Multichannel Retailing Lynda Gamans Poloian

Copyright ©2009 Fairchild Books All rights reserved. No part of this presentation covered by the copyright hereon may be reproduced or used in any form or by any means–graphic, electronic, or mechanical, including photocopying, recording, taping, or information storage and retrieval systems–without written permission of the publisher. ISBN: GST R

Unit II Strategic Imperatives

Chapter 4 The Strategic Planning Process

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 5 Strategic Planning Process Strategic planning—process of gathering and analyzing information from internal and external sources to identify concrete tactics that will reduce risk as business plans are executed

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 6 Steps of the Strategic Planning Process 1.Conducting situation analysis 2.Determining differential advantage 3.Preparing vision statement 4.Developing goals and objectives 5.Identifying specific strategies

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 7 Conducting a Situation Analysis Determine current strengths and weaknesses of a company Operations, management, merchandising, and advertising are examined internally Environmental scanning is done externally to detect opportunities and threats SWOT analysis helps organize findings

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 8 Determining a Differential Advantage The unique attributes that give a business superior position in the marketplace is called a differential advantage Perception a customer has of a company, store or brand in relation to others is called positioning

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 9 Developing a Vision Statement Articulating a company’s core business and its differential advantage is building a vision statement The part of a vision statement that addresses how a company will specifically reveal its vision is called a mission statement

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 10 Preparing Goals and Objectives Statements that indicate company aims or end results are called goals Specific intentions stated by a company as it pursues its goals are called objectives

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 11 Planning Detailed Strategies Action plans that prescribe tactics used to reach common goals and objectives are called strategies Strategies are planned for all key functional and related areas internally Examples: channel selection, global expansion, store locations, management structure, pricing, merchandising, human resources, and promotion

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 12 Monitoring the Retail Environment Uncontrollable external elements like these affect strategic planning: –Economic volatility –Political and legal influences –Demographic factors including population changes –Competitive sphere –Unplanned events –Technology

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 13 Economic Impact Monetary dynamics including recession, inflation, currency devaluation and interest rates affect business planning Economic indicators such as buying power, gross domestic product, consumer confidence, unemployment, and consumer prices are monitored by retailers

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 14 Monetary Dynamics Recession Slowdown of money in the economy Consumers spend less Entire supply chain affected Global implications Human resource cutbacks probable Bankruptcies increase Inflation Precipitates rising price levels Effects imports and consumer spending Costs of doing business increase Consumers adjust their spending habits; high income families not as vulnerable

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 15 Monetary Dynamics Currency Volatility Value of dollar against world currencies monitored Devaluation—when the worth of currency declines If the dollar weakens, it may cause more foreign investment and tourism in the U.S. Interest Rate Fluctuations Interest rates impact retail sales and development Changes in rates affect decision-making in banking, commercial and consumer sectors Credit card and mortgage loan rate fluctuations influence consumer spending

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 16 Monetary Dynamics

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 17 Economic Indicators Buying power—available family income Gross domestic product—measures productivity of country Consumer price index—measures changes in cost of living due to inflation Employment rates—measures joblessness –in first quarter of 2009 unemployment was 8.5 percent in the U.S.

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 18 Implications for Multichannel Retailers Converging economic factors in 2008 made a bad economy worse for retailers and consumers Many retailers –closed stores, catalog operations, and/or distribution centers –made significant executive and staff cutbacks –filed for bankruptcy protection

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 19 Political Influences Trade agreements—alliances between nations to encourage trade Trade restrictions—laws or programs to support domestic manufacturing and repress foreign trade Impact on globalization—governments wield power for or against international retail ownership and development

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 20 Multichannel Retailing and the Law The legal sector impacts retail and consumer sectors: –Legislative lobbying—trade associations promote pro-retail legislation –Legal and ethical issues—unfair labor practices, unsafe conditions, and humanitarian issues draw attention –Regulatory laws—antitrust, data privacy, and product safety issues predominate

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 21 Population Dynamics Demographic information of interest to strategic planners: –Population increases and declines in specific geographic areas and how they impact retail markets –Numbers of births, deaths, marriages, divorces, and immigration –Population density—number of people per square mile living in a specific geographic area

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 22 Internal and External Competition Competition is an external factor that cannot be controlled by a retailer –Horizontal competition retailer against retailer –Vertical competition retailer in direct competition against wholesaler or manufacturer that also engages in retailing

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 23 Internal and External Competition Internal Tactics –Infusing unexpected goods through scrambled merchandising –Finding advantageous locations –Using product differentiation via private-labels, new brands or departments

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 24 Internal and External Competition External Tactics –Using acquisitions and divestitures to control competition or tighten core concept –Gain dominance through market share growth –Market share—percentage of industry-wide sales earned by one company

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 25 Unpredictable Events Influence Strategic Planning Natural disasters: hurricanes, tsunamis and earthquakes Wars and terrorism Disease, tainted foods, unsafe products Coping with events like these bring out the best in retailers and communities

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 26 Decision-Making Tools and Market Strategies Growth-Share Matrix Product/Market Expansion Grid Market Segmentation Strategies Marketing mix—unique arrangement of product, pricing, distribution, and promotion tactics that appeal to target customers

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 27 Growth-Share Matrix Star—high market share and high market growth position Cash Cow—high market share in low growth market Question Mark—low market share in high growth market Dog—low market growth and low market share

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 28 Product/Market Expansion Grid Tool used to depict strategic options: –Market Penetration— existing product in existing market See example: Supercuts mobile coupon –Market Development— existing product in new market –Product Development— existing market, new product –Diversification—new market, new product

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 29 Market Segmentation Strategies Undifferentiated—mass marketing; one marketing mix for all Differentiated—multisegment marketing; different marketing mix for each segment Concentrated—niche marketing; one segment selected, one or more marketing mixes used Micromarketing—customization; marketing mix tailored to small groups or individual

L. Poloian Chapter 4 ©2009 Fairchild Books, A Division of Condé Nast Publications. 30 Summary Multichannel retailers monitor the environment and use many tools to help them articulate and implement well designed strategies to encourage growth and profitability