BBMM506 Strategic Management: Porter’s Five Forces on Myer Holdings

This report provides an industry analysis of Myer Holdings Limited, an Australian retail company, using Porter's Five Forces framework. The analysis examines competitive rivalry, the power of suppliers and buyers, the threat of substitutes, and the threat of new entrants within the Australian retail industry. It finds that while competitive rivalry and the threat of new entrants are relatively low for Myer, the bargaining power of suppliers and buyers, along with the threat of substitutes, are significantly high. The report recommends strategies for Myer to mitigate these high-pressure forces, such as diversifying its supply chain, expanding its customer base, focusing on service innovation, and creating customer loyalty. Additionally, it suggests that Myer collaborate with competitors to expand the market and continuously innovate to maintain a strong position against new entrants. The analysis concludes that Myer can sustain its market position by addressing these challenges and strategically shaping the competitive forces in its favor.

Running head: INDUSTRY ANALYSIS OF MYER HOLDINGS LIMITED
INDUSTRY ANALYSIS OF MYER HOLDINGS LIMITED
Name of the Student
Name of the University
Author Note

INDUSTRY ANALYSIS OF MYER HOLDINGS LIMITED
Introduction
Myer Holdings Limited (Myer) is a department store or retail company located in
Australia. The department store of the company has network around almost 60 stores in
various retail location across Australia. The merchandise of Myer has approximately 11
categories of product which are womenswear, menswear, childrenswear, miss shop (youth),
beauty, intimate apparel, homewares, toys, electric goods, fragrance and cosmetics, handbags
and accessories and general merchandise (Myer Holdings Limited 2018). The brands of the
company are Seed, Mimco, Jack & Jones, Topshop Topman, French Connection, Veronika
Maine and Industrie. The subsidiaries of the company are Myer Pty Ltd, NB Russell Pty Ltd,
Myer Group Finance Limited, Myer Travel Pty Ltd, NB Elizabeth Pty Ltd, Warehouse
Solutions Pty Ltd and Myer Group Pty Ltd. The company takes care of various activities as
well which are not under the department store retail business and they do this through its
various subsidiaries and FSS Retail Pty Ltd.
Porter’s Five Forces
The five forces is an industry analysis tool which was created by Michael Porter, who
was a professor of Harvard Business School. This is a tool which measure the likely
profitability of a company and also analyses the attractiveness of an industry (Dälken 2014).
Porter established five forces that was existent in the competitive business environment and
could lessen the profitability of companies. The five forces were:
 Competitive Rivalry – This determines the number of rivals of a company that are
present in the market and the strength that these rivals or competitors possess in the
market. The quality and services of the competitors are measured in this force (Dobbs
2014). Companies take aggressive measures and marketing techniques are adopted when

INDUSTRY ANALYSIS OF MYER HOLDINGS LIMITED
the competition is intense between them. Whereas if the rivalry is minimal between the
companies, then they can have increasing profits and strength in the market.
 Power of supplier – This force determines that if the number of products are more in
the market and the buyers find many alternatives to the products then the power of
supplier would be less as the buyers would purchase another product if the price increases
(Porter and Heppelmann 2014). However, if the number of products are less in the
market, then the power of supplier increases as they will be able to charge more from the
buyers.
 Power of buyers – This force depicts that if there are a large number of products in the
market then the buyers can switch to another supplier if they feel the price is high, then
the suppliers feel inclined to decrease the price to retain the buyers (Porter and Magretta
2014). However, when there are only a few chosen buyers for a particular supplier, then
the buyers have very less power over them.
 Threat of substitutes – This force refers to the availability of a cheaper substitute
product in the market which gives good competition to the existing product. The
substitute product would provide the same benefits as that of the original product,
however, the price would be less and hence would attract more buyers. These substitute
products can weaken the position of a company in the market and impact the sales and
profitability of that company (Rothaermel 2015).
 Threat of new entrants – This force determines that company can get affected by the
entry of new competition in the market as the risk of losing buyers can be high if the
products and services offered by the new entrant is better than the existing company
(Tanwar 2013). Hence, it is important to maintain a strong foothold in the market by the
existing companies.

INDUSTRY ANALYSIS OF MYER HOLDINGS LIMITED
Five Forces Analysis of Myer
The five forces analysis for Myer Holdings Limited is as follows:
 Competitive Rivalry – The rivalry among the existing players in the market will
determine the prices and the profitability of the industry. Myer Holdings Limited has
numerous rivals of the retail industry in the market and there is extreme competition
between them. However, the operations and the functioning of Myer is strong in the retail
industry. Therefore, the rivalry has no long lasting impact on the profitability of the
company and they do not suffer for a great period of time even when they are affected
(Mason and WRLC 2016).
 Power of suppliers – The retail sector is such that almost every company in the retail
industry purchases their raw materials from several suppliers. These suppliers find
themselves in a dominant position from where they can increase the prices of the raw
materials if they desire and this can decrease the margins that Myer gets from the market.
The suppliers in the retail sector have huge bargaining power through which they earn
more price from the companies in the field (Laudon and Traver 2013). Therefore, the high
bargaining power of the customer in the retail industry decreases the profitability of
Myer.
 Power of buyer – Myer has a small but powerful base of customers who have a lot of
power over the company. The normal agenda of a buyer is to be demanding and extract
the best possible products and services in the least price possible. This creates a great
impact on Myer Holdings as this high bargaining power of their buyers affects their
overall profitability in the long run (Fabbri and Klapper 2016). Hence, the small customer
base of Myer Holdings have high power over the company, and they can pressurize the
company to decrease the prices or demand more discounts or offers from them.

INDUSTRY ANALYSIS OF MYER HOLDINGS LIMITED
 Threat of substitutes – If there are products in the market which can satisfy the needs
of the customers, then the industry profitability takes a great impact. The department store
of Myer Holdings stocks a variety of products, however, their competitor, Harvey
Norman becomes their substitutes as their products range is more cheaper and of better
quality and they provide more discounts to their customers. Moreover, there are many
discount stores who use the strategy of high-low discounts and try to increase their sales
(Özer and Saldamli 2015).
 Threat of new entrants – The new entrants in the market put a lot of pressure on Myer
and enables them to do new things. It also pressurizes them to lower their pricing
strategy, reduce their costs and provide new propositions for value to the customers. Myer
Holdings have been able to overcome these challenges and maintain their foothold in the
market effectively (Marshall 2013).
Findings and Recommendations
After analysing the five forces of Myer Holdings Limited it has been found that the
competitive rivalry and the threat of new entrants of the company is comparatively low,
whereas, the threat of substitutes, the bargaining power of suppliers and the bargaining power
of buyers is quite high. There are certain recommendations that could be put to effect for the
powers that are high. To handle the high bargaining power of the suppliers Myer can build a
supply chain where there are many suppliers so that they have more suppliers to choose from
in case one increases their price. They could also research and experiment their products with
different raw materials so that they can use other raw materials if the price of one goes up. To
tackle the high bargaining power of the buyers, Myer could increase the base of customers
that they currently possess. This could have two benefits, one where they could decrease the
bargaining power of the buyer and second where they could increase the sales and production
of the company. They could innovate new products as the buyers get attracted easily to new

INDUSTRY ANALYSIS OF MYER HOLDINGS LIMITED
products in the market and this also decreases their bargaining power. To handle the threat of
substitutes, Myer could concentrate more in the service that they shall provide to the
customers, rather than just on the products. They should understand the needs of the
customers than just what the customer purchases. Finally, they could also increase the cost of
switching for the customers. These recommendations if adopted could help Myer to manage
the high forces of the market. However, the forces which are low could also become high if
they are not managed continuously. Hence, to keep forces such as competitive rivalry and
threat of new entrants low there are certain recommendations that could be followed by
Myer. To handle the growth in competitive rivalry among the existing competitors in the
retail sector, Myer could collaborate with the competitors to grow the size of the market,
rather than competing with each in a small market. They could also build sustainable
differentiation among them and their customers. Finally, to tackle the threat of new entrants
and to keep it low, Myer could innovate new products and services in the market so that it
could attract new customers and could also retain the old ones by giving them a reason to stay
loyal to Myer Holdings Limited. These are certain recommendations that could help Myer
Holdings Limited to remain the best in the retail industry.
Conclusion
Hence, it can concluded from the above industry analysis that Myer Holdings Limited
has a strong foothold in the market and could remain so for a long time if they are able to
access the issues that are faced by them and if the managers of the company could shape the
highs and lows of the forces in their favour. This analysis would help the company strategists
to understand their stand in the market and hence, help them to form strategies which will
increase the profitability in the retail industry.

INDUSTRY ANALYSIS OF MYER HOLDINGS LIMITED
References:
Dälken, F., 2014. Are porter’s five competitive forces still applicable? a critical examination
concerning the relevance for today’s business (Bachelor's thesis, University of Twente).
E. Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of industry
analysis templates. Competitiveness Review, 24(1), pp.32-45.
Fabbri, D. and Klapper, L.F., 2016. Bargaining power and trade credit. Journal of Corporate
Finance, 41, pp.66-80.
Laudon, K.C. and Traver, C.G., 2013. E-commerce. Pearson.
Marshall, S., 2013. Evaluating the strategic and leadership challenges of MOOCs. Journal of
Online Learning and Teaching, 9(2), p.216.
Mason, R.B. and WRLC, C., 2016. Prepared by: Lead researcher: WJ Sewell, D Litt et Phil
Research team: P Venter, CPUT.
Myer Holdings Limited, M., 2018. Myer Holdings Limited. [online] Myer Holdings Limited.
Available at: https://www.investsmart.com.au/shares/asx-myr/myer-holdings-limited
[Accessed 30 Jun. 2018].
Özer, K.O. and Saldamli, A., 2015. Evaluation of competition conditions in the hotel sector
in Istanbul. International Review of Management and Marketing, 5(2), pp.102-107.
Porter, M. and Magretta, J., 2014. Strategy and Competition: The Porter Collection (3 Items).
Harvard Business Review Press.
Porter, M.E. and Heppelmann, J.E., 2014. How smart, connected products are transforming
competition. Harvard Business Review, 92(11), pp.64-88.
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.

INDUSTRY ANALYSIS OF MYER HOLDINGS LIMITED
Tanwar, R., 2013. Porter’s generic competitive strategies. Journal of business and
management, 15(1), pp.11-17.