Case Analysis- Marketing Report

Macys Department Store Repositioning

Case Analysis- Marketing Report

Case overview:

Federated department stores were looking to develop Macy’s as a national brand. This initiative came as a response to the declining market share of the traditional department stores estimated at 7% in 2010 compared to as it was in 1950s at 30%. In addition the ROE industry was very low compared to expected level, 9% in 2010 while the desirable rate is 15%.

Taking into consideration these elements, Federated Department Stores made a decision in 2005 to convert and consolidate 15 regional department store chains into single national brand, Macy’s.

Through this essay we are going to analyze whether the repositioning strategy of Macy’s department store as a national brand was successful and how the federated department stores could have done this gig change.

Facts and assumptions of relevance and of importance

The analysis and assessment of this case is centered on 3 essential basic questions that make the core of any repositioning strategy:

What is the current position of the federal department stores?

What is the optimum or ideal position they can reach?

What is the most effective way of getting there?

To help us respond these questions an industry overview is important. Porter’s 5 forces analysis seems to be the first step to start with to get the big picture of the industry.

Porter’s 5 forces analysis: how would the consolidation decision making change some forces in the industry? Before and after consolidation

According to the case, analyzed by the porter 5 forces model, the traditional department store industry did not appear favorable. Probably, it was one of the reasons that made the federal proceeded to the repositioning.

-Suppliers: Before the consolidation each department store had his own suppliers. The intense competition in the industry made the suppliers having more power. With the consolidation, the number of department stores was reduced considerably since it’s consolidated under one and unique brand. After the consolidation the purchases become important from Macy’s side and the power of suppliers can be reduced this way.

-Costumers: A broad customer base and geographically spreads in the US territory. This leads to a little bargaining power of customers.

-Threat of new entrants: The competition intensiveness, low ROE and the decreasing of the market share to the benefit of substitution (Discount stores) do not encourage new entrance. In this sense, if the consolidation can succeed, Macy’s will have time and less pressure to develop a strong brand name.

-Rivalry: as mentioned before, this industry knows a strong competition that comes mostly from the substitution. According to the case there was intense rivalry between competing stores, which was fairly characteristic of declining industries. The consolidation decision can reduce the competition between the stores operating in the industry since a big number of these stores were concerted to one brand.

-Substitute products: this is the most threatening force of this industry. The threat of substitute was the major concern with discounters like Walmart and Targeting and the large chains specialized in clothing like H&M, Gap… Operating individually wasn’t enough to deal with this kind of threats. In addition, the online business is getting more popular and has a significant influence and considerable market share. In the ocean, to lead you need to be the shark. By consolidating the federal department stores the presence of one dominating brand in a specific segment can cope with the fierce competition.

As a conclusion of this part we can say that the decision to consolidate the federal department store reduced some negative aspects of the industry attractiveness. This can help the brand the go through its repositioning strategy more smoothly.

Repositioning strategy and alternatives assessment

Macy’s repositioning strategy key determinant:

-Costs saving determinant: The consolidation contribute to reduce costs such advertising, saving in term of purchasing as the contracts can be made for the whole chain across US…

-Brand name determinant: support the image of “America’s department store” reinforced by national advertising campaigns.

-Review of segments and targets: the vision is to position Macy’s above the mid-level department stores and below higher end segment. Indeed, the new slogans reflected the new positioning “affordable luxury”. Offering affordable prices was not the only repositioning tactic used by Macy’s, the company also changed its brand from specific demographics to fashion conscious consumers as well as the younger female audience.

According to our textbook, the repositioning decision is one of the key decisions in branding. In this case we can list two alternatives:

1- Repositioning Vs No repositioning

2- Brand name consolidation: the consolidation could have been done under a new brand name or as it was decided to make it under the name of Macy’s.

First alternative: Repositioning Vs No repositioning

The repositioning decision was necessary to face the declining market share and return on equity. As we did analyze in the first part of this report, Porter’s 5 forces demonstrated that the industry was in its maturity to declining stage and severe measures had to take place.

The factors to take into consideration while making a repositioning decision:

According to some professionals there are two key factors the company or organization should highly consider: customers and competitors.

-Customers: one of the first ports of call will be to identify and assess the brand’s relationship with its customers, current and potential, and to ascertain whether the market segment towards which the product is aimed is

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