Challenges and setbacks in the Chinese market
Discuss about the International Expansion of Marks and Spencer.
The report throws a light in analysis of the different kind of approaches of internationalisation along with implementation of different strategies across the borders of Asia. The company that has been taken in the report is Marks and Spencer that is based in United Kingdom. It has been seen that the company needs to focus more on the internationalisation strategy in such a manner that this will help them in maintaining the different kind of processes in expansion to the different countries. Proper internationalisation and expansion strategies has to be adopted by the company in order to resolve such issues (Awate, Larsen and Mudambi 2015).
However, there are different kind of issues that has been faced by Marks & Spencer as they failed to internationalise their business in China market. There was a huge failure of Marks & Spencer in China as they did not understand the marketing techniques that has been applied by the other companies in that market. There were different ventures and failures of Marks & Spencer when the company decided to expand their business in different parts of the world and Asia. The main market entry strategy that has been adopted by Marks & Spencer is the franchising strategy that has assisted them to spread into different parts of Asia (Bondy and Starkey 2014).
Furthermore, it has been seen that the abrupt and unannounced pleasure of Marks and Spencer has caused displeasure among the different customers in the market and this had affected the morale of the customers. One of the major problems with Marks and Spencer was spotted with Bolland, and this has created competing its entry into one market. The issues related to the internationalisation strategy of M&S has caused huge issues to the entire company along with the customers and employees as well.
It has been seen that the company needs to analyse the different strategies in such a manner that can help them in making the strategy of internationalisation successful in nature. Proper analysis is required to be done as this will help them in managing the focus on the Chinese market and this can help them in gaining competitive advantage in the market. Marks and Spencer need to adopt the product development strategy in an effectual manner as this will create re-entering into the other markets as well such as retail and other stores. In order to render the decision, the Ansoff’s matrix is the applicable model that can be applied by them as to reduce their weaknesses and they can implement the internationalisation strategy effectively as well (Castaño, Méndez and Galindo 2016).
Main market entry strategy and franchising model
Marks &Spencer is the major British multinational retail companies that is headquartered in Westminster, London. It is listed in the London Stock exchange and this specialises the selling of good, home products and luxury food products. M&S began to sell different kind of products and services such as Kellogg’s Corn Flakes in the month of November in 2008 (Marksandspencer.com, 2018).
The company was founded in the year in the year 1884 in the United Kingdom and this serves the entire world. There are more than 84939 employees who are working in Marks &Spencer wherein they are generating more than 10622 million revenues till the year 2017.
Lastly, it was seen that M&S is one of the largest retail companies that has helped the company in serving the different customers in the world, however there has been issues related to the internationalisation strategy in China market as the company did not get success as they did not understand the different strategies that was implemented by other companies in the China market.
Marks & Spencer had started as a small stall in the United Kingdom and has grown as the largest retailer of the country which operates in the retailing of food, clothing and home based products. The organization has also been expanding as an international retailer with more than 250 stores in 40 territories of the world. In the 2010, the Chief Executive of the organization said that the priority market of the organization in 2020 will be Shanghai and India. The main strategy that was implemented by Marks & Spencer to enter the Asian market was based on the entry in the potential retail market by applying the hyper-market based format. The entry mode that has been selected by M&S to enter the market is the franchise model. Marks & Spencer has applied this method for the purpose of entering the Chinese market which is considered to be a highly growing industry in Asia (Cavusgil and Knight 2015).
The internationalization strategy which has been implemented by the company is based on the analysis of past issues that has been faced in the global markets. The organization was established in the year 1884 with a small stall. After 125 years of its operations in the fashion retail industry, M&S has acquired the position of the largest retailer in the United Kingdom. The products that are offered by the company range from food items, clothing. The organization entered the international markets by franchising its stores in the countries like, USA, Canada, Belgium, France. The international market of the company was on the verge of collapse with the end of the 19th century. The main reason behind this collapse was the lack of proper management by the company (Chiarvesio, Marchi and Maria 2015).
Importance of analysis and product development for successful internationalization
The organization thereby decided to withdraw the presence from the international market and concentrate its efforts in the home market itself. The major reasons that have been found for the failure of the M&S in its international markets was the entry and successful operations of other ambitious organizations. The stiff competition that was being faced by M&S in the international markets was not faced in an effective manner by the organization. The needs of the company in the international market of M&S was also not considered by the management (Costa et al. 2017).
The organization first entered the international market by targeting countries like, South Africa and Hong Kong. M&S exported the products to the markets in these countries under name of St. Michaels. The organization then terminated its contract with Do dwells which proved to be a wrong step and it stopped the successful expansion of Marks and Spencer in the Asian market. The company then targeted the Canadian market with the help various family tie-ups and had become successful in operating around 275 stores in the country. The US market was also explored by M&S by the end of the 80’s with the purchase of a retail chain of markets. The brand was not accepted by the North American as a strong brand as there was lack of proper branding and marketing related activities (Crick and Crick 2014).
The organization was also not able to satisfy the needs and the demands of the customers of the international market area. M&S had not supported the decision of off-shoring the productions to different countries due to the various quality related concerns. This decision further led to the increase of the costs related to production which forced them to charge higher prices from the customers. The customers however did not find the products quite appealing as they were paying premium prices for the general products. M&S entered the European market without any specific strategy and this resulted to a situation where the organization was not able to create its position in the market. The overseas operations of M&S were withdrawn by the management in the year 2001 and the organization decided to concentrate totally on the domestic or home market (Dodgson 2018).
The global market then faced a stage of recession in the year 2007 to 2009. M&S was however able to perform a profitable business in the year 2009 with an increase of 17% and 5% in the profits. The organization is thereby trying to find new opportunities to enter the international markets with a structured and planned system with an aim to target global consumer market. The past mistakes of the organization have been analysed and decisions have been taken regarding the plans and policies that can be implemented in the future (Dominguez and Mayrhofer 2017).
The current internationalization strategy of M&S has been formulated with the help of detailed analysis of the mistakes that have been made the organization in the past. The company is taking steps which can help in stabilizing from the effects of global recession and they are trying to improve the previous irrational decisions that have been taken related to the expansion strategies. M&S has entered the Asian market which include the countries like, China and India where the demands for its products are quite high. The organization has concentrated in the markets one by one which has been helpful in the proper operations of M&S in all the areas. The marketing style of M&S has been changed to some extent from product driven to service or market driven (Eisend and Schmidt 2014).
This has helped the company in understanding the demand that has been placed for the products and try to cater to these accordingly. Franchising is another option that has been used by M&S in the Asian markets instead of opening its own stores. The choice of the franchisee can further help the organization to improve its revenues in the international operations. The franchisee related schemes cannot be same for the different countries in which M&S has its operations. The major difference that can be noticed between the domestic and international operations of M&S is related to the absence of the food items in its international stores (Estrin et al. 2016).
There are different strategies that can be implemented by Marks & Spencer in United Kingdom. M&S is growing from Penny Bazar stall is one of the leading retail markets in United Kingdom. M&S provides different kind of quality home and food products in the market and this is expanding international retailers with more than 296 stores in more than 40 territories. In order to render the decision in the present scenario, with the help of using Ansoff’s matrix, M&S needs to consider the product development in order to enter into the food segment entirely. Re-entering into the retail market by M&S such as hypermarket through the enhancement of the existing products in the market is done by introducing new products and improving the quality of the products and services delivered by them in an effective manner (Yemini 2015).
M&S has adopted the strategy of franchising model in order to sell in the entire Chinese retail market. However, the company failed to provide the different kind of products and services in a positive manner as this has caused huge issues as they did not adopt the different kind of strategies like the China market. Furthermore, this has been noticed that the M&S has adopted franchisee model and introduced different kind of new products under the brand of M&S as this has been proved helpful for them to gain the potentiality in the market for groceries and food items (Tubilewicz and Jayasuriya 2015).
Furthermore, M&S is adopting the model of franchise in such a manner that this has assisted them to sell goods and services in the Chinese market. The article in Telegraph has thrown a light on newly opened outlets in SkyMall that is situated in Shanghai. This is one of the strategy of internationalisation in the market as this has helped them in spreading their presence in all parts of the world and in entire Asia. It has been noticed that there has been huge failures and ventures of M&S in the Chinese market wherein they did not cope up with the internationalisation strategy as they could not able to compete with the different competitors in the market of China (Yemini 2015).
In order to present the decision in the present era, it has been seen that Ansoff’s Matrix has included the development of the product strategy that has helped them in developing new products for the market of China as this can provide them with profit making strategies in an effectual manner. M&S has been one of the largest retail companies that is based in United Kingdom and the product development strategy has been helping them presently with the influence of their presence in different other parts and solve the issues effectually as well. the failure of the strategies adopted by M&S has led them to failure and this has caused huge loss to the revenues in the entire competitive market as well (Johanson and Mattsson 2015).
The proper adoption of the culture in different regions of Shanghai has helped the organization in solving the issues effectively. The adoption of the different cultures or sectors of M&S is operating in order to enhance the loyalty of the brand effectively as this created huge potentiality in the market with the implementation of the proper strategies. Since India and China are both emerging markets, M&S needs to create and put more focus on the middle-class segments of these particular markets and this has solved the issues effectually in those markets as well (Yemini 2015).
Lastly, M&S has to adopt and opt for the test marketing by opening flagship store that can help the company in gaining more competitive advantage in the market. This kind of brand loyalty has helped the M&S company in gaining more competitive advantage in the market.
Marks & Spencer has been experiencing decline in sales in sales in the Chinese market which has led to the decision of withdrawal of operations from this area. The organization had made an announcement that all its stores in the Chinese mainland will be closed as a result of the continuous loss that has been incurred by the organization. The company had taken a decision of stopping its store based operations in the country. The main reason behind the failure of M&S in this market was the unclear positioning of the brand in the country. The brand was not able to attract the customers with the help of its various products, brands, price or quality. The development of the e-commerce market segment of the country has also put immense pressure on the business of M&S in the Chinese mainland (Knight and Liesch 2016).
The diversified and lower cost options that are provided by the e-commerce websites have created pressure on the revenues of M&S in the country. The lack of localisation has been the major cause behind the poor performance of the retailer in the Chinese market. M&S has made many mistakes which are related to the lack of adaptability to the retail market. The retailer had failed to tailor the apparels with respect to the Chinese body shapes and the style preferences as well. The locations in which the stores of the organization have been placed have been a major cause behind the failure of M&S. The organization had made many mistakes in the operations that were planned in Shanghai, China. The plans of M&S were to build more stores of the organization in China as compared to the number of stores which are present in the United Kingdom (Mitter et al. 2014).
The management of M&S had agreed that they had made many mistakes in the market of Shanghai which further led to the loss of sales of the organization in the country. The major risk that was being faced by M&S was based on the market position that it had obtained in China. The organization had fallen between the cheap and premium brands of products as the Chinese consumers did favoured products that were cheap and of high quality as well. The rapid growth of the middle class consumers has increased the sales of various types of products. However, after opening up the tenth store of the organization in China, M&S decided to pull off from the market (Rani, Yadav and Jain 2015).
The awareness of the brand was found to be quite low in China. The people did not have any idea about the services and products that are offered by the organization. The growth in the market had also been quite challenging as compared to the other areas where M&S has its operations. The retail market of China is however considered to be quite large and has provided opportunities to the various organizations which have entered the industry. The reputation that was held by the brand related to the type of fashion apparels that are offered in the market had thereby been a factor that has set off the interest of the customers in the products. The Chinese customers are mainly attracted towards the classic and traditional products that are offered by organizations of British origin. The lack of traditional British offerings in the product range of the company has thereby been a major reason behind the lack of popularity of M&S in the market (Schwens et al. 2017).
The high rents of the stores that had been opened by the organization in China had been a major pressure on the profitability and revenues of M&S. The organization had located the stores in the prime and costliest areas of the country. The design of the stores of M&S was not able to impress the Chinese customers as they preferred smaller stores as compared to the large ones that were present in the country. The multi-storeyed stores of the company have been a major issue for the sales and revenues of M&S and the customers were not happy with walking through the 4 storeys for the purpose of purchasing products from the retailer. Another major reason behind the fall of M&S in China was the opening of stores in the odd areas of the country where the well-established and cheaper Chinese retailers were already present. The stores of M&S in the other areas of China except Shanghai and Beijing where there are many cheaper alternatives available for the consumers. The consumers who stay in the other parts of the country are not quite interested in the products that are offered by M&S (Vahlne and Johanson 2017).
The company has faced some other major challenges in the operations in Asia based on the low wage rates that were provided to the workers in these countries. Marks & Spencer has been unable to deliver its promise of paying sufficient wages to the workers in their factories in India, Bangladesh and China. The company was supposed to pay wages to the workers based on the British wage rates. However, even after six years of the promise made to the workers, the organization was unable to pay sufficient wages to them. For example, the company demanded that the workers in Sri Lanka were being paid 30,000 Rupees per month and the actual amount that was paid to them was only 13,500 Rupees per month. The low amount of wages further caused high levels of dissatisfaction in the employees and the production of the company was affected in an adverse manner. The company had to face issues in the operations due to the lack of satisfaction among the employees. Therefore, it can be said that the company has been facing major issues in the operations in the various countries in Asia which can be solved with the help of proper internationalization strategies (Schwens et al. 2017).
Conclusion
Therefore, it can be concluded that proper internationalisation strategy has to be adopted by the company in order to improve the internationalisation strategy. The new plans of the internationalisation strategy that has been undertaken by M&S are series of calculated kind of steps that the organization decided to take in order as to prevent themselves from preventing into quicks and of the failure.
The organization needs to try again to expand the business internationally as this will increase the business operations. The globalisation is the essential factor that the successful organizations should consider and they need to focus more on internationalisation as this is the means of expansion to avoid being forced out by the other competitors. By moving into the markets of India and China as these are the two most densely populated countries in Asia and these are the largest economies in the emerging market.
The consumer market of India and Chinese is highly adoptable market and the individuals in such markets are influenced in an easy manner. These are the different individuals who can shift their focus regardless of the brands and they are giving higher preference to the concept of westernisation as this has provided higher prospects to the different international brands than the local kind of brands in the market.
Finally, it can be recommended that the entire market of Asia is greatly influenced by the different western culture, however it is also inclined towards the regional culture and traditions as well. The different kind of stitching is required to be done by keeping in mind the apparels should be on the United Kingdom based sizes along with they should opt for the test marketing only a flagship to see how well the different markets respond to the ideas provide y M&S in the emerging markets.
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