LOG 561 RETAIL MANAGEMENT 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 1. Define the type of business (corporate mission) 2. Set long-run and short-run objectives 3. Determine the customer market 4. Devise an overall, long-run plan 5. Implement an integrated strategy 6. Evaluate and correct (fine-tune) 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 mechanisms Elements of a Retail Strategy Retail Strategy 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 firms total efforts Encourages anticipation and avoidance of crises 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 1 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 1
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 1
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 1
Retail Objectives LO 1 Statement of Goals and Objectives Market performance objectives Establish the amount of dominance the retailer seeks in the marketplace. Market share - The retailers total sales divided by total market sales.
LO 1 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 byReturn
on assets (ROA) and Return on net worth (RONW). LO 1 Strategic Profit Model LO 1 Statement of Goals and Objectives Financial objectives Stockouts - Products that are out of stock and
therefore unavailable to customers when they want them. LO 1 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 fulltimeequivalent 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 1 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 year Strategies Are a carefully designed plan for achieving the retailers 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 1 SWOT Analysis Strengths: What major competitive advantage(s) do we have? What are we good at?
What do customers perceive as our strong points? Ikea Target McDonald's LO 1 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? Ikea Target McDonald's LO 1 SWOT Analysis Opportunities What 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? Ikea Target McDonald's LO 1 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 1 Building competitive advantage
Physical differentiation The selling process After-purchase satisfaction Location Never being out of stock 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 retailers value proposition. LO 1 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 1 Strategies Value proposition - A clear statement of the tangible and/or intangible results a receives
from shopping at and using the retailers products or services. LO 1 Organizational Mission Retailers commitment to a type of business and to a distinctive role in the marketplace.
Developing an Overall Retail Strategy Controllable Variables: Store location Managing business Merchandise management and pricing Communicating with customer
Seasonality Legal restrictions Retail Strategy Low Costs Removal of bad costs Use of private label products to reduce costs of national/manufacturer brands Reduce product proliferation Obtain best net price instead of focus on promotional monies, trade incentives and forward buying
Retail Strategy Low Costs (cont.) Supply chain initiatives Low promotional expense (everyday low pricing) Proper employee utilization Retail Strategy--Differentiation Well-thought out private labels (Trader Joes, Target, King Arthur flour, etc.) Hiring right employees (value-profit chain)
Empowering employees Use of a fun atmosphere Little things that mean a lot Money-back guarantees Legal Environment and Retailing Store Location
zoning 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 laws 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 laws 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 laws 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 officers Sample Strategic Plan Sallys 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. Sallys 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. 36 Checklist to Consider When Starting a New Business
Checklist for Purchasing an Existing Retail Business Retail Strategic Planning and Operations Management Model LO 2 The Retail Strategic Planning and Operations Management Model
Operations management - Deals with activities directed at maximizing the efficiency of the retailers 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 2 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 stations 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 courses Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall 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 Camps Image and Positioning
An image represents how a given retailer is perceived by consumers and others. 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. Niche Retai ling by Babi es R Us Selected Retail Positioning Strategies
Target Market Selection Three techniques Mass marketing Concentrated marketing Differentiated marketing La Boqueria Strategic Implications of Target Market Techniques
Retailers location Goods and service mix Promotion efforts Price orientation Strategy
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 strategy 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 selection
Factors to Consider When Engaging in Global Retailing
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