are out of stock at a given outlet
Poor demand forecasting (10, line 13-15), perhaps due to: overconfidence and the need to
stock massively increased retail space (8, line 3); buying teams surprising lack of market
sensitivity (14, lines 9-10); and buying so far ahead in a potentially fast changing market (10,
line 14; 15, line 26)
Product proliferation, especially under Greenbury (7, line 35; 13, line 9)
Approaches to reducing stock levels and increasing stock turn

Although this is at a rather tactical level, you might like to revisit your notes on inventory
management. From the case, you might like to think about policies such as:
Temporarily freezing buying, faced with high stocks and collapsed demand (12, line 24).
Consider the longer-term effects of this: popular goods sold out, less popular goods taking
over the shelves, no injection of fresh goods; less enticing offering, higher cost of clearance?
Extend customer-pull orientation of current merchandise flow from stock-to-outlet (eg

customer in-store ordering) to buying. Move towards continuous replenishment and
accurate response supply: more flexible pull supply in response to actual demand.
64
Reduce supplier lead-times, enabling more frequent, shorter-run ordering (14, line 17ff)
Investigate potential for late customisation of part-finished merchandise, putting

finishing (and transfer of stock from supplier to M&S) closer to customer demand.
This might be a hybrid of advance-of-demand production (avoiding stockout of core items),

and chasing actual demand eg via production/delivery postponement
Develop more accurate demand tracking systems via EPOS, store feedback monitoring,
market research and share demand information/systems with suppliers
Train and develop buying teams in demand tracking systems, demand-pull buying,
selecting and working with suppliers to reduce lead times etc (14, line 27)
Increase stock turn by marketing incentives: seasonal sales (4, line 47), special 20% sales
days (13, line 30), the launch (and further roll-out, if necessary) of Outlet Stores (aiding
clearance by year-round sale of slow-moving and recent season stock) and improving
offering (range, value, service, quality), branding and promotion to increase sales (eg 13, line
44; 15, line 6)
COST REDUCTION
Drivers for cost reduction
Threat of recession: need to reduce costs to protect profitability (given depressed sales) and
to pass savings on to consumers to maintain sales (6, line 16-17)
Need to cover costs (eg of new IT systems, store network development, re-branding
programmes and Plan A commitments), without eroding value proposition by raising
consumer prices
Desire to increase profit margins: ambition to reach sector profit milestones (7, line 34-35; 9,
line 9ff), pressure for profit growth from shareholders and market analysts (9, line 12); desire
for sector profit leadership?
Perception of risk of cost complacency in large, bureaucratic, successful organisations:

identification of potential for cutting the fat
Competitive need to improve price positioning and offer outstanding value, without
eroding profitability.
M&S approaches to cost reduction
Economies of scale, via long lead time, large-volume purchasing (5, line 39) but at the
expense of overstocking and lack of responsiveness (13, line 20)
Low-cost international sourcing, initially through requiring UK suppliers to off-shore

production capacity but at the expense of teething problems (9, line 39ff)
Repeated squeezing of supplier profit margins, as their contribution to the business,

advertising costs etc (6, line 20; 10, line 30, 39; 12, line 26; 15, line 13) but at the expense of
lost key suppliers (10, line 40), strained supplier relations and reputational damage through
supplier difficulties (10, line 32)
Product rationalisation (6, line 22) and standardisation occasionally counter-productive,

eliminating necessary differentiation (7, line 36ff: note the mixed messages - more product
lines plus rationalisation) and leaving gaps in the product range (14, line 10)
65
Investment in technology to improve process efficiency, reduce transaction costs etc eg

EPOS, e-procurement, e-commerce (15, line 23). Outside the case study, M&S was one of the
UK pioneers of the use of RFID tagging for its in-store clothing merchandise, trialling the
system in 2006 (Computer Weekly.com).
Closure of smaller, less profitable stores, often located in less prosperous parts of the
country (7, line 50) at the expense of local communities and unprofitable international
operations (11, line 6)
Withdrawal of less profitable lines (eg childrens clothing removed from smaller stores,
niche ranges only available online or by in-store/catalogue ordering) potentially at the
expense of customer alienation (Christopher & Peck, p 9) and future sales growth
Downsizing, delayering and reorganisation for greater efficiency (6, line 18; 10, line 35):
duplication of effort and layers of management and supplier interface but at the cost of
redundancy benefits, destabilisation (11, line 9) and management consultancy fees (10, line
25, 29)
You might like to think what other methods of cost reduction M&S might have considered, or
might now consider, or whether it just needs to do the above but more effectively.
66
SECTION 19
Leadership and Influence
There are lots of strong possibilities for questions on leadership and influence arising from this
case study. For example:
What styles of leadership and influence are demonstrated by Richard Greenbury, Stuart
Rose and Kate Bostock in the case?
Use an appropriate (or specified) theoretical model to explain and appraise the leadership
style of one or more parties in the case.
What are the benefits and risks/drawbacks of a strong central leadership culture, as
demonstrated by the case?
Appraise the leadership effectiveness of one or more parties described in the case (perhaps
most probably Richard Greenbury and/or Stuart Rose).
What forms of influence are exercised by M&S within its sector and British business as a
whole? (A May 2007 case study question asked you to appraise the vision and strategy of
[the case study organisation] in influencing [its industry].)
You might like to review your notes (or our Passnotes) for Leading and Influencing in Purchasing
in some of the following areas, and take into the exam any material you think you may require.
THE CULTURE OF LEADERSHIP AT M&S
In general, the M&S leadership culture is distinguished by:
A high degree of deference for the leader (eg 7, line 6) and identification of the leader with
the company: strong followership factor
A highly personal bond between leader and company, based on experience and loyalty (6,
line 36; 11, line 38), and passion for the companys success (7, line 2; 12, line 19)
A high value on leadership tradition and dynasty through history (6, line 8; 12, line 17)
High personal investment/cost in leadership (eg 8, line 35ff; 14, line 22) and perhaps an
expectation that others will be similarly invested: demanding leadership.
STRATEGIC LEADERSHIP APPROACHES

Johnson & Scholes describe a range of approaches to strategic leadership: that is, how senior
leaders manage higher-level strategy and change in the organisation. Leaders may focus on:
Their strategic role (the strategy approach). Leaders take personal responsibility for
articulating mission, scanning the environment and formulating strategic plans: day-to-day
operations are delegated to other managers. This appears to be typical of M&S chief
executives in general. Greenbury increasingly took responsibility for strategy (7, line 25ff),
while Rose is a clear example of articulating mission (eg 12, line 17, 37), environmental
scanning (15, line 46) and strategy formulation (13, line 16)
Developing people (the human assets approach) who can add value and take responsibility
for developing and manageing corporate strategy locally. Greenbury arguably lost sight of
67
this (7, line 4ff), but Rose demonstrates the empowerment and development of managerial
potential (13, line 35; 14, line 2, 13, 44; 16, line 34).
Developing core competencies in the organisation (the expertise approach). Leaders

cultivate expertise through planned employee development and supporting systems: other
managers are then expected to utilise competencies for maximum advantage. We see
Bostock adopt this approach to an extent (14, line 20, 27ff).
Controlling organisational performance, ensuring efficiency of processes and predictability

of outputs (the control approach). Leaders develop and communicate procedures,
performance measures and controls: other managers secure stable performance within the
plans. This is typical of a traditional bureaucracy, and one senses it may have been the
approach used in the steady growth years up to the 1980s.
Their role as change champions or drivers (the change approach), taking personal
responsibility for initiating and championing continual cultural and strategic change: the
role of other managers is to act as supportive change agents. We see a post-recovery shift
towards this orientation in Stuart Rose, with the introduction of the transformational Plan A
change programme (16, line 1ff, 19)
LEADERSHIP STYLE MODELS
Transformational/transactional leadership (Burns)

Transactional leadership sees relationships with followers in terms of mutual dependence
and trade: giving rewards in exchange for service/compliance. It is effective in stable
bureaucracies with security-seeking, authoritarian cultures, operating in predictable
environments: arguably, the situation at M&S prior to the 1990s. Hence, perhaps, M&Ss
traditional reputation for offering good employee job security, welfare benefits etc in return
for consistent performance.
Transformational leadership is an interpersonal process of stimulating interest, inspiring
higher achievement and motivating people. It is important in dynamic and competitive
environments, as it supports change, innovation and flexibility. Such leadership was
arguably required under Greenbury but we dont see this in the interpersonal style
described by the case (7, line 7) or its results: tensions, resistance to change etc.
Stuart Rose is painted as a portrait of transformational leadership, however:
o
o
o
o
o
o
o
Winning trust and respect (12, line 15ff, 32)

Acting as role model for team values (12, line 20; 15, line 18)
Articulating a compelling vision (12, line 37; 13, line 6; 16, line 5)
Communicating high expectations and confidence (12, line 19)
Supporting new thinking, questioning and stretching (14, line 13)
Treating people as individuals (13, line 11)
Supporting personal development (14, line 35)
Kate Bostock might also be characterised as transformational: compare the above-listed

factors against the description of her actions (14, lines 15, 16, 22ff, 27ff, 35ff).
Leadership roles (Mintzberg)

This model was developed to describe activity at the managerial (rather than leadership)
level, but it is notable how clearly Stuart Rose occupies the roles classified by Mintzberg.
68
Interpersonal roles
Figurehead (3, line 42)
Leader (eg 12, line 14ff;
13, line 11)
Liaison (12, line 23, 26)
Decisional roles
Entrepreneur (13, line 30; 15, line 20)
Disturbance handler (12, line 43;
13, line 12)
Resource allocator (12, line 34; 16, line 3)
Negotiator (12, line 25)
LEADER BEHAVIOUR
NG
LIN
EL
Share ideas
and facilitate
in decisionmaking
AT
I
IN
S4
Provide
specific
instructions
and closely
supervise
performance
LL
Turn over
responsibility
for decisions
and
implementation
S2
TE
NG
S3
D ELE
Explain
decisions
and provide
opportunity for
clarification
PART
ICIP
AT
(HIGH)
Situational leadership (Hersey/Blanchard)
(Supportive Behaviour)
RELATIONSHIP BEHAVIOUR
Informational roles
Monitor (15, line 46)
Spokesperson (12, line
31; 14, line 38)
Disseminator (16, line 1)
S1
TASK BEHAVIOUR
(Guidance)
FOLLOWER READINESS
(LOW)
MODERATE
HIGH
(HIGH)
LOW
R4
R3
R2
R1
Able and
Willing
or
Confident
Able but
Unwilling
or
Insecure
Unable but
Willing
or
Confident
Unable and
Unwilling
or
Insecure
FOLLOWER
DIRECTED
LEADER
DIRECTED
The most appropriate leadership style depends on the maturity/readiness/development

level of followers.
o
Experienced senior executives should be an R4 team. Greenbury rightly used a

delegating style (7, line 2ff). However, as the team failed to match his passion (perceived
as less willing?) and failed to question/challenge his ideas (7, line 6: less confident?), he
should arguably have shifted to a participating style, with high supportive behaviour.
Instead, he shifted towards a telling style (7, line 7, 25). The mismatch of style to the
boards ability created resentment (8, line 45), tension and hostility (10, line 7-9).
69
Rose inherited an executive team R3 at best: disunited, fighting, defensive and failing to
diagnose or tackle fundamental problems (eg 13, line 3ff). This suggests a selling strategy
for dealing with problems (high support to rebuild confidence, but high direction to reestablish control) and a participating style to re-unite and re-empower the team. Rose
demonstrates selling (eg 12, line 37; 15, line 13; 16, line 1) and participating (12, line 14).
For exceptional R4 team members like Bostock, he uses delegating (14, line 13). And for
under-performing teams, in problem areas, he uses telling (12, line 24; 13, line 12).
Bostock inherited a womenswear buying team at R1: lacking basic market awareness
and portfolio planning competencies (14, line 10) and lacking confidence (14, line 36).
This requires a task-focused telling style and we assume this is initially Bostocks
appraoch (15, line 15ff) although the situation was so critical that she brought in R3/R4
team members (14, line 10), presumably allowing a selling/participating style for the
mixed team. We assume a more supportive style from her staff training (14, line 27) and
Roses reference to her teams growing motivation and confidence (14, line 35).
Leadership styles
You may have your own preferred style models, and should make your own notes on which
styles are used (and how effectively) by Greenbury, Rose and Bostock. For example:
o
Blake & Moutons managerial grid. You might identify Greenbury, at the later stages of
his leadership, as a high-task, low-people leader (9, 1) in some respects: overbearing,
unilateral, pushing for profits, prizing good financial indicators over team morale (8, line
5-6) and so on. In contrast, Bostock and Rose are high-task, high-people (9,9) leaders
illustrating Blake and Moutons contention that the two are not incompatible. Both
believe that the motivation, unity and confidence of their teams are necessary for good
task results, and use both directive/task-focused and supportive/people-focused
behaviours as required. (For examples, see our Situational Leadership analysis above.)
Ashridge model: tells, sells, consults, joins. The culture of leadership at M&S has
historically been autocratic/tells. Greenbury was initially concerned about the
excessively autocratic style of the business and sought to change the culture (Bower &
Matthews, p 4) by encourageing board communication, openness and involvement (7,
line 4): a consults/joins style appropriate to an executive committee. However,
Greenburys impatience and M&Ss culture of deference led him to fall back to a frankly
autocratic/tells style (7, line 5, 25). Rose uses a tells style only when necessary to fix
critical problems decisively (eg on overstocking 12, line 25; the use of consultancies 13,
line 12) and otherwise prefers a sells/persuasive style (12, line 26; 13, line 11) and where
possible a consults/participative style (12, line 15; 14, line 13; 16, line 1). We dont really
know to what extent genuine consensus is sought for decisions: it may be safer to
assume a consults than a joins approach
INFLUENCING TACTICS (Yukl & Falbe)

Review your notes on the influencing tactics model, and see if you can identify the tactics
used by various parties in the case study in different directions. We mostly see downward
influence (of leaders over their teams) and outward influencing of external stakeholders
(suppliers, consumers, shareholders and market analysts). However, you might like to think
how you would answer a more general question: eg how buyers, say, might exercise
influence in relation to senior management, cross-functional buying colleagues, direct
reports (if any) and suppliers.
70
Greenbury seems to use:

o Inspirational appeal (7, line 2; 7, line 27)
o Consultation in relation to the management team at least, early on (7, line 4) and
perhaps rational persuasion bordering on pressure later on (7, line 7ff).
o Exchange and rational persuasion in relation to suppliers we assume, since this would
be the most common approach, although there may also be an element of personal
appeal (arising from Greenburys personal contact with suppliers) and/or pressure
(based on M&Ss high buyer power) (6, line 20; 9, line 39)
o Legitimating and coalition in relation to challenges to his power: appealing to authority,
tradition and internal support for the breach of Cadbury recommendations (7, line 20ff).
Rose seems to use:

o Inspirational appeal and rational persuasion in relation to market analysts and
shareholders (12, line 37)
o Consultation and rational persuasion in relation to the management team (12, line 14; 16,
line 1) and presumably legitimation when necessary (13, line 12).
o Exchange and rational persuasion in relation to suppliers (12, line 26), although again
there may be an element of pressure (15, line 13)
You might also like to think about what kinds of influencing Rose and his colleagues will now
need to exercise in order to get key stakeholder support for and involvement in Plan A.
LEADER EVALUATION
You should be able to use the above comments and models to rate individual leadership
effectiveness. Broadly:
Greenbury was strong on crisis leadership, passion and drive, and ability to keep most
external and internal stakeholders on board through a steady programme of change (quiet
revolution). However, his leadership style grew increasingly autocratic, isolating him,
causing risky decision making, and inhibiting the development and functioning of his
executive team. He was focused on results with an insensitivity to people and culture, and
this led him to push too far too fast for the capabilities and stability of his team.
Salsbury arguably lacked genuine vision (reacting against Greenburys strategies and using
too many consultants) and his leadership style alienated key external and internal
stakeholders although it should be remembered that he inherited a crisis situation.
Holmes arguably had potential as a visionary and steadying leader, but was undermined by
the lack of confidence of others in the face of the takeover bid: he had failed to manage
upwards where the chairman and non-executive directors were concerned.
Rose is a portrait of an effective leader in many ways: securing stakeholder buy-in,

articulating vision, being decisive when necessary and participatory when possible, clearly
defining core messages, communicating widely and personally, bringing in and supporting
new talent, being willing to initiate transformative change (with a focus on uniting
stakeholders behind a compelling vision) and so on. It is important to note the seeds of risk,
however, in relation to a possible willingness to hold too much power, or to push too far too
fast in other words, to risk history repeating itself.
71
BENEFITS AND DRAWBACKS OF STRONG INDIVIDUAL LEADERSHIP

Given the strong autocratic leadership culture at M&S, and the problems it caused under
Greenbury, there may well be a question about this. It would be a discussion question,
requiring attention to both points of view.
On the positive side, strong autocratic centralised leadership:
Has traditionally given M&S unity of purpose and direction, and preserved core brand
values (quality, service, trust) and a focused/controlled brand identity, when these were
strategic priorities. (Both during brand development in the early years and when needed
to recover focus under Rose.)
Is effective in bureaucratic cultures where deference, stability, security and followership are
valued (and often entrenched in the type of people the organisation employs).
Is effective in conditions of crisis, when people look for decisive leadership to steady the
ship (cf 11, line 24; 12, line 2) and when swift, unquestioned decisions are required to stem
problems (6, line 28; 12, line 24; 13, line 12, 38; 14, line 13).
Avoids problems where a potentially effective leader is undermined by competing or

conflicting initiatives from elsewhere in the organisation: perhaps the case for Roger Holmes
(11, line 12ff).
On the negative side, strong autocratic centralised leadership:
Prevents the development of initiative and decision-making skills at lower levels, distancing
the company from customers (14, line 7), creating indecisiveness and lengthening decisionmaking (13, line 10)
Prevents the development of senior management skills and confidence, creating ongoing
problems of management succession planning (10, line 7; 12, line 4; 16, line 30) and political
in-fighting (9, line 46).
Encourages a culture of deference and a reluctance to question or challenge the leaders

views or to present new or divergent thinking (7, line 6). This leads to two major effects.
It fosters groupthink (Janis): blinkered thinking (in the absence of new information), a
sense of invulnerability and rightness (in the absence of challenge), aggressive defence
of the groups decisions/views (eg 7, line 20) and increasingly unquestioned, risky
decision-making. We see this effect in M&S over Greenburys reign, contributing to the
1999 crisis (10, line 13ff) and the question is whether it is occurring again under Rose
(16, line 41ff).
It hampers organisational learning and change, because it does not encourage divergent
thinking or critical appraisal of leadership effectiveness. This is exacerbated by the
tradition of internal leadership appointment: no fresh eyes on the organisation and its
leadership (until Stuart Rose). Note Roses leadership acumen in affirming past
leadership in such a way as to nevertheless create impetus for change (12, line 17).
Gives unchecked authority to leaders who are poor strategic thinkers: arguably the case
with Salsbury (10, line 24ff; 11, line 2ff).
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LEADERSHIP BY M&S
In relation to suppliers
M&S generally appears effective in its leadership of suppliers, through:
Intentional monitoring and reporting on quality and ethical compliance (5, line 43)
A mixture of direction and support (5, line 41ff; 14, line 17ff)
Using its buying power strongly (eg to persuade suppliers to raise discounts, off-shore
production) although you may find Salsburys approach somewhat risky and counterproductive (if not less ethical), terminating or alienating key suppliers (10, line 31ff, 39ff).
Using commercial incentives to motivate suppliers (12, line 29)
Using interpersonal contact, leadership and influence (eg by Greenbury and Rose)
The main influencing styles relevant in supply chains are:
Exchange: commercial relationships of benefit to both partners: negotiation of terms,

reciprocal rights and obligations; the use of economic/commercial incentives and sanctions
Consultation: particularly in more developed collaborative or partnership relationships
Legitimating: appealing to agreed standards, rules, policies and targets, contract terms,
international regulations and so on.
In relation to customers
In relation to consumers, M&S uses high market mediation influencers through the marketing
mix: advertising (13, line 40ff; 14, line 45ff), branding (particularly strong: 13, line 33ff); sales
promotions (13, line 30) and customer loyalty programmes; web advertising and sales (15, line
20); and so on. This influence is used to secure sales and customer loyalty, and also commitment
to eco goals: Plan A includes customer pledges of commitment.
Customer communication typically uses a wide range of influencing tactics: rational
persuasion (eg 16, line 5, 9); inspirational appeal (eg engageing branding 13, line 38, 42;
celebrities 14, line 48; Plan A 16, line 19); consultation (eg customer feedback, market research 14,
line 20); and exchange (eg sales promotions 13, line 30 and loyalty incentives).
Note that not all M&Ss influencing attempts are successful (eg 10, line 14, 27), and that
influencing consumers may be increasingly difficult, due to growing consumer empowerment
and the erosion of brand loyalty (Lewis & Bridger).
In relation to business and the retail sector
M&S exercises referent power (French & Raven) as a leading retail brand, employer and
organisational success story: other players may seek to emulate it.
M&S now intentionally seeks industry leadership in CSR/eco values (16, line 4, 23): see our
discussion of CSR for details, since this could well form an exam question in its own right.
As an icon, major player and market leader in some segments (eg womenswear), M&Ss
performance affects market confidence and share prices throughout the sector (3, line 20ff)
M&S leaders are influential experts in their own right: eg Greenburys appointment to chair
the corporate governance report that bears his name.
You might like to contemplate a possible exam question such as: How can M&S use its
influence with key stakeholders to gain support for and involvement in its Plan A initiative?
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SECTION 20
Management Succession
Management succession is perhaps too narrow an area of focus for a question on its own, but it
is identified as a recurring issue in the case study, with ramifications for leadership and
corporate governance. So you might like to think about the following.
Succession planning means having a process for identifying potential leaders and
grooming them through career, skill and personal development so that when the current
leader is ready to leave/retire, there is an appropriate candidate to replace him (or her).
This is a form of risk management or contingency planning, minimising the risk of:
Traumatic, adversarial leadership transition (eg Greenbury > Salsbury: 10, line 14ff, 21)
Hurried/unevaluated appointments (M&S was lucky with Stuart Rose! 12, line 4)
Difficulty under a poor or unpopular leader, while searching for a successor (11, line 2)
Uncertainty over succession, leading to political in-fighting (eg under Greenbury 9, line
46 but possibly a risk now, under Rose 16, line 31ff) or loss of confidence
Leaders taking over insufficiently prepared or developed (perhaps the case with
Salsbury?) or with insufficient internal support (perhaps the case with Holmes?)
Note also that lack of planned succession creates corporate governance problems. Rose
became chairman to guarantee leadership continuity, but there was no obvious director to
replace him as chief executive breaching the code of corporate governance by leaving him
in both positions [>> Section 22]. This creates the risk of one individual having too much
power, which contributed to disaster under Greenbury (16, line 39ff).
SUCCESSION PLANNING AT M&S
In the early years, shrewd succession planning (4, line 34) had ensured continuity of
leadership, with a particular view to retaining family ownership (valued by the corporate
culture) and brand/values continuity.
Greenbury was an internal promotee, with broad experience in buying roles. One would
probably argue that he was a good choice, although he could perhaps have benefited from
grooming in areas (eg international markets and strategic leadership) the challenges of
which he perhaps underestimated. Without plans to develop a successor (8, line 19), there
was uncertainty and political conflict: despite the identification of an heir apparent in
deputy chairman Keith Oates, which itself created tensions (8, line 21; 10, line 1), Greenbury
gave the chief executive role to Salsbury (possibly in an attempt to retain control, 10, line 7).
This resulted in further tensions and distraction (10, line 9ff), and a traumatic and hostile
leadership handover (10, line 19ff).
The period 2000 2004 was arguably too short to allow coherent development planning:
there was a need for leadership and strategic continuity to recover from the 1999 crisis,
restore stability and establish new direction. However, continuity was impossible to
establish, due to Salsburys poor performance (10, line 44) and lack of confidence in Holmes
(11, line 21, 44). Note the role of the chairman and non-executive directors in these decisions:
a potentially reactive and subjective influence, which would be checked by clearer
succession processes.
74
M&S appears to have relied on happy coincidence to find Stuart Rose in a hurry (once it
was decided that Holmes had to go: 12, line 1-7). You might argue that the period 2004-2008
is again too short for meaningful succession planning, given the need to recover from
traumatic leadership transitions and undigested change. However, Rose clearly recognises
that future successors need to be identified early, leaving time for grooming and career
development path planning (16, line 29-26). (This is a matter of report and rumour: we dont
know if there is greater clarity within M&S.) You might also note that Rose personally
worked hard to avoid a hostile or defensive leadership handover: unlike Salsbury, he
neither criticised nor sought deliberately to overturn the strategies of his predecessor.
(Compare 10, line 20ff with 12, line 17ff.)
INTERNAL PROMOTION V EXTERNAL RECRUITMENT
The rationale for internal promotion is explained in the case: the need for leaders to
understand the company and its culture (and the lead time for an outsider to develop this
understanding); the security of having a known entity leading the company (and the risk
of incompatibility with an outsider); the benefit of continuity, allowing the company to
build on past success, preserve its brand values and maintain stability (the companys
cultural preference) (6, line 8-12)
The potential drawbacks of internal promotion, however, can also be seen from the case.
The organisation has low appetite and capabilities for change and learning, perhaps because
its leaders have grown up within the prevailing culture and skills sets. There is no
opportunity for fresh blood: fresh viewpoints, perceptions and competencies arising from
exposure to other markets or organisations. This may have hampered M&Ss ability to move
beyond its UK-centric supply chain, long-cycle/high-volume purchasing, increasingly oldfashioned brand and merchandising techniques. It lacked leadership expertise in
international market entry, agile/global supply.
Stuart Rose is a break from tradition. Although he had a 17-year career with M&S, he had
also obtained wider experience in other retail organisations (including niche fashion brands)
and experience of executive/strategic leadership (as CEO of Argos and Arcadia) (11, line 2737). He therefore brought fresh eyes, as well as familiarity, to the business, which enabled
him to: establish trust for initiating change (12, line 18); identify and tackle entrenched
problems (13, line 2ff, 33); exploit fresh talent from outside the company (Steve Sharp and
Kate Bostock); and explore new options such as internet sales and Plan A.
MANAGEMENT DEVELOPMENT AT M&S

It may also be worth noting that M&S has traditionally prized and developed broad experience
in its leaders and managers: Greenbury had wide experience in buying roles (6, line 36), as did
Rose (11, line 28-30). Wide experience is arguably valuable at the leadership level: you might
like to think about the implications of the choice of Bostock (merchandising background) or Ian
Dyson (finance and operations director) as potential successors to Rose.
At lower levels, M&S has traditionally rotated buyers around the business to give them broad
experience. (This was also part of a responsible HR policy, as delayering had removed avenues
for upward career development: sideways transfers became a way of offering career
development and variety.) Supply Management (31 July 2008) noted that Stuart Rose had ended
this tradition, making purchasers develop deeper experience in their specialist markets.
75
SECTION 21
Change Management
The case highlights change over M&Ss history (and particularly the difficulties of change for a
traditional bureaucracy), and major change programmes initiated by Greenbury and Rose. You
may well get a question asking you to evaluate the drivers of change, or the methods and
effectiveness of change management, at some of the key periods of change for the organisation.
(If youve been inclined to recommend any strategic changes for M&S, you should also be
prepared to recommend a change management plan for introducing them: such questions have
been set in recent case study exams.)
FORCEFIELD ANALYSIS
You might start with a forcefield analysis (Kurt Lewin) to identify factors in the situation which
will support or resist change: driving forces (for change) and restraining forces (against change
or for the status quo). Strategic and tactical options can then be selected to add or strengthen
driving forces and remove or weaken restraining forces.
Our analysis of the key elements of M&Ss overall forcefield is as follows. You may be asked to
focus on the forces for a particular change (such as Plan A, supply chain change or international
market entry) or a particular period of M&Ss history (eg the drivers for change faced by
Greenbury or Rose when they took leadership). Add or select forces accordingly
Current state
Preferred state
Driving forces
Restraining forces
Fresh visionary leader
Force of tradition: low change appetite
Crisis (eg 1999 collapse)
1999 and transitions: need to consolidate
Threat of recession (1991, 2008)
Cost of change, given recession threat
Emerging supply/retail markets

and footholds for entry/devlpt
Lack of competencies eg for global

supply, agile buying, portfolio planning
Competitor moves to advantage

(eg global/agile supply)
Lock in to existing supply relationships

and purchasing systems
Identified problems (eg overstocking, portfolio gaps)
Supply chain rigidity, UK-centricity

Lack of stakeholder support for change
Consumer demand for eco-retail
Lack of PESTLE analysis
Identified PESTLE factor change
Group think discourageing challenge,

learning, criticism of status quo
Identified ageing/vulnerability
of core brand(s)
Cultural unknowns of new retail

markets and product areas
Shortening fashion trend cycles

and consumer fickleness
Need to protect brand identity, cohesion
Capital available for investment
Past mistakes > risk aversion
76
From this analysis, we can see that in general, M&S has had a greater balance of restraining
forces than drivers accounting for its slowness to change and follow competitors in changing.
We know from the case that M&Ss general appetite for change is low (eg 7, line 17), and that
tradition is a recurring rationale for many of its policies and practices. The stronger driving
forces are fairly reactive: that is, they drive change through disruption or dissonance to the status
quo (the identification of problems or crises), rather than representing proactive forces for
change (such as a new or visionary leader). Note in particular that the burning platform of
crisis is explicitly seen as a positive force for change under Roses leadership: preventing M&S
from relying on past solutions, and forcing people to unite and act decisively in order to
survive. (You might like to think why it did not represent such a positive force under Salsbury.)
However, some of the restraining forces are amenable to manipulation from within the
company: lack of competencies can be addressed by training; stakeholder support can be
obtained; PESTLE analysis can be instituted; and so on. M&S should be able to increase the
forces for whatever particular change it contemplates.
You might also use a numerically scored technique, giving each force a score (on a scale of 15,
say). You could then more accurately evaluate the balance of the forces for and against change.
If you were analysing the proposed investigation of new retail markets, say, you might add +2
to the score for cost but reduce the score for cultural unknowns and increase the score for
emerging supply markets. This would add to the total driving score and lower the
restraining score giving preference to change.
MODELS OF CHANGE MANAGEMENT
You might also use a model to structure your recommendations for change management, or
appraisal of M&Ss change processes or change agents (filling in the details as appropriate).
Planned change: unfreeze, change, refreeze (Lewin)

M&S may have to unfreeze existing restraining and driving forces (such as tradition,
supplier rigidity/complacency, old brand values) which preserve equilibrium. The need
for change will have to be clearly conveyed, and resistance brought into the open. Old
habits and complacencies will have to be challenged. Rose is particularly good at this:
Greenbury, perhaps less so, because of his failure to confront resistance and questioning.
M &S will then have to introduce imbalances which allow the driving forces to outweigh
the restraining forces: recruiting a new marketing or womenswear director, say, or
offering incentives for shortened lead times.
The final stage is to refreeze the forces, to hold the new equilibrium in place, through
consolidation or reinforcement of the new behaviour: eg buyer training, the alteration of
policies and procedures, rewards and acknowledgement of positive changes and so on.
Eight-step model of transformational change (Kotter). You might prefer to use this
model. You might like to try apply this framework to recommending a change
programme for the roll out of Plan A, for example.
1
Establish a sense of urgency and prioritise change objectives based on market and
organisational imperatives (12, line 14, 37)
Form a guiding coalition of influential stakeholders (12, line 15; 16, line 1)
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Create a compelling vision for change: specific strategic intent, emphasising

response to challenges/opportunities (12, line 37; 16, line 4)
Communicate the vision as widely and clearly as possible: eg through staff

meetings, stakeholder communications (eg 12, line 15, 23, 26, 31)
Empower people to act on the vision by removing cultural, technological and

structural obstacles (13, line 11, 14, 30, 33; 14, line 18, 20, 27)
Plan to create short-term wins which foster momentum and buy-in: eg recognition
for participants (eg 13, line 45; 14, line 35), visible improvements (eg 12, line 44; 13, line
32, 38; 14, line 30)
Consolidate improvements to produce further change, eg HR development planning

(14, line 27; 16, line 33), next-stage change planning (15, line 47).
Institutionalise new approaches: embed in culture, procedures and HR systems, eg

procedure manuals, supplier/customer feedback-seeking, staff appraisal
Incremental and transformational change

Incremental or evolutionary change is often proactive, building on the status quo in small
steps over a long period of time. Since it requires only realistic, small operational changes,
it lends itself to bottom-up implementation (eg via suggestions schemes, quality circles
and supplier- or buyer-led improvement plans). It is effective for building up
organisational learning and competencies in response to ongoing patterns of gradual
change. From this description, you might consider:
o Whether Greenburys or Roses change programmes can be categorised as incremental
o Whether M&S would have been less traumatised by the need for change if it had
learned how to make small-step, bottom-up changes in response to ongoing
environmental changes and suggestions instead of waiting until they reached the
point of crisis or competitive disadvantage point
Transformational or revolutionary change is change at a fundamental level and on a
significant scale. It is often a reactive approach, seeking to overthrow the status quo over a
relatively short period of time. It requires discontinuous, sweeping change across existing
structures and systems, and can only be implemented from the top down, by strong vision
and leadership. It is effective where the status quo has become dysfunctional: a response to
disruptive environmental change, crisis or the need for new paradigms. From this
description, you might consider:
o
Whether Greenburys change programme was sufficiently transformative, given the

increasing realisation that the status quo was becoming restrictive and dysfunctional
Whether Roses recovery programme can be categorised as transformational
What are the risks and challenges of transformational change, and how will M&S
need to take these into account in proceeding with Plan A (16, line 5ff)?
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THE ROLE, STYLE AND EFFECTIVENESS OF CHANGE AGENTS

Review your notes (or use the Passnotes for Leading & Influencing and/or Strategic Supply Chain
Management) on:
The role, skills and attributes of change agents.

o
Crainers seven skills for manageing change: manageing processes (not just content);
manageing strategy; manageing personal development; project management;
interpersonal skills; leadership balanced with flexibility; and manageing conflict. What
skills and attributes do Greenbury, Salsbury, Rose and Bostock have for driving change?
How effectively do they tackle change tasks such as vision articulation, stakeholder
communication and influence, confronting resistance, risk management, perseverance,
and consolidation/reinforcement?
A number of different groups may have strategic change roles: strategic leaders, middle
managers, change agents (individuals or teams appointed and empowered to drive a
change project) and external change agents. To what extent has M&S availed itself of
these various change resources?
Change management styles: eg Johnson & Scholes (education/communication,

collaboration, intervention, direction, coercion) and/or Dunphy & Stace (coercion, direction,
consultation and collaboration). Which of these styles were used, and how effectively, by
Greenbury, Salsbury, Rose and Bostock? Which style might be most appropriate?
Collaborative/
Consultative style
Directive/
Coercive
style
Incremental change
Participative evolution strategy
Use when:
Minor adjustments required
Time for participation
Key interest groups favour change
Transformative change
Charismatic transformation strategy
Use when:
Major adjustments required
Little time for participation
There is support for radical change
Forced evolution strategy

Use when:
Minor adjustments required
Time for participation

BUT
Key interest groups oppose

change
Dictatorial transformation strategy

Use when:
Major adjustments required
No time for participation
No internal support
BUT
Change necessary for survival
The results of influencing and change management attempts: resistance, compliance

and/or internalisation/commitment. Which of these results were obtained by Greenbury,
Rose and Bostock? (Note the risk of pseudo consensus or false commitment resulting in
underlying resistance and compliance from the culture of deference that grew up around
Greenbury.)
The use of external change agents: whether newly appointed directors (like Sharp and
Bostock) or external consultants (as under Salsbury). What are the advantages and
disadvantages as illustrated by the case of using such change agents?
79
SECTION 22
Corporate Governance
Corporate governance doesnt explicitly appear in the syllabuses covered by the Case Study
paper, as far as we can see, but it is an issue clearly raised by the case (7, line 11-24; 10, line 6; 16,
line 27ff). An obvious area for a question here is to argue the case for and against keeping the
roles of CEO and Chairman separate, using examples from the case study. Just in case
CORPORATE GOVERNANCE
Corporate governance is the system by which organisations are directed and controlled
(Cadbury Report). It provides a framework for an organisation to pursue its strategies in an
ethical and effective way from the perspective of all key stakeholder groups, and particularly
addresses the need to ensure that directors use their power in the interests of shareholders, as
agents appointed to run the business on their behalf.
The Cadbury Report (7, line 11ff; 10, line 6; 16, line 40ff)
The Cadbury Committee made recommendations and created a Code of Best Practice, based on
openness, integrity and accountability, in a number of areas, including:
Board of directors. The report stressed the importance of the board meeting on a regular
basis, retaining full control over the company and monitoring executive management. There
should be a clear division of responsibilities at the head of a company, with no one person
having complete or unfettered power. Generally this would mean the posts of chairman and
chief executive being held by different people. (Chairmen are primarily responsible for the
working of the board and should be able to stand sufficiently back from the day-to-day
running of the business to ensure that their boards are in full control of the companys
affairs and alert to their obligations to their shareholders.)
Non-executive directors. The report saw non-executive directors as important figures

because of their independent judgement (12, line 1). Where the role of chair and chief
executive are combined, it is essential to have this strong independent element.
Executive directors. The report contained provisions about the length of service contracts
and disclosure of remuneration, which were developed further in the Greenbury Report.
The separation of chairman/chief executive roles is clearly of most relevance to the case.
The Greenbury Report (8, line 31ff; 9, line3)
The Greenbury Committee considered the issue of rewarding executive directors, and made
recommendations to improve accountability, transparency and performance, including: the
setting up of a remuneration committee of non-executive directors to determine reward policy
and awards; reporting on remuneration policy (and notification of directors service contracts
with notice periods longer 12 months) within the annual accounts; ensuring that performancerelated incentive schemes should balance the interests of directors and shareholders. It is
difficult to see the relevance of these recommendations to the case.
80
The Stock Exchange Combined Code

The recommendations of Cadbury and Greenbury (and also the Hempel Report) were merged
into a Combined Code I 1998, with which companies listed on the London Stock Exchange are
required to comply. This is what raises a genuine compliance issue for the case (16, line 40).
The Code states that there are two leading management roles: running the board and running
the company. A clear division of responsibilities should exist so that there is a balance of power,
and no one person has unchecked powers of decision. Combination of the roles of chairman and
chief executive should be justified publicly. There should be a strong and independent body of
non-executive directors with a recognised senior member other than the chairman.
M&S COMPLIANCE ON CORPORATE GOVERNANCE
If you are interested in further reading on this, we recommend that you skip the Cadbury
Report (mentioned in the Further reading list) and go straight to:
www.annualreport.marksandspencer.com/governance/relations
www.annualreport.marksandspencer.com/governance/board
These are sections of M&Ss 2008 Report and Accounts which declare how M&S has complied
with each of the corporate governance provisions, and a link to a special Corporate Government
Statement on why it has departed from the Code. (We will summarise its arguments in
presenting a more general case, below.)
ARGUMENTS FOR ROLE SEPARATION
The importance and particular role of the chairman in manageing and empowering the
board, and the need to stay separate from the day-to-day running of the company in order
to do this effectively.
The need to avoid placing unfettered power in the hands of any single individual (16, line
42), which may result from a combined chair/chief executive (unless there is a strong nonexecutive element on the board, to balance power).
M&Ss own experience of the disadvantages of overly strong, unchecked power in the
hands of Greenbury (16, line 39): development of groupthink, risky decision making, lack of
board development, lack of divergent/new views for strategic change [>> Section 19 for
details]
Potential for an individual with unchecked power to exploit that power unethically to the
detriment of shareholders and other stakeholders (although there is no suggestion that this
is the case at M&S)
Compliance with the Stock Exchange Combined Code, avoiding reputational damage and
shareholder conflict for failure to do so. (This has surfaced, beyond the case study period,
with significant shareholder opposition to the proposal to re-elect Rose as chief executive at
the 2008 AGM.)
Demonstration that M&S is able to learn from past mistakes (16, line 43), take on board
divergent information and confront changes to strongly held beliefs (eg that the division of
roles is business school rubbish: 7, line 24.)
81
ARGUMENTS FOR A DUAL OR COMBINED ROLE
There is no necessary difference in the role of chairman and the role of chief executive: the
division between long-term/strategic and short-term/day-to-day is not borne out in
organisational practice (7, line 20ff). There is no reason not to have an executive chairman
(which is what M&S has proposed).
There is a need for continuity of leadership to consolidate after recent leadership changes,
carry through crucial recovery strategies and push forward strategic plans (such as Plan A)
at the point at which the governance issue arises (for both Greenbury and Rose).
The primary concern of the board is the success of the enterprise. Focus during periods of
significant trading uncertainty (such as the wake of the 1991 recession and the threat of the
2008 recession) should be on business performance, rather than leadership issues.
The combined role is a way of streamlining executive management structure and saving
extra remuneration costs.
There is no available successor in the chief executive role in the immediate future (for either
Greenbury or Rose): a combined role buys time to groom an internal successor (which is
M&Ss preference for various sound reasons: 6, line 8ff).
Exceptional circumstances:
o
Greenbury was an example of a combined chairman and chief executive already in place
and securing a remarkable turnaround in the companys fortunes (6, line 25, 42) at the
time when the Cadbury recommendations were made in 1992: it would have been
disruptive and counter-productive to separate his role, given the need for leadership
continuity to see the recovery strategy through, and the lack of time to have developed a
succession plan.
Similarly, CEO succession was not a priority issue in the early years of Stuart Roses
tenure, with the need to implement a profound recovery programme. So options for
board succession are now constrained: no available candidate would be ready to take
over soon, and the challenges M&S now faces (with the threat of recession) make it
reluctant to undergo the risk and disruption of recruiting a CEO from outside. For
continuity of leadership, and to see through major strategic initiatives such as Plan A,
Roses appointment needs to be secured for the next few years (16, line 28) but with a
change in the emphasis of his responsibilities (ie by making him chairman) in order to
clear a path (make headroom: 16, line 33) for a future chief executive appointment.
CONTROLS WHICH M &S MIGHT PUT IN PLACE TO MITIGATE CONCERNS

(Actually put in place by M&S, as announced in the 2008 Governance Statement):
A limit put on the combined chairman/chief executive appointment eg until July 2010
The appointment of a Deputy Chairman and a clear specification of the duties of Chairman
and Deputy Chairman, to ensure balance of power
The recruitment of non-executive directors, as required, to ensure a majority of independent

directors on the board, and increased responsibility for the Group Finance and Operations
Director, to provide checks and balances on executive power
Annual voting by shareholders on Roses appointment as a director, starting at the 2008

AGM.
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SECTION 23
CSR, Ethics and Sustainability: Plan A
This is quite likely to be the subject of a question, given the importance of Plan A as a strategic
initiative. It may feature in connection with other topic areas, eg:
Plan A as an exercise in strategic/transformative change management [>> Section 21]
Plan A as an exercise in strategic leadership: a unifying vision which after a period of

leadership transitions and piecemeal problem-solving draws all stakeholders into
collaboration in pursuit of an overarching, compelling, global/urgent (There is no Plan B)
goal (16, line 9; 19ff)
Plan A as a differentiating strategy, focusing on one key area in which consumers may not
be cynical, demanding and driven by short-term wants, but which might act as a magnet for
increasingly rare brand loyalty (Lewis & Bridger)
However, it may also be the focus of a question in its own right, taking an angle such as:
Whether ethical and environmental responsibility have a genuine impact on business, or

whether it is simply to be viewed as a marketing opportunity (15, line 40ff). In other words,
what is the ethical and business case for CSR in general, and Plan A in particular?
What impact Plan A is having (or is likely to have) on all areas of M&Ss operations, (and/or
on its supply chain management and/or on its suppliers and other stakeholders), and how
this impact can be managed.
You should be prepared to make introductory remarks about the definition of CSR, ethics,
sustainability and environmental responsibility; and about their growing profile in the public
and private sectors, in terms of both regulation and stakeholder awareness. You should also be
ready to state the business (and marketing opportunity) case for ethical and environmental
responsibility. This should all be familiar from your studies in Strategic Supply Chain
Management and other modules.
GENUINE IMPORTANCE OR MARKETING PLOY?
Key business case points:
Avoidance of compliance risk and penalties for non-compliance

Voluntary industry CSR may avoid more onerous legislation/regulation (although M&Ss
targets are about as onerous as they get!)
Enhancement of corporate image and brand profile, with increasing consumer awareness of
green, ethical and CSR issues.
Opportunity to unite staff, supply chain and other stakeholders around CSR (and especially
CSR leadership) as a compelling shared vision
Positive employer brand and fair partner brand: ability to attract and retain quality
employees, investors, suppliers and business partners
Risk of political or consumer opposition and reputational damage for ethical/CSR breaches
Sustainability of resources, communities and supply relationships which the organisation
requires to operate
You might also like to think about this specifically in relation to the retail food and clothing
sectors. In addition to the above business case arguments, you might add:
83
The lack of legal protection given to workers in low-cost countries, where mass market
clothing is typically manufactured, placing ethical and public opinion pressure on retailers
to use their influence with manufacturers
Demonstrations outside the M&S stores by Unite trade union members, arguing that buying
and importing meat cheaply from countries such as Thailand and Brazil is affecting labour
conditions for low-paid workers in the UK (Supply Management, 28 Feb 2008)
The responsibility for public health and hygiene arising in relation to food products
The potential for Fair Trade branding in relation to both clothing and food/drink products
(eg Fair Trade cotton and coffee 16, line 17), and the underlying ethics of Fair Trade (fair
prices to small rural suppliers).
Accusations that clothing manufacturers exploit families by building fashion-based

obsolescence into their lines and encourageing over-consumption
Public and consumer group scrutiny about the way food animals are reared (eg free range,
cruelty free, hormone-free 16, line 19), crops are grown (eg genetic modification, use of
pesticides, clearance of rainforest for agricultural land, monoculture crops destroying soil)
and so on.
Extensive logistics/distribution networks, domestic and overseas, raising the organisations

carbon footprint (impact of carbon emissions thought to contribute to climate change)
through the use of fuels and emissions, especially air and road travel (16, line 15, 16).
Note that there is a challenge of communicating genuine CSR and ethical values widely, to
secure stakeholder buy-in and co-operation and using consumer approval to help invest in
your efforts to save the planet! without looking as if you are only doing it as a marketing ploy.
M&S tackles this by demonstrating:
Significant investment (16, line 3)
Integration of changes through all areas of the business (15, line 39, 43; 16, line 6) not just
marketing, branding and communications
Willingness to be accountable for performance: reporting regularly (via the website and
annual How We Do Business report) on progress against Plan A targets.
However, the marketing opportunity is still there to be exploited. Note the following comments
in an article in Supply Management, 2 March 2006 (Ethics and the purchaser, by Rosey Hurst).
According to a 2006 survey commissioned by Marks & Spencer, 90% of consumers think retailers should
ensure their products are manufactured in a fair and humane way and 31% said these considerations
had actively influenced a purchase decision.
Companies aware of these trends have been keeping ahead of the game for many years by working on
monitoring and improving conditions in their supply chains. But this has been done mainly behind the
scenes with the focus on brand protection rather than promotion. The M&S Look Behind the Label
campaign marks a fundamental change. It informs customers about how products are made, not in the
recesses of its CSR report, but in the national media, and in store windows. The way its products are
made is now a central part of its brand.
The shift presents purchasers with several challenges. They need to develop the core competencies of
supply chain professionals to include ethical considerations in purchasing. They also need to develop the
capacity of the supply base Will adherence cause costs to rise? Will consumers pay more for their
ethics?
84
DETAIL, IMPACT AND EVALUATION OF PLAN A

Given that only the broad Plan A summary (Table 3, page 20) is given in the case, it is difficult to
see how a question could be set at a more detailed level, without placing undue emphasis on
background reading.
You might simply work through each of the Pillars listed in Table 3 (Climate Change, Waste,
Sustainable Raw Materials, Fair Partner and Health), plus the hints given in the body of the case
(16, lines 14-18) considering:
What kinds of changes M&S would need to make to its operations and supply chain
management
What kinds of changes its suppliers will be called upon to make
What contribution the buying function might make to the plan.
If you really want to be well prepared, go to www.plana.marksandspencer.com. You can

download a more detailed summary of the five pillars (About Plan A) and progress (M&S
Progress) and even the full list of 100 steps/targets (The Plan), which should furnish you with
plenty of real-life material for a question on How might Marks & Spencer go about tackling
each of the five pillars? or How might Marks & Spencer go about measuring its progress?
If you havent got time or access, here are some examples:
Climate change: eg reducing energy-related CO2 emissions from stores and offices;
supporting farmers who are investing in small-scale renewable energy production; piloting
eco-stores; monitoring the carbon footprint of the food business; and encourageing
consumers in more eco-friendly washing of clothing products.
Waste: eg engageing customers in reducing carrier bag usage and recycling clothing;
reducing use of packageing, increasing use of recycled materials; improving recycling rates
for construction waste and coat hangers. (The target is to send zero waste to landfill from
M&S operations.)
Sustainable raw materials: eg promoting animal welfare in fashion and food production (eg
implementing lower stocking densities for chicken); increasing use of Fairtrade and organic
cotton and recycled polyester; increasing sales of organic food.
Fair partner: eg supplier benchmarking; responsible buying guidelines; use of small

suppliers; buying pledges to support farmers (eg guaranteed set price for milk); expansion
of Fair Trade foods and cotton; partnering with charities; and increasing awareness of
environmental and international community issues among franchise partners and customers
Health: eg removing artificial colourings and flavourings from 99% of food products;
reducing salt levels; introducing front-of-pack FSA traffic lights; and training employees as
healthy eating assistants.
M&S is appointing and training Plan A Champions in stores and offices. It is involving
stakeholders, including employees, suppliers and customers (using pledges of commitment to
each of the five pillars) in Plan A.
85
ETHICAL ISSUES IN M&SS PRACTICES

If asked to evaluate M&Ss ethical commitment, in connection with Plan A, you might bear in
mind that the case study author is clearly a fan (15, line 43). However, you might also note:
The closure of unprofitable stores in less affluent areas (7, line 50), which might be a social
access and equity issue
Profit margins: given profits rising by 87% on sales increases of 35%, one wonders which
stakeholder group was forced to subsidise shareholders windfall (9, line 10). Were cost
savings passed on to customers? Were gains shared with supply partners?
Staff cuts (6, line 18; 10, line 35). This is a justified business practice (particularly in a large
bureaucracy in a time of recession), but it puts pressure on ethical and responsible
management of redundancies. (Outside the case, The Times reported in August 2008 that
M&S had cut the redundancy benefits available for staff by up to 25%.)
Supplier margin squeezing and short-notice termination (10, line 30ff): to what extent might
this be seen as a social responsibility or fair partner issue, beyond the commercial
rationale?
Non-compliance on corporate governance, causing concern to some shareholders.
86
SECTION 24
Risk Management
In this Section, we give an outline risk assessment for M&S, and suggest some general methods
by which identified risks could be managed or mitigated. This is potentially a major underlying
area of the case study, and lends itself well to an exam question. Some of the strategies pursued
by M&S over the years seem to have been particularly risky, raising questions about its risk
assessment and management. You might be asked to assess M&Ss risk appetite, identify
particularly risky strategies and suggest how those risks might have been more effectively
assessed and managed.
Ensure that you take relevant notes/texts with you into the exam: the Profex Passnotes for Risk
Management and Supply Chain Vulnerability contain useful checklists on the risk management
cycle, specific categories of risk and mitigation options, for example.
THE RISK MANAGEMENT CYCLE
IDENTIFY
key risks
MONITOR/
REVIEW
Identify/manage
INFLUENCES
on the risk
outcome
ASSESS
probability and
impact of risks
Formulate
STRATEGIES
to manage the
risks
Allocate
ACCOUNTABILITIES
for manageing the

risk
THE RISK MANAGEMENT PROCESS

Risk
identification
Monitoring,
reporting &
adjustment
Risk management plans

and resources
Risk assessment &

evaluation
(probability & impact)
Identification of
responses to risk
(4Ts & contingency
plan)
87
RISK ASSESSMENT FOR M&S

Risk appetite and exposure
Background reading suggests that Greenbury was well aware of the need to be cautious in areas
such as international market entry. However the case focuses on his later tendency to drive too
hard on too many fronts, and on the groupthink and risky shift in the executive team that left
risks unidentified and unchecked in areas such as:
Entry into international markets (which subsequently proved unprofitable due to

unforeseen exchange rate and other risk factors)
Over-investment in stock and capital renewal projects on the basis of overconfident sales
projections (which failed to materialise), causing the collapse of 1999
Termination or alienation of core suppliers, under Salsbury, which exposed M&S to supply
risk and re-sourcing risk
Engagement in international sourcing without the competencies or infrastructure to do so

competitively
Current risk management

If asked to recommend a risk management strategy, you might be interested in M&Ss actual
methodology, as set out in its 2008 Annual Report:
Every six months the board reviews the Group Risk Profile. This is supported by an ongoing process for
identifying, evaluating and manageing the significant risks faced by the Group.
As an integral part of planning and review, managers from each business area and major projects:
Identify the risks to their plans

Evaluate the risks using likelihood and impact; and
Document the actions being taken to manage those risks.
RISK ASSESSMENT
Again, rather than devise our own risk assessment and mitigation options, you might like to
look at M&Ss own assessment of principal risks and uncertainties for its business:
(annualreport.marksandspencer.com/governance/accountability). We reproduce the essentials here.
PRODUCT: We aim to provide a wide choice of great value, high quality clothing, food and home products,
which are all sourced and made responsibly.
Risk
Impact
Clothing
We fail to maintain clothing
market share through
growth of space and focus
on product in the face of
increased competition in
tougher trading conditions
Adverse effect on
financial results
Lost market share
and customer
loyalty
Examples of mitigating activities
New and better product, exploiting areas of opportunity

Tracking of customer perceptions of product
A supply base that enables future growth with emphasis
on best value and speed to market
New and better space offering to make clothing more

accessible to our customers
Store specific cataloguing and effective stock

management to put the right stock in the right stores for
our customers
Plan A initiatives, eg ethical sourcing
88
Risk
Impact
Food
We fail to deliver profitable
sales growth while
maintaining an innovation
gap over competitors
Adverse effect on
financial results
Lost market share
and customer loyalty
Continual product and technical innovation to maintain

competitive advantage
Continued emphasis on fresh food credentials
Independent quality assessment of key food lines
Tracking of customer perceptions of product
A supply base that enables future growth and further
strengthens our food credentials
Food more accessible to our customers through new
owned and franchised stores
Plan A initiatives, eg differentiated raw materials
PEOPLE: As we continue to grow our business and invest for the future, its important we keep strengthening our
team at every level from shop floor through to management.
Risk
We fail to attract, develop and
retain talent with the correct
skills and capability for
succession
Impact
Inability to develop
and execute
business plans
Competitive
disadvantage
New senior management structure in place

A focus on senior leadership development and
succession
Competitive reward packages
Buying Academies in head office and coaches in stores
Graduate recruitment and development
Employee communication
Tracking of employee satisfaction surveys
Tracking of customer perceptions of service
M&S DIRECT: We are further developing our M&S Direct business as an important part of our commitment to
becoming a multi-channel retailer.
Risk
We fail to deliver sales
growth by failing to meet
customer expectations
Impact
Adverse effect on
financial results
Lost market share
and customer loyalty
Capability to grow sales via new products and new

customers
A focus on improved order fulfilment and

customer service
INTERNATIONAL:
INTERNATIONAL We have ambitious plans to grow our International business through expanding our franchise
operation, entering into partnerships and developing wholly-owned businesses in emerging economies.
Risk
We fail to grow our
International business
successfully through
franchise operations,
partnerships or wholly-owned
businesses
Impact
Adverse effect on
financial results
Damage to brand
A focus on appropriate resource required to integrate

new ventures
New operational and financial processes in place to

support growth of International businesses
Strong relationships forged with key stakeholders
89
PLAN A: We launched our five-year eco plan in January 2007 to address challenges across five areas: climate
change, waste, sustainable raw materials, fair partner and health
Risk
We fail to deliver, measure or
communicate performance
against our Plan A
commitments
Impact
Lost stakeholder trust
and confidence
Damage to brand
Governance in place to achieve our commitments,

including a new Director of Plan A
Performance reporting further developed

Plan A integrated into day-to-day operation including
Plan A Champions throughout head office and stores
Open dialogue with stakeholders developing our mutual

understanding of the challenges we face
You might classify these (and additional) risks differently. For example, as:
Financial risks: eg exchange rate risks, fluctuating commodity prices, investment risk,
loan/gearing risk
Supply risks: including late/unreliable delivery; non-compliant materials or finished

product; impact on brand (reputational risk) of poor ethics/quality; internal /external
failure/quality costs; supplier insolvency or termination; re-sourcing risks
International sourcing risks: exchange rate risks; transport risk; cultural/legal differences;
quality/ethical standards; political risks; barriers to trade (eg clothing import quotas);
supplier learning curve; supplier selection, evaluation and monitoring
International market entry risks: exchange rate risks; transport risk; cultural/legal
differences; product/consumption differences; barriers to trade; learning curve; franchise
development risks (selection, relationship compatibility, control issues); direct investment
risk (entry/exit costs of set-up or acquisition)
Marketing risks: competitor initiatives and price/focus competition; new market entrants;
consumer switching; brand outmoding; product portfolio gaps; e-commerce risks (inability
to fulfil delivery expectations; entry investment cost; technology breakdown; impact on
store retail)
Operational risks: holding inventory of pre-demand production (risk of theft, deterioration,

obsolescence; cost of clearing); insufficient finished stocks (poor service levels, lost sales);
transport/logistical risk; worker health and safety
Environmental risks: PESTLE factor changes, threat of recession
Reputational risks: increased scrutiny as a result of Plan A; failure to meet Plan A

commitments; association with poor supplier quality/ethics; compliance issues over
corporate governance
HR risks: failure to maintain competencies as competitive needs change; lack of planned

leadership and management succession; reputational risks re staff cuts
90
SECTION 25
Financial Aspects
It is most unlikely that you will face a question on the financial performance of M&S. Such
questions have never been a feature of the Case Study exam, and the Level 6 module on Finance
for Purchasers is not part of the underpinning knowledge for this unit. Moreover, the case does
not provide enough detail for a sensible analysis. However, Table 1 in the Appendices to the
case contains some financial figures, so we have thought it worthwhile to probe a little more
deeply: see the table below. You may find it useful to refer to the data presented here in order to
make a point while discussing a question on strategic issues.
Year
Pre-tax
profits (m)
Sales revenue
(m)
Number of
UK stores
Net profit
percentage
Revenue per
UK store (m)
1975
81.8
721.9
252
11.3
2.86
1980
173.6
1,667.9
252
10.4
6.62
1985
303.4
3,213.0
265
9.4
12.12
1990
604.2
5,608.1
272
10.8
20.62
1995
924.3
6,806.5
283
13.6
24.05
1996
965.8
7,211.3
284
13.4
25.39
1997
1,102.0
7,841.9
286
14.1
27.42
1998
1,168.0
8,343.3
294
14.0
28.38
1999
628.4
8,224.0
294
7.6
27.97
2000
557.2
8,195.5
300
6.8
27.32
2001
480.9
8,075.7
303
6.0
26.65
2002
335.9
7,619.4
324
4.4
23.52
2003
677.5
8,077.2
336
8.4
24.04
2004
781.6
8,301.5
375
9.4
22.14
2005
745.3
7,942.3
399
9.4
19.91
2006
751.4
7,797.7
508
9.6
15.35
2007
965.2
8,588.1
520
11.2
16.52
91
The table takes the later years of Table 1 from the Appendices to the case and adds a couple of
columns to show the profitability of the company and its sales revenue generated per UK store.
By comparing this with the M&S timeline on page 11 of this text you can see how profitability
and revenue per store have varied during the leadership of different chairmen and chief
executives.
The Greenbury years show a steady increase in both net profit percentage and revenue per
store, climaxing in 1998 with a 14% net profit and more than 28m of revenue per store. This, as
it soon proved, was not sustainable: the disaster of 1999 shows net profit plummeting to just
7.6% of sales while revenue per store begins to show a steady decline.
This disappointing pattern continues and reaches its lowest point in 2002, when net profit was
just 4.4% of sales. At this point, under the leadership of Roger Holmes, the company was
looking very vulnerable to takeover. From then on, however, and most noticeably after the
appointment of Stuart Rose, there is a marked improvement. By 2007 net profit had climbed
back to 11.2% of sales. This is despite the fact that revenue per store has continued to decline. In
fact it is clear from the figures that Rose has thought it more important to extend the stores
network (from 336 UK stores in 2003 to 520 in 2007) than to maximise the revenue earned per
store.
92
SECTION 26
Marketing
It would be rather unfair to have a marketing question, since Marketing isnt a compulsory
module of Level 5 and therefore isnt, strictly speaking, underpinning material for this
module. However, just in case, the following are some pointers to think about.
MARKETING ORIENTATION
In the 1950s and 1960s we were a production-led business, where the product was pushed
and manufacturing was king. In the 1970s and early 1980s it was a product business where
the retailer was king. Now we always say: Buy what we sell, not sell what we buy because,
as we move through the 1990s, the customer is king. (Greenbury, quoted in Bower &
Matthews, p 13).
How far is this borne out by subsequent perceptions that M&S had (a) massively
overbought stock and not foreseen a dramatic downturn in sales (10, line 13); (b) alienated
its core customer segment (14, line 7); and (c) failed to identify customer needs (14, line 10,
21, 31)?
MARKETING PLANNING
How was there no current plan for the crucial Womens Clothing division, when Bostock
took over? ( (14, line 8ff) What kinds of planning should have been carried out?
MARKETING MIX DECISIONS

What is M&Ss total proposition in regard to: Product; Price (or value); Promotion
(marketing communications); Place (availability and point of sale); People (service); Process
(supporting sale and after-sale service systems); and Physicals (store dcor, staff/vehicle
livery etc)? What dilemmas does it face in mix decisions, eg about price/quality positioning
(6, line 17)?
BRANDING AND PROMOTION

What is branding? What were the core values attached to the St Michael brand (4, line 42);
why did this brand increasingly fail to engage a changing consumer market (9, line 22; 13,
line 5, 28, 38; 14, line 7, 20); and how did the new Your M&S change this brand positioning
(13, line 33ff; 14, line 15, 29; 15, line 3ff)?
What potential is there for brand stretch or extension, without fragmenting or diluting the
new brand identity? [>> Section 9]
What marketing communications techniques were used to revitalise the M&S brand? Think
about sales promotion (13, line 30); public relations (12, line 31); choice of advertising media
and messages (13, line 40ff; 14, line 44ff); direct marketing (15, line 20).
PRODUCT/MARKET STRATEGY
See our Ansoff matrix analysis and identification of M&Ss product/market strategy
options: [>> Section 9]
93
PRODUCT PORTFOLIO
The product portfolio (or mix) is all the items or lines/ranges a company offers for sale.
Products may play different roles within the mix: profit provider, niche filler, innovation
leader, flagship brand and so on.
What weaknesses are demonstrated in M&Ss product portfolio planning? Think about:
Maintaining sales and profitability of mature, flagship or cash cow products (14, line 7)
Planning for succession of new potential star (high-growth) products, as mature

products decline
Identifying gaps in the portfolio, where there is untapped consumer demand (eg Petite
sizes, Plus sizes, fashion items: 14, line 10)
Identifying products which can be leveraged to capture market segments (eg a maternity
range establishing a market for childrenswear, toys etc: 14, line 31ff).
DIRECT/ONLINE MARKETING
What are the advantages (to the customer and to the retailer) of marketing online? What are
the marketing uses of a website? What makes an effective retail website and how effective
is the M&S Direct site?
RELATIONSHIP MARKETING
Relationship marketing is a shift of focus from customer acquisition to customer retention
and loyalty. It uses relationship building techniques (multiple contacts, personalisation,
customised offers, two-way dialogue, loyalty incentives) to induce repeat purchases, higher
value purchases (up-selling) and additional purchases (cross-selling) over time, in order to
increase the lifetime profit potential of customers. How might M&S exploit such techniques?
How might M&S Direct (the consumer e-commerce site) help in this?
INTERNATIONAL MARKETING
[>> Section 11]
94
SECTION 27
Other Issues
Just in case, and if you have time, you might like to think about the following topics.
Performance measurement issues

What kinds of financial and non-financial KPIs might M&S use?
(If interested, see: http://annualreport.marksandspencer.com/about/kpis.html)
What are the dangers of over-reliance on financial KPIs, and in particular profit targets? (9,
line 9ff) Think about the pressure for short-term and risky thinking (10, line 3); the risks of
squeezing suppliers for extra profit (10, line 32, 40ff); and the way that excellent financial
results may disguise underlying problems, cause risk-taking through overconfidence, and
prevent underlying problems from being dealt with (8, line 5-6; 10, line 11ff). Similarly, what
might be the dangers of relying on external awards and accolades (eg 6, line 41ff; 9, line 47; 3,
line 39ff)? Might M&S consider moving to some kind of balanced scorecard approach, and
what would this look like?
Should targets be ambitious/challenging in order to motivate (9, line 9, 14) or realistic or
understated, in order to manage stakeholder expectations and enable short-term wins (12,
line 32; 14, line 40; 15, line 10)?
Human resource management

We mention this only because it is a major feature of most analysis and writing on M&S,
due to its famously enlightened staff welfare practices and non-unionised employee
relations and you are bound to come across description of this in your background
reading. We think it unlikely to feature in an exam question, however, because it is barely
touched upon in the case, except for a mention of staff cuts under Greenbury (an inevitable
sign of the modernisation of M&Ss HR policies, according to Bower & Matthews) and fresh
initiatives in buyer training under Bostock. It should be fairly safe to leave it there but if
youre interested, you could glance at M&Ss current HR policy statement:
http://corporate.marksandspencer.com/howwedobusines/our_policies/our_people
Conflict and negotiation

The tension between Greenbury and Salsbury, or the conflict with suppliers under Salsbury,
or potential stakeholder conflict over corporate governance issues, could conceivably be
considered as conflict management scenarios. You might like to think about the immediate
and underlying causes of the conflicts; what conflict handling styles the leader used or
might use (using the Thomas-Kilmann model); and how effectively the conflict was
handled. But there really isnt enough information to make this likely.
Similarly, the negotiation of cost cuts, off-shoring and higher discounts with suppliers (at
various points in the scenario) could conceivably be considered as a negotiation scenario.
You might like to think what negotiation approach was used, and how effectively, and what
the bargaining power and negotiating positions of the parties would have been. But again,
we would hope this would be unlikely
95
SECTION 28
Summary of Ancillary Background Reading
BAHANDA: THE ROCKY ROAD TO RECOVERY

Sundeep Bahanda is a retail analyst for Deutsche Bank. A google search discloses numerous
articles that he has written on M&S, but none (that we can find) with the above title.
BEVAN: THE RISE AND FALL OF MARKS & SPENCER AND HOW IT ROSE
AGAIN
We presume that this has been cited to show where the examiner derived the material for
the case, rather than as a suggestion for further reading. In its 2007 edition the book runs to
336 densely printed pages of text, and it would be quite impossible for most students to
think of reading it with the limited time available before the exam. It is best to assume that
the pertinent details are those that have been extracted by the examiner and presented in the
case, though we have occasionally referred to extracts from the text in this Analysis.
BOWER & MATTHEWS: SIR RICHARD GREENBURYS QUIET REVOLUTION

This is quite a useful article (although you have to pay a US $6.95 fee to download it from
Harvard Business School Press), giving a bit more background into M&S under Sir Richard
Greenbury before the underlying dysfunctions became apparent. There are sections on:
The Chairman (an appraisal of Greenburys strategic thinking and leadership); Marks &
Spencer Origins; Top Management Structure and Responsibilities; Marks & Spencer culture;
Personnel & Welfare; The Product Range; Buying; Relationship with the Supplier Base;
Merchandise Flow; Store Operations; Estates and Store Development; Financial Services (a
portrait of M&Ss product/market development thinking); and The Challenge of
International Operations and Expansion (helpfully looking at the European, Far East, North
America, and franchising markets).
We have included snippets of information we think most interesting in the text (referenced
as Bower & Matthews): up to you if you think you need more information.
THE CADBURY REPORT

The recommendations of the Cadbury Committee on corporate governance issues, including
board roles, non-executive directors, audit committees and reporting. This can be
downloaded free from the internet, but as far as we can see, the only relevant section for the
case is a paragraph recommending the separation of the role of chairman and chief executive
of a company: we have digested this in the text.
THE GREENBURY REPORT

The recommendations of the Greenbury Committee on directors remuneration. Again, this
can be downloaded free from the internet, but we really cant see its relevance to the case
study, other than as the output of a difficult period in Sir Richard Greenburys life and
leadership (8, line 30-47): we have digested the main recommendations in the text.
96
LEWIS & BRIDGER: THE SOUL OF THE NEW CONSUMER

This text contains just a single reference to M&S. The company is cited along with Levi
Strauss, Kelloggs, Woolworths and Coca Cola as paying insufficient attention to the
attitudes and aspirations of New Consumers. The authors thesis is that modern
consumers are a completely different beast from their predecessors. They are cash rich, time
poor. Where an old consumer was forced to accept every aspect of a purchase transaction as
dictated to him by manufacturers and suppliers, the new breed of consumers are
increasingly able to dictate not only what they buy, but how and where those purchases are
made. This puts increasing pressure on retailers such as M&S to maximise flexibility and
customer responsiveness. We have seen throughout this Analysis that this has been a
weakness of M&S, and one of the problems that Stuart Rose has sought to overcome.
MONTGOMERY MARKS & SPENCER

To be honest, we couldnt find the discussion paper as cited. The only close citation available
was Marks & Spencer (B) by Dianna Magnani & CA Montgomery (1991, revised 1994). It
deals entirely with the decision process for the acquisition of Brooks Brothers and King
Supermarkets in the US, under the chairmanship of Lord Rayner in 1988. Its chief interest for
the case is probably as an illustration of the direct investment method of market entry (as
opposed to franchising, which M&S later adopted). It illustrates the criteria used to choose
an entry vehicle: similarity of market size, apparent similarity of brand status and values,
potential to add M&S food outlets in Brooks Brothers department stores, and an existing
joint venture in Japan which might give M&S a learning foothold in Japanese retail and
Asian supply markets. It also identifies downsides: the extent of investment required in
store modernisation, the barriers to entry and the cultural shift required, eg to pioneer a
market in pre-packaged fresh foods. M&S went ahead with the acquisition despite these
risks. (Both companies were later sold, having proved unprofitable.)
THE MARKS & SPENCER WEBSITE

Packed with information about M&S, obviously, but (a) you need to be selective, as not all of it
will be relevant to the case, and (b) you need to be aware that this is stakeholder/marketing
communication, not objective analysis! We have highlighted particular links and pages that will
be of most use, in the text.
THE BBC WEBSITE
We arent sure why this is picked out: worth a browse for archived articles, but you could just
as well browse any of the national quality newspaper sites. (We have cited some Times Online
and Supply Management archived articles, for example.)
97

Case Study Analysis: Marks & Spencer (M&S)

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Case Study Analysis: Marks & Spencer (M&S)

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CASE STUDY ANALYSIS

Copyright abuse: IMPORTANT NOTICE

Introduction to the case

Tackling the case study exam

An overview of the business

Strategic planning: an overview

External environmental analysis: PESTLE

Stakeholder and competition analysis

Organisation structure, culture and resources

Corporate appraisal: SWOT analysis

Generic strategic options: Ansoff, Porter

Strategic direction at different periods of M&S history

Current strategic issues and options for M&S

Procurement and supply chain management issues

Procurement and supply chain issues: overview

Retail buying and supply chain strategy

Supply chain relationships and supplier management

Cost reduction and stock management

Other key issues raised by the case study

Leadership and influence

CSR, ethics and sustainability: Plan A

Summary of ancillary background reading

(3, line 2ff)

This means Page 3, lines 2 and following.

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The recurring issue of management/leader succession planning at M&S: the tradition of

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Change management: historical contributors to M&Ss low change appetite and

Performance measurement: what financial and non-financial measures M&S uses to

Marketing: identification and evaluation of the marketing strategies pursued under

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THE STRUCTURE OF THIS TEXT

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DURING THE EXAM

Use frequent headings, underlined neatly with a ruler.

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The case study focuses mainly on the clothing (womenswear) range.

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SUPPLY/VALUE CHAIN POSITIONING

THE RETAIL SECTOR

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STRATEGIES AND STRATEGIC DIRECTION

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Acceptability: Will the strategy be acceptable to key stakeholders (shareholders, directors,

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Opportunistic strategy: eg taking advantage of opportunities to acquire other retailers

Bottom-up or emergent strategy: eg Kate Bostocks successful buying mantra Every

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M&S apparently argued, in defence of controversial strategies, that it had no choice eg

TYPES OF QUESTIONS THAT MIGHT BE SET ON STRATEGIC THEMES

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Government responses to restore consumer confidence and support economic activity in

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Consumer/public ownership of M&S as a cultural icon, leading to expectations, scrutiny,

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Technology development creating potential to retail new technology-based products (eg

ICT supporting different distribution methods, eg internet, home-shopping, in-store

Business and contract law (impacting on buyer-supplier relationships, consumer