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General Environment Analysis of Macys Inc

The demographic segment focuses primarily on 5 elements-the population’s size, age structure, geographic distribution, ethnic mix, and distribution of income. The products that Macy’s Inc. offers to customers cover a wide range of ages starting from newborn babies to women and men of over the age of 65. Macy’s has over 800 operational department store and furniture galleries in 45 states in addition to operating a fully functional e-commerce website to give ease of access to all customers conveniently regardless of location. Macy’s Inc. also operates the Bloomingdale’s brand which has 40 stores in 12 states in addition to also operating a fully functional e-commerce website as well for the same purpose.

Macy’s Inc. is a department store comprised of a variety of name brand goods of high quality that can be categorized in a variety of different categories that contribute to the wide selection of products Macy’s sells to generate sales revenue. Macy’s products target both men and women.

Brands that Macy’s department stores carry include (but are not limited to) Jessica Simpson, Calvin Klein, Ralph Lauren, Tommy Hilfiger, Anne Klein, and many more.

Macy’s Inc. is a diverse company and is an equal opportunity employer. It is not only diverse in its product selection, but also in its employees and customers in regards to the ethnic mix. Macy’s Inc. has a product selection with price ranges that are best suitable for individuals with middle to high income (with a reasonable, or fair to a very generous amount of extra spending money). Prices of individual items do vary based on product type and brand name. However, due to its huge cosmetic beauty and fragrances section which seems to be a big attention grabber for teenage girls, the income distribution need not be so high in order to purchase from a Macy’s Inc. department store.

Political/Legal Segment:

As a publicly traded company, it is extremely important that Macy’s Inc. complies with all government rules, laws, and regulations in order to stay in business. For instance, Macy’s Inc. acts accordingly to follow all government rules and regulations such as the Sarbanes-Oxley Act and in being honest with financial recordings and revelations. All financial information is posted for public retrieval on the corporate website for Macy’s Inc.

As mentioned previously, Macy’s Inc. is an equal opportunity employer so it tries its best to comply with all anti-discriminatory laws, rules, and policies in order to make a positive and productive work environment but also a pleasant shopping experience for customers. Macy’s Inc. makes sure to explain any contractual terms and conditions to all parties involved within a certain transaction rather it is the customers, an employee, manufacturer or supplier in order to avoid any confusion or prevent any future misunderstandings that can waste valuable time and money if further legal action is taken.

The Sociocultural Segment:

The sociocultural segment primarily focuses on the attitudes and cultural values of society. This segment is hard to keep up with for the attitudes and cultural values of society are undergoing changes pretty frequently over time. Not everyone has the same taste, needs, or wants. Hence, Macy’s Inc. diversifies its product selection to give customers alternative choices. However, Macy’s Inc. spends a reasonable amount of time in research of knowing what sells and what stinks. For instance, for majority of their celebrity endorsed and designed products (i.e. fragrances, clothes, handbags, etc.), Macy’s Inc. stays informed with the perception of these celebrities in society’s lens for these celebrities’ reputations are a portion to the success and fan base of their product lines.

Cultural diversity within the workforce is also promoted and enforced in the business operations of Macy’s Inc. One thing that Macy’s Inc. works towards is establishing a well-trained, knowledgeable workforce on their sales team in hopes of providing career satisfaction in hopes of developing contingency workers.

The Technological Segment:

Technological advancements have allowed Macy’s Inc. to deliver such an easy, convenient, and enriched shopping experience online for customers with the use of the internet. With all these technological advancements (i.e. internet, e-mail, etc.), Macy’s Inc. is able to keep in constant contact with all parties (customers, employees, suppliers, investors, etc.) efficiently and effectively. These online e-commerce transactions do require the use of logistics as a means of transporting the purchased goods to their designated place as specified by the buyer.

With technological advances, Macy’s Inc. is able to save time but also maximize sales and profits by reaching other unidentified markets through the convenience of e-commerce.

The Global Segment:

It is no secret that businesses do best in stable economies. With this in mind, Macy’s Inc. is aware of the importance of being knowledgeable of the new global markets that emerge in emerging economies in other countries, the existing global markets, and changes in these markets due to any influence of politics or culture that may affect the stability of the economy as well as the company’s performance within that economy.

Expansion into global markets not only provides Macy’s Inc. with the opportunity to cover any losses from within the USA with sales revenue from international sales, but it also imposes the threat of new competitors entering the market.

The Physical Environment Segment:

The physical environment focuses primarily on the potential and actual changes in the physical environment. It also consists of the business practices that are intended to have a positive response in dealing with those changes. Nowadays with the threat of global warming, increasing amount of waste and recycling awareness, and the “green movement”, companies are now trying to be more environmentally friendly or cautious with their business decisions. Other take on some method to give back to the community or do something in regards of establishing some sense of social responsibility like Macy’s Inc. does. Macy’s Inc. does everything in its power to fight the use of child labor in sweatshops. Macy’s Inc. also participates in the conservation of energy by reducing the amount of energy consumed, participates in fluorescent bulb recycling, the use of paper shopping bags made up of 30 percent of recycled materials, and offers eco-friendly products to customers.

Macy’s Inc. is also very strict in enforcing the rules of cleaning up and tidying up the departments and sectionals in every department store. A clean, tidy, and organized product display and shopping environment is also one of their main priorities in keeping customers satisfied.

Industry Environment Analysis:

Macy’s Inc. has been around for quite some time and has established itself as a well renowned brand worldwide. However, like any other company, Macy’s Inc. is still impacted by the five forces of competition due to its operation in one of the most competitive industries.

Threat of New Entrants:

Barriers to Entry:

Macy’s Inc. operates in a very competitive industry. However, Macys does impose several barriers to entry for new companies who wish to operate in the same industry. These barriers to entry include:

Economies of Scale: “Economies of scale can be developed in most business functions, such as marketing, manufacturing, research and development, and purchasing,” (Hitt, Hoskisson, Ireland, 2011, 53). Macy’s Inc. has established very professional relationships with numerous suppliers, designers and manufacturers in order to obtain their wide selection of inventory. These good relations allow a company like Macy’s to further establish good will, credit, and reputation which are advantages over a new entrant. This good reputation allows Macy’s to be a well renowned company who can receive their inventory at a discounted price in order to offer these products to the public at a discounted price of their own from the suggested retail price. Not only does Macy’s offer its high quality, name brand products available in large quantities to fulfill the customers’ demand, but it also provides great customer service and other services such as their personal shopper service. Macy’s Inc. also uses a highly effective marketing strategy to help market its products and increase sales which includes the use of an effective advertising campaign.

Product Differentiation: In addition to Macy’s effective advertising campaign and impeccable customer service which is a result of knowledgeable and enthusiastic employees, Macy’s Inc. does its best to work with its suppliers to differentiate their products. For instance, the beauty and fragrances that are sold at Macy’s department stores may possibly be bought for cheaper at other stores or even online depending on the brand, but it won’t be the exact same bundle package that is only exclusively offered at Macy’s department stores. Instead, it may be of a smaller size and only contain 2 items instead of 4 items total as the Macy’s bundle includes along with a free gift. Macy’s loves giving the offer of a free gift with purchase especially when it comes to beauty and fragrances. For Macy’s credit card holders, they get to enjoy an additional discount percentage, usually between 10-40 percent off just for having the official department store credit card. Not only does Macy’s use free gifts with purchase and extra discounts, but Macy’s tries to keep their inventory selection somewhat different than another department store such as Dillard’s, or Nieman Marcus or Bergdorf Goodman. They don’t all have the same exact collections of designer merchandise, even though they may carry products of the same designer or brand name. In that sense, product selection and availability as well as price is another means of product differentiation.

Capital Requirements: “Competing in a new industry requires a firm to have resources to invest,” (Hitt, Hoskisson, Ireland, 2011, 54). It is not cheap to start a huge department store such as the ones Macy’s Inc. has established. It requires a lot of capital-not just cash, but also physical facilities such as retail spaces, the need for human capital (employees, etc.), inventory, and capital for marketing activities. If a new entrant underestimates the cost of operating in this industry, that can lead to an early and unexpected downfall or demise of the new company.

Access to Distribution Channels: As mentioned earlier, Macy’s has over 800 operational department store and furniture galleries in 45 states in addition to operating a fully functional e-commerce website to give ease of access to all customers conveniently regardless of location. Macy’s Inc. also operates the Bloomingdale’s brand which has 40 stores in 12 states in addition to also operating a fully functional e-commerce website which contributes to its success in global sales. The fact that Macy’s Inc. has established two dominant brands within the same industry with a distribution channel that reaches nationwide poses as a barrier to entry for new entrants.

Expected Retaliation:

“Vigorous retaliation can be expected when the existing firm has a major stake in the industry…, when it has substantial resources, and when industry growth is slow or constrained,” (Hitt, Hoskisson, Ireland, 2011, 55).

The industry that Macy’s Inc. operates in is not one with an ultimately fast-paced growth especially given the recent economic circumstances. Also, Macy’s Inc. department stores serve a very large market and Macy’s Inc. does have access to a substantial amount of resources which is very discouraging to new entrants. It will pose a challenge to new entrants to find a market niche that isn’t being served by Macy’s Inc. department stores in order to have the possibility to avoid the barriers to entry, or even to win over the customers of Macy’s Inc. department stores due to the customer loyalty of Macy’s customers.

Bargaining Power of Suppliers:

Macy’s Inc. is known for providing high quality, brand name products discounted from their original suggested retail prices. However, should the suppliers decide to increase the prices of their products or even to decrease the quality of their products, Macy’s Inc. would be in an unfortunate predicament that would cause the company a reduction in profitability. These suppliers have a great deal of bargaining power given the fact that these are designer brands and very high quality where to find substitutes of the same quality are very hard. These suppliers are the ones that provide highly differentiated products to the inventory Macy’s Inc. department stores sell to the public on a daily basis.

Bargaining Power of Buyers:

“Firms seek to maximize the return on their invested capital,” (Hitt, Hoskisson, Ireland, 2011, 56).

It is no secret that customers are always in search of the best prices for a product also referred to as a ‘bargain’. This causes a lot of competition to win over the sale for the customer’s money even if it means accepting a lower rate of return. This competition is mainly price competition. Buyers bargain for higher quality, greater levels of customer service, and lower prices. Due to the introduction of the internet, customers are able to make price comparisons easier in order to find the best deals. Hence, some companies participate in what is called “price matching”.

Threat of Substitute Products:

Lucky for Macy’s Inc., product substitution isn’t much of a threat since Macy’s Inc. department stores offers high quality, designer brand name products. Although there are several stores and even online boutiques that offer ‘designer inspired’ goods at around the same price range, it is without a doubt that ‘designer inspired’ is never better than the actual authentic designer brand quality product. The only threat when it comes to substitution of designer brand products is the illegal counterfeiting and sale of counterfeit designer brand goods at an unreasonably low price.

Rivalry Among Competitors:

According to Yahoo Finance, Macy’s Inc. competes primarily with:

Dillard’s Inc.

Saks Incorporated (Saks Fifth Avenue)

TJ Max

JC Penney

Kohl’s

Nieman Marcus

Nordstrom Inc.

Numerous or Equally Balanced Competitors:

The big amount of competitors within the same industry is bound to increase or intensify the rivalry between competitors. Because of this, it is important for Macy’s Inc. to remain generally aware of their competitors’ actions at all times and respond to them when deemed necessary.

Slow Industry Growth:

“Growing markets reduce the pressure to take customers from competitors,” (Hitt, Hoskisson, Ireland, 2011, 57).

It is no question that in this slow-growing industry, Macy’s Inc. competes to win over the business of its competitors’ customers. It becomes a fierce battle for the obtaining and maintaining of the company’s market share.

Internal Analysis:

Resources:

Tangible Resources:

Product/Item Inventory

Product Manufacturers and Suppliers

Distribution Centers

Macy’s Inc. financial borrowing capacity

Macy’s Inc. ability to generate internal funds

Macy’s formal reporting structure (planning, controlling, and coordinating systems)

Location

Stock of technology (i.e. patents, trademarks, copyrights, and trade secrets)

Intangible Resources:

Macy’s Inc. Human Resources (i.e. Macy’s Employee knowledge, trust, managerial capabilities, and organizational routines)

Macy’s Inc. Innovative Resources (i.e. Macy’s Ideas, Macy’s Inc. capacity to innovate)

Macy’s Inc. Reputational Resources (i.e. Macy’s reputation with customers, Brand Name, Perception of Macy’s product quality, durability, and reliability, Macy’s Inc. reputation with suppliers, and efficient, effective, supportive, and mutually beneficial interactions and relationships)

Capabilities:

Distribution: Macy’s Inc. effectively uses logistics management techniques to fulfill their orders made online on their website.

Human Resources: Macy’s provides equal opportunity employment and also provides motivation, empowerment and training for employees as well as benefits.

Management Information Systems: Macy’s Inc. effectively and efficiently controls or keeps track of inventories through their (POS) point-of-sale systems’ data collection methods

Marketing: Macy’s Inc. effectively promotes their brand name products and provides excellent customer service and innovative merchandising.

Management: Macy’s Inc. possesses the ability to envision the future of clothing and apparel in order to determine what apparel to purchase for sale in their stores for the current season, and Macy’s Inc. implements an effective organizational structure.

Core Competencies/Discovering Core Competencies:

Macy’s Inc. possess capabilities that are valuable, costly to imitate, and non-substitutable. These capabilities include their management capabilities, their human resources or human capital, and their relations with their suppliers as well as their marketing strategy and capabilities. Also Macy’s Inc.’s operations and infrastructure.

VALUE CHAIN ANALYSIS:

(SUPPORT ACTIVITIES)

(Primary Activities)

Competitor Analysis of Macy’s Inc.:

Future Objectives:

How do our goals compare with our competitor’s goals?

Macy’s Inc. goals compare with their competitors’ goals for they all wish to take more responsible action in sustainability and being more aware or conscious of the environment with emergence and sale of eco-friendly products. Macy’s as well as its competitors all have the same goal of maximizing their return on their investments as wells as maximizing total shareholder returns in addition to increasing their market share.

Where will emphasis be placed in the future?

Macy’s Inc. will continue to emphasize the qualities and characteristics of the company in which they always emphasized-continuing to deliver high quality designer brand products, excellent customer service, innovative merchandising, growing sales and increasing the company’s profitability levels (i.e. earnings before interest, taxes, depreciation, and amortization) as a percent of sales.

However, competitors such as JC Penney will be placing an emphasis on a profitable sales growth, enhancing their financial performance and achieving industry leadership by focusing on their customers, merchandise, associates, performance and shareholders.

Current Strategy:

How are we currently competing?

Macy’s Inc. is currently competing with its competitors such as JC Penney through product differentiation, price, and customer service (the overall shopping experience & customer satisfaction).

Does their strategy support changes in the competitive structure?

Yes, the strategy to JC Penney is flexible enough to support changes in the competitive structure.

Assumptions:

Do we assume the future will be volatile?

Given the current economic circumstances and measures taken to make amends to the situation, Macy’s Inc. as well as its competitors do assume that the future will be volatile in a sense an change for the better of economic circumstances in order to achieve future objectives.

Are we operating under a status quo?

Yes, Macy’s Inc. and its competitors such as JC Penney are operating under a status quo or the existing economic circumstances and the impact it has on the general public otherwise known as the customers.

What assumptions do our competitors hold about the industry and themselves?

Competitors such as JC Penney hold the assumption that they will become the industry’s leading shopping destination for America by discovering great fashions and “styles at compelling prices”. This leads to their assumption that the customers will decide they are their favorite retail destination for apparel, accessories and home fashion. Also JC Penney assumes that it will become the preferred choice for a retail career by fostering innovation and teamwork.

Capabilities:

What are our strengths and weakness?

Our Strengths: Product Variety Selection, Human Resources and Capital, Location, Customer Service, Marketing Strategy, Reputation

Our Weaknesses: Macy’s Inc. can implement a better pricing strategy for certain products, stock value

How do we rate compared to our competitors?

Given the stock price comparison, Macy’s Inc. ($23.55) is valued less than the stock price of JC Penney ($35.96). This means that JC Penney has a better performance and is able to raise internal funds faster with the sales of stocks at a higher price. Hence more capital to reinvest for improvements.

Response:

What will our competitors do in the future?

According to the official website of JC Penney, JC Penney plans on doing the following to achieve its future objectives:.

“Refine marketing and messaging to improve JCPenney’s image positioning.”

“Build our lead in customer satisfaction and loyalty.”

“Deliver an exciting and interactive shopping experience.”

“Inspire our customers to shop more with us.”

“Attract a higher market share among younger customers. “

“Capture customers’ attention utilizing all media platforms.”

“Offer stylish, high-quality merchandise for our customers’ lifestyles.”

“Create a sense of discovery and excitement each shopping visit.”

“Offer an exceptional and complete assortment of apparel, accessories and home merchandise. “

“Leverage our superior trend, design, product development and sourcing capabilities across our merchandise categories.”

“Maximize the benefits from our industry-leading merchandise flow tools and talent.”

“Retain, attract, develop and reward the best talent in retail.”

“Deliver industry leading financial performance.”

“Increase sales and market share in the highest potential areas of the country.”

“Invest resources to support growth and innovation.”

“Pursue longer-term growth opportunities to maximize earnings potential and shareholder value.”

Where do we hold an advantage over our competitors?

Macy’s Inc. holds the advantage of more locations, bigger market share for Macy’s Inc. operates two different brands of department stores-Macy’s and Bloomingdales.

How will this change our relationship with our competitors?

This will allow a good competition in sales performance between Macy’s Inc. and the competitors such as JC Penney.

Business-Level Strategy Analysis:

Five Business Level Strategies (as in Figure 4.2):

Of all the five business-level strategies, Macy’s Inc. uses the Differentiation Strategy.

Differentiation Strategy:

“The differentiation strategy is an integrated set of actions taken to produce goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them,”( Hitt, Hoskisson, Ireland, 2011, 112).

Macy’s Inc. differentiates their products and services in several ways which include:

Excellent and responsive customer service

Rapid Product innovation and development

Perceived prestige and status in the retail industry as one of the top department store retailers of quality name brand products

Macy’s Inc.’s product selection caters to the different tastes of consumers

Rivalry with existing competitors:

Macy’s Inc. is constantly looking for ways to add more value and benefits to their products and services but not at the expense of the buyer or customer. This value that Macy’s Inc. adds to their products and services differentiation and is what drives the customer loyalty to Macy’s Inc. stores.

Bargaining Power of Buyers (Customers):

As mentioned, Macy’s Inc. tries to find ways to add value to their products and services with minimal to no added expense to the buyers or customers.

“The uniqueness of differentiated goods or services reduces customers’ sensitivity to price increases. Customers are willing to accept a price increase when a product still satisfies their perceived unique needs better than does a competitor’s offering,” (Hitt, Hoskisson, Ireland, 2011, 115).

It is for this reason that consumers remain loyal and bring business to Macy’s Inc. for they believe that they are still getting more for their money due to the additional value or benefits Macy’s places of their products and services rather it be an additional purchase discount, a free gift with purchase, etc.

Potential Entrants:

The customer loyalty consumers display towards Macy’s Inc. is a barrier to entry for any potential new entrants in the industry.

Product Substitutes:

Since Macy’s Inc. is a company known for selling top-quality brand name products, it isn’t really affected by the threat of substitutes. However, counterfeits are a different story.


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