International Expansion as the Solution
So far, it is clearly revealed that M&S has been in trouble due to the discrepancy between its vision and corporate strategy and itsportfolio composition neglecting risk-diversification. On top of that, U.K. retail market, where M&S has taken most of its revenue from, is getting unattractive to do business because of harsh competitionamong many mega-supermarkets and fast-changing customers’ trends. In this sense, it is needed for M&S to take strategic actions for regaining its profit, and international expansion must be the rightsolution to turn around M&S.
There are some reasons for selecting horizontal growth strategy suggesting international expansion as corporate direction of M&S. First of all, it will make M&S able tocontrol its threat that comes from the UK economic fluctuation. As it is mentioned before, due to its slanted concentration on the U.K. market, revenues and profits of M&S are hugely influenced byeconomic situation in U.K. This kind of domestic concentration has always been threat of M&S making its business risky. So, horizontal expansion can be one way to diversify its risk.
Of course, in orderto diversify its risk further, it is best for M&S to diversify its portfolio by starting up new business unit which is not directly related to the retail business. That way, M&S can be free frombeing influenced by economic fluctuation which generally has large impact on the whole retail industry. However, considering its limited resources and capabilities, it seems impossible for M&S todiversify its portfolio. It is proved that, according to its financial report in 2008, M&S recorded weak cash position in recent few years. The company’s cash from operating activities declined about 400million pounds for recent three years and it has led M&S to short term liquidity problems. Also according to M&S’s 2009 balanced sheet, even though it’s current net asset is 2,100.6₤m, its current...