Introduction: The Analytical Approach
After years of ever-increasing profits, the ailing British retailer Marks and Spencer (M&S) has fallen out of favour with British customers. Sales and profit strongly declined, followed by shake-ups in the top management team. M&S faced extinction when confronted with Philip Green’s takeover plans. Top management have made efforts to turn M&S around. The analytical approach to assess these efforts is as follows:
Having evaluated turnaround models (Chapter 1), I will observe actions undertaken by M&S (Chapter 2), finally putting both sides together, determining if the actions fit the model (Chapter 3). Introducing competitive advantage as the measurement for success (Chapter 4), the conclusion (Chapter 5) will show that M&S is just one example for a problem that goes far deeper.
Chapter 1: The Theory on Corporate Turnarounds
There are several turnaround models which could be applied to the M&S case.
Slatter claims that he has ‘identified ten major generic strategies’ and that the ‘successful turnaround manager needs to undertake (…) eight actions immediately on entering a turnaround situation, irrespective of the nature of the situation.’
Slatter makes assumptions about the turnaround process, introducing the above ‘generic strategies’ and ‘eight actions’. The model is based on a sample of ‘case-histories’, which serve to assign company examples to his theory. This approach underpins arguments empirically. In addition, the sample also includes three retailers, which might help to assess the M&S case.
His method, however, is not appropriate to assess a turnaround process. He defines theoretical terms first and then ‘fits’ examples to match his theory. This seems fairly arbitrary. One would rather observe what companies did and then draw conclusions. To define ‘eight actions’ to be applied ‘irrespective of the nature of the situation’ is too simplistic and ignores that every turnaround effort must be tailored to the respective company and internal and external factors. His ‘case-histories’ include only 20 firms, which is not enough for a representative sample.
Bibeault widens Slatter’s approach, with his sample including interviews of ‘sixteen of the top turnaround artists’, ‘eighty-one CEO questionnaires’ and an ‘exhaustive search of the literature’. He identifies six turnaround ‘types’ and introduces a ‘turnaround cycle’ comprising five stages.
This approach features broader empirical evidence. It is likely that experienced turnaround agents find the right measures for turnaround. Bibeault analyses internal and external factors, therefore giving some explanation for corporate decline. His 5-stage cycle tries to incorporate experience.
But his whole approach relies too heavily on the CEO interviews. He takes for granted everything his interviewees say. The subjective statements, however, cannot serve to draw general conclusions. Bibeault lacks critical reflection. Again, the sample of only 100 persons is not representative.
Grinyer/Mayes/McKiernan feature their ‘sharpbender’ model, extending the sample to 1,200 companies. Sharpbenders are ‘companies which have been in decline relative to their competitors, which have then exhibited a marked, and often dramatic, improvement in performance; and which have sustained that high relative performance over a reasonable period of time (…)’. The model classifies four basic types of sharpbenders and introduces a 4-stage model of the turnaround process (Viz. Appendix, diagrams 1&2).
The broad sample and the subtle classification recognise the complexity of the turnaround process. The model is likely to fit a multitude of cases. Gathering data first and then drawing conclusions is the right way of assessment. It might be argued that there are no retailers represented in the sample. All the better. As I will show, M&S’s situation is not a ‘retailer’ problem, but goes far the deeper. In addition, if the model properly describes M&S, this is another proof for its applicability. I therefore decide to apply the sharpbender model.
Chapter 2: M&S’s Actions
2.1 Definition of an appropriate timeframe
To confine the extent of actions and to apply the model appropriately, it is necessary to choose a timeframe. This timeframe will cover November 1998 to November 2000, for the following reasons:
In November 1998, a surprise decline in profits by 23% was announced, M&S’s shares slumped 10%; and Chairman-CEO Richard Greenbury stepped back.
I identify this as the starting point of decline. In November 2000, ambiguous results were announced. They were better than expected, but with sales still declining.
This period covers all of M&S’s turnaround actions and the low point, which to me is Philip Green’s takeover plan (November/December 1999).
2.2 Process of evaluation of key actions
Not all actions within the timeframe are equally important. Therefore, an evaluation of key actions is necessary. To ensure objectivity, I performed a statistical test as follows. Table 1 (Viz. appendix), containing all actions within the timeframe, was presented to three business students. They expressed their individual assessment by assigning a number from 1 to 10 to each action, with ‘1’ meaning ‘unimportant’ and 10 meaning ‘crucially important’. An action is a key action if the mean of the assessments is 7 or more. Table 2 identifies the following key actions:
- Luc Vandevelde appointed chairman (April 2000)
- M&S to launch first advertising campaign in its whole history (July 1999)
- Restructuring of Supply chain (November 1999)
- Store closures (1999-2000)
- Increased use of information about customers (November 1999)
- ‘Pull’ principle: Re-focusing on customer needs . (November 1999)
 Slatter, p.78
 Slatter, p.129
 Slatter, pp. 271ff.
 Bibeault, preface, page XVI
 Bibeault, p. 81-90
 Bibeault, p. 92
 Grinyer&Mayes&McKiernan, p.2-3
 The Economist, 21 Nov 1998 / Business (989)
 The Financial Times, 7 Nov 00, quoted online from www.ft.com
- Quote paper
- Marcus Matthias Keupp (Author), 2001, Turnaround as a key strategic issue in times of crisis, Munich, GRIN Verlag, https://www.grin.com/document/7762