1. Chapter 2 Retail Strategic Planning & Operations Management

2. What is Strategic Planning?

3. What is Strategic Planning?
Involves adapting the resources of the firm to the opportunities and threats of an ever-changing retail environment.

4. Strategic Planning (cont.)
Four components, or steps, involved in strategic planning:
Mission statement
Statement of goals and objectives
SWOT analysis
Strategy

5. What is a Mission Statement?

6. What is a Mission Statement?
It’s a basic description of the fundamental nature, rationale, and direction of the firm.
Three elements necessary for a sound 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 meet the needs and wants of the consumer.
Should be crafted at “the most meaningful level of generalization possible”… why?

7. Goals and Objectives Serve two general purposes:
Provide direction and guidance to the firm in the formulation of its strategies.
A [intermediate] “destination” for the firm
Establish a standard against which to measure and evaluate future firm performance.
And in so doing…
They minimize the ability for ex post justification by a retail manager*

8. Four Dimensions of Retailer Goals and Objectives

9. Market Performance Objectives
Establish the amount of dominance the retailer seeks in the marketplace.
Two most common measures are:
Sales volume
Market share
Refers to the retailer’s total sales divided by total market sales
Either at the level of the entire chain, geographic region, or product market.
While positively related to profit, this is not always the case*
At some point it may become curvilinear (i.e., upside-down “U” shaped) due to sacrificed margins that are not offset by increases in sales volume in order to gain additional market share *

10. Financial Performance Objectives
Analyze a retailer’s ability to provide a profit level adequate to continue future business.
Two general categories:
Profitability objectives
Deal directly with the monetary return the retailer desires from its business
Productivity objectives
Deal directly with how much output the retailer desires for each unit of resource input

11. Profitability Objectives
Focus primarily on the monetary return that is desired from one’s business (i.e., profit).
But what is meant by profit?

12. Profitability Objectives
Focus primarily on the monetary return that is desired from one’s business (i.e., profit).
But what is meant by profit?
Commonly means net profit after taxes, but can be expressed as a percentage of sales, or even return on investment (ROI)
But what is considered an investment?
Specifically, does it matter who provided the investment (i.e., creditors vs. owners)?
If it doesn’t matter then ROA is an adequate measure; otherwise, RONW is better suited.

13. The Five Most Frequently Encountered Profit Objectives (i.e., the SPM)

14. Productivity Objectives
Focus on output gained per unit of resource input.
Three common measures:
Space productivity
Sales divided by total sq. feet of total retail selling space.
Labor productivity
Sales divided by number of full-time-equivalent employees.
Merchandise productivity
Sales divided by average dollar investment in inventory (at cost).
*Note: the terms sales, total sales, and net sales are used interchangeably throughout the entire course*

15. What is a Strategy?

16. What is a Strategy?
A carefully designed plan for achieving one’s goals and objectives (i.e., its “game plan”).
Retailers must have at least three general strategies in order to have a shot at success:
Get consumers into your store (traffic strategy).
Convert these consumers into customers by having them purchase something (conversion or closure strategy).
Do so at the lowest cost possible consistent with the level of service your customers expect (cost management strategy).

17. Differentiation Strategies
Possible areas for differentiation include:
Price
Product
Selling process
After-purchase support
Location
Service level
What tradeoffs might be required to implement each?
E.G. - greater service levels lead to greater ICCs

18. Developing a Differentiation Strategy
Retailers begin with a SWOT analysis.
Internally:
What are the retailer’s relative strengths and weaknesses?
Externally:
What potential threats and opportunities exist within the market?
Successful retailers will…
Leverage strengths that minimize future threats, and
Correct weaknesses that coincide with market opportunities

19. SWOT Analysis Strengths:
What major competitive advantage(s) do we have?
What are we good at?
What do customers perceive as our strong points?

20. 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?

21. 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?

22. 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?

23. Strategy Checklist
A fully developed marketing strategy should include:
Target market(s)
Group of customers that the retailer is seeking to serve.
Location(s)
Geographic space or cyberspace where business is conducted.
Retail mix
The merchandise, price, advertising and promotion, location, customer service and selling, and store layout and design.
Value proposition
A statement of the tangible and/or intangible results one receives from shopping at and using the retailer’s products or services.

24. The Strategic Planning and Operations Management Model

25. What is Operations Management?

26. What is Operations Management?
The day-to-day management of retailer activities directed at maximizing retailer efficiency.
Most common activities evaluated include:
Buying & handling of merchandise
Pricing
Advertising & promotion
Customer services & selling
Facilities
People

27. What You Should Have Learned… Chapter’s Learning Objectives
Why strategic planning is so important and the components of strategic planning (i.e., the mission statement; goals and objectives; SWOT analysis; and strategy).
The retail strategic planning and operations management model.