MYER Case Study
Business life cycle analysis
As information given, the UAE department store industry is in growth phase. Few large players are currently in presence and at the same time, it is very attractive industry for external players as their profitability deemed to be higher than ‘average’ profitable level. Therefore, rivalry among existing competitors is expected to be low as market is rapidly growing and there will be enough room for others to penetrate. However, for external players who are interested to enter into department store industry in UAE, this is not a simple decision can be made. This is because cash is short as funds are needed for investment to cater for high growth rate and expansion plans.
As information given, the Australian department store industry is in decline. Few large players dominate the industry and new competitors are hard to enter. It is reasonably expected that even large players are no longer to yield sufficient return. Myer Ltd has focused on domestic market in the past few years through market penetration strategy, but once Australian department store industry is saturated and the current strategy seems to be exhausted, Myer Ltd must consider its strategic option for the future growth.
Porter’s 5 forces analysis (industry profitability analysis)
Threat of new entrants: Low
Threat of new entrants in the Dubai department store industry is low to medium. There are issues to be considered when Myer wants to expand into this region. Firstly, Department store industry requires large capital investment to set up a business as it provides well-established shopping opportunities to its customers. Also, it needs to ensure distributing their goods and services through established distribution channels, however it could be already locked by existing competitors. These issues make the entry barriers high for Myer to enter into the market.
Bargaining power of suppliers: Low
The bargaining power of suppliers is expected to be low.
Myer’s director of apparel, Judy Coober, has projected this offshoring strategic option will provide exciting opportunity with all of current Australian designers and suppliers with a view to launching their products in a new (future) Myer store in the UAE. In other words, Myer is in position to provide its suppliers to expand their brand/products into new geographical market for minimal costs or even with nil amounts. If Judy’s comment is not exaggerated, this is clearly showing that there are many suppliers who are willing to supply their products to Myer when they decide to open a new store in the UAE. Bargaining power of buyers: Medium - High
In general, individual customers have very little bargaining power with retail or department stores. However, as a whole, if customers demand high-quality products at bargain prices, it might be influencing retailer’s behaviors. In addition, the existence of competitors sustains increasing buyer’s power because customers easily switch their shopping habits without paying substantial cost. As Dubai was recognized as the shopping hub of the region and was one of the most ‘densely shopped cities’ in the world, it can be assumed that customers in Dubai who have high level of disposable income may not be merely ‘price taker’ but possibly ‘price maker’.
Threat of substitute products or services: Medium - High
Analysis on level of threat of substitute products or services can be begun with defining what can be substituted against the current offering products or services. In Myer’s case, Myer is defined as a department store that is offering a wide variety of goods for retail sales. Hence, Myer’s substitutes can be classified as chain stores such as retail outlets located in various locations under the same brand and management. There are insufficient information to determine the threat of substitutes in this case, however, given the fact that the location...
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