An Exploratory Study into Failure in Successful Organizations: The Case of Marks & Spencer
| Author | L. Sparks,K. Mellahi,P. Jackson |
| DOI | http://doi.org/10.1111/1467-8551.00220 |
| Published date | 01 March 2002 |
| Date | 01 March 2002 |
Introduction
‘If I had to pick one company in the world
that exemplified consistent long-term growth,
profitability and customer satisfaction, it would
be Marks and Spencer . . . In terms of perform-
ance no British company can match them.’ (Peter
Doyle, quoted in Seth and Randall, 1999,
pp. 123–124)
For over a century Marks & Spencer (M&S) has
been a legendary UK retailing organization.
M&S’s management, both its overall style and its
individual leaders, have been acknowledged as
exemplars of ‘best practice’. Peter Drucker (1974)
described M&S as a ‘managerial giant in the
western world’. Tse (1985, p. 1) noted that M&S
‘has been widely recognized as one of the best-
managed companies in Europe . . . as far as
management excellence of the firm is concerned,
the consensus is almost total in the trade, as well
as in government and specialist circles’. Kumar
(1997, p. 823) commented that ‘in almost every
survey in the United Kingdom, Marks and Spencer
tends to top the list of most admired companies
and their St Michael brand is world renowned’ .
Until 1997, a host of academic and business com-
mentators could be drawn upon to make similar
complimentary points. Since then however, the
situation has altered. M&S is experiencing unpre-
cedented troubles. The company has seen its sales
stagnate, profits collapse and market share fall.
Its reputation is much reduced both at home and
abroad, where, for example, it has been fined by
the French courts and severely criticized for its
attitude and behaviour towards its workers. Whilst
a restructuring plan is underway under new, non-
British management, after 12 consecutive quarters
of sales decline, considerable problems remain. It
is fair therefore to say that the company has been
publicly facing a survival crisis since 1998 (Bevan,
2001). The previously unthinkable, that M&S could
lose its independence, has become a real possi-
bility. How could M&S, which was so often hailed
as an exemplar of retailing companies, and indeed
British Journal of Management, Vol. 13, 15–29 (2002)
© 2002 British Academy of Management
An Exploratory Study into Failure
in Successful Organizations:
The Case of Marks & Spencer1
K. Mellahi, P. Jackson* and L. Sparks†
Loughborough University Business School, Loughborough LE11 3TU, *Coventry Business School,
Coventry CV6 5LW, and †Institute for Retail Studies, University of Stirling, Stirling FK9 4LA, UK
email (corresponding author): K.Mellahi@lboro.ac.uk
Marks & Spencer (M&S) was one of the world’s great retailers, enjoying legendary and
iconic status, being often held up as one of the best managed and admired businesses in
the world. Its ‘fall from grace’ has been spectacular and dramatic and the company is
currently fighting for its life. Based on extensive in-depth interviews with company
managers and utilizing a case-study approach, this paper provides an exploratory study
into failure at M&S and presents this in the context of the wider literature on organ-
izational and managerial failure. It concludes that whilst external factors in the various
trading environments affected the business, there were internal aspects of the crisis
which exacerbated the situation and the problems.
1We acknowledge the constructive and helpful advice
of the Editor and three anonymous BJM reviewers.
02_Mell 8/4/2002 12:21 pm Page 15 (Black plate)
of British business generally, suddenly find itself
in such dire straits?
The phenomenon of highly successful com-
panies facing a survival crisis is not new (Anheier,
1999; Lawler and Galbraith, 1994; Miller, 1990).
The corporate landscape is littered with the bones
of bankrupt, but previously successful, corpor-
ations. Several popular books describe collapses
of successful companies (e.g. Miller, 1990; Ricks,
1983, 1999; Ross and Kami, 1973; Sobel, 1999).
Notwithstanding the commercial importance of
organizational failures, both at the corporate and
business start-up levels, the topic is not a central
theme of management research (Cameron et al.,
1988; Sheppard, 1994; Whetten, 1988). Pauchant
and Douville (1993) argue that whilst excellence
is well-established within the literature on strategy
(and indeed Marks & Spencer have been included
themselves in a number of ‘excellence’ collections),
the study of failure is generally less common.
Using a case study of M&S, this exploratory study
investigates the process by which a successful
company is engulfed by a crisis, and the causes
that underlay the situation. The aims of the paper
are to understand the causes of failure in M&S, to
place this case study in the context of the lit-
erature on organizational crisis and failure and to
draw lessons from this analysis for management
and future research.
Organizational crisis and failure
The meaning of failure, decline or crisis is
problematic (Sheppard, 1994). Academics have
defined each of the terms in different ways
(Cameron, Kim and Whetten, 1987; Carroll, 1993;
Dutton and Jackson, 1987) and there is little
consensus about what each term precisely means.
For the purpose of the present research however,
we define crisis-failure as an event or condition
(or a series of events and conditions) that could
lead to severe market-share erosion (Starbuck,
Greve and Hedberg, 1978). Symptoms include
declining demand, sharp declines in sales and
reduced or negative profitability (D’Aveni, 1989a;
Hambrick and D’Aveni, 1988). The terms crisis,
decline or failure will be used interchangeably in
the present exploratory research, although we
recognize that there are theoretical debates about
the appropriateness of so doing. In this exploratory
work, we believe that a broad approach is the
most useful.
Causes of organizational failure have been
examined from at least two different perspectives.
The industrial organization (IO) perspective locates
the causes in the external environment (see
Frank, 1988; Jovanovic and Lach, 1989; Lippman
and Rumelt, 1982). The IO literature seems to
indicate that the management of failing firms are
the unfortunate victims of external circumstances,
and that failure does not imply management
ineffectiveness or inefficiency. The IO literature
suggests a range of primary causes of crisis and
decline. These include turbulent demand structure
as a result of brand switching, changes in consumer
tastes or cyclical decline in demand, strategic
competition due to rivalry among existing com-
petitors or new entrants (Baum and Singh,
1994; Frank, 1988; Jovanovic and Lach, 1989;
Lippman and Rumelt, 1982; Sheppard, 1995),
density of organizations and the natural selection
process (Aldrich, 1979; Aldrich and Pfeffer, 1976;
Amburgey and Rao, 1996; Campbell, 1969;
Hannan and Freeman, 1978), strong unexpected
environment jolts (Meyer, 1982), and techno-
logical uncertainty due to product innovations and
process innovations (Slater and Narver, 1994).
It can be argued that organizational failure is a
natural and objective phenomenon (Balderston,
1972), inherent to the efficient operation of markets.
Life-cycle theory argues that organizations follow
the path of ‘inexorable and irreversible movement
toward the equilibrium of death. Individuals,
family, firm, nation, and civilization all follow the
same grim law, and the history of any organism
is strikingly reminiscent of the rise and fall of
populations on the road to extinction’ (Boulding,
1950, p. 38, see also Downs, 1967, and in the retail
context, Davidson, Bates and Bass, 1976, amongst
others). This cycle of development and vulnerability
is also at the heart of the ‘Wheel of Retailing’
(Hollander, 1960), which is based on the notion
that organizations commence as low cost/low
price businesses, but that as the business develops
so it ‘trades up’ and adds services, ambience
and other more expensive attributes. It therefore
becomes vulnerable to leaner, newer entrants,
which offer shoppers the lower prices they seek.
Inherent in the ‘Wheel of Retailing’ are concepts
of change occurring in the environment (external),
but also concepts of management separation from
consumer realities, leading to an inability to respond
16 K. Mellahi, P. Jackson and L. Sparks
02_Mell 8/4/2002 12:21 pm Page 16 (Black plate)
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