Case Study Analysis: Marks and Spencer

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Concurrently with the organisation’s developing its skill in adaptability, M&S has progressed its innovative capabilities; both in terms of continuous improvement of processes and management, but also in terms of design of its products. For the contemporary marketplace, M&S strive to deliver clothing that is stylish yet practical, and food that is delicious but conscious towards nutrition; reflecting the requirements from its customers and thus driving sales (M&S Annual Report, 2016). With Japan having no shortage in competitors for M&S and a business culture heavily underpinned by innovation (Ready, 2015), this competency is critical for M&S to have success in this new market. Additionally, the modern technological age also traverses into the business world and thus organisations like M&S need to incorporate digital infrastructure to its traditional business models to meet the global consumer markets, including Japan. These dynamic capabilities for M&S are underpinned by its consolidation and integration competencies; aligning its internal processes such as human resources management, governance structure, policy creation and supply chain network to meeting customer needs and other strategic objectives (Cardy & Selvarajan, 2006). Such competencies have been particularly vital for M&S in its multi-channel expansions. A regard for risk management has assisted in its outward FDI activities; with the firm opting for joint ventures, franchising or partnerships as preferred modes of entry (M&S Strategic Report, 2016), rather than direct acquisition or greenfield project in the host country; which carries a greater initial risk. These are also the approaches that have enabled other retailers, such as GAP, H&M and Zara (JETRO, 2009) to find success when entering the Japanese market. Furthermore, M&S continually monitors the local market conditions and consumer dynamics (M&S Annual Report, 2016) in order to make necessary strategic adjustments and for better decision making when furthering commitment to operations in the new location. With the Japanese retail sector subject to dynamic fluctuations in terms of changing consumer needs, regulatory requirements and competitor environment; this competency is a necessity for M&S. Even though Marks and Spencer has historically had mixed success when it comes to internationalisation, these dynamic capabilities it possesses and the company’s commitment to continuous improvement; should facilitate success for its venture into the Japanese market.

Two modes of entry have been considered for M&S’s entry into the Japanese market; wholly owned subsidiary and joint venture. As it is the first time Marks and Spencer is going to expand into Japan, it seems that joint venture is more appropriate as Marks and Spencer have no brand power there yet, however when the brand has been established and there is a successful trend, then M&S should move to a wholly owned company in Japan. The joint venture is chosen compared to other mode of entries such as licensing, franchising, etc. because one of the major obstacle entering the market in Japan is the contracts and administration (Griek, 2014). By creating a partnership with a local settled organization in Japan, it allows us to utilise some administrative expertise of the local company in order to fast track the process. Just like other mode of entries, joint venture has its strength and limitation. The risk level is one of its strength, with joint venture. The risk is shared with the venture partners and local expertise of the market from a well-established organisation mitigates some risks that may have developed through a solo venture. Moreover, less capital is needed to run the company, and M&S can gain additional resources by working with the local companies (Queensland Government, 2016). However, the level of control is a concern with joint ventures, the partner could not provide equal support and leadership at the start of the venture. For example, the handling or management problems by the partner may not be align with how M&S handle theirs. The limitation does not only concern level of control, but it also may take time for both companies to build their relationship as their work culture may be different (Ahsan and Musteen, 2011). The other factor that can be both a strength and limitation is the competencies of the partner. Whether the partner is competent is important for the success of joint venture, therefore choosing the correct partner is crucial (Xiaoyun, Alex, and Kevin, 2014).

M&S uses various types of foreign entry modes around the world such as owned, franchise and joint venture. In a particular country, choosing the appropriate venture partner will generate high market sales and capturing. For example, to cater for the Indian market M&S had partnered with Reliance group. From another point of view, due to economic, political and social factors, the partnership systems are not exactly same in all the countries. This could create operational problem for the company in the long run. (Quinn and Doherty 2000) Eventually, wholly owned subsidiaries can reduce the risk of losing control over core competencies, and gives M&S the tight control over operations in different countries. M&S has its own stores in Belgium, Canada, France, Germany, Spain and Netherlands; and franchises in Cyprus, Israel, Bermuda, etc. (Essay UK, 2013). When internationalizing, M&S has usually preferred to combine resources, knowledge and

skills with an experienced retailer

in that host country. Joint ventures share the associated risks and rewards of

a project between businesses (Queensland Government, 2016). M&S first joint venture was established in

Spain but, M&S has had extensive experience in foreign direct investment in

following years as well. Therefore, it can learn from the past mistakes and

build a better future. In this way, the

company's international business provides M&S with a number of development opportunities and

helped it sustained firm growth. That is the reason why M&S becomes world-renowned enterprise.

Establishing a new business in Japan is known to

have a lengthy administration process and is definitely a major obstacle that

Marks and Spencer face. Although Japan is the 3rd largest economy in the world,

according to the World Bank Group (2016), Japan was ranked 81st for the