Supply Chains Networks and Markets Assignment Sample 2023
Introduction
The report presents a case study of Marks and Spencer in China stating its failure to dominate the Chinese market. The global company with a long and prestigious history was forced to withdraw from the market of China due to wrong strategies. The company is looking to enter the lion’s den again with a brand new franchising strategy and position itself within relevant Chinese supply networks.
Through this case study, analysis and evaluation of the existing strategies and supply network are carried out in the context. New strategies are proposed that will benefit the market position of Marks and Spencer so that they can regain their lost share price and gain competitive advantage again.
Task I: Analysis and Evaluation
1. Evaluation of M&S’s existing supply networks and strategies
The vendors, customers and suppliers are linked in the supply chain network to interchange goods from one end to another. According to Islam (2016), customers are the main element in the supply chain network as well as the starting point for any transaction to take place. The organization that is involved in interchanging goods need to follow these major phases:
Figure 1: Phases of the supply network
(Source: Islam 2016)
- Planning– This is a critical phase that requires the implementation of various strategies to fulfil the needs and demands of the customer. Starting from production planning to resource management and raw material availability, everything requires proper planning.
- Purchasing– Refilling the stock is important for the departments so that any demand can be met. As per the view of Anderson (2019), negotiation in price is a valuable asset in this phase.
- Inventory– Collection of raw materials and producing the necessary product is an essential step for any company. Storage of the raw materials, so that it can be used when necessary is an underlying factor for success.
- Production– The production department schedules the production activity by testing the quality and getting the product ready for supplying (Gribbin et al.2018).
- Transportation– The finished product is then delivered to the customer channels and locations. The company sends an invoice to the customers for the delivered products.
Marks and Spencer have over 428 supply network in all over the world, earning over £3 billion per annum (Marksandspencer.com, 2020). Company’s logistics policy has enabled its growth in the market chain and has been analysed as one of the best in the globe. However, as argued by Putri et al. (2017), recent studies show that the marketing strategies adopted by M&S are decreasing in value. Despite having a rich heritage of brand recognition, the company has been exposed to many strategical gaps in the current meta. It is observed that the overall sales of the company have been decreased from 11% to 7% which is generating fear among the company shareholders (Marksandspencer.com, 2020). It is also revealed that the company is no longer a part of the prestigious FTSE 100 index and its share price is falling gradually.
The goal of M&S is to maximize profitability and reduce the incurred costs. However, as argued by Budianto (2018), in the competitive world, logistical drivers affect the market balance. The supply chain strategy adopted by M&S has shown signs of ineffectiveness in various countries.
The main problems identified include the rising price of real estate and increasing competition from the local market. The company is trying its best to reach a strategic fit in the markets by balancing their inventory and reducing the load on operations. The company has been using faster transportation to get maximum response from the customers. While some products are shown to have a lesser response, keeping the stocks refuelled has been an advantage.
Although the strategies of the supply chain are well organized yet results show that there is a negative impact on their sales. As argued by Iglesias et al. (2020), the fact that the competitors are performing well in the supply environment while M&S is lagging behind has affected the company greatly. The main reasons identified include a rise in real estate costs, increased competition from the locals, failure to understand the preference of customers according to change in country culture.
The theory adopted by M&S is the economic theory that helped the company to cope up with the changing demands according to changes in supply. However, the economic theory is only focused on refuelling and balancing inventory so that changes in supply and demand could be met (Feiwel 2016). However, it does not go well with every application that results in mismanagement in inventories and supplies.
2. Evaluation of the supply network of the global apparel industry and market
In this globalized societal network, the products developed need to be transported from one end to the other. Thus a proper supply chain is essential to monitor and control the delivery of the products to the end-users. Companies are dependent on the communities to interchange the goods and retailers work hard to improve their current bond and enhance the relationship with suppliers and local communities. M&S is committed to the operation and regard suppliers and local communities highly.
The company not only has a long and prestigious heritage that backs its positioning but also ensures fair deals and payments in the network channel. Being one of the trusted brands recognized throughout the globe, the company takes their partners quite seriously. According to Anees-ur-Rehman et al. (2018), it can be observed that the company has 428 stores across 56 markets in Europe, Asia, Australia and the Middle East.
M&S is also looking for carrying out its supply chain management in India and Hong Kong to increase their customer base. The company is known for its reputation with bringing in transformational change and incorporating innovation to maintain a solid relationship with the suppliers.
M&S is well known for its clothing and home products that cover homeware and beauty products.
The company is said to operate with over 1000 factories in the top countries across the world (Marksandspencer.com, 2020). The major suppliers can be listed as Turkey, Vietnam, Sri Lanka, Cambodia, Bangladesh and India. Along with home and clothing, the company is also known for its product and services in the field of the food supply. M&S is engaged with more than 30,000 farms from which the sourcing of raw materials is carried out.
As per Bian and Veloutsou (2017), it can be observed that 90% of the food farms are present in Europe scattered around the continent in 44 different countries in 800 major sites.
The food suppliers correct the raw materials directly from the site and source them to 400 countries across the globe. The raw materials are sourced from a total of 70 different countries in and out of Europe. The food supply is a complex frame as the raw materials produced each year is not the same and varies. However, M&S makes sure to renew around 30% of the total supplies each year to keep operating and not fall short on demand (Marksandspencer.com, 2020).
The Continuous-flow theory is adopted by the company to supply the raw materials across the countries. The theory entails that relationship with the suppliers and the end-users are essential to keep the flow of operation steady. The main focus is given to portray the value proposition of the company to the masses (See et al. 2019).
The continuous-flow theory enhances the company’s goals and elements to receive feedback from the end-users. Failure to consider the audience culture and language is a major drawback of this theory, thus, the message of the company does not always reach the audience.
3. Evaluation of the supply networks of China’s apparel industry and market
One of the failures of M&S is to capture the audience in the Chinese market. M&S has been using the same strategy for years on a global platform, however, recently it has been observed that the company is facing stifles. As argued by Hunt (2019), in the last few years, the shares of the company have dropped considerably and the revenue of the company has fallen. This has led to withdrawal from many countries including China.
The audience of China shared a unique culture that M&S could not grasp. Moreover, the positioning strategy used by the company did not fit in the Chinese market. On the other hand, the cost of real estate in the Chinese domain is relatively high, and competition from the locals was intense. Due to a lack of management in customer segments and inventory, the company was forced to withdraw from China in 2017 (Marksandspencer.com, 2020).
The extended-self theory used by the company has brought unparalleled success, yet it did not bear fruit in the Chinese market (Aksak et al. 2016). The theory stated that possessing unique products that defines and expands the value of oneself can bring in success. However, due to the wrong customer segment, the usage of this theory misaligned and resulted in reducing the value of the products.
Task II: Proposed Strategies
1. Formulation of a market positioning strategy for M&S’s entry into the Chinese market
A new market entry strategy is devised focusing on franchising to get the clothing and home products back in the market of China. M&S entered the Chinese market back in 2008 and faced a lot of challenges due to the difference in behaviour and buying pattern (Marksandspencer.com, 2020).
Chinese people prefer local products more than the company’s branded products due to wrong segmentation. Thus, in order to know the viability and cultural differences in the market, M&S should opt for developing franchises.
It will help the company to understand the preference and the company would be able to tailor the products according to the customer’s specification. These know-how franchises will serve as an asset to make a re-entry in the Chinese market. As per Alon and Kruesi (2019), the company has to aim its expansion into the rural areas more, as western culture is more unknown there.
The Chinese people have a tendency to get attracted when something new comes up in the market. Thus, the western cultural products that are unknown to them would be able to attract the citizens to ensure a better strategic position for the company.
Applying the market orientation theory and market positioning model would be able to achieve the correct marketing mix for the Chinese market. As positioning is a relatively important factor, market orientation theory can provide customer insights so that best ways can be adopted to meet the customer’s demands. Besides that, M&S needs to jump hurdles as China has a weak intellectual property investment (Kiessling et al. 2016).
Thus, unmasking the secrets to support the franchises exposes the company to high risks. This theory and model will help to identify the intermediaries so that the appropriate franchise can be chosen. Choosing the correct franchise will help the company to acquire loyal intermediaries and prevent the risks.
The segmentation theory needs to be adopted by the company to separate the short-term interest from the long-term and plan to invest in products accordingly. It could be observed that M&S were ruled out from the Chinese market due to their failure to segmenting the products in a proper frame.
Through the aid of this theory, M&S will have the knowledge to target the right customer segment (Li 2019). A change in culture is a major barrier that needs to be broken down, so applying the segmentation theory can help the company to separate the products accordingly. This way a greater appeal can be made to the customers and a diverse range of people can be attracted.
2. Formulation of a supply network strategy to support M&S’s entry into the Chinese market
Chinese customers are evolving rapidly with changes in time and are the engines to drive the economic growth of the country. The enigma of franchising has developed greatly over the past few years in the Chinese market. As per Gitman et al. (2019), the major advantage of franchises is that it provides an opportunity to start a business with a recognized brand name thus reducing risks of failure. This allows the business to be recognized in the market for its luxury brand collection and quality service. As argued by Rosado-Serrano and Paul (2018), China’s investment and regulatory policies are becoming more transparent that will allow brands like M&S to cement their position in the market with correct franchises.
Management of the supply network so that production and distribution of the resources can be achieved with the lowest is very difficult in actual practice. The major strategies that will be helpful for M&S in entering the Chinese market can be categorised as:
- Being practical when adopting a supply chain strategy will help the management to assess the alternatives in the strategies. According to Junjie (2019), elements such as technology and innovation should be incorporated to rely more on a practical approach rather than a conceptual approach.
- Focusing on customers’ preference should be prioritized to the greatest possible extent. Accordingly linking the suppliers, distributors and franchisees to cater to the customer’s needs.
- Controlling the franchises with new and modern business practices will entice more appeal to the customers (Madanoglu et al.2017).
- Communication will be the key to establish a franchising strategy in the supply network. Ensuring the supply of products to the key distributors and suppliers ensures them with a long-term business relationship.
- Understanding the risks involved in franchising and then jumping to a conclusion will also guide M&S to value the franchises and engage in investment properly.
The network theory can be an essential tool to build a successful business relationship in the supply channel. This theory will facilitate the entry of M&S in the market by recognizing the patterns and motives of the suppliers and distributors (Khashanah and Alsulaiman 2016).
Identifying and understanding human behaviour can help the company to appeal to more customers and maintain its competitive background. As identified local markets in the Chinese sector poses a lot of threat thus, the STP model will be useful in this situation. The STP model not only solves the problem regarding the segmentation of the product but also help to achieve a better position in the supply network. Utilizing this theory and model re-entering the Chinese market will be possible.
3. Formulation of a collaboration strategy for M&S’s entry into China
Franchising has undergone major changes in the last few years, M&S has been looking for a perfect re-entry strategy and franchising strategy will be a blessing in the current meta. Collaboration with the Chinese partners provides an opportunity to utilize an already existing customer base and supply channels to expand the company’s sphere.
According to Nyadzayo et al. (2018), accessing and utilizing the partner’s resources during collaboration is a good chance to increase the production facility and distributing channels. The overall cost base would be low; thus the increasing real estate price will not pose a threat to the company.
The game theory will be quite useful in this situation to engage with a collaborative strategy and predict the rivals in the market. Acting accordingly with the business trends and anticipating the competitor’s next move is of paramount importance when thinking of re-entering the Chinese market (Roth and Wilson 2019). The collaborative model can be effective to learn about the partners while using the planned behaviour theory will help to adapt to Chinese behaviours.
Task III: Reflection on Theory
The theories adopted in the tasks identify the significance of the conceptual framework required to re-enter the Chinese market. Although it is advisable to think out of the box and be practical when forming strategies, yet balancing the conceptual and practical theories and model into actual practice ensures definite success.
Task 1
In task 1 the theories identified in the process are economic theory, continuous flow theory, and extended-self theory. The theories state the current behaviour of M&S strategies and their major drawback in the Chinese market (Bai 2018). Although I think that the theories will be quite effective in Western culture, the Chinese market was not compatible with those theories.
The strength of the economic theory is that it relates changes in supplies and distribution according to supply and demand policy has a major drawback. A major weakness is that it fails to highlight the nature of business practices which has resulted in the downfall of the company’s sales.
I believe that the continuous flow theory has a viable strength for any company as it aids to distribute the value proposition of the company in the supply network. However, as argued by Albrecht et al. (2019), although this theory is well valued, it has a major weakness.
The Flow theory does not consider the behaviour, pattern or preference of the audience, rather focuses on delivering the company message to the customers. Without learning the culture of the market, sometimes the message of the company does not get by the customers which result in loss of sales.
I think that self-extended theory is an effective tool in the global market to channel new and unique product in the supply network. However, as argued by Bai et al. (2017), it did not work as the management of M&S was lacking. The customer segmentation was not at all proper which sparked the failure of this theory. I think M&S should fix its internal management first to avoid such failures in the future.
Task 2
The theories and concepts used in task 2 are aligned with the proposed strategies to maintain a coherent advantage in the market. Segmentation theory is identified as one of the prime theories that will support the entry of M&S in the Chinese market. I believe that utilizing this theory will solve the problem of customer segmentation that is identified in M&S management.
As I advised to use the franchising strategy to position the company within the Chinese market, I think using market orientation theory will be helpful to get an upper hand. As per Pomering (2017), through the aid of this theory and applying the market positioning model, the franchises can be identified. In franchising trust and loyalty is a factor, therefore, I suggest using this theory to acquire the loyalty of the intermediaries in franchising strategy.
Implementation of network theory and STP model will be valuable for re-entering the Chinese market as the STP model can solve all the problems that M&S is currently facing. I also want to state that the implementation of network theory will help to gain insight into customers, suppliers and distributors.
Along with these, I suggest using the collaborative model while partnering up with Chinese firms and also for franchising. As per Gulati and Sytch, (2017), Game theory and planned behaviour theory will be beneficial to understand the diversity between Chinese patterns of buying. Although I think, theories such as consistency theory, the cross-cultural theory would help too, however, regarding market entry the theories enlisted are better than these two.
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Website
Marksandspencer.com, 2020, Home. Retrieved from: https://corporate.marksandspencer.com/home. [Retrieved on: 1st May 2020]
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