Myer competitor analysis

Strategic Analysis of Myer Holding Limited 7

STRATEGIC ANALYSIS OF MYER HOLDING LIMITED

by NG YU REN (S3566185)

Class: LF03

Course: Strategic Management

Lecturer’s Name: Goon Swee Khiang

Date: 22/2/17

Strategic Analysis of Myer Holding Limited

Company Overview

Myer Holding Limited is an Australian giant in the retail business. It is regarded as one of the largest department stores in the Australian subcontinent. It operates more than 68 stores that provide its customers with top products in fashion across the country. The company deals in more than 2400 brands obtained from numerous suppliers all over the world (Hoovers 2017, p.2; Myer 2017, p.1). The products include accessories, clothing, cosmetics and beauty products, toys, house equipment, as well as electrical appliances. Out of the 30 major shopping centers in Australia, Myer operates 25. A considerable market served by the company is in the New South Wales, Queensland, and Victoria regions.

In 2009, Myer made an application to join the Australian stock exchange market to emulate the gains achieved by its main competitor David Jones. In 2011, it also acquired a 65% stake in Sass & Bide. Myer Holding Limited was established in the year 1900. Its founder Sidney Myer was an immigrant who settled in Australia from Russia and opened his first outlet, which grew to become one of the largest department stores not only in Australia, but also the world (Drury 2011, p.29; IBISWorld, 2017, p.1). After Myer purchased a draper store and other adjacent stores, it marked the birth of a mega department store. The company emphasizes on offering inspiration not only to its customers and employees, but also its shareholders. Currently, the firm has more than 12500 employees, 1200 suppliers, as well as 54000 shareholders. The communities served by the company benefit from numerous philanthropic activities conducted by Myer (Myer 2015, p.3).

SWOT Analysis

Strengths

Myer’s primary strength is anchored on the positioning of its stores within a shopping environment. The company is a major player in the market in the department store sector in Australia’s retail industry. Moreover, Myer has a strong brand identity among its customers who perceive it as an upper class or elite department store offering high-quality premium products (Myer 2014, p.12). In addition, Myer makes use of its product diversity and quality as a competitive advantage. The company has established a broad range of prestigious brands to satisfy the preferences of its clients. For example, within the ground floors of its stores, Myer deals in well-known and established brands, such as YSL and Gucci.

Myer also has a strong customer relationship department. The company offers special benefits to its most loyal customer who are offered Smartcards that allow them to enjoy discounted prices and great features in their favorite stores. These exclusive benefits include interest-free promotions that last for about 62 days, interest rates of about 15% as well as online account management. Myer also offers Fly Buy cards that are linked to Australia’s most renowned customer loyalty program. The points earned on this card can be redeemed for air travel, dinner in select restaurants, and vouchers that can be used in different stores around Australia (Myer 2015, p.14). Customer service is a pivotal pillar in the company, which is evident in its product strategy and branding in its stores.

Weaknesses

Pricing is a major weakness associated with Myer. The firm emphasizes on offering high-quality products at premium prices that are relatively beyond the capacity of the lower class. This leads to the company’s positioning as a luxury brand. Myer’s product positioning can also be perceived as a significant weakness in its business strategy. For example, even during the harsh economic periods when consumer spending significantly reduces, Myer rarely makes adjustments to its high prices. Similarly, Myer’s rarely engages in price wars to reduce the cost of its products to compete with its major rivals (Investor 2016, p.6-8). Doing so would contravene Myer’s reputation and image as a premium brand. This could have potentially adverse impacts on its customer base.

Opportunities

Myer has the potential to increase its expansion through the developing technology of online shopping. Digital platforms such as social media can also help Myer’s maintain and cultivate its close relationship with its customers. Social media platforms offer real-time feedback from different demographics of clients about their perceptions and preferences. The current trends in increased customer services and relationship management offer opportunities for Myer’s to enhance its customer loyalty program (Investor 2016, p.5). Online shopping will ensure that the company expands its reach to global customers and, hence, increases its market share in the industry.

Threats

The external environments possess a significant threat to Myer’s operations. This threat manifests itself in the form of governmental policies such new regulations governing taxation, policy changes in the industry, as well as economic downturns. In terms of developing an online shopping strategy, Myer’s is relatively behind in comparison to its competitors who have already created digital shopping platforms (IBISWorld 2017, p.2). In terms of competition, the biggest threat is manifested by large foreign departmental stores that would like to expand their operations into the Australian market, such as Tesco.

Porter’s Five Forces Analysis

Threats of New Entrants

The threat from new entries into the department store sector is relatively low because of the capital-intensive nature of the business. Government policies and the economics of scale have a critical function to play in the department stores business, since they are required to increase or decrease stock levels at short notices. For example, large department stores often accrue cost savings through making large purchases, but small emerging stores do not have the financial strength to do the same (Armstrong and Kotler 2015, p.176). New government and regulation policies could also be an adverse barrier. Regulations are often a big barrier to prospective entrants into the industry because they have a huge effect on their profit margins. Another barrier to new entrants is the reputation and image built by existing businesses (Porter 2008, p.65). Venturing into this industry requires extensive capital investments that small organizations are not able to access. In this regard, the threat of new start-ups is relatively low.

The Suppliers Bargaining Power

Large organizations have the privilege of selecting from which supplier’s they are going to source their products. This implies that in the department stores sector, the power of suppliers is relatively low. In the recent past, large retailers such as Myer have gained an upper hand on the suppliers. This suggests that they can exploit the systemic relationship power that they enjoy over their suppliers (Griffin 2012, p.76). As large retailers continue to gain more influence on their suppliers, this threat remains relatively minimal.

The Bargaining Powers of the Consumers

Myer’s strength is that it can vary the price of various products within the same category in their large department stores. As a result of the disparities and preferences of their customers, the company is forced to stock a variety of products to satisfy its clients’ needs and demands. This implies that the switching cost of consumers is relatively low because they rarely leave the department store to find the products they need. Everything can be accessed in the large department store. Nonetheless, this suggests that the bargaining power of customers in the retail industry is relatively high (Porter 2008, p.68). However, due to Myer’s targeting strategy, brand image, and reputation of a prestige store, buyers do not have a significant influence on the company’s pricing strategy. Myer can not simply reduce its prices because it would imply that the organization is sacrificing quality, which would significantly harm the brand image.

Availability of Substitutes

Myer is a large department store dealing in the sale of a wide range of products. This implies that there is a huge availability of substitutes for customers shopping at Myer’s. Moreover, other electronic shops such as Harvey Norman could be offering relatively lower prices while also providing high quality and premium products. Other competitors also offer high discount rates on the same products which could be cheaper alternatives if the customers are not bothered in forfeiting quality for the price (Doole and Lowe 2008, p.106). The emerging online shopping industry could also be a significant substitute for some of Myer’s clients.

Industry Rivalry

The retail industry is characterized by high competition because of the high number of companies involved regardless of whether they are targeting different market segments. For instance, David Jones is a competitor to Myer even though they target different segments of the market. This is because they both deal in similar products, which makes competition among department stores very fierce (Armstrong and Kotler 2015, p.172).

Core Capabilities of Myer

Core capabilities are strategic aspects that a business must establish and sustain to attain a competitive advantage over its competitors. They are value added support aspects that assist the organization in attaining its core objectives that do not necessarily lead to competitive advantage, but are needed to ensure the company continues to operate (Roy 2009, p.17).

Branding

Myer’s branding offers it a strategic competitive advantage on the rivals. Myer makes use of a modern layout, presentation, and advertising strategies to market and promote its products consistently and clearly to its target customers (Meek and Meek 2003, p.86; Fifield 2012, p.61). The wording and layout used in these advertisements maintain the exceptional image and branding focus pursued by Myer. The competitive advantage is anchored on the company’s tremendously crafted brand image reputation, which has earned it the status of one of the largest premium quality departmental stores in Australia (Aaker 2014, p.98; Ferrell and Hartline 2014, p.92). However, Myer’s must also enhance its value-added capabilities, such as the capacity of its employees. It is important for Myer’s to ensure that its sales staff and other employees have the capacity to offer high-quality customer services across all its stores, since the corporate strategy is anchored on customer relationships.

Positioning

The choice of a competitive business location is also affected by the capacity and capability to raise the required resources. The strengths and weaknesses of the organization also play a critical role in positioning the business. In this regard, the best fit for a company lies between these factors and other environmental market determinants (Sengupta 2005, p.45). The brand visibility of the quality and premium products have become very vital to Myer because they also portray its prestige which is a core strength of the company (Wilson and Gilligan 2012, p.132). Myer has also positioned itself as one of the leading department stores not only in Australia, but also globally. The company leverages on its experience in the industry, since it has been in existence for more than a century.