Essay: International marketing plan for marks and spencer in russia

Marks and Spencer in Russia

International Marketing Plan

1. terms of reference

This report has been compiled by CHARLOTTE Rebien, Vanja Rupar, Celeste Bauby, and IEVA Baranauskaite on the request of Richard Cawley for the International Marketing module. It is due no later than the 6th May 2009.

2. Methods/ procedure

3. introduction (VANJA)

CCVE Consultancy has structured an International Marketing Plan for Marks & Spencer in Russia. The plan is an expansion of a previously constructed development analysis of the country. The main focus is to create a successful strategy with regard to the marketing mix, which is to be supported by clear, SMART objectives and tactics that can be applied to the international move to Russia. This includes understanding previous international mistakes made regarding entry modes and communication processes whilst observing Russia’s current macro- environment, trends and culture.

M&S must follow an appropriate marketing programme in order of gaining competitive advantage,. This means knowing when to standardise operations and when to adapt them, following M&S principles whilst respecting the Russian norms and expectations. The company must closely monitor and evaluate its performance to see how appropriate the implemented strategy has benefited the company, and also in order to take advantage of opportunities and prevent any possible threats.

4. findings

4.1 Situation analysis (Celeste)

As part of Marks and Spencer’s corporate objective of extending their international businesses, we have conducted a situation analysis of Russia as an opportunistic market (find the detailed analysis in the appendix 1 and 2). Russia represents potentially the largest consumer market in Europe with a population of 144 million, mainly concentrated in Moscow and St Petersburg. However, the Russian market has traditionally been viewed as risky due to economic and politic instability and high level of corruption. Since the crisis of 1998, the level of foreign investment has increased and the retail sector has been booming due to a new generation of more affluent and more demanding Russian consumer. The retail infrastructure is developing fast in the major cities of Moscow and St Petersburg, where the competition is the highest. Besides, the government is making efforts to attract investors and to modernize the retail sector, with less strict customs and tax systems for foreign investment and measures to tackle the corruption (Mintel, 2006). The low level of development of the Russian retail sector means that there is not a single retailer that has managed to build a significant market share over the years. However, eight of the top ten retailers are domestic companies. Eldorado and Pyaterochka are the largest, then Magnit, Mvideo and Euroset. However, it seems that the industry and its players are constantly changing. The development of the Russian market is developing in such a way that Western retailers have the opportunity to take or buy out local players who are looking for more funding instead of following a Greenfield strategy. Currently, the foreign retailer that has the largest presence in the Russia is the German group, Metro.

4.2 Customer analysis and target market (VANJA)

M&S is appealing to a high-premium group of customers in Russia offering them high quality food products that fulfil their expectations as oppose to just offering a good deal as some supermarkets do for the mass market segment. Therefore the marketing strategy should be focused on concentrated target marketing. In other words the marketing mix should be diversified to reach a niche market; targeting the upscale, prestige segment by offering excellent food products and services (Sirkeci 2009). Please refer to Appendix for a detailed outlook of the customer analysis.

4.3 Objectives and strategies (Charlotte and Celeste)

Corporate Objectives

“To be able to formulate meaningful objectives and select the markets to be served, management must first determine the success pattern of their organization in the past, and then reinterpret them according to current and future challenges in the international markets considered serving” (M�hlbacher, 2006, p325).

• Continue to invest in and grow our core UK retail business, by introducing new goods and services.
• Strengthen our UK property portfolio.
• Drive our M&S Direct business.
• Expand our International business. In 2007/08 we announced plans to grow our International business to between 15% and 20% of total Group revenues within the next five years.
• Integrate Plan A (our ‘eco plan’) into every aspect of how we do business, so that we grow in a sustainable way.

Their corporate objectives serve the more basic goal of long-term survival.

Strategy

We will be focusing on their objective of expanding internationally, but will make sure that the strategy followed respects the overall corporate objectives.

Marks and Spencer are expanding their business towards Eastern Europe through a franchising mode of entry. Marks and Spencer as part of their new plan are encouraging when entering new markets investment from their own capital rather than a franchising model.

However, the company still supplies their international stores from their UK distribution centers. In order to make the overall operations cost and time efficient in the longer term Marks and Spencer will have to create supplier relationships and open logistics in Russia. At the moment, one single company is in charge of Marks and Spencer’s international supply chain management which highly increases their dependence to the outsourcer.

Generic Objectives:

• To gain 5% of the Russian retail market share within the next two years.
• Opening 20 stores in Russia at best locations within the next two years.
• Increase the total Group revenues by 5% through the expansion to Russia within the next tree years.

Strategy

• expanding the range of food we sell in all of our stores
• improving the value and quality of our lines
• maintaining our lead on innovation and quality
• enhancing our store experience and hospitality offers(Marks and Spencer website, 2008

Marketing and Promotional Objectives:

• Obtaining new customers by increasing consumer awareness of the Marks & Spencer shop to 75% in a two years time
• Increasing brand awareness to 75% in a two years time
• Improving the firm’s corporate image among a new target customer group
• Create immediate revenue growth

4.3 Entry mode (Charlotte)

According to the dunning model (1988) the firm has to choose the entry mode that provides the best return on investment after accounting for the entailed risk.

In the past Marks & Spencer has been using the naive rule for many of their expansions. They used franchising as an entry mode for almost every country ignoring the different culture and demand patterns. M&S’ international franchisees operate over 200 stores in about 30 countries. However they have not always been successful with this approach. Considering their failure in France, where M&S used franchising as en entry mode and tried to succeed with home country success factors rather than attributes targeted for the French local market. In 1999 Marks & Spencer had to close five franchised stores, because their franchise partner Turk Petrol Holding could not meet its bank obligations and collapsed. Marks & Spencer also had direct retailing investments in Canada, under their own brand name, but at the end of 1999 after 25 years of business M&S closed its 38 stores (Euromonitor, 2007). Given that the naive approach may not even work in a culture close country it is unlikely that M&S will be successful in Russia with not considering the individual foreign market. Therefore they should use the strategy rule approach and carefully compare and evaluate all alternatives before choosing an entry mode. Sirkeci et al (2009) argues that four factors my influence the entry mode decision:

• Internal factors: Firm size
• External factors
• desired mode characteristics
• transaction-specific behaviour

An internal factor could be the firm size, meaning if the company has enough resources available to invest them in the foreign market. M&S strong market position, especially in the UK drives its financial performance and could give them the possibility to invest in foreign market. The company’s UK sales rose by 9.7% to �8 billion and its profit before tax rose by 28.5% in fiscal 2007.

If a company such as M&S desires to get a high level of control over their international operations they should think of entering the market through a foreign direct investment. Furthermore since M&S has already experiences in international operations, it lowers the cost and uncertainty of serving a market and the possibility of the firms committing resources to a foreign market increases.

When considering M&S premium products it is more likely that they need a higher degree of control to ensure the quality standards. Therefore a high control entry mode (hierarchical mode) for example brown or greenfield acquisition should be chosen. However, considering the great socio-cultural differences between the UK and Russia, managers of M&S might find a direct investment too risky and rather prefer a joint venture agreement as an entry mode. In terms of the county, Russia might be seen as a risky due their political and economical situation. Thus M&S might limit its exposure to such risk by restricting its resource commitment in Russia (Sirkeci et al, 2009, p.472). On the other hand, Russia’s market size and growth rate might again motivate M&S mangers to commit resources to its development, throughout a wholly-owned sales subsidiary or to participate in a majority-owned joint venture. Moreover, this strategy will follow the overall corporate objectives that Marks and Spencer have set regarding the increase in investing their own capital rather than following a franchising entry mode.

According to the desired mode characteristics M&S by mainly using franchising and joint ventures, was generally less willing to commit a high level of financial and management resources to the foreign country. However, such entry modes that require minimal levels of resource commitment and hence minimal risks are unlikely to enhance the development of international operations and may result in significant loss of opportunity (Sirkeci et all, 2009, p.473). In order to not lose these opportunities as well as to ensure their quality control and standards through an efficient transfer of their firm-specific know-how, M&S should invest more by choosing a hierarchical mode to enter the Russian market.

4.4Marketing action program

“The challenge for M&S marketing is how we stay ahead of the competition, by responding to the things that matter them most to our customers.”

Product

In 2007, Marks and Spencer have undertaken a large store investment program. They decided to modify nationally and internationally their marketing by modernizing their stores. They currently offer a more spacious, brighter and modern store as part of the new M&S experience. There are two factors that have to be taken into account when entering a foreign market regarding the product:

Firstly, the product design which represents the core product benefit of Marks and Spencer which is ensuring the right store in the right location, being one their generic objectives, and easy to shop for their target market to be part of the M&S experience. The store reflects the corporate image of the company with bright and contemporary design but also with a touch of adaptation to the Russian market with an increase in the total space and a wider food range. If we look at the product attributes Marks and Spencer benefits from the country of origin effect, being a brand from Europe. They offer the tangible aspects of a good quality and healthy food range but they also offer the opportunity to be part of the M&S experience through a range of hospitality options (caf�s, restaurants) and services in order to gain distinctive properties to be a foreign food retailer, which represents one of their generic strategy. However, Marks and Spencer have to look closely at the habits of the Russian customer in order to adapt their hospitality and services and not disturb them by overwhelmed staffs and services. Finally, the marketing support services should focus on efficient delivery system as the Russian target market hardly commute to go food shopping due to heavy traffic and inefficient public transports.

Secondly, we shall look at the product communication which represents the branding and the positioning strategies. Marks and Spencer through extensive, sophisticated international advertising has been benefiting from consistent brand recognition as a company that provides a unique experience and hospitality when visiting their stores. Marks & Spencer brand name and values such as quality, innovation and trust represent the company’s core competitive advantage which set them apart from their competitors. They are currently following a strategy of private label with an “own brand business” called Your M&S which has help them to develop their own stores Simply Food when entering new countries. The company should keep on following a global brand name strategy in Russia. Regarding the positioning of the brand, Marks and Spencer are internationally perceived as a company that provides in the best locations easy to shop stores, good quality and healthy food. To conclude they should follow a local consumer culture positioning (LCCP) as being part of the intrinsic local culture but also by providing differentiated products.

Price

Pricing strategy is one of the most important aspects of the marketing mix as it is the only one that generates revenue rather than implying costs. It represents the positioning Marks and Spencer will follow and therefore how the brand is perceived by the Russian target market. When entering in Russia, Marks and Spencer’s pricing method will be affected by both internal and external factors.

Firm level factors:

Marks and Spencer’s corporate strategy is to position their product as exclusive locations and high quality using differentiation through marketing. They are mainly entering international market through franchising which leaves them a high control over the pricing policy. Moreover, they are following a strategy of keeping the production in the UK where they have a large network of suppliers to then export their merchandise to the international markets.

Product factors:

The three main factors that will affect the pricing policy regarding the product are: the product adaptation that will allow Marks and Spencer to develop a unique selling proposal (best location and food line) the delivery service and the logistics. Regarding the logistics, as Marks and Spencer will be producing from the domestic market they will have to rationalise the distribution process in order to reduce the number of intermediaries from the factory to the Russian customers in order to reduce the costs.

Environmental factors

Although the Russian government is making efforts to attract investors and to modernize the retail sector, with less strict customs and tax systems for foreign investment they implement high tariff barriers. The fact that the country doesn’t belong to the WTO leaves the Russian government with high power over the imports tariffs. The cost of importing food into the Russian market has to be taken into account when setting prices.

Market factors:

Marks and Spencer stores are perceived as right locations, easy to shop, high quality stores and offers benefits for customer that any other foreign company offers. Therefore, the Russian target perceived them as exclusive with allows Marks and Spencer to charge higher prices. However, it is essential to note that due to the financial crisis, the Russian target market are getting more price sensitive even if they are willing to pay for value.

To conclude, Marks and Spencer can use its own private stores Simply Food to target a specific segmentation with a pricing differentiation strategy. Although they are targeting an upper middle class segment they shouldn’t use a skimming strategy but a market pricing one in order not to narrow the target market to a high upper class in such financial turmoil.

4.5 Promotion (VANJA)

Communication process

M&S must be the initiator of the communication process as they have not yet established a relationship with their customers in the new environment. The objective is to generate reverse marketing by creating a positive post-purchase experience for the buyer in order for them to return to the stores and repurchase products on several occasions. This opinion is supported by ‘the shift from seller initiative to buyer initiative in buyer/seller relationships’ model (Hollensen 2003).

M&S must effectively transmit their message “quality, value, service, innovation and trust” (About US 2009) through a medium of mass communication media to the potential customers. The Shannon and Weaver model of communication suggests that the targeted market may not receive the M&S message clearly due to ‘noise’ of interference, such as competitors, misleading use of language or culture (Sirkeci 2009). These complications can also derive from internal sources and when operating in foreign markets it can cause damages to the brand or reputation of the company. In order to prevent the disturbance, the M&S message should be adapted to the Russia market, for example having advertisements in the Cyrillic alphabet, avoiding any language misunderstandings such as translation or misinterpretation errors.

Russia is a high-context culture, which Edward T. Hall explains as “Most of the information is either in the physical context or initialized in the person.”(Sirkeci 2009 p701). It suggests that Russians have close connections with each other and prefer being in a social environment, communicating face-to-face. This usually means that social dinners or drinks are considered part of the negotiation process as they get to know the foreign representatives and/or future partners on formal and informal basis. M&S representatives should be familiar with the Russian term ‘dusha’ (soul), because Russians often rely on mutual liking when building successful business relationships (Doing Business in Russia 2007).

In regards to promotional activities, in a high-context culture personal selling (word-of mouth) is often used as a communication channel (The Cross Border Project 2009). The M&S domestic market is considered as a middle range culture; therefore it is easier for them to change their communication style from specific to diffuse in order to be understood by the Russians (Sirkeci 2009).

Advertising media

Upon entering the Russian market M&S should use integrated advertising media to reach its defined target audience. M&S food campaigns are very successful and popular in the home market due to the emphasis of high quality food being enjoyed at home. They are likely to be welcomed by the Russian customers as food quality is considered of very high importance (M&S launches new TV Food Campaign 2008). M&S’s unique selling proposition “This is not just food, this is M&S Food” is known and understood by customers in many foreign markets, but standardising it in Russia may not function due to cultural differences therefore slight modification should take place such as translating the meaning in Russian and providing customers with more visual may add to the effectiveness of the campaign. Furthermore Russians react positively to inspirational advertising as oppose to ones which try to confront with their feelings therefore the M&S food adverts are likely to become popular among the viewers as they are quiet rousing (Boumphrey S. Euromonitor 2008).

Promotion via television will transform the M&S message using a combination of sound, colour and motion. Simultaneously it will raise awareness of the brand, whilst potentially reaching to larger audiences. Russia’s TV ad market is more than $2.3 billion, however length time restrictions on its terrestrial channels means that M&S will be better of broadcasting on satellite channels (Holdsworth N. 2006). The limitations of using the TV broadcasting is the low-involvement factor, which does not guarantee that Russian audiences will follow the message, learning from it and eventually buying the product (Brassington and Pettitt 2007).

Print media such as magazines is another source of promotion as majority of magazines are kept for a longer time and passed around to a number of people. Likewise they have a narrower readership. M&S already has a Your M&S Magazine, which they could introduce to the Russian market to promote their quality food and brand or they could advertise in particular Russian magazine related to food and leisure. The magazine market in Russia has doubled from 2000 to 2006, indicating that print media will prompt purchase action (The Russian Median landscape-print media 2008).

Outdoor media such as the use of billboards and posters is cost effective, depending on the place the reach may be smaller, but the frequency is likely to be higher. Currently there are new restriction bans in Moscow on outdoor advertising in tourist places such as the Kremlin (Gold S. 2008) therefore M&S should advertise in more exclusive areas such as shopping malls, exclusive restaurants of even theatres and operas where the premium target market groups spend most of their time.

Sales Promotion and Direct marketing

A short-term strategy for M&S once entering the foreign market would be to offer a range of food, perhaps a sample of something typically Russian to encourage the customers to try the product and repeat purchase. Similar to magazines, catalogues and brochures can be useful to reinforce the image of M&S food as people are likely to leave them around the house for a while before disposing them. Using below-the-line activities will enable the consumers to familiarise themselves with the store and its offerings (Brassington and Pettitt 2007).

Sale promotion or direct marketing within the store is vital as the customer is ready to purchase, but perhaps indecisive of choosing the right product. In-store offerings or tasters (eg. Drinks, cheese, biscuits) are a very good idea as Russian customers like to take their time when making a decision about product purchase. Sales force must be trained to approach Russian customers in a polite and unthreatening way therefore it might be useful to staff a mixture of sales force from the home and host country. The advantages of having host sale staff is their knowledge of the market, the culture and the language where as the advantages of the home sales staff is that they do not need training and can ensure loyalty (Brassington and Pettitt 2007).

Events and Public Relations

Upon opening the first store M&S should host a social event party for key stakeholders on the premises this will raise awareness of the corporate image, the product and services on offer. The event will be beneficial not only for the stakeholders, but it will also raise media interest, which are likely to talk about M&S and its activities in the press (Livsey 2006). It should continue to provide the press with the positive stories about the product as word-of-mouth is highly practised in Russia due to their high-context culture.

4.6 Place (IEVA)

Place variables

• Channels of distribution
• Outlet location
• Sales territories
• Warehousing system

Place is considered one of the four major factors, that tend to help in satisfying customer requirements. Every business must have a location that it can afford, and that is convenient and suitable for customers and any supplier. As for Marks & Spencer entering Russian market stores are to be located in urban, cosmopolitan cities. Moscow and St Petersburg are the largest business centers in Russia which cover a large customer base. In March 2008, Moscow was claimed to have the highest cost of living in the world (Russia the next stop for potential investors 2009). The general M&S store location is to be in areas surrounding shopping centers, high streets and retailers. Having its stores based in prime high-street locations has a positive influence on its consumers and provides convenience of shopping.

In common with most other large retailers, M&S draws goods from suppliers into regional distribution centers, for preparation and onward delivery to stores. In terms of M&S food in Russia, the distribution of products is being directed by its major British distribution centers which are carrying a role of supplier. Marks & Spencer has a command over its supply chain whereby it is ensured that all stores have adequate inventory levels. Year 2006 ended with relatively high inventory levels as compared to the previous year because the group increased its direct sourcing for general goods. (Marks & Spencer Plc.2009). However, as part of their corporate strategy Marks and Spencer will enhance their effort to develop a supplier relationship in Russia in order to increase their supply chain management efficiency rather than organizing all their operations from the UK distributor centers.

4.8 Monitoring & evaluation (Charlotte)

The global marketing budget decisions:

Given that firm should always put more money into advertising then their actual adverting return, it is difficult to set and optimum marketing budget. However there are 3 practical guidelines M&S could use.

• Percentage of sales/affordable approach
• Competitive parity approach
• Objective and task approach

With the first approach the firm automatically allocates a fixed percentage of sales to the advertising budget. However, since M&S is entering a new market this approach can’t be used (zero sales= zero advertising) (Sirkeci, 2009, p.660).

The Competitive parity approach, which involves estimating and duplicating the amounts spent on advertising by major rivals” could be used by M&S to set their promotional budget. Nevertheless, it could be far more difficult to determining the marketing expenditures of their foreign-based competitors than in their home country businesses. For example some companies financial accounts might not be open to public since they are not limited companies. Furthermore when examining M&S competitor’s spending in Russia they should keep in mind that thus spending are not necessarily right. M&S will be new to the Russian market and has therefore a different relationship to the Russian customers than the existing domestic companies

According to the limitations of the above approaches M&S should start by determining the marketing and promotional objectives and then planning the tasks needed to attain these objectives (objective and task approach). In order to take advantage of this approach M&S first need to have good knowledge of the Russian market to then do a cost/benefit analysis (relating objectives to the costs of achieving them). Given that our company is recommending M&S to us a hierarchical entry mode, where they will need to have good knowledge of the Russian markets, to not risk their investments, they should use this approach to determining the promotion budget (Sirkeci, 2009, p.660).

After the first years M&S should evaluate and control the global marketing budget they have chosen. When reviewing the process M&S manager has to evaluate performance against budget. They need to go back to their marketing strategy and objectives they wanted to achieve. In this case to grow market share or increase brand awareness. Hence M&S need to focus on Russia and their Russian customers, not just their products or units sold.

M&S has to evaluate the marketing effort against the level of market share they wanted to achieve. “The cost of this marketing effort is the marketing expenses and they must be deducted from the total contribution to produce a net marketing contribution”.

M&S could use the following margins to measure their marketing profitability:

Contribution margin in %= Total contribution/Total revenue x 100

Marketing contribution margin % = Total marketing contribution/ Total revenue X 100

Profit margin % = Net profit (before taxes)/Total revenue x 100

Return on assets (ROA) = Neto profit (before taxes)/ Assets

(Sirkeci, 2009)

Controlling the global marketing plan:

After creating the budget, which is the basis for the marketing control system, it is important to get the necessary feedback for a possible reformulation of the global marketing plan. To ensure an accurate control of profits, sales and expenditures (output control) and abilities of sales people (behavioural control) in Russia M&S have to choose a suitable control system. They have to locate responsibility to on or two people from their SBU (strategic business unit) in Russia. This could be the brand manager or the sales manager who are than responsible for the success of marketing activities. It is important that they are convinced that the purpose of control is to improve their own level of success and that of the whole company. To achieve that kind of behaviour or deeper understanding M&S headquarter should always work closely with their SBU and involve them in the overall process of the international marketing plan (Sirkeci, 2009, p.757).

4. conclusion (IEVA)

Russia is an opportunist market with a growing market of demanding customers. The current macro environment in Russia is mainly a positive one with strong economic growth and increased FDI, suggesting that now is the time for M&S to establish their brand and presence in the market. However continuous legal and political instability in Russia is slightly worrying, therefore the strategy implemented for the move must be in accordance to M&S principles and to the expectations of the Russian market.

At the corporate level the profit is allocated to international expansion and integration of the environmentally friendly project ‘Plan A’. However the M&S norm of franchising is unlikely to be successful in Russia therefore the hierarchical mode of entry is to be applied and certain generic objectives such as the opening of 20 stores within two years are to be pursued.

The business level strategy will be strongly focused on establishing immediate growth whilst increasing brand and customer awareness through aggressive advertising.

Simultaneously the marketing action programme will aim to create competitive advantage through the M&S product in regards to innovation, quality and trust; focusing on local consumer culture positioning. Due to the current economic climate many of M&S’s target audiences will be price sensitive, which is to suggest that high-premium pricing might be a long-term objective, whilst a short-one would be to offer certain products at a promotional price. Regarding marketing communications, integrated advertising should be used (TV, outdoor media, print media, PR and direct marketing). Keeping in mind that Russia is a high-context culture, personal selling is likely to take place therefore the communicated message must be accurate in accordance to the target audience, avoiding translation and misinterpretation errors. Having sales force from both home and host countries will be helpful in integrating the two cultures whilst building a long, successfully relationship.

The objectives and task approach method will be used by the strategic business unit to monitor and evaluate performance, ensuring that all objectives and criterias have been met, whilst observing and planning future improvements in all marketing operations.

4. recommendations (CELESTE)

Product testing

Recommendations:

1. M&S should advertise their high quality of food above everything else as this triggers positive reactions by Russian buyers. All adverts should be adapted to the Russian language and not standardised.
2. Direct marketing is the key to building long-term relationships with the Russian customers therefore having personnel from both the UK and Russia will help the process of building brand loyalty.

In order to be successful, Marks & Spencer needs to maximize its strengths, take advantage of its opportunities and prevent or reduce the effect of its weaknesses or external threats.

Firstly, in order to enter Russian market successfully M&S should analyze and familiarize with Russian culture, their working relationships, values and business etiquette. In addition to this, although United Kingdom and Russia is in close vicinity but their culture is very distinct and individual.

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8. Appendices

1. PEST analysis of Russia’s retail market

Political

Russia’s recent past of communism, still have repercussions on the current political environment. The authoritarian government has a high level of power and control in a country where corruption, bureaucracy and unwritten rules regulate the market. Besides, the country’s relation with the West has been facing numerous conflicts of interests. This can be illustrated by the fact that the World Trade Organisation hasn’t yet allowed Russia to be a member due to the lack of liberalism and high level of protectionism (The Economist). However the government has been implementing reforms in some areas in order to attract the foreign companies (Datamonitor). For example, the corporate tax rate has been reduced at the beginning of 2009 by 4% to reach 20% (The Economist). Although all foreign competitors will be facing the same challenge, Marks and Spencer will have to make changes in the way they are operating in other countries in order to suit the Russian market.

Economic:

Russia has been the centre of attention in the last decade as being part of the powerful BRIC economies. It experienced strong single-digit growth for several years that led to a rise in living standards and an inflow of foreign capital. However, it is essential to underline that several obstacles are enabling the economy to work freely. According to the Economic Freedom Index, in 2006 Russia was considered has mostly unfree. The fact that some sectors of the economy are informal and non transparent have to be taken into account when analysing opportunities for Marks and Spencer. Besides, the banking system and the high level of bureaucracy make the economy more fragile and uncertain, increasing the risk assessment of Marks and Spencer’s strategy.

Sociological:

Russia is the 9th more populous country in the world with 142 million people in 2007. However the population is forecast to decline to 138 millions by 2015. This is due to the urbanisation and people in the cities are less willing to have kids (Euromonitor). However this can also be seen as an opportunity for a branch to be implemented in large cities where people don’t have to spend a part of their disposable income on kid’s items. Over the last five years we have seen the creation of a large gap between the top earners and the middle class, the former following a “westernisation” of his consumer patterns, which could be an opportunity for Marks and Spencer’s premium food branch. Besides, it is important to underline the fact that there is a high share of spending in the total disposable income due to the absence of a culture of saving.

Technological:

The Russian government has been investing heavily in telecommunications and transportations infrastructures in order to make the trade and access to its market easier for the companies and for the citizens to be able to move more freely (Daniels et al). This will affect Marks and Spencer if they decide to export their products to the Russian market and for customers to be able to commute more easily to their shops. Regarding the internet, in 2008, 23.3% of the total population was using the internet and this number is forecast to grow rapidly (Euromonitor). Therefore, Marks and Spencer will be able to develop their e-commerce and extend their brand awareness through this channel.

2. SWOT analysis of Marks and Spencer in the Russian market.

Strengths:

The development and growth of the premium food branch of Marks and Spencer in the UK gives the company the extra advantage of know how and learning experience over the Russian market where disposable income has been increasing in the last five years. The growth of top earners and their increasing interest in western products have led to a completely change in their consumer behaviour. Therefore Marks and Spencer could create a new need in a niche market where the demand in premium food product is high. The position of Marks and Spencer will be considered unique and they will be able in the short run to strengthen their competitive advantage within the Russian market in order to prevent competitors to enter the market. The corporate stability and growth of the company in the economic downturn can stand as a strength. According to the annual report 2008, Marks and Spencer’s management team reached an operating profit for international sales of � 116.4 million, an increase of 33.3% compare to 2007.

Weaknesses:

Despite the fact that Marks and Spencer is present internationally they still preserve a strong British culture and image. However, even if the Russian’s elite class has been orientated towards a westernisation of their way of life, some still conserve a strong loyalty towards their history, culture and products. Therefore, Marks and Spencer will have to adjust their effort on their brand recognition in Russia in order to develop the right image that will appeal the most to the target.

Opportunities

The Russian market would be a great opportunity for Marks and Spencer premium food branch. The Russian food market is increasing in sales every year due to rising employment and rising disposable income. According to a report from Research and Markets, in 2007, a Russian consumer will spend in average 27% of their total spending on food and non-alcoholic beverages. In 2009, they were no national supermarkets registered in Russia that offers premium food products, there is a clear gap of supply in this segment. The Russian elite class is wiling to pay a higher price if the quality is proven to be good and especially if it comes from Europe. Besides, the obvious high demand for such products, the international economic crisis and the devaluation of the rubble have led to a decrease in the value of Russian assets, therefore the acquisition of a Russian supermarket branch appears more attracting for Marks and Spencer in order to benefit from the local knowledge of its partner.

Threats:

The Russian food market has been showing continuous strength and growth due to large retail companies that can access to support and equity from the government for their expansion. The financial crisis might affect people’s disposable income and their consumer behaviour, leaving the discount supermarket such as Wal-Mart to increase their market share as people will go back to their old consumer pattern, cut back on their spending and unnecessary luxury goods (Reuters). This will significantly affect Marks and Spencer especially if they decide to focus on the premium food branch.

Customer Analysis:

Demographic

The majority of M&S customers have a family size of two plus, although there are single status customers as well, aged 30+. The target socioeconomic groupings are upmarket, mainly group A and group B, educated individuals with occupations such as intermediate or higher managerial, administrative or professional (GMID: Russia Country Factlife 2008).

Psychographic

Incomes are fairly low for many Russians therefore they can be price sensitive, which means building the brand loyalty is more difficult than in some other European countries (Food retail in Russia: Datamonitor 2008). However the shopping experience for many Russian consumers is changing towards greater expectations. Customers are more demanding, especially when seeking services within the store; they expect excellent service such as a sales assistant helping them through the selection and purchase process (International Journal of Retail & Distribution Management 2008).

Geographic

Stores are to be located in urban, cosmopolitan cities such as St Petersburg and Moscow, which cover a large customer base. In March 2008, Moscow was claimed to have the highest cost of living in the world (Russia the next stop for potential investors 2009). M&S’s target market group is primarily located in these cities. The general M&S store location is to be in areas surrounding shopping centres, high streets and retailers.

Socio- cultural segmentation

The Russian culture has always been rich in art, music, literature and language therefore customers enjoy indulging in their activities (Karpova et al. 2007). Food is very important in the culture and most family activities are centred in the kitchen than in any other room in the house (Mack and Surina 2005). Russian consumers believe that good food quality is worth the money meaning that M&S is likely to be successful in the market (Boumphrey S. Euromonitor 2008; Karpova et al 2007).

3. Other P’s

Physical Evidence (VANJA)

The tangible elements that will support M&S services and products are the layout of M&S stores and the equipment within the store. This essential evidence also includes the employees who work for M&S, the uniform they wear and the services they provide. The M&S internet website is also physical evidence that Russian customers can turn to receive a service (Brassington and Pettitt 2007).

Peripheral evidence apart from the M&S food product itself includes M&S carrier bags that the customer can take home with them, receipt and M&S food packaging. Other examples are M&S Brochures or the Your M&S Magazine that a customer might pick up on their way out of the store.

People

An essential ingredient to any service provision is the use of appropriate staff and people. Recruiting the right staff and training them appropriately in the delivery of their service is essential if the organization wants to obtain a form of competitive advantage. People refer to the customers, employees, management and everybody else involved in it. It is essential for everyone to realize that the reputation of the brand that you are involved with is in the people’s hands (Learn Marketing 2008). In addition to this, Marks & Spencer employ around 71,000 people in the UK 75,000 worldwide. It is important to emphasize that M&S has one of the lowest employee turnover rates in UK retail. Around 40% of employees have been with M&S for over 5 years and 22% for more than ten years. (M&S, How we do business report 2008). Marks& Spencer claims “We need to train people thoroughly to do their jobs, but we also want to retain their skills and experience by giving them real opportunities to plan and build a career with Marks & Spencer” ( Find relevant figures in appendixes). Furthermore, as Russian and British cultures, understanding and business etiquette are substantially different, M&S will have to make shift while building a teamwork culture. What is more, the major language used in Russian business circles is Russian. Through many business people speak English the country’s business culture prescribes using Russian in correspondence and at personal meetings. M&S representatives should find reliable Russian businessman or translator that would help in the beginning to deal during the meetings and successful collaboration. ( Doing Business in Russia 2007).

Processes (IEVA)

Process is the processes involved in providing a service and the behavior of people, which can be crucial to customer satisfaction. It refers to the systems used to assist the organisation in delivering the service. The customer service department of Marks& Spencer deal with a number of processes involved in making marketing effective in an organization e.g. processes for handling customer complaints, processes for identifying customer needs and requirements, processes for handling order etc. (Marks & Spencer Plc.2009)