Int. Rev.

of Retail, Distribution and Consumer Research 12:2 April 2002 191219

Retail internationalization and

retail failure: issues from the
case of Marks and Spencer
S.L. Burt, K. Mellahi, T.P. Jackson and L. Sparks
Abstract
Retail internationalization has attracted much attention in recent years as the scale and
nature of the activity has changed. Most analysis of retail internationalization however
is based on market entry and mainly successful businesses. Here, the internationalization strategy of Marks and Spencer over 30 years is examined. Its recent large-scale
withdrawal from such activity is considered in the light of theories about internationalization and business failure. The complexity of market exit in retailing is
emphasized. It is suggested that market exit and failure are important underresearched dimensions of retail internationalization. More detailed and careful work
on market entry and withdrawal (failure?) is needed to adequately conceptualize the
subject area.

Keywords
Failure, internationalization, market entry, Marks and Spencer, retail, withdrawal
International expansion has been the graveyard of many prominent UK
retailers, and none more so than Marks and Spencer. Now it must extricate
itself from the businesses around the world that have never ful lled its
hopes.
(Urry, M. Overseas expansion has been retailers graveyard, 30 March 2001,
ft.com)
Introduction
On 29 March 2001, Marks and Spencer (M&S) announced that it was to sell its
Brooks Brothers clothing chain (USA and Japan) and Kings supermarkets
(USA) businesses, and turn its company-owned stores in Hong Kong into a
franchise. In addition, it was going to close most of its company-owned
S.L. Burt, L. Sparks, Institute for Retail Studies, University of Stirling, Stirling, FK9
4LA, UK; e-mail: leigh.sparks@stir.ac.uk. K. Mellahi, Loughborough University,
Loughborough, UK. T.P. Jackson, Coventry University, Coventry, UK.
The International Review of Retail, Distribution and Consumer Research
ISSN 0959-3969 print/ISSN 1466-4402 online 2002 Taylor & Francis Ltd
http://www.tandf.co.uk/journals
DOI: 10.1080/09593960210127727

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continental European stores, viewing them as distractions in its quest to restore

its fortunes (which have seen sales stagnate since 1998, pro ts (after exceptional
items) fall by over 1bn in three years and its share price collapse from a high
of 6.60 on 3 October 1997 to a low of 1.70 on 20 October 2000). A wave of
protests across continental Europe about the closures and job losses was the
result. This managerial giant of the western world (Drucker 1974) and one of
the best managed companies in the world (Tse 1985) found its closure
announcement condemned by the French Prime Minister, Lionel Jospin, as
particularly unacceptable . . . (they) should be punished. Other French ministers weighed in with comments on the scandal and exceptionally brutal
behaviour of the company. In early April 2001 a French court ned M&S for
breaking the law through a lack of consultation with its workers (they claimed
they were effectively sacked by e-mail) and its manifestly illegal troublemaking, suspended the store closures and threatened prosecutions of individual
M&S managers. Demonstrations and protests continued in the summer of 2001,
including a rally and march in London organized by the global skills and
services union UNI. Rather ironically, one analyst report (Dresdner Kleinwort
Wasserstein 2001) described the announced restructuring as the easy bit of
turning M&S around!
Whilst much attention has rightly focused on the rights of employers to act as
they see t and employees to be consulted and informed properly, the announcement by Marks and Spencer was signi cant for another reason. It signalled an
end to the international ambitions of successive M&S chairmen and Boards of
Directors. Whilst some international store activity will remain, mainly in the
form of franchised shops, most company-owned activities will be sold off, closed
down or franchised. So ends over 30 years of direct retail international activity
and ambition. M&Ss internationalization could perhaps be viewed as an
inglorious failure. Given the current level and scale of international retailer
activity (e.g. Ahold, Delhaize), and takeovers at the international level by leading
retailers (e.g. Wal-Mart/Asda and Carrefour/Promod`es), Marks and Spencer
can no longer be considered a candidate for the global retail elite. Rather, it is
ghting for its independent life in its British heartland. Whiteheads (1992: 41)
challenge (to become the major international retailer with . . . products which
sell worldwide) has not been met.
The phenomenon of previously successful companies facing a survival crisis is
not new (Miller 1990; Lawler and Galbraith 1994; Anheier 1999). The corporate
landscape is littered with the bones of bankrupt, but previously successful,
corporations. Several popular books describe collapses of successful companies
(e.g. Ross and Kami 1973; Ricks 1983, 1999; Miller 1990; Sobel 1999).
Notwithstanding the commercial importance of organizational failures, both at
the corporate and business start-up levels, the topic however is not a central
theme of management research (Cameron et al. 1988; Whetten 1988; Sheppard
1994). Pauchant and Douville (1993) argue that whilst excellence is wellestablished within the literature on strategy (and indeed M&S have been
included themselves in a number of excellence collections), the study of failure
or market withdrawal is generally less common (though for a recent retail
example see Meyer-Ohle 2002).
If organizational failure is not a central theme in management research, then
the idea of failure in retail internationalization research hardly registers at all.

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Recent years have seen a torrent of research publications on internationalization.

There are, for example, the edited or collected volumes of Brown and Burt
(1992), McGoldrick and Davies (1995), Akehurst and Alexander (1996) and
Alexander and Doherty (2000), and the books of Sternquist and Kacker (1994),
Alexander (1997) and Sternquist (1998). Reading these works however, bring up
concerns with the way in which internationalization theory has been developed
and outlined in the literature (see Alexander 1997 for a sound run-through of
theory development). The literature is replete with metaphors about growth in
internationalization, whether it be stages or development theory, waves of
internationalization, retailers being cautious or ambitious over activity, emphases
on competences or critical activities such as in Dunnings eclectic paradigm or
concepts such as psychic distance. If failure in retail internationalization has
been considered at all, it is under the guise of cross cultural factors such as
adaptability, entry mode and locational disadvantage. Whilst it would be unfair to
claim that risk in retail internationalization has been ignored totally, the myriad
of failures in retail internationalization practice seem curiously at odds with the
mainly positive statements suggested by the academic literature.
This lack of consideration of failure in retail international activity may be
attributed to a number of elements. First, what is seen on the ground today is
the positive outcome of the international activity. It is possible to either forget or
fail to record activities that close down. Godley and Fletcher (2001) demonstrate
the historical volume of internationalization into the British retail sector, but
tellingly comment that one reason why this has been ignored is because so many
of these developments failed or were taken over. Second, retailers themselves
wipe failed activities from their record books or public memory. For example you
will nd little mention of Tescos rst foray into Ireland (see Lord et al. 1988) in
any of that companys brie ngs on company history, its web pages or in the books
produced recently by those involved (MacLaurin 1999). Yet lessons were learnt
from this problematic venture, which have subsequently informed the companys
internationalization approach and return to Ireland. This corporate amnesia
probably re ects the fact that failure is not such an attractive construct as
success. There are many such examples, involving both high pro le and lesserknown companies. For example Wal-Marts struggles in the 1990s in Hong
Kong, Indonesia and China or Lane Crawfords disastrous move into Singapore
are seemingly forgotten or ignored by retailers and academics. Finally, researching failure is generally more dif cult than researching success, partly for the
reasons above and partly because personnel change more rapidly after failure and
neither they, nor the artifacts remain to inform us.
However, it is believed that a combination of failure and internationalization
can provide insights into both constructs and theory development. Why do
companies fail in the international market? Why are decisions in retrospect,
disastrous? How can businesses extricate themselves from problems? What are
the roles of other stakeholders? The aim of this paper is to use M&S as a case
illustration to probe these issues. Its international activity is long-term and
diverse. It has been a hugely respected business, though currently it can not
seem to put a foot right. It is believed that an analysis of its failure in
international arenas is both long overdue and may well prove insightful.
The research presented here is part of a larger piece of work on organizational
failure in M&S (Mellahi et al. 2002). The overall research design focused on

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using a range of sources, to enable breadth of data capture, augmented by

detailed depth research processes, with cross-checking and validation of data,
opinions and sources. Here, the focus is only on the international activity of the
business, though the same data sources have been used as in the wider
research.
First, the media and stockmarket analyst coverage of M&S has been enormous, because of their high pro le, previous success and the depth of the
unfolding crisis. For example the Dresdner Kleinwort Wasserstein (2001) report
cited earlier is one amongst many analysts reports on the company. Secondary
material is thus extensive.
Second, M&S corporate publications such as annual reports are readily
available. These have been considered together with other public statements by
M&S managers and directors available through the press or made for example at
the Annual General Meeting (which has been attended regularly by one of the
research team).
Third, for the overall project, 12 formal interviews were conducted over a
period of six months in 2000, with a sample of managers, executives and
Directors (see Mellahi et al. 2002 for full details). Whilst the interviews focused
on general issues of crisis development and management at M&S, comments
about internationalization were made.
Finally, since 1998, one of the authors, a former executive at M&S and
personally involved in aspects of M&S internationalization, has conducted
informal interviews and discussions with M&S management about M&S activities, utilizing his past contacts and colleagues. Most of these informal discussions have been by telephone and have sought to cross-check information as it
emerged from the research.
The paper is structured into ve sections. First, the literature on retail
internationalization research is presented, followed secondly by examination of
the concepts of failure or market exit. A description and then discussion of
Marks and Spencers international activity follow this. Finally, conclusions are
drawn, both about Marks and Spencer and the lessons from the case for our
understanding of failure and internationalization.
Retail internationalization
International activity is inevitable . . . the subject area is concerned with
explaining . . . the directional or motivational issues associated with that
process.
(Alexander and Myers 2000: 340)
Retail internationalization, as noted earlier, has become the subject of much
academic study. Our understanding of the issues involved has undoubtedly
developed in the last decade, but questions remain. Alexander and Myers (2000)
criticize those working in the subject for being overly concerned with process
and insuf ciently worried about the pre-conditions for internationalization.
Taking a broader but similar position, Wrigley (2000b) questions the ability of
existing theorizing to suf ciently include the factors that are important in the
corporate landscape and the ways in which these vary over time. These broad,

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linkage-type issues can themselves be set within a framework of concern about

retail internationalization research, which has perhaps four dimensions (Dawson
1993, 1994; Pellegrini 1994).
First, there is an over-concern on describing what happens in retail internationalization. Research has become very adept at describing the opening of
stores and the countries that any company has penetrated. Listings of countries
are then somehow related to degrees of internationalization. Alexander and
Myers (2000) argue that this descriptive work, whilst of interest and necessary as
a basis, is insuf ciently grounded in the pre-conditions of markets in the
countries concerned. Wrigley (2000a) states that the descriptions are not
suf ciently cognizant of the corporate and nancial realities of rm and global
capital. Both points have merit, in that the description of store openings per se
does not tell us the full story about internationalization, but is probably the
necessary starting point.
This paper however, wishes to make a different point about this work. By
focusing on stores opened and countries entered, it is argued that the research is
missing an essential component of the internationalization process, namely
failure. Adding up countries entered tells us something about a companys
international reach. Focusing as well on the relationships between countries
and locations (stores) that have been exited, and the reasons behind closures or
withdrawals, may however tell us more about the activity, process, company
realities and the pre-conditions in target markets for retail internationalization.
Second, there has been a debate about the very scope of retail internationalization. Dawsons (1993, 1994) framework lays out a very broad range of
activities in which a retailer may engage, all of which may have international
dimensions. Sternquist (1997) has challenged this approach, suggesting that
store operations alone should be the prime focus for international retailing
research. This debate continues (see Alexander and Doherty 2000 for an
example). At its extreme, Dawsons suggestion helps us to situate the retail
business in the activities it undertakes, similar in a way to Wrigleys (2000a) call
to understand the nancial dimension to retail internationalization. However,
adding product sourcing, nancing, management movements and the like, does
expand the dimensions to be considered and perhaps limits our ability to
proceed other than on a detailed case by case basis (Sparks 1995, 2000). It also
highlights the important and obvious (but sometimes ignored) point that retail
internationalization is multi-faceted and complex.
Third, the literature is full of references to aspects of theories that have been
borrowed from other sectors. This debate again has been joined by Dawson
(1993, 1994) and Sternquist (1997) and commented upon by others (e.g.
Alexander and Doherty 2000). In essence, Dawson cautioned about borrowing
theories unthinkingly from research in other sectors, when retailing is such a
different activity to those other sectors. The nature of retailing and the practice,
importance and meaning of its internationalization are for example vastly
different to an oil producer or a water company. But the retail literature is
replete with such borrowings, particularly from manufacturing research and
generally focused on aspects of growth of internationalization (see Alexander
1997; Sternquist 1998 for good run-throughs of this work). The reasons for
internationalization and the reasons behind entry and withdrawal are it can be

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argued fundamentally different in retailing and need to be considered in this

different light.
It is also generally the case that such broad theory development emphasizes
establishment over all other factors. It may become more concerned somewhat
with pre-conditions for entry, but it is still market entry that appears to be the
critical dimension. As may be expected, it is argued that considering failure (or
market exit) in retail internationalization might also be important. For example,
research has covered Kmarts entry into Eastern Europe, as it has the more
recent entry of Tesco. However, the exit of Kmart, which provided opportunities
for Tesco, tends to be neglected. What were the motivating factors for this exit
and what can the comparative actions of these companies tell us? Such issues are
neglected in the literature, although Dawson (2001) has begun to question
whether retail internationalization is the outcome of a clear cut, rationale,
strategic planning process or rather an opportunistic event (see Lord et al.
1988).
Fourth, the vast majority of academic research on retail internationalization is
grounded in the present. There are few studies that present a longitudinal
analysis of events, or consider the historical context. Those that do examine the
process of retail internationalization over time either with respect to speci c
retail sectors (Burt 1991, 1993; Godley and Fletcher 2000a, 2000b) or individual
companies (for example, Laulajainen 1991, 1992; Treadgold 1991) again tend
to focus on entry methods, patterns of investment, market entry and growth.
This context also tends to focus on discussion of past actions with current (and
possibly uninvolved) decision makers, even when exploring motives for previous
internationalization (Alexander 1990; Williams 1992). Discussion of future
intentions (Myers 1995) also tends to focus on current plans for expansion,
rather than any retrenchment.
There has been a considerable expansion of academic work and literature on
retail internationalization. This work is however problematic in a number of
ways. In particular, and in the context of this study, the literature tends to
underplay the merits of taking a longitudinal, case based approach, grounded in
the business and corporate realities of the time. It also has little to say about
market exit or failure in international retailing, despite the multitude of examples
available from practice. This case study aims to explore these issues to help begin
building a broader understanding of retail internationalization. The paper now
turns to the literature on failure and market exit.
Failure and market exit: a review
It has to be recognized at the outset that the terminology in this area is inexact.
A number of terms or phrases are used in the literature, but rarely are they
de ned. How they relate to each other is also often unconsidered. Thus for
example, failure, closure, exit, divestment or disinvestment could be examined.
There is internationalization, so why not de-internationalization? Closure of a
business by one company can mean the opportunity to move in to a market for
another. Hinfelaar and Kasper (2001) note: the failed internationalization
strategy of one retailer becomes the vehicle for market consolidation for
another. There are clearly issues to be resolved in our basic de nitional

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197

apparatus. The terms, closure, failure or exit will be used interchangeably in the
present exploratory research, although it is recognized that there will have to be
theoretical debates about these. In this exploratory work, it is believed that this
broad approach is the most useful to allow investigation of the subject.
There is also an issue over what is being studied and at what level. There is
a long history of research on macro changes in the retail shop stock at various
scales (Converse 1932; Burd 1941; Kirby and Law 1981). Research also covers
the idea of market entry and exit at the macro-economic level (see Carree and
Thurik 1996; Nijkamp et al. 2001 for discussion of this). Debates about business
formation are plentiful and indeed some countries have focused their economic
policies on ensuring a conveyor belt of new concepts, ideas and businesses.
These business start-ups of course succeed, or more likely fail. This raises the
question of predicting business failure and attempts have been made to improve
predictive accuracy, including for retail failures (McGurr and DeVanay 1998).
More pertinent in the current context however, is the work at the corporate
level, although as seen above, these do not normally cover concepts of failure. An
exception to this can be found in some of the case study work, particularly that
on methods of market entry (Quinn 1996) or on structural change (Sparks
1996a, b). Such case study speci c work has on occasions considered in passing
situations where withdrawal from an international market has occurred (Sparks
1995). Recently, Alexander and Quinn (2001) have used three brief company
examples to examine what they term divestment in retailing.
There is also a question of what exactly is the focus of any such study. The
discussion above focuses on the rm as the object of study. As noted earlier,
some would argue that internationalization is about more than opening shops in
another country. It is necessary to decide whether the focus of study of failure is
at the rm, outlet or activity level (or all of these?). In retailing for example, high
pro le international management moves that have been failures can be pointed
to, for example, the sequence of Americans brought in to rescue Laura Ashley.
Failures of supply systems or withdrawal of sourcing from countries is another
example, as are international nance movements and their implications for the
funding (or not) of international activity. It is necessary to be clear when
discussing failure or exit, that it may be highly complex and inter-related and
extend beyond ideas of shop opening or closing.
It is possible to relate our study of retail international failure to the broader
literature on business failures (see Mellahi et al. 2002 for a longer discussion).
Causes of organizational failure have been examined from at least two different
perspectives. The Industrial Organization (IO) perspective locates the causes of
failure in the external environment (Lippman and Rumlet 1982; Frank 1988;
Jovanovic and Lach 1989). This perspective emphasizes external constraints and
implies that forces of circumstances leave senior mangers with very little room
for maneuver. Managers have little strategic choice but to withdraw from
international activities because of events beyond their control, or for rational
economic reasons. Put differently, senior management of failing rms are the
unfortunate victims of external circumstances, and that failure does not imply
management ineffectiveness or inef ciency. This deterministic role of the
environment implies that the management role can therefore be ignored when
examining strategic decisions such as international withdrawal. The IO literature
suggests instead a range of primary causes of crisis and decline. These include

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turbulent demand structure due to brand switching, changes in consumer tastes,

or cyclical decline in demand, strategic competition due to rivalry among
existing competitors or new entrants (Lippman and Rumlet 1982; Frank 1988;
Jovanovic and Lach 1989; Baum and Singh 1994; Sheppard 1995), density of
organizations and the natural selection process (Aldrich 1979; Aldrich and
Pfeffer 1976; Campbell 1969; Hannan and Freeman 1978; Aldrich 1979; Amburgey and Rao 1996), strong unexpected environment jolts (Meyer 1982), and
technological 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 ef cient operation of markets.
Life cycle theory (LCT) argues that organizations follow the path of:
Inexorable and irreversible movement toward the equilibrium of death.
Individuals, family, rm, 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: 38, see also Downs 1967, and in the retail context, Davidson
et al. 1976, among 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 to threats
to the business. Whilst not universally accepted, the concept of cyclical trends or
tendencies that need to be managed or overcome is an attractive one. This leaves
open however, the question of whether failure is due to these external factors or
to management failure.
On the other hand, Organizational Studies (OS) literature takes a voluntaristic
perspective and places more emphasis on internal factors associated with failure
(Cameron et al. 1988). Accordingly, and in sharp contrast to the IO literature
examined above, this approach assumes that management does in uence the
strategic path of organizations, including market withdrawal and failure. Advocates of internal causes criticize IO literature on failure as being too rational,
arguing that it presumes objectivity by ignoring the effects of internal factors
and the misperception of organizational members in responding to external
changes. According to OS literature, failure is a result of managements lack of
vision and the lack of will and ability to respond effectively and make necessary
adjustments to reverse the downward spiral of decline triggered by external
factors. The literature cites as the main internal causes of a crisis, escalating
commitment by management to pre-existing strategies and routines (Staw 1981;
Bateman and Zeithaml 1988), blinded perception by management to their
weaknesses and strengths, customers demands and competitors (Zajac and
Bazerman 1991), management malfunctioning (Argenti 1976), strategic paralysis

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199

(DAveni 1989b, 1990), threat rigidity effects (Staw et al. 1981) and structural
inertia (Hannan and Freeman 1984).
The discussion above suggests that both IO and OS orientations need to be
incorporated in any consideration of retail de-internationalization. A number of
previous attempts have been made to integrate the two approaches (Levine 1978;
Witteloostuijn 1998). These however have not tended to be developed in the
context of either retailing or internationalization.
A further strand in the wider literature on failure is the work on divestment
and particularly the divestment of activities in an international context. Benito
(1997) shows that divestment of foreign manufacturing operations is common,
and is related to the economic growth in the host country, the mode of
organization (subsidiary or green eld) and the closeness of the operation to the
core business activity. This is reinforced by Chang and Singh (1999), who
conclude that whilst the entry and exit mode decisions are dependent on
different factors, the mode of exit is strongly related to the original mode of
entry. Clark and Wrigley (1997) produce a typology of exit decisions, de ning
three main types: strategic reallocation, restructuring and changed corporate
form and structure; and moving from the simple to the complex. As Baroncelli
and Manoresi (1997) show in a retail context however, there are complications,
which make simple typologies problematic. They point to a retail divestment of
company stores into a franchise, commenting that this is classically an assetshrinking exercise, but in this case is undertaken for enhanced speed of growth
reasons.
The literature reviews of retail internationalization and failure and exit
suggest therefore that both are somewhat complex and problematic areas of
study. There are de nitional, conceptual and level of analysis dif culties that
need to be clari ed and resolved. Any research at this stage is therefore
necessarily exploratory in nature. One way of approaching this is by utilizing a
case study to examine some of these issues and to suggest from this, aspects of
retail internationalization failure that could be more fully analysed and researched, and thus help in theoretical development.
M&S: internationalization
Prior to its current decline, M&S had been one of the most successful British
retailing companies. Figure 1 takes the simple measures of sales and pro t to
illustrate the commercial success of the company and the scale of the current
reverse. There is no point in repeating here the well-known history of the
development of M&S from its family, market bazaar, xed price origins. A
number of erudite texts by outside observers (Briggs 1984; Tse 1985; Rees 1989),
company leaders (Sieff 1970, 1986, 1990) and internal of cers (Bookbinder 1989,
1993; Goldenberg 1989) provide more than enough detail. In addition there are
detailed (Bird and Witherick 1986) and more super cial (Davies 1999) academic
attempts at exploring aspects of the companys development. Others have
focused on speci c strengths or presumed characteristics of M&S (Tse 1989;
Kumar 1997; Turnbull and Wass 1998) and how other sectors of the economy
could learn from their business practices (Howells 1981; Chesterman 1984). The
recent decline of M&S has also attracted wide media comment (Retail Week

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2001) and the rst journalist authored book on the decline has already been
published (Bevan 2001).
Such was its domestic image and success, that M&Ss moves abroad had
become of interest to academics searching to understand the role of image in
retailer internationalization (McGoldrick and Ho 1992; McGoldrick and Blair
1995; McGoldrick 1998; Burt and Carralero-Encinas 2000). One particular
aspect of its approach to internationalization, franchising, has also been the focus
of study (Whitehead 1991, 1992). M&Ss iconic status within the UK may
sometimes have puzzled those from outside the country. However, by 1998 the
business had retail sales of almost 8bn, traded from almost 500 M&S stores in
over 30 countries and owned Brooks Brothers and Kings Supermarkets in the
US. It possessed a renowned private label/retailer brand in St Michael, an
enviable UK nancial services operation and made over 1.15bn pro t before
tax. By any measure, this was a successful business. Two years later however this
empire was in nancial and prestige terms, and for a number of reasons, in
great dif culties (Goodman 2000; Bevan 2001; Mellahi et al. 2002). By 2000,

Figure 1 Marks and Spencer recent business performance

Burt et al.: Retail internalization and retail failure

201

international activities represented 25 percent of the companys retail oorspace,

17.2 percent of its retail (i.e. not nancial services) turnover, but less than 1.25%
of the pre-tax pro ts. Even in its most pro table year (1997), this pre-tax pro t
percentage was only 8.3 percent. Thirty years of international retail store activity
has not produced the returns anticipated.
There are a number of ways in which M&Ss internationalization can be
considered, as it has varied over time. Dimensions of entry method, time,
destination and format all are important. The discussion below provides a base
chronology for the international activity, before considering details of format,
entry and subsequently exit. Table 1 supports this discussion by outlining
measures of M&Ss internationalization at ve yearly intervals. It shows clearly
the development of the company both within the UK, but also in terms of its
internationalization. Table 2 provides details of where and how the company
currently (September 2001) operates.
Marks and Spencer for a long time had an established export business that
exported product around the world to appropriate retail partners, and on ve
occasions, the company was the recipient of a Queens Award for Export for this
Table 1 Marks and Spencer Business Development 19752000a
Turnover
(m current prices)
UK
Europe
US/Canada
Rest of Worldc
Financial services
Total

1975

1980

1985

1990

1995

2000

687b
9b

1543
28
70
26

2900
80
175
38
19
3213

4765
120
579
63
81
5608

5596
360
544
171
136
6807

6483
556
691
101
364
8195

26b
721

1667

Floorspace (000 sq ft)

UK
5712
6374
7216
9225e
11000
12265
Europe
53
154
266
325
N/a
1517
US/Canada
1881
2304
3895f
N/a
1421
Rest of World
223
Franchises
959
Total
5765
8409
9786
13445h
13794h
16485
Stores
UK
252
251
265
292e
283
296
Europe
2
5
9
11
29
40
US/Canada
190
227
376g
320
328
Hong Kong
7
10
Franchises
N/a
N/a
N/a
N/a
73
115
Total
254d
446d
501d
679d
712
779
Notes
(a) The data reported by the company changed often in the reporting period, and
terminology is somewhat loose in their reports. It is best to treat the table as estimates
and tendencies therefore; (b) Estimated; (c) Initial years re ect the export business, later
years Hong Kong plus franchises; (d) Franchise store numbers excluded as unknown; (e)
Includes Republic of Ireland stores and oorspace; (f) Includes stores in the Rest of
World; (g) Includes Hong Kong stores as well; and (h) Excludes franchise store
oorspace.
Source: Constructed from company Annual Reports and Accounts

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Table 2 Marks and Spencer group locations (at 30 September 2001)

Marks and Spencer
Number of stores
United Kingdom:
310 includes 8 outlet centres
Belgium 4
France 18
Luxembourg 1
Netherlands 2
Portugal 2
Republic of Ireland 4
Spain 9
Hong Kong 10
TOTAL 353
Marks and Spencer Direct 1

UK Regional Stores
England 268
N. Ireland 7
Scotland 22
Wales 13

Marks and Spencer franchises

Number of outlets
Bahrain 1
Bermuda 1
Canary Islands (5)
Gran Canaria 3
Tenerife 2
Channel Islands (4)
Guernsey 1
Jersey 3
Croatia 1
Cyprus 8
Czech Republic 3
Finland 6
Gibraltar 1
Greece 28
Hungary 4
Indonesia 9
Israel 6
Kuwait 1
Malaysia 3
Malta 3
Philippines 9
Poland 1
Qatar 1
Romania 1
Singapore 6
South Korea 5
Thailand 10
Turkey 11
UAE 2
TOTAL 130

Brooks Brothers
Number of stores
Brooks Brothers USA: 155
incl. 79 retail stores, 75 outlets, 1 clearance
Brooks Brothers Japan 65
TOTAL 220

Brooks Brothers franchises

Number of stores
US Airports: 4
Hong Kong 5
Taiwan 2
China 1
TOTAL 10

Kings Supermarkets
Number of stores
USA 27

Group Worldwide Locations

TOTAL 750

Source:
http://www2.marksandspencer.com/thecompany/downloads/store_information/index.
shtml (downloaded 12th November 2001)

(and its franchising) activity. Rees (1969) comments that even in the 1960s, this
export business involved sending products to over 50 countries. The expatriate
and military (NAAFI) markets were the focus of this business, but other
countries were involved. This business grew substantially in volume over the
1970s, but was always subject to the vagaries of import bans and international

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Table 3 Export sales (m current prices)

Year

Total exports

Direct exports
outside group

Of which

Europe
America
Africa
Far East
1977
40.4
24.3
1978
53.2
35.1
1979
44.0
25.5
1980
46.7
26.3
1981
47.6
22.3
1982
58.0
26.5
14.0
2.2
5.9
4.4
1983
67.9
27.6
15.6
3.1
3.2
5.7
1984
84.0
33.2
18.3
2.2
5.2
6.5
1985
92.7
38.2
19.5
4.8
7.6
6.3
1986
106.3
44.8
25.6
6.4
4.8
8.0
1987
115.1
45.0
27.8
6.0
2.4
8.8
1988
126.1
46.5
34.0
5.0
2.5
5.0
1989
125.4
45.8
37.0
3.4
1.8
3.6
1990
136.0
49.3
39.6
3.2
1.3
5.2
1991
164.0
59.0
47.3
2.9
1.3
7.5
1992
N/a
62.7
50.0
12.7(a)
1993
232.2
73.3
57.6
15.7
1994
280.8
87.2
66.8
20.4
1995
339.8
99.8
69.4
30.4
1996
381.6
114.8
81.6
33.2
1997
458.5
(b)
1998
469.6
1999
440.2
Notes
(a): From 1992 direct export sales reported as Europe and Rest of the World; (b): From
1997 direct exports incorporated into new geographical reporting structure
Source: constructed from company Annual Reports and Accounts

trade wars. Export sales outside the group (Table 3) had reached 35 million
by 1978, before trade embargoes, various wars e.g. Nigeria, the Iranian Revolution, and exchange rate problems pegged back growth. Nonetheless, it would be
wrong to characterize the pre-1970s M&S as a wholly UK business, as many
previously have. Indeed, as Table 3 shows, this export business provided not only
important sales opportunities but also valuable pointers towards areas of business
opportunity. Some of the partners were transformed formally into franchisees as
internationalization activity strengthened (see below). As Finlan (1992: 58) notes:
Export of goods enabled the business to establish a series of good personal and
business relationships.
This export business took a variety of forms and depth of agreement. For
example, M&S had an agreement with Isetan to sell products in Japan between
1970 and 1978, after which Daiei became the partner in a wider agreement
involving managerial know-how and technology transfer. It is not known to us
why one partnership ended and another began. For other countries, there was in
essence a wholesale operation targeting retailers and trying to expand sales.
Some relationships were simply entrepreneurial in the export context e.g. an
Indonesian entrepreneur buying $1.5m of goods in 1990, for resale in Jakarta. As
a consequence he became the Indonesian franchisee a couple of years later. Some

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deals were made for locations e.g. Panama that served as a staging post for other
countries e.g. elsewhere in South America. The full details of all this activity are
not in the public domain, but as Finlan (1992) points out, it was not all
bene cial, except in total sales terms. There was no control, no contracts in some
cases, variable standards and inconsistent brand presentation. Across the world,
M&S product was sold in a variety of guises and situations, not all re ecting
positively on the company.
This export activity, to a considerable extent, held little developmental
attraction. Export sales have declined in importance as this business has
withered or been converted (Table 3). Some of the better opportunities for
development were formalized in franchise agreements, as for example in Greece
or in island communities such as Jersey, Malta and Cyprus, or elsewhere as in
Portugal. Other markets were left to their own devices. Long-standing partners
sometimes transferred to franchises as with Rustans in the Philippines. Others
such as Dodwells (Inchcape) in Hong Kong, saw their export agreement
terminated in 1987 as M&S decided to open its own stores there.
The rst formal store-based internationalization occurred in 1972, when a
stakeholding was purchased in three Canadian clothing retailers. The minority
stakeholding was bought out and full ownership assumed when Canadian
legislation changed in 1978. These three chains, DAllairds, Peoples and
Walkers (the last of which were re-branded as M&S stores) operated as the main
international activity of the business for some years. However, this was not a very
pro table venture and its fortunes uctuated dramatically (Figures 2 and 3).
Despite growing to 275 stores in Canada (an increase of almost 50 percent from
purchase), and even starting a brief DAlliards excursion into New York State in
the late 1980s, M&S never made Canada succeed. The store numbers were cut
sharply in the 1990s, DAlliards was sold off in 1996, at a loss on disposal of
25m, and subsequently (1999) the entire Canadian operation was closed, at a
cost of 25m plus 24m goodwill write-off. Market exit in Canada took a
number of forms over time (stores closed and/or relocated, stores sold-off and
eventually chain closure), but all were basically related to a poor economic
performance of the business.
Marks and Spencer entered the US in 1988 through purchases of the upmarket clothing chain, Brooks Brothers (which also had stores in Japan) and
Kings Supermarkets, a 16 store New Jersey chain. As with Canada, this
acquisition has never really produced the results expected (Figures 2, 3), despite
store expansion of both chains. As part of the March 2001 restructuring, both
chains are up for sale, though in reality bids for the companies have been
encouraged (though have not been forthcoming) for the last two years. This
proposed market exit would seem to be different to Canada, as here the
businesses are pro table and broadly successful. Exit re ects perhaps the entry
price paid and thus a failure to meet performance expectations and more
recently a perceived lack of business t.
In the 1970s, M&S also began an organic market entry strategy in parts of
continental Europe (Table 4). The rst store to open (subsequently expanded
and at the heart of the 2001 restructuring crisis) was in 1975 at Boulevard
Haussmann in Central Paris. This was soon joined by a store in Brussels,
Belgium. In France, Belgium and Ireland store numbers grew slowly over the
1980s, until another wave of expansion in the early 1990s when Spain and the

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205

Figure 2 Sales by business component (m)

Note
Sales here are as reported in the Annual Accounts i.e. at the prevailing exchange rates
each year.

Netherlands were added to this company owned operation. This was followed by
a long-awaited entry to Germany in 1996. This corporate store business was
never dramatically large, as the store numbers show, or particularly fast-growing,
but growth did continue and the business seemed to be solid, particularly in
France and Ireland (another country where the export deal with Dunnes was
terminated in favour of store development). In the late 1990s however, store
numbers in Germany and France were cut as problems continued in the
business. Exit here was therefore initially at the store level, rather than the
country level. Europe was not the only part of the international expansion to be
totally under central control. Perhaps surprisingly, Hong Kong stores opened
under corporate ownership in 1988 and expanded rapidly until the economic
crisis in the region in the late 1990s, although this expansion was not without its
problems (Jackson 1998).
The nal strand of the international activity has been franchise stores (Table
5). The franchise route has been used in a variety of markets over time. It
evolved in the late 1980s, largely growing out of a formalization of the existing
export business, and driven by a desire to control and manage standards of
presentation and the wider M&S brand in selected export markets (Finlan 1992).
St Michael franchise stores and shop in shop outlets were present in 16
countries by the start of the 1990s, and in Annual Reports were publicly
recognized as a means of expansion in markets not deemed suitable for company

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Figure 3 Pro ts and losses by business component (m)

Note
Sales here are as reported in the Annual Accounts i.e. at the prevailing exchange rates
each year.
Table 4 Company owned Marks and Spencer store developments: Europe and Asia
Year of
entry

1980

1985

France
Belgium
Ireland
Spaina
Netherlands
Germany
Luxembourg
Portugalb

1975
1975
1979
1990
1991
1996
?
2000

3
1
1

6
2
1

8
2
3
1

16
3
3
5
2

18
4
4
10
2
2
1
2

Hong Kong

1988

12

Country

Number of stores
1990
1995

2001

Total
5
9
17
36
55
Notes
(a): The Spanish operation appears to have begun as a franchise, but was then converted
into a joint venture with Corte el (80 percent M&S), who were themselves bought out
by M&S in April 1999 for 6.2m. (b): Portugal was a franchise operation but this was
closed in 1999, with a smaller number of company owned stores opening in 2000.
Source: Annual Reports and Accounts

Burt et al.: Retail internalization and retail failure

207

owned stores in the mid 1990s (effectively non-core Western Europe). The stores
are typically much smaller than the UK stores and the colonial base of some of
the export business is easy to identify. Some stores have been branded M&S,
others St Michael. As with all franchise arrangements, this venture was
supposedly geared at utilizing local expertize. There have been outright successes (e.g. Greece) and failures (e.g. Austria), but in many countries this is not
a large operation, nor one with huge growth potential (Table 5). In line with
existing academic thought, it might be argued that franchising has been used for
the more remote (from the UK) parts of the world (e.g. Indonesia and
Thailand). However, as Hong Kong was set up as a company operation and there
have been European franchises, the strategic reality is more mixed.
It is also clear that the choice of partner in each country and the ambition
levels of, and for, each partner are mixed. There have been problems in a number
of countries, necessitating closure of stores or even temporary or permanent
market exit. The Portuguese franchise agreement was terminated in 1999 after a
range of problems, including nancing and standards of the stores. Israel and
Turkey are other countries where the partner has changed. Austria has closed
completely. Choice of partner and maintenance of standards are key franchising
issues. Some partners have multiple countries to run e.g. Al-Futtaim Sons in the
Middle East and Robinsons in Singapore and Malaysia. Other agreements are
joint ventures set up to manage a franchise. Hungary is run by an Austrian/
Hungarian partnership, whilst Romania is operated by a partnership of the
existing Greek and Turkish M&S franchisees.
The details of the franchise agreements are not revealed in Table 5, but
obviously affect performance and thus market exit. The number of franchises
that have changed hands or failed to grow is quite striking. This could be due to
problems in the franchise partners business generally, their ability as a retailer
to understand the local market and to select appropriate M&S product ranges,
the use of varying formats within countries or other essentially internal countrybased reasons. On the other hand, questions could be raised as to the contract
from M&S in terms of length of time (and thus rate of return), pricing of
products at supply and thus consumer levels, availability of supply and other
restrictions on activities. Problems in these areas together make it very dif cult
to develop franchises pro tability and thus have led directly to store closures and
market withdrawals. It is perhaps signi cant in this regard that the most
successful M&S franchise, Marinopoulos, seems to have disregarded many of the
standard M&S franchise restrictions. A full consideration of such operational
and control issues is beyond the scope of this paper. It is suf cient here to note
the impact such issues have on entry, performance and withdrawal (Quinn and
Doherty 2000).
Table 6 summarizes the exit strategies followed by M&S. The table shows that
there have been a range of both entry and exit strategies used, and that there are
relationships between them, in that an exit decision can lead to a new entry
mode. The table also suggests that there are issues about the level of exit e.g.
store or country. It is also suggested that there are different reasons behind the
different exit strategies reported here, and that whilst some of them are
economic in nature, not all of them can be seen in this way. It would seem that
there are linkages between modes of entry and entry decisions and subsequent
exit decisions, but it is not believed that one is simply a mirror image of the

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Table 5 Franchise store operations

Country

Partner

Entry

Abu-Dhabi
(UAE)
Austria

Al-Futtaim Sons

1998

Thomas Feldman
then (1998)
Al-Wazzan
Archie Brown
Al-Futtaim Sons
Tess Ltd
Galloway Ltd
(Tenerife) and
Confecciones Martel
(GC)
Le Riche (J) and
Creaseys (G)
Al-Wazzan then
(2000) Marinopoulos
Voice la Mode and
Symeonides Fashion
House Ltd
COMS

1994

Al-Futtaim Sons
OY Stockmann AB
York Ltd
Marinopoulos
JV between Demexco
(Vienna) and S.
Modell (Hungary)
PT Maikelindo
MSIF (Blue Square)
then (1996/1999)
Golf Kitan
Al-Futtaim Sons
Robinsons
Supermarkets (1960)
Ltd
Brynild Salg AS
Rustans (Stores
Specialists Inc.)
MSF Polska
CRB
Al-Futtaim Sons
JV between
Marinopoulos and
FIBA
Robinsons
D&S Ltd (Dae
Sung)
Corte el
Central Group
(Suvimol)

Bahamas
Bahrain
Bermuda
Canary Islands

Channel
Islands
Croatia
Cyprus
Czech
Republic
Dubai (UAE)
Finland
Gibraltar
Greece
Hungary
Indonesia
Israel
Kuwait
Malaysia
Malta
Norway
Philippines
Poland
Portugal
Qatar
Romania
Singapore
South Korea
Spain
Thailand

Exit

Number of stores
1994 1997 2001

Note

1998
1992
by 1988

1
3

1
3

1
1
1
5

(b)

by 1988

(c)

2000

by 1988

1996

1998
by 1992
by 1988
by 1988
1988

1
7
2

5
1
9
2

1
6
1
14
4

1992
by 1991

5
8

5
7

8
7

1998
1996
by 1988

2
3

2
2

1
3
3

1
6

1
1

6
5

10

1988
1999
1988
1998
2000

2000

1996

1999

1992?
1997
1988
1993

1990

(a)

(c)

(c)

(d)

(e)

(f)

Burt et al.: Retail internalization and retail failure

209

Number of stores
1994 1997 2001

Note

Table 5 Continued
Country

Partner

Entry

Turkey

Turk Petrol
Holdings, then FIBA
(1999)

1995

Exit

12

Total franchise
76
85
118
stores
Total countries
18
20
27
(g)
Note
(a): Austria did have four stores in 2000, but trading dif culties saw them close; (b):
Bahamas are not included in the company list as at June 2001 so could be closed; (c): In
each of these countries there are two partners with separate spatial agreements; (d): The
company list of June 2001 claims 28 franchise outlets in Greece. We believe this is
achieved by adding in-store operations; (e): The 5 stores of the Portuguese franchise
(CRB) were closed in 1999 when M&S severed the relationship. M&S subsequently
reopened two stores as company stores; (f): Spanish franchise became a joint venture
with Corte el; (g): Other countries have often appeared in the media as possible targets
or even with agreed deals for Marks and Spencer franchises e.g. Russia, Japan. However
the truth behind these reports is hard to ascertain and they appear to be incorrect. In the
Annual Reports for the late 1980s, the company mentions franchises in Denmark and
Sweden, but it is understood that this was not an accurate description of the activity.
More accurately, a deal for a franchise in Australia was concluded with Just Jeans in 1997,
but was delayed inde nitely in 1998. Most recently, franchises have been announced for
India (with the Hong Kong owned Planet Sports 08/2001) and Saudi Arabia (Al Farida
09/2001).
Source: Annual Reports and Accounts (all years), company web site (2001), reports
obtained via Lexis-Nexis, interviews and personal communications.

other, or that our understanding of internationalization entry can simply transfer

over to internationalization exit.
M&S: understanding internationalization and de-internationalization
The discussion above has described the components of international activity
(entry and exit). This section attempts to understand this described process by
examining themes in this internationalization.
One of the key themes in retail internationalization is the motivation of
businesses and the direction of retail activity. The motivation for the purchase of
the Canadian chains has primarily been ascribed to a set of circumstances and
factors in Britain at the time (see Whitehead 1992). To understand the expansion
into Canada, the political and economic situation of the time, as well as the
interests of the Marks and Spencer founding families has to be considered. From
prior to 1939, much of the family fortune was invested within the UK, but also
in South Africa in the Woolworths (SA) organization run by the Sussman family
(grandchildren of Michael Marks). Indeed, from 1947 there has been a formal
agreement between the two companies on matters of management know-how
and technological transfer, as well as an agreement not to trade against each
other in Africa and the Middle East (Gerdis 1999). Because of the growing

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Table 6 Marks and Spencer internationalization exit

Mode of
international
activity
Export business
(undated origins)

Corporate
purchases (1972,
1988)

Franchises (1987
onwards)

Company stores
(1975 onwards)

Joint ventures
(1990 onwards)
Sources: Annual
Lexis-Nexis

Exit methods

Example

Possible reason for exit

Allowed to decline

NAAFI

Declining market

Crisis withdrawal
Transformed into
franchises
Transformed into
company stores
Partial sell-off

Nigeria
Philippines

Risk evaluation
Market opportunity

Hong Kong

Market opportunity

Canada

Business restructuring to
attempt turn-around

Close down

Canada

Total sell-off

USA

Agreements not
renewed
Trading decline
leading to partial
closure
Trading decline
leading to full
closure
Converted to joint
venture
Converted to
company stores
Closure of selected
stores
Sold-off

Israel

Failure to make returns of

investment
Failure to make suf cient
returns, business t, raise
money
Franchise performance

Singapore

Economic view of store

performance

Austria

Franchisee withdrew due

to losses

Spain

Market opportunity, to
improve corporate returns
Portugal
Franchisee performance
unacceptable
Germany
Economic view of store
performance
France
Stores not pro table,
buyer available
Converted to
Hong Kong To save corporate
franchise
management effort
Closed down
Belgium
No buyer for stores
deemed to be unpro table
Converted to
Spain
To maximize returns
company stores
centrally
Reports and Accounts, foreign newspaper reports obtained through

condemnation of the Apartheid regime in South Africa, many businesses were

withdrawing their funds. At the same time, the UK Labour government of the
1960s had made noises about extending nationalization into retailing. Chains
such as M&S viewed themselves as possible targets in the future. These two
issues resulted in investment in Canada, where the Chair and CEO of Walkers,
Abraham Gold, was well known to the M&S families. Entry therefore may not
have been for the most positive of reasons.
Unfortunately however, Canada was not a successful retail venture (Figures 2
and 3). Supply chain problems were never properly addressed, nor were the

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211

fundamental differences between the Canadian and the UK clothing requirements. It would also appear that Canadians never got M&S. Its positioning in
the UK market was replicated for Canada, but in a different competitive
environment, its position was not seen as distinctive nor unique and the brand
lacked meaning (Burt and Sparks 2002). Certainly, its merchandise did not
warrant its price premium. The business model did not transfer (Evans and Cox
1997).
Investment was poured into the Canadian operation throughout the 1970s and
1980s but without any real impression on the problems. Indeed, it could be
argued that a reckless expansion of a bad business took place. When Lord Rayner
(the rst non-family member to chair the company since the turn of the century)
took over, he wished to establish the business as a true international player. The
focus thus switched to the USA and resulted in the purchase of Brooks
Brothers. In retrospect, this was seen as a poor buy for M&S in that the price
paid was too high and the costs of turning an exclusive chain into a more
generally available operation outweighed the bene ts. Returns were never as high
as anticipated (Figures 2 and 3). One of the main parts of the deal, space for
M&S stores in Campeaus malls in the USA, was never taken up. M&S in
essence never were able to run and fully develop these very different chains.
Whilst it could be argued that Canada and then the USA represent culturally
similar situations to the UK, in fact the peculiarities of M&S (see later) made
them very different. The exit strategy adopted has been to sell off assets in
Canada and eventually to close down the remaining operations. In the USA, the
exit is being managed through an offer to sell. Sell-off as a strategy is possible
because of the distance between the chains and M&S core business.
Second, the multi-dimensional approach to store internationalization does not
appear to be that coherent. In essence, the business became a collection of
activities with little synergy and mix. Canada had been problematic for years.
There was no direction in the United States purchases and no synergy. The
franchise operations were a mix of the small, colonial, developing markets and
random other countries. There was seemingly no rationale in the choice of
countries, or strategy in where to move next. At various times reports of M&S
franchises opening in Russia, Australia, Taiwan, Japan and China amongst others
have appeared in the press. The choice of franchisees seems almost haphazard,
and it is unclear if the details of the franchise deal helped or hindered. In some
cases it would seem that international expansion initiative has been directed
more by franchisees than by M&S. Company-owned stores abroad were developing slowly, with interest shifted from Europe to Hong Kong. Further, a range of
branding approaches was being used. In North America the bulk of the
operation did not trade as M&S, unlike in Europe. The franchises were mainly
branded as St Michael. At home, the operation was struggling with recession
(see Figure 1) and a switch in locational and format emphases, encompassing
more off-centre and out-of-town stores and stand-alone formats. In short, the
company was a collection of operations with little apparent overall strategy, other
than a belief in their own business model and power. This belief was, in terms of
the home market, apparently well founded until the late 1990s. However, the
consequences of this pick and mix approach to the international business were
all too predictable. No one element of the international business obtained the
attention and direction it needed and potential synergies were not recognized

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and achieved. The brand potential was never fully leveraged internationally.
Purchase or entry alone seemed to be the driving factors, rather than a desire to
develop the businesses. Store closures, franchise withdrawals and market exits
were the all too obvious consequences.
Third, M&S have always held to a belief in their way of doing things above all
else. For example the well known Buy British policy, the lack of advertising and
marketing, a refusal to take credit cards and a long time resistance to out-of-town
developments all marked the company out as different. Mellahi et al. (2002)
show how this belief created a cycle of misunderstanding of the marketplace in
the UK, which reinforced the decline, once crisis hit in 1998 (see also Bevan
2001). The same holds true for the international operations. The peculiarities of
the operation, as for example the long standing aversion to changing rooms and
credit cards in the UK, were problems for the international operation to
overcome. The reliance on the St Michael brand to hold meaning internationally
created another problem. It worked in the UK, so why would it not work
anywhere else? Product sourcing that was heavily based in the UK, particularly
post-1996, and to a far greater extent than in competitors, damaged the company
nancially through the price positions adopted and the currency uctuations
caused by the steady appreciation of Sterling. At the same time, the international
operations were not insulated from market property prices as in the UK, which
hid the problems in Britain for some time, yet at the same time made overseas
businesses look comparatively under-performing. To a considerable extent, what
were perceived as strengths at home, were weaknesses abroad. In turn of course,
these have now become institutional weaknesses at home as well.
Finally, we can consider the current restructuring plan. Canada has already
been closed, after two decades of problems and weak performance. The US
chains are up for sale. The Hong Kong store business is to be converted into a
franchise. With the exception of Ireland, the company stores in Europe are to be
closed or sold-off as assets (there were also seven previous store closures in
Germany and France a year before). This restructuring is to allow concentration
on the problems of the British core chain, where modernization and market
positioning are fundamental to any restructuring. Yet it is pertinent to ask just
how much core management time and effort was involved in these international
operations, as the evidence indicates that it was relatively little. Many of the
previous idiosyncrasies of the business are to be eliminated. However, the ways
in which the closure announcements were made remain the subject of French
legal cases, one of which M&S recently (September 2001) won, although others
remain to be decided. Whilst these legal cases have now forced M&S to sell the
stores rather than close them (thus protecting jobs to some extent), they could
not reverse the fundamental decision. This is not really the issue however. The
closures in France illustrates one aspect of a number of issues in the process of
market withdrawal.
The French position is that businesses have moral and social as well as legal
obligations to their employees and to the countries in which they operate.
Companies who wish to cease operations have to negotiate this with the
workforce, provide alternatives and pay appropriate compensation. There are
thus legal ties on market exit, just as there are in some cases on market entry. In
many ways, these issues are similar to many of those raised by Davies (1995) in
his analysis of the effect of Trade-Related Investment Measures (TRIMs) on

Burt et al.: Retail internalization and retail failure

213

retail internationalization. The M&S affair shows not only that the playing eld
in this regard is not level within Europe, but also that such considerations affect
both market entry and market exit. For international businesses, some countries
offer an easier entry and exit route than others, and thus may be favoured for
investment. Compare for example the furore over M&S, with the decision in
2000 by C&A to close its entire 108 store chain in Great Britain. There was no
outcry, yet the job loss total was approximately the same. The closure announcements may have been handled differently internally by the two companies, but
the overall effect remains. Far from a British or Anglo-American disregard for
rights, the comparative events show that the country of origin of the retailer
may be irrelevant. What are important are the legal requirements in the country
of operation. This raises interesting questions about harmonization of labour and
commercial laws and their applicability to international retail operations, including affecting decisions on entry and exit.
Conclusions
Our experience illustrates that to succeed internationally when entering
mature markets, you must adapt your store formats to the competitive realities
of these markets.
(M&S Annual Report 2001: 12)
Why did the internationalization activity of M&S fail? With hindsight, it might
be said that there are a number of inter-connecting reasons. First, there has been
no overall internationalization strategy. Some of the activities have been serendipitous; some were probably misguided. But the range of activities and the
incoherence amongst them, tends to point to a lack of direction over a long
period. This is a management failure. There were global ambitions for the
business, as evidenced in the Quality, Value, Service, worldwide promotional
line of the mid 1990s, but no real commitment to converting these ambitions
into something concrete. Second, many of the elements that made M&S
successful in the UK, did not apply in the global arena. The long-sustained buyBritish policy, the peculiarities of the retail operation, the emphasis on a British
brand alone and the lack of clear retail positioning and design, all presented
problems in the global situation. This suggests that in addition to entry, there
should be concern with activities after establishment. Third, despite the length
of time in international activities, there was no experience of decentralized
control of businesses and the systems needed to develop these businesses. Values
in the companies taken over were not enhanced. Arguably M&S never really
understood what they had bought, as it was so different to their own operation.
When the crisis hit at home, the reaction was quickly to distance themselves
from this global operation. If it had really worked, then this international
dimension could have been a source of strength in times of crisis. In short, the
failure of the international operation falls at the feet of successive M&S
management teams.
This study lends more credence to the OS perspective discussed earlier than
to the IO perspective. The international failure of M&S was not a product of
external constraints alone. M&S management often had a genuine choice to

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enter and exit international markets. Management had the ability to choose
where, when and how to enter international markets and when, where and how
to exit from them. The argument that rms withdraw for rational economic
objectives alone provides only a crude indication to why rms fail internationally.
It is suggested that the issue of who makes such choices needs to be examined
in more detail when studying international failure.
So, what else does this case say about the literature on failure and internationalization? Four key issues can be suggested here. First, it would seem that
there may be differences between crisis and failure at home and abroad. Marks
and Spencer had crises abroad over a long period of time, but whilst they
affected in some way the parent operation, they could not be said to be business
threatening. This suggests that in companies that are multi-national in their
activities, crises differ in their degree and their importance. Whilst self-evident
to some extent, it does argue that failure needs to be looked at in businesses at
various scales, including both organizational and spatial scales. International
failure may be caused by failure at home rather than operational failure in the
overseas market. It might be argued that if M&S had not suffered such a crisis
at home, then their poor international performance would have been less visible
or problematic. However, in this more global retail market place and with
continuous analysis of companies, it is more likely that their continued problems
abroad would have impacted on the market view of the potential for the business
in due course.
This paper would also argue that the case demonstrates clearly that models of
internationalization focusing on growth patterns and development alone are
inadequate. Whilst there are some links to concepts of expertize in international
activity, this failure case shows that it is necessary to understand how and why
failures in internationalization occur in order to fully conceptualize the changing
retail internationalization world. Studying only the market entry of Marks and
Spencer is simply inadequate. Internationalization studies need to consider
market entry failure or withdrawal in terms of issues of corporate management,
market issues themselves and business method issues. Also it might be useful to
add to these issues which have not been covered in detail here, such as the
closure of other non-shop based activities such as buying of ces, and the
movement of stores at locational levels within countries e.g. the urban hierarchy
and micro-locations. At the moment, retail internationalization theory would
seem to be covering only one part of the internationalization story.
Third, the case also raises the issue of what is meant by failure in internationalization. M&S have changed and altered their international activities,
swapping modes of operation and indeed withdrawing from some activities,
locations and countries. Franchise partners have failed, but the international
activity has continued. There are elements of closure, failure, exit and divestment as well as complicated activity switching. Our lexicon to describe,
understand and conceptualize this is insuf ciently developed.
Finally, there is a speci c issue raised by the M&S case in this regard. Marks
and Spencer have announced a radical restructuring plan as detailed earlier. This
plan abandons much of the international activity to concentrate on the UK. Part
of this plan provides for a major dividend reimbursement to shareholders on
completion of property and closure activities. Leaving aside questions of which
stores in continental Europe may or may not make pro ts (as the data are not

Burt et al.: Retail internalization and retail failure

215

really available), it does seem that much of this plan is driven by the need to
satisfy institutional shareholders and the London Stock Exchange, who saw their
investments in the company decline massively in value. Financial imperatives
may be dictating the scope of the restructuring of the international activity (they
seem to have succeeded to date in this regard as the share price has risen sharply
since the depth of the crisis, though it remains at a level half its peak some years
ago).
The case study of M&Ss internationalization experiences has demonstrated
that any account of retailing development has to include issues of internationalization and failure. Their story is one that is relatively common, yet
under-reported and under-researched in the literature. Perhaps this case study
can be the start of a fuller study of these issues and begin the process of
conceptualizing all international retail activities.
Acknowledgements
The authors thank the referees for their useful and helpful comments, as well as others
who read some or all of the manuscript and gave advice generally or on points of detail.
Helpful information about commercial aspects of the franchise relationships was also
received from a number of individuals who must remain anonymous.

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