Case Study Analysis: Marks and Spencer

Case Study Analysis:

Marks and Spencer

“Marks and Spencer possesses all the 'O'-Advantages to expand into the new emerging economies.  What should be Marks and Spencer's specific international expansion strategy to maintain global presence and niche in the retail sector.”

Case Study Analysis: Marks and Spencer

Marks and Spencer (M&S) are a leading UK and international, multi-channel organisation that retail clothing, food and homeware, with a strong focus on delivering high quality goods for great value. M&S have 914 stores in the UK where there is a 58% to 42% split between food and general merchandise sold respectively, amongst their local stores earning them 5.4billion pounds for food and 3.9 billion pounds for clothing and homeware (M&S, 2016). This produced annual revenue from the UK of 9.3 billion British pounds in the 2015-16 financial year making up a majority of their total revenue (M&S, 2016). M&S are able to maintain competitive by focusing on quality and innovation, as well as a continuous dedication to working closely with their customers to ensure all aspects of its products and services meet their needs as a driving force for sales growth (M&S, 2016). In recent times, the Asian market has grown tremendously with significant economic and tourist growth in China and other neighbouring countries, which has seen many organisations flock towards Asia to conduct business (Palamalai & Kalaivani, 2016). Marks and Spencer should seize this opportunity to capture market share in Asia before they are no longer able to maintain global presence compared to other major retail organisations. Japan would be a suitable new destination for M&S to endeavour towards establishing a store in. Japan is a developed country with a GDP per capita that has been forecasted to increase until 2020, which could be a good indicator for an increase in their disposable income, which may lead to more sales possibilities (Statista, 2016). In considering entry into Japan, M&S will need to identify the risks or barriers of entry into the market, economic conditions and competencies that it possesses in which it can leverage success.

Marks and Spencer have already established international stores in many parts of Europe and Asia in locations such as India, Hong Kong and Turkey to name a few. However, M&S are yet to enter the Japanese market. Although Japan is one of the world's largest economies it remains quite stagnant due to an ageing population and poor demographics. Japan has around a zero inflation rate but still remains one of the wealthiest countries when measured by average income (Zervos, 2016). As part of M&S’s goal to maintain global presence, M&S should establish a fashion, retail store in Japan. Currently FDI investment into Japan remains quite slow, with most investment in the country landing in finance and insurance, meaning that the retail sector would make up less than 3% of investments (Santander, 2016). The Japanese government recognises the poor inward investment performance, thus the Abe administration has plans to cut corporate tax levels to the same as many European countries in hopes of attracting more foreign investment (The Japan Times, 2014). Despite this, potential companies such as M&S still face many obstacles and barriers. The administration process is known to be a lengthy procedure, with permits and property registrations taking on average 193 days according to the World Bank which exceeds OECD averages (TMF Group, 2014), which is definitely an obstacle or ‘push’ factor M&S need to take into consideration. Furthermore, Japan has strong local competitors in the retail sector and are known to develop strategies to compete aggressively against new companies rather than welcome them (TMF Group, 2014). The Japanese retail market is one of the largest in the world with a customer base filled with consumers with high levels of disposable income. It is a major tourist destination and attracts consumers from all over the world, giving stores a locational advantage with around 1,918,400 potential consumers flooding in from other countries (Research & co, 2016); this excludes the potential domestic consumers. Japan External Trade Organisation state that “the number of tourists traveling to Japan from other parts of Asia continues to grow, with roughly 35% citing ‘shopping’ as one of their reasons for visiting” emphasising the integral fashion culture in Japan that would be fitting for Marks and Spencer to join. Another pull factor for M&S includes previous success of other major international fashion brands such as Zara and H&M, whom have been well received and highly successful in Japan (Jetro, 2009). These are major competitors for M&S in the fashion sector and their success in Japan should indicate that M&S need to get a foothold in this market.

The combination and interaction between a firm’s resources – both tangible and intangible – and integration to form capabilities, outlines its core competencies. These core competencies are unique and become a source of competitive advantage for the organisation in the market when they are valuable, rare and difficult to imitate and substitute (Cardy & Selvarajan, 2006; Bromiley & Rau, 2016). For Marks and Spencer, these core competencies serve to create value for the company and thus drives its sustained competitiveness against other retailers. Throughout all the countries in which M&S have a presence, the retailer has maintained its reputation as a brand delivering quality and value to customers. The standard of M&S has been upheld through the company’s dedication to ensuring only products of high quality and safety are delivered to consumers. The ability to translate its perceived brand quality across borders from the UK has been a vital aspect for M&S’s international success (Burt & Sparks, 2002).One of the key competencies for M&S that has driven the success of the firm is its strategic emphasis on delivering customer value through their products and services (M&S Strategic Report, 2016). With this aim, M&S has place their customers as a central focus, with processes and activities in their business model synergistically integrated to achieve this (M&S Strategic Report, 2016); which in turn creates connected value for the company. Although flexibility was not an attribute that M&S possessed for a period in the 1990s/2000s (SOURCE), its current renewed strategy to be consumer-orientated (M&S Strategic Report, 2016) and constantly review and respond to the changing demands of its customers; has enabled its adaptability to become an ownership advantage and a source for competitive advantage. While, during its early international ventures, M&S failed to recognise that its international market differed from its UK home base and thus success overseas was limited. However, the firm’s new approach means its products, channels and services, are tailored to its targeted market (M&S Strategic Report, 2016), without compromising on the company’s core ability for quality and customer value. Given the Japanese market is vastly different from that of the UK, this capability will facilitate its entry.