Macy's in United Arab Emirates - Case Study Example

Macys in United Arab Emirates Purpose/objective of the study The prime objective of this study is to open a new store of Macy’s in the region of United Arab Emirates in order to enhance its market share and portfolio among other rival players. Other than this, the organization of Macy’s also desired to open a new store in UAE in order to expand its customer base and profitability so as to improve its sustainability and demand as compared to Sears. Moreover, by entering into the market region of UAE, the organization of Macy’s might become successful in enhancing its number of stores and competitiveness. By doing so, the organization of Macy’s might improve its brand image and market value that may amplify its total sale and revenues significantly in this age of aggressiveness. Furthermore, the organization of Macy’s might attain the opportunity to analyze the taste and preferences of the customers of UAE along with their buying behavior. After knowing the customer preference, the organization of Macy’s might try to develop varied types of trendy and attractive clothes at a competitive cost so as to improve its position and market presence among others. Such a strategy might prove effective for the organization of Macy’s to improve its profit margin and customer dependency that may increase its leadership and equity. In addition, by opening a store, the market capitalization of the organization of Macy’s might also get enhanced that may improve its market share and prosperity to a considerable extent. Hence, by opening the store in UAE, the intensity of rivalry of the competitors of Macy’s might get reduced that may increase the sustainability of the organization in long run. Executive Summary This essay mainly highlights the importance of opening a store of Macy’s in the market region of United Arab Emirates in order to attract the customer of varying age groups, income groups and life style. Apart from this, by opening a store in UAE, the organization of Macy’s tried to improve its brand image and loyalty in the market of UAE than its competitors. Moreover, due to the improvement of the disposable income or per capita income of the customers, the organization of Macy’s desired to enter into the market region of UAE as compared to many other retailers. The prime desire behind it is to improve the total sale and profitability of the organization that may increase its inner strengths and opportunities. Other than this, in order to analyze the demand of the products of Macy’s, the market share of the competitors is evaluated. Only then, it might become successful in improving its market position and reliability in the market of UAE among many reputed existing market players. Along with this, the product lines of the reputed competitors of UAE are also evaluated and viewed by the organization of Macy’s, prior introducing its products so as to increase its demand within the customers. According to a survey that was conducted in 2005, “Foreign direct investment inflow into the UAE achieved a record US$ 10 billion amounting to nearly 34 percent of the total foreign capital flow into the Arab world” (United Arab Emirates 2007, 2007, p.76). Moreover, due to the improvement of the disposable income or per capita income of the customers, the organization of Macy’s desired to enter into the market region of UAE as compared to many other retailers. History and Background of Macys The organization of Macy’s was established in between 1843 and 1855 by Rowland Hussey Macy. Then, the store of Macy’s used to offer dry goods to the employees of mill industry. But unfortunately, it failed to retain its presence and position in the market and then Macy’s opened its new outlet in New York City in the year 1858. After introduction, it attained a total sale of US$11.08 that proved extremely effective for the organization. Then, the organization of Macy’s desired to expand its business as well as product lines. As a result of which, it became successful in amplifying its brand image and reputation in the entire globe among other rival contenders. However, very slowly and gradually, it expanded its stores in different regions of United States and positioned itself as the 16th largest retailer as per its total revenue. This proved extremely effective for the organization that amplified its equity and popularity in the market of United States. Macy’s is considered as one of the largest sequence of department stores, headquartered in the region of Cincinnati of Ohio of United States. It is owned by America’s reputed multinational organization, Macy’s Inc. It came into existence in the year 1853, and by 2014, it expanded its operations in more than 793 locations in United States. Since then, it tried to enhance its total revenue by US$ 27.7 billion by the year 2013. Due to which, the organization of Macy’s now became successful in presenting a wide range of brands such as Alfani, Bar III, American Rag etc (Macy’s Inc, 2014). Macys Current Industry position and Market Share Macys quarterly results are showing that the department store operator has increased sales and gained market share. The company has done very well without giving too much discounts to their customers. Shares of the organization rose 5.9 percent. The company has done very good inventory management lead to a better sales forecast for rest of the year. Current industry position of Macy’s is better than its other competitors. Sears, one of the competitors of Macy’s has closed down its 300 shops since 2010. The country operates in almost 800 stores throughout the country. Total market capitalization of the organization is almost 21 billion $. The industry is not performing very well. But Macy’s is an exceptional case where the company is performing very well and is strengthening its position in the industry. Over the years the organization has changed its self with the time. The company has transformed itself with the changing time. The organization has been very much contemporary with the industry. Macy’s is currently the market leader in the industry. Macy’s has closed its 5 nonperforming stores. The organization has reduced its head count for gaining profitability. Different competitors in the industry are divesting heavily, making it easy for the company to be the market leader in the industry. Macys has the ability to target all types of consumers through its various means. This is a highly positive factor for the company for long term potential growth. The organization has been using a strategic evolution. In different stages the company has various degrees of success. Macys is very strongly positioned in the industry. The organization is adapting with the changing demands of consumer buying behaviors. Macy’s efforts in different channel have made the company more competitive in nature. Macy’s has incorporated technologies significantly. Inclusion of technologies in to the business has made the company more prominent in the industry. Macy’s Product line The organization of Macy’s comprises of a wide range of products so as to fascinate and satisfy the changing trends of the customers. But, all the brands of clothes for men and women are sold exclusively from its stores so as to retain its uniqueness in the market among others. It includes private brands such as Alfani for men and women, American Rag, Belgique, Bar III, Charter Club, First Impression, Epic Threads, Hotel Collection and many more. All these above mentioned brands offer extremely trendy and modern clothes of varying styles and designs so as to suit the demands of the customers. For example: Club Room is one of the reputed private brands of Macy’s that offers business casual outfits for the men, sportswear, varied types of designed furniture’s, stylish shoes as well as accessories of different prices ranges. Other than this, First Impression is another well-known brand that offers designed clothes for the infants and new born babies. Jenni by Jennifer Moore is also another reputed brand that offers pajamas, lingerie, loungewear, pajamas, children pajama etc at a quite competitive cost. As a result of which, the demand of the products of these brands are extremely high in the market of United States as compared to many other rival players. Similarly, Epic Threads is a unique brand that tries to offer urban designed clothes to the younger section of the society so as to present a distinctive look among others. However, Charter Club offers, a unique collection of ready to wear clothing’s mainly for the female section of the society. Apart from these brands, Style & Co is another important brand that presents varied types of sportswear for women, shoes, jewelery, handbags, beddings as well as accessories for the female section of the society. It is done, in order to attract the females so as to amplify its demand and profit margin. Jenni is another reputed brand that sells funny and bright colored pajamas, loungewear, active-wear and lingerie and many more for the fashionable customers. Other than this, Giani Bernini offers a wide range of fashionable bags, small leather products as well as jewelries of different sizes along with shoes of varying prices to its customers. Moreover, the organization of Macy’s also comprises of numerous other brands such as Greendog, John Ashford, Morgan Taylor, The Cellar, Holiday Lane, Studio Silver, Tools of the Trade, Karen Scott, Via Europe, JM Collection etc (Macy’s Inc, 2014). However, apart from these brands, Macy’s also includes a wide variety of skin-care products such as skin creams, skin treatment creams and many others at a quite low price so as to preset stunning appearance to its customers. Thus, due to the presence of such a wide range of product lines, the organization of Macy’s became successful in enhancing its loyalty and popularity in the entire globe among many other rival players. Hence, the presence of numerous brands and products lines, the organization enhanced its profitability and brand image that improved its market share and prosperity among others. Summary of Macys financial reports (Source: Bloomberg) The above graphical representation is showing that profit margin of the organization is going through ups and downs. Profit margin of the company reached to its highest position in February 2014. But the profit margin is sharply declining in May 2014. In February 2014 the profit margin was almost 10%. But within two months the profit margin has reduced and it is below 4%. It is evident from the picture that profit margin increased very well in between November 2013 to February 2014. One more thing is very clear from the picture is net income. Net income of the company is very much consistent throughout the period. In February 2014 net income of the organization was highest. Company’s net income never touched 2,500 million $ mark. Within this period revenue of the organization is also very consistent in nature. According to this trend revenue of Macy’s has never come down below 5,000 million $. On the other hand revenue of the company rose almost 10,000 million $ in February 2014. The above picture is clearly stating that the organization has financially done very well in February 2014. In this period Macy’s recorded highest Net income, Profit Margin and Revenue. Earnings per share are 4.06 $. Market capitalization of the company is 20,962.73. The company has registered 23.82% five year dividend growth. It is a good sign for all its stake holders. Estimated earnings per share in January 2015 are 4.5070 for the company. It is greater than the present situation. The organization has 8.17% return on assets and 24.74% return on equity shows management effectiveness of the organization. Gross profit of the organization is 11.21B $. Current share price is 58.16 $. Current operating margin of Macy’s is 9.95%. Market capitalization of the organization has consistently increased over the years. PE ratio of the company is 14.2975. It signifies that investors are expecting higher earnings in growth from the company. Brand Management at Macys Brand management is very much important for any organization. Over the years Macy’s has managed their brands very professionally and intelligently. When all others competitors in the industry are finding it difficult to manage their brands Macy’s is doing pretty well. The company has given great focus towards localization. Macy’s has presence in 69 districts in USA. The organization has placed key management personnel in all local markets. Their back office function is totally centralized. With this strategy the company offers relevant retail experiences to consumers. It helps Macy’s to gain economy of scale. The company has done wonders in terms of their inventory management. By reducing over head costs the organization has able to give more focus towards marketing and advertising. It helps Macy’s to strengthen its performing centre’s. The organization has managed their brands with the help of Omni channel capabilities. The company very professionally managed their brand with the help of websites and mobile applications. According to Inter brand, with the help of mobile application the company has increased its brand value up to 383%. The organization has able to identify recent digital behaviors of the industry very well. According to that they have arranged their total branding strategies. It placed the organization in a good position in the industry. Over the years Macys has made great advancement in offering national and exclusive brands. It has been a great differentiator for the company as far as market competition is concerned. The organization has good advantages related with location. Retail locations are important for the company to manage their brands properly. Macy’s is very flexible in terms of their brand management. The company very often announces new tactics for increasing sales. It does not believe in discounting strategies. It is also very different from its competitors. Macy’s has positioned their brands very well. The company has also focused on their stores. They have tried to make their stores as attractive destinations. Fashion shows, book readings, culinary events, celebrity appearances and flower shows have been arranged in their stores. All these efforts have strengthened the position of Macy’s in terms of brand management. Background and history of UAE market that is related to Macys sector The background related with Macy’s sector in UAE was very different in ancient period. In last 4 decades the country has witnessed a significant change in terms of this sector. Previously the country’s retail markets were use to be situated within central mosque where people use to gather and shop from retail stores. In 1981 first shopping mall came into the picture in the country. In 1995 one of the largest retail hubs of the country Deira City Centre was opened. It was a significant move in the retail sector of UAE. It was a pioneer of UAE retail industry. Dubai is considered as one of the Middle East’s Shopping Capital. Huge number of dedicated consumers has made UAE as a top-class retail destination over the years. Duty free facilities have made UAE as one of the most attractive markets in the world. Retail industry of UAE has great growth of 7.1%. The market is worth of US$ 50.1 billion. It is the retail nerve centre of Gulf region. The country has stable political situation. Due to stable political situations tourists across the world gather in the country. Higher tourists demand backed up by increasing disposable incomes of local people have made this place attractive destination for retail industry. Macy’s operates in non food retail sector. (Source: Oxford Business Group 123) According to the given picture it is very clear that historically non food retail sector has done very well in UAE market compare to food retail sector. Day by day non food retail sales are increasing. French company Carrefour also has entered in to the country. The country has very suitable environment in terms of retail businesses. Over the years the country has diversified its economic dependencies from oil sector to other different sectors. Retail sector is one of those sectors. The country has a history of orthodoxy. As the time passes by the country is becoming more and more fashion conscious. Although fashion senses are different in the country. After China, India and Russia UAE is the fourth most-valuable retail market in the world. Competitors of Macys in the United Arab Emirates Competitors of Macy’s are there in UAE market. Being a retail destination there are lots of local competitors in UAE market. Those are discussed below. The Apparel Group is a competitor for Macy’s in UAE market. In the last one decade the organization has registered a huge growth. The company is associated with different world class fashion brands like Tommy Hilfiger, Nine West, Aldo & Tim Hortons and Kenneth Cole etc. The group has 900 stores across four continents. Numbers of employees associated with the group are 8000. The group is very popular in UAE. In 2012 the company has own different awards like UAE Super brands 2012 and Sharjah Retailers Award. Big & tall is a potential competitor for Macy’s in UAE. Different world class brands are available with the company. The departmental store has the collections of different foreign brands. The store has presence in three locations in UAE. Two stores are in Dubai one in Abu Dhabi. The store provides collections of formal, casual wares, active wares and accessories. Bin hendi enterprises can be a potential competitor for Macy’s. It is 40 years old company. The group is very famous in UAE. It is UAE’s most respected business conglomerate in fashion, watches and jewelry. Over the years the group has successfully launched many world famous top class brands in UAE. The group for the first time launched very famous fashion house Pierre Cardin in the country. The organization has very friendly relationship with local Government. The organization is very much successful in fashion and jewelry sectors. The group identifies local buying behaviors very well. Diverse product lines are very much competitive. Foreign retail giant like Carrefour is also a competitor present in UAE market. The French organization is globally very famous and have wide present in UAE market. Prices of products at Carrefour are very less and numbers of products are also very high. Market share of the Competitors in UAE, their industry position and their product line Market share of Bin hendi enterprises is very high. The enterprise has very stable industry position in the country. It is very old and reputed organization in UAE. The organization is very famous in whole GCC region. It is one of the largest conglomerates in UAE. People of UAE are very much familiar with the group. The organization has very vast product lines. Product lines of the group are Accessories, Fashion, and Jewelry. In fashion the organization has collections of Hugo Boss, Brioni, Shanghai Tang, Paul & Shark etc. Apparel Group has less market share than Bin hendi group. Still the group is very famous for its design and services. The organization has become very famous in the industry within very short period of time. The company has grown very well. Different awards are showing that the organization has got good position in the industry. The company is engaged with different CSR activities. All these activities have strengthened its position in the industry. The organization has vast product lines like Fashion, Accessories, Foot wares, Cosmetics, watches, Books and food. World second largest retailer Carrefour has presence in UAE. The organization has started their operations three years back in UAE. The organization has four shops in the country. Industry position of the organization is improving day by day. People of the country are feeling attracted with company’s low cost pricing. World famous brand name is also a positive factor for the French multinational company. The organization is earning good revenue out of UAE markets. Being world’s second largest retail company the company has very vast product lines. Those are Fashion, Accessories, Groceries, Cosmetics, watches, Books and food etc. Big & Tall has very small market share in the country. The organization is less prominent than other three competitors. It has very limited presence in the market. Being a small company product line of the company is very limited. Big & Tall only focuses towards fashion products (Butler, Carter, Dunston and Frances 145). Extending Macys UAE Market With the help of market development strategy Macy’s can extend their market in UAE. It will be a suitable strategy for the organization. Here organization has to find proper market for their business extension. Products are ready with the company. In this strategy Macy’s has to conduct extensive market research for finding proper market in UAE. Once the market research is completed then the organization can plan their operations in that market. With this strategy the company will face a limited risk. Here products are already ready and familiar with UAE citizens. Only, organization has to invest in the proper market. As products are globally well known so product related risks are very less. The company can focus and concentrate towards one direction. Modern business is ever-changing. Apart from market identification the company must notice different developments in the industry. Macy’s have to monitor each and every development in the market. The organization must be proactive. It has to be flexible with its strategies. Legal rules in UAE are very strict. Macy’s must abide by all legalities of the Country. The company must adapt itself with local cultures and buying behaviors. Macy’s is USA based company. Cultures and consumer buying behaviors of USA and UAE are totally different. The organization has to keep that thing in mind. The company must be very innovative and creative in nature. Innovation and creativity is very important for the organization to gain competitive advantage in UAE market. Facts and the possibility of Macys success in UAE and what is going to add to the citizens. Economy of UAE is in recovery mode. The country’s GDP has grown 3% in 2013. The country’s economy started recovering from 2011. Disposable incomes of people are growing. People are spending more money. This fact of economic recovery opens lots of possibilities in front of Macy’s. One more fact is very important for Macy’s. The country in 2013 has experienced huge 9% growth in tourism industry. It means combination of domestic demand and tourists demand generating huge possibilities for Macy’s to open their account in UAE. The retail sector in Dubai is estimated to grow by 5.5% in 2015. It is a huge possibility for the USA based retailer to open their business in UAE. The country has become global retail destination. Many major foreign players are planning to open their market in the country. Possibilities of Macy’s success in UAE market are very high. Macy’s may add many things to the lives of UAE citizens. The company can create many of jobs for local people. Macy’s can provide good quality products and services to UAE customers. The organization can offer more options in front of UAE people. With the help of corporate social responsibility Macy’s can contribute towards the society of UAE. It will be a great addition for UAE retail Industry. Works Cited Bloomberg. Macy’s Inc. Web. 2014. 21 June 2014. Retrieved from: Butler, Stuart. Terry Carter, Lara Dunston and Frances Linzee Gordon. Oman, UAE & Arabian Peninsula. Melbourn: Lonely Planet. 2007. Print. Macy’s Inc, “Private Brands. 2014”. Web. 21 June 2014. Retrieved From: < http://macysinc.com/macys/private-brands/default.aspx> Macy’s Inc, “About Us, 2014”. Web. 21 June 2014. Retrieved From: Oxford Business Group. The Report: Dubai. London: Oxford Business Group. 2013. Print. Read More