Myer strategy analysis

Executive Summary

This report will enable us to conduct a strategic analysis of Myer in the retail industry. Firstly, it will examine 6 macro-environment factors and impact on future growth of industry using PESTEL analysis. Secondly, it will examine 5 competitive forces and attractiveness on the industry using Porter’s Five Forces. Finally, it will examine which strategic capabilities allows Myer to gain unfaltering competitive advantage using activity systems and VRIO.

Table of Contents

Executive Summary……………………………………………………………1

1. Background Information…………………………………………...…………3

2. Macro-Environment Analysis………………………………………………3

3. Industry Analysis……………………………………………………………5

4. Internal Strategic Capabilities Analysis………………………………………7

5. Conclusion……………………………………………………………………9

6. Reference List………………………………………………………………10

MYER

1. Background Information

Myer (2017) is the biggest department store company in Australia with 11 main product sections and about 60 over retail establishments at strategic area in the country. Myer is fixed on being an inspiration to all stakeholders. Myer has many unparalleled stores stocked with prominent brands, assisted by its e-commerce platforms. This allows Myer to introduce a noteworthy omni-channel experience for customers regardless of shopping preferences. Myer’s strategy is aimed at providing a modern presentation of its brand, a pertinent and re-vitalised range of products, improve customer service and enhance retail experience via a solid omni-channel (Myer 2017). Myer’s profits in 2016 is $60.5 million (News.com.au 2016). Conversely, David Jones’s profit is about $168 million (McCauley 2016). Thus, David Jones has a competitive advantage over Myer.

2. Macro-Environment Analysis

According to Johnson et al. (2013), macro-environment comprises of six environmental aspects that affects almost every organisation. Thus, PESTEL framework will assist in examining issues arising from environments that will impact on organisation hereafter.

Political

According to Powell (2015), Trans-Pacific Partnership is formulated for commerce and growth of economy in Australia and 11 nations. It is a substantial free-trade agreement that reduce financial levies and duties of products, facilitating investments and growth of cross-border industries through minimising regulations (Powell 2015). The TPP ensure that products manufactured by foreign suppliers meets U.S. standards, and eliminates high toll of business transactions with TPP nations (National Retail Federation 2016). Thus, TPP presents Myer an opportunity to save trading costs and ensure foreign supplier provide quality goods.

However, TPP provide a threat to retailers, as it popularises e-commerce, prohibits forced localisation and provides e-commerce businesses greater access to Australia’s consumers (Thumm 2015). Thus, the prospect of increased online competition will threaten Myer’s profitability from its retail and online businesses.

Economic

Over the last few years, Australia has been experiencing steady economic growth. As reported by Australian Government (2016), real GDP growth has increased by 2.8% and rate of unemployment has decreased to 5.6% in 2016. This shows that Australia’s economy is in good position and therefore not much changes in consumers’ purchasing power, therefore presenting a good opportunity for Myer to maintain its sales revenue.

However, exchange rate has dropped due to declination of Australia’s trade associating with export to import price ratios (Australian Government 2016). This presents a threat to Myer as imports will be costlier, and affects profitability because Myer source most of its products overseas. In light of US withdrawal of TPP, it might culminate in trade wars among TPP nations, making imports even more expensive.

Social

Consumers are highly concerned with environmental issues nowadays, and this altered their shopping habits, because they would sub-consciously avoid a product or brand that harms the environment (Kennell 2015). This presents a threat to Myer as issues culminating from foreign suppliers’ products might affect Myer’s reputation. Therefore, Myer should ensure their products do not present a risk to environment.

As the world becomes more developed, more people are connected to internet, leading to rise of e-generation, who are people that grew up with internet and generally more tech-savvy (AMP Capital 2013). This presents both an opportunity and threat to Myer, as market shifts to capitalise online market affects sales in brick-and-mortar outlets.

Technological

Technological changes will affect retailers’ business operations, as society embracing of technology via smartphones and internet, will compel retailers to adapt and be competitive, by doing businesses online, while not neglecting performance of retail outlets (Mack 2016). As customers reside in a homogenous world between online and offline, retailers are mandated to ensure their presence in medium where these people exist (Abidi 2012). Therefore, Myer must adapt retail strategy to a modern business method, through integration of retail and online experiences via omni-channel.

Environment

Environmental issues have moderate impact on retail businesses, as it depends on level of Corporate Social Responsibility that businesses partake. Some businesses focus on profit maximisation whereas others are more environment-friendly. CSR is a debatable but Myer have excelled in this aspect as they incorporated green practices into business benefiting all stakeholders. As stated in Myer (2016) annual report, Myer is concerned with quality and ethical sourcing of products. Myer also take initiatives to reduce energy usages and is a champion of recycling programmes. Therefore, Myer’s focus on environmental issues is good opportunity to show they are ‘green company’ while reducing costs of running businesses through energy savings.

Legal

Exclusivity clauses are sometimes stipulated in written contracts to prevent suppliers from providing products to competitors (Arts Law 2013). According to Ruel (2013), this form of contract is prevalent in retail industry, as Myer and David Jones entice brands to supply products exclusively for them. Thus, a department store that stocks exclusive brands could lure shoppers to patronise their stores, resulting in higher sales. This provides good opportunity for Myer to differentiate from its competitors, leading to higher profitability. However, Sydney fashion designer, Kym Ellery, breached an exclusivity contract with Myer, by provided apparel collection to Myer’s competitor David Jones (ABC News 2013). This present a threat to Myer as they might lose a popular brand to its rival.

Overall Conclusions and Implications

After analysing all the factors, only social and technological factors have a significant impact on Myer, as they revolutionise the way retailers do businesses. Political, economic and environment factors present a moderate impact as it depends on circumstances. Legal factor presents no significant impact as supplier breach of exclusivity contract is uncommon. Overall, environmental factors present no significant impact on Myer. Therefore, Myer should focus on its business online as the retail industry grows towards e-commerce.