Industry Analysis Department Store

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Department Store Industry
NACIS 452111

Table of Contents

Introduction…………………………………………………………………………….………… 3

The Industry’s Dominant Economic Features……………………………………………………………..……………………….…… 3

Porters 5 Forces…………...……………………………………………………..…………………………. 7

Power of Buyers…………………………………….……….…………………………….7

Power of Suppliers……………………………………….………………………………. 7

Barriers to Entry…………………………………..……………………………………… 7

Threat of Substitutes……………………………...…………...…………………………. 7

Competitive Rivalry………………………………………….……………………………8

The Drivers of Change………………...………………………………………………………………..…………9

Companies in the Strongest/Weakest Positions………………………...………………………..11

Industry’s Attractiveness and Prospects for Long-Term Profitability……………...……………15

Works Cited………………………...……………………………………………………………………17

Industry Analysis: Department Store Industry

Introduction:
The Department store industry is defined by the North American Industry Classification System (NAICS) as “… stores that have separate departments for various merchandise lines, such as apparel, jewelry, home furnishings, and linens, each with separate cash registers and sales associates. Department stores in this industry generally do not have central customer checkout and cash register facilities.”(Census Bureau)

According to Investopedia industry handbook the department store industry has been divided into three segments namely traditional department stores, discounters and demographic retailers. (Investopedia). The industry’s primary competitors are Target, Macys, Sears Holding Corp, JC Penny & Kohl’s. (Lekovic 23)

Due to the economic crisis that we are currently facing, this industry has been faced with difficult challenges. Many department store customers are keeping a watchful eye on their spending habits.

The contents of this analysis will describe the department store’s dominant economic factors, forces acting on the industry, drivers that shape the industry and SWOT (Strengths, Weaknesses, Opportunities and Threats). It will also identify three firms within the industry and analyze them accordingly.

1. The Industry’s Dominant Economic Features
* Market Size:
* Industry’s revenue estimated at $195.6 billion (Lekovic 4) * The industry employs more than 1.3 million people with wages paid amounting to $26 million (Lekovic 34). * The industry Ranks 85th out of 756 in share of the economy which amounts to 0.25%. * Scope of Rivalry:

* Primary competitors in this industry include stores like Target, Macys, Sears Holding Corp, JC Penny & Kohl’s who currently dominate the market with over 70% market share. (Lekovic 23). Figure below will show the market share of major competitors and their respective market share. (Lekovic 23)

Fig. 1

* Growth Rate and Life Cycle Stage:
* Research shows that this industry is mature and is in the declining phase of its life cycle. (Lekovic 4, 11) * The past five years’ figures concur with the fact that this industry is on a downturn. “Industry value added is estimated to fall by 5% per annum over the five Years to 2010, with a further annualized contraction of 4.7% over the outlook period. This is much worse performance compared to real GDP, which is expected to grow at 0.9% over the past five years. As such, the industry is falling behind the rest of the economy” (Lekovic 11). * Department stores are in a very competitive industry, in reaction to this competition and the on-going recession, department stores heighten the level of marketing and promotion. Department stores response as per IBIS world is “to grow by taking market share away from existing operators, thus leading to several industry mergers and acquisitions” (Lekovic 11).

* Number of Rivals and their relative size:
* There are a few top firms that hold a majority of the market share. * The major holders of market share with their respective share as per IBIS world...
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