I- Introduction This case study presents two companies, Marks & Spencer and Zara, which are active

in the apparel industry, and examines supply chains and the product-process linkages of both companies. Marks & Spencer, originally named Penny Bazaars, was founded by Michael Marks in 1884 in Northern England as a clothing sales company. Ten years after its startup, Thomas Spencer joined Michael Marks and became co-owner of the company. From 1894, the company has continued to work under the name of Marks & Spencer (M&S). Influenced by American chain stores, M&S 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, M&S 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 80s. On the other hand, despite this promising strategy, M&S started to undergo a gradual decline in its sales; consequently, in its profits in the 1980s. A decrease in market share followed this drop. Moreover, in the late 1990s, 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. 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, itll present solutions and provide recommendations to prevent similar problems in the future.

II- Analysis The success story of M&S, lasted almost a century after its foundation, seemed to end at the beginning of the 1980s. While a new, promising era was starting for the apparel industry in the early 1980s, M&S started to experience its first disruptions in sales and in companys profit. When we look closely at the M&S business model, its marketing strategy and its supply chain choices are the main causes for the deterioration of this companys sales and its profits. M&S marketing strategy is based on its buying teams 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, M&S 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 M&S has no contact with customers. In other words, M&S 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, M&Ss economy was deeply injured by misidentifying the color of its entire collection one year before. Another weakness in the marketing strategy of M&S can be observed in its advertisements. Because new collections were created without customers opinions, M&S 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 M&S to financial decline was inaccurate supply chain strategy. M&S, 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 M&S 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, M&S passed all its orders to its supplier en mass. Consequently, its suppliers bought all raw materials and semi-finished products as soon as they received orders from M&S. 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 M&S supply chain was that it was completely decentralized. In other words, unlike Zara, M&S depended completely on the other companies, and it was not its 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 companys 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 M&S, two main strategic mistakes play the most important roles: the misguided marketing strategy and the inadequate supply chain. In order to rectify the companys economic situation, these two mistakes should be analyzed, and adequate solutions should be found.

III- SWOT Analysis Strengths and Weaknesses of Marks & Spencer Strengths Built on strong foundation Emphasis on using the latest technology Close cooperation with suppliers and extensive supplier network Quality oriented Cost-efficient supply chain model Large product variety (clothes, food, furniture) International outreach Online shopping service Welfare department for the employees: dentists and doctors, a pension plan scheme

Weaknesses Inflexible product development Neglect of customer needs Incorrect supply chain choice

Long production process Over-centralization of the decision process Inaccurate forecasts of the seasons fashion hits Lack of inventory to replenish stores stock due to inaccurate production forecasts Buildup of unsold product inventory Lack of creativity in new creations: keeping traditional models with minor modifications

Opportunities and Threats of Marks & Spencer Opportunities Loyal customers can help regain market-share if correct strategies are followed by M&S. Close and long-term relationship with suppliers can help M&S recover. Image change by introducing more fashionable clothes to attract new customers

Threats Market image of unfashionable clothing Increased competition: new, dynamic, more responsive to customers needs and desires Aging loyal customers and inability to attract younger consumers

IV- Solutions After a century of success since its founding, M&S should rectify its economic situation and its market image in order to regain its place in the competition among its adversaries. The textile

industry grows every day with new, competitive, and dynamic companies. To be able to compete with them, M&S can address its problem by doing the following: Changing its supply chain Adapting its marketing strategy to the textiles market Introducing new models in its stores during the fashion season

M&S, in order to emphasize the quality of its products, used a cost efficient supply chain. The cost efficient supply chain allowed M&S to minimize transport and warehousing costs, but it limited the flexibility to respond to markets trend changes on time because the textile industry is an unpredictable demand industry. If M&S changed its supply chain and uses a responsive supply chain instead of the cost-efficient one, like Zara, it would have more flexibility to follow the trend changes and adapt its product to market demand. This will prevent M&S losing its customers because of inaccurate forecasts and building up inaccurate inventory. Another solution to improve M&Ss financial situation is to adapt its marketing strategy to the textile market. To define its clothes, M&S does not make enough effort. Its buying team defines clothes specifications and in general, the new creation is defined by making some minor modifications in the previous seasons creation. In addition, the specifications of a creation are frozen one year before its marketing. This method takes into account neither customers needs nor the trend changes. If M&S follows a marketing strategy like the Zaras strategy, it can define its creations more accurately by using customers desires. Using this method, it can attract new customers and doesnt lose its loyal customers. This method can also enable M&S to have adequate inventory to respond the market demand and to avoid build up of the unneeded inventory. To improve its economy, in addition to follow the market trend, one of the solutions that M&S may consider is a dynamic product range. Like in Zaras stores, if the products in M&Ss stores change periodically during the season, the customers are more likely to visit its stores to see new arrivals. This will allow M&S to improve its unfashionable market image also.

These three solutions discussed above can ameliorate M&Ss financial performance and increase its market share. However, because itll provide good results in the short term, and it has longterm benefits as well, changing the supply chain of the company is the most efficient solution. The main reason is the incompatibility between the M&Ss supply chain model and the variability of demands of its products. In the textile industry, since trends are changing rapidly, the customers demands are unpredictable. In such an industry, companies need to be flexible and quick in order to respond to customers demands on time with products demanded by customers. Like Zaras supply chain, a market responsive process should be implemented instead of a cost efficient process, which is used by M&S.

V- Recommendations

The solutions explained in the previous section may allow M&S to ameliorate its financial situation on the short time, but the company needs more changes in order to avoid further financial problems. To prevent similar troubles in the future, M&S should consider doing following: Working closer with its suppliers so that suppliers will implement flexible production

systems in their plants. Working more with international suppliers (instead of the U.K. centralized suppliers

network). Although a responsive supply chain strategy will allow M&S to ameliorate its financial situation, in order to achieve this supply chain, it is important that its suppliers have a flexible production system in their plants. M&S should work closely with its suppliers to implement a flexible production system in their plants. This will allow suppliers to respond to any order changes on time with demanded products. Consequently, M&S will be able to respond to trends with accurate products.

M&S obtains 77% of its products from suppliers implemented in the U.K. When we look at all industries, we notice that the new tendency is to buy supplies as cheaply as possible. Therefore, most companies go to Eastern countries where the supplies are cheaper than western countries. For example, Zaras suppliers are in China. The U.K., where M&S buys three-quart of its products, is one of the most expensive countries in Europe in terms of labor cost. As a result, all products manufactured in U.K are relatively more expensive than those manufactured in European or Asian countries. If M&S applies a new global sourcing strategy, which means purchasing products from cheaper sources, it can reduce its supplies cost; therefore, it can increase its profit margin. On the other hand, following this strategy represents a risk in terms of quality for the company. Thus, the company should focus on guaranteeing high quality of its products while applying the global sourcing strategy.