The External Environment Essay
The External Environment
Complete an analysis of the traditional department store industry and of Macy’s as of 2005. Which factors in the external environment could (positively or negatively) affect the success of Macy’s new strategy? I think the following external environment factors could affect the success of Macy’s new strategy. The general economic environment as the country was entering a significant recession affected the company negatively. Another negative effect is the industry life cycle model in which the traditional department store industry was in the “mature” phase or even “decline” phase. Also, the intense competition between the existing companies and the rise of online shopping is also a negative. Here are some of the internal factors I believe that could affect the success of the company’s strategy. Macy’s is recognized as a national brand with national advertising. They also have a sound customer base with new stores in prime location. The management teams are skilled and experienced. In 2005, Macy’s consolidation and repositioning strategy strengthened the consolidation and the image as “America’s department store”. The begin to remodel the stores in hopes to promote a pleasant shopping experience, affordable luxury, and changing the brand to focus on attracting customers interested in fashion.
Some of the weaknesses I see are the fact that the quality of merchandise and service has deteriorated the attempt to standardize the merchandise and pricing across all the stores. Porter argues that the goal of strategy, and a key to achieving a sustainable competitive advantage, is finding a unique and valuable position. In my opinion, Macy’s has attempted to place their stores in a unique position as a “mid-level” store which is a good positioning for its new strategy. However, the decision to consolidation is not unique. As far as I am concerned, Macy’s cannot success with the strategy outlines in the case. Although Macy’s has launched a bold strategy, the external environment especially the industry life cycle is in decline and competition is growing rapidly. I believe that Macy’s should count more on the technology development, such as E-commerce; to open an online shop is a good try for Macy’s.
What elements in the external environment could affect Dippin’ Dots’ strategy in relationship to their growth? Political/Legal, Economic and Global, Sociocultural, Demographic, and Technological factors should be considered
Dippin’ Dots, “Ice Cream of the Future,” has been around for nearly 25 years. The company has had some major obstacles to overcome throughout the years. When Dippin’ Dots first launched, it truly stood behind its name, “Ice Cream of the Future.” The founder of Dippin’ Dots came up with a process known as flash freeze liquid cream. He was able to reinvent a product that people of all ages had either heard of or tried. The strategies used were, developing “futuristic” ice cream, targeting people ages 8 to 18, continuing to grow the company by use of franchises and selling the product through amusement parks, fairs, malls and the use of vending machines. He used celebrities to promote product, tried a joint venture with McDonald’s, and introduced healthier options to be able to target selling product in schools. The threat of new entrants is high due to loss of patent; competition along with disenfranchised former employees can copy the product. Power of suppliers is high due to special equipment needed to store product in addition to storing with dry ice.
International shipping was also difficult due to equipment needed to store and ship product. The buyer power is low due to locations where Dippin’ Dots are sold are places in where consumers typically spend more money. Therefore the 5 oz. cup for $5.00 is not an over-priced product. Consumers realize in these environments they are going to pay more for a product than in a grocery store. The threat of substitutes is high because of the many different types of frozen desserts-various types of ice cream, sherbet, sorbet, ice cream sandwiches/bars, frozen custard and gelato. Consumers can also purchase different frozen desserts in grocery stores, where Dippin’ Dots are not available. There are already substitutes to the company. The intensity of rivalry is high due to imitation of Dippin’ Dots, large international companies, family-owned businesses and full-line dairies. When Dippin’ Dots first launched their target demographic was people ranging from 8 years of age to 18 years.
As the industry changes Dippin’ Dots strategy was to target not only kids, but older generations.
Sociocultural- The founder took a nationally known product and reinvented ice cream as flash freeze ice cream beads. The company developed different products to reach a larger and more diverse audience. They developed coffee drinks, low-fat options and healthier products. The company utilized celebrities and popular magazines to promote product and tried a joint venture with McDonald’s that turned out to be not successful.
Legal-The loss of patent really put the company’s future in jeopardy. Companies and even disenfranchised former dealers were able to sell similar products and develop imitations.
Technological-Due to the unique storage requirements for product it was more challenging to ship product internationally.
Economic-Increased franchise fees and royalties, rising operating costs.
Global-More efficient shipping options and expands international market. Dippin’ Dots became a very successful company by the use of innovation. The founder was able to develop a product that was unlike any other in the frozen dessert industry. Due to loss of patent, copies and imitations have been made over the years. The future of Dippin’ Dots, I believe lies in the introduction of take home line of ice cream and the ability to expand franchisees internationally. Dippin’ Dots is known for its innovative products and they must continue to stay ahead of the competition by developing additional products that reach a more diverse customer base.