The Spotlight Hits Marc Bolland As He’s Appointed Marks & Spencer’s New C.E.O

Only six weeks ago I discussed Marks and Spencer being knocked off the top retail spot by supermarket giant Asda. At the time we were sympathizing with Sir Stuart Rose’s tough job of having to keep the company positive over that last 18 months of his reign. With a nation fearing the worst for the once UK high-street leader, all eyes have certainly been on Rose. However, with this week’s news…I think he has struck lucky, as the attention has been diverted.

 

“Marks & Spencer has confirmed it is appointing Morrisons’ boss Marc Bolland as its new chief executive” were the exact words of breaking news champions Sky News on Wednesday 18^th November. Without doubt this took the nation by surprise because for some weeks now we have been focusing on Sir Stuart Rose’s survival plan over the Christmas period. One may argue that this announcement was a strategic way of “taking the heat off” of M&S. The breaking news report shares the words of their City editor Mark Kleinman who reflects that the selection of Marc Bolland could see M&S reaching its top spot on the retail scale again. This opinion is further agreed by ‘The Guardian’ reporter Zoe Wood who prides the Dutchman who is apparently a “crowd pleaser”, especially due to his successful running of Morrisons, which is expected to top rival Sainsbury’s profit by  £200 million by the end of the year. I would argue that Zoe Wood remains too surfaced in her opinion, in other words she basis Bolland’s success on the basis of Morrisons rather than digging deeper to consider the individual characteristics of M&S, which he may not be successful with.  This is the general approach of the rest of this article, which even goes to the extent to say that new CEO Marc Bolland will be welcomed with a “Golden Hello”. The reporter is too optimistic about Bolland rather than weighing up each side. At this point I am determined to find an article that outlines just how tough Bolland’s job will be.

 

Is Marc Bolland right for the job?

 

Jenny Davey for ‘The Times’ does exactly this and even includes in her title- ‘Will he be able to work his magic?’ This article outlines the suspected aims of Marc Bolland, once he takes over from Rose, in relation to the current issues faced by M&S. In particular, Davey suggests that the global market driven man will try desperately to take the UK retailer further abroad outside of the EU. On the contrary the author cleverly comments on the company’s previous experiences abroad, in particular the failure of their Taiwan shop, which closed in July 2008 after only 14 months of trade. Unfortunately, Davey takes this route a little too far by referring to international failures as far back as 1974 when their launch in Canada failed.  This is a little unrealistic when it is obvious to the reader that M&S has implemented new strategies since then and that new CEO Marc Bolland will not be expected to recover mistakes which happened as long ago as 1974. In the reporter’s defense, she does end the article by concluding that if Bolland does “work his magic” and puts his successful marketing tools into practice he could have the potential of doubling M&S turnover from  £9 billion to  £20 billion.

 

Straight from the “horse’s mouth”

 

After reading the opinion of these various business reporters I couldn’t help but wonder what M&S had to say, and more excitingly, what Marc Bolland had to say! In a press release issued by M&S last Wednesday; Sir Stuart Rose positively addresses his audience by highlighting how valuable Bolland’s consumer marketing experience will be for M&S. He ends his speach by saying just how much he looks forward to working with Bolland during the hand-over period in 2010. Although a straightforward source, it must be highlighted that it is only expected for M&S to express positive thoughts in their press release, therefore not that reliable.

 

The most talked about man on the high street- Marc Bolland

 

Reporters were most probably scratching their way to capture the words and opinions of Marc Bolland once M&S broke the news on Wednesday. James Thompson of ‘The Independent’ was quick to share the reaction of Bolland, who stated, “This is simply an opportunity that passed by that I could not miss. I am totally committed to the business to the last moment”. In my opinion these are the words of a brave man whose start at M&S could be rocked by the current instability of the UK retail giant. Unfortunately, reporter Thompson fails to give opinion and so this article remains merely a summary of Bolland’s words.  I can just respond that the press can only give opinion on the basis of his current job at Morrisons and they are probably waiting for him to start at M&S before critically reviewing his work. 

Articles read:

http://news.sky.com/skynews/Home/Business/Marc-Bolland-To-Be-New-Marks--Spencer-Chief-Executive-Sky-Sources-Say/Article/200911315456654?lpos=Business_Third_Buisness_Article_Teaser_Region_2&lid=ARTICLE_15456654_Marc_Bolland_To_Be_New_Marks__Spencer_Chief_Executive%2C_Sky_Sources_Say

http://www.guardian.co.uk/business/2009/nov/22/bolland-marks-spencer-problems

 

http://www.independent.co.uk/news/business/news/bolland-i-could-not-pass-up-chance-to-become-ms-boss-1824053.html

 

 

http://corporate.marksandspencer.com/investors/press_releases/company/ChiefExecutive

 

http://business.timesonline.co.uk/tol/business/industry_sectors/retailing/article6926847.ece

High street retailers fearing Jingle-Hell…

Supermarket giants set to reap in the profits with tactics that high-street retailers will not be able to match over the Christmas period.

 

For any high street shop, whether small or big, the thought of Christmas looming in six weeks time would be exciting in terms of increasing revenue. Well one would presume so…

 

The last twelve months have been torture for British high streets across the country with the implications of the recession and consequential decreased consumer disposable income. This has lead to a fall in sales and has forced retailers to cut costs wherever possible. In such circumstances Christmas is a chance to benefit from higher demand. Despite this, media sources have been reporting that this Christmas sales for high street shops will be crushed by bigger players in the market- the supermarkets! Supermarkets? Yes…supermarkets.

 

The Times- “It’s vicious out there”

 

More than one month before Christmas supermarket giants including Tesco and Sainsbury’s have already launched special promotion bonanzas. These include, in the case of Sainsbury, offering half-price on Christmas cards and decorations making it merely impossible for smaller high street retailers (EG: Clinton’s) to compete with such prices. Asda has already started to prepare for what they believe to be their biggest selling period ever, by doubling their toy space offering over 700 choices of toys. Although at first this might seem a little confident of Asda, especially in a financial crisis, their top-seller (Dolls House- £35) sold 25,000 in one week. This is a sign of the strength of supermarkets because they have the scale/capacity to cut prices in order to stimulate demand. For a high street shop this competitive strategy is something they cannot match, as they may not have the financial security to make such a risk.

 

The Telegraph- What do the supermarkets say?

 

The Telegraph concludes that the premature promotions taking place at the moment are being fueled by the drive for supermarkets to beat each other. In other words, supermarkets are competing in their own market way above high street retailers. Although supermarkets are not fretting high street shops, quite surely the Christmas profits of high street shops lies on what supermarkets do next.

 

Asda’s chief financial officer Judith McKenna, has warned to The Telegraph that, “This Christmas will be the most aggressive on price for a decade”.  This price war has already started with Tesco cutting £250 million worth of consumer prices and Asda responding by cutting £150 million worth of prices. This type of strategic performance is unheard on in early November, as in previous years this is known as being a post-Christmas sales tactic. One could argue that 2009 is a unique year due to the recession and in future non-recessional years such pre-Christmas price cutting behaviour will not occur. In other words, this is merely a reaction to the recession. So how are high street shops expected to respond to the recession?

 

Another issue to add to the high streets’ problems…VAT

 

To add to the fear of the market-dominating supermarkets clouding over the high streets, the government are in talks of pushing up VAT to 20% in January. The VAT cut to 15% early this year that was implied to stimulate consumer spending in the recession, has been confirmed to be reversed back to 17.5% in January, according to a report released by The Guardian last week.  However, the decision to push VAT even further to 20% in response to the UK’s inflation is something the British Retail Consortium are trying to persuade Alistair Darling to avoid doing.  The Times also reports that the VAT increase will cut into UK spending growth in the start of 2010.

 

For high street retailers who may have a struggle this Christmas due to the extensive price cuts by supermarkets, the VAT increase will furthermore pro-long their ability to exceed out of the recession. One might say that the only glimmer of hope for small retailers is January sales but they may have to make even bigger discounts for customers in order to cover the 3.5% increase in VAT. This may be the only way of showing customers that their discounted product is a worthwhile buy.

 

In conclusion to the high street and supermarket Christmas sales war, I feel inclined to recognize that the supermarkets are not doing something “out-of-the-ordinary” but they are simply responding to the recession. By making pre-Christmas price cuts they are tactfully assuring their cash flow for the start of the new year- a time that suggests a slow start in terms of consumer spending. As like the supermarkets, small retailers need to develop their own Christmas tactic, especially if Alistair Darling “stick to his guns” and increases VAT in January 2010.

Articles read:

http://business.timesonline.co.uk/tol/business/industry_sectors/retailing/article6917207.ece

http://www.guardian.co.uk/business/2009/nov/08/high-street-retail-vat-20

http://business.timesonline.co.uk/tol/business/industry_sectors/retailing/article6907891.ece

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/6555313/Supermarkets-start-Christmas-price-war.html

British Airways clocking up costs rather than miles…

On November 6^th the UK’s oldest airline BA reported their worst-ever loss of £292 million, which was even more than the £252 million forecasted by analysts. This has caused a catastrophe for the company who are currently trying to avoid the rumoured Christmas employee strike.

 

What went wrong?

 

‘The Times’ reported that BA’s revenue fell by 13.7% due to poor performance but most significantly due to low demand for seats on the premium airline. These figures are the result of performance 6 months prior to September, which includes the summer period- BA’s supposed busiest time of the year. However, this year saw a different outcome in the summer with revenue down by a all time low compared to summer 2008. One would say that this is the case for any airline operating in the time of a global financial crisis. However for BA, who has cost rich operations, this loss is critical for them. Chief Executive, Willie Walsh commented to ‘BBC News’ that 2009 is the, “most difficult year in history for the aviation industry”.  Despite this, I would argue that Walsh’s problem lies beyond the economic crisis, as internally the company obviously has expenditures and HRM issues.

 

A Christmas strike is just bad timing…

 

 

‘The Guardian’ reports that BA are desperately encouraging customers to make their Christmas bookings with the airline, despite the media uproar of the company’s forecasted strike. One would argue that customers will be reluctant to make bookings with the hanging uncertainty of the employee strike. Walsh, on the other hand, commented, “Talk of a strike is premature and there is a long way to go”. Is this enough to secure customer confidence when purchasing with BA for Christmas? 

 

One can only look at BA’s previous poor performance during a strike at Christmas 2007, when cabin crew refused to strike at a time that was too late for the airline to re-gain the customers, who they had already refunded or passed their tickets onto another airline. This is a tormenting situation that surely BA would hate to be faced with again, especially when demand is already down due to the recession.

 

 

What is BA doing about it?

 

‘CNN News’ has claimed that BA already began the process of cutting costs during the summer of 2009 through more part-time employees, reduced overtime and most significantly- voluntary redundancies.  These initial price cuts have not been enough for BA who have planned to cut a further 3000 jobs by March 2010, using the winter (low season) as an opportunity. With this in mind, it seems only understandable that employees intend to strike when their jobs currently sitting so unstable. With the aim of Walsh showing his determination to cut costs as a strategy for BA, he revealed in August 2009 that he waived his salary resulting in a personal 8.5% pay cut. This is not the first time Walsh has done this, as in 2008 he also waived his bonus due to the disappointing opening of Heathrow’s Terminal 5.  I would conclude that Walsh’s actions against his salary are a positive indication of his drive to “save” British Airways.

 

Is cutting costs and jobs enough?

 

Although BA has been keen to share their financial plans with the media as a method of showing their honesty and determination within the airline industry, the growing strength of competitors could be a further threat to them.  ‘The Times’ reported that low-cost airline Ryanair posted half-year profits of £376.2 million. Although they are only operating on a smaller scale, the company shows positives signs of growth and a healthy cash flow. Furthermore, Ryanair’s CEO Michael O’Leary told ‘The Times’ that they will continue to grow and takeover BA’s demand, as BA “contracts”.

 

On the other hand, maybe Ryanair are on their own with regards to performing successfully in the time of recession. This is because other major airlines, such as Lufthansa, have also been forced to cut jobs as like BA in aid of improving fallen profits.

 

In conclusion BA is in a very “sticky” situation, whereby the external impact of decreased revenue is colliding with the internal issue of a potential Christmas strike. In my opinion, the company needs a new strategy in order to compete against the likes of Ryanair- an airline that was once a minor threat…

 Articles read:

http://business.timesonline.co.uk/tol/business/industry_sectors/retailing/article6867118.ece

http://news.bbc.co.uk/1/hi/business/companies/8299290.stm

http://www.reuters.com/article/rbssRetailDepartmentStores/idUSNWLA470920091001

http://www.guardian.co.uk/business/2004/aug/23/shopping.supermarkets

 

 

 

Goodbye F1 for Britain, unless…

‘For F1 to retain its annual host position in England for the Grand Prix in 2010, it relies heavily on the UK government agreeing to fund some other the increasing costs predicted over the next year. The question is, should the government bail-out this rich-sport?’

 

As you may have realized, the Formula 1 season came to an end in Abu Dhabi on the $250 million race track which is funded by their government. With the new season launching in England next year, will the UK government save F1 in 2010 by funding our Donington track?

 

What’s going on?

 

Since 1987, Silverstone has been hosting the British Formula 1, however with this contract ending earlier this year, F1 chief executive Bernie Ecclestone was set to sign a 17-year contract with Donington Ventures Leisure Ltd for their Donington track. However, in order for the new track to live up to the standards of Silverstone, it is currently undergoing a F1 required re-vamp. This week it became apparent that Donnington Ventures Leisure Ltd couldn’t raise the £135m renovation funds due to an issue with bonds. Owing to this there have been reports that England will axe F1 next year. This has put enormous pressure on F1 and has alarmed UK economists, who know just how important it is for the economy. Business Secretary Lord Mandelson commented, “This is a very British institution and every effort must be made to keep the race in the UK”.

 

How will it effect the UK economy?

 

‘The Telegraph’ reports that the Grand Prix contributes $60million to the UK economy every year. If funds are not located or if the government fails to financially support F1 in England, the UK could lose out on $1 billion dollars over the next 17 years. Furthermore this could result in huge loss of jobs, which are currently filled by the British Grand Prix. There are an estimated 25,000 engineer jobs created from solely the Grand Prix (Google News, 2009). Would it be worth the UK government paying the £135m renovation costs rather than losing out on the long-term income from F1 in England? Tourism and Merchandise sales will also be affected as places such as Silverstone in Kent, are so highly dependent on the F1 season each year.

 

Journalist Will Gray argues that other governments around the world help fund their motor sport industry and so he believes it would be only natural for the UK government to step-in a save F1 for England. Unfortunately for UK fans and Bernie Ecclestone and his team, the UK government refuses for the motor industry to be ‘state sponsored’.  Furthermore Google News quotes Lord Mandelson, who strongly argues that the UK will, “not use taxpayers money to bail-out such a wealthy sport”.

 

 

Will we see a Grand Prix in England next year?

 

The BBC refers to the Donnington deal with F1 as ‘dead in the water’. Alternative solutions are being pursued by Bernie Ecclestone in desperate strive to save F1 in England. A recent report from ‘The Telegraph’ is that Bernie Ecclestone has proposed an extension contract with Silverstone, who will simply not accept his offer.  Reason being that Silverstone fears the estimated annual cost of $25million. In a recession this would only be expected. Although Gray, for Google Sport, puts pressure and blame on the government, it would seem that the problem is deeper than the initial renovation cost. With reference to the information shared by ‘The Telegraph’, race track hosts such as Silverstone, are being crushed by the annual costs that are mounting up with F1. So is the UK government right not to ‘bail-out’ Donnington track? Do they foresee the underlying annual costs?

 

In my opinion the Grand Prix holds too much history and reputation for England, especially with rising stars such as Lewis Hamilton and Jenson Button. Thinking from a financial point of view, I would agree that for the government to fund F1 in England, it would become a regular payment and not a one-off ‘bail-out’ which would cause a media frenzy, not too mention a public uproar. This is especially most likely when there are UK non-government funded sports such as football. Therefore, one may argue that it’s only fair that this rich-sport remains a private affair. On the other hand, F1 contributes so highly to the UK economy, and this is something that the government should possibly strive to keep, whether it does mean bailing Donnington track out…

 

 Articles read:

http://www.google.com/hostednews/afp/article/ALeqM5jX4_En5vxiA_SSIKCJmUDFvX_t_A

http://www.telegraph.co.uk/finance/economics/6480991/Loss-of-British-Grand-Prix-could-cost-economy-1bn.html

http://news.bbc.co.uk/sport1/hi/motorsport/formula_one/8332525.stm

http://uk.eurosport.yahoo.com/formula-1/will-gray/article/1123/