Case Study Description of Macy's Inc.: Turnaround Strategy in Crisis
In 2017, Macy's Inc. (Macy's), one of the world's largest and oldest premier department stores, announced it would close 100 stores and make other significant strategic changes to try to return the brand to its former glory. Macy's sales had fallen for eight straight quarters, causing investors to fear that the company was continuing to lose market share. The firm had been pursuing an aggressive strategy to optimize all facets of its business, but had its chief executive officer addressed all of the company's challenges in an optimal way? The department store industry was still experiencing an overall decline, and competition from online companies and off-price retailers was particularly severe. Could Macy's overcome these obstacles, refocus its strategy, and turn itself around? Won-Yong Oh is affiliated with University of Nevada, Las Vegas.
Swot Analysis of "Macy's Inc.: Turnaround Strategy in Crisis" written by Won-Yong Oh, Ratchel Zeng, Jessica Schuldhaus includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Macy's Department facing as an external strategic factors. Some of the topics covered in Macy's Inc.: Turnaround Strategy in Crisis case study are - Strategic Management Strategies, and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Macy's Inc.: Turnaround Strategy in Crisis casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, increasing energy prices, increasing government debt because of Covid-19 spendings, geopolitical disruptions, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%,
increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of Macy's Inc.: Turnaround Strategy in Crisis
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Macy's Inc.: Turnaround Strategy in Crisis case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Macy's Department, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Macy's Department operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Macy's Inc.: Turnaround Strategy in Crisis can be done for the following purposes –
1. Strategic planning using facts provided in Macy's Inc.: Turnaround Strategy in Crisis case study
2. Improving business portfolio management of Macy's Department
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Macy's Department
Strengths Macy's Inc.: Turnaround Strategy in Crisis | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Macy's Department in Macy's Inc.: Turnaround Strategy in Crisis Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the Macy's Inc.: Turnaround Strategy in Crisis Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Cross disciplinary teams
– Horizontal connected teams at the Macy's Department are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Macy's Department digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Macy's Department has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Training and development
– Macy's Department has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Macy's Inc.: Turnaround Strategy in Crisis Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Strong track record of project management
– Macy's Department is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Learning organization
- Macy's Department is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Macy's Department is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Macy's Inc.: Turnaround Strategy in Crisis Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Macy's Department has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Organizational Resilience of Macy's Department
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Macy's Department does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Successful track record of launching new products
– Macy's Department has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Macy's Department has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Superior customer experience
– The customer experience strategy of Macy's Department in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Macy's Department is one of the most innovative firm in sector. Manager in Macy's Inc.: Turnaround Strategy in Crisis Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Effective Research and Development (R&D)
– Macy's Department has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Macy's Inc.: Turnaround Strategy in Crisis - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses Macy's Inc.: Turnaround Strategy in Crisis | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Macy's Inc.: Turnaround Strategy in Crisis are -
High cash cycle compare to competitors
Macy's Department has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow decision making process
– As mentioned earlier in the report, Macy's Department has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Macy's Department even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Macy's Inc.: Turnaround Strategy in Crisis HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Macy's Department has relatively successful track record of launching new products.
Need for greater diversity
– Macy's Department has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Low market penetration in new markets
– Outside its home market of Macy's Department, firm in the HBR case study Macy's Inc.: Turnaround Strategy in Crisis needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, Macy's Department has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Macy's Inc.: Turnaround Strategy in Crisis, is just above the industry average. Macy's Department needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Lack of clear differentiation of Macy's Department products
– To increase the profitability and margins on the products, Macy's Department needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring
– The stress on hiring functional specialists at Macy's Department has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
No frontier risks strategy
– After analyzing the HBR case study Macy's Inc.: Turnaround Strategy in Crisis, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Increasing silos among functional specialists
– The organizational structure of Macy's Department is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Macy's Department needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Macy's Department to focus more on services rather than just following the product oriented approach.
Opportunities Macy's Inc.: Turnaround Strategy in Crisis | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Macy's Inc.: Turnaround Strategy in Crisis are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Macy's Department can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Loyalty marketing
– Macy's Department has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Leveraging digital technologies
– Macy's Department can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Macy's Department can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Macy's Department can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Macy's Department to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Macy's Department can use these opportunities to build new business models that can help the communities that Macy's Department operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Developing new processes and practices
– Macy's Department can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Creating value in data economy
– The success of analytics program of Macy's Department has opened avenues for new revenue streams for the organization in the industry. This can help Macy's Department to build a more holistic ecosystem as suggested in the Macy's Inc.: Turnaround Strategy in Crisis case study. Macy's Department can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Macy's Department to increase its market reach. Macy's Department will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Macy's Department can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Building a culture of innovation
– managers at Macy's Department can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Learning at scale
– Online learning technologies has now opened space for Macy's Department to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Threats Macy's Inc.: Turnaround Strategy in Crisis External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Macy's Inc.: Turnaround Strategy in Crisis are -
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Macy's Department will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Macy's Department.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Macy's Department in the Strategy & Execution sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Macy's Department high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Macy's Inc.: Turnaround Strategy in Crisis, Macy's Department may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Macy's Department with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology acceleration in Forth Industrial Revolution
– Macy's Department has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Macy's Department needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Regulatory challenges
– Macy's Department needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Macy's Department can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Macy's Inc.: Turnaround Strategy in Crisis .
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Stagnating economy with rate increase
– Macy's Department can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Macy's Department needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Macy's Inc.: Turnaround Strategy in Crisis Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Macy's Inc.: Turnaround Strategy in Crisis needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Macy's Inc.: Turnaround Strategy in Crisis is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Macy's Inc.: Turnaround Strategy in Crisis is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Macy's Inc.: Turnaround Strategy in Crisis is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Macy's Department needs to make to build a sustainable competitive advantage.