Improper resource Management
Being one of the largest retail chains, M&S had a large number of outlets, which seemed to have worked well for them in terms of establishing a strong presence and brand name in the market. However, during their stage of declining profits, the company went on to acquire 19 Littlewoods stores and refurbish their existing stores. This decision from the management can be heavily questioned, since the capital involved in the acquisition may have been used to strengthen other aspects of the business such as their marketing efforts for instance. But the practice in the organization did not encourage employees to question management decisions.
When analyzing the M&S’s performance in terms of market share and profit generation and most importantly the misalignment of its strategy and the environment during early 90’s to early 2000, it can be clearly related to the four phases of strategic drift. (Source: Exploring Corporate Strategy: 8th Edition) Unsuccessful remedial measure In 2000, Luc Vandevelde was appointed as the CEO of M&S. This was the first time in the history of M&S that a person outside the industry was hired. This was a major change for M&S and the way it operated. Upon his appointment, Vandevelde brought about some changes
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The root of the problems that threatened M&S’s profitability was its culture and resistance to acknowledge the changes in the operating environment. This eventually led M&S to a state of complacency and a negligent attitude to resolving issues. Despite trying to bring about changes to the culture, the old values and beliefs that had been deeply embedded in the way things worked were still to a greater extent believed in.
Elements such as tradition and formality still exist despite a restructuring effort where the organization has been de-layered. Much of this still remain, and will continue to do so till M&S goes through a complete transformation process. M&S also underwent a restructuring exercise where layers of management were cut, decentralization was introduced and the core products were departmentalized. However, M&S failed to see if their culture supported such a restructuring process. As good as decentralization seemed given their problems of a centralized buying function, one may question store managers ability to make buying decisions, since they have been used to following a parent – child type of culture in the past.
M&S had a firmly established brand name which was synonymous with high quality due to its ‘buy British’ policy. During the turbulent time, when M&S faced a loss of sales, market share and a falling share price, instead of focusing on rebuilding market share and facing the problem at hand, M&S went on a restructuring process. Further, the decision to acquire the 19 Littlewoods sores is questionable as it came at a time of falling profits when in fact that capital could have been put to better use in terms of strengthening their core competence. Further, Vandevelde made a decision to pull out of America and Europe, in an effort to focus on revising the business in the UK. However, this may have received negative publicity resulting in the M&S brand name being tarnished further.
M&S’s human resource management system of promoting within also meant that though changes were taking place, it was by the same people that contributed to a strong culture, especially one that was resistant to change. M&S failed to determine if their employees were ready for the change. It was time M&S underwent a paradigm shift, where they could move from a more traditional “we know best” and “why change things if they are working well” attitude to one that embraces changing environments and keeps in line with changing customer needs and actually pay heed to competition thereby strengthen their bottom lines.
Johnson, G., Scholes, K., & Whittington, R. (2007). Exploring Corporate Strategy.Prentice Hall, Financial Times.