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

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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

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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.

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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."

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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

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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 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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