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PPT 5-1 5 th Edition. PPT 5-2 Chapter 5 Retail Marketing Strategy McGraw-Hill/Irwin Levy/Weitz: Retailing Management, 5/e Copyright © 2004 by The McGraw-Hill.

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Presentation on theme: "PPT 5-1 5 th Edition. PPT 5-2 Chapter 5 Retail Marketing Strategy McGraw-Hill/Irwin Levy/Weitz: Retailing Management, 5/e Copyright © 2004 by The McGraw-Hill."— Presentation transcript:

1 PPT th Edition

2 PPT 5-2 Chapter 5 Retail Marketing Strategy McGraw-Hill/Irwin Levy/Weitz: Retailing Management, 5/e Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.

3 PPT 5-3 Retailing Strategy Retail Market Strategy Chapter 5 Financial Strategy Chapter 6 Retail Locations Chapters 7,8 Human Resource Management Chapter 9 Information and Distribution Systems Chapter 10 Customer Relationship Management Chapter 11

4 PPT 5-4 Strategy Is Over Used Retailers Talk About A Lot of Different Strategies –Sales Strategy –Advertising Strategy –Merchandise Strategy –Location Strategy Strategy Is Not Just Another Term for A Management Decision

5 PPT 5-5 Strategic vs. Tactical Decisions StrategicTactical DirectionImplementation Strategy statementAnnual plan BroadSpecific, detailed UnstructuredStructuredProblem solving CreativityAnalytical External focusInternal focus IrregularRegular Long-termShort-term Difficult to evaluateEasy to evaluate Note:Success Comes for Having a Good Strategy and Executing It Well

6 PPT 5-6 Elements in Retail Strategy Target Market Customer Needs Retail Format Method for Satisfying Needs Bases for Building Sustainable Competitive Advantage Defending Position Against Competitors

7 PPT 5-7 Chicos Strategy Target Market Woman 35 to 55 Who Want Comfortable, Casual, But Stylish Apparel Retail Format Specialty Apparel Stores in Malls and Strip Centers Selling Private Label, Coordinated Outfits Bases for Building Sustainable Competitive Advantage Unique Merchandise Sized 0,1,2,3

8 PPT 5-8 Analyzing McDonalds Retail Strategy What Is McDonalds: -Target market? -Retail offering (format)? -Bases for competitive advantage? What Threats Might McDonalds Face in the Future?

9 PPT 5-9 Examples of Retail Strategies Starbucks Kohls Restoration Hardware Ukrops What is the target market, retail offering, and source of competitive advantage for each retailer?

10 PPT 5-10 Strategy for Looking for a Job Determine Your Target Market –Area of Country –Type of Company –Type of Position Assess and Exploit Your Competitive Advantage –Unique Skills, Experience, Knowledge

11 PPT 5-11 Why Does a Retailer Need to Focus on a Specific Target Market? Why Not Sell to Everyone?

12 PPT 5-12 Retail Market Opportunities for Womens Apparel

13 PPT 5-13 Methods for Segmenting Markets Demographics Geographic Lifestyle, Psychographics Buying Situations Benefits Sought

14 PPT 5-14 Criteria For Selecting A Target Market Attractiveness -- Large, Growing, Little Competition More Profits Consistent with Your Competitive Advantages

15 PPT 5-15 Can A Retailer Develop a Sustainable Competitive Advantage by: Dropping the Price of Your Merchandise? Building a Store at the Best Location? Deciding to Sell Some Hot Merchandise? Increasing Your Level of Advertising? Attracting Better Sales Associates by Paying Higher Wages? Providing Better Customer Service?

16 PPT 5-16 Internal and External Bases for Competitive Advantage Retail Firm Low Cost Large Size Efficient Distribution, Operations Unique Knowledge Loyal Employees Sources of Capital Vendors, Suppliers Customers

17 PPT 5-17 Sources of Competitive Advantage More Sustainable Location Customer Loyalty Customer Service Exclusive Merchandise Low Cost Supply Chain Management Information Systems Buying Power with Vendors Committed Employees Less Sustainable Better Computers More Employees More Merchandise Greater Assortments Lower Prices More Advertising More Promotions Cleaner Stores

18 PPT 5-18 What does loyalty mean? Is It the same as liking a store? …Going to the store frequently? Loyalty

19 PPT 5-19 Approaches for Building Customer Loyalty Unique Positioning Customer Service Information About Customers (Database Retailing) Unique Merchandise Location

20 PPT 5-20 Example of Positioning

21 PPT 5-21 Basis of Loyalty, Commitment Costs –Location –Frequent Shopper Programs –Unique Merchandise Mental, Emotional Attachment

22 PPT 5-22 Creating Store Loyalty Mental and Emotional Attachments Elements in a Strong Brand –Top of the Mind Awareness –Associations with Brand/Store Name Methods Used to Develop a Strong Brand –Massive Exposure –Symbols to Reinforce Image –Consistent Positioning Creating Strong Associations –Limited Brand Extensions

23 PPT 5-23 Vendor Relationships Low Cost - Efficiency Through Coordination –Electronic Data Interchange (EDI) –Collaborative Planning and Forecasting to Reduce Inventory and Distribution Costs Exclusive Sale of Desirable Brands Special Treatment –Early Delivery of New Styles –Shipment of Scare Merchandise

24 PPT 5-24 High Quality Customer Service Difficult to Achieve –People Are Not Machines -- Inconsistent –Retail Sales Associates At Bottom of Labor Pool Goes Beyond Hiring Good People at High Wages and Training Them -- Organizational Culture

25 PPT 5-25 Critical Tradeoff In Developing Strategic Advantage Focus Leads to Developing A Competitive Advantage But Focus Reduces Flexibility Low Cost, Consistent Image, Vendor Relationships Reduces Flexibility Similar to Dating and Marriage – Commitment to a Relationship (Vendor) Reduces Flexibility

26 PPT 5-26 Growth Opportunities Market Penetration Market Expansion Retail Format Development Diversification ­ Related vs. Unrelated

27 PPT 5-27 Growth Opportunities

28 PPT 5-28 International Growth Opportunities Europe China Mexico, Latin America Japan

29 PPT 5-29 Key to Success in Global Retailing Domestic market leadership – strong base Exploiting core competencies – competitive advantage –Low cost - Wal-mart, Carrefour –Fashion Reputation - The Gap, Zara, H&M –Category dominance - Toys R Us, Office Depot –Unique Image, Brand – Disney, IKEA, Starbucks Adaptability Global Culture Long-term commitment

30 PPT 5-30 International Market Entry Strategies Direct Investment Joint Ventures Strategic Alliances Franchising

31 PPT 5-31 Steps in the Strategic Retail Planning Process 1. Define the business mission 2. Conduct a situation audit: Market attractiveness analysis Competitor analysis Self-analysis 3. Identify strategic opportunities 5. Establish specific objectives and allocate resources 7. Evaluate performance and make adjustments 6. Develop a retail mix to implement strategy 4. Evaluate strategic alternatives

32 PPT 5-32 Elements in a Market Analysis MARKET FACTORS COMPETITIVE FACTORS ENVIRONMENTAL FACTORS ANALYSIS OF STRENGTHS & WEAKNESSES Barriers to entry Bargaining power of vendors Competitive rivalry Threat of superior new formats Technology Economic Regulatory Social Size Growth Seasonality Business cycles Management capabilities Financial resources Locations Operations Merchandise Store Management Customer loyalty

33 PPT 5-33 Questions for Analyzing the Environment New developments or changes -- technologies, regulations, social factors, economic conditions Likelihood changes will occur Key factors determining change Impact of change on retail market firm, competitors

34 PPT 5-34 Porters Five Forces Competitive Rivalry Bargaining Power of Vendors Barriers to Entry Large Customers Threat of Substitution

35 PPT 5-35 Strengths and Weaknesses Analysis Management Capability: Capabilities and experience of top management Depth of Management--capabilities of middle management Managements commitment to firm Financial Resources: Cash flow from existing business Ability to raise debt or equity financing Operations: Overhead cost structure Quality of operating systems Distribution capabilities Management information systems Loss prevention systems Inventory control system Merchandising Capabilities: Knowledge and skills of buyers Relationships with vendors Capabilities in developing private capabilities Store Management Capabilities Management capabilities Quality of sales associates Commitment of sales associates to firm Locations Customers Loyalty of customers

36 PPT 5-36 Illustration of the Strategic Retail Planning Process Kelly Bradford – Owner of Gifts To Go –Two Store Chain in Chicago –Target Market – Upper Income Men and Women Looking for Gifts between $50 and $500 –Strong Customer Loyalty Based on Knowing What Customers Want, Providing Good Customer Service –Low Turnover Among Associates

37 PPT 5-37 Mission Statement for Gifts To Go The mission of Gifts to Go is to be the leading retailers of higher-priced gifts in the Chicago and provide a stable income of $100,000 per year for the owner. Define growth opportunities will and wont consider Indicates objective of company

38 PPT 5-38 Situation Analysis of Gifts to Go Market Factors –Chicago is an attractive market. (+) –Relatively expensive gifts are not affected much by the economy. (+) –Gifts are highly seasonal. (-) Competitive Factors –Many in area. Primary department stores, craft galleries, catalogs, and Internet retailers (-) –Lack of large suppliers, customer (+) –Opportunities for differentiation (+) –Limited competitive rivalry. (+)

39 PPT 5-39 Situation Analysis of Gifts to Go (continued) Environmental Factors –Potential Threat - Development of electronic channel by traditional bricks and mortar retailers (-) Strengths and Weaknesses –Management Capability – Limited –Financial Resources – Good –Operations – Poor –Merchandise Capabilities – Good –Store Management Capabilities – Excellent –Locations – Excellent –Customer Loyalty – Good –Customer Database - Good

40 PPT 5-40 Growth Opportunities for Gifts to Go Market Penetration –Increase size of present stores –Open additional gifts stores in Chicago area Market Expansion –Open gift stores outside Chicago area –Sell lower priced gifts in present stores

41 PPT 5-41 Growth Opportunities for Gifts to Go (continued) Retail Format Development –Sell non-gift merchandise to same customers in present or new stores –Sell similar gifts to same customers through an electronic channel Diversification –Manufacture craft gifts –Open an apparel store targeting teenagers –Open a category killer store selling a broader assortment of gifts

42 PPT 5-42 Evaluating Growth Opportunities for Gifts to Go Market Attractiveness Market Penetration –Increase size of present stores (low) –Open additional gifts stores in Chicago area (medium) Market Expansion –Open gift stores outside Chicago area – new geographic segment (medium) –Sell lower priced gifts in present stores – new benefit segment (medium)

43 PPT 5-43 Evaluating Growth Opportunities for Gifts to Go (continued) Market Attractiveness Retail Format Development –Sell non-gift merchandise to same customers in present or new stores (High) –Sell similar gifts to same customers through an electronic channel (High) Diversification –Manufacture craft gifts (High) –Open an apparel store targeting teenagers (High) –Open a category killer store selling a broader assortment of gifts (High)

44 PPT 5-44 Evaluating Growth Opportunities for Gifts to Go Competitive Position Market Penetration –Increase size of present stores (High) –Open additional gifts stores in Chicago area (Medium) Market Expansion –Open gift stores outside Chicago area (Low) –Sell lower priced gifts in present stores (low)

45 PPT 5-45 Evaluating Growth Opportunities for Gifts to Go (continued) Competitive Position Retail Format Development –Sell non-gift merchandise to same customers in present or new stores (Low) –Sell similar gifts to same customers through an electronic channel (Medium) Diversification –Manufacture craft gifts (Low) –Open an apparel store targeting teenagers (Low) –Open a category killer store selling a broader assortment of gifts (Low)

46 PPT 5-46 Market Attractiveness/Competitive Position Matrix Market Attractiveness Competitive Position HighLowMedium Maximum investment Consolidate position Invest to challenge leader Opportunities investment Build strength or exit Selective investment Build on strengths Cautious investment Harvest or divest Protect position Manage for cash generation Harvest or divest Aggressive investment Cautious investment Minimal investment

47 PPT 5-47 Steps in Using Market Attractiveness - Competitive Position Matrix Define strategic opportunities Identify market attractiveness and competitive position factors Assign weight based on importance of factors Rate opportunities on market attractiveness and competitive position Calculate scores and evaluate opportunities

48 PPT 5-48 Characteristics of International Markets U.S. Germany Japan Population (Millions) Business Climate Logistical Infrastructure Exc. Good Avg. U.S. Germany Japan Population (Millions) Business Climate Logistical Infrastructure Exc. Good Avg.

49 PPT 5-49 Attractiveness Ratings for International Growth Opportunities

50 PPT 5-50 Competitive Position in International Growth Opportunities

51 PPT 5-51 Evaluation of International Growth Opportunities

52 PPT 5-52 Risk and Rewards in Latin America: Country Risk Assessment Source: Coopers & Lybrand Analysis, Global Retailing: Assignment Latin America, Chain Store Age Executive, April 1996, seciton 2, p. 4. RISK Market Size (GDP Billions) LowMedium High Short-Term Risk Long-Term Risk Chile Colombia Peru Venezuela Argentina Mexico Brazil

53 PPT 5-53 Evaluation of Retail Market Opportunities in European Community HighLow UNITED KINGDOM NETHERLANDS Open Restricted MARKETS SPAIN ITALY FRANCE GERMANY BELGIUM PORTUGAL LUXEMBOURG IRELAND GREECE DENMARK GROWTH

54 PPT 5-54 Market Attractiveness Ratings for Growth Opportunities in Merchandise Categories Weight Market size Growth Vendor power Competitive intensity Social trends Score Juniors (2) Mens (3) Childrens (4) Furniture (5) Cons. Elec. (6) Soft Home (7) Womens( 1) Factors

55 PPT 5-55 Competitive Position Ratings in Merchandise Categories Weight Location Vendor relationship Costs Skills of buyers Image with customer Score Juniors (2) Mens (3) Childrens (4) Furniture (5) Cons. Elec. (6) Soft Home (7) Womens (1) Factors

56 PPT 5-56 Evaluation of Merchandise Category Opportunities 1,000 Market Attractiveness HighLowMedium Soft home Mens clothing Womens clothing Childrens clothing Consumer electronics 1, Low High Medium Juniors clothing Furniture


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