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/

Richard Branson to fly away with Northern Rock…

The entrepreneur hungry Richard Branson has returned to bid for Northern Rock again, after failing first time round in 2007.

 

This week saw transport mogul Richard Branson spark rumours of a possible attempt to purchase Northern Rock when Virgin Money applied to the Financial Services Authority for a banking license. Is it just a rumour or is Virgin set to dominate another British industry?

 

Not so lucky first time round -(Reuters- ‘Virgin applies to FSA for banking license)

 

In a report from Reuters UK they reflected on the rumour that is causing controversy in the press this week. Virgin Money, a company that provides credit cards, insurance and mortgages tried to purchase Northern Rock back in 2007. At the time a confident Branson promised to pay off Northern Rock’s ‘£11billion bank loan immediately, and the rest within three years’ (The Economist).  However, Branson’s wishes were blown out of the window when Northern Rock was forced to accept government support when early signs of a recession started to emerge in late 2007. Since, a takeover bid from Virgin Money has never been mentioned…

 

Two years on and Branson has “itchy feet” again- (The Times- ‘Virgin Money signals new move for Northern Rock)

 

With an eventful two years for the global financial economy hopefully coming to an end, it would seem apparent that Richard Branson, and Virgin Money chief executive Jayne-Anne Ghadia, are timing another attempt to buy Northern Rock nicely with the predicted start of economic recovery.  In ‘The Times’ this week reporters referred to Virgin Money as being one of the biggest players in mind for Northern rock. The bank, which is currently controlled by the European Commission, is said to be selling off “the good bits” of Northern Rock to other banks including Lloyds TSB and Royal Bank of Scotland.

 

The article goes on to tell of the issues that Virgin Money faced previously in 2007, which included the fact that the Treasury for northern rock feared that, at the time, Virgin lacked the required experience to take on the fifth biggest mortgage provider in Britain.  Since then Virgin Money have “upped their game” by employing Sir Brian Pitman who previously run Lloyds TSB.

 

Has Virgin Money got what it takes? – (The Telegraph- ‘Sir Richard Branson to launch ‘Virgin Bank’)

 

Banking editor Phillip Aldrick comments that Britain could fear , ‘ an aggressive’, competitor if Virgin Money is granted a full banking license from the FSA. Although the process can take up to six months to be finalized, bankers are already commenting on Virgin’s plans to launch an online bank allowing customers to make online mortgage applications. Jayne-Anne Gadhia has always openly declared that Virgin Money would be interested in any banking opportunities that come up for sale. This is what is fueling the belief that they are applying for the banking license for a potential Northern rock takeover.  It would seem that the UK “banking world” feel threatened by Branson’s potential power and might possibly hoped that their banking license application is refused.

 

In spite of this, Virgin Money continues to express a healthy position with over 200 employees and an increase to £24million in profit in the year to December 31^st 2008. Although only minimal, could one argue that Branson’s entrepreneurial success will be the driving brain of this new venture?  Or should Virgin stick to planes and trains?

 

If the rumour is true…does the idea of ‘Virgin Bank’ sound plausible?

 

In conclusion to the debates that have been going on in the press this week, I would say that on the basis of Richard Branson’s existing success, Virgin Bank is extremely plausible. However, based on the current status of the financial crisis I am inclined to think that right now Virgin might be trying to “fill some very big shoes” as after all, it is the transport industry that they thrive at, not banking. On the other hand, a small part of me believes that Branson is doing what any other wise, cash-ready entrepreneur would do – snap up a good opportunity!

Articles read:

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6418584/Sir-Richard-Branson-to-launch-Virgin-Bank.html

http://www.economist.com/world/britain/displaystory.cfm?story_id=E1_TDNTVDRS

http://uk.reuters.com/article/idUKTRE59M36D20091023TimesOnline

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6888182.ece

This might seem absurd…but yes the weak pound is good for the UK economy!

The weak pound against the Euro stimulates exportation for UK manufacturers fulfilling the hopes of the government in the ongoing attempt of national economic recovery.

When we hear that the pound has weakened again against the Euro, our holiday to Europe seems that little more painfully expensive. A stroll across the Grand Canal in Venice or a swim in the Mediterranean remains just a dream when we consider just how weak the pound is….From an economic point-of-view, the weak pound opens up opportunity for the UK as a country, despite being disappointing for British people hoping to travel abroad .

How did the pound get so weak?

‘The Telegraph’ blames the long-term weakness in sterling on the extensive national debt and extreme measures being taken to rebalance the UK economy. Furthermore, economist Erik Britton, predicts that, ‘…depreciating we have seen so far is a permanent shock’. This is something that could therefore probe problem for the recovery of the UK in the current recession. A reaction to this, one would think, would be fear. Yet, economists still continue to argue that the weak pound is just what the UK needs. Using the pound against the Euro as an example, it was at its strongest in January 2007 when it reached 1.53. However, the implications of the recession caused the worth of the pound to drop to an all time low of 1.05 in January 2009.

What does the weak pound mean for the UK?

Industry benefits

Opinions of the majority of economists are that the weak pound sparks a strategic increase in exports from the UK and therefore a potential increase in sales for industries across Britain. For European and American companies who are benefiting from a stronger currency compared to the pound, they have been able to purchase higher levels of resources from the UK for a considerably lower prices. This advantage for the UK has not be favoured by everyone with the French Economy Minister Christine Lagarde (Reuters, 2009) arguing that it is "unfair" for the UK to take advantage of cheaper exports for foreign traders. Does the UK care?.......No 

In response to such comments, the UK dispute that increased exports has enabled large manufacturers situated in the struggling UK to “keep-their-head-above-water” during the economic crisis. Vicky Redwood from Capital Economics, a consultancy company, commented in a news report that the competitiveness between UK exporters has intensified due to increased demand from foreign buyers, which in the long run can lead to greater efficiency and productivity. Couldn’t this support the UK through recovery?

Tourism benefits

Anyone living in London would have surely recognized an increase in European and American tourists. With the opportunity for them get more value for their money; London has never seemed so cheap. On the other end of the spectrum, English people cannot afford to go abroad as the Euro and Dollar have become so expensive to purchase. Henk Potts of Barclays Wealth concludes that this has lead to increased sales in holiday destinations in the domestic market. Furthermore, low-cost UK based resorts such as Pontins and Butlins are performing better as British people are choosing to holiday at home.

Ironically, is the weak pound working out for the UK?

As a textbook would say, a country experiences a weak currency, so their exports begin to increase and in return the country’s economy starts to recover. Right? A recent article published by ‘The Telegraph’ suggests that the textbook theory is not quite working out for the UK. Although exports were growing in early 2009, a recent report published by the Office of National Statistics in September showed that exports are not as prosperous as hoped by the government. Reason being, according to Edmund Conway, is that countries (EG: Germany, France and America) who would normally “snap-up” the opportunity of cheap exports from the UK, have been so deep in the recession that they have not been financially able to do so. The government’s hopes of greater exports have been shattered.

My final opinion would be that a desperate UK has been holding onto any glimpse of positive activity for the economy during the recession. Although economists have been responding to the news of the weak pound with the “text book” theory of exchange rates, it would seem that the UK were unconscious to the global recession and instead focused on the national recession forgetting that as foreign traders would not be in a financial position to import from the UK. Finally, the problems with strength of the pound, may give them a drive towards converting to the Euro in many years to come, once the worth of the pound has strengthened.

Sources:

http://www.telegraph.co.uk/finance/financetopics/recession/6163566/Weak-pound-might-not-be-enough-to-rescue-UK-economy.html

http://www.reuters.com/article/usDollarRpt/idUSLM16726720090122

http://uk.biz.yahoo.com/02032009/389/six-reasons-weak-pound-good-economy.html

http://www.telegraph.co.uk/finance/currency/6234980/Weak-pound-is-permanent--economists-warn.html

UK’s pride and joy Marks & Spencer feeling the pinch…

M&S knocked from the top spot retailer in the market to third position giving Sir Stuart Rose the last 18 months of his role to "up their game".

This week saw the release of private market research carried out by TNS Worldpanel, declaring that Asda has taken over Marks & Spencer in the UK and is now the biggest fashion retailer holding the largest market share. M&S sit third place with 9.8% ownership of the market, Primark second with 9.9% and Wal-mart giant Asda claiming the largest share with 10.1%. Although only minimal differences, the psychological consequences are huge for one of the UK’s original stores- M&S. They will certainly be feeling the “pinch” after dominating the clothing retail market for so long and now watching their discount rivals soar above them. Things just aren’t looking so “rosy” for Sir Stuart Rose…..

 

Asda-Gem in the crown (BBC News)

In a methodical report from ‘BBC News’ they managed to sneak in some opinion stating that Sir Stuart Rose of M&S, will be feeling the pressure as Asda emerges as the largest clothes retailer in Britain. His intentions were to “go out on a high” when he steps down from M&S next year. However in my opinion, if performance doesn’t creep up in the near future he may be sighing with relief when he steps down.

 

Managing Director of Asda Anthony Thompson spoke to ‘BBC News’ referring to the current situation as early sign of success commenting, “Our objective was to be number one by volume by 2011, so we’re 18 months early”.  Mr Thompson goes onto discuss the causes of this early success being that of the recession, whereby consumers have become money conscious, looking for clothes that are “quality, style and value coming together”. This is what he believes Asda has and M&S doesn’t resulting in Asda taking over the top spot of UK retailers. Mr Thompson is confident that they will hold this market position because they offer quality clothing, unlike their second place rival Primark. He believes that consumers have learnt through the recession to buy one-off, long lasting pieces rather than “throwaway fashion”. What has M&S got to say about Asda’s confidence?

 

The struggle of M&S (The Times)

Sir Stuart Rose has strived to display a significant difference between the likes of Primark and Asda with M&S. A spokeswoman for M&S commented to ‘The Times’ that the news isn’t a real threat for M&S. This is because they have the prosperous thought of growth in market share over this winter, when their clothing sales generally increase due to their highly regarded knitwear. But maybe a few knitted jumpers isn’t enough to get M&S back on top…

 

Reason being that there are other underlying issues for M&S at the moment. In the same article ‘The Times’ reflects back on a report they made earlier this year when they had an attack on rival Primark when Sir Stuart Rose commented “You cannot sell a T-Shirt in the UK for £2 and pay the designer and pay for the raw material, manufacturer, designer, rents, rates and pay fair living wage to the person who made it. I won’t sell a T-Shirt for £2”. With M&S determined to express their values for corporate social responsibility, it suggests that they are sub-consciously aware that their performance has fallen and so they need to protect the brand for the long term.  Should M&S be worried about growing competition from the likes of Asda and Primark?

 

Although not a solid source, a public blog under the ‘The Times’ article includes a comment made by one blogger sharing their view that “M&S is yesterdays news…like it or not, Primark offers unmatchable pricing.” With the public catching onto the cracks in M&S’s strategy, this may be just be the core of their recent decrease in market share.

 

M&S staying strong (Guardian and Reuters)

In fairness to M&S they have suffered attacks from both Asda and Primark (first and second position market share holders). Sir Stuart Rose has defended his role and showed a competitive long-term strategy for the future, something M&S has always been good at. ‘The Guardian’ discusses how Stuart Rose fought off a £9bn takeover bid from retail giant Philip Green, recognized for his achievements through shops such as ‘Topshop’. In times of a recession and during Rose’s last year at M&S one may think he should ‘snap-up’ the opportunity of a takeover and walk away confident that M&S will be OK.  However, I would conclude that Rose is doing the right thing by promising to improve the clothing strategy of M&S before stepping down in 18 months time. Furthermore, the results of M&S retail performance could be the consequences of the recession and with economists predicting recovering starting by 2010, I think there is still hope for M&S to possibly return to the top. Yet, one could argue that this principle is the same for Asda and Primark too...

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