Macy's General Environment Analysis
Macy’s is one of the oldest and largest department stores in the world. However, it is oriented only on the U.S. market. The geographic distribution of the population covers 45 U.S. states having 870 stores located in the home country. Moreover, two stores are located in Puerto Rico and one in Guam although their impact on the common market share and company’s profitability is rather low (Macy’s, n.d. a). The products of Macy’s are rather diverse and are oriented toward both men and women of all ages. In addition, there are clothes for babies as well as for people in their 60s. Thus, the company’s demographic product range is maximally varied. Moreover, the company is targeting a middle-income social group that allows capturing considerable market share.
The number of the USA in 2015 increased to 321 million compared with 319 million in 2014. The population of the USA is mainly increasing due to the high immigration intensity. That is why Macy’s should take into account racial and ethical diversity that recently increased in the country. Thus, the company needs to accommodate its policy according to this fact. In addition, a trend of the aging of the American population can affect the company (Cohn & Caumont, 2016).
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Initially, it is important to note that exactly social forces are the key success factors of the apparel industry. The bargaining power of buyers is very high. The tastes, likes, and dislikes of the customers determine the market share of the industry brand. Therefore, Macy’s is following all trends in clothes to satisfy the needs of the target audience. The fashion factor influences the social forces of the apparel industry. People are willing to follow the fashion trends; thus, Macy’s needs to produce the clothes that are in trend. Moreover, the management of the company needs to promote its brand and settle fashion trends by themselves. In addition, there is strong popularity of eco-friendly products since the protection of the environment is one of the current societal values. Thus, people show their attitude to this issue by preferring clothes made of natural raw materials, the production of which does not harm nature.
Political, Legal, and Regulatory Factors
To ensure the safe and successful running of the company, its management needs to obey the political and legal conditions of the country in which it is operating. Since Macy’s is situated in the USA, the U.S. legislation is considered when the company’s policy is developed. Macy’s values obeying the rules and laws respecting the rights and properties of others and being good corporate citizens (Macy’s, n.d. b).
Overall, the U.S. political climate is very favorable for business development. However, the apparel industry business is still obliged to pay the taxes according to a rather high corporate tax rate of the country. The U.S. companies of the apparel industry cooperate with state organizations such as the U.S. Department of Labor and the Federal Trade Commission that regulate the business within the state industry.
Several acts regulate the apparel industry of the USA., In particular, the Federal Trade Commission Act regulates unfair or deceptive behavior of industry participants in commerce the result of which the customers are cheated or misled (U.S. Department of Commerce, 2013). The Textile Fiber Products Identification Act describes the rules of labeling and packaging that should be applied in the apparel industry (U.S. Department of Commerce, 2013). Since Macy’s is oriented on the children’s segment of the apparel industry, the company needs to take into Section 101(a) of the CPSIA which restricts the use of paint of children’s clothes with a content limit of 90 ppm (U.S. Department of Commerce, 2013). In addition, the legislation, policies, and regulatory trends of other countries’ apparel industries must be studied when the company is running on foreign markets.
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The natural environment plays a considerable part in the apparel industry. First, the seasonal and weather changes need to be taken into account when the company strategy is developed and the clothes diversity is proposed. For example, the Macy’s department store in Miami and New York will have different seasonal clothes choices for the clients due to the difference in weather conditions. In addition, due to global warming and general climate conditions, Macy’s should vary the main strategy and consequently change the product range in the stores. Moreover, Macy’s operation process is rather ecologically friendly and does not harm nature. From the marketing perspective, it is important to focus on such type of production because more and more customers prefer to use eco-friendly goods, including clothes.
Due to the rapid technological development, the apparel industry is engaged in sales and product improvement with technological innovation. One of the main technological changes that took place recently is Internet sales and mobile commerce. Most of the apparel industry companies have developed mobile applications that allow seeing virtual showrooms, viewing the products, and giving feedback about them (Spears, 2014). Macy’s has also created a mobile application that can be easily downloaded from both Apple Store and Google Play Market. Another technological trend important in the apparel industry promoting is mobile usage of websites. More and more people are using their mobile phones to attend the website of the company. Therefore, all the websites of the apparel industry should be adapted for smartphone usage. Macy’s has made its website for comfortable usage by its clients. One more technological innovation in the apparel industry is the usage of 3D printing in clothes production. This innovative technology gives new opportunities to make the products more interesting, unique, and attractive for the clients (Spears, 2014). This trend can be very beneficial for Macy’s company since it allows acquiring one more competitive advantage among the competitors.
The U.S. apparel market is the largest in the world. Moreover, being critically important for the home-country economy, it has a considerable impact on the global industry of clothes, fashion, and apparel. It occupies approximately 28% of the total global industry of apparel products (“Statistics and facts,” n.d.).
Political events and policies toward international trade are critically important for Macy’s operations in the apparel industry. It is caused by the fact that manufacturing facilities of the company are situated abroad, and the finished goods are imported into the country. In addition, many of the spare parts and accessories are delivered to the final customer through international trade. Consequently, the international political environment is critically important for the U.S. apparel industry and Macy’s department stores in particular.
The U.S. national and cultural diversity has a considerable effect on Macy’s product range and its diversification. The stores need to have various types of clothes to satisfy the needs of the clients according to their cultural, ethical, and religious characteristics. The institutional environment of the country that affects the company is of Anglo-Saxon type. It is favorable for business development because it is characterized by decentralization of power and flexible approaches to business.
Due to the constant need for clothes for all people, the apparel industry is very stable. However, the level of industry profitability depends on the global economic conditions. When the economy grows, people have more free money that can be spent on clothes whereas when the economy goes down, people are saving on all products, including clothes.
General Economic Conditions
The USA has one of the strongest and most stable as well as developed economies in the world. The real gross domestic product increased by 2.9 percent in the third quarter of 2016 whereas, in the second quarter, there was a growth of real GDP per 1.4 percent (Focus-Economics, 2016). The gross domestic product per capita in 2015 was $55.868, which is constantly increasing over recent years. The unemployment rate has decreased by 1% from the previous year and was 5.3% in 2015 (Focus-Economics, 2016). In addition, Macy’s helps to solve the state problem of unemployment
Analyzing general economic conditions, the U.S. apparel manufacturing industry is currently suffering a deficit. It means that there were more products of the industry imported ($82 billion) than exported ($6 billion) from the USA (Joint Economic Committee, 2015). Most of the products are imported from the East, namely from China 36%, Vietnam 11%, and Bangladesh 6% (Joint Economic Committee, 2015). It is caused by the fact that many U.S. companies have manufacturing facilities in Eastern countries.
Summarizing Macy’s general environment analysis, it is important to note that Macy’s is one of the oldest and most successful retailers in the apparel industry around the globe. It is a good example for the industry followers in reaching success and profitability. Macy’s management copes with negative environmental conditions drawing as many competitive advantages as possible. In addition, Macy’s is flexible to the changes in the trade and adopts all apparel industry innovations that allow the company to remain among the industry leaders for many years.