3 Retailing Strategy Human Resource Management Chapter 9 Retail Locations Chapters 7,8Retail Market Strategy Chapter 5Financial Strategy Chapter 6Information and Distribution Systems Chapter 10Customer Relationship Management Chapter 11
4 “Strategy” Is Over Used Retailers Talk About A Lot of Different “Strategies”Sales StrategyAdvertising StrategyMerchandise StrategyLocation StrategyStrategy Is Not Just Another Term for A Management Decision
5 Strategic vs. Tactical Decisions Strategic TacticalDirection ImplementationStrategy statement Annual planBroad Specific, detailedUnstructured StructuredProblem solving Problem solvingCreativity AnalyticalExternal focus Internal focusIrregular RegularLong-term Short-termDifficult to evaluate Easy to evaluateNote: Success Comes for Having a Good Strategy and Executing It Well
6 Elements in Retail Strategy Target MarketCustomer NeedsRetail FormatMethod for Satisfying NeedsBases for Building Sustainable Competitive AdvantageDefending Position Against Competitors
7 Chico’s Strategy Target Market Woman 35 to 55 Who Want Comfortable, Casual, But Stylish ApparelRetail FormatSpecialty Apparel Stores in Malls and Strip Centers Selling Private Label, Coordinated OutfitsBases for Building Sustainable Competitive AdvantageUnique Merchandise Sized 0,1,2,3
8 Analyzing McDonalds’ Retail Strategy What Is McDonalds’:-Target market?-Retail offering (format)?-Bases for competitive advantage?What Threats Might McDonald’s Face in the Future?
9 Examples of Retail Strategies StarbucksKohlsRestoration HardwareUkrop’sWhat is the target market, retail offering, and source of competitive advantage for each retailer?
10 Strategy for Looking for a Job Determine Your Target MarketArea of CountryType of CompanyType of PositionAssess and Exploit Your Competitive AdvantageUnique Skills, Experience, Knowledge
11 Why Does a Retailer Need to Focus on a Specific Target Market Why Does a Retailer Need to Focus on a Specific Target Market? Why Not Sell to Everyone?
12 Retail Market Opportunities for Women’s Apparel
13 Methods for Segmenting Markets Buying SituationsBenefits SoughtGeographicLifestyle, PsychographicsDemographics
14 Criteria For Selecting A Target Market Attractiveness -- Large, Growing, Little Competition More ProfitsConsistent with Your Competitive Advantages
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 Internal and External Bases for Competitive Advantage Retail FirmLow CostLarge SizeEfficientDistribution,OperationsUniqueKnowledgeLoyal EmployeesSources ofCapitalVendors, SuppliersCustomers
17 Sources of Competitive Advantage More SustainableLocationCustomer LoyaltyCustomer ServiceExclusive MerchandiseLow Cost Supply Chain ManagementInformation SystemsBuying Power with VendorsCommitted EmployeesLess SustainableBetter ComputersMore EmployeesMore MerchandiseGreater AssortmentsLower PricesMore AdvertisingMore PromotionsCleaner Stores
18 Loyalty What does loyalty mean? Is It the same as liking a store? …Going to the store frequently?
19 Approaches for Building Customer Loyalty Unique PositioningCustomer ServiceInformation About Customers (Database Retailing)Unique MerchandiseLocation
22 Creating Store Loyalty Mental and Emotional Attachments Elements in a Strong BrandTop of the Mind AwarenessAssociations with Brand/Store NameMethods Used to Develop a Strong BrandMassive ExposureSymbols to Reinforce ImageConsistent Positioning Creating Strong AssociationsLimited Brand Extensions
23 Vendor Relationships Low Cost - Efficiency Through Coordination Electronic Data Interchange (EDI)Collaborative Planning and Forecasting to Reduce Inventory and Distribution CostsExclusive Sale of Desirable BrandsSpecial TreatmentEarly Delivery of New StylesShipment of Scare Merchandise
24 High Quality Customer Service Difficult to AchievePeople Are Not Machines -- InconsistentRetail Sales Associates At Bottom of Labor PoolGoes Beyond Hiring Good People at High Wages and Training Them -- Organizational Culture
25 Critical Tradeoff In Developing Strategic Advantage Focus Leads to DevelopingA Competitive AdvantageButFocus Reduces FlexibilityLow Cost, Consistent Image, Vendor Relationships Reduces FlexibilitySimilar to Dating and Marriage – Commitment to a Relationship (Vendor) Reduces Flexibility
26 Growth Opportunities Market Penetration Market Expansion Retail Format DevelopmentDiversificationRelated vs. Unrelated
30 International Market Entry Strategies Direct InvestmentJoint VenturesStrategic AlliancesFranchising
31 Steps in the Strategic Retail Planning Process 1. Define the business mission2. Conduct a situation audit: Market attractiveness analysis Competitor analysis Self-analysis3. Identify strategic opportunities5. Establish specific objectives and allocate resources7. Evaluate performance and make adjustments6. Develop a retail mix to implement strategy4. Evaluate strategic alternatives
32 Elements in a Market Analysis MARKET FACTORSCOMPETITIVE FACTORSENVIRONMENTAL FACTORSANALYSIS OF STRENGTHS & WEAKNESSESBarriers to entry Bargaining power of vendors Competitive rivalry Threat of superior new formatsTechnology Economic Regulatory SocialManagement capabilities Financial resources Locations Operations Merchandise Store Management Customer loyaltySize Growth Seasonality Business cycles
33 Questions for Analyzing the Environment New developments or changes -- technologies, regulations, social factors, economic conditionsLikelihood changes will occurKey factors determining changeImpact of change on retail market firm, competitors
34 Bargaining Power of Vendors Threat of Substitution Porter’s Five ForcesBarriers to EntryBargaining Power of VendorsCompetitive RivalryLarge CustomersThreat of Substitution
35 Strengths and Weaknesses Analysis Management Capability: Capabilities and experience of top management Depth of Management--capabilities of middle management Management’s commitment to firmFinancial Resources: Cash flow from existing business Ability to raise debt or equity financingOperations: Overhead cost structure Quality of operating systems Distribution capabilities Management information systems Loss prevention systems Inventory control systemStore Management Capabilities Management capabilities Quality of sales associates Commitment of sales associates to firmLocationsMerchandising Capabilities: Knowledge and skills of buyers Relationships with vendors Capabilities in developing private capabilitiesCustomers Loyalty of customers
36 Illustration of the Strategic Retail Planning Process Kelly Bradford – Owner of Gifts To GoTwo Store Chain in ChicagoTarget Market – Upper Income Men and Women Looking for Gifts between $50 and $500Strong Customer Loyalty Based on Knowing What Customers Want, Providing Good Customer ServiceLow Turnover Among Associates
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 won’t considerIndicates objective of company
38 Situation Analysis of Gifts to Go Market FactorsChicago is an attractive market. (+)Relatively expensive gifts are not affected much by the economy. (+)Gifts are highly seasonal. (-)Competitive FactorsMany in area. Primary department stores, craft galleries, catalogs, and Internet retailers (-)Lack of large suppliers, customer (+)Opportunities for differentiation (+)Limited competitive rivalry. (+)
39 Situation Analysis of Gifts to Go (continued) Environmental FactorsPotential Threat - Development of electronic channel by traditional bricks and mortar retailers (-)Strengths and WeaknessesManagement Capability – LimitedFinancial Resources – GoodOperations – PoorMerchandise Capabilities – GoodStore Management Capabilities – ExcellentLocations – ExcellentCustomer Loyalty – GoodCustomer Database - Good
40 Growth Opportunities for Gifts to Go Market PenetrationIncrease size of present storesOpen additional gifts stores in Chicago areaMarket ExpansionOpen gift stores outside Chicago areaSell lower priced gifts in present stores
41 Growth Opportunities for Gifts to Go (continued) Retail Format DevelopmentSell non-gift merchandise to same customers in present or new storesSell similar gifts to same customers through an electronic channelDiversificationManufacture craft giftsOpen an apparel store targeting teenagersOpen a category killer store selling a broader assortment of gifts
42 Evaluating Growth Opportunities for Gifts to Go Market AttractivenessMarket PenetrationIncrease size of present stores (low)Open additional gifts stores in Chicago area (medium)Market ExpansionOpen gift stores outside Chicago area – new geographic segment (medium)Sell lower priced gifts in present stores – new benefit segment (medium)
43 Evaluating Growth Opportunities for Gifts to Go (continued) Market AttractivenessRetail Format DevelopmentSell non-gift merchandise to same customers in present or new stores (High)Sell similar gifts to same customers through an electronic channel (High)DiversificationManufacture craft gifts (High)Open an apparel store targeting teenagers (High)Open a category killer store selling a broader assortment of gifts (High)
44 Evaluating Growth Opportunities for Gifts to Go Competitive PositionMarket PenetrationIncrease size of present stores (High)Open additional gifts stores in Chicago area (Medium)Market ExpansionOpen gift stores outside Chicago area (Low)Sell lower priced gifts in present stores (low)
45 Evaluating Growth Opportunities for Gifts to Go (continued) Competitive PositionRetail Format DevelopmentSell non-gift merchandise to same customers in present or new stores (Low)Sell similar gifts to same customers through an electronic channel (Medium)DiversificationManufacture craft gifts (Low)Open an apparel store targeting teenagers (Low)Open a category killer store selling a broader assortment of gifts (Low)
46 Market Attractiveness Aggressive investment Market Attractiveness/Competitive Position MatrixMarket AttractivenessCompetitive PositionHighLowMediumMaximum investmentConsolidate positionInvest to challenge leaderOpportunities investmentBuild strength or exitSelective investmentBuild on strengthsCautious investmentHarvest or divestProtect positionManage for cash generationHarvest or divestHarvest or divestAggressive investmentMinimal investment
47 Steps in Using Market Attractiveness - Competitive Position Matrix Define strategic opportunitiesIdentify market attractiveness and competitive position factorsAssign weight based on importance of factorsRate opportunities on market attractiveness and competitive positionCalculate scores and evaluate opportunities
48 Characteristics of International Markets U.S Germany JapanPopulation (Millions)Business ClimateLogistical Infrastructure Exc Good Avg.
49 Attractiveness Ratings for International Growth Opportunities
50 Competitive Position in International Growth Opportunities
51 Evaluation of International Growth Opportunities
52 Market Size (GDP Billions) Risk and Rewards in Latin America: Country Risk AssessmentShort-Term RiskLong-Term RiskBrazilMexicoArgentinaMarket Size (GDP Billions)ColombiaVenezuelaChilePeruLowMediumHighRISKSource: Coopers & Lybrand Analysis, “Global Retailing: Assignment Latin America,” Chain Store Age Executive, April 1996, seciton 2, p. 4.
53 Evaluation of Retail Market Opportunities in European Community HighLowUNITED KINGDOMNETHERLANDSOpenRestrictedMARKETSSPAINITALYFRANCEGERMANYBELGIUMPORTUGALLUXEMBOURGIRELANDGREECEDENMARKGROWTH
54 Market Attractiveness Ratings for Growth Opportunities in Merchandise Categories WeightMarket sizeGrowthVendor powerCompetitive intensitySocial trendsScoreJunior’s (2)Men’s (3)Children’s (4)Furniture (5)Cons. Elec. (6)Soft Home (7)Women’s(1)Factors20152510945540734456720250548581435805
55 Competitive Position Ratings in Merchandise Categories WeightLocationVendor relationshipCostsSkills of buyersImage with customerScoreJunior’s (2)Men’s (3)Children’s (4)Furniture (5)Cons. Elec. (6)Soft Home (7)Women’s(1)Factors202510100986800778555606554341521225675
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