Discuss about the Capstone Logistics and Retail Management.
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.
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.
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);
“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).
Economic factors that are likely to have an impact on firms to remain competitive such as Myer are:
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.
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(Koumparoulis, 2013). Therefore, important factors for Myer to take into consideration would include the following demographic changes;
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.
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 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 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.).
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):
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.
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.
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):
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:
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.
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.
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, 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.
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.
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 Davide Jones Limited, Harris Scarfe, Target Australia, and many others(MBA Skool, 2017). David 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 based on 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 targets 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.
As being stated earlier, the consumers of the retail stores in Australia are highly sensitive to price, brands and quality of the products. Considering the fact that the company has a huge number of competitors in the market of Australia, it is very easy for the consumers to switch from one online shopping company to another. The target consumers of the Myer retail group include both high-end consumers as well as consumers who are bargain oriented. In order to attract the high profile consumers the mentioned online retail shop has incorporated luxury items like highly costly Make up products and outfits of expensive brands in its collection. In order to appeal to the working-class, bargain oriented consumers, the management of the Myer Retail group offers frequent sales and high discounts on specific products for an exclusive time period. According to researchers, the majority of the consumers in Australia prefer high quality products in a commendably low price (Fernie & Sparks, 2014). However, when it comes to apparels and foot ware, 70 percent of the overall population of Australia is found to be aware of the brand value. These consumers give more priority to the brand of an outfit or footwear rather than its quality and price (Oh, Teo & Sambamurthy, 2012). Approximately 30 percent of the Australians are found be going for outfits or footwear that are highly inexpensive. The same tendency of consumers has been noticed when it comes to makeup and skin care products. Consumers prefer and trusts products from well-known brands while purchasing the above-mentioned products.
One of the major marketing issues of the mentioned retail group includes high competition in the online retail market of Australia. Some of the major competitors of the brand include Haris Scarfe, David Jones Limited and Target Australia. The products offered by the David Jones Limited is highly cost efficient and hence several consumers of Mayer are found to be switching to David Jones Limited. Along with that, the Target Australia retail group is working on enhancing its consumer base by refurbishments and incorporating new stores (Oh, Teo & Sambamurthy, 2012). Besides that, the supply chain inefficiency of the Mayer Retail group is also imposing a negative impact on the company. As a result of the insufficient supply chain, the company is facing issues to turn around products from manufacture to in-store in a matter of weeks.
Another marketing issue faced by the mentioned organization is the year round discounting on products to enhance the consumer loyalty. A few years back, discounts were offered to the consumers during two major sales event per year, one mid-year and one after the Christmas. However, in the recent years, In order to deal with high competition, the Mayer Retail group is compelled to provide a discount to the consumers even in the season when the purchasing costs are high. As a result of the above-mentioned marketing issues, the Mayer Retail Group has suffered a loss of 5.3 percent of its total
Considering the fact that the mentioned organization is suffering from various issues associated with marketing their products, some of the recommendations for the Mayer Retail group are as follows.
Implementation of social media marketing: The mentioned company is already present in popular social media platforms like Facebook, Instagram, LinkedIn and Snapchat. However, like its competitors, the company should enhance its activities and posts in order to attract more consumers. Not only that, the management of Mayer Retail group should increase communication with the consumers through social media platforms (Green Jr., Whitten & Inman, 2012). By active communication, the company will be able to understand the exact requirements of the consumers. Not only that, effective communication through social media will help the consumers to develop consumer loyalty.
Curating the best stock: The Mayer Retail group needs to understand that consumers are not looking for more lines, models or choices (Ryan, 2016). Instead, Australian consumers are looking for best choice. The best choice is referred to products that are of high quality and reasonably priced.
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:
(Cardeal & Antonio, 2012)
|
Valuable |
Rare |
Inimitable |
Organisation |
Competitive |
|
|
1 |
Yes |
No |
No |
No |
Competitive Disadvantage |
|
2 |
Yes |
Yes |
No |
No |
Competitive Parity |
|
3 |
Yes |
Yes |
Yes |
No |
Temporary Competitive Advantage |
|
4 |
Yes |
Yes |
Yes |
Yes |
Sustained Competitive Advantage |
Table 2 – VIRO Analysis (Thomas & Jugdev, 2002)
Conclusion
From the above discussion, it can be understood that in spite of being a well known retail organization, Mayer Retail Group is going through several crises due to high competition in the global market. The PESTLE analysis of the mentioned company shows that Australia, being a developed country bears the capability to provide efficient technological facilities to the Mayer Retail group. However, the company needs to abide by the strict legal and environmental laws of Australia. From Porter’s five forces analysis of the company, it has been found that both the power of the suppliers as well as the buyers is high. The threat of new entrances in the retail market of Australia is also high. In order to deal with the marketing issues, several recommendations are provided to the Mayer Martins Company. Finally, it can be stated that the company will surely be able to regain its success in near future if it implements the above mentioned recommendation in its marketing strategies.
References
Australian Bureau of Statistics, 2018. Australian Bureau of Statistics. [Online]
Available at: https://www.abs.gov.au/ausstats/[email protected]/Latestproducts/8501.0Main%20Features3Feb%202018?opendocument&tabname=Summary&prodno=8501.0&issue=Feb%202018&num=&view=
Bainbridge, A., 2013. Myer wants the Federal Government to review the low value GST threshold on imported goods. [Online]
Available at: https://www.abc.net.au/news/2013-11-20/myer-wants-gst-review/5105050
Bivolaru, E., Andrei, R. & Purcaroiu, G. V., 2009. Branding Romania: A PESTEL framework based on a comparitive analysis of two country brand indexes. Management & Marketing, 4(4), pp. 101-112.
Bivolaru, E., Andrei, R. & Purc?roiu, G. V., 2009. Branding Romania: A PESTEL framework based on a comparitive analysis of two country brand indexes. Management & Marketing, 4(4), pp. 101-112.
Cardeal, N. & Antonio, N., 2012. Valuable, Rare, Inimitable Resources and Organization Resourses or Valuable, Rare, Inimitible resources Capabilities: What Leads to Competitive Advantage?, s.l.: African Journal of Business Management.
Gupta, A., 2013. Environment & PEST Analysis: An Approach to External Business Environment. International Journal of Modern Social Sciences, 2(1), pp. 34-43.
Kolios, A. & Read, G., 2013. A Political, Economic, Social, Technology, Legal and Environmental (PESTLE) Approach for Risk Identification of the Tidal Industry in the United Kingdom. Energies, Volume 6, pp. 5023-5045.
Koumparoulis, D. N., 2013. PEST Analysis: The case of E-shop. International Journal of Economy, Management and Social Sciences, 2(2), pp. 31-36.
Suttle, R., 2018. Chron.com. [Online]
Available at: https://smallbusiness.chron.com/macroenvironmental-factors-affecting-clothing-industry-37254.html
Thomas, J. & Jugdev, K., 2002. Project Management Maturity Models: The Silver Bullet of Competitive Advantage, s.l.: Project Management Journal .
Fernie, J., & Sparks, L. (2014). Logistics and retail management: emerging issues and new challenges in the retail supply chain. Kogan page publishers.
Green Jr, K. W., Whitten, D., & Inman, R. A. (2012). Aligning marketing strategies throughout the supply chain to enhance performance. Industrial Marketing Management, 41(6), 1008-1018.
Oh, L. B., Teo, H. H., & Sambamurthy, V. (2012). The effects of retail channel integration through the use of information technologies on firm performance. Journal of Operations Management, 30(5), 368-381.
Ryan, D., 2016. Understanding digital marketing: marketing strategies for engaging the digital generation. Kogan Page Publishers.
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