External and Internal Environment factors for an MNC Socio-Cultural Legal Economic Political - Domestic - Local - International Technological Regulators Competitors Suppliers Consumers/External Customers Internal Customers

Political/ Legal Economic Technological Global Demographic Sociocultural CompetitiveEnvironment Industry Environment Components of the General Environment

External Environmental Analysis The external environmental analysis process should be conducted on a continuous basis. This process includes four activities: Scanning:Monitoring: Forecasting: Assessing: Identifying early signals of environmental changes and trends Detecting meaning through ongoing observations of environmental changes and trends Developing projections of anticipated outcomes based on monitored changes and trends Determining the timing and importance of environmental changes and trends for firms' strategies and their management

Scanning models Delphi Technique Spire Approach – Systematic Probing and Identification of the Relevant Environment* 1) fgfgf 2) kk *Klein and Newman

Environment Scanning Competitor Intelligence Strategic Analysis The SPIRE Approach (Systematic Probing and Identification of the Relevant Environment)* -Detailed list of environment variables -Set out strategic marketing components -Facilitate interactions of different factors for any linkages Scenario Building * Klein and Newman, How to Integrate New Environmental Forces into Strategic Planning, “Management Review”, Volume 69, July 1980, pp.40-48

Scenario Building Stage 1: Analysis of the Decisions Stage 2: Identification of Key Decision Factors Stage 3: Identifying the Socio-Cultural Factors Stage 4: Analysis of each of the key variables separately Stage 5: Selection of Scenario Logics

Franchising

Almost exclusively concerned with small business Holds at offer of Individual ownerships Fastest growing business segment, and market entry methods 1851…Singer Sewing Machine Co. Became popular after WW-II in the US Offer: proven products, business know-ow, financial help

Franchising: a definition It’s a legal document, a contractual agreement between the Franchiser (Manufacturer, Wholesaler, Service Sponsor) and the Franchisee (Retailer) to conduct a given business in accordance with prescribed operating methods, financing systems, territorial domain, commission fees/royalty Holder is given the benefit of Franchiser’s experience, and help in the choice of locations, financing, marketing, record keeping, promotional techniques, brand name and standardization

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Merchandise Management

PLANNING MERCHANDISE ASSORTMENT

Merchandise Management Involves: Buy Merchandise Control merchandise inventory Price merchandise

Merchandise Buying Involves: Locate Vendors Evaluate vendors Negotiate with vendors Place orders

Merchandise inventory control involves: Develop merchandise budget plans Allocate merchandise to stores Review open-to-buy & stock position

Pricing merchandise Set initial price Adjust price

A few retail definitions

STOCK BALANCE: A strategic decision that defines the degree to which a retailer wishes to be a specialist with a narrow range of merchandise OR A generalist with many different types of merchandise. A store’s stock balance results in a trade-off amongst three factors: -Varieties -Assortments -Service levels Stock balance: increasingly it is a strategic issue

Organising the buying process by categories:- The category Category Management The Category Captain

The Buying organization Department Classification Categories SKU (Stock Keeping Units)

Setting Objective for the Merchandise Plan Putting Margin, Sales, and Turnover together: GMROI- Gross Margin Return On Investment Measuring Inventory Turnover – Stock Turn

Advantage of High Inventory Turnover Increased Sales Volume Less Risk of Obsolescence and Markdowns Improved Sales Person Morale More money for market opportunities

Relation between Cycle Stock & Base Stock Units Availability WEEKS Cycle Stocks Safety/ Base Stock Lead Time Time for Replenishment

The Category Life Cycle Variations on the category Life Cycle Seasonal Merchandise

Developing a Sales Forecast Sources of information for category Level Forecast Previous Sales volume Published sources Customer Information A focus group Shop competition Vendors & Buying residing office Store level Forecasting CPFR- Collaboration, Planning Forecasting, and Replenishment

The Assortment Planning Process Variety Assortment Product Availability-Assortment Process for service retailers

Trade-Offs between Variety, Assortment & Product Availability Determining Variety and Assortment Profitability of Merchandise Mix Corporate Strategy and positioning toward the assortment Physical Characteristics of the store layout of the internet site Balance between Too much versus Too little assortment Determining product availability Cycle stock

Buying Systems Staple Merchandise Buying Systems The Inventory Management Report Basic Stock List Inventory Turnover Product availability Backup stock Forecast Order Point

Buying Systems (contd..) Order Quantity Monthly Reductions BOM- Beginning of Month Stock to Sales Ratio EOM- End of Month stock ratio Monthly additions to stock Evaluating the Merchandise Budget Plan Calculating Open-To-Buy for past periods & Current period

Allocating merchandise to stores Analyzing Merchandise Performance ABC Analysis Sell through Analysis Multi attribute Method

Buying Merchandise Private –Label Brands Private Label Options Bargain branding Premium Branding A Brand or a store?

INTERNATIONAL SOURCING DESCISIONS Cost Associated with Global Sourcing decisions Country-of-Origin effect Foreign Currency Fluctuations Tariffs WTO NAFTA - North American Free Trade Agreement

Free Trade Zones Managerial issues associated with global sourcing decisions Building of Strategic Partnerships Source close to Home or buy Made in America

Connecting with Vendors Internet Exchanges Wholesale Market Centres Trade shows Buying on their turf Resident Buying Offices

Negotiating with Vendors Guidelines for Planning Negotiations with Vendors Knowledge is Power Consider History Assess where things are today Set goals Additional Markup opportunities Terms of Purchase Transportation

Negotiating with Vendors (contd..) Delivery & Exclusivity Communications Advertising allowances Know the vendor’s goals & Constraints A Continuous relationship Testing new items Communications Showcase

Negotiating with Vendors (contd..) Plans to have as many negotiations as the vendor Choose a good place to negotiate Don’t burn bridges Don’t assume

Establishing & Maintaining strategic relationships with vendors Defining strategic relationships Maintaining strategic relationships mutual trust Open Communication Common Goals Credible commitments Building Partnering relationships

Pricing Pricing Strategy Everyday Low Price High Low Pricing- Deciding which strategy is best

Approaches for setting prices The cost oriented method Determining the initial markup from maintained markup and gross margin Determining the initial retail price under cost oriented pricing The demand oriented method The competition oriented method Profit impact of setting a retail price The us e of break-even analysis Calculating Break-even for a new product Calculating Break-even sales

Price Adjustments Markdowns Reasons for taking markdowns Liquidating markdown merchandise Markdowns and price discrimination Coupons Rebates Price bundling

Price Adjustments (contd..) Multiple Unit-pricing Variable pricing Pricing on the internet Leader pricing Price lining Odd pricing

Are you a smart merchandiser now??