Macy’s (MACY34) SWOT Analysis / TOWS Matrix / MBA Resources
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Macy’s (Brazil)
Based on various researches at Oak Spring University , Macy’s is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, wage bills are increasing, cloud computing is disrupting traditional business models, technology disruption, increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China,
there is backlash against globalization, increasing government debt because of Covid-19 spendings, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Macy’s can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Macy’s, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Macy’s 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 can be done for the following purposes –
1. Strategic planning of Macy’s
2. Improving business portfolio management of Macy’s
3. Assessing feasibility of the new initiative in Brazil
4. Making a sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Macy’s
Strengths of Macy’s | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Macy’s are -
Innovation driven organization
– Macy’s is one of the most innovative firm in sector.
Effective Research and Development (R&D)
– Macy’s has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Macy’s staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Macy’s 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.
Operational resilience
– The operational resilience strategy of Macy’s 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.
Low bargaining power of suppliers
– Suppliers of Macy’s in the sector have low bargaining power. Macy’s has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Macy’s to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in industry
– Macy’s has clearly differentiated products in the market place. This has enabled Macy’s to fetch slight price premium compare to the competitors in the industry. The sustainable margins have also helped Macy’s to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Macy’s 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.
Highly skilled collaborators
– Macy’s has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive industry. Secondly the value chain collaborators of Macy’s have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Macy’s has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Macy’s 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.
Digital Transformation in industry
- digital transformation varies from industry to industry. For Macy’s digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Macy’s 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.
Diverse revenue streams
– Macy’s is present in almost all the verticals within the industry. This has provided Macy’s a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Ability to recruit top talent
– Macy’s is one of the leading players in the industry in Brazil. It is in a position to attract the best talent available in Brazil. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses of Macy’s | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Macy’s are -
No frontier risks strategy
– From the 10K / annual statement of Macy’s, it seems that company is thinking out the frontier risks that can impact industry. 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.
Ability to respond to the competition
– As the decision making is very deliberative at Macy’s, in the dynamic environment of industry it has struggled to respond to the nimble upstart competition. Macy’s has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Macy’s 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.
Aligning sales with marketing
– From the outside it seems that Macy’s needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department at Macy’s can leverage the sales team experience to cultivate customer relationships as Macy’s is planning to shift buying processes online.
High cash cycle compare to competitors
Macy’s 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.
Skills based hiring in industry
– The stress on hiring functional specialists at Macy’s 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Macy’s is slow explore the new channels of communication. These new channels of communication can help Macy’s to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Products dominated business model
– Even though Macy’s has some of the most successful models in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Macy’s should strive to include more intangible value offerings along with its core products and services.
Lack of clear differentiation of Macy’s products
– To increase the profitability and margins on the products, Macy’s needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners in industry
– because of the regulatory requirements in Brazil, Macy’s is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Increasing silos among functional specialists
– The organizational structure of Macy’s is dominated by functional specialists. It is not different from other players in the industry, but Macy’s needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Macy’s to focus more on services in the industry rather than just following the product oriented approach.
Macy’s Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Macy’s are -
Using analytics as competitive advantage
– Macy’s has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in sector. This continuous investment in analytics has enabled Macy’s to build a competitive advantage using analytics. The analytics driven competitive advantage can help Macy’s to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Macy’s 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Macy’s in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the industry, and it will provide faster access to the consumers.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Macy’s can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Macy’s to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Macy’s 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 industry.
Developing new processes and practices
– Macy’s can develop new processes and procedures in 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.
Buying journey improvements
– Macy’s can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in industry, but it has also influenced the consumer preferences. Macy’s can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Macy’s can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Macy’s can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
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 can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Macy’s to increase its market reach. Macy’s 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Macy’s 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Macy’s to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Macy’s to hire the very best people irrespective of their geographical location.
Threats Macy’s External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Macy’s are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Macy’s 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 Macy’s prominent markets.
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.
Regulatory challenges
– Macy’s 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 industry regulations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to industry are lowering. It can presents Macy’s with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Stagnating economy with rate increase
– Macy’s 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 industry.
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 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.
Consumer confidence and its impact on Macy’s demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in industry and other sectors.
Increasing wage structure of Macy’s
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Macy’s.
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 in the sector and impact the bottomline of the organization.
Environmental challenges
– Macy’s needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Macy’s can take advantage of this fund but it will also bring new competitors in the industry.
Technology acceleration in Forth Industrial Revolution
– Macy’s has witnessed rapid integration of technology during Covid-19 in the industry. As one of the leading players in the industry, Macy’s needs to keep up with the evolution of technology in the 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.
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.
High dependence on third party suppliers
– Macy’s 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.
Weighted SWOT Analysis of Macy’s Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Macy’s 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 Macy’s 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 Macy’s 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 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 needs to make to build a sustainable competitive advantage.