Strategic Management Capstone Assessment 2 - Case Study | Desklib

Read the case study analysis of Myer's environmental impacts, organisational strategy and performance, and recommendations for the future. Get insights on macro environment, capabilities, and VRIO analysis.

Strategic Capstone
ASSESSMENT 2 – CASE STUDY
TORRENS UNIVERITY
18-OL-MGMT6011-TRI1-LEC-98F20A
Group 2 Due Date 11 April 2018
Tejaswi Sridhara - 00152280T
Marshall Palham -
Carolina Vanegas Marquez -
Daniel Heeney - 00181608T

Strategic Management Capstone Assessment 2 – Case Study
Executive Summary
Group 2 11 May, 2017

Table of Contents
Executive Summary.....................................................................................................................................0
1 Introduction.........................................................................................................................................1
2 Environmental Analysis.......................................................................................................................1
2.1 Macro environment.....................................................................................................................2
2.1.1 Political................................................................................................................................2
2.1.2 Economic.............................................................................................................................3
2.1.3 Social and Demographic.......................................................................................................4
2.1.4 Technological.......................................................................................................................5
2.1.5 Legal.....................................................................................................................................7
2.1.6 Environmental.....................................................................................................................7
2.2 Industry environment..................................................................................................................8
2.2.1 Treat of new entrants..........................................................................................................8
2.2.2 Supplier power.....................................................................................................................8
2.2.3 Buyer power........................................................................................................................8
2.2.4 Substitutes...........................................................................................................................8
2.2.5 Industry rivalry.....................................................................................................................8
3 Organisation Analysis..........................................................................................................................8
3.1 Strategy.......................................................................................................................................8
3.2 Performance................................................................................................................................8
3.2.1 Financial...............................................................................................................................8
3.2.2 Customer.............................................................................................................................8
3.2.3 Internal Current Performance..............................................................................................8
3.2.4 Internal long-term development.........................................................................................8
3.3 Capabilities..................................................................................................................................8
3.3.1 Marketing issues..................................................................................................................8
3.3.2 Operations issues.................................................................................................................8
3.3.3 Human resources issues......................................................................................................9
4 Recommendations...............................................................................................................................9
VRIO Analysis...............................................................................................................................................9
5 Conclusion.........................................................................................................................................10
6 References.........................................................................................................................................11

Strategic Management Capstone Assessment 2 – Case Study
Group 2 11 May, 2017

Strategic Management Capstone Assessment 2 – Case Study
1 Introduction
Myer operates in a fierce competitive environment, however, Myer has developed new
strategies over the past FY2017 that has made significant headway to achieve a more efficient and
resilient company, in light of the competition and new entrants to the market, such as Amazon. Myer
has become leaner as an organisation which puts it in a better position to react to a rapidly changing
environment. Consequently, with sales declining by 1.4% to $3.2B, Myer has reduced the number of
stores by 3, and handed back space in 2 other centres. With increased competition, Myer intends to be
successful by focusing on their efforts to evolve in response to the ever changing retail landscape and
competitive environment (McClintock, Paul , 2017).
Despite declining sale and challenging conditions Myer remains strong with a highly cash
generated balance sheet. Therefore, the forecast looks promising moving forward for the core business,
especially in the online space and Omni-Channel. Myer has maintain differentiation with providing a
seamless online experience for the consumer through innovative technological advances in online
shopping.
Subsequently, this case study analysis will analyse the environmental impacts of the
organisation in Section 2 of this report. In Section 3, this case study analysis will evaluate the
organisational strategy and performance followed by recommendations in Section 4, with concluding
remarks in Section 5.
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Strategic Management Capstone Assessment 2 – Case Study
2 Environmental Analysis
When analysing Myer it’s important to assess the factors that have an impact on an organisation
(Bivolaru, Andrei, & Purcaroiu, Branding Romania: A PESTEL framework based on a comparitive analysis
of two country brand indexes, 2009). Determining what impacts the firm in terms of political influences,
economic factors, social acceptance, any technological impacts, environmental considerations, and any
legal constraints, is commonly referred to as PESTEL.
Source: Google images
2.1 Macro environment
2.1.1 Political
Politically, Myer’s biggest issue is the Government’s stance on GST for imported goods.
Chairman Paul McClintock has stepped up political pressure on this issue during annual general meeting
with shareholders in Melbourne 2013 with this statement (Bainbridge, 2013);
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Strategic Management Capstone Assessment 2 – Case Study
“All Australian retailers are being impacted by rising employment costs, escalating utilities
costs and an import duty and GST loophole on so-called ‘lower value’ imports providing an
unfair advantage to foreign retailers, some of these issues are not easy to address, but the
last one, GST compliance, can be solved.”
Currently, Goods and Services Tax (GST) only applies to imported goods that have a value of more than
$1,000. Myer’s management has petitioned the Government to review its policy on imports to create
an even playing field for Australian retailers who are struggling in an already ‘difficult trading
environment’ (Bainbridge, 2013).
Government policies play a key role in the fabric of retail operations within their countries, and
in some cases may have a negative effect. These negative pressures can also have a competing interest
for government parties who are already managing increasing tight budgets (Kolios & Read, 2013).
2.1.2 Economic
Economic factors that are likely to have an impact on firms to remain competitive such as Myer
are:
 Economic cycles
 World trade patterns
 Currency exchange rates
 Commodity prices
 Capital markets
 Labour markets
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Strategic Management Capstone Assessment 2 – Case Study
 Suppliers and consumer spending (Gupta, 2013)
These factors can have a positive or negative effect on the clothing retail industry that Myer operates in.
When economies are booming, individuals have more income to spend on non-essential items such as
clothing, footwear, and accessories. In contrast during economic downturns the opposite effect takes
place and as a result companies like Myer have a surplus of inventory (Suttle, 2018).
According to the Australian Bureau of Statistics (ABS), clothing, footwear and accessories rose by
0.4% in February 2008. With seasonal adjustments up by 1.1% in the industry subgroups. These
subgroups saw clothing rise by 0.5%, footwear and accessories remained static with 0.0% change.
Seasonal adjustments however for these categories were more optimistic with clothing up by 0.8% and
footwear and accessories up by 1.6%. In sharp contrast, Department stores fell by 0.2% in February
2018 (Australian Bureau of Statistics, 2018). This decline in Department stores trend estimates could
possibly be related to the GST issue discussed in item 3.1.1 Political in the last section (3). Moreover,
online retailing has made barriers to entry non-exciting for small retailers competing in the same space
as Myer causing even more pressure on the clothing giant (Koumparoulis, 2013). Therefore, more
research is needed to understand the full impact that online shopping has had on the Department store
competitive landscape.
2.1.3 Social and Demographic
Companies such as Myer operate within socio-cultural environments where demand and tastes
fluctuate and are determined by fashion trends and disposable income. Such changes can provide
opportunities for savvy companies or threats to firms who ignore these trends. Additionally, as the
novelty wears off and market saturation sets in, organisations need to pay particular attention to pricing,
with promotional activities and strategies being capable of adapting to changes to the latest trends
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Strategic Management Capstone Assessment 2 – Case Study
(Koumparoulis, 2013). Therefore, important factors for Myer to take into consideration would include
the following demographic changes;
 Age of target market
 Affluence
 Regions and logistics
 Employment statistics (current employment rate)
Consequently, being alert to product threats, and exploring opportunities for differentiation, and market
segmentation will be key matrices for Myer management to consider (Koumparoulis, 2013). For
instance, studies indicate that generational progress causes a shift in focus for political, economic,
cultural and retail experience (Wyn, 2006). Increased social interaction driven by technology, has been
seen to reduce ethnocentric demographic preconceptions. Further scholarly study has been
recommended on ethnocentrism and its application to local and global retail sector (Carpenter et al.,
2013). Global retailer Aldi has been identified as an example in which findings suggest that gender and
education positively affect exposure to retailer marketing, while age affects it negatively (Carpenter et
al., 2013). Social and Demographical factors have been found to impact buyers willingness to purchase
products that support or boycott certain foreign products (Chih-Kang Wang and Charles W. Lamb,
1983). Myer needs collective data from its cultural and demographic consumer groups to make
informed decisions on market proliferation and competition.
2.1.4 Technological
Over the centuries, retail sector has seen a global shift from being traditional to an art and
further transformed into science. Technological advancement has been witnessed as being the primary
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Strategic Management Capstone Assessment 2 – Case Study
driver for change in consumer behaviour as well as being seen as the opportunity to ride the next
success wave (Niemeier et al., 2013). This dramatic force is not only shaping consumer choice, but also
the scale and speed of growth (Kotler and Armstrong, 2014).
Retailers are forced to constantly reshape and re-evaluate their position in their market to
sustain their consumer appeal or expand their market share. This is driven to some extent by the
urgency created by revolutionary new market entrants with radical approach to their technological
systems (Niemeier et al., 2013).
Myer like any other retailer has faced and continues to face the effect of new entrants and other
small players who drove innovation in retailing to consumers. Online only retailers like Amazon (until
recently) employs efficient process to pick, pack and ship to consumers (“Fulfillment By Amazon
(FBA) fulfillment services - Amazon.com,” n.d.). Myer has seen to have embraced similar e-
commerce by building “fulfilment distribution centres” in 2013 similar to food retailers like Woolworths
and Coles (Cummins, 2013). Myer unlike Amazon or Ebay has continued to invest in physical stores,
which is also forced into the forefront of technology. The following Table -1 illustrates the technological
aspects that impact Myer’s online and physical stores.
Table - 1
Online Physical Stores
Secure purchase (eg: privacy, credit card storage,
apps on smart devices)
Security for products (eg: RFID tags, store
monitoring)
Digital solutions to attract consumers online Digital solution to attract consumers into store
(eg: loyalty programs, buyer preferences, targeted
campaigns and sales, digital media and web
advertising)
Information security (eg: data storage, firewalls,
encryption, disaster recovery)
Information security (eg: shoppers smartphones,
in-store Wi-Fi, consumer touchpoints like
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Strategic Management Capstone Assessment 2 – Case Study
shopping guides or virtual assistants, staff
devices)
Business continuity (eg: anti-virus, detection and
prevention of Distributed Denial of Service attacks,
ransomware, network, hardware and software
infrastructure)
Business continuity (eg: “Internet of Things” like
Point of Sale systems, security cameras, sensors,
network, hardware and software infrastructure)
Consumer experience (eg: mobility apps and
websites, warranty, trial and returns, technology
exhibitions)
Consumer experience (eg: digital signage, in-
store maps and guides, invoicing and warranty)
From the table above it can be established that there are several overlapping aspects, while still
requiring a varied application of technology to online and physical stores (Commissioner et al., n.d.;
Kotler and Armstrong, 2014; Miyazaki and Fernandez, 2001). While the table may be limited to
two types of exposure, Myer continues to maintain a largely diverse range of products and services
(“Myer Investor Relations,” n.d.).
2.1.5 Environmental
Environmental impacts and conservation of natural resources are ideas whose roots are difficult to
trace. History of modern environmental movements been gaining momentum and attention since 1960s
in the United States (Gordon, 2012). Environmental sustainability expectations are immensely
increasing on retailers like Myer regarding sourcing of products to use of resources (Hermes, 2014).
Sustainability factors for Myer to consider (Kotler and Armstrong, 2014):
 Pollution from transportation of products and operations of stores
 Packaging of goods (from source and at point of sale) and its subsequent impact on disposal
For instance, in July 2017, Australian supermarkets announced the end of free plastic bags, which not
only reduces the consumption, it is also speculated that this will save these retailers over A$1Million per
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Strategic Management Capstone Assessment 2 – Case Study
year.
Political and environmental pressures have forced industries like motor industry and companies like GE,
who create “cleaner” products like aircraft engines, locomotives and cleaner fuel technologies (Kotler
and Armstrong, 2014). Similarly, retailers like Myer need to increasingly commit to these pressures
and consider their overall management and consumption of resources.
2.1.6 Legal
Many of the technological aspects also have legal implications, particularly around obtaining, storing and
using consumer’s personal information. These aspects are part of the overall retail industry that is
comprehensively covered by strict regulations like the consumer law and policies enforced often by
independent authority (Commission, 2012) and the country’s judicial courts (“The Australian
Consumer Law – Australian Consumer Law,” n.d.). Australian Competition and Consumer
Commission (ACCC) is an independent authority that closely monitors the various retail markets for
protecting consumers and controlling competition (Commission, 2012). The ACCC has historically
covered the following topics in relation to Myer’s dealings (Commission, 2018):
 Groceries (in relation to Myer’s parent group, Coles Myer company which was formed in 1985.)
 Fuel (in relation to Myer’s credit card products and the Coles Myer company)
 Mergers (in relation to 20 years of Myer’s evolution)
 Authorisation (in relation to enabling licensee businesses operating within Myer stores)
 Product Safety (in relation to recalled products in Myer and Coles Myer Group)
 Advertising (in relation to pricing, scams, discounts, emerging issues in the online marketplace
and credence claims)
 Enforcement and Compliance policies (including: business responsibilities, cartels,
communications, online shopping and use of resources)
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Strategic Management Capstone Assessment 2 – Case Study
2.2 Industry environment
2.2.1 Threat of new entrants
Profitable industry attracts a maximum number of new companies in the industry. The threat of
new entrants in the industry is less due to the requirement of the large capital in the industry
(Hollensen, 2010). According to the research, there are some of the factors that can affect the
entrants of the business in the industry. Some of them are discussed below: -
• High Capital requirement
• Access to distribution
The company who is willing to expand their business in the market need high capital so that they
can establish a maximum number of stores in the market. Along with this, they need to hire big
workforce for the management in the stores for that they need to provide them better salaries and
wages. Moreover, the company has to bear the high operating cost of the business in the market
(Wilson & Gilligan, 2012). The new entrants also find it difficult to form the access to the
distribution of the products which might reduce their attractiveness of the market.
Apart from this, the Australian Department stores industry is struggling a lot in the past five
years due to which they are not willing to expand their business in the industry. According to the
IBIS world report, industry revenue is predicted to fall at an annualized 0.9% over the five years
through 2017-2018 to $18.3 billion. In addition, the study states that the uncertain economic
conditions and a decrease in the household discretionary income in 2017-18 are predicted to
contribute to a projected 2.7% decline in the current year industry revenue (IBIS World, 2018).
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Strategic Management Capstone Assessment 2 – Case Study
This reflects that Myer has less threat of the new entrants in the industry which is a positive sign
for them.
2.2.2 Supplier power
A maximum number of companies in the competitive market rely on the supplier for the delivery
of the quality products. In the industry, there are many suppliers available due to which the Myer
finds a low bargaining power of the suppliers. The major suppliers of the company offer the
products like clothing, footwear, and accessories. There are many fashion designers who supply
fashionable products to the customers and the company has tie-ups with 1,200 suppliers (Myer,
2017). According to the analysis, currently, the Myer Company cut their 100 brands so that they
make a way for the new labels as part of a plan to restore sales and the earnings growth.
Moreover, the company has notified that there are about more than 100 men's, women's,
children's, footwear and the homeware brand and they are no longer listed in its 67 departmental
stores. This step was taken by the company as they want to clear the space for the Seed, Fcuk,
Marcs, Trenery and Country Road (Mitchell, 2015). The company announced that these brands
had minimal presence in the market which made the company to take this step. Now, the
company is performing the tie-ups with the other suppliers who can offer them good revenue in
the market.
2.2.3 Buyer power
Myer faces the high bargaining power of the customers in the market. The buyer has the market
which means if they found any deals better than Myer then they can easily shift to the other
companies. According to the research, in the industry, maximum numbers of buyers are price,
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Strategic Management Capstone Assessment 2 – Case Study
quality, and brands sensitive due to which can easily shift with less switching cost. Therefore, the
company relies on the service differentiation from their customers which helps the company in
attracting and retaining the customers. The effective services and price of the company also lead
to the customer loyalty (Chernev, 2018). The company provides online service so that their
customer can easily order the product. Myer ensures that they are offering the products at the
best price with an interactive experience for which the company delivers the product on time to
their customers.
2.2.4 Substitutes
The threat of substitute came into existence when the similar products are available in the market
with the competitors which make the customers shift to the other company. The supplier of the
company has tie-ups with different companies due to which they offer the same products to the
customers. The buyers of the company can easily switch to the other competitors at low
switching cost in the market (Kotler, 2015).
Most of the buyers are inclined to the specific brands and each of these stores has no exclusive
access to these products which means that the consumers can get the same products from the
various stores present in the market. This results in the intense rivalry between the firms in the
market. This threat of the substitutes is high in the market for the Myer Company due to which
the profitability of the company might reduce.
2.2.5 Industry rivalry
The competition among the firm is intensive in this industry as different companies compete with
the customers with the no switching cost. The major competitors of the Myer Company include
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Strategic Management Capstone Assessment 2 – Case Study
Davide Jones Limited, Harris Scarfe, Target Australia, and many others (MBA Skool, 2017).
Dravid Jones is an Australian upmarket Department store with approximately 45 stores in the
market. The company is the major competitor of Myer. The company follows the clear strategy
of the concentrating on its core business mainly the departmental stores and the credit card
operations. The company competes with the Myer on the basis of the cost efficiency to offset the
high cost of the customer service initiatives. On the other hand, the Target Australia another
competitor of the company target the mid-market customers and investing in the new stores and
refurbishments. The company makes use different methods with the help of which they can
communicate with the customers through social and internet networks. The study reflects the
main strategy that is implemented by the competitors.
Myer Company has decided to form the tie-ups with the new brands so that they can generate the
revenue. Moreover, they want to involve the tie-ups with the brand which are mainly demanded
by the customers so that they can meet the needs of the customers. The analysis reflects that the
company faces high industry rivalry.
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Strategic Management Capstone Assessment 2 – Case Study
3 Organisation Analysis
3.1 Strategy
3.2 Performance
3.2.1 Financial
3.2.2 Customer
3.2.3 Internal Current Performance
3.2.4 Internal long-term development
3.3 Capabilities
3.3.1 Marketing issues
3.3.2 Operations issues
3.3.3 Human resources issues
4 Recommendations
VRIO Analysis
Developed by J Barney in 1991 the VRIO analyses the organisations resources and evaluates them to
identify the organisation competitive advantage. (Thomas & Jugdev, 2002) The analysis asks 4 questions
in identifying competitive advantage:
1. Valuable: Does the resource provide value?
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Strategic Management Capstone Assessment 2 – Case Study
2. Rare: Is the resource rare? Competitors sharing the same valuable resource would lead to
competitive parity
3. Inimitability: is the resource easily imitated? If the resource is easily repeatable other
competitors would likely copy and lead to temporary competitive advantage
4. Organisation: Is the organisation ready to capitalize in the resource? To complete
sustainable competitive advantage the organisation must be positioned to capitalize on the
resource
(Cardeal & Antonio, 2012)
Valuable Rare Inimitable Organisation
Competitive
Implications
1 Yes No No No
Competitive
Disadvantage
2 Yes Yes No No
Competitive
Parity
3 Yes Yes Yes No
Temporary
Competitive
Advantage
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Strategic Management Capstone Assessment 2 – Case Study
4 Yes Yes Yes Yes
Sustained
Competitive
Advantage
Table 1 – VIRO Analysis (Thomas & Jugdev, 2002)
5 Conclusion
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Strategic Management Capstone Assessment 2 – Case Study
6 References
Chernev, A. (2018). Strategic Marketing Management. Chicago: Cerebellum press.
Hollensen, S. (2010). Marketing Management: A relationship Approach. India: Pearson
Education.
IBIS World. (2018). Departmental Stores-Australia Market Research Report. Retrieved from:
https://www.ibisworld.com.au/industry-trends/market-research-reports/retail-trade/other-
store-based-retailing/department-stores.html/
Kotler, P. (2015) Framework for Marketing Management. India: Pearson Education.
MBA Skool. (2017) Myer SWOT Analysis, USP & Competitors. Retrieved from:
https://www.mbaskool.com/brandguide/lifestyle-and-retail/4954-myer.html
Mitchell, S. (2015). Suppliers shocked as Myer and DJs dump brands. Retrieved from:
https://www.smh.com.au/business/companies/suppliers-shocked-as-myer-and-djs-dump-
brands-20150728-gim9bu.html
Myer. (2018). Myer Today. Retrieved from: https://www.myer.com.au/p/about-myer/the-
company/about-us/content-myer-today/
Wilson, R. M., & Gilligan, C. (2012). Strategic marketing management. New York: Routledge.
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