Business Strategy

Porter's Five Forces Model

The five forces models was created by Michael E. Porter, the model allows companies identify and analyzes five forces that helps determine and industry's weaknesses and strengths.

Bargining Power of Customers (Middle)

In the retail industry, the buyers cannot have high bargain power. The buyers want to have diverse products with high quality, and the number of buyers is large. It is not easy for buyers to bargain with Macy’s. However, there are lots of competitors for Macy’s, so the customers are dispersive by these competitors. As a result, Macy’s has to follow the bargain demands rule to retain customers.

Threat of substitutions (High)

The products offered at Macy’s could be also available at another retail store or online. There are plenty of substitutions in the market. Firstly, products from flagship stores with one branch are a substitute, such as clothes from H&M, and cosmetic from Dior. Secondly, products from supermarkets are a substitute, products from supermarkets are cheaper than Macy’s, so it has price threat, for example make-up. Macy’s offers different kinds of products, which could be provided in other store which makes it very difficult to maintain its market share.

Bargaining power of suppliers (Low)

Bargaining power of suppliers is low because there are many numbers of suppliers available in the market for Macy’s. If one supplier reduces its products price, other suppliers also have to reduce their prices. Otherwise, Macy’s can switch its supplier easily.

Threat of new entrants (Low)

To be able to enter the retail industry, companies need to meet products differentiation, economy of scale, and government policies. They also, have to compete with companies that have relatively mature distribution channels, financing channels, and economy of scale. As a result, it is difficult to enter the industry and compete against well know retail stores.

Rivalry (High)

The level of competition among the existing competitors in the industry is very stiff. The top three competitors of Macy’s Department Stores Inc. are Dillard's, Inc., J. C. Penney Corporation, Inc. and Saks Incorporated respectively (Hoovers, 2011). Moreover, the whole market growth rate is low, so different department stores have to compete with each other with price, quality and service they offer. Many department stores offer the same products for similar or less price.

Competitive strategy 

Competitive strategy is a long term plan which helps the company to gain competitive advantage; which is an advantage a company has over its competitors by providing the same products or services at a lower price, or be able to charge much higher prices by providing better products or service through differentiation. 

The Macy’s efforts to become an international retailing brand, it follows the

competitive strategy to be; Industry-wide differentiation; a better product/services across the industry. 

One of the key factors of Macy's success over their competitors has been the great execution of their core strategies know as; Macy's localization, Omnichannel integration and Magic Selling. 

Macy's localization helps them to deliver a merchandise assortment and shopping experience in each location to meet the needs of the local customer by devoting more attention to the different climate zones. 

The Omnichannel integration has helped Macy's to keep up with new technology and with the customers that like to shop online. In 2014, Macy's launched their new service; buy online pickup in store (BOPS) which it has helped sales grow dramatically, because customers love the idea of shopping online and having their item ready to pick up at their local Macy's the same day.

Magic Selling has helped Macy's to understand its customers and their needs. Macy's employees are trained every few months on how to improve their Magic Selling skills.

Macy's new technology; Mobile point-of-sale devices, kiosks and tablets helps their associates to improve their Magic Selling skills and to provide quick and effective customer service.

Macy's is a well known retailer store that offers well known products, such as Michael Kors, Ralph Lauren, Coach and many more which could be high in price, for people who are looking for more affordable fashion cloth. This could become a threat to Macy's because, fast fashion brands such as H&M, Forever 21 and many more are growing at such a high rate that could become a thereat of substitution to Macy's. These stores offer cloth and accessories that are in fashion at a very low price.