You need to read the first case and answer questions 3, 4, 5, 6, and 7.
are
ther
d for
t is
tions
In a
hics
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 £33
1
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.
F
Al
in
en
an
in
ch
●
c
c
e
●
c
f
l
●
o
p
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.
Reproduced with permission of the copyright owner. Further reproduction prohibited without
permission.
