The Seeds Case Study

It is never easy to establish a precise point in time when ‘the seeds for disastrous decline’ are sown. The reasons for this are that, especially with an organisation such as M&S, the problem was not the result of one decision or change, rather a culmination of many changes, oversights and incorrect decisions. Therefore to establish a point in time when M&S began their decline, we need to examine many different factors and their causes and effects.

One of the major factors that appears to have detrimentally affected M&S is one of complacency. While complacency should at no time be forgiven, it is easier to understand why this could have taken place when the history of M&S is studied. Up until the mid-nineties M&S had been an extremely successful company. They had diversified their retail business to include more products than any other retailer and had continued to expand into other fields such as personal loans and life assurance (FT 07/10/88). M&S also had a strong policy on expansion of shopping space both inside and outside cities, strengthening their market position and allowing for continued profitability. There was also a strong move to international expansion during the ‘80s and ‘90s as M&S spread out to Europe, the US and other locations around the world. Another contributing factor was that M&S had found that they had such a market standing that it was unnecessary to advertise. The first advertising campaign launched by M&S was only created as an attempt to stop the abysmal decline of their sales that took place in the late ‘90s. The management of M&S had received continuous praise throughout their history, emphasised by their winning of the BQMA ‘Best Managed Company’ award for the third year in a row in ’97 (FT 19/03/97). With this kind of history it is easy to imagine how both the board of directors and the senior management could assume an air of complacency. M&S had suffered minor setbacks before and had always come out on top, it was a completely foreign concept for the group to feel that they may be in serious trouble.

While complacency is a serious issue, it is also one in which it is very hard to identify a point in time when it alone started the decline. It is far easier to examine and analyse financial figures to determine the point in time that the decline became evident to all. For example M&S shares suffered their first major drop in September ’97 when they achieved the second biggest fall in the FTSE 100 (FT 10/09/97). This continued as the share price fell constantly until it had halved its original price by the beginning of 1999. This seems to indicate fairly strongly that their decline had begun, however there are no clear indications of why.

It is clear that the way a retailer is most likely to start losing profit margins is through lack of sales. One of the reasons that M&S started

...