I. INTRODUCTION Marks & Spenceris a leading retailer in Britain which started as a “Penny Bazaar” in 1884.Over the years, it has grown and recognized in offering core products with mixin clothing and food.
The passage of time also saw the company’s strategicdecisions such as delving into financial services, home furnishings andphysical modernization programs. The company has no manufacturing facility inUK and is purely a retail business which is highly centralized in itsstructure. As acentury-old company, M has a long history of expansion, both domestic andinternational. M became a major player in the UK retail market by beingand upholding everything British, while ensuring and encouraging quality fromsuppliers who offer affordable, but not cheap, products. AsM grew, two domestic factors, both internal and external, arose, whichcalled for further business expansion. M have fully saturated the UKmarket, while Labour Party members were lobbying for nationalization program ofleading domestic retailers to counter the economic crisis in the country backthen.
International expansion was, therefore, seen as key forbusiness growth and way of allocating company funds outside thecountry. II. PROBLEM Thecase is about expansion of Marks & Spencer, as a prime retailer of coreproducts, in the international market.
III. SOLUTION Marks& Spencer used diverse types of entry modes in the following countries asinternational expansion strategy.· CanadaMentered the Canadian market thru acquisition of budget-priced departmentstores, D’Allairds and Walkers Clothing Stores. The company used this marketentry strategy due to perceived cultural similarities with Canada. · Franceand BelgiumM&Sutilized organic growth on penetrating neighbouring European countries, due togeographic proximity and practicability. The company opened stores at HaussmanBoulevard in Paris, and at Brussels in Belgium.
· SpainM&Sexpansion in the Spanish market was first a franchise agreement with GaleriasPreciados, where the company had stalls inside Galerias stores. Next was ajoint venture with Cortefiel, Spain’s major retailing chain, opening Mstore in Madrid’s Calle Serrano. · USAM&Sventured in the American market by acquiring both Brooks Brothers, America’soldest clothing company, and Kings Supermarket, a family owned chain offood-only stores. Alongside the acquisition of Brook Brothers is anon-competition agreement between M and Canadian Campeau, preventing thelatter to compete with Brooks Brothers, and right to rent space of M inany Campeau’s department stores to sell St. Michael food products. · HongKong and JapanM&S opened and fostered organic growth of St.
Michaelbrand in Hong Kong. It also opened new outlets if Brook Brothers in jointventure with Daido Worsted Mills in Japan. Furthermore,M&S exported products to 30 countries worldwide.
Acting as a supplier todifferent entities, from clothing brands like Benetton to food chains likeMcDonald’s. IV. CONCLUSION The case narrates the success story ofM in entering the retail market of mentioned foreign countries. Thesequence and entry strategy for each country was chosen according to business opportunitiesand likeness of the foreign market with UK market. But maintaining and growingM in these foreign markets were another story.
Canadawas the first chosen country for international expansion due to its developedeconomy, good labour relations and political stability. Moreover, acquisitionwas the entry strategy used due to Canadian market’s high purchasing power,large population and infrastructure. These indicated high return on investment.However, site of some store was undesirable, low sales affected the M&Sbrand image and unsuited UK business formula in the Canadian market led toseveral store closures on later years. Organicgrowth was the entry strategy used in France and Belgium.
Ease of control andcommunication was possible due to geographic nearness of both neighbouringcountries. Successwas ensured on these foreign European markets due to similaritieswith UK market, but growth of stores was slow compared to other foreignmarkets.Franchiseagreement and joint venture was selected to enter Spain due to unfamiliarretail market. These are the less risky mode of entry when the venturing tountried market and unsure political climate of the foreign country.M&Sused Canada as a spring-board to enter USA.
The company acquired the BrookBrothers and Kings Supermarket, both known market leaders on respective fields.But M&S faced several government restrictions and St. Michael brand washaphazardly thrown in the market arena to compete with manufacturer’s brandnames in the US.Furthermore,M eyed the developing economies of Far East Asia. It banked onestablished name of Brook Brothers and opened outlets in Japan, while openingM stores in Hong Kong. This was testing the Asian market while using abranded name to grab a market position, only downturn was it’s not St. Michaelbrand.
Thestrategies used by M&S on its international expansion was based on its UKbusiness model, which strategies, philosophies and decisions were catered and effectiveon British market, but evidently not applicable and needs modification onforeign market. As a major player in the cutthroat retail industry, M&Ssomehow was able to acquire business which eventually turned out as moneymaking centres. But M&S fell short in fully assessing wider internationalenvironment, which contributed to unexpected downturns and undefined businessdirections that challenged M&S international expansion. V. RECOMMENDATIONM&Swas already at its maturity stage as a domestic company and fully saturated theUK retail market. It continually provided quality products to its patrons butthe opportunity to expand internationally will open greater possibilities bothfor M&S and its consumers. Such possibilities may have been achieved with lessrisk and minimized losses, if M&S have a defined internationalizationprocess and taken the following in consideration:· M&Sneed to identify the national brand and transform it to be an internationalbrand. Brand positioning, symbol and philosophy arouse brand awareness and generateconsumer preference.
There is also the question whether to use one brand in allmarket or differentiate brand depending on market inclination. · M&Sneed detailed market research and expansion strategy for every host countries. Thiscover both economic and political climate, where investment opportunities mustbe taken in account in comparison with government and labour regulations andpossible income must outweigh possible loss. Furthermore, short term and longterm objectives will be formulated for individual host countries to addressspecific market needs.· M&Sneed to organize its company structure. Being a centralized organization workedin UK market, where business philosophy of quality equates to upholding Britishproducts over foreign ones, may possibly not work in international expansionmainly due to distance and culture differences.
Decentralization of some, notall, authority to geographic or country divisions will result to betterunderstanding of host country’s business situation and cost effectiveness inhandling both investments and expenses.· Mmust have entry mode and execution plan, where the company will choose one or combinationof entry mode depending on the host country’s specific situation. Furthermore, entryand implementation will be monitored if running smoothly and adjust accordingto changes of the market timely. · M&Smust open its sourcing policies to its domestic and international outlets.
Thiswill pave way to review global logistics to improve distribution and lowercosts. Development and sharing of ideas will be also fostered.· M&Smust hire local executives for geographic or country divisions, who are mostlikely knowledgeable and adept on the host country’s business scenario. All inall, implementation is the key for an effective strategy.
A company cannotsucceed unless it can effectively carry out its strategy. Furthermore, Mmust keep pace with changing technology, market environment and consumer needsof the host country to fully reap fruits of investment.