Macy Group Strategic Analysis

[Type text]
CS1Group#8/Macy
Group -8 Manu Maudgal S-42, Mohit Donter S-43, Mudit Mehrotra S-44,
Murali Krishna Rupakla S-45, Nagendra Yadav S-46
0
Amit Prakash S-07, Manu Maudgal S-42, Saurabh Jain S-78
Group 7 | Authored By
EMBA Batch 2013-2015
Contents
1. The Case Information ................................................................................................................. 2
2. Case issues ................................................................................................................................. 2
3. Case Data Analysis ...................................................................................................................... 3
4. Case Solution Hypothesis............................................................................................................ 7
5. Company Profile ......................................................................................................................... 9
6. Vision ......................................................................................................................................... 9
7. Mission....................................................................................................................................... 9
8. Objectives .................................................................................................................................. 9
9. Factors Affecting Business: Porters five forces ...........................................................................10
10. Competitive Profile Matrix (CPM) ..............................................................................................10
11. Internal Factor Evaluation Matrix (IFE) .......................................................................................11
12. External Factor Evaluation (EFE) Matrix .....................................................................................12
13. Internal-External (IE) Matrix ......................................................................................................13
14. Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix ...................................................14
15. Strategic Position & Action Evaluation Matrix (SPACE) ...............................................................15
16. Grand Strategy ..........................................................................................................................16
17. Boston Consulting Group (BCG) Matrix ......................................................................................17
18. Quantitative Strategic Planning Matrix (QSPM) .........................................................................17
19. Suggested Strategic Course .......................................................................................................20
20. Appendix: Case Update .............................................................................................................21
1
Submitted By Group 8: Manu Maudgal S-42, Mohit Donter S-43, Mudit Mehrotra S-44, Murali Krishnarupakla S-45, Nagendra Yadav S-46
The Case Information

In 2005, Macy Inc, acquired May department stores, which operated regional brands such as Filene's, Marshall
Field's, and Kaufmann's, which were all well known for their flagship downtown stores and local traditions. The
process of re-branding them to Macy or even closure was met with negative reaction in many of the regions
surrounding those department stores because they were widely considered to be beloved local institutions.
If this was not enough, post 2008 economic melt-down, the United States is passing through a serious economic
downturn, which has resulted in closing down of a further 11 Macy stores. Macys 2008 financial figures were
poor and the 2009 results upto quarter 2 are not encouraging either.
The respected Wall Street Journal in February 2009 reported that Macys intends to shed 7000 jobs, around 4 %
of its workforce. Further it said that Macy is ending merit pay increases for executives and cutting shareholder
dividends by 62%.
Clearly in this morale sapping environment, Terry J Lundgren, Macys Chairman, President and Chief
Executive Officer outlook for the future is very optimistic. According to him, the 2009 Q1 results were in line
with expectations. In Q1, the My Macy localization initiative was completed and in Q2 a new organizational
structure is in place. Thus an improvement in sales trend is expected starting Q4.
Chairman Lundgren has described the recent store closures as part of our normal-course process to prune
underperforming locations each year. The long term strategy is to continue selectively adding new stores while
closing those that are underperforming.
Case issues
Macys leadership needs to determine an appropriate strategy to
1. Avoid more layoffs
2. Avoid store closings
3. Meet (or surpass) the financial objectives:
To accelerate comparable store sales growth.

2
To continue to increase the companys profitability levels (earnings before interest, taxes,
depreciation, and amortization) as a percentage of sales to a level of 14 percent to 15 percent.
To effectively use excess cash flow through a combination of strategic growth opportunities and
stock buybacks.
To grow earnings per share while increasing return on gross investment.
Case Data Analysis

Exhibit 1: Macys divisional organizational chart
The organization has regional divisions (Central, East, Florida, West), Home store and online.
Exhibit 2: Macys Division review
Ratio
Central
No of Division
Stores
239
Total Store Area

(million sq ft)
42543
No of
Employees
39200
Area/Store
Employees/Store
178
164
Employees/
Area
0.92
East
253
52896
57700
209
228
1.09
Florida
62
10277
10200
166
165
0.99
West
259
40507
46700
156
180
1.15
Observation: Stores in the West and East have the highest ratios of employees per store area.
Recommendation: It would be useful to understand the need to have more employees in West and East.
Exhibit 3: Sales by Merchandise categories
Macy has four distinct product categories
i. 36%-Furniture, accessories, intimate apparel, shoes and cosmetics
ii. 27%-Feminine apparel
iii. 22%-Mens and childrens
iv. 15%-Home/miscellaneous
Observations:
The sales percentage has been more or less constant over the last three years.
Category (i) has gained 1% share since 2006, whereas Category (ii) has lost 1%. It might be useful to
understand if this change in merchandise reveals a trend or is just a re-distribution of category.
Recommendation: Category (i) should be sub-divided into sub-categories for analysis.
3
Exhibit 4: Consolidated Statement of Income

$ Million
Net Sales
Cost of Goods
sold (COGS)
Gross Margin
(GM)
% Margin to sales
2009
24,892.00
2008
26,313.00
Change ($ M)
(1,421.00)
Change (%)
(5.40)
15,009.00
15,677.00
(668.00)
(4.26)
9,883.00
39.70
10,636.00
40.42
(753.00)
(0.72)
(7.08)
(1.78)
As is observed from the table, in 2009 Macys net sales dropped by $ 1421 M, i.e. 5.4% drop in sales over 2008,
whereas company has not been able to maintain the same ratio of drop in COGS and change is $ 668, i.e. 4.26
%. Due to disproportionate decrease of Cost of Goods Sold, there is huge drop in the gross margin in 2009. The
decline in GM is $ 753 M, i.e. a 7.08% drop. This is despite the decrease of 5.76% in Inventory; Macy is not
able to maintain its COGS down by the same ratio, which indicates an area of concern. In our opinion reasons
for inability to manage the COGS can be:
Excess inventory holding costs
Excess purchase costs for merchandise/ raw material.
Recommendation: Reduce costs of merchandise and its inventory
In Selling & general expenses
Year
Sales ($)
2008
2009
26,313.00
24,892.00
Selling &
General
Expenses ($)
8,554
8,481
Variable
Cost ($)
Fixed Cost
($)
1,352
1,279
7,202
7,202
The total variable cost in selling & general expenses are only 5.13% of the sales and rest is fixed costs. This
indicates that company should reduce its fixed cost.
Despite the saving in Integration cost in 2009, an additional cost of Divisional Consolidation and Asset
impairment charges of Rs $398 M has reduced companys EBITA by $ 859 M. In 2009 EBITA has dropped
from 7% (2008) to 4% (2009).
Further despite a good GM of 40%, Macy has not been able to generate good net income. Macy has huge selling
& distribution expenses which contributes 34 % of sales in 2009. In addition 2% cost is for other charges.
In 2009 MACY has EBT of $ 444 M i.e. 1.78% of sales against $1320 in 2008. In 2008 Macys EBT was
5.02% of the sales. It depicts that company is paying higher interest cost than last year. This is explained as
interest cost in 2009 is 2.25% against 2.06% in 2008.
Recommendation: Reduce fixed costs and use it retire debt.
4
Exhibit 5: Consolidated Balance Sheet
Liabilities
Current Liabilities
Short Term Debt
Accounts Payable
Accrued Liabilities
Income Tax
Deffered Income tax (DIT)
Total Current liability (TCL)
Long Term debts
Deffered Income Taxes
Other Liabilities
Equity
Total Liabilities
BALANCE SHEET OF MACY INC. (Amount in $ Millions)

2009
2008 Change Assets
966
1,282
2,628
28
224
5,128
8,733
1,416
2,521
9,729
22,399
666
1,398
2,729
344
223
5,360
9,087
1,446
1,989
9,907
22,429
300
-116
-101
-316
1
-232
-354
-30
532
-178
-30
27,527
27,789
-262
Current Assets
Cash & Cash Equivalent
Accounts Receivable
Inventory
Supplies & Prepeaid expenses
2009
2008 Change
1,306
439
4,769
226
583
463
5,060
218
Total Current Assest (TCA)

Property & Equipment
Goodwill
Other Tangible Assets
Other Assets
6,740
10,442
9,125
719
501
20,787
6,324
10,991
9,133
831
510
21,465
723
-24
-291
8
0
416
-549
-8
-112
-9
-678
Total Assets
27,527
27,789
-262
Analysis of Macy Inc. balance sheet suggests the current status of companys sources and application of funds:
Apparently it looks that company is maintaining huge cash balance. Whereas on the other hand company
has increased its short term debts by $ 300 M. There is huge interest cost to the company in 2009 which
is due to higher short term as well as long term debts. In our opinion Macy should repay some of its
short term debts and utilize the excess cash & cash equivalent in better way.
Company is recovering accounts receivable (AR) but not paying its creditors in the same proportion.
Company has been able to reduce its inventory but has not reduced its Accounts payable.
Company has given advance of $ 226 M and increased the same by $ 8M from 2008 and on the other
hand company has accrued liability of $2628 m.
We have analyzed Macy Inc performance relative to the retail industry using ratio analysis (Source:
statcan.gc.ca). Ratio analysis of Macy relative to industry suggests the following:
a) Debt: Equity ratio is 1:1 in 2009 which is ideal for any company, but relative to the industry is high.
Hence Macy needs to reduce its debt.
From the balance sheet it is observed that Macy has Short term debt of $ 966 M which increased by
$300 from 2008. It is recommended that Macy reduce its short term debt by utilizing the excess cash &
cash equivalents. It is evident that the firm maintained a higher debt level in times when macroeconomic
conditions were on downward trend. The costly debt was affecting the profitability of the firm.
Alternatively, Macy can explore to raise equity to repay short term as well as long term debt.
5
b) Inventory turnover ratio is lower than the industry. It means company has maintained huge inventory or
is not able to liquidate the stock into sales, resulting in high inventory costs.
c) Receivable turnover ratio of the retail industry is 41.47, whereas MACY Inc. has 55.19, indicates that
the company is getting its dues quickly from the debtors. MACY Inc. is getting its debtors in 6 days. But
company is not managing its funds efficiently to pay its creditors. MACY Inc. has creditor turnover of
3.73, i.e. company is paying off debts in 97 days.
d) Return on Capital Employed (ROCE) is lower than the industry (4.48% vs 7.2%).This implies that Macy
is not able to generate the return on the capital employed. (note: Return is EBITA for ROCE & Capital
Employed is Total Assets Current Liabilities)
e) Return on Equity (ROE) is less than the industry (2.88% vs 9.6%); Macy is not managing its equity
efficiently despite reduction of equity (buy back) there is still low return on Equity.
f) MACY has a Fixed Assets ratio of 73.69% i.e. fixed assets to Total Assets is 74%. Macy can consider
liquidating some fixed assets and generate funds to repay short term and long term debts.
Exhibit 6: Macys closest competitors
Comparing Macys vs competition sales in January 2008 and 2009, it is observed that
The generic retail segment catering to all segments has seen sales dip 5-24%.
The segment catering to below 30 age group seems to have bucked the trend with sales actually growing
11-14%.
Similar is the case with small town (Gottschalk) sales which have increased 8.8%.
6
Recommendation: Focus on below 30 age group demographic to enhance sales.

Exhibit 7: Macys Inc, Store Closings, 2008-09
Division wise closure of stores is as follows:
Division
West
East
Central
Florida
Total
Stores
5
4
1
0
10
%
50
40
10
0
100
Observation: Correlating with Exhibit 2, we see that stores in the West and East having the highest ratios
of employees per store area have been closed down.
Recommendation: Recent store closures are in line with overall strategy to enhance sales and reduce
costs
Case Solution Hypothesis

On the basis of the case information, Macy Inc website and our own analysis, our group as arrived at the
following strategy hypothesis:
A.
Manage financials
7
i.
ii.
iii.
B.
i.
ii.

Reengineer financial debt (short term debt to be retired, cash reserve to be reduced, property/goodwill to be
utilized)
Enhance inventory turnover (invest in technology)
Manage HR layoffs/ retraining
Increase sales / margin

Bring focus on target customer (my Macy should continue)
Omni channel inventory integration (inventory tagging, point of sales technology, merge online offline
especially sharing of sales commissions)
These hypothesis have been tested using various strategy tools, to arrive at the final strategy outcome.
8
Company Profile
Macys is a mid-range department store chain catering to middle and upper middle class life style merchandise
in the USA.
Vision
Existing
Our vision is to operate Macy's and Bloomingdale's
as dynamic national brands while focusing on the
customer offering in each store location.
Recommendation
Change proposed is to drop
the word national before
brand. This is to reflect the
international aspirations of
Macy.
Mission
Existing
Recommendation
Our goal is to be a retailer with the ability to see
No change
opportunity on the horizon and have a clear path for
capitalizing on it. To do so, we are moving faster
than ever before, employing advanced technology
and concentrating our resources on those elements
most important to our core customers.
Objectives
Macys leadership has set out three key objectives
1. Avoid more layoffs
2. Avoid store closings
3. Meet (or surpass) the financial objectives:
To accelerate comparable store sales growth.
To continue to increase the companys profitability levels (earnings before interest, taxes,
depreciation, and amortization) as a percentage of sales to a level of 14 percent to 15 percent.
To effectively use excess cash flow through a combination of strategic growth opportunities and
stock buybacks.
To grow earnings per share while increasing return on gross investment.

9
Factors Affecting Business: Porters five forces

An analysis of Macy as per Porters five forces model is as under:
The essential challenge before Macy is to enhance sales in a period of economic downturn. Another issue is
that existing baby boomer customers are spending conservatively, while America is facing a demographic
shift from baby boomer to the Millennial (age<30) generation.
The Millennials choice of merchandise, expectations of retail experience and choice of sales platforms is
significantly different from the baby boomer generation, which implies that Macy needs to invest to upgrade
its existing customer service channels.
Competitive Profile Matrix (CPM)

The competitive profile matrix (CPM) identifies a firms key competitors and compares them using industrys
critical success factors. Ten such critical success factors for the retail industry in USA have been studied.
Macys relative standing against three other prominent industry players- Dillards, Saks and J C penny have been
analyzed. The analysis reveals Macys relative strengths and weaknesses against its competitors, so a company
would know, which areas it should improve and, which areas to protect.
10
Macy's
Critical Success
factors
Dillard's
JC
Penny
Saks
1
Weights
0.0 to 1.0
2
Rating
1 to 4
3=1x2
Weighted
Score
4
Rating
1 to 4
5=1x4
Weighted
Score
6
Rating
1 to 4
7=1x6
Weighted
Score
8
Rating
1 to 4
9=1x8
Weighted
Score
1. Advertising
0.1
0.3
0.1
0.4
0.2
2. Financial
Position
3. Store locations
0.1
0.4
0.1
0.3
0.2
0.1
0.2
0.3
0.4
0.1
4. Market Share
0.1
0.4
0.2
0.3
0.1
5. Price
Competitiveness
0.12
0.36
0.48
0.24
0.12
6. Product Quality
0.11
0.33
0.11
0.22
0.44
7. Technology
0.1
0.4
0.1
0.2
0.3
8. Customer
loyalty
9. Merchandise
Variety
10. Customer
Service
TOTALS
0.1
0.1
0.2
0.4
0.3
0.09
0.36
0.27
0.18
0.09
0.08
0.16
0.24
0.16
0.32
3.01
2.1
2.8
2.17
The matrix clearly reveals that Macy scores high in most areas vis--vis the competition. However in the areas
of Customer Loyalty and store locations, Macy scores lower. On both these critical success factors, Macy has
initiated action under the My Macy strategic initiative piloted in 2008. An online retail thrust is also
underway.
This matrix reinforces that Macys current strategic path is correct and should be continued.
Internal Factor Evaluation Matrix (IFE)

The intrinsic strengths / weaknesses of Macy are analyzed as under:
11
External Factor Evaluation (EFE) Matrix

Weights
0.0 to 1.0
Key Factors
Opportunities
Expand overseas for growth
Expand focus on online retail channel
Leverage buyout to consolidate the segment and boost presence
Rejig the merchandise portfolio towards those items which are growing
0.07
0.13
0.1
0.11
Rating Weighted
1 to 4
Score
4
4
1
1
0.28
0.52
0.1
0.11
12
Weights
0.0 to 1.0
Key Factors

Rating Weighted
1 to 4
Score
faster
Enhancement in technology and automation for retail industry
Total
Threats
Global economic recession
Change in laws effecting wage increase
Competitors getting desperate
Price reduction by competitors
Employees layoff affecting motivation
Change in customer demand and preference
Total
0.12
0.48
1.49
0.1
0.06
0.07
0.08
0.1
0.06
4
1
3
3
1
2
0.4
0.06
0.21
0.24
0.1
0.12
1.13
Internal-External (IE) Matrix

For Macy we have obtained two scores-for Internal analysis- 2.76 and from External analysis-1.13. When we
plot these on a IE matrix (sample provided below), depending on in which cell those lines intersect, we can
obtain the direction in which our strategy should be.
Macy as per our analysis falls in quadrant VII, which implies harvest or exit strategy. If costs for rejuvenating
the business are low, then it should be attempted to revitalize the business. In other cases, aggressive cost
management is a way to play the end game.
13
Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix
Strengths
Weaknesses
1. Macy brand
recognizable in America and abroad
integrated in cultural fabric of America
known to introduce innovative brands,
categories and practices
2. Scale: 800 stores allow for
Bargaining power on suppliers
Operational efficiencies
Marketing efficiency
3. Merchandise
large portfolio of private brands
diverse product mix
4. My Macy localization initiative
5. Restructured workforce-future ready as per My
Macy
6. Financials
Goodwill
Cash on hand
Land / asset ownership
Opportunities
1. Retaining customers loyal to regional brands

while transiting to brand Macy
2. Loosing trained man-power in lay-offs
3. Reducing mark-downs on merchandise
4. Financials
High debt: equity ratio

Low inventory turnover ratio
Threats
1. CSR initiatives
Promoting
customer
oriented
environmental/ social causes
Vendor/supplier code of conduct
2. Merchandise
Eco-friendly products
Celebrity promotions
Franchising out e.g. selling ipad
3. Advertising
Online / Social media
4. Tap Brand Macy
organic and inorganic growth abroad
5. Technology
New point of sales enabling multichannel retail in future
Online retailing website
1. Litigation issues due to closing stores / lay-offs /

social media/ CSR issues
2. Economic down-turn likely to continue for next
2-3 years
3. Margins squeezeas traditional baby boomer
customers demand better value
4. Changing customer
Traditional baby boomer generation is
spending conservatively
Below 30 age group is spending and is
also the largest consumer group in next
five years
14
Strategic Position & Action Evaluation Matrix (SPACE)

The SPACE matrix reveals the type of strategy the company should pursue. The SPACE Matrix analyses two
internal and two external strategic dimensions in order to determine the organization's strategic posture in the
industry. For Macy, these have been analyzed as under:
Financial Strength
<FS>
Environmental
Stability <ES>
Competitive
Advantage <CA>
Industry Strength
<IS>
+1 to +6 Y Axis
Cash Flow 4.0
-1 to -6 Y Axis
Technological
Changes -3.0
-1 to -6 X Axis
Market Share -1.0
+1 to +6 X Axis
Profit Potential 4.0
Inventory Turnover
3.0
Rate of inflation
-4.0
Product Quality -2.0
Growth Potential
3.0
Liquidity 4.0
competing products
Price range -4.0
Customer Loyalty
-3.0
Financial Stability
2.0
Earnings per Share

1.0
Barriers of entry into

market -1.0
Product Lifecycle
-2.0
Ease of entry into

market 4.0
Price earnings ratio

2.0
Risk involved with

business -5.0
Control over
suppliers and
distributors -3.0
Productivity 3.0
Y Coordinate = -.6
X Coordinate = .8
Macy falls under quadrant four implying competitive strategy.

15
Grand Strategy
Grand Strategy Matrix represents two evaluative dimensions referred to as market growth and competitive
position. Horizontal line shows market growth labeling rapid market growth at the upper front and slow market
growth at the lower front whereas vertical line shows competitive position labeling strong competitive position
at the right end and weak competitive position at the left end. Thus the Grand Strategy Matrix has four
quadrants where right strategies are enlisted in accordance with the characteristics or attributes of each quadrant
firms.
An organization can be placed in any one of four quadrants. Appropriate strategies for an organization to
consider are listed in sequential order of attractiveness in each quadrant of the matrix. All quadrants contain all
possible strategies.
Macy as per our analysis falls under Fourth quadrant (competitive position (strong) and Market Growth
(slow)).
Quadrant III
Weak
Quadrant IV
Quadrant I
Quadrant II
Strong
Recommended Strategies to be employed by Macy

1. Related diversification
2. Unrelated diversification
3. Joint ventures
16
Boston Consulting Group (BCG) Matrix

The analysis so far has essentially suggested that Macy needs to be competitive. The IE matrix also suggesting
that either a business is harvested or Macy should consider exiting the business. The BCG model helps in
understanding what to harvest and what to exit.
Quantitative Strategic Planning Matrix (QSPM)

The SPACE matrix has placed Macy in quadrant four, i.e. maintaining competitiveness in a weak growth
market. The QSPM helps in identifying the best one.
External Factors:
Omni-channel sales
and International
Expansion
WEIGHT AS
TAS
1 to 4
Manage
inventories and
reduce cost
AS
TAS
1 to 4
Manage
Finances better
AS
1 to 4
TAS
Opportunities
Expand overseas for growth
Expand focus on online retail
0.07
0.13
4
4
0.28
0.52
0
0.26
0
0.39
17

Manage
Manage
inventories and
Finances better
reduce cost
AS
TAS
AS
TAS
1 to 4
1 to 4
Omni-channel sales
and International
Expansion
WEIGHT AS
TAS
1 to 4
channel
Leverage buyout to consolidate
the segment and boost presence
Rejig the merchandise portfolio
towards those items which are
growing faster
Enhancement in technology and
automation for retail industry
0.1
0.1
0.2
0.2
0.11
0.11
0.44
0.44
0.12
0.48
0.48
0.24
TOTAL
1.49
1.38
1.27
Threats
Global Economic Recession
Change in laws effecting wage
increase
0.1
0.06
4
1
0.4
0.06
1
1
0.1
0.06
0.1
0
Competitors getting desperate
0.07
0.21
0.21
0.21
Price reduction by competitors
0.08
0.24
0.24
0.24
0.1
0.1
0.1
0.06
0.12
0.12
Employees layoff affecting

motivation
Change in customer demand and
preference
TOTAL
1.13
0.83
Omni-channel sales
and International
Expansion
WEIGHT AS
TAS
1 to 4
Manage
inventories and
reduce cost
AS
TAS
1 to 4
0
3
0.18
0.73
Internal Factors:
Manage
Finances better
AS
1 to 4
TAS
Strengths
Very Solid Brand Equity
Great Advertising
0.09
0.08
4
4
0.36
0.32
4
4
0.36
0.32
4
3
0.36
0.24
18
WEIGHT
Economies of scale
Track record of the organization
Well-structured vendor
agreements
Merchandise portfolio
Openness to new innovations
Clear segmentation with
Bloomingdale
Market share leader
0.06
0.07
0.08
Omni-channel sales
and International
Expansion
AS
TAS
1 to 4
4
0.24
3
0.21
3
0.24

Manage
Manage
inventories and
Finances better
reduce cost
AS
TAS
AS
TAS
1 to 4
1 to 4
4
0.24
4
0.24
3
0.21
3
0.21
3
0.24
3
0.24
0.05
0.05
0.03
3
4
2
0.15
0.2
0.06
3
4
3
0.15
0.2
0.09
3
3
3
0.15
0.15
0.09
0.04
0.12
1.9
0.16
1.97
0.12
1.8
Declining Net Profit

Declining footfalls in stores
Lack of diversity in merchandise
0.1
0.08
0.06
1
1
0.1
0
0.06
1
1
1
0.1
0.08
0.06
1
1
1
0.1
0.08
0.06
Weakness in certain
merchandise departments such
as ladies sportswear,
mattresses, handbags
0.05
0.1
0.1
0.2
Historically reliable profit

centers facing pressure
No clarity on how to handle the
threat of Walmart at the lower
end
Current customer perception
slightly negative about the
brand
0.05
0.15
0.1
0.05
0.07
0.14
0.04
0.08
TOTALS
Weakness
GRAND
TOTALS
TOTALS
0.41
4.93
0.66
4.84
0.04
0.53
4.33
Clearly the model is suggesting that Macy focus on Omni-channel sales and International Expansion followed
by managing inventories to reduce costs. It may be noted that many of the actions to be undertaken will be
common to these two strategies.
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Suggested Strategic Course

Macys is a mid-range department store chain catering to Middle and upper middle class seeking affordable
luxury. The unique economic situation in the USA ensures that Macy competes in many retailing formats
including specialty stores, general merchandise stores, department stores, off-price and discount stores, home
shopping including the Internet, catalogs and television, and manufacturers outlets.
The business is and will require constantly improving business strategies to maintain and increase market share.
On the basis of the case information, Macy Inc website and our own analysis, our group as arrived at the
following strategy initiatives:
1. Omni-channel sales / International diversification
a. Retain focus on target customer (my Macy should continue)

b. Omni channel inventory integration (inventory tagging, point of sales technology, merge online
offline especially sharing of sales commissions)
c. International stores to leverage on Macy brand / diversify from US downturn
2. Manage Inventory / Reduce costs
a. Reengineer financial debt (reduce fixed costs, short term debt to be retired, cash reserve to be
reduced, property/goodwill to be utilized)
b. Enhance inventory turnover (inventory tagging, point of sales technology, merge online offline
especially sharing of sales commissions)
Both of these initiatives are currently underway throughMy Macy initiative, organizational restructuring,
Emphasis on online-store inventory synergies and capital expenditure on new point of sales technologies.
Our group feels the morale sapping financials upto Q2 2009 notwithstanding, Macy should go full throttle on
the existing strategic initiatives and timelines.
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Appendix: Case Update
Macy has been successfully able to ride out the economic downturn in the US economy. As per Macy Annual
report (page 1), the following initiatives were successfully carried out in 2009:
MY MACYS
After initial pilots in 20 markets in 2008, the My Macys localization initiative was rolled out across the country
in 2009. In doing so, Macy created eight stores regions and 49 new districts (for a total of 69 districts). Macy
added human intelligence including new district merchants and planners in each district in a manner that
enables Macy to tailor merchandise assortments and the shopping experience by location.
My Macys is proving itself to be a powerful competitive differentiator and driver of sales.
In 2009, all of the companys top 12 markets in sales growth were from the initial My Macys pilot districts. As
the national rollout progresses, it is expected that the remainder of the company to perform consistently with the
initial pilot districts.
UNIFIED ORGANIZATION
To enable the rollout of My Macys, the operating division structure was unified for all of Macys. By
eliminating redundancy in central offices and instituting consistency in stores, Macy was able to act more
quickly, sharpen execution and partner more effectively with vendors and business partners while reducing
administrative expense.
Through these actions, in 2008 and 2009, Macy has been able to reduce previously planned expenses by more
than $500 million per year going forward.
MULTICHANNEL INTEGRATION
Continued emphasis on integration of stores and online sites at Macys and at Bloomingdales.
This has helped to create a 360-degree view of the customer so that customer needs can be serviced across
channels, which in turn drives sales in both stores and online.
Investments in the infrastructure of online businesses over starting 2005 are paying off. In fiscal 2009, online
sales (macys.com and bloomingdales.com combined) were up 20 percent.
BLOOMINGDALES
Significantly improved its performance in the second half of 2009. Bloomingdales has re-emphasized designer
merchandise, contemporary fashion and uniqueness in its assortment. During the year, Bloomingdales debuted
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an entirely new Beauty Floor on the main level of its Manhattan flagship store. In early 2010, two
Bloomingdales stores (one for apparel, one for home merchandise) opened in Dubai. These stores, operated
under a license agreement with Al Tayer Insignia, a company of Al Tayer Group LLC, are Macys, Inc.s first
international locations. A Bloomingdales Outlet store concept is planned to launch in fall 2010 with four
locations and others to follow in subsequent years.
Over the next few years Macy has built on these initiatives to devise a three pronged strategies which are known
by the acronym M.O.M.
1. My Macys localization,
2. Omni-channel integration
a. Creation of a new post --Chief omni-channel officerall sales & inventory report to him
b. Sharing of commissions with store from which inventory is being pulled through online sales
c. Use technology--RFID tags
3. MAGIC Selling customer engagement
The results of these initiatives are reflected in Macys stock price, which has increased from less than $10 in
2009 to $55 in 2014, a fivefold gain in five years.
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Macy Group Strategic Analysis

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Macy Group Strategic Analysis

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Amit Prakash S-07, Manu Maudgal S-42, Saurabh Jain S-78

EMBA Batch 2013-2015

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The Case Information

To accelerate comparable store sales growth.

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To grow earnings per share while increasing return on gross investment.

Case Data Analysis

Total Store Area

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Exhibit 4: Consolidated Statement of Income

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Exhibit 5: Consolidated Balance Sheet

BALANCE SHEET OF MACY INC. (Amount in $ Millions)

Total Current Assest (TCA)

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Recommendation: Focus on below 30 age group demographic to enhance sales.

Case Solution Hypothesis

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Increase sales / margin

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To accelerate comparable store sales growth.

To grow earnings per share while increasing return on gross investment.

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Factors Affecting Business: Porters five forces

Competitive Profile Matrix (CPM)

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Internal Factor Evaluation Matrix (IFE)

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External Factor Evaluation (EFE) Matrix

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Internal-External (IE) Matrix

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Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix

1. Retaining customers loyal to regional brands

High debt: equity ratio

1. Litigation issues due to closing stores / lay-offs /

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Strategic Position & Action Evaluation Matrix (SPACE)

Product Quality -2.0

Earnings per Share

Barriers of entry into

Ease of entry into

Price earnings ratio

Risk involved with

Macy falls under quadrant four implying competitive strategy.

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Recommended Strategies to be employed by Macy

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Boston Consulting Group (BCG) Matrix

Quantitative Strategic Planning Matrix (QSPM)

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Competitors getting desperate

Price reduction by competitors

Employees layoff affecting

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Declining Net Profit

Historically reliable profit

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Suggested Strategic Course