The document discusses the Uppsala model of internationalization and its application to Marks & Spencer's expansion into foreign markets. It describes the assumptions and stages of the Uppsala model, including the importance of psychic distance. It then provides an overview of Marks & Spencer's history and details its expansion into Asian markets like India and China, highlighting both successes and challenges faced.

1. Leeds University Business School
Leeds University Business School
The Uppsala Model
and Marks & Spencer
Davide D’Aleo 200904489, Yuvraj Rattan Nangpal 200900397, Mayank Beria
200894390, Yalan Ao 200838738, Haibin Jiang 200828505
Group 35 Group ID: I3

2. Leeds University Business School
Uppsala Model - Assumptions
• The model’s assumption are:
– That lack of knowledge in relation to foreign markets and
operations is a major hurdle for firms wanting to
internationalise.
– That the this form of knowledge is primarily gained from
certain operations abroad.
• Since International operations can be risky it is believed that
the move towards internationalisation should be done so
gradually to mitigate the risk.
– Thus, the model dictates a “series of incremental
decisions”.
• N.B. This model is based on empirical findings of Swedish
Firms.
Source: J. Johanson and J. Vahlne, “The Internationalization Process of the Firm – A model of Knowledge Development and
Increasing Foreign Market Commitments”, Journal of International Business Studies, Vol. 8, No.1 (spring-summer, 1977), pp 23-
32.

3. Leeds University Business School
Uppsala Model – Psychic distance
• The different stages of the model are related closely to
a concept referred to as “psychic distance”.
– “Psychic distance” is defined by Johanson and
Vahlne (1977, p 24) as “the sum of factors
preventing the flow of information from and to the
market.”
• E.g. Language, education, culture, business
practices
• “Psychic distance” relates to asymmetry of information
between firm and foreign market
Source: J. Johanson and J. Vahlne, “The Internationalization Process of the Firm – A model of Knowledge Development and
Increasing Foreign Market Commitments”, Journal of International Business Studies, Vol. 8, No.1 (spring-summer, 1977), pp 23-
32.

4. Leeds University Business School
Uppsala Model - Stages
• There are four main stages (Johanson and
Wiedersheim-Paul, 1975):
– No regular export activities;
– Export via independent representatives (agent);
– Sales Subsidiary;
– Production/manufacturing.
Source: J. Johanson and F. Wiedersheim-Paul, “The internationalization of the Firm – Four Swedish Cases”, Journal of
Management Studies, Vol 12. Issue 3, (October, 1975) pp 305-323; see also: (Johanson and Vahlne, 1977).

5. Leeds University Business School
Uppsala Model - Revaluation
• Johanson and Vahlne address these issues and
expanding on the model (re-modernising it).
– They acknowledge the importance of business
networks.
• Within networks there are two aspects:
– Insidership
• Entry into market via networks and relationships
with other firms
– Outsidership
• Lack of trust; liability of foreignness; barriers to
entry
Source: J. Johanson and J. Vahlne, “The Uppsala Internationalization Process Model Revisited: From Liability of Foreignness to
Liability of Outsidership”, Journal of International Business Studies 40 (2009) pp 1411 -1431.

6. Leeds University Business School
Uppsala Model – Revaluation
• In modern times, knowledge doesn’t flow into the firm
just by its activities but also via it relationships with
other countries and this provides an advantage in
terms of tacit knowledge.
• Lack of market knowledge in a foreign country can be
overcome by a trustful relationship with other foreign
firms. (Arenius, 2005; mentioned in Johanson and
Vahlne, 2009)
• ‘Psychic distance’ is not as relevant now as it was in
1970s
Source: (Johanson and Vahlne, 2009); P. Arneius, “The Psychic Distance Postulate Revised: From Market Selection to Speed of
Market Penetration”, Journal of International Entreprenurship 3(2) (2005), pp 115-131.

7. Leeds University Business School
Leeds University Business School
Marks & Spencer

8. Leeds University Business School
Introduction
• About a century ago, M&S started its business from a
single store to become an international chain retailer.
• Operate in 54 countries
• Employ about 86000 people
• UK business is split between food and merchandise.
• 798 stores in UK
• 455 international stores
• 10.3 billion pound sterling global revenue

9. Leeds University Business School
Timeline
• Founded in 1884.
• It was a penny bazaar stall in Leeds Kirkgate market.
• Opened 20 shops soon in partnership with Tom
Spencer
• 1926 – became a public limited company
• 1931 – it started with food department
• 1934 – first retailer to open their own scientific
research laboratory to develop and test new fabrics.
• 1986 – introduced furniture
• Also went international having a flagship store in
Hong Kong.

10. Leeds University Business School
• 1986 – acquired Brooks Brothers
• In the 21st century, they catered customers with
branded clothing range like Blue Harbour, Autograph,
Per Una
• 2007- it launched Plan A. (5 year ethical campaign)

11. Leeds University Business School
Why Asian Market ?
• China and India contain a large part of the population.
• There is a rise in the middle class in both the
countries.
• People are seeking to adapt to the western heritage
and taste.
• Also, these two are a fastest growing economies in
the world.

12. Leeds University Business School
(Economist Intelligence Unit ,2013, cited in blog.royaleinternational.com )

13. Leeds University Business School
Leeds University Business School
INDIA

14. Leeds University Business School
Why it went to Indian Sub-continent ?
• Population size of over 1 billion therefore long term
potential.
• India’s retail industry is around 200 pound sterling.
• Indian middle class is growing especially in urban
areas
• One of the fastest growing economies.
• Asia Pacific’s retail growth volume would be around 5
% in 2016.
• India is 4th in Asia in terms of growth in retail sector.
• Consumers transforming to international taste in retail
area.

15. Leeds University Business School
How they started ?
• Came into franchising agreement with Planet retail in
2001.
• 2007 : exited the franchisee agreement and came into
a joint venture with Reliance Retail.
• Proper stores for Lingerie and Beauty products in
Mumbai
• Initially had 14 stores with franchising and with JV
they went upto 40 stores.
• Opened stores in tier 2 cities like Kanpur, Kochi and
Surat.
• 64% products are locally sourced.

16. Leeds University Business School
Reasons for Failure in India
• Not too many stores when it franchised
• Over priced clothes (due to import duty)
• Promotion of the brand was a failure
• Tend to have problem with the size of the clothes
• Import duty was high
• Aggressive expansion of other retailers

17. Leeds University Business School
Future in India
• Having 100 stores in India by 2016
• Plans to increase the local souring to 70%
• Plans to invest 750 pound sterling million

18. Leeds University Business School

19. Leeds University Business School
First M&S Store in China 玛莎
• 2008
• Shanghai
• West Nanjing Road
• Flagship Store in Asia
(was)
Source: Marks & Spencer annual report 2008

20. Leeds University Business School
M&S in China (2014) 玛莎
• 16 stores in 8 cities
• 7 stores in Shanghai
• Online retail on Taobao.com and JD.com
Source: Marks & Spencer annual report 2014

21. Leeds University Business School
Reasons to Enter China 玛莎
•Opportunity for future growth
•Rapid GDP Growth
•An increasing middle class
Source: Marks & Spencer annual report 2008

22. Leeds University Business School
Strategies in China 玛莎
Source: Marks & Spencer annual report 2008,2014
•Wholly-owned subsidiaries
•Local Partner (planning)

23. Leeds University Business School
Performance in China 玛莎
• Marks & Spencer admits mistakes in
Shanghai.
Source: Financial Times
—— Sir Stuart Rose
Chairman of Marks &
Spencer (2004-2010)
“We need to get the A to Z of sizing right
and we need better market research,”
“We had a screw-up,”

24. Leeds University Business School
Performance in China 玛莎
• Sales in China were 30% lower than
internal target. (2013)
Source: The Telegraph

25. Leeds University Business School
Performance in China 玛莎
• Possible failure in second-tier cities.
Source: Financial Times, Marks & Spencer annual report 2014
M&S will move stores from second-tier cities to metropolises.
“They are basically conceding defeat but they can’t say that.”

26. Leeds University Business School
Problems 玛莎
•High Price
Marks & Spencer’s:
292RMB/500g
=30Pound/500g
Local middle range brand:
120RMB/500g
=12Pound/500g
Source: Marks & Spencer online China store

27. Leeds University Business School
Problems 玛莎
•Lack of high-end image
Source: China Daily

28. Leeds University Business School
Problems 玛莎
•Design
Chinese customers think productions in M&S China are too English.
However, British customers think productions in M&S China are
localized too much.
Old fashioned.
Source: Financial Times
Size.

29. Leeds University Business School
Problems 玛莎
•High rent costs
Rent expense of the flagship store on West Nanjing Road (2013):
100,000,000 RMB/1Year = 10,000,000 Pound/1Year
Source: TopSpring

30. Leeds University Business School
Leeds University Business School
The Future of M&S

31. Leeds University Business School
Plan A
because there is no plan b
• Plan A had started in 2007 focused mainly on climate
change and waste but Plan A 2020 is a business plan
with its focus on customer, employee supplier
engagement.
• Aim: to become the “world’s most sustainable major
retailer”.
• There are four main principles of Plan A
– Inspiration
– Intouch
– Integrity
– Innovation
Source: Marks and Spencer Plan A Report 2014 <http://planareport.marksandspencer.com/downloads/M&S-
PlanA-2014.pdf> Accessed on 27/11/2014.

32. Leeds University Business School
Plan A – Performance summary and
achievements
because there is no plan b
• Progress Summary:
– Number of commitments: 100
– Number of commitments achieved: 9
– Number of commitments not started/behind plan: 12
– Number of commitments on plan: 79
• Examples of some commitments achieved:
– Meet your producer website
– Nutritional labelling
– Supply chain training
– Products with Plan A qualities
– Textile recovery R&D
– Carbon Neutral Operations
– Reduce business flights
Source: Marks and Spencer Plan A Report 2014 <http://planareport.marksandspencer.com/downloads/M&S-PlanA-
2014.pdf> Accessed on 27/11/2014.

33. Leeds University Business School
Plan A – Aims
because there is no plan b
• Some aims:
– M&S intend to conduct further research to obtain more
information on the needs of different stakeholders
– No waste to landfill – operations
• M&S certified as the first retailer to hold all three standards to
the Carbon Trust’s Waste Standard.
• In 2013/14 recycled 100% of the waste generated in UK and
Rol stores, offices and warehouses.
– Promoting Healthy food
• Work with key external stakeholders to help define the best
practice on promoting and marketing healthy foods.
– Plan A Marketing
• Run a continuous programme of Plan A marketing to
encourage customers to take action.
• Various Plan A communications campaigns were ran
throughout the year.
Source: Marks and Spencer Plan A Report 2014 <http://planareport.marksandspencer.com/downloads/M&S-PlanA-
2014.pdf> Accessed on 27/11/2014.

34. Leeds University Business School
Leeds University Business School
Recommendations
and Conclusion

35. Leeds University Business School
Recommendations
• Change certain styles of products to better fit
Chinese market. (E.g. Chinese cultural elements)
• Introducing new series for young people.
• Investing factories in China to produce products in
China to lower costs (JV)

36. Leeds University Business School
SWOT Analysis
Strengths Weakness
• Strong Brand Image
• Strong domestic presence
• Diverse Business Portfolio
• International chain
• Weak Public Relation across
borders.
• Certain material is imported so
high cost.
• Frequent Change in management
• Weak logistic
Opportunity Threats
• Asian Market is booming
• E-commerce
• Local and International
Competitions
• Change in political and legal
system in countries.

37. Leeds University Business School
BCG Matrix
Relative Market Share
STAR
QUESTION MARK
CASH COWS DOGS
Relative
Market
Growth
High Low
High
Low
M&S

38. Leeds University Business School
Ansoff’s Matrix
MARKET PENETRATION MARKET DEVELOPMENT
PRODUCT DEVELOPMENT DIVERSIFICATION
Existing Market New Market
Existing Product
New Product

39. Leeds University Business School
Conclusion
• M&S started on the wrong foot and these are some of the
reasons why it failed:
– Didn’t follow Uppsala model
– Lack of adaption to local needs
– Lack of projection of brand image
– Personal rather than business decisions e.g. in Canada.
– Didn’t take full advantage of existing networks with
other companies

40. Leeds University Business School
Conclusion
• What it needs to change
– Better promotion and projection of brand image.
– Communication with different stakeholders
– Improved logistics and supply chain management
– Adaption to local markets

41. Leeds University Business School
Conclusion
• M&S Simple
Success

42. References
Felsted, A. and Waldmeir, P. 2014. Marks and Spencer shifts focus in key Chinese market. Financial Times. [Online]. 9
April. [Accessed 28 November 2014]. Available from: http://www.ft.com/cms/s/0/a3e90366-bfd2-11e3-b6e8-
00144feabdc0.html#axzz3KPM2hnRY
Ruddick, G. 2013. Marks & Spencer missing Chinese sales targets. The Telegraph. [Online]. 28 January. [Accessed 28
November 2014]. Available from:
http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/9832782/Marks-and-Spencer-missing-
Chinese-sales-targets.html
J. Johanson and J. Vahlne, “The Internationalization Process of the Firm – A model of Knowledge Development and
Increasing Foreign Market Commitments”, Journal of International Business Studies, Vol. 8, No.1 (spring-summer,
1977), pp 23-32.
J. Johanson and F. Wiedersheim-Paul, “The internationalization of the Firm – Four Swedish Cases”, Journal of
Management Studies, vol 12. Issue 3, (October, 1975) pp 305-323.
Marks & Spencer, 2008. Annual Report and Financial Statements 2008. [Online]. Marks & Spencer. [Accessed 27
November 2014]. Available from:
http://corporate.marksandspencer.com/investors/69358ce4ad7f4a1c9c56f0cd87954b82
Marks & Spencer, 2014. Marks & Spencer Plan A Report 2014. [Online]. Marks & Spencer. [Accessed 27 November
2014]. Available from: http://planareport.marksandspencer.com/downloads/MS_AR2014_Annual_Report.pdf
TOPSPRING, 2013. Financial Report. [Online]. TOPSPRING. [Accessed 28 November 2014]. Available from:
http://www.topspring.com/p9_3.php
Waldmeir, P. 2009. M&S finds little support for China debut. Financial Times. [Online]. 17 January. [Accessed 28
November 2014]. Available from: http://www.ft.com/cms/s/0/4ae78dd0-e438-11dd-8274-
0000779fd2ac.html#axzz3KPM2hnRY

43. References
Waldmeir, P. 2009. M&S admits Shanghai errors. Financial Times. [Online]. 9 February. [Accessed 28 November 2014].
Available from: www.ft.com/cms/s/0/2bac61ae-f6e2-11dd-8a1f-0000779fd2ac.html#axzz3KPM2hnRY
Wang, ZQ. 2014. Marks & Spencer fashions new sales strategy in China. China Daily. [Online]. 9 April. [Accessed 28
November 2014]. Available from: http://usa.chinadaily.com.cn/business/2014-04/09/content_17419263_2.htm
Yu, C. (2013). retail-consumer-industry-sector. 1st ed. [ebook] pwc. Available at:
http://www.pwc.co.nz/KenticoFiles/5d/5dff81f2-7242-43e0-87ff-941e1d02e8df.pdf [Accessed 29 Nov. 2014].
Uk.reuters.com, (2014). Marks & Spencer looks to India to stem fall in clothing sales. [online] Available at:
http://uk.reuters.com/article/2013/11/11/uk-marksspencer-india-idUKBRE9AA0MA20131111 [Accessed 29 Nov. 2014].
Outlookbusiness.com, (2014). business.outlookindia.com | Changing Partners. [online] Available at:
http://www.outlookbusiness.com/printarticle.aspx?283945 [Accessed 28 Nov. 2014].
Corporate.marksandspencer.com, (2014). MARKS & SPENCER TO BUILD A LEADERSHIP POSITION IN INDIA. [online]
Available at: http://corporate.marksandspencer.com/media/press-releases/2013/marks-and-spencer-to-build-a-leadership-
position-in-india [Accessed 30 Nov. 2014].
Surendar, S. (2010). Marks & Spencer's Retail Rethink. [online] Forbes. Available at: http://www.forbes.com/2010/10/05/forbes-
india-marks-and-spencer-repositioning-in-india.html [Accessed 30 Nov. 2014].
Corporate.marksandspencer.com, (2014). Key Facts. [online] Available at: http://corporate.marksandspencer.com/aboutus/key-
facts [Accessed 30 Nov. 2014].
the Guardian, (2008). The history of Marks and Spencer: In pictures. [online] Available at:
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Green Retail Decision, (2012). [image] Available at:
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IBNLive, (2014). India to be largest overseas market by 2016: Marks & Spencer. [online] Available at:
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