Marks and Spencer’s is a large British company that has had a consistent record of success and profitability until around 1997. Since 1997 is sales have plummeted which lead to a large decrease in profit. Marks and Spencer’s was the store that everyone turned to for basics, from underwear to ready meals. They did this without advertising or accepting credit cards. It was thought that they could never fall from the top spot. They are now trying to find out what has gone wrong and how they could solve their problem. I am going to see what could have been the cause of Marks and Spencer’s fall, and to see how effective the steps that they have taken to solve their problem.
Marks and Spencer’s has suffered from stiff competition by US retailers, such as Gap, muscling in on the UK market. This has reduced the demand for Marks and Spencer’s products. Appendix 1 shows that the supply has stayed the same, but the demand has shifted to the left (demand 1). The competition has gained the demand that Marks and Spencer’s has lost. The clothes that the company sells have been condemned by fashion critics as downy and uninspired. The company have even admitted that there has been a clear decline in consumer confidence. This is one of the reasons why Marks and Spencer’s has lost its demand to its competition.
Marks and Spencer’s have been expanding in the UK while their sales abroad have decreasing. This was a bad move as they were losing profit abroad they were using money to expand in the UK which made them loose even more profit. This huge loss in profit forced Marks and Spencer’s to cut down on an investment programme by ï¿½300 million. It also forced Marks and Spencer’s to cut more than 500 management jobs.
Marks and Spencer’s was also slow to join the internet shopping revolution, which made its competitors gain some competitive advantage. They were also reluctant in accepting credit cards which made its profits suffer even more. Marks and Spencer’s may have been reluctant to change as its corporate culture, which would not allow it to change with fashion. Businesses are always under constant pressure to change, both internally (management and shareholders) and externally (in the market place). Marks and Spencer’s was slow to change internally and externally. They did not keep up with fashion and trends which lost them much of their market share. Marks and Spencer’s has always been associated with quality, which adds value to all their products and services. This should give them a competitive advantage, but they lost it as their products were not thought of as fashionable any more.
Competitive advantage is the idea there are many other businesses in the same market as you, and to gain more customers you need to do something that is different and better than your rivals. Competitive advantage can be gained by cost leadership, which is where you cut all your costs down so that you can pass on your saving to your customers at a cheaper price. This should increase the demand for your product as the demand curve shows (Appendix 2). Marks and Spencer’s does not gain competitive advantage in this way as they charge quite high prices. Another way that businesses gain competitive advantage is by innovation. Marks and Spencer’s uses their relationship that they have with their stakeholders to gain competitive advantage.