SM A1 25.5 out of 35 (D) PDF

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Executive Summary This report provides a strategic analysis on Myer, an Australia’s department store. It analyses how Myer manage to stay top in Australia’s retail industry by identifying the key factors that contributes to its opportunities and threats, using competitive analysis to recognize the interconnectedness and impact between the competitive forces and macro-environment. Including how Myer’s strategy uses its strategic capabilities to provide the company with a sustainable competitive advantage. 1. Background information of Myer Myer Pty Ltd; Australia’s largest departmental store group was founded by Sidney Myer in 1900 (Myer Pty Ltd 1999). Myer retails products categories that range across women and men’s clothes, miss shop; Myer’s exclusive brand, beauty, kids & toys, homewares, electrical goods, books, footwear, handbags & accessories, catering to mid-up market individuals (Myer Pty Ltd 1999). With 67 stores all over Australia’s states, Myer position itself as Australia’s leading department store group to date. Myer’s 12,500 employees include Richard Umbers (CEO and MD) (Myer Pty Ltd 1999). Coming up second in Australia’s retail industry is Myer’s primary competitor; David Jones who has 42 stores, 7,200 employees with John Dixon as it’s CEO (David Jones n.d.) and also presents a similar product range as Myer (David Jones 2016). In 2016, Myer generated a total sale of AU$3.2 billion (Myer Pty Ltd 1999) compared with David Jones’ sale of AU$2.47 billion (Pash 2016). Despite a greater total sale, Myer had a lower sales growth of 3.3% (Pash 2016) compared to David Jones of 11.2% (Pash 2016) due to the unexpected warm weather during the last half year. 2. Macro-environment analysis In an ever-changing business world, it is important for businesses to identify the factors of its external environment to achieve a sustainable competitive advantage. A PESTEL analysis framework provides information of the macro-environment the company operates which allows the business to predict situations it may encounter in the future (Yüksel 2012). Thereby, reducing the business risks and enabling the business to maximise its potential. Political

Penalty rates have been a part of Australia’s social and economic resolution since the 1900s as a form of compensation to employees for alienation from their community, family and friends. To fulfil the criteria of receiving that penalty rate, an employee would have to be working on the weekends/public holidays/do overtime/late night or early morning shifts (Fair work Ombudsman n.d). In 2013, Myer’s CEO, Bernie Brooks urged Australia government to reconsider the increase of penalty rates as an increase of labour cost will affect Myer’s net profit (Lauder 2013). In the recent few years, Fair Work Commission has been trying to cut or remove penalty rates (Karp 2016). However, an article from The Sydney Morning Herald states that if workers’ wages are cut, consumer demand falls as employees will have lesser disposable income to spend (White 2015). This will then become a threat to Myer when lesser people shop. Economic The global financial markets have been facing instability since 2009 (Gittens 2001) to year 2015, the financial markets remain unstable (Beams 2014) and affected many countries. With Australia’s weak retail environment and low consumer sentiment, Australian consumers have gradually become price conscious and prefer to cut down on expenses and pay off debts, slowly boosting their savings. In 2013, Myer's increase its sale growth of 1% to $3.14 million but because of employment issues, customers are watchful with their spending. This caused Myer's Net Profit to decrease by 8.7% to $127 million. (Lauder 2013) This shows that customers are still wary of spending unnecessarily where the global financial crisis poses a threat to Myer.

Social The social factor analyse trends in generations differences given there are baby boomers, Gen X, Y (born 1980-1994) and Z (born 1995-2020) (WJSchroer n.d.) Shoppers of Gen Y and Z are well-acquainted with technology which causes them to stay updated and exert/get fashion influence on social media. In addition, Gen Y and Z favours brands and tend to seek validation from others with what they purchased (Iris 2016).

Myer uses this behaviour as an opportunity by recruiting models, retailing their brand as upmarket and providing quality products (Myer Pty Ltd 1999) where people of Gen Y and Z would be satisfied owning a product from this particular brand. Technological Technology is a clear threat to Myer given that the world is rapidly developing, people shopping experience changes at the same time such that they have the convenience to shop whenever they want. Moreover, Myer was slow to incorporating more technology into the business but is now catching up with the internet pace (Greenblat 2014). Environmental In relations to environmental sustainability, Myer established an Energy Management Strategy through year 2013-2018 to shrink their energy intensity by 10-15% at the end of the project. This is facilitated with the upgrades in lighting efficiencies, building controls, heating and cooling systems. Furthermore, Myer managed to recycle 60% of its waste stream in 2016, having committed itself to reduce waste and increase recycling of package (Myer Pty Ltd 1999). Legal Under the Competition and Consumer Act (CCA), consumers and businesses are protected from unfair trading practices (Australia Government 2017). For instance, product safety and price setting are one of the requirements Myer has to abide to. Having examined this factor, there is no meaningful impact found for Myer. Based on the PESTEL analysis on Myer, political factor affect the activities and employments while economic factor influence consumers spending decisions. Social factor shape the service of Myer, technological factor provide Myer solutions to more revenue, environmental factor help Myer be sustainable in everyday business practices and contribute to the world at the same time. Lastly, the CCA is compulsory in retail industry to comply with so no significant findings for threat or opportunity. By understanding these factors in Myer’s macro-environment, Myer can strategize its activities appropriately to maximise opportunities and diminish threats. 3. Industry environment analysis

Porter (2008) five forces analysis offers a structure to understand key threats in an industry and allows a company to analyse the level of competition. If the forces surrounding an industry are strong, the returns are unattractive and vice versa (Porter 2008). Threat of entry (High)  not properly developed. Threat of entry is high when barrier to entry are low. Myer faces high entrants according to (Perrott 2013) like Topshop, H&M, Zara and Uniqlo and other international retailers entering entrants into Australia retail industry. With the existing abilities and capital of these players, rivalry and market share in the industry increases and profitability are moderated. Threat of substitutes (High)  DON’T USE. Substitutes are products that customers are able to obtain easily from another company. In addition, buyers low switching costs, gaining similar quality and lower price, raise the threat of substitutes (Porter 2008). Comparable to Myer, Harris Scarfe (Harris Scarfe n.d.) and Kmart (Kmart n.d.) offers a wide array of products to its customers too. As Myer set its goods at mid to high price range, threat of substitute is high when competing with cheap-chic companies like Kmart. Rivalry (medium) The rivalry of established firms about equal size as Myer among the retail industry is medium given that Myer is the largest retail company with 67 stores throughout Australia (Myer Pty Ltd 1999). Myer main competitor would be David Jones who has 42 stores (David Jones 2016). Having high product diversity, Myer is able to reach its customers wants easily compared to other smaller retail stores in Australia. Bargaining power of buyer (High) Buyers of Myers are high as they contribute a big portion of Myer revenue. Furthermore, they have low switching costs of transferring to high availability substitutes like Kmart (Kmart n.d.) and Harris Scarfe (Harris Scarfe n.d.) who also sells a range of merchandises. Bargaining power of suppliers (Low)

According to (Mitchell 2015) news, Myer cut 100 brands as the suppliers are not concentrated and aplenty suppliers offering similar products. Moreover, switching costs for Myer is low. Therefore, the bargaining power of Myer’s suppliers is low. Through analysis of the inter-connectedness competitive forces, it helps enables Myer to gauge the profitability in the retail industry and design its strategies to influence the impact of the forces. 4. Strategic Capabilities Competitive advantage An organisation that implements tactics that exploit their resources and competences, along with responding to external opportunities is likely to obtain sustained competitive advantage (Barney 1991). By using four key criteria, VRIN; value, rarity, inimitability, nonsubstitutability, we will be able to identify Myer strategic capabilities (Barney 1991) and, using Porter’s (1985) value chain analysis to diagnose organisational capabilities. Value chain analysis evaluates which activities are most valuable to the firm, its costs and as decision support tools (Porter 1985). The model is categorised in primary and support activities. Primary activities of Myer are moving raw materials from suppliers to warehouse (Inbound logistics), factory production (Operations), timeliness final product delivery (Outbound logistics), promoting their products with sales; social media (Marketing and sales) and product service where customers can change/refund their purchases (Service) (Myer Pty Ltd 1999). Myer support activities include management team, board of directors (Firm infrastructure), recruitment; training; managing of employees (Human resource management), inventory and warehouse management systems (technology development), high quality raw materials, reliable inbound deliveries (procurement). MYER Resources Myer has threshold resources both in tangible and intangible ways. Some of Myer’s tangible resources are capital, warehouse, 67 stores, vast range of merchandises and 12,500 employees (Myer Pty Ltd 1999). On the other hand, Myer’s distinctive capabilities in intangible resources are renowned reputation, strong inventory and warehouse management systems (T4N9Ln3Wz_admin 2012), corporate social responsibility (CSR) (Myer Pty Ltd 1999).

Competences Myer engages in CSR where they commit themselves to only source goods that are produced under safe working conditions (Myer Pty Ltd 1999). Myer capabilities also lie in Omnichannel shopping, good layout both in physical store, website and MYER One App (Myer 2015). Valuable Owning many stores throughout Australia (Myer Pty Ltd 1999) allows Myer’s customers to access the store conveniently, increasing the chance of more consumers. In 2015, Myer developed a five year plan to boost its profits while driving productivity. One of the plan priorities is putting their focus on high value customers who are informed with fashion to increase critical success factors. Myer intends to adjust itself with what these customers wants such as wanted brands like Nike, Apple, Chanel, Topshop etc., improved fitting rooms, engagement with customers and more online product range (Myer 2015). These valuable resources will help Myer gain competitive advantage. Rare Myer has similar resources like CSR and Omni-channel shopping as its other competitors like David Jones (David Jones n.d.) and Kmart (Kmart n.d.). Therefore, only competitive parity is met here. Inimitable A firm that has valuable and rare resources may also be a cause for competitive advantage (Barney 1991). Another capability of Myer is having a fun and friendly culture (Indeed 2017). Hence, there is competitive advantage as not all companies are able to provide such culture. Non-substitutable One of the points that substitutability could refer to is, a firm can substitute a similar resource of another (Barney 1991). Though Myer has strong inventory and warehouse management systems (T4N9Ln3Wz_admin 2012), other businesses can create a comparable system too. Hence, Myer holds threshold capabilities in this aspect.

Thus, in order for a company to sustain a competitive advantage, resources and competences they utilize must have the VRIN attributes. To be highly successful, a company must find their niche, a specialty that makes them unique and a valuable choice to their customers. Myer strategy of product differentiation, culture, giant network provides them with a sustainable competitive advantage in the industry. 5. Conclusion In conclusion, it is important for an organization to decide wisely the strategy taken as it can provide a competitive advantage and opportunities in future. Myer strengths and capabilities enable them to remain the leading retail store in Australia. Based from above analysis, Myer has adopted cost focus and differentiation strategy. By placing more attention on what the targeted customers want, Myer can minimize cost on resources and produce goods more effectively. Though there are many competitors in the industry, Myer still managed to keep top position. Therefore, this can be seen that Myer’s strategies are successful.

Word Count: 2014

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