STRATEGIC MANAGEMENT

MACY’S EFE AND IFE MATRIX

MACY’S
Macy’s, Inc. is one of the nation’s premier retailers. With fiscal 2016 sales of $25.778
billion and approximately 140,000 employees, the company operates more than 700
department stores under the nameplates Macy’s and Bloomingdale’s, and
approximately 125 specialty stores that include Bloomingdale’s The Outlet,
Bluemercury and Macy’s Backstage.
 Macy’s, Inc. operates stores in 45 states, the District of Columbia, Guam and
Puerto Rico, as well as macys.com, bloomingdales.com and bluemercury.com.
Bloomingdale’s stores in Dubai and Kuwait are operated by Al Tayer Group
LLC under license agreements.
 Macy’s, Inc. has corporate offices in Cincinnati, Ohio and New York, New
York. Prior to June 1, 2007, Macy’s, Inc. was known as Federated Department
Stores, Inc. The company’s shares are traded under the symbol “M” on the
New York Stock Exchange.

EXTERNAL ASSESSMENT

POLITICAL FACTORS IN PESTEL ANALYSIS OF MACY’S

The political environment affects the operations of Macy in America and beyond.
Under, its political action committee, Macy’s PAC, the company participates in
various political contributions. Through the committee and individuals, Macy’s
donated about $50,000 in the year 2010 to national and state level parties. This is
according to the Open Secrets Org.
ECONOMIC FACTORS THAT AFFECT MACY’S BUSINESS ACTIVITIES

The prevailing economic conditions play a major role in determining the success of
any business entity. For Macy’s, this is an important element in its external
environment because almost all its functions are within America’s domestic market.
Like many other companies in America, Macy feels the pinch of economic
turbulence, which increases the opportunity cost of business operations and segments.
A PESTEL analysis of Macy’s, shows that this economic environment largely
contributes to high unemployment rates in the organization. The shrinking US
markets further affect business operations of Travelers Companies Inc.

SOCIAL, CULTURAL FACTORS IN PESTEL ANALYSIS OF MACY’S

In partnership with charitable organizations, Macy embraces social corporate

responsibility. For example, it makes donations every year, which go directly into
bettering the lives within its surrounding communities. In 2010, Macy’s spent over
$60 million through the Macy’s Foundation on various community-based initiatives.
The company also gives gifts in areas of art, women’s issues, education, and
HIV/AIDS among others.

TECHNOLOGICAL ENVIRONMENT IN MACY’S PESTEL ANALYSIS

This PESTEL analysis of Macy’s, shows that technological advancements play a

major role in determining the success of the organization. In recent years, Macy’s has
implemented latest information technology systems to allow the flow of information
internally and within its business divisions.

To maximize business across its borders, Macy’s plans to expand its e-commerce
platform and improve its online presence to maximize its influence. The company is
currently working on Omnichannel strategy, which will give its buyers a new and
better buying experience through the internet. The company also embraces mobile
technology in making its e-commerce sites more effective for customers worldwide.
ENVIRONMENTAL FACTORS IN PESTEL ANALYSIS OF MACY’S

According to Marcy’s social responsibility report, the company is committed to

giving its customers a better experience whenever they shop at its stores. Macy’s
believes is adhering to good, healthy and safe business practices, which safeguard its
business and the natural environment within which it operates. Thus, it focuses on
meeting customer expectations without harming the environment.
To achieve environmental friendliness, Macy’s has cut down its use of paper, limiting
its use and encouraging recycling of waste products to curb environmental pollution
and enhance efficiency. It also seeks to increase its uptake of renewable energy from
3% to 5% and adopt the use of sustainable raw materials to conduct its business.

LEGAL ENVIRONMENT AT MACY’S STORES

From this PESTEL analysis of Macy’s, the legal environment equally affects the
performance of Macy’s in the market. This emanates from state, federal and local
laws and regulations, which govern businesses. Macy’s has been involved in law
battles before for misleading its customers on jewelry. It has also been sued for its
unsafe and hazardous clothing that caught fire and caused burns to users. All these
legal proceedings negatively affect the company’s business.

OPPORTUNITIES

1) Expansion in overseas market: Currently Macy’s is majorly focused in U.S.

market. A single Bloomingdale’s outlet also operates in Dubai Al Tayer
Group LLC under license agreement. There exist an opportunity for Macy’s to
operate in new market such as India and UAE.
2) Progress through e-commerce: A large portion of Macy’s customers are
choosing digital platform to make purchases. Macy’s lags far behind the giant
Amazon.com in online retailing. With macys.co, bloomingdales.com and
bluemercury.com the company can expand its online business not only in
U.S.A. but also other new markets.
 3) Growth in luxury beauty products and spa services: The completion of
Bluemercury Inc in 2015 gives Macy’s an opportunity to grow in luxury
cosmetic products market and spa services. The Bluemercury stores are
present at prime locations and give a new channel of growth.

THREATS
1) Labor Slowdown: The slowdown in West coast caused delayed delivery of
merchandise to departmental stores. This problem may be temporary but still
poses a threat to the operational productivity of Macy’s stores.
2) Lesser tourists: Macy’s saw a decline in the number of tourists at it’s stores in
Chicago, New York City, Las Vegas and San Francisco. This was partly due
to severe winter conditions but mostly because of crimping purchasing power
due to strengthening of dollar.
3) Strong competition from Walmart, Amazon, and Kohl’s etc.: The company
has to face intense competition from national and local players. This rivalry is
bound to increase as the industry enters into a mode of consolidation and
alliances. Walmart dominates the offline retailing while Amazon mostly rules
the online retailing. As the customer preferences are changing a greater effort
must be put in engaging them at online platforms.

EXTERNAL FACTOR EVALUATION (EFE) MATRIX

Weights Rating Weighted

KEY EXTERNAL FACTORS
0.0 to 1.0 1 to 4 Score
OPPORTUNITIES
1. Expansion in overseas market 0.20 4 0.80
2. Progress through e-commerce: 0.40 4 1.60
3. Growth in luxury beauty products and
0.20 2 0.40
spa services
THREATS
1. Labor Slowdown 0.05 1 0.05
2. Lesser tourists 0.10 3 0.30
3. Strong competition from Walmart,
0.05 1 0.05
Amazon, and Kohl’s etc
TOTAL 1 3.20

INTERNAL ASSESSMENT
For the full year 2016, earnings per diluted share were $1.99, and adjusted earnings
(excluding certain items) were $3.11 per diluted share. Fiscal 2016 comparable sales
on an owned basis declined by 3.5 percent, and on an owned plus licensed basis,
comparable sales for fiscal 2016 declined by 2.9 percent.

CEO Transition: Passing the Baton … Leader to Leader

In June 2016, Macy’s, Inc. announced their CEO succession plan. On March 23,
2017, that transition was complete as Jeff Gennette was elected chief executive officer
and Terry Lundgren became executive chairman.

Terry Lundgren served as chief executive officer of Macy’s, Inc. beginning in 2003.
He has worked for Macy’s, Inc. and their predecessor companies since 1994. Long
considered one of the retail industry greats, Lundgren will continue to serve Macy’s,
Inc. as executive chairman.

Jeff Gennette was named chief executive officer of Macy’s, Inc. on March 23, 2017
after taking on the role of president in 2014. Prior to that, he served as Macy’s chief
merchandising officer, beginning in 2009. Gennette began his retail career in 1983 as
an executive trainee at Macy’s West in San Francisco. He held positions of increasing
responsibility, including vice president and division merchandise manager for men’s
collections, and senior vice president and general merchandise manager for men’s and
children’s. From 2006 to 2008, Gennette served as chairman and CEO of Seattle-
based Macy’s Northwest. He returned to San Francisco from 2008 to 2009 as
chairman and CEO of Macy’s West.

Double-Digit Growth in Digital

In 2016, Macy’s, Inc. continued to see double-digit growth in their digital business,
reflecting the success of their investments in this space. They have created one of the
best omnichannel experiences in the retail industry.

The Macy’s app received accolades in 2016, including L2 listing the app on its Top
10 Department Stores in Digital ranking.

Reinvestment Through Real Estate Strategy

In 2016, Macy’s, Inc. solidified their real estate strategy and started to make good
progress on its execution. Overall, real estate transactions in fiscal 2016 generated
cash proceeds of approximately $675 million, which is helping to fund continued
reinvestment in the business.

Aligned for Growth

In August 2016, they announced their intent to close 100 stores in their portfolio, and
are well on our way to that number. Closures of 68 Macy’s stores were announced in
late 2016 and early 2017, and the company intends to close approximately 30
additional stores as leases expire or sales transactions are completed. Aggressively
paring back their store footprint was a bold step, giving them a healthy physical store
portfolio that complements their expanding digital footprint. This combination gives
their customers the ability to shop with us any way they want, anytime they choose.

At the end of fiscal year 2016, the company announced a major restructuring of the
entire Macy’s organization. This included a significant reduction in layers of
management in the central organization and improvements to the field and store
management structures.

The store closures and organizational restructuring, along with other cost savings
activities, are expected to generate annual expense savings of approximately $550
million beginning in 2017, enabling the company to invest an additional $250 million
in growth initiatives. They have taken actions that have reduced their expenses by
more than $1 billion since 2015.

STRENGTHS
 1) Strong Omni channel existence: Macy’s follows a omni channel strategy to
serve its customers. Apart from operating retail stores under the name Macy’s,
Backstage, Bloomingdale’s Outlet and Bluemercury also maintains online
touch points.
2) High business credibility and worthiness: Macy’s has the BBB accreditation
since 1965. The BBB has given the company extraordinary rating of A+ on a
scale from A+ to F. This accreditation is based on sufficient background
information along with Macy’s efforts to resolve customer issues in good
faith.
3) Comprehensive value-for-money and luxury products portfolio: Macy’s has a
collection of star brands such as Ralph Lauren, Calvin Klein, and Michael
Kors among others. All the gaps in the portfolio has been filled by private
brands like Alfani, bar III, Charter Club, etc. and private labels such as
Holiday Threads, Karen Scott etc.
4) Personalized merchandise offering: Macy’s utilizes shopBeacons, which is an
enhanced mobile location-based technology to provide more personalized
department level recommendation, discounts and rewards. This will help in
improving customer engagement and increase relevance of promotional and
marketing activities.
5) Stronghold in USA: The company has 850 stores spread across 45 states, the
District of Columbia, Guam and Puerto Rico.

WEAKNESSES
1) Low inventory turnover: Management of inventory is of utmost importance to
retailers such as Macy’s. As an optimal level of inventory brings down the
cost, reduces chances of obsolesce and improves customer experience.
2) High rates of employee turnover: Company employees over 1.5 lac people
globally. Nearly 10% of labor force is unionized. More number of employees
are required in peak season and attracting, training, developing and retaining
them incurs a significant cost.
3) Decreasing return on equity: For Macy’s in the trailing 12 months the ROE
has come down to 17.73% which is much lower than the 5 year average of
 23.37%. But these figures are still better than the Departmental group’s
median of 11.32% and S&P 500 of 14.41%.
4) Seasonality of business: The business picks up in November and December
i.e. the holiday season. High portion of sales and operating income are
generated in same period. This causes fluctuations in working capital
requirements and high levels of inventory in anticipation of fall merchandising
season.

INTERNAL FACTOR EVALUATION (IFE) MATRIX

Weights Rating Weighted
KEY INTERNAL FACTORS
0.0 to 1.0 1 to 4 Score
STRENGTHS
1. Strong Omni channel existence 0.20 4 0.80
2. High business credibility and worthiness 0.05 1 0.05
3. Comprehensive value-for-money and
0.15 3 0.45
luxury products portfolio
4. Personalized merchandise offering 0.05 1 0.05
5. Stronghold in USA 0.05 1 0.05

WEAKNESSES
1. Low inventory turnover 0.20 4 0.08
2. High rates of employee turnover 0.20 4 0.08
3. Decreasing return on equity 0.05 1 0.05
4. Seasonality of business 0.05 1 0.05
TOTAL 1 0.94
REFERENCES
https://www.macysinc.com/about-us/highlights-of-progress/default.aspx
http://www.swotandpestle.com/macys/?succes=1
https://www.globalcompose.com/blog/sample-essay-on-pestel-analysis-of-macys/