Zara vs MarkSpencer free essay sample

From 1894, the company has continued to work under the name of â€Å"Marks Spencer (MS). † Influenced by American chain stores, MS started to sell both food and clothes in the 1920s. The company experienced a rapid growth from 1894 to 1939, expanding its 234 stores. In order to reach the highest quality in its products, MS concentrated its strategy on the close cooperation with suppliers and the use of new technologies. In addition, the company added internationalization and product diversification to its strategy in the late ’80’s. On the other hand, despite this promising strategy, MS started to undergo a gradual decline in its sales; consequently, in its profits in the 1980’s. A decrease in market share followed this drop. Moreover, in the late 1990’s, the share prices of the company decreased dramatically. By contrast, Zara, another clothing company founded in Spain in 1963, achieved a remarkable success in the textile market in short period by its brand new supply chain and correct business philosophy, including creativity, innovation, and fast market response. We will write a custom essay sample on Zara vs MarkSpencer or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page This case study will analyze the sources of the decline of the company by analyzing its chain value. This section will be followed by a SWOT analysis. Then, it’ll present solutions and provide recommendations to prevent similar problems in the future. II- Analysis The success story of MS, lasted almost a century after its foundation, seemed to end at the beginning of the 1980’s. While a new, promising era was starting for the apparel industry in the early 1980’s, MS started to experience its first disruptions in sales and in company’s profit. When we look closely at the MS business model, its marketing strategy and its supply chain choices are the main causes for the deterioration of this company’s sales and its profits. MS marketing strategy is based on its buying team’s decisions. Unlike Zara, which defines a portfolio of models at the beginning of each season and adapts it to latest fashion trends during the season, MS defines specifications of clothes one year before launching them in its stores. In fact, the definitions of clothes are frozen, and any trend changes cannot be taken into account during that one-year period. In addition, unlike Zara, the buying team of MS has no contact with customers. In other words, MS defines its new creations completely blindly from its customers’ or its potential customers’ expectations and demands. This strategy is not misguided if the demand is constant and predictable in the market. If the demand is unpredictable, like in the textile industry, following this strategy represents a tremendous risk. For example, in the 1998/1999 Fall Winter collection, MS’s economy was deeply injured by misidentifying the color of its entire collection one year before. Another weakness in the marketing strategy of MS can be observed in its advertisements. Because new collections were created without customers’ opinions, MS had to spend huge amount of money to impose new collections on clients. For example, in 2000, ? 20 million was spent on television advertisements. Another main reason that led MS to financial decline was inaccurate supply chain strategy. MS, with a well-defined warehouse, supplier, and store network, had a cost-efficient supply chain. Although a cost-efficient model seems like a positive factor for the economy of a company, because such a supply chain model is inflexible, it does not allow MS to adjust its production planning during the one-year product development phase. In fact, once the buying team defined clothes specifications and quantities, orders were sent to suppliers. In order to minimize costs, MS passed all its orders to its suppliers en mass. Consequently, its suppliers bought all raw materials and semi-finished products as soon as they received orders from MS. If a new trend occurred during the one-year development period, it was too late to change all its orders because its suppliers already ordered all the raw materials. Another weakness in the MS supply chain was that it was completely decentralized. In other words, unlike Zara, MS depended completely on the other companies, and it was not its â€Å"self-supplier† for any of products sold in its stores. Although it has had its own brand, St. Michel, and it defined all the parameters of the production of this brand, it was produced by suppliers. This lack of vertical integration caused a lack of flexibility in the company’s supply chain. Because all the suppliers were external, it had not flexibility to change any order or to manage the purchase of raw materials or the purchase of semi-finished products. To summarize the economic decline of MS, two main strategic mistakes play the most important roles: the misguided marketing strategy and the inadequate supply chain. In order to rectify the company’s economic situation, these two mistakes should be analyzed, and adequate solutions should be found. III- SWOT Analysis Strengths a