Chapter 2

Retail Strategic Planning and Operations Management

Learning Objectives

Explain why strategic planning is important and describe the components of strategic planning

Describe the retail strategic planning and operations management model

Components of Strategic Planning (1 of 2)

Strategic planning: Adapting the resources of the firm to the opportunities and threats of an ever-changing retail environment

Through the proper use of strategic planning, retailers hope to achieve and maintain a balance between resources available and opportunities ahead

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Components of Strategic Planning (2 of 2)

Development of a mission statement for the firm

Definition of specific goals and objectives for the firm

S W O T analysis

Development of strategies that will enable the firm to reach its objectives and fulfill its mission

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Mission Statement

Basic description of the fundamental nature, rationale, and direction of the firm

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

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Statement of Goals and Objectives (1 of 2)

Provide:

Specific direction and guidance to the firm in the formulation of its strategy

A control mechanism by establishing a standard against which the firm can measure and evaluate its performance

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Statement of Goals and Objectives (2 of 2)

Dimensions

Market performance

Financial performance

Societal objectives

Personal objectives

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Market Performance Objectives

Establish the amount of dominance the retailer seeks in the marketplace

Market share: Retailer’s total sales divided by total market sales

High sales growth retailing is directly linked to expanding the size of the retail stores

Disney

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Exhibit 2.1 – The Market Share-Profitability Relationship

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Financial Objectives (1 of 2)

Profit-based objectives: Deal directly with the monetary return a retailer desires from its business

Profit – Aggregate total of net profit after taxes

Profit can be expressed as a percentage of net sales

It can also be defined in terms of return on investment (R O I)

Stockouts: Products that are out of stock and unavailable to customers when required

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Exhibit 2.2 – Elements of Strategic Profit Model

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Financial Objectives (2 of 2)

Productivity objectives: State the sales objectives that the retailer desires for each unit of resource input

Space productivity – Net sales divided by the total square feet of retail floor space

Labor productivity – Net sales divided by the number of full time-equivalent employees

Merchandise productivity – Net sales divided by the average dollar investment in inventory

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Societal Objectives (1 of 2)

Reflect the retailer’s desire to help society fulfill some of its needs

Employment objectives – Provision of employment opportunities for the members of the retailer’s community

Payment of taxes – Helping finance societal needs that the government deems appropriate

Consumer choice – Provide the consumer with choices that previously were not available in the trade area

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Societal Objectives (2 of 2)

Equity – Retailer’s desire to treat the consumer and suppliers fairly

Being a benefactor – Retailer may desire to underwrite certain community activities

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Personal Objectives

Reflect the retailers’ desire to help individuals employed in retailing fulfill some of their needs

Self-gratification – Focuses on the needs and desires of the owners, managers, or employees of the enterprise

Status and respect – Recognizes that the owners, managers, and employees need status and respect in their community

Power and authority – Need of managers and other employees to be in positions of influence

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Strategies (1 of 3)

Carefully designed plan for achieving the retailer’s goals and objectives

Retailers can operate with three strategies

Get shoppers into the store

Convert these shoppers into customers by having them purchase merchandise

Implement the above two strategies at the lowest operating cost possible that is consistent with the level of service that customers expect

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Strategies (2 of 3)

Forms of differentiation for a retailer

Outstanding design of the market offering

The selling process

After-purchase satisfaction

Location

Never being out of stock

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S W O T Analysis (1 of 4)

Strengths:

What major competitive advantage(s) do we have?

What are we good at?

What do customers perceive as our strong points?

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S W O T Analysis (2 of 4)

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?

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S W O T Analysis (3 of 4)

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?

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S W O T Analysis (4 of 4)

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?

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Strategies (3 of 3)

A fully developed marketing strategy should address the following considerations

Target market: Groups of customers that the retailer is seeking to serve

Location

Retail mix: Combination of merchandise, price, advertising and promotion, location, customer service and selling, and store layout and design

Value proposition: Statement of the tangible and intangible results a customer receives from shopping

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Exhibit 2.8 – Retail Strategic Planning and Operations Management Model

Competitive Environment: Behavior of Consumers, Competition, Supply Chain Members

Social and Legal Environment: Socioeconomic Environment, State of Technology, Legal System, Ethical Behavior

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The Retail Strategic Planning and Operations Management Model

Operations management: Deals with activities directed at maximizing the efficiency of the retailer’s use of resources

Referred to as day-to-day management

The need to strive for a high profit is tied to the extremely competitive nature of retailing

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MAR4231-CH21.pptx

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