Strategic Management Capstone: Myer Case Study Analysis, Torrens Uni

This case study provides a comprehensive analysis of Myer, a major Australian retailer, within its competitive environment. It examines the company's strategic responses to challenges such as declining sales and new market entrants like Amazon. The analysis includes a PESTEL analysis of macro-environmental factors (political, economic, social, technological, environmental, and legal) and an assessment of the industry environment using Porter's Five Forces. The study further evaluates Myer's organizational strategy, performance (financial, customer, and internal), and capabilities, addressing marketing, operations, and human resources issues. The report concludes with strategic recommendations for Myer to improve its competitive position and a VRIO analysis of its resources and capabilities. The analysis highlights Myer's efforts to adapt to the changing retail landscape through online channel development and cost efficiencies.

Assessment 2 – Case study
Torrens Univerity
18-ol-Mgmt6011-tri1-lec-98F20A
Group 2 Due Date 11 April 2018

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
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 Myerit’s important to assess the factors that have an impact on an
organisation (Bivolaru, et al., 2009). Determining what impacts the firm in terms of
politicalinfluences, economic factors, social acceptance, any technological impacts,
environmental considerations, and any legal constraints, is commonly referred to asPESTEL.
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
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Strategic Management Capstone Assessment 2 – Case Study
adapting to changes to the latest trends(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 ethnocentrismand 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 frombeing traditional to an art
and further transformed into science. Technological advancement has been witnessed as being
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Strategic Management Capstone Assessment 2 – Case Study
the primary 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
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Strategic Management Capstone Assessment 2 – Case Study
touchpoints like 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 impacton
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 year.
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Strategic Management Capstone Assessment 2 – Case Study
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 ofthe overall retail
industry that is comprehensively covered by strict regulationslike the consumer law and
policiesenforced 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 enablinglicensee 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 anduse 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 must 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).
This reflects that Myer has less threat of the new entrants in the industry which is a positive sign
for them.
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