Chapter 2 Retail Strategic Planning and Operations Management Retailing, 6 th Edition. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved.

Learning Objectives 1.Explain why strategic planning is so important and be able to describe the components of strategic planning: statement of mission; goals and objectives; an analysis of strengths, weaknesses, opportunities, and threats; and strategy. 2.Describe the text’s retail strategic planning and operation management model, which explains the two tasks that a retailer must perform and how they lead to high profit.

Components of Strategic Planning Mission Statement Statement of Goals and Objectives SWOT Analysis Strategies LO 1

Components of Strategic Planning Planning: Is the anticipation and organization of what needs to be done to reach on objective. LO 1

Components of Strategic Planning Strategic Planning: Involves adapting the resources of the firm to the opportunities and threats of an ever- changing retail environment. LO 1

Components of Strategic Planning Mission Statement: Is a basic description of the fundamental nature, rationale, and direction of the firm. LO 1

Elements of a Mission Statement 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 Goals and Objectives: Are the performance results intended to be brought about through the execution of a strategy. LO 1

Statement of Goals and Objectives Market Performance Objective Financial Performance Objective Societal Objectives Personal Objectives LO 1

Statement of Goals and Objectives Market Performance: Represents how a retailer desires to be compared to its competitors. LO 1

Statement of Goals and Objectives Financial Performance: Represents the profit and economic performance a retailer desires. LO 1

Market Performance Objectives Market performance objectives establish the amount of dominance the retailer has in the marketplace. LO 1

Market Performance Objectives Market Share: Is the retailer’s total sales divided by total market sales. LO 1

Financial Objectives Profitability Objectives: Objectives that deal directly with monetary return a retailer desires from its business. LO 1

Profitability Objectives Net Profit Margin Asset Turnover Return on Assets Financial Leverage Return on Net Worth LO 1

Profitability Objectives Net Profit Margin: Is the ratio of net profit (after taxes) to total sales and shows how much profit a retailer makes on each dollar of sales after all expenses and taxes have been met. LO 1

Profitability Objectives Asset Turnover: Is the total sales divided by total assets and shows how many dollars of sales a retailer can generate on an annual basis with each dollar invested in assets. LO 1

Strategic Profit Model Exhibit 2.1 LO 1

Profitability Objectives Return on Assets (ROA): Is net profit (after taxes) divided by total assets. LO 1

Profitability Objectives Financial Leverage: Is total assets divided by net worth or owners’ equity and shows how aggressive the retailer is in its use of debt. LO 1

Profitability Objectives Return on Net Worth (RONW): Is net profit (after taxes) divided by owners’ equity. LO 1

Profitability Objectives Gross Margin Percentage: A measure of profitability derived by dividing gross margin by net sales. LO 1

Productivity Objectives Productivity Objectives: State the sales objective that the retailer desires for each unit of resource input: floor space, labor, and inventory investment. LO 1

Productivity Objectives Space Productivity: Annual net sales divided by the total square feet of retail floor space. LO 1

Productivity Objectives Yield Management: The understanding, anticipating, and reacting to changing customer needs in order to maximize the revenue from a fixed capacity of available services. LO 1

Productivity Objectives Labor Productivity: Annual net sales divided by the number of full- time-equivalent employees. LO 1

Productivity Objectives Merchandise Productivity: Annual net sales divided by the average dollar investment in inventory. (Sales-to-Stock Ratio) LO 1

Productivity Objectives RASM: The revenue per available seat mile calculation used by airlines. LO 1

Societal Objectives Societal Objectives: Reflect the retailers’ desire to help society fulfill some of its needs. LO 1

Societal Objectives Employment objectives Payment of taxes Consumer choice Equity Benefactor LO 1

Personal Objectives Personal Objectives: Reflect the retailers’ desire to help individuals employed in retailing fulfill some of their needs. LO 1

Personal Objectives Self-gratification Status and respect Power and authority LO 1

Retail Objectives Exhibit 2.2 Personal Objectives Societal Objectives Profitability LO 1

Strategies Strategy: Is a carefully designed plan for achieving the retailer’s goals and objectives. LO 1

Minimal Retail Strategies Get shoppers into your store. Convert these shoppers into customers by having them purchase merchandise. Do this at the lowest operating cost possible that is consistent with the level of service that your customers expect. LO 1

More Retail Strategies Physical differentiation of the product. The selling process. After-purchase satisfaction. Location. Never being out of stock. LO 1

Strategies SWOT Analysis: Is the identification and analysis of a retailer’s strengths, weaknesses, opportunities, and threats a firm faces. LO 1

SWOT Analysis Strengths? Weaknesses? Opportunities? Threats? LO 1

Strategies Target Market: Is the group or groups of customers that the retailer is seeking to serve. LO 1

Strategies Location: Is the geographic space or cyberspace where the retailer conducts business. LO 1

Features Offered by Best Buy to Meet the Needs of Its Various Customer Types Exhibit 2.3LO 1

Strategies Retail mix: Is the combination of merchandise, assortment, price, promotion, customer service, and store layout that best serves the segments targeted by the retailer. LO 1

Retail Mix Exhibit 2.4LO 1

Strategies Value Proposition: A clear statement of the tangible and/or intangible results a customer receives from shopping at and using the retailer’s products or services. LO 1

Retail Strategic Planning and Operations Management Model Strategic Planning Operations Management High-Profit Retailing LO 2

Retail Strategic Planning and Operations Management Model Strategic Planning: Is a plan of action detailing how the retailer will respond to the environment in an effort to establish a long-term course of action to follow. LO 2

Retail Strategic Planning and Operations Management Model Exhibit 2.5LO 2

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 planning. LO 2

Retail Strategic Planning and Operations Management Model High-Profit Retailing: To be a high profit retailer, the retailer needs good strategic planning coupled with strong operations management. LO 2

Strategic Profit Model for Some of the Country’s Leading Retailers Exhibit 2.6LO 2

Additional Slides

Elements of a Mission Statement How the retailer uses or intends to use its resources How the retailer expects to relate to the ever- changing environment The values intended to offer to serve the needs and wants of consumers LO 1

Goals and Objectives Market Performance Objectives Financial Performance Objectives Societal Objectives Personal Objectives LO 1

Retail Planning and Management Strategic Planning Operations Management High-profit Retailing LO 2