Retail Strategic Planning and Operations Management 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 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 LO 1

Components of Strategic Planning Development of a mission statement for the firm Definition of specific goals and objectives for the firm SWOT analysis Development of strategies that will enable the firm to reach its objectives and fulfill its mission LO 1

Retailing Headlines… For a brand to have international success, on-line presence must speak more than 16 languages. 11 languages can only reach 80% of the world, and monolingual sites typically capture just 25% of the world's Net users Tesco owned Fresh & Easy chain offers only self-service checkouts Amazon most trusted brand among consumers

Retailing Headlines… Target struggles in Canada Target security breach bigger (Neiman Marcus also hit) JC Penney expanding its kids and baby line-up with launch of exclusive new brands Enough?

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 LO 1

The mission of The ________ Company is to be one of the world's leading producers and providers of entertainment and information. Using our portfolio of brands to differentiate our content, services and consumer products, we seek to develop the most creative, innovative and profitable entertainment experiences and related products in the world. To Bring Inspiration and innovation to every athlete in the world. (If you have a body you are an athlete)

“________ mission is to continually provide our members with quality goods and services at the lowest possible prices. In order to achieve our mission we will conduct our business with the following Code of Ethics in mind:Obey the law Take care of our members Take care of our employees Respect our vendors If we do these four things throughout our organization, then we will realize our ultimate goal, which is to reward our shareholders." 

we work to help people and businesses throughout the world realize their full potential. This is our mission. Everything we do reflects this mission and the values that make it possible The guiding vision of The ________ Companies is "Bringing the best to everyone we touch". By "The best", we mean the best products, the best people and the best ideas. These three pillars have been the hallmarks of our Company since it was founded… in 1946. They remain the foundation upon which we continue to build our success today.

"Our mission is to make _____ the preferred shopping destination for our guests by delivering outstanding value, continuous innovation and an exceptional guest experience by consistently fulfilling our Expect More. Pay Less.® brand promise."  "We save people money so they can live better.“  "We will provide customer-valued solutions with the best prices, products and services to make Lowe's the first choice for home improvement." 

Disney Nike Costco Microsoft Estee Lauder Target Walmart Lowe’s

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 LO 1

Statement of Goals and Objectives Dimensions Market performance Financial performance Societal objectives Personal objectives LO 1

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 LO 1

Exhibit 2.1 - The Market Share-Profitability Relationship LO 1

Financial Objectives 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 (ROI) Stockouts: Products that are out of stock and unavailable to customers when required LO 1

Exhibit 2.2 - Elements of Strategic Profit Model LO 1

Financial Objectives 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 (Trader Joe) 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 LO 1

Societal Objectives 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 LO 1

Societal Objectives Equity - Retailer’s desire to treat the consumer and suppliers fairly Being a benefactor - Retailer may desire to underwrite certain community activities LO 1

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 LO 1

Strategies 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 (Distribution company? Teens in the mall? Other unwanted customers?) LO 1

Strategies Forms of differentiation for a retailer Outstanding design of the market offering (Target and Torrid) The selling process (Nordstrom’s) After-purchase satisfaction Location Never being out of stock LO 1

SWOT Analysis Strengths: What major competitive advantage(s) do we have? What are we good at? What do customers perceive as our strong points? LO 1

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? LO 1

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? LO 1

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? LO 1

Strategies 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 LO 1

Exhibit 2.8 - Retail Strategic Planning and Operations Management Model LO 2

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 LO 2