Chapter 2 Retail Strategic Planning and Operations Management.

Chapter 2

Retail Strategic Planning

and Operations Management

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Learning Objectives

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.

Describe the retail strategic planning and operations management model, which explains the two tasks that a retailer must perform and how they lead to high profit.


Components of Strategic Planning

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

Strategic planning consists of four components:Development of a mission (or purpose) statement for

the firm.Definition of specific goals and objectives for the firm.S(strengths)W(weaknesses)O(opportunities)T(threats)

analysis.Development of basic strategies that will enable the

firm to reach its objectives and fulfill its mission.

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Mission Statement

It is a basic description of the fundamental nature, rationale, and direction of the firm.

Elements of a mission statement are: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

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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Exhibit 2.2 - Retail Objectives

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Market performance objectivesEstablish the amount of dominance the retailer seeks

in the marketplace.Market share - The retailer’s total sales divided by

total market sales.

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Financial objectivesProfit-based objectives - Deal directly with the

monetary return a retailer desires from its business.Profit is the aggregate total of net profit after taxes—

that is, the bottom line of the income statement.Profit can be expressed as a percentage of net sales.It can also be defined in terms of return on investment

(ROI), which can be defined by—Return on assets (ROA) and Return on net worth (RONW).

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Exhibit 2.1 - Strategic Profit Model

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Financial objectivesStockouts - Products that are out of stock and

therefore unavailable to customers when they want them.

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Financial objectivesProductivity 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.Productivity objectives are vehicles by which a retailer

can program its business for high-profit results.

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Open or acquire on store over the next four yearsRemodel one existing store every three yearsIncrease operating profit margin in each story

by .25 percent for each six-month periodIncrease clothing sales in existing stores by 10

percent over the preceding year


Strategies

Are a carefully designed plan for achieving the retailer’s goals and objectives.

Retailers can operate with three strategies:Get shoppers into your 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 your customers expect.

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SWOT Analysis

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

IkeaTargetMcDonald's

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SWOT Analysis

WeaknessesWhat 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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SWOT Analysis

OpportunitiesWhat 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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SWOT Analysis

ThreatsWhat 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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Building competitive advantage

Physical differentiationThe selling processAfter-purchase satisfactionLocationNever being out of stock


Strategies

The retailer must develop a retail marketing strategy with strong financial elements.

A fully developed marketing strategy should address the following considerations: the specific target market, location, the specific retail mix that the retailer intends to use, and the retailer’s value proposition.

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Strategies

Target market - Group of customers that the retailer is seeking to serve.

Location - Geographic space or cyberspace where the retailer conducts business.

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

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Strategies

Value proposition - A clear statement of the tangible and/or intangible results a receives from shopping at and using the retailer’s products or services.

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Exhibit 2.6 - Retail Strategic Planning and Operations Management Model

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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. It is frequently referred to as day-to-day management.

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

LO 2

Chapter 2 Retail Strategic Planning and Operations Management.

Documents

Transcript of Chapter 2 Retail Strategic Planning and Operations Management.