Page 4: Facing the challenges
Although clear opportunities existed in Germany, Marks & Spencer, in entering the most price-orientated food and quality conscious clothing market in Europe, faced many new challenges. For example:
- The Marks & Spencer brand was virtually unknown in Germany. It would be a major challenge to create customer awareness against the background of well established, highly competitive retailers.
- Marks & Spencer needed to compete against the variety and choice already provided by these established retailers.
- Many issues needed to be communicated to customers, such as food shelf life, packaging, policies, labelling and ticketing.
- The recruitment and development of high quality staff would be a key priority.
Developing an entry strategy
The starting point when entering a new market is to learn as much as possible about the market and its customers. In 1994, Marks & Spencer carried out extensive market and location research. In order to maximise efficiencies of scale, plans to locate stores in the northern and western regions of Germany, around the conurbations of the Rhine and Ruhr, were drawn up. This region has 17.5 million inhabitants, almost 22% of the German population. The population density is 1,360 people per square mile and it is the richest German state. Opening a store in Cologne, a city at the centre of a major conurbation of 960,000 people, became the focus for Marks & Spencer's entry into Germany.
Marks & Spencer’s entry strategy was to: focus on similarities BUT recognise the differences. It included a range of key elements - the five Ps:
- PROCEDURES AND SYSTEMS.
In order to understand customer requirements fully, Marks & Spencer needed German nationals to join its managerial team. In January 1996, 17 German managers were recruited and taken to the UK for training, in preparation for the opening of the Cologne store in October of that year. By recruiting staff early, it was possible to obtain critical feedback about differences in operating in Germany, particularly relating to issues such as cultural diversity.
It was soon identified that most German retailers did not strive to offer the high levels of customer service found in the UK. This was one area in which Marks & Spencer could differentiate itself from other retailers.