1. Merchandising Theory
Grace Kunz

2. Copyright ©2010 Fairchild Books
All rights reserved. No part of this presentation covered by the copyright hereon may be reproduced or used in any form or by any means–graphic, electronic, or mechanical, including photocopying, recording, taping, or information storage and retrieval systems–without written permission of the publisher.
ISBN:
GST R

3. Section One
Merchandising Theory

4. Merchandising Concepts
Chapter One
Merchandising Concepts

5. ©2010 Fairchild Books, A Division of Condé Nast Publications.
Learning Objectives
Define merchandising
Introduce the fundamental components of the merchandising process
Examine the role of merchandising according to the Behavioral Theory of the Apparel Firm
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications.

6. Merchandising Processes
Merchandising is integral to every part of the textile and apparel trade:
Lines of textile fibers, yarns, and fabrics planned, developed, and presented
Lines of findings merchandised for sale to finished-goods manufacturers
Manufacturers plan, develop, and present lines to be offered at wholesale markets
Retail buyers merchandise selected combination of lines to sell to retail customers
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications.

7. ©2010 Fairchild Books, A Division of Condé Nast Publications.
Merchandising
Planning, developing, and presenting product lines for identified target markets
Necessary business process for most types of consumer products
Automobiles, groceries, restaurants
Textiles and apparel industry
Model of the merchandising processes
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications.

8. Merchandising Strategies*
Merchandising leaders:
Create trends
Lead their customers
Push the envelope in product development
Cold-heartedly kill the dogs
(unsalable merchandise)
Encourage responsible risk
Strive relentlessly
Have swagger and bravado
*Economist Intelligence Unit Survey, 2007
“Tired” merchandisers:
Wait for customers to accept trends
Merchandise based on history
Rely on line extensions
Are risk-averse in product development
Focus on the fact that most products fail
Carry too many unproductive SKUs
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications.

9. ©2010 Fairchild Books, A Division of Condé Nast Publications.
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications.

10. Components of Merchandising
Line planning
Determining the amount and use of funds
Line development
Determining the nature of the merchandise
Line presentation
Determining how the line will be offered at different levels of the trade matrix
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications.

11. Merchandising as a Business Function
Theoretical Foundations
Economic theories of the firm
emphasize profit maximization
traditional, economic theory based
Behavioral theories of the firm
provide an alternate way of thinking
related to how and why business firms operate as they do
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications.

12. Fundamental Constructs of Behavioral Theories of the Firm*
A firm is a coalition of individuals with some common goals
Interdependent, internal constituencies correspond to functional divisions of the firm
Constituencies negotiate resource exchanges inside and outside the firm
Based on Anderson (1982), Cyert & March (1963), and Pfeffer & Salancik (1978)
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications.

13. Fundamental Constructs of Behavioral Theories of the Firm*
Specialization of constituencies causes conflicting goals to develop
Negotiation is the primary means of resolving conflicts
Most powerful internal constituencies manage the most critical resources
The most powerful external coalitions control the most critical resources
Based on Anderson (1982), Cyert & March (1963), and Pfeffer & Salancik (1978)
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications. 13

14. Behavioral Theory of the Apparel Firm
Relationships among Internal Constituencies in the Apparel Firm
Theory X management style
Interactive decision making matrix
Theory Y management style
Coalitions of employees
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications.

15. The Marketing Concept as a Philosophy of the Firm
Target market
central focus of behavioral model of firm
Marketing concept
philosophy of the firm as a whole
Market-driven company
in relation to the firm’s capabilities
evaluates opportunities in the market
merchandises, produces, and markets accordingly
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications.

16. Model of Functional Areas of Apparel Firm
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications.

17. Constituencies of the Firm
Executive Constituency
Merchandising Constituency
Marketing Constituency
Operations Constituency
Finance Constituency
Supply Chain Constituency
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications.

18. The Decision-Making Matrix
Each constituency interacts with
internal constituencies
external coalitions (other firms)
Multiple environments surround negotiations
Economic
Social
Cultural
Political
Technological
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications.

19. Executive Constituency
Who?
Owner/Manager/CEO/President
What?
Development of firm’s mission and business plan; selection of target markets; identification of product lines, price range, and quality levels
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications.

20. Merchandising Constituency
The Profit Center of the Company – the main source of income, not a service provider
Who?
Buyer, designer, merchandise manager, merchandiser, product development manager, product manager
What?
Plan, develop, present
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications.

21. Marketing Constituency
Strengthen the company’s image through promotions and campaigns
Who?
Advertising manager, representative, communication manager, PR manager, sales manager?
What?
Market research; develop marketing strategies; position relative to competition: advertising budget
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications.

22. Operations Constituency
Manages organization’s resources of people and physical property
Who?
Personnel manager, recruiter, inventory controller, municipality relations, plant/store manager, machine operator
What?
Manages human resources, inventories, physical facilities, retailing
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications.

23. ©2010 Fairchild Books, A Division of Condé Nast Publications.
Finance Constituency
Evaluate profitability and setting goals
Who?
Accountant, financial analyst, investment manager
What?
Manages accounts receivables, accounts payables, borrowing, spending, investments
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications.

24. Supply Chain Constituency
Minimizes time and cost between conceptualizing a product and delivering it to retail selling floor
Who?
Supply chain director or coordinator, EDI (electronic data interchange) director, UPC (universal product code) supervisor
What?
Cut across all other divisions and seek team support from other areas
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications.

25. Summary of Relationships Among a Firm’s Internal Constituencies
Apparel coalition divided into six major constituencies: upper management, merchandising, marketing, operations, finance, and supply chain
Each constituency has goals and responsibilities related to its particular functions within the firm
Goals and responsibilities of one constituency contribute to those of the total firm, but are not likely to be the same as goals and responsibilities of other areas
Goals and responsibilities of constituencies may conflict with one another
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications.

26. Summary of Relationships Among a Firm’s Internal Constituencies
5. Conflicts between constituencies are resolved through negotiation
6. Merchandising constituency arbitrates differences among constituencies and provides an integrative function in relation to the product line
7. Power of a constituency related to the value of the resource exchanges it negotiates
8. Business decisions frequently involve a complex matrix of information sources
9. Business decisions impact both internal constituencies and external coalitions
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications.

27. Fundamental Assumptions of Behavioral Theory of the Apparel Firm
Apparel firm consists of manufacturing and distribution functions
A firm is a coalition of individuals with common goals
The coalition is made up of subcoalitions or constituencies that conform to the firm’s functional areas of specialization
Six constituencies can perform all the business functions required for operation of an apparel firm
Executive constituency formulates overall goals
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications.

28. Fundamental Assumptions of Behavioral Theory of the Apparel Firm
Focus of each coalition: how to satisfy the customer’s needs within limitations of the firm
The relationships among constituencies form the firm’s internal decision-making matrix
Time-based competition changes the firm’s decision-making priorities and measures of success
Agility contributes to the firm satisfying customer wants and needs
Partnering among internal and external constituencies provides information to optimize the ability to achieve the firm’s goals
Kunz
Chapter 1
©2010 Fairchild Books, A Division of Condé Nast Publications.