Fluent Essays

During Unit IV, VI, and VIII, you will be working on an implementation plan for a business. The components within these three units combined will create this plan.Please take a look at the 30 case studies located in your textbook on pages 357–614. There are multiple corporations that provide a large array of services and products. Please select one of these 30 organizations that interests you. You will use this company for the assignments in Unit VI and Unit VIII.For Part 1, describe the company that you selected, the products/services they offer, and the history of the company. Next, analyze the company’s strategy, mission, and organizational structure. In your analysis, include the information below. What does the strategy, mission, and organizational structure say about the company? What are the positive aspects of the strategy, mission, and organizational structure? What are the company’s short-term and long-term goals? What are ways to improve the strategy, mission, and organizational structure? You will need to reference your textbook and at least one outside source for this assignment. You are encouraged to utilize the CSU Online Library, but you may also use external sources, as long as the source is reliable.Your project must be a minimum of two full pages in length, not counting the title and reference pages. Include an introduction paragraph. BUS 4302, Business Policy & Strategy 1 Course Learning Outcomes for Unit IV Upon completion of this unit, students should be able to: 1. Analyze the nuances of strategic management. 1.1 Analyze the company’s strategy, mission, and organizational structure. 2. Correlate the characteristics of vision and mission to business success. 2.1 Explain the strategy, mission, and organizational structure of a successful company. 5. Diagram the strategy analysis process. 5.1 Describe the strategy analysis process. Course/Unit Learning Outcomes Learning Activity 1 Unit Lesson Chapter 5 Chapter 6 Unit IV Project 2 Unit Lesson Chapter 5 Chapter 6 Unit IV Project 5.1 Unit Lesson Chapter 5 Chapter 6 Unit IV Project Required Unit Resources Chapter 5: Strategies in Action Chapter 6: Strategy Analysis and Choice Unit Lesson Previously, we have discussed how to assess your internal and external factors. In this unit, we are going to expand on that by discussing strategies. Chapters 5 and 6 will really focus on past strategies that have been successful and effective. These will include formulation and an introduction of the SWOT analysis. This unit will also begin laying the framework for a successful strategic plan. The final project for this course will be initiated during this unit and will build upon each section as we move forward in the term together. Strategy Formulation Every strategy also encompasses long-term and short-term objectives. We will begin with a discussion of long-term objectives and how these impact the strategy. A long-term objective is defined as the results expected from pursing specific strategies. These objectives generally take between two to five years to attain. The objectives must be attainable and realistic for the organization to achieve. Common long-term objectives include growth, profitability, earnings, and social responsibility. Each level within the organization can have UNIT IV STUDY GUIDE Strategy BUS 4302, Business Policy & Strategy 2 UNIT x STUDY GUIDE Title long-term objectives. This includes the levels of corporate (highest level), division (middle level), and function (lowest level) within an organization. An example of a long-term oriented company could be your local taxi company and its plans to remain competitive in the digital age. For example, taxis have interactive apps like Curb, which allow riders to request a ride, split fares, and even receive a digital receipt. Companies like Uber and Lift are now competing heavily with the taxi industry. Financial Objectives Financial objectives are similar to long-term objectives but are more specific to financial themes. Examples of financial objectives include growth in revenues, profit margins, cash flow, and other financial considerations. There is a delicate balance when considering financial objectives. An organization may create a short-term objective that may be harmful or even detrimental to the organization in the long term. Let us use Kodak as an example; their short-term objective led to their overall failure. Kodak has been around for several decades as the lead photo developer. They produced an array of products to include the introduction of the digital camera. What Kodak failed to do was to ensure they remained technologically savvy with their digital camera production and trademarks. Ultimately, the digital camera (their own creation) put them behind in the industry. Because Kodak did not have the foresight to create a long-term (and financial) objective, they were not able to remain relevant to consumers and ultimately lost market share. Strategic Model There are many different models that can be incorporated into an organization’s strategy. Most organizations incorporate one strategy to achieve their goals and expected outcomes. A few examples of different types of strategies include: forward integration, market penetration, product development, and liquidation. Below are examples of how these strategies could be applied: • Forward integration: Think of Apple Pay, which would enable the customer to be validated and pay for physical merchandise from a brick and mortar retailer via his or her phone. • Market penetration: Coca Cola personalized cans and bottles with individual names and catch phrases, which has increased the popularity of the brand and are an example of this strategy. This personalization has increased Coca Cola’s bottom line and presence in the domestic and international households. • Product development: Think of a drug manufacturer creating a vaccine to prevent COVID-19. This product would serve a specific purpose and, if successful, would benefit the world. • Liquidation: An example would be Blockbuster Video selling all of their merchandise before closing all of their stores. This is an opportunity to pay creditors and investors a portion of what is owed before dissolving. • Bankruptcy: You may be asking yourself how bankruptcy is a strategy, but it is a potential strategy to assist an organization restructure or dissolve itself. There are five varying types of bankruptcy in the United States. The specific types are Chapter 7, Chapter 9, Chapter 11, Chapter 12, and Chapter 13. The below chart outlines the different chapters of bankruptcy: Bankruptcy Chapter Description Chapter 7 All of the organization’s assets are wiped out in order to eliminate debt. Chapter 9 Municipalities or incorporated areas that file this bankruptcy do not have to shut down vital operations. Chapter 11 This type allows for reorganization and a comeback. An example is an airline that reorganized and comes back. Chapter 12 This provides special relief to family farmers. Chapter 13 Similar to Chapter 11, this provides relief to small businesses. The specific chapter a company may choose would depend on its size and goals. For example, Kodak would not file for Chapter 12 bankruptcy as it applies to family farms. The company must also consider whether or not they want to dissolve the business or try and start fresh. However, in looking to start fresh, the company must determine how it will reorganize itself to avoid future issues. BUS 4302, Business Policy & Strategy 3 UNIT x STUDY GUIDE Title Strategy Analysis The SWOT matrix is a tool to assist managers and leaders identify strategies within and outside their organization. The strength, weakness, opportunity, and threat (SWOT) model has four strategies used to evaluate and compare the organization related to its strength and weaknesses. This analysis is often used to compare and contrast an organization against other competing organizations. The analysis is also used to evaluate its internal operations to determine where improvements can be made. The chart below outlines the functions of a SWOT matrix: Strategy Description SO: Strength-opportunity Evaluation of the organization’s internal strengths to identify external opportunities WO: Weakness-opportunities Improving internal weaknesses by taking advantage of external opportunities ST: Strength-threats The reduction of external threats WT: Weakness-threats Reducing internal weaknesses The SWOT matrix and strategy go hand-in-hand. Suggested Unit Resources In order to access the following resources, click the links below. The chapter presentations below will provide you with additional information on this unit’s concepts. Access the Chapter 5 Presentation. Access the PDF version of the Chapter 5 Presentation. Access the Chapter 6 Presentation. Access the PDF version of the Chapter 6 Presentation. https://online.columbiasouthern.edu/bbcswebdav/xid-136194220_1 https://online.columbiasouthern.edu/bbcswebdav/xid-136174355_1 https://online.columbiasouthern.edu/bbcswebdav/xid-136194210_1 https://online.columbiasouthern.edu/bbcswebdav/xid-136174359_1 Course Learning Outcomes for Unit IV Learning Activity Required Unit Resources Unit Lesson Strategy Formulation Financial Objectives Strategic Model Strategy Analysis Suggested Unit Resources Pg 357 Macy’s, Inc.—2018 www.macys.com, M As of March 2018, Macy’s, Inc. operates 690 department stores in 45 states, Washington DC, and outside the United States in Columbia, Guam, Puerto Rico, China, United Arab Emirates, and Kuwait with third party license agreements. Headquartered in Cincinnati, Ohio, the company’s brands include Macy’s, Bloomingdale’s, Backstage, The Outlet, Last Act, and Bluemercury. Most stores are located in urban or suburban areas and include a mix of apparel, accessories, cosmetics, home furnishings, and various other consumer goods. Macy’s reported revenues in excess of $25 billion in year ending January 2017 deriving from 382 company-owned stores,with the rest being leased. Approximately 710 stores are department stores operating under the names Macy’s and Bloomingdale’s, and the remainder are specialty stores that include Bloomindale’s The Outlet, Bluemercury, Macy’s Backstage, and Last Act. Macy’s divested 66 stores in year ending January 2017 and 43 year end January 2016, with plans to continue reducing total store numbers by about 30 as leases expire. Macy’s employs 148,300 full-time and part-time employees with 10 percent represented by unions. Closing more and more stores every year, Macy’s is struggling financially and needs a clear strategic plan. During the month of December 2017, Macy’s spent $32 million on television advertising, compared to J.C. Penney, who spent $27 million that month. Copyright by Fred David Books LLC; written by Forest R. David. History Macy’s was founded by Rowland Hussey Macy 150 years ago. He chose the red star logo based on a tattoo on his forearm which was inspired by the North Star Polaris that often guided him as a sailor. After several failed attempts in retail, R. H. Macy started Macy’s in 1858 as a dry goods store in New York City with first-day sales grossing $11.06, but first-full-year sales of $85,000. Macy was a pioneer in many facets of business, promoting the first woman to an executive position in retail and the first to charge all customers the same price for an item. That original Macy’s store at 1.1 million square feet has been at the same location since 1902 and has been the same size since 1924. Macy’s went public in 1922 and began expanding across the United States shortly after. The firm is famously known for its Thanksgiving Day Parade, which began as a Christmas Parade in 1920 by immigrant workers thankful for their new American nationality. In 1929, Macy’s was acquired by Federated Department Stores and remained in operation under that name until 2007 when Federated changed its corporate name to Macy’s, Inc. The company’s revenues and profits have declined every year since 2015. Vision/Mission Macy’s provides a quite lengthy vision statement on their website, but no mission statement. At the corporate website, simply click on About Us then click on Corporate Vision. Unhappy with the vision and lack of mission, someone once proposed a mission statement for Macy’s as follows: At Macy’s, we aspire to provide our worldwide shoppers an experience that gives them the confidence to be the best version of themselves. Whether utilizing the unsurpassed expertise of our employees in store, or shopping on-line, we want to provide our customers with open and honest communication while they shop for clothing and accessories that makes them life-long members of our family. Pg 358 - 361 Internal Issues Organizational Structure Exhibit 1 provides Macy’s organizational structure. Currently, 7 of the top 19 executives are female. Mr. Macy would likely take great pride in this; he hired the first women executives in U.S. retail history in the 1920s. Exhibit 1 Macy’s Top Executives and Organizational Chart Source: Based on company documents. Figure 1 Full Alternative Text Sustainability Macy’s is committed to sustainability and has detailed commentary on its website on various sustainable measures it has taken such as the firm adding 1.8 million LED lights through its properties, saving 26 million kilowatt-hours of power. Macy’s was ranked in 2016 as the fourth largest American enterprise for installed solar capacity; the company sells most of the solar power it generates to others. Macy’s has been a member of the Dow Jones Sustainability Index since 2005. Current Strategies Macy’s fiscal 2017 revenues and profits were down 4.8 and 42.9 percent, respectively, and the company closed about 7 percent of its stores. The corporation blames shifts in consumer shopping habits and has designed several new strategies moving forward, but most center around what Macy’s, Inc. refers to as the North Star Strategy, with the name being an acknowledgement to their founder. There are five key points to the North Star Strategy, and while all are vague as reported on the Annual Report, they are worth mentioning (paraphrased): 1) Increased marketing research to improve Macy’s loyalty programs and pricing strategies, 2) Increased focus on private label brands only found at Macy’s stores as well as catering increasingly to Macy’s Backstage and Last Act customers, 3) Further developing of the mobile app and focus on better trained sales associates in what Macy refers to as Omnichannel, simply meaning customers can shop in more ways than traditional stores, 4) Increased focus on cost reduction, reinvestment, and extra care in the real estate decisions, 5) Exploring unmet customer needs and exploring acquisitions through increased marketing research. Macy’s is adding Macy’s Backstage stores in existing Macy’s stores. The firm’s Last Act program is aimed to move clearance merchandise at Macy’s stores more effectively. The company is using a retrenchment strategy by recently closing 100 Macy’s stores, with plans to close another 30 stores by year end 2018. Macy’s, Inc. is adding Bloomingdale’s and Bluemercury stores as well as adding Bluemercury boutiques inside existing Macy’s stores. The company currently has about 20 Bluemercury locations inside Macy’s stores. Macy’s has a partnership with Brookfield Asset Management to help determine effective ways of increasing value in Macy’s, Inc.’s real estate investments. Through January 2019, Brookfield is formulating strategies for each of Macy’s Inc.’s real estate assets. Macy’s continues to expand its Macy’s Backstage stores, which are around 30,000 square feet each and offer discounted products, after first opening six such stores in New York in 2015. Current focus is on adding Backstage stores inside existing Macy’s stores as a means of attracting cost conscious customers into Macy’s stores. The company desires to expand further into China and currently has a joint venture with Fung Retailing Limited holding a 35 percent stake and Macy’s holding the remaining 65 percent ownership stake in Macy’s China Limited. All business to date is through ecommerce on Alibaba Group’s Tmall Global website. Suppliers Macy’s purchases its products from many different suppliers with no single supplier accounting for more than 5 percent of the firm’s net purchases and no formal long-term commitments with any of the suppliers. Macy’s considers its relationships with suppliers to be good. The majority of Macy’s products are produced outside the United States, primarily from Asia. Private Label Brands Macy’s has numerous private labels brands that include American Rag, Aqua, Charter Club, Epic Threads, first impressions, Greg Norman for Tasso Elba, Hudson Park, John Ashford, Martha Steward Collection, Morgan Taylor, and many more. Several of the private label brands are licensed to Macy’s, Inc. through third party trademarks that extend decades into the future. Finance Macy’s continues to struggle financially as indicated by declining revenues in Exhibit 2, and all the red downward pointing arrows in the balance sheets provided in Exhibit 3. Even as its finances worsened, the firm repurchased nearly 8 million shares of stock in 2016 and increased its dividend to $1.51 per share, possibly as a measure to keep shareholders from selling the stock. This marked the sixth dividend increase in the last 5 years. From 2015 to the end of 2017, Macy’s stock dropped 75 percent in value from over $70 to $18 per share, yet dividend payouts in 2017 resulted in a reduction of retained earnings; the firm paid out approximately $850 million in dividends to only $611 million in net income in 2017. Exhibit 2 Macy’s, Inc.’s Income Statements (in millions) Source: Based on company documents. Figure 2 Full Alternative Text Exhibit 3 Macy’s, Inc.’s Balance Sheets (in millions) Source: Based on company documents. Figure 3 Full Alternative Text Segment Data Exhibit 4 reveals that Macy’s is fairly well positioned across the United States, but in reality the firm is primarily focused on the east and west coasts. Like many department stores and retailers, women account for the bulk of the business and Macy’s, Inc. is no exception with over 60 percent of revenues derived from products exclusively for women. Department stores generally do not cater to men much. Exhibit 4 The Number of Macy’s Inc. Stores Across the United States Source: Based on company documents. Figure 4 Full Alternative Text Exhibit 5 gives the number of Macy’s, Inc. stores by brand. Note the steady decline in the flagship Macy’s department stores. Exhibit 6 gives a percentage breakdown of Macy’s, Inc. sales by product category; note that women products comprise 61 percent of total sales. Exhibit 5 The Total Number of Macy’s, Inc. Stores Business January 2018 January 2017 January 2016 January 2015 Macy’s 660 673 737 773 Bloomingdale’s 55 55 54 50 Bluemercury 137 101 77 0 Source: Based on company documents. Exhibit 6 Macy’s, Inc.’s Percent of Sales by Division (as of February 2017) Source: Based on company documents. Figure 6 Full Alternative Text As of January 2018, Macy’s, Inc. had 852 stores with nearly 400 owned and the others, leased. Among the 852 stores, 258 were located in the Northeast USA, while 188 were located in the South, 144 in the North Central, and 131 in both the Northwest and Southwest. Exhibit 5 reveals that the majority of stores are of Macy’s brand with Bluemercury store numbers accounting for the second most, followed by Bloomingdale’s. Bluemercury stores are significantly smaller than Bloomindales in square feet. The firm does not report revenues nor profits across segments, but it can be inferred from company actions that Bluemercury is more efficient at least in generating profits as the firm is expanding this segment while closing underperforming Macy’s branded stores. Bluemercury is an upscale spa focusing on offering spa services as well as haircuts, makeup, and other beauty products. Ulta Beauty is a much larger competitor with a similar profile and target customer as Bluemercury. Macy’s, Inc. hopes customers utilizing Bluemercury will shop in Macy’s department stores as they make their way for spa services at Bluemercury. Pg 361-362 Competitors Competition in the department store business is extremely competitive with many options for customers ranging from online to traditional stores. Stores specialize in home goods, apparel, general merchandise, and many other areas from discount stores to higher end stores. Even stores like Walmart and Target have entire sections devoted to department store offerings including clothing, home goods, jewelry, and more. Customers have never had as many choices as before. The entire department store industry is valued at over $150 billion with profits in excess of $4 billion. However annual growth has declined around 5 percent a year for the last several years and is expected to continue to decline around 3 percent annually through 2023. Such numbers for example would place department stores in the bottom half of a BCG Matrix either as cash cows or dogs depending on their relative position to the top revenue-generating firm in the industry. Online department stores offering similar products simply do not incur the overhead cost of traditional stores like Macy’s that incur really high rent, tax, utilities, and labor expenses in areas such as New York City. Moving forward in the industry, it is vital for stores such as Macy’s to differentiate themselves from rivals and online options—probably by providing superior in-store service. To date, Macy’s strategy (at least publicly stated on the Annual Report) is providing omnichannel offerings and superior service. This type of vague strategy will likely not be good enough to compete with online providers offering similar quality products to Macy’s, Inc. Being forced to enter pricing wars with online providers is a huge threat facing all brick and mortar providers, and one they are likely unable to win. Simply offering online products themselves is a viable strategy although it is likely unwise to undercut in-store prices; customers can simply shop in the store and then order online. This phenomenon is called show rooming. All specialty stores that sell similar products as department stores, such as shoe stores and athletic apparel stores, can be considered rivals to Macy’s, Inc. A financial comparison with two rival companies is provided in Exhibit 7. Exhibit 7 A Financial Comparison of Macy’s, Inc. with Two Rival Companies Macy’s, Inc. J. C. Penney Company Nordstrom $ Market Capitalization 7.5B 1.1B 8.0B # Employees 148K 106K 78K $ Revenue 25.8B 4.5B 14.7B \% Gross Margin 39.1\% 35.6\% 35.8\% $ Net Income 619M 1.0B 354M EPS Ratio 2.28 ‒0.57 2.87 P/E Ratio 10.80 — 16.77 Source: Based on a variety of sources. J. C. Penney Company (JCP) Headquartered in Plano, Texas, JCP operates 1,013 retail locations in the United States and Puerto Rico and had revenues of $4.5 billion in year ending January 2017. The firm has struggled in recent years switching its strategy and product offerings back and forth at times, often confusing the customer. Around 2012, JCP hired a new CEO and removed the coupons customers expected using “One Fair Price” strategy and removed commissions for sales people. Three CEOs later, these programs are back in effect and operating income is positive after 3 years of negative numbers. JCP continues to cut its workforce though, particularly at the corporate level. About 45 percent of JCP brands are private label brands that provide higher margins than national brands the store sells, such as Levis. JCP has 106,000 full-time employees and operates 875 stores as of November 2017. Founded in 1902, JCP is not doing well today. At the close of 2017, JCP’s Better Business Bureau (BBB) rating was 1.08 out of 5 stars based on 47 customer reviews and a BBB Rating of F. The company’s ConsumerAffairs.com rating is 1 out of 5 stars based on 259 reviews submitted in the past year. Most of the low ratings are attributed to poor customer service. Nordstrom, Inc. (JWN) Headquartered in Seattle, Washington, Nordstrom was founded in 1901 as a shoe store in Seattle. Nordstrom caters to upper and middle class consumers who enjoy purchasing luxury items. Nordstrom typically focuses on goods that are one level below a true luxury good of say, Louis Vuitton, offering customers excellent quality and notoriety with a better price. Nordstrom’s inventory includes clothing, accessories, handbags, jewelry, cosmetics, and fragrances as well as wedding and home furnishings departments. Nordstrom operates in the US, Puerto Rico, and Canada. The firm operates over 120 department stores and 226 off-price with Nordstrom Rack stores employing 78,000. The firm is currently testing smaller stores with an increased focus on luxury goods that focus on customers who are less price conscious as a means of differentiating itself in the market, or at least as a means of focusing on a more profitable customer segment. The first Nordstrom Rack store in Canada opened in 2018 in Toronto. Target Corporation (TGT) Headquartered in Minneapolis, Minnesota, Target is the second-largest general merchandise retailer in the United States, behind Walmart. Target is similar to Walmart, but with higher quality products, according to its patrons. Target operates over 1,834 stores across the United States and employs over 320,000; the firm reported revenues in year ending January 2017 of $69.5 billion. Target recently launched a series of national, local and charitable initiatives that mark the retailer’s largest-ever push into team sports. Target is an official partner of Major League Soccer (MLS) and has a multi-year deal that includes airtime during MLS broadcasts on Univision, FOX Sports and ESPN, opportunities for in-stadium experiences, player appearances, and ownership of certain major MLS platform. Target also has a $14 million commitment to local youth soccer through two new national initiatives—an $8 million local soccer grant program, and a $6 million partnership with the U.S. Soccer Foundation to build 100 new soccer play spaces by 2020. Online Consumers are increasingly shopping online for clothing through auctions and online-only stores. Traditional retailers such as Nordstrom have virtually all responded with their own online websites, yet often at the same high prices found in their stores. Brick-and-mortar stores still hold the distinct advantage of customers being able to hold, feel, and try on items before purchasing, as well as talk to knowledgeable salespeople at higher quality stores. According to some analysts, the 15 most popular “online only” clothing stores that compete with Macy’s, Inc. by offering clothing, mainly for women, are listed below: 1. Boohoo—a UK-based company; dresses start at $6; free shipping on orders over 60 2. Cotton On—an Australian retailer; dresses start at $10; free shipping on orders of over $55+ 3. One Loved Babe—an online boutique for women; dresses start at $20; free shipping 4. Yes Style—a Hong Kong-based store; dresses start at $3.95, free shipping on orders over $35 5. Amazon.com—Prime members get free shipping and returns 6. Missguided—a UK-based firm; dresses start at $6; shipping free is $5 on all orders 7. ASOS—very fast and reliable; dresses start at $12.50; free shipping on orders over $40 8. Adore Me—specializes in lingerie in straight and plus sizes; free shipping 9. Saved by the Dress—Miami-based; dresses start at $25; free shipping on orders over $60 10. Dog Dog—dresses start at $17.95; free shipping on all orders 11. Lulu’s—dresses start at $14; free shipping on orders over $50 12. Dress Up—boutiques; dresses start at $16; free shipping on orders over $50 13. Thred Up—a resale store carrying all brands like new; free shipping on orders over $79 14. Blame Betty—offers vintage or retro clothing; dresses start at $27.60; shipping costs vary 15. 6pm—carries many brands such as Columbia, Under Armour, Prana; for men and women Pg 363 External Issues Economic Conditions Department stores are heavily dependent on the state of the economy and customers’ disposable income. The economic outlook for the United States is excellent through 2020. Customers are increasingly purchasing online and this means of purchasing is expected to exceed 10 percent annually through 2023. Despite lower profit margins, department stores are expected to increase marketing efforts to attract customers into the stores. Many customers of Macy’s are increasingly shopping online for the price range of products Macy’s provides. Department stores have unknowingly “trained customers to wait for sales or look for deals as consumers are increasingly price conscious.” Firms are offering deals in low-traffic times and even offering unannounced deals on select items. Expenses Although not likely to lead to a competitive advantage, controlling costs remains a significant concern for department stores moving forward simply to avoid going bankrupt. Purchases account for over 50 percent of industry revenue alone and Macy’s cost of goods sold is about 60 percent. Firms should explore joint ventures or strategic alliances with providers to help reduce costs, if at all possible. Backward integration is an option as well, but most department stores simply offer too many different products to make this a viable strategy. Labor continues to be a relatively high expense totaling around 14 percent of revenues, but most workers are hourly and not paid significantly. On January 1, 2018, however, 18 states increased their minimum wages rates, even though the federal minimum wage rate remains unchanged. Firms must decide moving forward if they wish to increase their labor to provide customers increased customer service with experienced knowledgeable sales people in each section of the store. Rent and utilities maybe surprisingly account for around 8 percent of revenues, but the price is still significant when attempting to compete with online providers who have considerably lower bills in this category. Marketing, contrary to what many believe is a relatively low expense, accounts for only 1 percent of revenues. However, this number may increase as firms look to increase their marketing efforts to help attract customers to the store. Pg 364-365 Future Like many department stores, Macy’s is struggling to compete with online shopping and more niche retail stores that focus tremendously on customer service or a small subset of high-end customers. Because of this, Macy’s is moving their popular Bluemercury stores inside Macy’s department stores to attract new customers, the company’s promotions and other tactics hope to draw new customers into the stores. As Macy’s sales have declined in recent years, management has shifted attention to monetizing some of the company’s highly valuable real estate, knowing that real estate sales often lead to significant one-time gains on an income statement. Macy’s may be the biggest beneficiary in the retail sector from the new, lower U.S. corporate tax law because with the sale of high-dollar properties, Macy’s can pay down debt, continue paying its really high dividend (currently one of the highest dividend yields as of mid-2018) and possibly in late 2018 or 2019 start buying back stock again. In 2016–2017, the company was focused on paying down debt rather than trying to buy back stock. Macy’s has actually started to sell excess real estate, and some of the properties are in valuable locations. Some Macy’s stores, while profitable, are not making enough money to pay for the opportunity cost of what the real estate would be worth if it were to be sold. For example, Macy’s has numerous downtown stores in really hot real estate markets like New York, San Francisco, and Chicago. Every time Macy’s sells one of these “50-year-old” stores however, it has to pay a pretty big tax bill because of that asset sale gain. But with lower corporate taxes, there is more incentive to sell. To manage this selling of real estate, Macy’s has formed a strategic partnership with Brookfield Asset Management, a private equity and real estate management firm that’s looking into several dozen Macy’s store sites and ways to either redevelop the store or do additional real estate development on, for example, the parking lots or similar ideas of that nature. Macy’s wants to monetize the upper floors of its humongous stores, partly because the company’s real estate is worth more than the entire company’s valuation right now. Being able to sell off some of that real estate can bring in needed cash, pay down debt, pay dividends to shareholders, and be transformative for Macy’s viability. Fiscal 2018–2019 In early 2019, Macy’s closed its Redmond Town Center main store in Redmond, Washington, bringing the total to 83 of the approximately 100 store closures announced in August 2016. Over the last three fiscal years, Macy’s, Inc. has completed transactions totaling approximately $1.3 billion in cash proceeds. Heading into fiscal 2018, Macy’s, Inc. continues to evaluate its real estate portfolio to identify opportunities where the redevelopment value of its real estate exceeds that of non-strategic operating locations. For example, in February 2018, Macy’s signed an agreement to sell floors 8 through 14 of its State Street store in Chicago to a private real estate fund sponsored by Brookfield Asset Management. Brookfield intends to convert these largely unused floors into dynamic, creative office space. As part of this transaction, Macy’s, Inc. will receive a total of $30 million ($27 million of consideration and a $3 million contribution for certain improvements), as well as upside participation in the ultimate value creation associated with the conversion of the upper floors to office space. This transaction will enable the company to make Macy’s on State Street a more vibrant shopping destination. The company anticipates closing this transaction in the first half of fiscal 2018. Macy’s, Inc. expects to open two additional Bloomingdale’s stores in San Jose, California, and Norwalk, Connecticut, in fiscal 2019. Both Macy’s off-price brand of stores, Macy’s Backstage, and its clearance strategy, Last Act, are growing. As of February 3, 2018, the company has a total of 52 Macy’s Backstage locations (7 freestanding and 45 inside Macy’s stores). Additionally, Macy’s Inc. is growing its luxury beauty products and spa retailer, Bluemercury, by opening additional freestanding Bluemercury stores and adding Bluemercury products and boutiques to Macy’s stores. As of February 3, 2018, Macy’s, Inc. operated 157 Bluemercury locations (137 freestanding and 20 inside Macy’s stores). Moving forward, Macy’s, Inc. needs a detailed strategic plan; they must decide what position they wish to take in the industry. Currently, offering moderately priced items in the traditional department store format has not been effective relative to discount department stores, specialty stores, or pure online shopping.