Case Study
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Timing is a key element in any strategy. In 1990, an entry strategy was considered but high property costs and intense competition between retailers suggested it would be prudent to wait and monitor the market. A period of recession for the German economy then followed.
The recession saw a change
the former East Germany. There was also a strong rise in imports from elsewhere in the European Economic Community.
value if products were sold at competitive prices.
● As well as Marks & Spencer’s known market strength in Lingerie, there was considerable potential in a wider range of clothing, such as men and women’s tailoring and natural fibre knitwear. There was also added value through technical innovation of clothing and raw
ilding a Business in Europe Introduction
Over recent years, the changing political, social and economic e created a different type of competitive situation for European pace of change has created many new challenges for nearly organisation. The net result has been an increasing interest in marketing opportunities it represents. Europe has become o important trading areas of the world, accounting for over 40% o
Organisations cannot ignore the potential opportunities offere developments in Europe. They must monitor their comp constantly and be aware of changes in demographics and b Europe now has great strategic importance. The challenge is u p
U l i h w c b
S E a v i a
T o h e
Turning points in Europe
By the mid-1970s, as the European Community developed and some trading barriers started to disappear, a new framework was created for relationships between businesses in member countries. Marks & Spencer was able to learn about European markets through its suppliers in foods,
has shown that these qualities universally transportable to o markets where they can be adapte local needs and requirements.
Maintaining customer focus
The key to market developmen market-orientation. Few organisa operate in a static environment. global marketplace, tastes, demograp
Bu
nvironment has companies. The every business Europe and the ne of the most f world trade.
d through such etitors' actions uying patterns.
clothing and raw materials. Increased and purchasing power are just a few of ich
ices ere
an cts. e to .
kets ide As ese
to mer the
in the structure of German retailing with the merger of a number of major department store chains. There was also an apparent lack of differentiation between many of the retailers. By the mid 1990s, however, prospects looked much more attractive - market and entry costs were falling and the ‘new Germany’ was gradually reborn. Marks & Spencer’s good value and consistent high quality products, combined with Germany is the largest clothing and
food market in Europe. Research
materials e.g. tactel, tencel, cotton, teflon finishes, fibres and stretch.
● Marks & Spencer’s ‘added value’ approach to Foods would be quite unique and offer a prime differentiation factor. For example,Marks & Spencer’s ‘chilled offer’ was far more than local retailers could offer and standards of quality, freshness and hygiene would stand out against the lower standards in supermarkets and discount stores.
● Marks & Spencer had
to develop an
international competition forced Marks & Spencer strategists to look to the future - in terms of trade, the world was getting smaller and many markets were becoming global. National trading policies would no longer suffice. At the same time, many overseas trading opportunities emerged for Marks & Spencer, with clear scope to develop the business further.
In any industry, superior performance depends upon an organisation's ability to deploy its resources to develop
the constantly changing factors wh influence the goods and serv required. In the past, goods w relatively similar and there was unsatisfied thirst for niche produ Successful organisations today hav monitor customer needs constantly
Marks & Spencer operates in mar in which many retailers provide a w variety of offerings for customers. Marks & Spencer moved into th different marketplaces, the need develop high-quality custo relationships similar to those in
nderstanding of the key axes of development and the changing competitive atterns and include this data into the organisation’s corporate strategies.
nlike many other organisations, growth for Marks & Spencer has been argely organic rather than through acquisition. This means that, rather than ncrease market share quickly by buying other businesses, Marks & Spencer as developed internally, capitalising on core competences to provide a ‘fit’ ith its activities and the positioning of the organisation. For a company
ommitted to high standards, this has become a critical element of its usiness strategy.
trategists at Marks and Spencer have been aware of the potential of the uropean Market for some time. Many thousands of European visitors have ssociated shopping at Marks & Spencer as one of the main ingredients of isiting the UK. In 1975, Marks & Spencer first entered continental Europe n Paris, where it now has 10 of its 20 French stores. Today, it has stores and
as the es, not ors lso rs'
the
clarity of display and customer service package would provide a clear market position.
Opportunities in the German market
Gross Domestic Product, GDP, is a measure of national wealth. Germany's GDP is a staggering £1,500 billion, nearly three times that of the UK economy. German consumer expenditure is 50% more than the UK and 22% higher than France. With economic indices such as inflation under 2% and
showed that:
● German consumers have a clear appreciation of consistent highquality. Marks & Spencer products would be very good
examined customer requirements and catered for the preferences of the German market.
● There was a huge snack lunch market with good potential.
competences. Successful strategies rely upon an organisation’s strategic capability to undertake demanding activities at a high level. Marks & Spencer had a fast-developing technological base and a well developed organisational infrastructure which dealt cost-efficiently with large- scale logistical activities. European markets were within reach, providing the company with opportunities for market development and to gain economies of scale e.g. from increased buying power.
UK, soon became apparent. It w vital to place the customer at centre of developmental activiti ensuring that Marks & Spencer only responded to different competit and business conditions, but a remained focused on custome current and future needs.
Timing an entry strategy
Marks & Spencer's entry into
ctivities in many other countries within the European Union.
his case study focuses on one of Marks & Spencer’s current business bjectives - to accelerate the growth of its international business. It examines ow Marks & Spencer has increased the momentum of its European xpansion and focuses on the opening of the first store in Germany.
German market had been carefully ith of to the ter a a
igh lso
retail sales in Germany of £331 billion, even a very small share of such a vast market represented a sizeable opportunity for Marks & Spencer.
Germany has more major towns and cities than any other European country (16 with a population of over 400,000). Following re-unification, a large proportion of goods that would have been exported were diverted to
Marks & Spencer has many unique qualities which enable it to outperform competitors. For example, Marks & Spencer is a brand house with a single brand name - St. Michael. This helps to create perceptions which appeal to a particular market niche and also helps to develop a global business. The cornerstones of Marks & Spencer are quality, value and service. Experience
considered for some time. W re-unification, the population Germany expanded from 65 million more than 80 million and, as world’s second largest expor following the USA, Germany is highly industrialised country with strong service sector and h population density. Germany is a the world’s largest import market.
Cologne store
1Consider the product and serviceofferings from your local Marks & Spencer store. Working in groups, list
five strengths and weaknesses of the
5Describe the importance playedby timing in Marks & Spencer’s entry strategy into Germany.
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Al in en an in ch
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Th ma abo In ou res eff sto reg con we mi Ge den and Op the 960 Ma Ge
communicate s. Marks & d heavily in wspapers and r pre-opening
s and s
TASKS & A CTIVITIES
1
2
● Layout and presentation techniques, shopkeeping standards, customer service package, IT based ordering systems and product information would all compare favourably against the established stores.
acing the challenges
Marks & Spencer’s entry strategy was to: focus on similarities BUT recognise the differences.
It included a range of key elements - the five Ps:
PEOPLE
PRODUCT
● environmental considerations
● products with man-made fibres
● sizes and length of clothes
● investment in packaging and labelling
PR and publicity
Internal marketing helped focus the attention of Marks & Spencer’s employees on the entry strategy into the German market. Marks & Spencer appointed agencies for advertising and public relations well before the opening of the Cologne store.
product positioning and the company's value Spencer also investe advertising using ne magazine inserts fo announcements.
Procedure system
business and explain how the
strengths help Marks & Spencer to
compete overseas. Compare your
answers with those from other groups
within the class.
2The growth of Marks & Spencerhas been largely ‘organic.’ Explain how this has helped Marks &
Spencer to achieve a unique position
in the UK market.
6Why was Germany such anattractive market for Marks & Spencer? Describe the difficulties
likely to be faced by any organisation
entering this market.
7What factors influenced thelocation of Marks & Spencer’s first German store?
integrate the ms for the those in the systems and allow Marks s the major
process
provide the & Spencer to ifferent to
3
4
5
though clear opportunities existed Germany, Marks & Spencer, in
tering the most price-orientated food d quality conscious clothing market
Europe, faced many new allenges. For example:
● The Marks & Spencer brand was virtually unknown in Germany. It would be a major challenge to create customer awareness against the background of well established, highly competitive retailers.
PROPERTY
PR/PUBLICITY
PROCEDURES AND SYSTEMS.
People
In order to understand customer requirements fully, Marks & Spencer needed German nationals to join its managerial team. In January 1996, 17 German managers were recruited and
● natural ingredients.
Although Marks & Spencer products might not be the cheapest, they would certainly be good value and of a consistent quality which would be appreciated by German customers over a period of time.
The building itself was the biggest single promotional tool. Decorations were used to enhance its character and this was supported with the strapline, ‘not a department store, a philosophy!’ The purpose of the campaign was to target the middle of the market and raise consumer perceptions of Marks & Spencer’s
It was important to procedures and syste German operation with UK. State-of-the-art IT logistics were needed to & Spencer to surpas German competitors.
Refining the
Overseas markets opportunity for Marks bring something d
Cologne store
3Identify three reasons why Marks& Spencer wants to accelerate the growth of its international business.
4Explain what is meant by thefollowing words and phrases:
8The key to Marks & Spencer’sentry strategy was to recognise German cultural and business
differences. Use one example to show
how Marks & Spencer's strategies in
the German market differ to those
used in the UK.
receptive to value. As a s, Marks &
uch of its ing into a usiness in the his has been al nature of
ture has been n between erations.
ness strategy it to enter a ● quality, value and service
Marks & Spencer needed to ompete against the variety and hoice already provided by these stablished retailers.
Many issues needed to be ommunicated to customers, such as ood shelf life, packaging, policies, abelling and ticketing.
The recruitment and development f high quality staff would be a key riority.
taken to the UK for training, in preparation for the opening of the Cologne store in October of that year. By recruiting staff early, it was possible to obtain critical feedback about differences in operating in Germany, particularly relating to issues such as cultural diversity.
It was soon identified that most German retailers did not strive to offer the high levels of customer service found in the UK. This was one area in which Marks & Spencer could
marketplaces which are new products and added successful UK busines Spencer has focused m efforts upon develop successful international b long-term. The key to t appreciating the individu each market. Another fea the close co-ordinatio overseas and domestic op
Marks & Spencer’s busi for Germany has enabled
● market-orientation
● entry strategy
● customer service package
● market position
● chilled offer
● efficiencies of scale.
Developing an entry strategy
e starting point when entering a new rket is to learn as much as possible ut the market and its customers. 1994, Marks & Spencer carried
t extensive market and location earch. In order to maximise iciencies of scale, plans to locate res in the northern and western ions of Germany, around the urbations of the Rhine and Ruhr,
re drawn up. This region has 17.5 llion inhabitants, almost 22% of the rman population. The population sity is 1,360 people per square mile it is the richest German state. ening a store in Cologne, a city at centre of a major conurbation of ,000 people, became the focus for rks & Spencer's entry into rmany.
differentiate itself from other retailers.
Product Marks & Spencer's activities attracted country-wide publicity. It was not simply Marks & Spencer going to Cologne, it was a British retailer going into Germany.
Marks & Spencer aimed to price its products competitively. Over a two- year period, the entry strategy into Germany was developed by ‘walking the market.’ This entailed customer surveys and close
Feedback from helped Marks & catalogue’ for This involved re needs of the putting goods o met these requ making specif
Property The German retail marketplace and particularly the food sector, is dominated by large organisations which lead the European ‘discount market.’ Germany has the second biggest retail organisation in the world
market in the mpetition. The consolidates elopment as a
● market-orientation
● entry strategy
● customer service package
● market position
sophisticated retailing face of strong local co move into Germany Marks & Spencer's dev truly global business.
● chilled offer
● efficiencies of scale.
product examination.
customer surveys Spencer ‘shape its
the Cologne market. cognising the specific German market and n sale which closely irements. It involved ic decisions about.
and seven out of its top twenty companies are in retailing. To make an impact in Germany, Marks & Spencer required a prime location of around 50,000 sq. ft., communicating quality and reliability to German shoppers.
The Cologne site offered a prime pitch, next to a flagship German retailer, in a landmark building, with wooden floors and natural lighting.
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