Analysis Report and MYER’s Strategic

Myer is one of Australia’s best department stores, dating back to 1900 in Bendigo. Sydney then expanded his firm to include Adelaide and Melbourne in Australia. Sydney Myer started the department store, which began as a hawker before extending his firm to become one of the favored corporations today. Its principal ambition is to become a global retail organization with the goal of inspiring and assisting every consumer. As a result, it attempts to provide a wide range of products at reasonable prices. It kept on expanding through acquisition businesses such as Drapers, Doveton woollen mills, Stephens & Sons, Robertson & Moffat , Marshall’s departmental store. By1925 the company had been listed in the stock exchange (Myer Holdings Limited, 2016).

Today it offers a variety products designed for children, women and men. Specifically deals with children’s, men’s and women’s clothing, cosmetics and fragrance, food and confectionery, books and stationery, footwear and accessories, furniture and bedding, electrical. Other products include homeware, general merchandize, and handbags and accessories, Miss Shop and toys. In its quest to offer the products, it has established over 600000 lines and 2400 brands coned from its main products categories. With over 12500 employees, it has established operations in over 60 places within the Australian market and keeps on its expansion plan. Its annual report indicates that in 2016 it had a net income of A$60.5 million indicating its potential. During the same financial year, revenue generated from sales was above $3.2 billion (Myer Holdings Limited, 2016, p. 8).

Macro - Environment

Understanding macro-environment is crucial to businesses in form of decision making. Thorough analysis of macro-environment helps firms to understand their weaknesses, strength, opportunities and potential threats within the business environment. External environment must be analysed to come up with better strategies aimed at protecting the business. Since businesses have no control over the operation of the macro-environment in which they operate, constant analysis is crucial to ensure that appropriate measures are taken. To do the analysis or scanning, it is important to use PESTEL as analytical tool. The tool outlines the political, ecological, economical, technological, social, competition environments in which a business operates in (Chermack & Kasshanna, 2007, p. 387).

PESTEL Analysis

Political Environment

This refers to the stability or instability of the political atmosphere within the country. Where a country experiences political stability, more investors will be willing to invest as opposed to a nation where there is too much political instability. Australia is regarded as one of the democratic countries offering favourable business environment. There is peace and this attracts more investors to establish businesses within the region. It is a democratic nation with stable and open type of economy thus good for business purposes. Peace all investors require as this guarantees them safety of workers, property and constant sales thus good profit. With this exceptionally friendly market there is no doubt every foreign investors as well as domestic investors would love start and sustain a business (Gillespie, 2007, p. 17).

Economic Environment

These include factors that may hinder or encourage the consumers’ ability to purchase. These factors include interest rates, inflation rates, unemployment rates, income level and the prices of commodities. Favourable factors such as high rate of employment, low inflation rate, low interest rate and good income level increase the consumer’s ability to purchase commodities. Unfavourable conditions such as high rate of inflation, high unemployment, low income, and low interest rate lower the consumer’s purchasing power as there is little to spend. The rate of unemployment is at 6.3% while inflation rate stands at 1.5%. It has a GDP of US$1.1 trillion with a compounded growth of 2.7- 5. Australian per capita stands at $47,389 with an FDI inflow of $22.3 billion. The economy has been widely embraced for its strong performance for over two decades that saw it unaffected by the 2009 recession. Regionally, it is ranked fourth economically after Hong Kong, Singapore and New Zealand. These economic indicators offers good business environment to the potential investors. It is thus necessary for the Myer to take advantage of the situation (Myer Holdings Limited, 2016, p. 14).

Technological Environment

Technology has the potential of increasing business performance as long as the appropriate one is adopted. The changes in technology often require firms to adjust to ensure they are up to date. If a firm does not adopt appropriate technology, it will lose to its competitors and further will experience low sales due to poor quality. Australia is considered among the countries that lead in technological advancement. With institutions that offer and invest in innovations, there is no doubt that firms will benefit from such investments. It is one country that is quick in adopting technology and that is why it’s preferred. It’s been taking lead in scientific researches that has seen it offer technological solutions to the world. There is better internet access by most of the populace. Eight of its populace have been rewarded by Nobel Prize in technological inventions. The technological level thus will offer Myer an opportunity to improve productivity, invent new products, maintain customer base and advance marketing techniques. Cyber attacks however present one of the common technological challenges that Myer ought to watch out.

Competitive Environment

The level of competition determines the ease of entry or exit in the market. Stiff competition often makes it difficult for new entry into the industry. If however the level of competition is favourable, then new firms can easily entre the market. To remain competitive, firms usually invest in technology, customer base as well as product. Better technology, good customer service and better products works help in creating competitive advantage through establishing brand loyalty and association. The competition is experienced by both store-based and online-based retailers. The market is quite competitive and that is why strong and stable strategies are necessary within the market. Some of the competing firms include Harris Scarfe, Kmart Australia, Target Australia, David Jones Limited and Woolworth. Any new entry into the business together with the existing key players within the industry offer potential competition that Myer should consider while coming up with a better strategy.

Legal Environment

Every entity must observe laid down procedures, rules and regulations. Government often stipulates the environmental business conditions that firms must observe to ensure that the operations are within the law. The Australian government provides businesses with license to establish their activities. These operations must however be done with due regards to employment acts or labor laws, the environmental laws, and consumer protection acts. Any business that operate without due considerations to the stipulated regulations as set by the government can have their businesses close, fined or restricted. Adherence to the employment laws ensures that there are no constant litigations that may threaten the operation of a firm. Environmental laws must be observed because failure to do so will elicit court battles that may end up reducing profit margin. There should be no exploitation of consumers by charging exorbitant prices or offering low quality products. The country experiences regulation on the operating hours with exemption a few areas and this affects the operations of business (Chermack & Kasshanna, 2007, p. 385).

Ecological Environment

Refers to the natural environment in which an entity operates in. As businesses operate their activities may pollute the environment. It is important for any business entity to minimise the pollution to ensure sustainability. The constant call for sustainable future thus is a challenge to many firms that engage in production as they must observe the environmental regulations. Business must take part in rehabilitating the natural environment. As it stands, the climatic changes being experienced in Australia is attributed to deforestation, infrastructure development. The changes have caused concern within the environment and thus every business must take lead towards establishing green culture.

Demographic Environment

Refers to characteristics of the targeted customers in terms of race, age, gender and income disparity. These factors determine the buying behaviour of customers. A business must look into these characteristics to develop products that are customized to each category. Analysis of the same helps in market segmentation thus creating a god customer focus. The country has received migrants from all over the world estimated to be 6 millions. As at 2010, female were 94,600 more than male with a population estimated to be over 22,500,000. Male were estimated at 11.12 million while female stood at 11.21 million (The Age Company , 2007).

Social Culture

Culture affects consumption pattern. Business must keep watch of these cultures that favours and those that discourage consumption to remain competitive. Mayer thus needs to understand culture of the Australian.

SWOT Analysis

Based on the macro-analysis, it is possible to highlight some of the potential opportunities and threats that the business can look into. Strength and weaknesses are internal issues that a business can control to come up with best strategy. Strength offers a firm a chance to improve the performance while weaknesses are internal factors that hinders business performance. Opportunity and threats are external factors that affect the performance of a business positively and negatively (Westhues, Lafrance, & Schmidt, 2001, p. 40).

Myer’s SWOT Analysis

Strengths

The firm has a strong brand and association which offers it large customer base hence increased sales.

Myer operates numerous stores (over 60 stores) within the Australian market.

It offers variety of products at n affordable price thus consumers are able to select what they need.

It mainly focuses in customer services thus giving an advantage.

Weaknesses

The distribution channels are no fully developed to operate in all the regions within Australia.

Increase in retail prices poses a challenge to the firm.

The company has only concentrated in domestic market thus loosing on the international market.

Opportunities

The country has technological advancement that the company can take advantage of.

There is room for internalization to capture the global market.

Increasing population trend that offers ready market for the products.

Stable economic conditions being experienced for over two decades.

Threats

Changing customer needs in terms of fashion and design creating preference.

Competition from rival firms often forming mergers and acquisitions may disadvantage the firm.

Cyber attacks due to its adoption of technology in its production.

Restrictive government regulations in regarding opening hours in certain regions except Northern Territory.

Michael Porter’s Five Forces Model

The model is useful in ascertaining the level of competition within an industry. It has five key variables namely supplier, buyer, substitution, rivalry and entry. These variables work together to determine level of industry competition. The role of the government is to encourage competition through establishing fair and favourable environment to compete hence keeping customers satisfied. The model helps in understanding the competitive level of a macro environment (Arline, 2015).

Supplier’s Power

This is meant to measure the strength of any supplier within the industry. The supplier’s power is determined by the ability to influence the prices of the commodity. The fewer the supplier the stronger they become and hence influence prices. Myer has over 1250 suppliers indicating that withdrawal of one has little effect on the business. If however the suppliers were few, withdrawal of one would greatly affect productivity.

Buyer Power

The power of buyers too is important to determine their effect on the business or product. When buyers are few, they become stronger and hence able to influence price of a commodity. Myer operates in over 60 stores with numerous buyers acting independently hence making them less strong as they cannot influence decisions on the products

Threat of Substitutes

A threat of substitute is established if a product from a different industry can be preferred by consumers instead of the one offered. The retail and lifestyle industry has numerous substitutes and thus can be substituted. Mayer operates departmental stores with variety of products which can be substituted by other forms of retailer.

Threat of New Entrants

Entry to retail industry is free and not restricted. Any potential investor thus can easily start the business. Mayer has established a brand name and any new entrant will find it difficult to outdo it. The current trend of merger and acquisition in the retail industry however may act as a barrier to new entrants (Arline, 2015).

Industry’s Rivalry

Industry’s rivalry Refers to the measure of concentration level of firms in an industry. Rivalry rate is high where firms are many and there is no organization while low when firms are few and organized. Within the Australian retail sector, firms are not organized hence there is moderate level of rivalry.

VRIO Framework

The framework is useful in determining the internal strength of firm entity. It involves analysing the resources of a business to ascertain competiveness to do this an organization must consider resources in form of organization, value, irritability and rarity. Myer has good employees offering excellent customer service. It also has a brand name that has been instrumental in capturing and retaining customers. Good distribution network that help in delivery of products to consumers. They also take advantage of the technology to achieve their target. Thus these resources are valuable to them, rare, costly to imitate and organized to capture market.

Resource

Valuable?

Rare?

Costly to Imitate?

Organized Properly?

Competitive Implications

Employees

Yes

yes

yes

yes

Competitive Advantage

Technology

Yes

yes

yes

yes

Competitive Advantage

Brand name

Yes

Yes

yes

yes

Competitive Advantage

Conclusion

Although Myer began as small sole business in 1900, it has established a brand name within the Australian retail industry. The industry in which it operates is affected by environmental factors such as government regulations, technology, economic factor, demographics and social. It owes its competitive advantage to its brand name, customer service and employees. Despite environmental challenges it has stood out as one leading companies offering products tailored to meet young and old generation’s wear.

Recommendations

To increase capacity through internalization of its products

Increase distribution channel to ensure domestic market is well served

Embrace technology and keep track of current development

Conduct market analysis to ensure it maintains constant customer taste and preference.

To continue embracing expansion through acquisitions and merger.

Invest in cyber protection strategies to ensure information is safe and inaccessible to attackers.

References

Arline, K. (2015). Porter’s Five Forces: Analyzing the Competition. Retrieved April03, 2017, from Business News Daily: http://www.businessnewsdaily.com/5446-porters-five- forces.html

Barney, J. (1995). Looking Inside for Competitive Advantage. Academy of Management Executive, 9 (4), 49-61.

Barney, J.B. (1991). “Firm resources and sustained competitive advantage.” Journal of Management, 19, pp. 99–120.

Barney, J. B., &Hesterly, W. S. (2010). VRIO Framework. In Strategic Management and Competitive Advantage (pp. 68–86). New Jersey: Pearson.

Chermack, T., & Kasshanna, B. (2007). The Use of and Misuse of SWOT analysis and implications for HRD professionals. Human Resource Development International , 10 (4), 383–399.

Gillespie, A. (2007). PESTEL Analysis of the Macro-environment. Foundations of Economics. London: Oxford University Press.

Hill, T. & R. Westbrook (1997). ”SWOT Analysis: It’s Time for a Product Recall“. Long Range Planning. 30 (1): 46–52

Lawrence, P. & A. Nanni (2009). Delivering Results: Managing What Matters,Springer Science & Business Media. p. 44.

Blake, M. & W. Shehan (2015). ”5 tips to grow your start-up using SWOT analysis“ Sydney. Retrieved 03 April 2017.

Michael Parkin; Gerardo Esquivel (1999). Macroeconomía (in Spanish) (5th ed.). Mexico: Addison Wesley. p. 160.

Menon, A.; et al. (1999). ”Antecedents and Consequences of Marketing Strategy Making“. Journal of Marketing. American Marketing Association. 63 (2): 18–40

Myer Holdings Limited. (2016). Myer Holdings Limited 2016 Annual Report. ASX and Media Release .

The Age Company . (2007). Myer hands back part of store after fire. Retrieved April 3, 2017, from theage.com: http://www.theage.com.au/news/National/Myer-hands-back-part-of- store-after-fire/2007/09/27/1190486454662.html

T. Kono (1994) ”Changing a Company’s Strategy and Culture“, Long Range Planning, 27, 5 (October 1994), pp: 85-97

Westhues, A., Lafrance, J., & Schmidt, G. (2001). A SWOT analysis of social work education in Canada”. Social Work Education. The International Journal , 20 (1), 35–56.