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Was the strategy of withdrawal of Marks & Spencers the single recourse for the financial problems it faced?

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Marks & Spencer is a UK-based distributor of cosmetics, clothing, household items and food. Initially, M&S was raking in profits and growing at a steady pace. Then, things slowly started going downhill; the sales that were booming once became slowed down. The financial situation of Marks & Spencer has been deteriorating since 1994, when sales began to decrease. It was between 1997 and 1998 that the sales began to stagnate. The turnover of the firm decreased, but the cost of employees and other expenses remained stable. Hence, the profitability of M&S collapsed.

The shareholders of M&S stocks, who hold about 2,267,225,795 shares in major stock exchanges in London, Paris, Amsterdam, Brussels, and Frankfurt, started complaining for various reasons. The stock price was high, and the rate of return from the company was low. The rate of return which was 15% in 1997, decreased to 5% in 1999. The shareholders were very displeased, and demanded that the distribution of dividends on the rate of return be made 15% again.

This situation would land M&S in further trouble, as the dividend distribution would exceed the net profit of the company. The shareholders refused to budge, and expected 33% equity, which represented 6.5% interest, equivalent to £2 billion, or an annual interest of 17%. To meet the shareholders' requirements, the company must find a way to increase its financial return and react quickly, knowing that these demands are difficult to be fulfilled.

Competition facing M&S is present at three levels.
-Employees (several unemployed for the same position)
-Capital (battle between the different companies to get more capital.)
-Enterprise (business competition, which grow to increase productivity and profitability)
In women's fashion business, Spanish Zara and Sweden's H&M have established themselves as brands offering ready-made, trendy clothing at affordable prices; these practices of the competitors have eclipsed M&S.

A strategic approach is a process used to solve problems in business through four phases:
- Strategic analysis examines the environment, organization, and company resources to identify strengths and weaknesses of the company
- development and selection of projects to be implemented
- implementation of projects, decisions
- monitoring, assessing alternatives

Faced with mounting financial problems, M&S decides to fall back on its homeland, where its activities remain the most profitable in order to redress the balance and better equip for the future. Indeed, after the arrival of French Luc Vandevelde as head of the firm, M&S has decided to close all its stores in continental Europe. Thus it easily observable that M&S has taken drastic measures. CEO Vandevelde claimed the need for a radical plan to turn around the flagging fortunes of the company.

Tags: Withdrawal of Marks & Spencers from continental Europe, Internationalization strategy of M&S, Financial turmoil in the retail sector

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