Seeking and Securing Competitive Advantage - Case Study Example

Myer’s Competitive Analysis Name Analysis Course Date Myer’s Competitive Analysis Introduction Myer is a departmental chain store located in Australia (Myer, 2010). The company provides a range of products such as men and women wear, cosmetics, toys, books, food and furniture among others. Myer Australia has for a long time been the largest chain store in the country by revenue and store count (Myer, 2010). The company was started in 1899 with a humble beginning. Over the years, it has grown so fast due to operation strategies, effective expansion strategies, and efficient workforce among others. However, the company has been faced with financial problems that have threatened its revenue generation and profits growth (Myer, 2010). This paper will carry out a competitive analysis of Myer Australia. First, it will highlight the financial turbulence faced by the company over the last years. Second, it will identify Myer’s capabilities and will detail out the company’s competitive advantage. Lastly, it will recommend a number of strategies to be implemented by Myer in order to ensure success. Myer’s Current Performance Myer departmental store experienced a substantial amount of growth between 2000 and 2009 (Myer, 2005). However, in the last three years, things have not been easy. The 115 year of chain store has suffered a decline in revenue and profits over the past three years. The profit in 2014 for the last six months of the year fell by a massive rate of 23.1% to about $62.15 million (Myer, 2005). However, the sales in 2015 financial year increased by 1.7%. This represented one of the biggest fall for the company. In comparison, the financial results of 2015 were better than 2016. For instance, the 2015 half year operating gross profits were $714.857 million and for 2016 it dropped to $694.081 million (Myer, 2005). In the last three years, there has been a strong performance in the childrenwear and wemenwear, cosmetics and entertainment products (Myer, 2005). The sales in the other products were substantially low compared to the previous years. This is attributed to their margin expansion model used by the company. This model resulted to a cost base that was exceeding revenue which was too inflexible to blend well with the change in retail industry. Myer’s Capabilities According to the resource-based theory, a company’s success factors that lead to sustainable competitive advantage are resources and capability (Newbert, 2008). Capability can be defined as the collection of people, process as well as technology brought together for a specific purpose. In order to gain sustainable competitive advantage, organisations’ capabilities and resources should be rare, non-substitutable, non-imitable and valuable. In order to identify organisational capabilities, value chain analysis can be used (Newbert, 2008). Value-chain analysis is a tool that helps in identifying organisational capabilities and resources that have the potential to create value and boost competitive advantage. Porter has split the organisation into primary and support activities. The primary activities include inbound logistics, operations, outbound logistics, service and marketing while the support activities include procurement, human resource, infrastructure and technology (Montgomery and Porter, 2009). Inbound logistics In Myer Australia, more than 50% of its products are supplied from outside Australia. Inbound logistics of Myer Australia is based three concepts; using few links in the supply chain, forming effective partnership with dealers and transferring products direct without storage (Myer, 2010). Operations Myer has about 65 departmental stores in Australia that offer about 11 categories of products. The company has stores in six Australian stores (Myer, 2010). Their location includes main city centres, suburban areas and high streets. The stores are located in Tasmania, Victoria, and Queensland among others. Outbound logistics Myer sells its products to different countries. The company controls the distribution operations that are controlled by distributers and retailers. Generally, outbound logistics are done through manual distribution. The company also uses e-commerce as one of its distribution network (Myer, 2010). Marketing and sales The company uses integrated marketing strategy such as advertising, sales promotion and public relation elements (Myer, 2010). In addition, the company associates its brands with high quality products, highly accessible stores and competitive prices. Service Myer has maintained its customer service initiative through online chat with the customers (Myer, 2010). The company website contains information that has all the aspects of its products. The employees also undergo training in order to maintain effective service delivery. Competitive Analysis Threat of new entrance Starting a departmental store is very expensive and requires a lot of capital to start this makes it hard for new entrants to enter the market (Ferrell and Hertline, 2014). In addition, there are high legal and regulatory constraints that discourage new entrants. Bargaining power of suppliers Australian suppliers are threatened by the ability of international retailers to source products and services from abroad at cheaper prices. The company can use multiple supply sources therefore suppliers cannot raise prices or reduce quality to their advantage (Ferrell and Hertline, 2014). The industry enjoys low bargaining power of suppliers. Bargaining power of customers Australia is considered a market with people with high disposable income. For this reason, the industry has considerably lower bargaining powers of buyers therefore making them attractive potential market for Myer Company (Myer, 2010). Substitute products In Australia, there exist high potential substitutes for products offered by Myer Company (Myer, 2010). Due to this, the company will be imposed with small market portion and high competition in the country. The profitability of the market is threatened due to high potential substitute. Competitive Rivalry The Australian chain store market is dominated by competitors such as Myer, David Jones Limited, Harris Scarfe, Kmart Australia and Target Australia (Myer, 2010). The rivalries in this industry are very high. Therefore, Myer involves itself in advertising than pricing since it competes to differentiate itself from its rivals thus gaining some market share. Myer’s Competitive Advantage Competitive advantage of Myer can be determined using Porters generic strategies. Porter has presented three generic strategies that can be used by companies to create competitive advantage; cost leadership, differentiation and focus. Differentiation strategy is looking for something that is valued by customer and is unique to them (Taraja, 2012). Myer Company uses differentiation strategy in order boost its competitive advantage. The company has established itself as the largest departmental store in Australia. It has been able to do this by spending large amount of capital in marketing strategies to differentiate itself from the competitors. In addition, it has provided different and unique products that have given them a competitive edge over the competitors (Taraja, 2012). Due to the fact that Myer is already established, it does not need to use cost leadership or focus strategy. In addition, Myer offer ensure effective customer service and offer complementary services such as discounts, delivery and credit (Myer, 2010). It also positions products in its stores according to target customer group. Recommendation Strategies According to the marketing analysis of Myer, we can establish that the company require some adjustments and changes in order to be successful. The company has a huge presence in Australia and has not ventured properly in other regions of the world. Many of its competitors operate in Australia and the rest of the world and offer differentiated products. Therefore, in order to improve its marketing strategies, Myer should expand its presence in other countries. Myer faces stiff competition from multinational companies in Australia which have established their brands in other parts of the world. Internationalization is a strategy that will enable the company to expand its brand awareness and sales. The company can enter foreign markets through merger and acquisition and partnership. This will enable it grow and reach new markets (Doole and Lowe, 2008). According to Porter’s diamond of national advantage, competitive advantage is founded upon the factors that a country may be fortunate to inherit (Doole and Lowe, 2008). These factors may include land, demographic pattern, and natural resources, labour among others. In addition, a country can create additional factor endowments including skilled labour, government support, strong technology etc. that would boost its competitive advantage. In order for Myer to improve its strategies, it should invest in strengthening their competitive sources such as human resources and technology (Montgomery and Porter, 2009). They should invest capital and time in training its manpower and technology that will enhance their operations. In addition, another way to improve the operation of Myer is to disperse production globally. It is important for an organisation to take into account the national resource conditions, firm-specific advantage and tradability issues (Montgomery and Porter, 2009). Myer should establish proper locations of value chain activities in order to save cost, avoid strict legal restriction, and access cheap labour amount others. Conclusion To sum up, Myer is a company that offers products such as men’s and women’s wear, toys and books to mention a few. The company has experienced remarkable growth over the past years due to operation strategies, effective expansion strategies as well as efficient workforce among others. In order for an organization to gain sustainable competitive advantage, it has to have rare resources, non-imitable, valuable and non-substitutable to name a few. The primary activities include inbound logistics, operations, outbound logistics, service and marketing while the support activities include procurement, human resource, infrastructure and technology. Furthermore, Myers competitive advantage is that they maintain their uniqueness, they have differentiation strategy, ensures proper customer service and also they offer complementary services such as discounts. Thus, it is recommended that they should expand their presence in other countries through internationalization as well as through mergers, acquisition and partnership. References Doole, I & Lowe, R 2008, International marketing strategy : analysis, development and implementation, London, Cengage Learning. Ferrell, O. & Hartline, M 2014, Marketing strategy: text and cases, Mason, OH: South-Western/Cengage Learning. Montgomery, C. A & Porter, M. E 2009, Strategy: Seeking and Securing Competitive Advantage, The Harvard Business Review, Boston, M. A. Myer 2005, "$800m Myer sale season tipped". The Age, Melbourne. 17 August 2005. Retrieved 5TH July 2016 from http://www.theage.com.au/news/business/800m-myer-sale-season-tipped/2005/08/16/1123958062291.html Myer 2010, Myer’s place in history, Bendigo Advertiser. 20 August 2010. Retrieved 5TH July 2016 from http://www.bendigoadvertiser.com.au/story/710520/myers-place-in-history/ Newbert, S. L 2008, Value, rareness, competitive advantage, and performance: A conceptual-level empirical investigation of the resource-based view of the firm, Strategic Management Journal, 29, pp. 745-768. Talaja, A 2012, Linking resource value to sustainable competitive advantage: investigation of medium and large Croatian companies, Global Business Conference 2012 Proceedings, pp. 387-395. Read More