Chapter 3 Strategic Planning in Retailing RETAIL MANAGEMENT

Chapter 3 Strategic Planning in Retailing RETAIL MANAGEMENT: A STRATEGIC APPROACH, 9 th Edition BERMAN EVANS

Chapter Objectives To show the value of strategic planning for all types of retailers To explain the steps in strategic planning for retailers: situation analysis, objectives, identification of consumers, overall strategy, specific activities, control, and feedback 3 -2

Chapter Objectives_2 To examine the individual controllable and uncontrollable elements of a retail strategy To present strategic planning as a series of integrated steps 3 -3

Retail Strategy ¯ Retail Strategy is the overall plan or framework of action that guides a retailer ¯One year in duration ¯Outlines mission, goals, consumer market, overall and specific activities, and control mechanisms 3 -4

Retail Strategy • Without a well conceived strategy, a retailer may not be as effective or unable to cope with environmental changes 3 -5

Figure 3. 1 Elements of a Retail Strategy Situation Analysis Objectives Identification of consumers Overall Strategy Specific activities Control 3 -6

Benefits of Strategic Retail Planning ¯ Provides thorough analysis of the requirements for doing business for different types of retailers ¯ Outlines retailer goals ¯ Allows retailer to determine how to differentiate itself from competitors ¯ Allows retailer to develop an offering that appeals to a group of customers 3 -7

Benefits of Strategic Retail Planning_2 ¯ Offers an analysis of the legal, economic, and competitive environment ¯ Provides for the coordination of the firm’s total efforts ¯ Encourages the anticipation and avoidance of crises 3 -8

Situation Analysis • Situation Analysis – evaluation of opportunities and threats facing a retailer • Anticipates opportunities and threats in environment • Opportunities – a marketing opportunity that a retailer has not capitalized ( unmet need) • Threats – environmental or marketplace fadtors that adversely affect the success of the retailer. • Mission must be clearly defined 3 -9

Organizational Mission Retailer’s commitment to a type of business and to a distinctive role in the marketplace. 3 -10

Major Decisions Related to Mission • Base business around goods and services or consumer needs • Do you want to be a leader or a follower • Market Scope - broad customer base or small focused customer base 3 -11

Ownership and Management Alternatives ¯ Sole proprietorship is an unincorporated retail firm owned by one person ¯ A partnership is an unincorporated retail firm owned by two or more persons, each with a financial interest ¯ A corporation is a retail firm that is formally incorporated under state law; it is a legal entity apart from its officers 3 -12

Name of Business___________ Figure 3. 3 Checklist to Consider When Starting a New Business Pg. 53 of text A. Self Assessment and Business Choice B. Overall Retail Plan C. Financial Plan D. Organizational Details of Plan 3 -13

Should you buy existing Retail Business or Start from Scratch ? Examine checklist on page 54 Figure 3. 4 Checklist for Purchasing an Existing Retail Business 3 -14

Ownership and Management Alternatives are factors to consider • An important part of situation analysis • Type chosen may have tax consequences • Different owner types Sole proprietorship Partnership Corporation 3 -15

Other factors which are related to mission selected • Good/Service Category • Personal Abilities – individual’s apitiude and preferences • Financial resources • Time Demands – some types of retail categories may demand more time 3 -16

Figure 3. 5 Selected Kinds of Retail Goods and Service Establishments Durable Goods Stores: Automotive group Furniture and appliances group Lumber, building, and hardware group Jewelry stores Nondurable Goods Stores: Apparel group Food group General merchandise group Gasoline service stations 3 -17

Figure 3. 5 Selected Kinds of Retail Goods and Service Establishments (Personal): Laundry and dry cleaning Beauty/barber shops Funeral services Health-care services Service Establishments (Amusement): Movie theaters Bowling alleys Dance halls Golf courses 3 -18

Figure 3. 5 Selected Kinds of Retail Goods and Service Establishments (Repair): Automobile repair Car washes Consumer electronics repair Appliance repairs Service Establishments (Hotel): Hotels Motels Trailer parks Camps 3 -19

Objectives • Objectives are long –run and short-run performance targets • These help mold a firm’s strategy • They include: 1. Sales objectives 2. Profit Objectives 3. Satisfaction level of publics 4. Image (positioning) 3 -20

Kroger’s Goals ¯ Increase its identical food store sales growth target ¯ Reduce operating and administrative costs by more than $500 million ¯ Further leverage its size to achieve even greater economies of scale ¯ Reinvest in its core business to increase sales and market share 3 -21

Image and Positioning An image represents how a given retailer is perceived by consumers and others. 3 -22

Positioning • Positioning, a retailer devises its strategy that projects an image relative to it retail category and competitors and that elicits a positive consumer response • Two opposite positioning philosophies are popular Mass Merchandising and Niche retailing 3 -23

Positioning Approaches 1. Mass merchandising is a positioning approach whereby retailers offer a discount or value-oriented image, a wide or deep merchandise selection, and large store facilities 2. Niche retailing occurs when retailers identify specific customer segments and deploy unique strategies to address the desires of those segments rather than the mass market 3. Bifurcated retailing – no in the middle approach is becoming the norm 3 -24

Figure 3. 7 Selected Retail Positioning Strategies 3 -25

Identification of Target Market • Target market – customer group that retailer seeks to satisfy • Retailing mix is target to selling products and services wanted by this group • Three different approaches 3 -26

Target Market Selection • Three techniques ¯Mass marketing- selling to a broad group of people ¯Concentrated marketingnarrowing to one specific group ¯Differentiated marketing- aiming at 2 or more distinctive groups with different retailing mixes 3 -27

Strategic Implications of Target Market Techniques ¯ Retailer’s location ¯ Goods and service mix ¯ Promotion efforts ¯ Price orientation ¯ Strategy 3 -28

Overall Strategy • Must develop an in-depth overall strategy • Involves the use of Controllables – aspects retailer can control Uncontrollables – aspects that retailer must adapt to 3 -29

Figure 3. 9 Developing an Overall Retail Strategy Controllable Variables: • Store location • Managing business • Merchandise management and pricing • Communicating with customer 3 -30 Retail Strategy Uncontrollable Variables: • Consumers • Competition • Technology • Economic conditions • Seasonality • Legal restrictions

Table 3. 4 a Legal Environment and Retailing • Store Location • Managing the Business ¯zoning laws ¯licensing provisions ¯blue laws ¯personnel laws ¯environmental ¯antitrust laws ¯franchise ¯direct selling laws agreements ¯local ordinances ¯business taxes ¯leases and ¯recycling laws mortgages 3 -31

Table 3. 4 b Legal Environment and Retailing • Merchandise Management and Pricing ¯trademarks ¯merchandise restrictions ¯product liability laws and lemon laws ¯sales taxes ¯unit-pricing laws ¯collusion laws ¯sale prices ¯price discrimination laws 3 -32

Table 3. 4 c Legal Environment and Retailing • Communicating with the Customer ¯truth-in-advertising and selling laws ¯truth-in-credit laws ¯telemarketing laws ¯bait-and-switch laws ¯inventory laws ¯labeling laws ¯cooling-off laws 3 -33

Additional Concerns for Global Retailing ¯ In addition to the strategic planning process: ¯assess your international potential ¯get expert advice and counseling ¯select your countries ¯develop, implement, and review an international retailing strategy 3 -34

Factors Affecting the Success of a Global Retailing Strategy ¯Timing ¯A balanced international program ¯A growing middle class ¯Matching concept to market ¯Solo or partnering ¯Store location and facilities ¯Product selection 3 -35

Integrating Overall Strategy • Once all the steps including situation analysis, mission, ownership, goods/service category, objectives, selection of target market , overall strategy, then these elements must be coordinated to form a consistent, integrated strategy and to systematic account for uncontrollables. • Next specific tasks to carry out this strategy is devised 3 -36

Specific Activities • Short run decisions are enacted for each controllable part of the strategy • Tactics are operations things which must be done to operationalize strategy • Examples where tactics can be employed: - Store hours/location - Merchandise management/markdowns 3 -37

Control • Control focus on comparing the actual performance of store to mission, objectives, and target market 3 -38

Feedback • Management assessment of situation and decisions or changes are given to those who are responsible for implementing the strategey • Feedback can be on various factors • Feedback should be both positive and negative (So don’t only provide the negative but also give some positive) 3 -39

Questions 3 -40