Macy's Department Store Repositioning
(7 pages of text)
From 2005-2006, Federated Department Stores converted some 15 regional department store chains into a single national brand, Macy’s, with 810 stores across the United States. In addition, the company repositioned the consolidated Macy’s in the overall retail landscape in an attempt to differentiate the new company from its competitors. These maneuvers were undertaken to counter decreasing sales and profits in the traditional department store industry. Some retail analysts suggested that the consolidation of Macy’s, while interesting, was destined to fail because the traditional department store was an obsolete entity; however, other analysts suggested that Macy’s strategy might hold the key to success in a declining industry. In 2008, the U.S. economy entered a recession, and by 2011 it remained far from booming. Did Macy’s need to change parts of its strategy to remain competitive? What would need to change?
The case attempts to integrate many of the methods and models used in strategic management (and some marketing) textbooks and courses and, as such, demonstrates to students how some of the important models of strategy may be applied. For example, the case begins with an external analysis of the factors affecting the traditional department store industry, from the macro environment to the competitive environment. Several important models are used to analyze the case — such as the industry lifecycle model and Porter’s five forces model — on which the instructor can elaborate in more detail.
Following the external analysis, the case presents a brief internal analysis, highlighting some of the strengths of the company. This is followed by a description of Macy’s new strategy. Here the instructor can introduce strategy concepts, such as appropriate strategy options for companies in a declining industry, as well as cost versus differentiation strategies, and perceptual maps and the search for the “white space” on the map.
The case forces students to consider conflicting information in deciding the future of Macy’s. Was the consolidation and repositioning a brilliant strategic move that would allow Macy’s to flourish in a declining industry? Or was this effort futile because the traditional department store industry was on the road to obsolescence?
United States, Large, 2005-2011
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