This case study takes aims at recommending the strategies for the internationalization of the operations of Marks and Spencer in the Chinese retail industry. The researcher aims at identifying these strategies by taking into account the analysis of the internal and external factors carried out by using various analytical tools for identifying business strategies. The use of different strategy evaluation models has helped the researcher to present important findings regarding the internationalization strategies of Marks and Spencer.
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Background to the Study
Retailing Industry is among the largest industries in the world, which provide necessary services to consumers and also a livelihood to many across the globe. The retail industry has progressed undoubtedly progressed at a very fast pace from basic household-based units selling their products to domestic consumers to large multinational corporations that aim at serving the consumers across the borders. As, Wal-Mart, a US-based retailer company has become the world’s largest retail business organization with total monetary reserves which amount to USD 312 billion. Wal-Mart competes with huge global retail businesses, which includes Carrefour from France, Metro AG from Germany and Tesco PLC from United Kingdom (Alon 2000; Govindarajan and Gupta 1999).
All these retail businesses have expanded their respective business operations by making entry into global markets to fulfill the needs and requirements of the across the world. This approach from retail giants attracted huge investments from all over the world in the retail sector and a huge number of retailers emerged globally seeking to globalize their operations, reach customers everywhere and to reduce their dependence on the revenue from local operations. Marks & Spencer from the UK also became a part of this globalization scheme, although the strategies of the company proved to be largely ineffective in this respect, particularly in the European region and also in China where they recently tried to implement their internationalization strategies (M&S 2009).
Marks & Spencer is a part of the UK’s retail sector and like others, it has also faced jolts of the recent economic crisis (Alon 2000). The retail sector has been the most affected of all, due to the huge gap between demand and supply (Capell 2002). While the retail sector has struggled to maintain profit levels, the competition in the industry soared up as the retailers went for offering products at cheap rates to increase consumers’ spending level, which although comes along with reduced margins. Marks & Spencer’s reaction to this situation of intense competition was the closure of low earning or loss-making stores in the UK. As reported in the Annual Report 2009, “value market share in women’s wear fell from 11.3% to 11.1% in the face of tough competition on the high street, strong downward pressure on prices, and a slowdown in customer spending” (M&S 2009). The increased competition acted as a catalyst for the development of internationalization strategies, which were aimed at diversifying the business risk. The internationalization plans were also justified while considering the global expansion of Tesco PLC, which has been Marks & Spencer’s major competitor in the UK.
Apart from the strategy of the company to strengthen its business in the UK, there has been a strong need felt for expanding its operations globally, which will place Marks & Spencer in a better position as the company would not be solely dependent on the revenue generated from UK business. The need for expanding its operations was also felt by other analysts, as the following statement was made in Business Week magazine, which suggested Marks & Spencer to internationalize its operations, “With 85% of sales and 94% of profits coming from Britain, the company needs to diversify” (Business Week 1998). This statement can be connected to the below-par performance of Marks & Spencer from the year 1997. From 1997 and onwards, the company found itself involved in a huge crisis in the form of poor performance relating to its business operations and continuous changes in the management of the company (Jackson and Sparks 2005). The new management of the company decided to change the company’s strategies in 2001 and in doing so, the management of Marks & Spencer decided to put more emphasis on the deteriorating condition of the company’s domestic operations and to let out the global outlets through franchising agreements. The decision to withdraw Marks & Spencer from the international retail market was based on the continuous loss suffered by the company due to the economic crisis in Asia in the late 90s. Marks & Spencer’s Hong Kong business was as a result offered for franchising (Jackson and Sparks 2005). A brief glimpse of different phases of progress and downfall of Marks & Spencer in the past, which also includes its internationalization efforts, has been shown in the following table as given below.
Table 1: Phases of Ups and Downs in International Operations of Marks & Spencer. Source: Press Reports, Marks & Spencer Annual Report 1996, (Jackson and Sparks 2005).
|PHASE 1 – Exports|
|1950s||Marks & Spencer sold its products using NAAFI|
|1960s to 70s||Marks & Spencer starts selling its products through Dodwell|
|1981||Marks & Spencer launch its offices in Hong Kong with the mission to increase its exports|
|1987 (February)||Marks & Spencer and Dodwell terminate their agreement|
|1988||Marks & Spencer appoints its Divisional director in Hong Kong|
|PHASE 2 – Stores Opening|
|1988 (May)||Opening of 1stOutlet in Hong Kong|
|1990 (October)||Opening of 5thOutlet|
|1993 (December)||Main Board Director appointed for monitoring Asia – Pacific operations|
|1997 (July)||Hong Kong gets back to China’s control|
|PHASE 3 – Crises|
|1997 (October)||The economic crisis in Asia begins and lasts till the year 1999|
|1998 (May)||Opening of 10thoutlet|
|1998 (November)||Restructuring related to staff|
|2001 (March)||Hong Kong business offered for franchise|
|2001 (December)||Franchise operations ended|
“If M&S believes that its imported packets of egg fried rice or jars of black bean sauce are going to be a smash success in China, at London prices, then it is going to get a Shanghai surprise…… No one in Shanghai is going to make M&S a destination store when all that is on offer is a meager selection of frozen potatoes, fish pies, and pizza. On the clothing front, the displays looked an awful jumble” (Moore 2008). However, notwithstanding what it has failed to achieve back in 2008, Marks & Spencer went for joint ventures with various franchising partners, particularly in Greece, Europe, and India, to speed up its internationalization mission (M&S, 2009). At present, Marks & Spencer is running 600 outlets in the UK and a total of 285 stores in 40 countries all over the world. In the financial year 2008-2009, the annual turnover of Marks & Spencer from international operations amounted to 7.9 percent of the total turnover in the year (M&S 2009).
However, keeping in view the unsuccessful internationalization campaigns of the company, it is important to consider and select those strategies for globalization which are not only effective but also implemented timely based on a careful analysis of the situational requirements of the organization itself and also of the region where it seeks to expand its business operations. This case study is aimed at exploring the theoretical basis for the process of internationalization in general and recommends strategies for Marks & Spencer to expand its business operations.
Research Objectives and Questions
To find out the ideal strategies for internationalization and to give suggestions on the existing strategies in this respect for Marks & Spencer, it is pertinent to sort out the reasons which are considered fundamental for entering into a particular market in a foreign country, the conditions prevailing in those identified markets which primarily include market competitiveness, cultural norms, domestic likings and disliking, perceptions, etc. and also the available opportunities for the new entrants in the market.
To do so, the researcher in this study has chosen to analyze China as the target foreign market for Marks & Spencer to enter in. The motivation for choosing China as the target foreign market has come from the fact that the strategies and plans made by Marks & Spencer about expand its business in China have been proved as ineffective. It is, therefore, a good opportunity to analyze the situation in this research work and propose suggestions and recommendations in this regard to improve the strategic moves made by Marks and Spencer in China.
In light of this motive, the research objectives and questions set for this study are given as follows:
- What are the reasons that make M&S enter the Chinese Market?
- What’s the situation like in the Chinese retail market?
- What are the suitable strategies for M&S to enter the Chinese market?
- If a joint venture is preferred, who are the potential partners that M&S can form into a joint venture with?
This research work is aimed at suggesting suitable strategies for Marks & Spencer to enter into the Chinese retail market in light of the internationalization process while considering the factors which are regarded as the main reasons for Marks and Spencer to enter into the retail sector of China. While suggesting a strategy in this study, the researcher disregards the presence of Marks and Spencer in China through a wholly-owned subsidiary in Shanghai. In addition to this, the study also suggests those companies which can be considered suitable as partners in a joint venture with Marks and Spencer, if a joint venture is preferred. Furthermore, the research work aims at linking the existing theories relating to the internationalization process with actual practices in particular markets and presents a more theoretical based view on the complex issue of internationalization.
Scope of the Research Work
This study, as mentioned earlier, is aimed at suggesting suitable strategies for Marks & Spencer to enter into the Chinese retail market in light of the internationalization process. In light of this objective, the researcher aims at linking the theories identified in the literature review to Marks and Spencer’s situation. In addition to this, the researcher studies the point of view of Marks and Spencer regarding the reasons as to why they want to enter the Chinese retail sector. In the last part of the analysis of this research work, the researcher aims at identifying the customs and norms prevailing in the Chinese retail sector to identify the strategy or a combination of strategies considered suitable for Marks and Spencer in China. The overall scope of the researcher is, therefore, limited to the ability of the researcher to collect useful information and then assemble it in such a way that meaningful outcome to the research can be achieved. Moreover, the scope of the research work is affected by the time allotted for completion of the report.
This chapter of the study provides a review of the available literature on the subject in light of the theories related to the concept of internationalization of the organizations in the global market. The chapter discusses theories in this respect which are regarded as the most applied and followed theories while discussing and analyzing the concept of internationalization about business organizations. The chapter discusses two broad concepts concerning the internationalization of the businesses, which are “The Incremental Stage Approach” and “The Born Global Approach”. The incremental stage approach further takes into account the theory of product life cycle presented by Raymond Vernon (1966, 1971 and 1979) and the Uppsala Internationalization Model presented by Johanson and Wiedersheim-Paul (1975), Johanson and Vahlne (1977). Moreover, the chapter also presents the arguments and criticism related to the theories and models discussed to establish a balanced approach towards this study.
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The Incremental Stage Approach
In light of the stage approach, business enterprises usually follow a step by step approach towards their development. At first, a business organization tends to operate in its country of origin and then gradually it starts to expand its operations and activities on the international stage. There are two major models developed in the past that are based on this approach. These models include the “Product Life Cycle Theory” introduced by Raymond Vernon (1966, 1971, and 1979) and the “Uppsala Internationalization Model” introduced by Johanson and Wiedersheim-Paul (1975), Johanson and Vahlne (1977). These models are discussed as under:
The Product Life Cycle Theory
Vernon (1966, 1971 and 1979) states that the process of internationalization of an organization is based on the theory of product life cycle. This phenomenon was particularly identified by Vernon (1966, 1971, and 1979) in which he stated that organizations followed an approach that included different phases of production. In the first phase, organizations produced their products in the United States and exported them to other parts of the world. After they achieved stability in this phase, they developed production facilities in other advanced regions and produced their products to fulfill the demand of their products in that respective region. This phase was then followed by the entry of those organizations into markets that were comparatively less advanced in terms of technology and other infrastructural requirements. However, as the organizations developed their skills to produce their products, these advancement gaps were removed. These observations can be specifically formulated as three different stages for a product’s production which is as follows:
New Product: Development Phase
As identified by Vernon (1966, 1971, and 1979), the organizations in the United States tend to produce those products domestically which are intended to satisfy the demands of the consumers, who are placed in high-income base (Vernon 1966). The reason behind this is that the income level of consumers in the United States is comparatively higher than other countries’ markets. Apart from this, Vernon (1966, 1971, and 1979) also states that the required facilities for producing goods will be found in the United States, even though a majority of the organizations hold other production factors in other regions which are more cost-effective.
Organizations in this phase consider factors other than those related to costs (Vernon 1966). These factors include the “communication infrastructure” and “external economies”. While taking into account the needs and requirements for the organizations in this first stage, due to the non-standardization of the products being produced, it is more viable for organizations to become more flexible rather than searching for cost-reducing techniques. This approach would allow them to develop their products and production techniques further and attain the desired standardization of their products (Vernon 1966).
Growing Product: Maturing Phase
The increase in the demand of the consumers is expected to determine the standardization of the product to some extent and then consequently there is a decreased requirement for flexibility on the organization’s part (Vernon 1966). In this phase, organizations tend to focus on economies of scale using increasing their output levels. On the other hand, the demand for the goods produced by the organizations locally also begins to increase in regions that are regarded as advanced and developed countries or regions.
As a result, the business enterprises explore the emerging and new markets for their products and find out ways to make entry and erect their production lines to fulfill the demand of their products in the new market. If production in the new markets turns out to be cost-effective, the organizations may think of reducing their levels of production back in home and export the products produced in foreign lands to home for fulfilling the local demand (Vernon 1966).
Standard Product: Standardization Phase
When the organizations achieve advancement in their production techniques and can produce their products in a standardized manner, they tend to shift their production facilities to regions that are comparatively less advanced and are underdeveloped (Vernon 1966). The primary motive behind this move is to produce goods at reduced costs. However, the possibility of doing so rests on the preconditions that the organizations intending to relocate their production facilities in new underdeveloped regions are indigenous in terms of their production needs and requirements and are well aware of the market conditions and the related information (Vernon 1966). Once established; these new arenas serve as the major production locations for the organizations, which not only fulfill the local demand in the region of operation but also satiate the needs of other markets in which the organizations have their share (Vernon 1966).
However, while keeping aside the theoretical assumptions being mentioned in the life cycle of the product, there are many elements which are not taken into account and Vernon (1979) has also shown his agreement in this respect by saying that “some of the starting assumptions of the product cycle hypothesis are clearly in question” (Vernon 1979). The business enterprises in the fast-changing world of today may not be ready to wait for these phases to elapse before entering into new markets and there may be various products launched in various markets at a time without having regard to the factors identified in the first two phases of the life cycle. This approach has become a trend due to the fruits of globalization; the geographical and cultural differences have been washed away with the wave of globalization and henceforth the existing businesses find themselves more able to reach geographically dispersed regions.
As, the enterprises dealing with the production of electronic items have such a huge customer base, that producing at home or some other single isolated place is neither economical nor justifiable (Vernon 1979). Keeping in view these global changes in mind and the significance of his model, Vernon (1979) summed up the situation by saying that although the applicability and practicality of the product life cycle model has been undermined by the prevailing circumstances, the significance and the relativity of the theory still holds its position by way of guiding particular business concerns. In addition to this, he also suggested that the model presented by him could still be adopted by small and medium enterprises that have not yet made their entrance on the international stage through establishing production facilities for their products in regions other than the place of their origination (Vernon 1979).
The Uppsala Internationalization Model
Johanson and Vahlne (1977, 1990 and 2006) presented the Uppsala Internationalization Model. The model presented states that “enterprise gradually increases its international involvement” (Johanson and Vahlne 1990). It is argued in the model that the perceived gaps by the investors and organizations serve as the major hindrance in the process of internationalization of the business operations. These gaps are shaped by the variances in the languages spoken in different parts of the world, the cultural differences, differences in political setups in different countries and various other factors.
These gaps tend to create virtually a much larger distance than the actual geographical distances between the organizations and the markets where they have not yet marked their entry, although these are only perceived (Johanson and Wiedersheim-Paul 1975). However, when an organization initiates its international operations in those markets where it perceives that the identified factors creating the gap are comparatively less forceful. Eventually, as the organization’s operations increase in the international settings, the acquisition of knowledge and increased commitment towards internationalization of operations allow the organization to make its entry into new markets which were previously conceived to be at greater distances (Johanson and Wiedersheim-Paul 1975). The overall idea of the model may be depicted in the following figure:
Figure 1: Uppsala Internationalization Model: Theoretical and Operational Levels.
|Market Knowledge Commitment Decisions|
|Market Commitment Current Activities|
|Establishment Chain||Perceived Gaps|
| ||Selection of new markets: markets with increasing gaps, which are perceived, are successively selected.|
By this idea, it is pertinent to differentiate between two types of knowledge gained by the organizations going through the internationalization of their operations. This differentiation shall be made based on “objective knowledge” and “experimental knowledge”. The objective knowledge is generally taught rather than acquired, whereas the experimental knowledge is acquired through experiences gained through expanding operations. Out of these two types of knowledge, the experimental knowledge holds a significant position in reducing the perceived gaps and distances (Johanson and Vahlne 1990). While reviewing their ideas in the model presented by them, Johanson and Vahlne (2006, p. 175) emphasized that “learning and commitment building is more about discovering and constructing opportunities […] involving other firms in the network” (Johanson and Vahlne 2006). This confers that the opportunities and the new openings being identified by the organization at a specific period is largely dependent on the level of knowledge gained and commitment shown by the organization.
Apart from the efforts shown in the Uppsala Internationalization Model to add further explanations to the Vernon’s Product Life Cycle, various critics have made their criticism in this respect by considering the development of the organization in its own environmental set up to develop a further explanation of the process of internationalization. As Chetty et al. (2004) concluded his opinions on the model by stating that the Uppsala Model is highly deterministic, the stages identified by the model are often neglected by the organizations while moving towards internationalization, the model has dealt with a highly complex situation in a manner which is unnecessarily simplified and the model also does not take into account the acquisitions and the effects posed by the factors which are outside the environment in which the organization operates (Chetty and Campbell-Hunt 2004). Apart from these issues highlighted by Chetty et al. (2004), there are three major weaknesses or areas of concerns highlighted by the critics generally:
- Keeping in view the “External Validity” of the model, it is argued that is there any reason to believe that the Uppsala Model, which was developed while considering the internationalization process of various organizations in Sweden back in the 70s, is still applicable and relevant in the modern world of today (Doclib 2011).
- On the other hand, a much more important shortcoming identified, concerning the operational level of the Model, is the presentation of the internationalization process as a “deterministic” and “irreversible process” in the discussion related to the experimental knowledge (Doclib 2011).
- Lastly, it is a general argument that the model lacks the required theoretical power due to the consideration of “explanatory variables” in a limited number. Moreover, the idea presented that the commitment and acquiring knowledge comes after one another, but the model fails to explain that what comes first in this process; commitment or gaining knowledge? (Doclib 2011).
While considering the approaches followed by the two models, it can be established that when these models are taken into account in isolation, it may not be possible to address and understand the internationalization processes of the originations operating in the modern and global market settings (Andersson, Gabrielsson and Wictor 2004). In consequence of this, a new approach has been developed to fill this space. The approach is called “The Born Global Approach”.
The Born Global Approach
Several small and medium-sized enterprises (SMEs) are not seen to be following the “Incremental stage Approach” they initiate their international operations right from their inception. These types of organizations tend to mark their entry on the international stage early on in their life and also enter into various new markets at the same time. In light of this, these types of organizations are often termed as “Born Global” (Doclib 2011).
The terminology and idea of “Born Global” organizations was initially presented through a survey conducted for the “Australian Manufacturing Council” by Mckinsey consultants. It was stated in the survey report that these types of organizations compete successfully with other companies especially with MNCs (Multinational Companies) through their vast geographical spread and reach. Moreover, the report also stated that the born global organizations are found everywhere, in every industry and sector and are taking part in the competition with other giants quite successfully (Doclib 2011). Their success is based on the following attributes:
- They can fulfill the demands of the consumers which are new;
- They tend to earn benefits out of the opportunities available due to advancements in technology and cost reduction techniques.
- Advancement in information technology and other communication means allow these organizations to spread their operations in areas which are geographically dispersed.
- Moreover, being small in size, they have the advantage of being able to adapt to the changes in the environment surrounding them and display much more flexibility in their actions (Doclib 2011).
This approach is also followed in the study conducted by Oviatt and McDougall (1994). In this study, the authors named the SMEs as “International New Ventures”. The International New Ventures are defined by Oviatt and McDougall (1994) as “business organization that from inception, seeks to derive significant competitive advantage from the use of resources and the sale of outputs in multiple countries” (Oviatt and McDougall 1994). These new ventures are characterized as originating as international organizations, in which the resources are inducted from international platforms. This approach distinguishes them from organizations that follow the incremental stage approach, i.e. those organizations which tend to initially develop themselves locally and then subsequently go for internationalization with a careful analysis of the environmental conditions and their relative competitiveness (Oviatt and McDougall 1994).
Oviatt and McDougall (1994) presented an analysis of the organizations which fall under the scope of New International Ventures. This analysis categorized the new ventures into three classes (Oviatt and McDougall 1994).
New International Market Makers
These are the organizations which focus on generating income “by moving goods from nations where they are to nations where they are demanded”. These organizations make use of the conditions prevailing in different regions and build new markets (Rasmussen and Madsen 2002).
Geographically Focused Start-ups
This type of new venture aims at utilizing the production resources, which belong to those regions which are external to them, to fulfill the requirements of their product in a specific area of operation. “Competitive advantage is found in the coordination of multiple chain activities, such as technological development, human resources, and production” (Rasmussen and Madsen 2002).
These organizations tend to attain “significant competitive advantage from extensive coordination among multiple organizational activities, the locations of which are geographically unlimited”. These types of organizations ensure their global presence by way of adopting strategies that are proactive in obtaining resources for production from everywhere in the world and then making available their products in every part of the world. Although these organizations may have to face initially some disadvantages in the form of lower production skills and coordinating skills in geographically dispersed regions, but when these shortcomings are eliminated these organizations enjoy such competitive advantages which are unmatched and unsurpassed, primarily due to the strengthening in their operational activities through increase knowledge and the formation of strategic alliances with other players in the market (Rasmussen and Madsen 2002).
Factors Having Impact on the Choice of the Global Approach
The following are the major factors or determinants which make the organizations to choose a particular approach while going for the internationalization of the business operations.
Uncertainty in the environment of the organization
Due to the continuous variations in the surrounding environment of the organizations, the concept of “Born Global” has held its place (Laanti, Gabrielsson and Gabrielsson 2007, Rasmussen and Madsen 2002, Oviatt and McDougall 2000). In light of the conclusions reached by Madsen and Servais (1997), it is possible to categorize the changes into three major portions which are brought by the organizations in response to the changes in the surrounding environment (Madsen and Servais 1997). These changes are as follows:
- Greater specialization in the production techniques and therefore more intermingling of markets;
- Sourcing of factors of production at global level, which in turn causes many business sectors to diffuse;
- The internationalization of the capital and financial markets (Madsen and Servais 1997).
The above-mentioned trends have been established due to fundamental technological changes taking place all over the world. As, improved and advanced production techniques have enabled the organizations striving for internationalization to exploit new markets, to access the world with greater ease, reliability and lower costs due to developments in the communication and transportation means and also due to advancements in information technology.
Rasmussen and Madsen (2002) have added their opinion in this respect by saying that these changes in the environments surrounding the organizations tend to create conducive conditions for the organizations and the businesses in general using
- Reducing the barriers in global trade,
- Improving or changing stiff regulations and allow privatization of the organizations.
- Enabling local markets to become more mature,
- Swift flow of information from market to market,
- Improvement in the communication and transport channels,
- High use of technology,
- Increased competition,
- Free flow of factors of production from one region to another and so on (Rasmussen and Madsen 2002).
The Domestic Market
The role played by the domestic markets has been taken into account by various researchers, as, Gabrielsson et al. (2008) and Madsen and Servais (1997). A local market that is thought to be not so able to attain the internationalization process is one of the most important determinants of the internationalization process (Madsen and Servais 1997, Gabrielsson, et al. 2008). As a result, it is observed that these types of organizations are present in large numbers, particularly in those market environments which are of a small size and have developed themselves (Oviatt and McDougall 1994).
Industry and segment
Few researchers have argued that the particular features and characteristics have a huge impact on the operations and prospects of the new ventures and therefore these factors determine the “Born Global” feature of these organizations (Fernhaber, McDougall and Oviatt 2007).
The new ventures are faced with the problems of lack of resources related to production which may be tangible or intangible. It is due to these reasons that the organizations are now focusing on gaining prior knowledge of the market in which they intend to enter in. This prior knowledge allows these organizations to pre-empt the shortcomings associated with the market in consideration (Autio, Sapienza and Almeida 2000).
Entrepreneur and management previous experience
The past researchers have argued that the skills acquired by the entrepreneurs, through their continuous operations globally and interaction with global forces play a significant role in promoting the internationalization of the organizations to which they belong. It is further argued that those organizations which have leaders and managers having prior experience in the international context tend to become and adopt the “Born Global” approach more easily as compared to those organizations which lack these types of individuals (Madsen and Servais 1997).
The Organization’s Innovativeness
The innovative skills of an organization account for the ability of the organizations to put forward new techniques and ideas related to improving the growth of its operations and activities and to develop further its products and services (Karlsen 2007). In the context of born global approach, the level of innovative skills developed by an organization is dependent upon the level of globalization.
It is a fact that networks, whatever they may be of, and cooperation play a significant role in making the internationalization of the new ventures a success (Chetty and Campbell-Hunt 2004, Madsen and Servais 1997).
The process of internationalization of the organization allows an organization to establish relationship and connection in different regions and markets by way of:
- Making new relationship,
- Developing further the already existing relations, or
- Creating networks for establishing new and maintaining the existing relationships using its existing relationships (Madsen and Servais 1997).
This chapter has discussed the existing theories and models on the subject of internationalization of the organizations. The chapter takes into account the two major broad approaches; the incremental stage approach and the born-global approach to review the literature on the subject of this study. The two approaches are further reviewed in light of the principles on which they are based. The discussion of the theories also takes into account the arguments and criticisms made by various authors in the past on the identified theories and models in this chapter.
This chapter of the study discusses the research methodology adopted by the author while formulating and recommending the internationalization strategies for Marks and Spencer. While keeping in view the research objectives and questions in mind, the author in this case study of Marks and Spencer has made use of the previous studies in developing an initial understanding of the methodology to be adopted in this study. Moreover, this chapter discusses the techniques and methods which are employed by the researcher to recommend the internationalization strategies for Marks and Spencer. The chapter also presents the justification of research methodology being employed in this study.
Adopted Research Methodology
The researcher in this study adopts the case study approach to recommend a strategy for the internationalization of Marks and Spencer. Apart from the fact that the case study is criticized based on the methodology adopted while collecting data and other information, the importance and significance of using them are also recognized, particularly where detailed explanation and understanding of a particular individual or scenario is required. While considering the qualitative and quantitative aspects of the research works, the researcher follows a mixed approach in analyzing the data collected and discussing the trends and analyses found therein.
Case Study Approach
The definition of case study approach followed in a research work is given by Yin (1984) as follows:
“An empirical inquiry that investigates a contemporary phenomenon within its real-life context; when the boundaries between phenomenon and context are not evident; and in which multiple sources of evidence are used.” (Yin 1984)
Furthermore, Yin (1984) has categorized case studies into three main classes, which are discussed as follows:
Exploratory Case Studies: These case studies are aimed at exploring any kind of relationship in the available data and information which suits the objectives of the researcher. This type of case study requires the researcher to carry out some groundwork and preliminary data collection before identifying the questions to be answered based on the research work (Zainal 2007).
Descriptive Case Studies: These case studies are aimed at describing what is at hand. As the researcher in this type of case study comments and describes the data which has been collected for the research work. To lay down strong foundations on which the discussion is based, the researcher is first required to put up a convincing theoretical background, which serves as the basis of the discussion in the research work (Zainal 2007).
Explanatory Case Studies: In this type of case study, the researcher conducts a careful in-depth examination of the data and other information collected and presents an explanation in respect of the identified relationships and phenomenon in the data and other supportive information. An explanatory approach is also used in such case studies which aim at correlating certain variables (Zainal 2007).
The present case study is explanatory. Keeping in view the objectives and research questions of this study, the researcher aims at presenting and explaining the available information related to Marks and Spencer. This aim is best achieved by using the explanatory case study approach and based on the explanation of the identified facts and other related information; the researcher can present recommendations regarding the internationalization strategies for Marks and Spencer.
Strategic Tools Used
The researcher in this research work uses various strategic tools to analyze the conditions in which Marks and Spencer are operating and to find out the available strategic options for internationalizing its business activities. The strategic tools which are being used by the researcher are “SWOT Analysis” and “Porter’s Five Forces Model”. The selection of these tools is made based on the expected outcomes of using them. An overview of these tools is presented as under.
SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats. SWOT Analysis technique was developed by Albert Humphrey. This strategic tool helps in identifying the areas where a business organization is strong and weak as compared to its competitors. Whereas, the analysis also reveals the available opportunities for the business concern and the threats it may face in any identified situation (Menon 1999). In short, the significance of identifying Strengths, Weaknesses, Opportunities, and Threats in this analysis is described as follows:
- Strengths: the features of the organization in consideration which enables that organization to have some advantages as compared to other competitors in the market.
- Weaknesses: the features of the organization which presents disadvantages to the business in comparison with other rivals in the market.
- Opportunities: these are the opportunities for the business concerning a particular market or in case of a general scenario for achieving higher sales and profit targets.
- Threats: these are the factors in the environment in which a business organization operates which poses certain threats concerning the activities of the organization or the future strategies developed by it (Menon 1999).
Porter’s Five Forces Model
The Porter’s Five Forces Model helps develop strategies for business organizations. The model was presented by Michael E Porter in the year 1979. In his model, Porter (1979) identified five major forces that play a deterministic role in a business organization’s entry into a new market. Out of the five forces identified by Porter (1979), three forces relate to external factors, whereas the rest of the two forces are internally driven (Porter 2008). The five forces identified by Porter (1979) are as follows:
- The threat of new competitors’ entry in the market,
- The threat that substitute products or services are introduced,
- The power with which customers bargain,
- The power with which suppliers bargain and
- The level of competitive rivalry in the industry (Porter 2008).
The adopted research methodology for this research work is justified on the basis that the case study approach allows the research to conduct an examination of the information at hand within the scope of the research work (Yin 1984). The case study approach also enables the researcher to analyze the data collected in qualitative and quantitative terms. Moreover, the carrying out of qualitative analysis in detail allows explains scenarios as observed in the real-life, which might not be highlighted while using other approaches. Apart from this, the nature of this research work requires the researcher to adopt the case study approach in designing strategies for internationalization of Marks and Spencer. Also, the use of strategic tools in this research work is justified on the premise that these identified tools assist in designing the strategies for businesses in general and Marks and Spencer in particular.
As discussed earlier that this research work follows a mixed approach; encompassing qualitative and quantitative approaches in conducting the analysis, therefore the researcher makes use of various data sources for collecting the information required for the analysis of the situation in this study. In this regard, the researcher has made use of financial and non-financial information about Marks and Spencer through the website of the company and annual reports. Moreover, the information relating to the company has also been obtained from research papers, journals, articles, websites, books, and newspapers. Also, the researcher focuses on reviewing the past studies conducted on the internationalization strategies of Marks and Spencer to develop an understanding of the views presented by other researchers.
This chapter lays down the basis on which the researcher analyzes this research work. The chapter explains the research methodology followed in this study. The researcher adopts an explanatory case study approach together with a mixed approach to quantitative and qualitative analysis. Moreover, the strategic tools such as SWOT Analysis and Porter’s Five Forces Model, are also used by the researcher to help in identifying and recommending the strategies available to be applied and followed by Marks and Spencer. The chapter also discusses the justification for the selected research methodology and the sources used by the researcher to collect the required data for analysis.
Findings and Analysis
This chapter aims at finding out the basis for developing and recommending strategies for Marks and Spencer to internationalize its business operations in the context of market conditions, competitiveness in the environment, potential for expansion, the strengths and weaknesses of the company and other relevant factors. In this chapter, the researcher addresses the areas where Marks and Spencer is strong and those areas in which it is weak. Furthermore, the opportunities and threats for Marks and Spencer have also been analyzed.
This analysis has been carried out by using SWOT analysis. Apart from this, the external factors have been analyzed by using Porter’s Five Forces Model. Based on the findings from these analytical tools, the researcher presents a discussion that takes into account the research questions and objectives of this study. The main research question, i.e. recommending the strategies for Marks and Spencer to enter in the Chinese retail market through internationalizing the business operations, has also been discussed in the discussion part of the chapter. The strategies recommended in this chapter are not only based on the findings of the analysis in this chapter but also takes into consideration the theories and models discussed in the chapter “Literature Review” while laying the foundations for Marks and Spencer’s approach towards internationalization.
Analysis of Internal and External Conditions
To analyze the internal and conditions for Marks and Spencer, SWOT Analysis and Porter’s Five Forces Model is used respectively. These analytical tools present an in-depth analysis, which helps determine the strategies for Marks and Spencer to internationalize its operations in the Chinese retail market. Following are the analysis in light of the identified analytical tools:
This analysis attempts to present a comprehensive analytical review of the internal conditions of the company “Marks and Spencer”. As embedded in the acronym ‘SWOT’, the analysis aims at analyzing the strengths and weaknesses possessed by Marks and Spencer indigenously and in contrast to its competitors. Moreover, the analysis also focuses on the available opportunities for the company to excel and expand its operations internationally and the threats or challenges that are to be encountered while doing so. This analysis is presented below with a detailed discussion on each of the above-mentioned areas about Marks and Spencer.
The major strengths or areas where Marks and Spencer is comparatively at a better position include maintenance of high quality in the products developed by the company, maintenance of friendly relationship with customers, making available a good environment for customers to shop and the managers training facilities at Marks and Spencer. These strengths are individually discussed as under:
The success of Marks and Spencer has been the outcome of the quality of the products offered by it. The products in which Marks and Spencer deal are of high quality and this fact is evidenced while considering the customers’ preference to buy Marks and Spencer’s products as compared to the products offered by other competitors of the company (CIAO 2002).
Customer Service and Relationship
Marks and Spencer are regarded as one of the most efficient companies in maintaining good customer relationships and the provision of services whether it is after-sale or in the outlets of the company. This advantage gives Marks and Spencer an edge over its rivals and establishes goodwill in the eyes of the existing and potential customers (Christie 2002).
The shopping environment at Marks and Spencer’s outlets is full of comfort and convenience for the customers. The state of the art designing and decorating techniques employed by the company is in itself an attraction for the buyers (Rungfapaisarn 2001).
Marks and Spencer has a very strong and well-established management training system in place. The management training system offers learning with work side by side (Retail Technology 1999).
The weaknesses which are found in the operations and activities of Marks and Spencer include lack of segmentation in the clothing, inefficient management of stocks and inefficient usage of outlet space. These weaknesses are discussed individually as under:
Lack of Segmentation in Clothing Line
Marks and Spencer lacks segmentation and innovation in its clothing lines. The available stocks need to be updated while keeping in mind the demands and requirements of the customers. The modern customer looks for branded items. The available clothing options at Marks and Spencer lack famous brands. This might be the result of the company’s failure to understand the emotional appeal of the brands for the customers (Jobber 2001).
Inefficiencies in Stock Management
There have been instances where customers have faced inconvenience, due to unavailability of stock, while shopping at Marks and Spencer through the internet. This problem not only reduces the confidence and trust of the customers but also affects the overall goodwill of the company.
Wastage of Space in Outlets
It has been observed that Marks and Spencer have faced many problems in managing its space in the outlets. There has been a consistent increase in the outlet space but the increase in the sales was not reported to be that much. Henceforth, it is required that Marks and Spencer shall focus on developing new product lines (Stewart 2000).
There are several opportunities for Marks and Spencer to cash. Out of these opportunities, usage of e-commerce, investment in healthy food items and internationalization are major ones. These are discussed as under:
Usage of e-commerce
The modern world of today requires the companies to equip themselves with the available technological developments. By doing this organizations can achieve competitive advantage over their rivals. Marks and Spencer’s nature of operations require the company to develop internet portals for facilitating customers to shop online which will allow the customers to access the outlets of Marks and Spencer from different parts of the world. This will not only improve the sales volume of the company but will also help in introducing the company and its products in regions where there is low or no customer base of Marks and Spencer.
Investment in Healthy Eating Food Items
Today’s consumers are more aware of their health and diet than ever before. This awareness is consistently increasing by the passage of time. The health and diet awareness in consumers have shifted their spending on food items significantly and has offered many opportunities for the existing providers of food items. In light of these developments, Marks and Spencer have the opportunity to invest in those food items which are considered healthy and offer complete nutritional requirements. This can be extremely favorable for the company while considering the Chinese retail market. The huge population of China offers great attraction in this respect to Marks and Spencer (Sung, et al. 2002).
Market Expansion: Internationalization
The globalization trends all across the world have motivated business entities to go international. Keeping in view the market conditions of the Chinese retail market, which is undoubtedly the world’s largest retail market, it can be said that there is a great opportunity and potential for Marks and Spencer to internationalize its operations in China and open up new arenas for its products and services. These opportunities for Marks and Spencer in the Chinese retail market are further enhanced and justified by the fact that China after entering into the World Trade Agreement (WTO) in 2001 agreed to open up its markets for foreign investors. Although the retail sector in China is still dominated by the local players and there is a very small percentage of foreign companies, but the scope for new foreign entrants has been widened by the policy shifts in China (Sung, et al. 2002).
Besides the available opportunities for Marks and Spencer in the Chinese retail market, there are some threats for the company. The major threat comes from the existing competitors in the retail market of China. The competitors for Marks and Spencer in China have established themselves well enough to survive in the market. Although, Marks and Spencer are not new to China but still the spread of its operations has not been too wide, which presents a tough situation for the company to deal with. However, Marks and Spencer can overcome this challenge by moving towards joint ventures which will reduce its direct exposure to the market and allow the company to gain the knowledge and experience of the market conditions practically (Sung, et al. 2002).
Porter’s Five Forces Model
Porter’s Five Forces Model is applied to analyze the external factors which may influence Marks and Spencer while entering in the Chinese retail market. The analysis carried out while using this model discusses the threats related to new entrants, substitute products, competition from rivals and the powers of suppliers and buyers. The detailed analysis of the five forces identified by Porter is presented as under:
Threat of New Entrants
Chinese retail market has traditionally remained under the strict regulatory control of the government and consequently, there were strict barriers for other entities to enter the market. However, as the government of China decided to bring reforms in the regulatory frameworks governing the retail market of China in the 90s, the situation was significantly changed. The reforms brought an end to the strict control of government over the market and changes were observed in the following areas:
- The conditions imposed by the government on the market players to deal with specific types of products and also control over the operations and activities of the companies in the market were either relaxed or abolished (Li 1998).
- There was a significant decrease in the governmental price control activities in the retail sector (Li 1998).
- The government allowed the retail markets to flourish and grow based on market forces of demand and supply.
- New investors were encouraged by the government to enter into the retail market (Zhao 1996).
These initiatives on the part of the government opened up the market and a competitive environment developed in the market. For Marks and Spencer, entering the Chinese retail market may not be a big issue. But remaining competitive in the market is a key to the survival, as new entrants are encouraged to step into the market (Zhuang, Herndon and Zhou 2003).
Threat of Substitutes
There are several retailers in the Chinese retail market offering the same line of products as offered by Marks and Spencer. As China’s retail market is the largest retail market in the world, there are a huge number of rivals and competitors for Marks and Spencer. Henceforth, the threat of substitutes is always present (Zhuang, Herndon and Zhou 2003).
Bargaining Power of Suppliers
The Chinese retail sector had been influenced by the suppliers’ power in the past due to market imperfections caused by governmental control. But since the economic development in the late 70s and the governmental reforms in the early 90s, things started to improve and the retail market saw a shift of powers from suppliers to buyers. Due to the increased number of suppliers in the market, the more products were available than demanded, which ultimately resulted in competition between the market players (Domestic Trade Ministry of China 1997). This competition benefited the buyer who found more options in the same market and thus had the power to negotiate on his terms. In our case, Marks and Spencer shall also take into account the fact that the Chinese retail market offers only little bargaining power to the supplier (Zhuang, Herndon and Zhou 2003).
Bargaining Power of Buyers
As discussed in the section above, the bargaining power of buyers increased significantly since the economic reforms in the country. In contrast to the past, the prevailing market conditions are favorable for buyers. The buyers have a variety of options to choose from and their choices are no more influenced by the decisions of the suppliers. In light of this situation, Marks and Spencer shall consider establishing its business in a way that offers more to the customers and takes into account the demands and requirements of the customers (Domestic Trade Ministry of China 1997).
Competitive Rivalry in the Market
As discussed in the section “Threat of Substitutes”, the Chinese retail market of today offers a very competitive environment for the retailers operating in the market. The retail market in China consists of retail businesses that are owned by private enterprises, government, joint ventures, sole proprietors, public enterprises and foreign-based enterprises (State Statistical Bureau of China 2000). Since the reforms took place in the retail sector in China, the concentration of the government-owned businesses in the retail market reduced significantly and as result, new enterprises with different ownership structures entered in the market and thus an upsurge in the retail market competition and rivalry was observed. Keeping in view these trends in the market and the fact that the forces of demand and supply are the determining factors of the market, Marks and Spencer will have to face strong competition from its rivals in the Chinese retail market (Zhuang, Herndon and Zhou 2003).
Discussion and Recommendations
This section aims at presenting a discussion based on the findings and the theories and models discussed in the literature review. Moreover, the researcher also recommends the strategies which suit Marks and Spencer for the internationalization of its operations in the Chinese retail market.
Why Marks and Spencer shall enter the Chinese Market?
As discussed in the background of Marks and Spencer in the first chapter that the company faced torrid times not only domestically but also in its international operations, it is pertinent that Marks and Spencer shall find ways to solidify its position in the market and revive the financial stability. To do this, the company requires some extraordinary measures to be taken. Internationalization is one major option in this respect which is expected to boost the performance of the company furthermore and bring financial strength. In this regard, Marks and Spencer need to step into a market that offers greater exposure to the company and what it is offering and provides all the necessary constituents for operating smoothly. These requirements are fulfilled by the Chinese retail market, as it has everything to offer. China’s retail sector is regarded as the largest in the world and has continuously and consistently changed itself over the years from a state-controlled sector to a free, competitive and investor-friendly market place (China Business Review 2010).
Chinese retail market
The retail market of China is considered amongst the fastest-growing retail markets all over the globe. Apart from the recent economic crisis, the Chinese retail market showed a turnover of USD 1.8 trillion in the year 2009. This figure represented an increase of more than 15 percent from the previous year. The consistent increase in the turnover of the retail market of China is primarily due to consistency in the increase in the general public’s income. As, the per capita income in China was reported to be USD 2,125, which was approximately three times higher than the per capita income of Chinese ten years ago. This income level moves upward further when considering more developed cities of the country like Beijing and Shanghai (China Business Review 2010).
Due to the higher per capita income level of the citizens of China, consumer spending has now moved on from basic demands to luxury, which has in itself created a huge opportunity for retailers to step into the Chinese retail market. It is estimated that from the year 2001 to 2008, the trends of consumer spending on food items has decreased significantly, whereas spending on other products such as clothing, health care, transportation and communication services has almost doubled. These trends show that the general consumers’ cash resources have significantly increased which favors the potential retailers to step in (China Business Review 2010).
Apart from these lucrative conditions prevailing in the retail market of China, the retailers have to face a reality that China’s retail market is not as open to foreign retailers as retail markets in other parts of the world are. The total percentage of foreign retailers in China comes out to be 5 percent only. However, since the signing of World Trade Agreement (WTO) by China in 2001, it is expected that the foreign investors will be allowed gradually to step into the Chinese market in light of the agreement to remove barriers for investors coming into China from abroad (China Business Review 2010).
The structure of the Chinese retail market is full of variations due to regional differences, income level differences, differences in buying power and variations in the demand of a single product in different areas of the country. The retail market of China comprises of many segments in the form of small and medium level retail businesses. Due to the presence of these small and medium-sized retail businesses in large numbers, the retail market is not dominated by any particular big retail businesses and henceforth the competition in the market is prevalent. However, there are different levels of competition in certain retail sectors in the market. Particularly, the supermarkets and other big stores are dominated by a few big retail market players. These big players include Wal-Mart and Carrefour (China Business Review 2010).
The most flourishing sector in the retail market includes automotive businesses and spare parts. The importance and success of these businesses in the Chinese retail market is justified by the fact that these sectors contributed 39% of the total revenue generation in China in the year 2008. On the other hand, other businesses such as food chains, clothing, furniture business, and health care and medical instrument businesses face strong competition in the Chinese retail market (China Business Review 2010).
Suitable Strategies for Marks and Spencer to enter Chinese market
“Our experience illustrates that to succeed internationally when entering mature markets; you must adapt your store formats to the competitive realities of these markets.” (M&S annual report 2001)
While considering the factors and determinants of the Chinese retail market, Marks and Spencer shall realize that the factors which are required for internationalization in the retail sector are expected to influence the overall business plan and strategies of the company which are planned to be followed in foreign market conditions. Keeping in view the available resources and capabilities of Marks and Spencer while considering the competitiveness in the Chinese retail market, the company has to form a decision as to what level its strategies are going to be standardized and adapted, especially those relating to the marketing and operating strategies.
The standardized strategies or approach towards internationalization in the retail sector refers to the situation where an organization seeks to expand internationally while maintaining its standards of operations. As, while following a standardized approach the organization tends to expand internationally but with strict compliance with its already established sets of principles for carrying on business. These principles include the standard policy for the quality of the products, price levels, store environment, services, etc. On the other hand, the organizations may go for an adapted approach in which the business operations are made to run in such a flexible manner that the organization can adapt the changes in the environment in which it operates instantly. As, a product’s quality, design, manufacturing, price, marketing, etc. are adjusted by the needs and requirements of the retail sector in which an organization operates. Furthermore, these adjustments are also influenced by the competitors in the market.
Keeping in view the prevailing conditions in the Chinese retail market, particularly the high degree of competition in the clothing and other sectors, it is favorable for Marks and Spencer to follow a mixed set of approach towards expanding its operations in China’s retail sector. The mixed approach shall take into account standardized and adapted strategies for internationalization. The core reason behind this recommendation is that the standardized strategy will help Marks and Spencer to maintain its standards in terms of quality, pricing and other areas, which will, in turn, ensure the stability of its operations and attainment of the overall objectives. On the other hand, an adapted way of doing things will allow Marks and Spencer to take into account the regional requirements of the consumers and how the competition is shaping the operations of the market players. The adapted strategy is also necessary on the basis that the survival of a foreign enterprise is highly dependent on the ability of the enterprise to involve itself in the market in such a way that the products offered are meant to serve the needs and requirements of the consumers by their desires.
Furthermore, the previous efforts of Marks and Spencer shall be taken into account to evaluate the policies adopted by the company in the past to internationalize its operations. In the year 1988, Marks and Spencer marked its entry in the United States using acquiring the famous clothing chain “Brooks Brothers” and a supermarket chain “Kings Supermarkets”. But these acquisitions did not prove to be fruitful enough for the company and as a result, the company decided to put these chains on sale in 2001. There were various reasons behind the failure of the operations of Marks and Spencer in the United States and Canada.
The foremost reason behind the failure was that due to the UK background of the company, Marks and Spencer failed to understand the market requirements of the United States retail sector and predominantly tried to run its operations in UK style and henceforth the consumers found nothing special in the company’s products for them. There was no visible strategy for the internationalization of the operations. The worldwide ambitions and slogans of the company were not supported by the actions of the company which could have given a real meaning to the ambitious strategies of the business. Moreover, the strict approach towards standardized strategy followed by Marks and Spencer accounted for its downfall in the international markets. The idea of operating in the same manner as it did in the UK made the company inflexible towards market changes and demands. The international customers were offered what was offered to UK customers back at home. These factors also affected the pricing strategy of Marks and Spencer.
Apart from these things, keeping in view the models and theories discussed in the literature review of this study, Marks, and Spencer does not fall into the category of “Born Global” as it has restricted its operations to the UK in the initial period of its life span. Therefore, it is recommended that the company shall follow the approach mentioned in the Uppsala Internationalization model, which is discussed under the Incremental Stage Approach. By this model, Marks and Spencer shall gradually increase its international involvement and expand its operations to other global markets.
Joint Venture and Potential Partners for Marks and Spencer
Although Marks and Spencer has already entered the Chinese retail sector through its operations in Shanghai, it is still relevant to recommend that the company shall focus on preferring joint ventures with other companies who are in the same line of operations in the Chinese retail market. This strategy will allow marks and Spencer to gain insights into the prevailing conditions of the market and would allow the company to progress quickly by making use of the skills and ideas of the potential partners and filling the gap of required expertise and knowledge. The joint venturing will also enable the company to explore new areas for development and innovation in the production techniques. Furthermore, operating through joint ventures will surely help Marks and Spencer in devising marketing and promotional strategies more effectively. While talking about joint ventures, the potential partners for Marks and Spencer can be Next, Tesco, Gucci, John Lewis, etc.
This chapter presented the analysis of the existing conditions in the Chinese retail market and also the conditions in which Marks and Spencer are placed. Based on the findings of the analysis of these areas, the researcher presented a discussion to recommend the strategies for Marks and Spencer to enter into the Chinese retail market. In doing so the researcher carried out the analysis by following different strategic tools, which included SWOT analysis and Porter’s Five Forces Model. These analytical tools were used and applied to find out both the internal and external factors which may affect the internationalization of the Marks and Spencer’s operations. After presenting the analysis of the company in the light of these models, the chapter moved on to discuss the research objectives and questions while keeping in view the outcomes of the analysis and the information and theories presented earlier. Apart from this, the chapter particularly focused on presenting an overview of the Chinese retail market and the reasons why Marks and Spencer shall enter into it. The discussion laid the foundation on which the strategies for Marks and Spencer were recommended for internationalizing its operations in the Chinese retail market.
The process of internationalization involves the following of strategies on which the business enterprises base their objectives and targets. These strategies are meant to provide the organizations a particular course of action; based on which they can expand their operations at international levels. This research work has taken into account the available options for Marks and Spencer to internationalize its retail business, particularly in the Chinese retail market by following particular strategies. The researcher, therefore, has discussed the strategies which may be followed by Marks and Spencer in internationalizing its operations in China and in doing so, the researcher has considered various models and theories and other analytical tools.
In the initial chapter of this study, the researcher has presented a brief background of Marks and Spencer’s operations and ups and downs faced by the company since its inception. The background presented also discussed the attempts made by Marks and Spencer towards internationalizing its operations and the results achieved through internationalization. The chapter also discussed the research objectives and questions which are addressed in the last chapter. The project aim has also been identified in the same chapter. Moreover, the chapter also identified the scope of this research work. Moving ahead, the study considered the reviewing of the existing literature on the internationalization approaches and strategies in the chapter “Literature Review”.
The literature review presented a comprehensive overview of the models and theories developed in the past which relate to the subject of this study, i.e. the internationalization of the operations of Marks and Spencer. The researcher categorized the theories and strategies into two approaches, namely “The Incremental Stage Approach” and “The Born Global Approach”. In these approaches, the researcher discussed various models and theories which included “The Product Life Cycle Theory” and “The Uppsala Internationalization Model”. Furthermore, the researcher discussed the born global approach and took into account the factors on which that approach is based. Apart from this, the factors which influence the choice of the global approach were also discussed by the author.
After presenting the discussion and review of the available literature on the subject, the author discussed the research methodology being followed by the researcher in this study. The research methodology chapter described in detail the basis on which the researcher has conducted this research work. The study, as stated in the chapter, followed a case study approach which was explanatory. The case study was also supported by a mixed approach; which included both quantitative and qualitative analysis of the information of about the company under consideration and the Chinese retail market. Apart from this, the chapter also explained how the researcher would use the strategic analytical tools, which were SWOT analysis and Porter’s Five Forces Model, to analyze the internal and external factors affecting the internationalization of the operations of Marks and Spencer.
The next portion of the study was the most important part which presented the analysis of the situation of Marks and Spencer and a comprehensive discussion based on the results of the analysis and theories and models discussed before. The discussion aimed at addressing the research objectives and the questions which were already set in the first chapter. While doing so, the analysis of the internal factors through SWOT analysis revealed that there are certain weaknesses and strengths of Marks and Spencer which shall be taken into account before moving towards internationalization. Moreover, the analysis also discovered areas where Marks and Spencer may find opportunities for the growth of its business operations and the threats it may have to face while internationalizing.
After carrying out the SWOT analysis for Marks and Spencer, the researcher applied the Porter’s Five Forces Model on Marks and Spencer in the context of the Chinese retail market, which identified the external factors influencing the internationalization of the Marks and Spencer. Porter’s five forces model identified the threats for Marks and Spencer concerning the new entrants in the market, the availability of the substitutes of the products in which Marks and Spencer deals and the competition from the rivals already existing in the market. Apart from these threats, the model presented the prevailing conditions relating to the suppliers’ and buyers’ power in the Chinese retail market.
After the presentation of analysis and discussion on the subject, the researcher gave recommendations in the form of strategies to be followed by Marks and Spencer to enter into the Chinese retail sector. The recommended strategies suggested that marks and Spencer shall follow the Uppsala Internationalization Model to expand its operations by focusing on following a mixed approach, i.e. standardized and adapted approach. Moreover, it was also recommended that Marks and Spencer shall look for joint ventures to initiate its operations in the Chinese retail market and for doing so some potential partners were also suggested.
Recommendations for Future Studies
It is recommended that the researchers in the future shall take into account the strategies adopted by other companies that are already operating in the Chinese retail sector and have managed to hold a strong position in the market. Furthermore, the researchers in the future shall consider the particular parts or regions of China which offer greater opportunities for the company entering into the market.
Overall, the process of carrying out the above research and write up of the report has allowed the researcher to not only develop new academic skills but also polish existing ones. Different management strategy tools have been selected after acquiring background information and understanding regarding their purpose and way of bringing about meaningful results from the use of these tools. This practice would surely help the researcher to benefit in the years to come as they have allowed the researcher to improve his analytical and descriptive skills.
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