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Chapter

Macys Case

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Department
Marketing
Course
MKTG 2030
Professor
Linda Reeser
Semester
Winter

Description
Macy’s Repositioning Jessica Gahtan Macy’s Department Store Repositioning For the past century Macy’s Department stores have been one of the most recognizable American retailers. Through aggressive marketing they have become ingrained in American culture via parades, movies and strong consumer satisfaction. After purchasing 15 department store chains Macy’s has decided to reposition itself in this changing economy. Macy’s is in the predicament of whether it will be “the” department store or risk failure. According to Porter, two factor s are paramount in determining the viability of a company: the strength of the industry and the company’s strength within said industry. In the case of Macy’s, there are clear weaknesses within the first area. The department store sector is in demise. A gr oup that once held 30% of the market share in 1950 has declined to only 7% in 2010, and return on invest has decreased to a meager 9%. While the retail sector has roughly doubled since 1992, department store sales have remained relatively constant while specialty stores, online shopping, and general merchandise stores have grown. Although strength within both areas is ideal, great success in the latter can still lead to financial viabilthrough sustainable competitive advantage. For example, Southwest Airlines was able to turn large profi ts during the last decade while competitors struggled. Using SWOT analysis and analyzing Porter’s Five Forces and the positioning matrix, we can predict whether Macy’s will be the ne xt Southwest or Research in Motion. SWOT analysis of Macy’s provides a mixed bag . Strengths for the company lie in a strong brand, marketing strategy, size, and purchasing power. The new strategy has attempted to take advantages of these strengths. For example, Macy’s strong brand as “America’s Department th Store” has been utilized via the parade and 4 of July advertisement. With over 800 stores, Macy’s has been able to purchase advertising without separating resources and focused on a national campaign as well as achieved economies of scale to a degree. Strategic location has also increased profitability. This additional centralized capital provides Macy’s with leverage in purchasing ability. These strengths, however, do not come without weakness. Some customers, such as Marshall Field’s loyalists, have resisted changes c omplaining about quality and service. Also standardized, higher prices repelled customers. In response, Macy’s eliminated this policy, marketed the unique qualities Macy’s could provide, and focused on higher income markets. Opportunities include the ability to dominate the upper middle industry that is less competitive and strengthen financial health. Unfortunately economic recession provides uncertainty and high end department stores, specialty stores, discount stores, and internet distributers provide threats to the operation. By consolidating and providing their own products Macy’s has improved five force 2 conditions . By creating brands they have become their own suppliers, however, providing designer clothing still provides Ralph Lauren , etc. leverage. The large base el iminates the power of customers as certain markets do not completely dictate success. The new lines also decrease the threat of new entrants as they reduce ability for competitors to provide substitute products. The new positioning in the upper middle luxu ry segment also decreases rivalry. The strong brand recognition and ability to provide luxury at a good price via the size of the company allow Macy’s to deliver barriers to entry from competitors. Under the positioning matrix Macy’s is trying to find a 3 middle ground between differentiation and cost through “affordable luxury” . This combination, 1 Macy’s Repositioning Jessica Gahtan however, has in a way allowed Macy’s to differentiate itself among department stores and distinguish itself from the likes of Nordstom and Sears while walking a ti ghtrope. By repositioning Macy’s has done what is necessary to remain competitive in the retail industry. The strategy has allowed success in the department store market, and 2010 net income has returned to levels similar to those before the 2008 recessi on despite a weakened economy as they have rather effectively walked the tightrope of quality and price . This repositioning should provide short term success; however, the barriers to entry and rivalry will eventually diminish further weakening the department store as other areas of retail continue to grow. For now Macy’s is in relatively good shape; however, they must formulate long term changes to remain successful in retail as their growth in the dept. store sector will eventually be offset by the decay of the segment. Appendices: 1. Strengths Opportunities Brand- Macy’s is known as America
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