Case Study

MACYS

PLANNING FOR A MIRACLE ON 34 STREET

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November 27, 2007 Rumana Parveen Senior Lecturer Department of Business Administration East West University 43, Mohakhali C/A Dhaka-1212, Bangladesh.

Subject: Case Study on Planning for a Miracle on 34th Street.

Dear Madam, We the students of the MGT 101 are going to prepare a case study on Planning for a Miracle on 34th Street which you have assigned us as a partial fulfillment of our MGT 101 course. It is a research and educative assignment for us in term of acquiring knowledge on the prospect of managing strategy and strategic planning for Macys The Worlds Largest Store. We are examining the strategy and policy that Macys used to solve its problems and bring it on a right path. Finally, we sincerely thank you for providing us the opportunity to work with this topic.

Sincerely yours, Section: 2 Course: MGT 101

Name: Jahidul Islam Name: Junayed Khurshid Name: Johabe Haque Name: Farhan Sharif Name: Afroza Akter

ID: 2007-1-10-079 ID: 2007-1-10-086 ID: 2007-2-10-043 ID: 2006-3-10-111 ID: 2003-3-60-008

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Table of Contents
Page Number Company Profile

4 5 6

History Divisions

Brief Description of Case

Answer to Case Question

Question # 01 Question # 02 Question # 03 Question # 04 Question # 05

9 10 11 12 13

Conclusion and Comments

14

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Company Profile:
R. H. Macy & Company

Type Division Founded 1858 Corporate: Cincinnati, OH Headquarters Secondary: New York, NY Industry Retail Clothing, footwear, bedding, Products furniture, jewelry, beauty products, and house wares. Owner Macy's, Inc. Slogan Macy's, way to shop! Website www.macys.com

Macy's is a chain of mid-range American department stores with its flagship store in Herald Square, New York City, which, with its one million square feet of selling space has been billed as the "world's largest store" since completion of the Seventh Avenue addition in 1924. The company also operates two other national flagship stores, at San Francisco's

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Union Square and the former Marshall Field's flagship on State Street in the Chicago Loop. Additionally, five divisional flagship store locations are part of the legacy of various acquisitions by Macy's over the years Atlanta, representing the former Rich's chain; Miami, where Burdines formerly operated; St. Louis, former headquarters of May Department Stores and its Famous-Barr division; Washington, D. C., home of The Hecht Company (Hecht's); and Seattle, which was the location of The Bon March.

History: Macy's was founded in 1858 by Rowland Hussey Macy. Macy had established a dry goods store in downtown Haverhill, Massachusetts in 1851. He moved to New York City and established a new store named "R. H. Macy & Company" on the corner of 14th Street and 6th Avenue, later moving to 18th Street and Broadway, on the "Ladies' Mile", the 19th century elite shopping district, where it remained for nearly forty years. In 1896, R. H. Macy's was acquired by Isidor Straus and his brother Nathan, who had previously sold merchandise in the store. In 1902 the flagship store moved further uptown to Herald Square at 34th Street and Broadway. Macy's underwent a period of expansion during the 1920s and 1930s. The company went public in 1922 and began to open up branch stores around New York and Long Island. Acquisitions were also made outside of the New York City region. Department stores in Toledo (LaSalle & Koch 1924), Atlanta (Davison-Paxon-Stokes 1929), Newark (L. Bamberger & Co. 1929), San Francisco (O'Connor Moffat & Company 1945), and Kansas City (John Taylor Dry Goods Co. 1947) were purchased during this time. O'Connor Moffat was renamed Macy's San Francisco in 1947, later becoming Macy's California, and John Taylor was renamed Macy's Missouri-Kansas in 1949. In 1986 Edward Finkelstein, chairman and CEO of R. H. Macy and Co. Inc., led a leveraged buy-out of the company and engaged in a take-over battle for Federated Department Stores, which it lost to a Canadian company.

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In January of 1992, Macys filed for bankruptcy and had to shut several of its stores. Two years later in 1994, R. H. Macy and Co. merged with Federated Department Stores. Over the next few years Federated merged with other stores across the U.S. and consolidated all under the Macys nameplate. In 1996, Federated took the brand name a step further by doing away with its hyphenated-names (Bon-Macys, Burdines-Macys, Goldsmiths-Macys, Lazarus-Macys, and Rich-Macys) renaming all simply as Macys. Division As of February 2006, Macy's stores were organized into seven divisions with store locations in 45 states, Washington, D.C., Puerto Rico and Guam. The seven current Macy's divisions include five former divisions existing as of 2005, plus the properties of six former regional May Company divisions.

Macy's East, headquartered in New York; 216 stores/29,100 employees (employment figure is for Macy's East division prior to February 2006) in Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, portions of Virginia, and the city of Washington, D.C..

Macy's Florida, headquartered in Miami (formerly Burdines) 61 stores/9,800 employees in Florida and Puerto Rico. The majority of the stores were formerly Burdines; the San Juan, Puerto Rico, store was transferred from Macy's East in August 2007.

Macy's Midwest, headquartered in St. Louis 95 stores in the mid-West states. There was a prior division of R. H. Macy & Co., Inc. named Macy's Midwest that was headquartered in Kansas City formed from a consolidation of two Macy's divisions, LaSalle's and Macy's Missouri-Kansas, in 1981.

Macy's North, headquartered in Minneapolis 65 stores in Illinois, Indiana, Michigan, Minnesota, North Dakota, Ohio, South Dakota, and Wisconsin.

Macy's Northwest, headquartered in Seattle 71 stores/7,200 employees Idaho, Montana, Oregon, Utah, Washington, and Wyoming.

in

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Macy's South, headquartered in Atlanta 136 stores/22,500 employees (as of March 2007) in Alabama, Georgia, Kentucky, Louisiana, North Carolina, Oklahoma, South Carolina, Tennessee, Texas & Virginia.

Macy's West, headquartered in San Francisco 232 stores/31,100 (employment figure is for Macy's West division prior to February 2006) in Arizona, California, Colorado, Hawaii, Nevada, New Mexico, Texas and Guam.

The corporate philosophy for Macys is recognizes that is customer is paramount and that all actions and strategies must be directed toward providing and enhanced merchandise offering and better service to targeted customers. R.H. Macy's East is using a buyer-planner-store strategy that is benefiting such departments as menswear. Within the scheme, a planner is used as a merchandiser liaison between the stores and buyers to help plan what type and quantity of merchandise is needed. The strategy has boosted department sales, and the plan may serve as a model for other departments within Macy's. In the view of SWOT analysis, the strength of Macys Recognizable brand mane Perfect place Low advertising cost

Macys main weakness is high cost. There are some problems in customer service and computer system. The opportunity of Macys is seven divisions with store locations in 45 states. They have one million square feet of selling space .They can easily control their customers. The effects of penny-pinching consumers become a big threat of Macys. Also they have no exception. On February 21, 2006, Macy's appointed a new chief marketing officer, Anne MacDonald, to oversee the transformation of Macy's into a "national department store."

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Brief Description of Case:

Macys the largest store faced obstacles in April, 1992 with its maintaining debt, inadequate equity and inefficient operating system. By considering the above facts directors of Macys placed the companys fate in the hands of Ullman, a financial whiz and handler, an experienced merchandising executive of Macys. It was a tough job for them as every department of Macys such as customer service, cost controls, computer systems and the type and price of its merchandise had collapsed. Moreover, penny-pinching consumers influencing the retail market everywhere. To address these challenges they had released a five year plan where they focused slow sales for 1993 and did not project a return to previous cash flow levels until 1998.This strategy impressed the creditors and regains the faith. By taking this opportunity Ullman and Handler decided to shift the companys focus away from the high priced glitzy product line to attract the uprising cost conscious consumers. Though some people disagree with this cost leadership strategy, but Ullman and Handler pointed out that customers criticized them for not getting their desired products. In order to remedy this problem the CEOs implemented a new system known as Buyer planner store or BPS where the buyer will get the best merchandise the best price and the best delivery. To assist the BPS system Ullman Ana Handler attempting to improve customer service and store layout. In this connection they had installed a new satellite network to connect suppliers with sales people. It allowed the executives of Macys to talk directly to their employees about issues or censers. Besides these, to gain the competitive advantage Macys plan to install a TV station known as TV Macys 24 hours cable channel selling Macys own private level apparel, house wares and other items in addition to national brand products. Which will allow the home viewers to be familiarized with Macys products who are not located near a Macys store? While rivals have experimented with one or two hours spots on QVC or Home Shopping Network (HSN). TV Macys will be the first channel devoted entirely to a single retailer

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Answer to Case Question:

Question # 01

What steps have the CEOs taken to set realistic goals?

Goals are critical for organizational effectiveness. A primary benefit of goal setting is improving employee motivation. By clarifying exactly what is expected, by allowing the employee a voice indeterminate expectations and by basing rewards on achievement of whose expectations, organization create a powerful motive system for their employee. Communication also enhanced though the process of discussion though the process of discussion and performance appraisals may be done more objectively with less reliance on arbitrary or subjective assessment. Goal setting focus attention on appropriate goals and plants help identify superior managerial talent for future promotion and provides a systematic management philosophy that can have a positive effect on overall organization. Realistic goal setting also facilities off realistic goal CEO off Macys has taken a step to set realistic goal. In order to set realistic goal they first identified the problem of Macys. The CEO of Macys found that day has numbers of problem. This problem are Poor customer service Excessive cost Old pc system Limited types and price of its merchandise

After identifying these problem CEO of Macys start their goal setting process. At first CEO communicate with sub ordinate why they have adopted the program to set goal. What they think to do. Then they set some basic goal. Such as improving customer service, cost control, improving merchandise type. After that the CEO of Macys collaborate goal setting and planning. AT these steps they follow number distinct steps. First the CEO tell their subordinate what organizational and unit goals the CEO has taken. Next the goals are refined to be as verifiable as possible. The CEO also ensures that goals are attainable and workable. Beside this also spell out resources that the subordinate will need. The work effectively towards goal.

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Question # 02

Analyze the CEOs strategy according to the Porter Framework.

Strategy is a comprehensive plane for accomplishing an organization goal. Manager in an organization must set effective strategy. Effective strategy means that promote superior alignment between organization and its environment and the achievement of its strategic goal. There is several farm works for identifying major strategic alternative. Three important classifications are porters generic strategy, Miles and snow typology and strategy based on product life cycle. According to porter organization may pursue a differentiation overall cost leadership or focus strategy. If we look Macys strategy we will see that although Macys strategy from defecation to cost leadership strategy. They have taken numbers of steps which represent Macys strategy. They changed their focus from high price glossy product line to more moderately price product line to appeal cost conscious consumer. Although they changed their focus but they where compromised about their product standard. They installed satellite network to connect supplier with sells people in less cost. Macys opens a TV channel for advertising Macys own product in less cost. Implementation of these entire plan shows that Macys is implementing cost leadership statement

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Question # 03

What kind of planning and strategy techniques could Finkelstein have used to prevent the situation that the CEOs confronted when they took over?

The CEOs of R.H. Macy's are using a buyer-planner-store strategy that is benefiting such departments. Within the scheme, a planner is used as a merchandiser liaison between the stores and buyers to help plan what type and quantity of merchandise is needed. The strategy has boosted department sales, and the plan may serve as a model for other departments within Macy's. But the BPS plan is not a new idea. The Limited and the Gap have been using similar system. In this point, Finkelstein could use differentiation strategy to prevent the situation that the CEOs confronted when they took over. Differentiation strategy means a strategy in which an organization seeks to distinguish itself through the quality of products or services. In general to support differentiation, Finkelstein must emphasis the high quality, high value. Image of the organizations product and services. He should control the flow of funds without discouraging their creativity needs to develop their product and service. By using the function of accounting and finance, he could implementing a differentiation strategy that can control the flow of funds without discouraging creativity needed to constantly develop new products and services to meet customer needs. To implement their differentiation strategy Finkelstein would take three steps plan. These steps would be strategic plan, tactical plan and operational plan. At strategic plan he would take steps to differentiate their supplies. Under this strategic plan he would take necessary steps in tactical plan and operational plan.

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Question # 04

What planning and strategic measures would you recommend?

For Macys we would recommend the focus strategy aims on a specific regional market, product line, or group of buyers. This strategy might have either a differentiation focus, whereby Macys differentiated its products in the focus market, or an overall cost leadership focus, whereby Macys sold their products at low cost in the focus market. The focus market could be base on product variety, type of end buyer, distribution channel or location of buyers. So that Macys could cover all types of customers. Also Macys would take Diversity Plan. This would help Macys continue to embrace and broaden diversity among five key areas: workforce, communications, and supplier diversity and community partnerships. They would commit to fostering an inclusive work environment by attracting, retaining and promoting a talented workforce - Associates that reflect their markets. We would promote ongoing diversity learning through workshops and computer based-training, and contract Diversity Councils and Employee Resource Groups whose events and discovery dates expand and grow their relationships.

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Question # 05

How TV Macys does fit in to the companys over-all strategy for survival?

Previously we have described Macys has taken many steps to support their strategy. One of them is giving advertising. For giving advertising in less cost Macys have taken steps to open TV Macys in the fall off 1944. It is the most successful and most profitable plan for Macys for supporting her strategy .TV Macys is the 1st channel devoted entirely for Macys. It helped Macys to advertise their own product it swerves to familiarize home viewers with Macys. It also provides excess to those products to people not located near a Macys store. Thus by helping Macys to familiarize with customers TV Macys fit in to the companys overall strategy for survival.

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Conclusion and Comments:

Macys faces problem but giving the responsibility of CEOs they make Macys world Lergest Departmental Store. Effective goal setting and planning help them to do this successfully. They also showed their skill by selecting cost leadership strategy.

Comments Macy's strategic plan revealed-----let's pay big cash to buy the leader department store in America, we'll then proceed to tick off all the Field's customers, so we can then start from scratch trying to woo all NEW customers. No matter what Macy's does to former Field's stores, it does so in Macy's name and this is at the heart of why millions of lost former Field's customers are so upset. Marshall Field's is a more than just another generic Chicago institution and unique destination department store, for 154 years it has been Chicago's most generous benefactor and an integral part of Chicago's culture and most treasured traditions.

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