STRATEGIC PLANING IN RETAILING Retail Strategy An overall plan for guiding a retail firm Influences the firms business activities Influences firms response to market forces Six Steps in Strategic Planning ID: 568248
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LOG 561 RETAIL MANAGEMENT
STRATEGIC PLANING IN RETAILINGSlide2
Retail Strategy
An overall plan for guiding a retail firm
Influences the firm’s business activities
Influences firm’s response to market forcesSlide3
Six Steps in Strategic Planning
1. Define the type of business (corporate mission)
2. Set long-run and short-run objectives
3. Determine the customer market4. Devise an overall, long-run plan5. Implement an integrated strategy
6. Evaluate and correct (fine-tune)Slide4
Retail Strategy
The overall plan or framework of action that guides a retailer
One year in duration
Outlines mission, goals, consumer market, overall and specific activities, and control mechanismsSlide5
Elements of a
Retail Strategy
Retail StrategySlide6
Benefits of Strategic Retail Planning
Provides thorough analysis of the requirements for doing business for different types of retailers
Outlines retailer goals
Allows retailer to determine how to differentiate itself from competitors
Allows retailer to develop an offering that appeals to a group of customers
Offers an analysis of the legal, economic, and competitive environment
Provides for the coordination of firm’s total efforts
Encourages anticipation and avoidance of crisesSlide7
Components of Strategic Planning
Strategic planning
- Adapting the resources of the firm to the opportunities and threats of an ever-changing retail environment.
Through the proper use of strategic planning, retailers hope to achieve and maintain a balance between resources available and opportunities ahead.LO 1Slide8
Components of Strategic Planning
Strategic planning consists of four components:
Development of a mission (or purpose) statement for the firm.
Definition of specific goals and objectives for the firm.S(strengths)W(weaknesses)O(opportunities)T(threats) analysis.Development of basic strategies that will enable the firm to reach its objectives and fulfill its mission.
LO 1Slide9
Mission
Statement
It is a basic description of the fundamental nature, rationale, and direction of the firm.Elements of a mission statement are:How the retailer uses or intends to use its resources.How it expects to relate to the ever-changing environment.The kinds of values it intends to provide in order to serve the needs and wants of the consumer.
LO 1Slide10
Statement of Goals and Objectives
Provide:
Specific direction and guidance to the firm in the formulation of its strategy.
A control mechanism by establishing a standard against which the firm can measure and evaluate its performance.LO 1Slide11
Retail Objectives
LO 1Slide12
Statement of Goals and Objectives
Market performance objectives
Establish the amount of dominance the retailer seeks in the marketplace.
Market share - The retailer’s total sales divided by total market sales.LO 1Slide13
Statement of Goals and Objectives
Financial objectives
Profit-based objectives - Deal directly with the monetary return a retailer desires from its business.
Profit is the aggregate total of net profit after taxes— that is, the bottom line of the income statement.Profit can be expressed as a percentage of net sales.It can also be defined in terms of return on investment (ROI), which can be defined by—Return on assets (ROA) and Return on net worth (RONW).
LO 1Slide14
Strategic Profit Model
LO 1Slide15
Statement of Goals and Objectives
Financial objectives
Stockouts
- Products that are out of stock and therefore unavailable to customers when they want them.LO 1Slide16
Statement of Goals and Objectives
Financial objectives
Productivity
objectives - State the sales objectives that the retailer desires for each unit of resource input.Space productivity - Net sales divided by the total square feet of retail floor space.Labor productivity - Net sales divided by the number of full-time–equivalent employees.Merchandise productivity - Net sales divided by the average dollar investment in inventory.
Productivity objectives are vehicles by which a retailer can program its business for high-profit results.
LO 1Slide17
Open or acquire on store over the next four years
Remodel one existing store every three years
Increase operating profit margin in each story by .25 percent for each six-month period
Increase clothing sales in existing stores by 10 percent over the preceding yearSlide18
Strategies
Are a carefully designed plan for achieving the retailer’s goals and objectives.
Retailers
can operate with three strategies:Get shoppers into your store.Convert these shoppers into customers by having them purchase merchandise.Implement the above two strategies at the lowest operating cost possible that is consistent with the level of service that your customers expect.
LO 1Slide19
SWOT Analysis
Strengths:
What major competitive advantage(s) do we have?
What are we good at? What do customers perceive as our strong points?IkeaTargetMcDonald's
LO 1Slide20
SWOT Analysis
Weaknesses
What major competitive advantage(s) do competitors have over us?
What are competitors better at than we are?What are our major internal weaknesses?IkeaTargetMcDonald's
LO 1Slide21
SWOT
Analysis
OpportunitiesWhat favorable environmental trends may benefit our firm?What is the competition doing in our market?What areas of business that are closely related to ours are undeveloped?IkeaTargetMcDonald's
LO 1Slide22
SWOT Analysis
Threats
What unfortunate environmental trends may hurt our future performance?
What technology is on the horizon that may soon have an impact on our firm?LO 1Slide23
Building competitive advantage
Physical
differentiationThe selling processAfter-purchase satisfactionLocationNever being out of stockSlide24
Strategies
The retailer must develop a retail marketing strategy with strong financial elements.
A fully developed marketing strategy should address the following considerations: the specific target market, location, the specific retail mix that the retailer intends to use, and the retailer’s value proposition.
LO 1Slide25
Strategies
Target market
- Group of customers that the retailer is seeking to serve.
Location - Geographic space or cyberspace where the retailer conducts business.Retail mix - Combination of merchandise, price, advertising and promotion, location, customer service and selling, and store layout and design.LO 1Slide26
Strategies
Value proposition
- A clear statement of the tangible and/or intangible results a receives from shopping at and using the retailer’s products or services.
LO 1Slide27
Organizational Mission
Retailer’s commitment
to a type of business and to a
distinctive role in the marketplace
.Slide28
Developing
an Overall Retail Strategy
Retail
Strategy
Uncontrollable
Variables:
Consumers
Competition
Technology
Economic
conditions
Seasonality
Legal restrictions
Controllable
Variables:
Store location
Managing business
Merchandise
management
and pricing
Communicating
with customerSlide29
Retail Strategy– Low Costs
Removal of bad costs
Use of private label products to reduce costs of national/manufacturer brands
Reduce product proliferationObtain best net price instead of focus on promotional monies, trade incentives and forward buyingSlide30
Retail Strategy– Low Costs
(cont.)
Supply chain initiatives
Low promotional expense (everyday low pricing)Proper employee utilizationSlide31
Retail Strategy--Differentiation
Well-thought out private labels (Trader Joe’s, Target, King Arthur flour, etc.)
Hiring right employees (value-profit chain)
Empowering employeesUse of a fun atmosphere
“Little things that mean a lot”
Money-back guaranteesSlide32
Legal Environment
and Retailing
Store Locationzoning laws
blue laws
environmental laws
direct selling laws
local ordinances
leases and mortgages
Managing the Business
licensing provisions
personnel laws
antitrust laws
franchise agreements
business taxes
recycling lawsSlide33
Legal Environment
and Retailing
Merchandise Management and Pricing
trademarks
merchandise restrictions
product liability laws and lemon laws
sales taxes
unit-pricing laws
collusion laws
sale prices
price discrimination lawsSlide34
Legal Environment
and Retailing
Communicating with the Customer
truth-in-advertising and selling laws
truth-in-credit laws
telemarketing laws
bait-and-switch laws
inventory laws
labeling laws
cooling-off lawsSlide35
Ownership and Management Alternatives
Sole proprietorship
is an unincorporated retail firm owned by one person
A
partnership
is an unincorporated retail firm owned by two or more persons, each with a financial interest
A
corporation
is a retail firm that is formally incorporated under state law; it is a legal entity apart from its officersSlide36
36
Sample Strategic Plan
Sally’s is a small, independently owned, high-fashion ladies clothing shop located in a suburban strip mall. It is a full-price, full-service store for fashion-forward shoppers. Sally’s carries sportswear from popular designers, has a personal shopper for busy executives, and has an on-premises tailor. The store is updating its strategic plan as a means of getting additional financing for an anticipated expansion.Slide37
Checklist
to Consider When Starting a New BusinessSlide38
Checklist
for Purchasing an Existing Retail BusinessSlide39
Retail Strategic Planning and Operations Management Model
LO 2Slide40
The Retail Strategic Planning and Operations Management Model
Operations management
- Deals with activities directed at maximizing the efficiency of the retailer’s use of resources. It is frequently referred to as day-to-day management.
The need to strive for a high profit is tied to the extremely competitive nature of retailing.LO 2Slide41
Selected
Kinds of Retail Goods and Service Establishments
Durable Goods Stores:
Automotive group
Furniture and appliances group
Lumber, building, and hardware group
Jewelry stores
Nondurable Goods Stores:
Apparel group
Food group
General merchandise group
Gasoline service stationsSlide42
Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall
Selected
Kinds of Retail Goods and Service Establishments
Service Establishments (Personal):
Laundry and dry cleaning
Beauty/barber shops
Funeral services
Health-care services
Service Establishments (Amusement):
Movie theaters
Bowling alleys
Dance halls
Golf coursesSlide43
Selected
Kinds of Retail Goods and Service Establishments
Service Establishments (Repair):
Automobile repair
Car washes
Consumer electronics repair
Appliance repairs
Service Establishments (Hotel):
Hotels
Motels
Trailer parks
CampsSlide44
Image and Positioning
An
image
represents how a given retailer is perceived
by consumers and others.
Slide45
Positioning Approaches
Mass merchandising
is a positioning approach whereby retailers offer a discount or value-oriented image, a wide or deep merchandise selection, and large store facilities.
Niche retailing
occurs when retailers identify specific customer segments and deploy unique strategies to address the desires of those segments rather than the mass market.Slide46
Niche
Retailing by
Babies “R” UsSlide47
Selected Retail
Positioning StrategiesSlide48
Target Market Selection
Three techniques
Mass marketing
Concentrated marketing
Differentiated marketingSlide49
La BoqueriaSlide50
Strategic Implications of
Target Market Techniques
Retailer’s location
Goods and service mix
Promotion efforts
Price orientation
StrategySlide51
Additional Concerns for
Global Retailing
In addition to the strategic planning process:
assess your international potential
get expert advice and counseling
select your countries
develop, implement, and review an international retailing strategySlide52
Factors Affecting the Success of a Global Retailing Strategy
Timing
A balanced international program
A growing middle class
Matching concept to market
Solo or partnering
Store location and facilities
Product selectionSlide53
Factors to Consider When Engaging in Global Retailing