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Case Study
MACY’S “PLANNING FOR A MIRACLE ON 34TH STREET”
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 Macy’s “The World’s Largest Store”. We are
examining the strategy and policy that Macy’s 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 ID: 2007-1-10-079
Name: Junayed Khurshid ID: 2007-1-10-086
Name: Johabe Haque ID: 2007-2-10-043
Name: Farhan Sharif ID: 2006-3-10-111
Name: Afroza Akter ID: 2003-3-60-008
Page 2
Table of Contents
Page Number
Company Profile … … … … … … … 4
• History … … … … … … … 5
• Divisions … … … … … … … 6
Brief Description of Case … … … … … 8
Answer to Case Question
• Question # 01 … … … … … … 9
• Question # 02 … … … … … … 10
• Question # 03 … … … … … … 11
• Question # 04 … … … … … … 12
• Question # 05 … … … … … … 13
Conclusion and Comments … … … … 14
Page 3
Company Profile:
R. H. Macy & Company
Type DivisionFounded 1858
Headquarters Corporate: Cincinnati, OHSecondary: New York, NY
Industry Retail
ProductsClothing, footwear, bedding, 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 Marché.
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.
Page 5
In January of 1992, Macy’s 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 Macy’s nameplate. In 1996, Federated took the brand name a
step further by doing away with its hyphenated-names (Bon-Macy’s, Burdines-Macy’s,
Goldsmiths-Macy’s, Lazarus-Macy’s, and Rich-Macy’s) renaming all simply as “Macy’s.”
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 in
Idaho, Montana, Oregon, Utah, Washington, and Wyoming.
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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 Macy’s 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 Macy’s –
• Recognizable brand mane
• Perfect place
• Low advertising cost
Macy’s main weakness is high cost. There are some problems in customer service and
computer system.
The opportunity of Macy’s 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 Macy’s. 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."
Page 7
Brief Description of Case:Macy’s 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 Macy’s placed the company’s fate in the hands of Ullman, a financial whiz and
handler, an experienced merchandising executive of Macy’s.
It was a tough job for them as every department of Macy’s 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 company’s 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 CEO’s 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 Macy’s to talk directly to their
employees about issues or censers.
Besides these, to gain the competitive advantage Macy’s plan to install a TV station known
as “TV Macy’s” 24 hours cable channel selling Macy’s 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 Macy’s products who are not located near a Macy’s store?
While rivals have experimented with one or two hours spots on QVC or Home Shopping
Network (HSN). TV Macy’s 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 porter’s 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 Macy’s 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
Page 10
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 Macy’s 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 Macy’s differentiated its products in the focus market, or an overall cost
leadership focus, whereby Macy’s 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 Macy’s could cover all types of customers.
Also Macy’s would take Diversity Plan. This would help Macy’s 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 Macy’s does fit in to the company’s over-all strategy for survival?
Previously we have described Macy’s has taken many steps to support their
strategy. One of them is giving advertising. For giving advertising in less cost Macy’s have
taken steps to open TV Macy’s in the fall off 1944. It is the most successful and most
profitable plan for Macy’s for supporting her strategy .TV Macys is the 1st channel devoted
entirely for Macy’s. It helped Macy’s to advertise their own product it swerves to familiarize
home viewers with Macy’s. It also provides excess to those products to people not located
near a Macy’s store. Thus by helping Macy’s to familiarize with customers TV Macy’s fit in
to the company’s overall strategy for survival.
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Conclusion and Comments:
Macy’s faces problem but giving the responsibility of CEOs they make Macy’s “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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