Student: Glenford Thomas

Bus 969: Global Virtual Enterprise

Prof: Daniel Kane

Topic: Potential business partner for GNA Essence Bands, Inc.

Contents

Potential Business Partner for GNA Essence Bands, Inc. ........................................................................ 2

History of Macy’s ......................................................................................................................................... 3

Detailed Description of the Business ............................................................................................................ 4

SWOT Analysis ............................................................................................................................................ 6

Business Partners and Potential Obstacles .................................................................................................... 7

The benefits of GNA’s partnership with Macy’s ...................................................................................... 8

The negative aspects of GNA’s partnership with Macy’s ........................................................................ 8

Terms of partnership ..................................................................................................................................... 9

Potential collaboration ............................................................................................................................. 9

Terms of Potential Partnership ................................................................................................................. 9

Conclusion .................................................................................................................................................. 10

References ................................................................................................................................................... 12

Potential Business Partner for GNA Essence Bands, Inc.

The company that I have chosen to be GNA Essence Bands, Inc.’s potential business

partner is Macy’s Corporation. Macy’s has a long standing history for having diverse markets

nationally. Macy’s serves and connects with many types of customers. They have created a

diverse workforce that fosters inclusiveness where different perspectives are valued. Macy’s

shares time, talent, and resources with communities, maintains access for the continued

development of a diverse vendor network, communicates values, and finally, grows sales and

profits by capturing the buying power of a diverse market. Also, Macy’s has over 800 stores

nationwide, ships to over 100 countries and has more than 14 million Facebook supporters that

follow them daily (Macy’s, 2015c).

History of Macy’s

Rowland Hussey Macy opened his first dry goods store in New York City in 1858. In his

first day of operation, sales only totaled $11.06 but by the end of the first full year, sales had

grown to $85,000. Nineteen years later (1877), R.H. Macy & Co. became a full-grown

department store occupying a total of 11 adjacent building ground floors. During the same

period, Macy’s had made history by promoting a woman (Margaret Getchell) to an executive

position and was first to introduce such products as the tea bag, the Idaho baked potato and

colored bath towels. Also, Macy’s was the first retailer to hold a New York City liquor license.

(Macy’s, 2015c)

In November 1902, Macy’s moved to their Herald Square location on Broadway and 34th

Street, establishing an attraction for shoppers from around the world. In 1924, Macy’s Herald

Square store became the “World’s Largest Store,” with more than 1 million square feet of retail

space due to their expansion and renovation.

By 1918, R.H. Macy & Co.’s annual sales reached $36 million and in 1924, Macy’s

immigrant employees organized the first Christmas Parade that featured floats, bands, animals

from the zoo and 10,000 onlookers. This was the beginning of a time-honored tradition now

known as the annual Macy’s Thanksgiving Day Parade. (Macy’s, 2015c)

1945 - 1947 were years of acquisition for Macy’s. The company expanded westward and

purchased O’Connor Moffatt & Company in San Francisco. Also in 1946, Macy’s broke new

ground with the first department store flower show in California that was promoted in the

cosmetics department and served as a celebration for the spring season. This celebration spread

to other stores held in New York City, Chicago, Minneapolis, Philadelphia and Washington,

D.C. (Macy’s, 2015c)

The once cluttered Macy’s Union Square store’s lower level located in New York City

was transformed in 1971, changing the way customers shop for housewares. Due to its success,

the Herald Square store followed suit five years later. (Macy’s, 2015c)

On December 19, 1994, Federated Department Stores, Inc. (now known as Macy’s, Inc.)

acquired R.H. Macy & Co., creating the world’s largest premier department store company.

Federated Department Stores operated over 400 department stores and more than 157 specialty

stores in 37 states. (Macy’s, 2015c)

In January 2001, Macy’s bought 17 Stern’s department stores located in New York and

New Jersey. Then in June 2001, Federated purchased the Liberty House operations in Hawaii

and Guam, bringing the proud Macy’s tradition and heritage to the Pacific. By 2005, Macy’s

had over 240 locations, primarily on the East and West Coasts and with the Federated regional

store nameplates; they grew to about 425 locations across the country. (Macy’s, 2015c)

As of today, Macy’s now serves customers through approximately 800 stores in virtually

every major geographic market in the United States, as well as the macys.com website. (Macy’s

Inc. 2015b)

Detailed Description of the Business

Macy’s is an American department store. Their stores are located throughout all regions

of the United States as well as two American territories (Guam and Puerto Rico). They currently

(as of January 2015) operate 730 full-line stores plus an additional 93 home/ furniture/ clearance/

outlet stores. Most of their stores are located in urban or suburban areas. They also operate a

website, macys.com, which offers the same brands and often a greater assortment of products

than can be found in stores. (Macy’s Inc. 2015b) Macy’s stores are operated by Macy’s Inc,

which also operates Bloomingdale’s, an upscale department store, and Bluemercury, a specialty

makeup, skincare and spa retail chain. (Macy’s, Inc. 2015a)

Out of all of Macy’s stores, 460 of the locations (roughly 55%) are owned by Macy’s.

The remaining stores are either in a leased location (32%) or subject to a ground lease (13%).

Interestingly, these figures vary greatly by region. For example, the Northwest and Southwest

regions have more leased stores than owned stores, yet the South Central and Southeast regions

have a far greater percentage of owned stores that the average figure of 55%. (Macy’s Inc.,

2015d)

As of January 31, 2015, Macy’s employed about 166,900 regular (year-round) workers.

They hire additional seasonal workers every November and December. Each store employs on

average between 100 and 300 people, though some of the larger stores have many more

employees. (Macy’s Inc., 2015e)

Macy’s sells a wide variety of products including clothing and shoes for men, women,

juniors, and children; cosmetics and accessories such as handbags and jewelry; and items for the

home including kitchen wares, bedding, bath accessories, and even furniture. Their merchandise

includes many private brands that are developed to appeal to a certain type of customer and are

marketed as “available only at Macy’s.” (Macy’s Inc., 2015a)

Macy’s stock is publicly traded on the New York Stock Exchange under the symbol “M.”

The company has approximately 17,700 stockholders. Their net sales in 2014 totaled over $28

billion, which yielded $1.5 billion in net income. At the closing of 2014, their long-term debt

totaled $7.2 billion and their short-term debt was $76 million. The price of stock shares for 2014

ranged from $50.05 to $68.30, and basic earnings per share was $4.30. (Macy’s, Inc. 2015a)

SWOT Analysis

Strengths:

Strong advertising

Healthy and impressive portfolio of

strong private brands

Large market share that appeals to all

generations

Socially and ethically responsible

Economies of scale

Innovative and strong brand equity

Well diversified with products,

customers and locations

The affiliation with Bloomingdale’s

allows Macy’s to appeal to upscale

shoppers

Has international presence in Canada,

Puerto Rico and Guam

Weaknesses:

Customer’s perception of impersonality

of the national brand

Reposition by the company

Cater to middle and upper class only

Opportunities:

Growth through overseas operations

Threats:

The increase in the minimum wage in

E-commerce holds huge potential for

sales growth in online retail spending.

Opportunities to acquire smaller stores

because of size.

Can penetrate the emerging middle

class markets in China and India.

the States.

Competition from retail stores such as

Kohl’s, JC Penney and Saks Fifth

Avenue.

Online presence allows customers to

find best price.

Unforeseen economic conditions could

slow growth.

Business Partners and Potential Obstacles

A partnership with Macy’s will drastically change the dynamics of running GNA Essence

Bands, Inc. the way it was envisioned. For instance we keep a small amount of inventory on

hand to keep down costs. Dealing with partners such as Macy’s and the many stores they

operate plus online will require GNA Essence Bands to keep higher inventory on hand which

will increase costs. Another potential obstacle is switching to their manufacturers to produce

GNA products. Also, because of the size and reputation that Macy’s has, they may possibly

want to dictate how GNA designs its products and at what price we should sell.

On the other hand, if the partnership is a good fit, it has the potential to add a lot of

benefits. The partnership with Macy’s, I feel will benefit GNA Essence Bands, Inc.

exponentially. GNA Essence Bands has the ability to benefit from this partnership with Macy’s

in order to reach a greater market. This will allow GNA to earn higher profits, better branding

and positioning, and lower imports, tariffs and shipping costs.

The benefits of GNA’s partnership with Macy’s

GNA Essence Bands’ partnership with Macy’s allows GNA a greater pool of diversified

skills that will serve the company well. Because Macy’s is well established, has positions in the

world and has a large pool of experts in marketing and sales among others, I feel GNA products

will be in the best position to maximize sales and profits and capture market shares. Also with

the partnership, each party gains from different perspectives: new partners give outside

perspective that avoid tunnel vision (one’s tendency to focus on a single goal or point of view)

and see the business from different points of view, making the decision-making process easier.

Different perspectives also lead to new ideas that are important for the innovation and survival of

any business.

Networking is an essential aspect of GNA Essence Bands’ business. Macy’s has over 14

million followers and partners that can serve both of our interests in the areas of potential clients,

investors, suppliers, and manufacturers.

The negative aspects of GNA’s partnership with Macy’s

While partnerships provide many advantages, they also come with disadvantages. Some

of the disadvantages that GNA Essence Bands may face doing business with Macy’s are: the

possibility of conflict in business culture. At GNA Essence Bands, the partners know each other

well and understand each other’s thinking. A partnership with Macy’s may interrupt the

decision-making process that we have developed. For instance, GNA Essence Bands has three

partners. Our rule is that whenever a decision is to be made that we find difficult, we vote on it

and two thirds or 67 percent decides. A partnership with Macy’s company is likely to change

GNA’s culture and decision making process. There is also the issue of trust. Distrust can

quickly escalate when one partner feels undermined or cheated due to unfair compensation.

Terms of partnership

Potential collaboration

The potential collaboration between GNA Essence Bands and Macy’s Corporation will

be based on sharing expertise, marketing, and working together to tackle challenges through

visible leadership, coordination and evaluation of activities. Our joint venture will be focused on

engaging or reaching external consumers to buy our products so that we can reach or surpass our

set goals.

GNA Essence Bands is a relatively new company compared to Macy's and because we

have not worked together in the past it is important for us to find common ground where trust is

the focus.

Terms of Potential Partnership

A partnership agreement or terms of partnership allows GNA Essence Bands to structure

its relationship with Macy’s so that the partnership will be an advantage and not a disadvantage.

Laurence (2014) outlined some areas that GNA Essence Bands have found to be a good fit in

order to partnership with Macy’s. They are:

Nature of Partnership: GNA Essence Bands, Inc. and Macy’s Company will conduct

business jointly where Macy’s will sell GNA’s product line, but GNA Essence Bands,

Inc. and Macy’s should remain two separate companies.

Contributions to the partnership: It is GNA’s responsibility to provide Macys with

GNA’s product line for sale. Macy’s will yield a percentage or commission for every

sale they make with GNA’s products.

Allocation of profits, losses, and draws: Because GNA and Macy’s will operate as two

separate entities, any profits and losses to GNA will be the sole responsibility of GNA.

Macy’s will not share GNA’s profits or losses.

Partnership decision making: Macy’s is allowed to participate in the discussion of

future products and innovations; however, the final decision on whether to initialize new

products will be made by GNA’s three partners.

Management duties: GNA alone will negotiate with their suppliers and manufacturers in

the development of GNA’s products.

Admitting new partners: While Macy’s carries GNA’s product line, if in the future

GNA decides to create additional partnerships similarly, Macy’s will be notified of our

intention out of respect but in no circumstances will Macy’s be allowed to dictate the

direction of GNA’s Essence Bands, Inc.’s future.

Withdrawal or death of a partner: If at any time a partner of GNA should die or be

bought out, the business agreement or contract between Macy’s and GNA Essence

Bands, Inc. will still be binding.

Conclusion

The potential for a partnership between GNA Essence Bands, Inc. and Macy’s Inc. offers

several opportunistic advantages that would make the venture worthwhile as long as certain

precautions are taken. The breadth of Macy’s consumer base would open up many avenues for

sales of GNA’s products. Having our products available in Macy’s stores where customers could

see and try them out for themselves would be an invaluable advantage. At the same time, the

chance to sell the products online through Macy’s website would reach a far greater range and

number of customers than we would be able to achieve on our own. Additionally, the lessons that

GNA could learn by partnering with such an experienced company as Macy’s could be

innumerable. As a new company, GNA would benefit from observing firsthand how Macy’s

experts manage the marketing and sales of the products. A few safeguards should be put into

place to ensure that GNA does not lose its focus and individuality. GNA’s partners should

continue to meet as frequently as past practice dictates, and without representatives from Macy’s,

to help ensure that GNA’s vision is not lost amidst the changes to the company. The business

contract should stipulate that Macy’s will not become involved in decision-making processes of

GNA that do not directly concern them. If GNA Essence Bands use this business relationship to

their advantage, it will be beneficial for both parties involved and will give GNA a chance to

expand and grow.

References

Laurence, B. K. (2014). “Creating a Partnership Agreement.” Retrieved from:

http://www.nolo.com/legal-encyclopedia/creating-partnership-agreement-29906.html

Macy’s, Inc. (2015a). 2014 Annual Report. Retrieved from

http://www.macysinc.com/Assets/docs/for-investors/annual-report/2014_ar.pdf

Macy’s Inc. (2015b). 2014 Store Count and Square Footage. Retrieved from

http://www.macysinc.com/for-investors/store-information/store-count/2014/default.aspx

Macy’s (2015c). Diversity Leadership. Retrieved from https://www.macysinc.com/diversity-

leadership/

Macy’s Inc. (2015d). Properties. Retrieved from http://www.macysinc.com/for-investors/store-

information/properties/default.aspx

Macy’s Inc. (2015e). Stores by State. Retrieved from http://www.macysinc.com/for-

investors/store-information/stores-by-state/default.aspx