Marks And Spencer Enters China Case Study Solution
Targeting strategy of M&S
Notably, the company planned to focus on the United Kingdom market by improving the stores, brand, housewares, clothing and food. Also the company concentrated on the narrow segments of the market specifically a high end marker segment, product features which included freshness within that selected segments, the company extensively attempted to achieve the differentiation or competitive edge over Tesco. As an addition the company also tailored products according to need of the different countries for example; it offered longer shirts in Turkey and shorter shirts in Greece.
Positioning Segmented Market
Simply put, the company positioned itself as the premium priced brand in China that was neither affordable nor reasonable to Chinese customers. In the initial period of time, a value based pricing had been followed by company, in which the company had set the prices that the customer were willing to pay on the basis of the perceived value of customers about product or services.
Point of difference
As such, the dimensions that the company added to its valuable resources were sustainability by heavily investing in the numerous green initiatives, thus differentiating it from that of the market rivals. Also, the company added value dimension to all of its product range, which in turn secured the high amount of the customer loyalty and customer satisfaction. Moreover, it is to notify that the company differentiated itself from the market competitors through its unique brand name. The company had always been known and recognized for the affordability of its products.(Montgomery, 2005).
Product Standardization/ Product Adaption
The table is summarized below;
| Variables | Explanation of variables | When standardization was favorable | When adaptation was favorable |
| Environmental factors | There was a difference between Chinese culture and the Britain culture along with the socio economic and demographic differences such as the target market of M&S were old age people. | Environmental factors were homogeneous. | Environmental factors were non- homogeneous. |
| Cost reduction | M&S wanted to reduce it’s per unit cost which could’ve been only possible through standardization. | Cost reduction was preferred. | Cost reduction was not necessary. |
| Global image | M&S had a global image as its operations were in 41 countries of Europe, the Middle East and Asia with combinations of 337 different stores. | The company had a global image. | The company had a local image. |
| Easier planning and control | Company did not want to change its existing plan as it wanted to continue its current planning in expanded areas. | When the easier route is preferred. | When ease of implementation is not a consideration. |
| Diffusion of innovation | M&S best practices involved product tailoring in which it manufactured longer skirts in Turkey while shorter ones in Greece. | Diffusion of innovation was more justifiable. | Diffusion of the cost of innovation supported adaptation. |
| Motivation of managers | Local managers were not highly motivated as they were terminated from their jobs because of their immature act that caused the failure in the Chinese market. | Local managers were not highly motivated. | Local managers were highly motivated. |
| Benefits for local consumers | Company offered larger sized shirts that became a great reason behind dissatisfied customer. This issue was reported by media that it was not a good act by the company. | Consumers were homogeneous, making them more willing to purchase standardized products. | Local consumers were interested in reaping benefits, making them more willing to purchase adapted products. |
| Legal Issues and Differences in Technical Standards | Due to the intense trade rule, food shipment of the company had been blocked, becoming the main reason of loss in revenues and profits. | Few or no differences | Many differences |
| Distribution Costs, Coordination and Personal Client Services | Physical distance was roughly 9,169 km between London and Shanghai which led to an increase in per unit cost. | Low costs | High costs that could be reduced through adaptation. |
| Competition | In Chinese market, global competition was much high. There were too many global brands operated such as Zara, H&M, Debenhams, NEXT and Walmart. | High level of global competition | High level of local competition |
| Customers | Because of the high global image, most of the customers were global. | Most customers were global. | Most customers were local. |
Based on the evidences that have been collected form the case, it could’ve been recommended to company to follow standardized oriented strategy because more of the evidences are in favor of standardization.
Pricing Strategy of M&S in China
Marks and Spencer followed the value price strategy (value based pricing) which is one of the pricing strategies that is used for the purpose of perceiving customer’s value about the newly launched product or services. In this pricing strategy, prices are set on the basis of customer’s perception. It is mostly used when any company opts to offer something unique in market that is different form its competitors’ offerings and contain high valuable features for customers that are willing to pay more price than usual. For this purpose, companies use some valuable marketing strategies to position their brand strategy in better way in the minds of customers for the purpose of enjoying value based pricing (Dholakia, 2016).
For Marks and Spencer, the reason behind the usage of value based pricing is to empower customer’s self-image when they own these products. Apart from its main perception, value based pricing was used for the purpose of reducing the labor cost, manufacturing cost and indirect and direct cost. The higher perception of brand enhanced the perceived value for customers.
By analyzing the five external factors that influenced in pricing decision of Marks and Spencer are:
- Competitive factors.
- Consumer and cultural factors.
- Products factors.
- Distribution channel factors.
- Country factors.
In competitive factors, M&S’s prices were higher than its competitors in food, clothes and beer. Its food prices were too high along with the price imbalance as compared to its competitors such as Carrefour and Tesco. Its full rice bag price cost was RMB 42 which was higher than its competitors, while the cost of full bottle of wine was RMB 100 which was lesser than its competitors. In Shanghai, its jacket price range was from RMB 500 to 3000 which was un affordable by Chinese people due to the product factors.
In country factors, China’s major population portion was categorized in low income class while major population portion in the United Kingdom was categorized under middle income class. Due to this categorization, M&S’s products failed in China because they were un affordable by the Chinese people due to their low income classes as compared to the UK. That is why same marketing strategy which was used in the UK failed in China.
Consumer and cultural factors have major influence on pricing decisions. In China, middle class citizens are price focused as compared to quality and value. But M&S’s strategy had more focus on value based pricing in contrast to cost plus pricing, which caused a failure of franchising in China by the UK based company, due to some unavoidable factors that are mentioned in above paragraphs.
For the purpose of making better and profit based successful pricing strategy, it could’ve been recommended to M&S to use cost plus pricing because the Chinese citizen’s income was lower than Britain citizens and that’s why they couldn’t afford high priced products. They wanted lower priced products that is why cost plus pricing strategy would’ve been best for company in the discussed situation. It is a simple and cost cover technique that provides some markup on cost which helps to cover the product cost by adding some pure profit margins.
Cost plus pricing provides good starting point that ensures the company’s profitability in all under consideration situations. The disadvantage that comes from cost plus pricing is the pricing fluctuations due to some fluctuating economic scenarios. These scenarios might affect the total cost for the company that could ultimately result to a hit on the company’s profit..........
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