Chapter 2

Retail Strategic Planning and Operations Management

Copyright 2005 by South-Western, a division of Thomson Learning. All rights reserved.

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Retail Strategy

The overall plan or framework of action that guides a retailer

One year in duration

Outlines mission, goals, consumer market, overall and specific activities, and control mechanisms

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Elements of a Retail Strategy

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Benefits of Strategic Retail Planning

Provides thorough analysis of the requirements for doing business for different types of retailers Outlines retailer goals Allows retailer to determine how to differentiate itself from competitors Allows retailer to develop an offering that appeals to a group of customers Offers an analysis of the legal, economic, and competitive environment Provides for the coordination of firms total efforts Encourages anticipation and avoidance of crises
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Components of Strategic Planning

LO 1

Planning Is the anticipation and organization of what needs to be done to reach on objective.

Strategic Planning Involves adapting the resources of the firm to the opportunities and threats of an ever changing retail environment.

Components of Strategic Planning

LO 1

Mission Statement Statement of Goals and Objectives Strategies SWOT Analysis

Components of Strategic Planning

LO 1

Mission Statement is a basic description of the fundamental nature, rationale (foundation), and direction of the firm.

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

Retailers commitment to a type of business and to a

distinctive role in the marketplace.

Figure 3-2: The Focused Organizational Mission of Frischs Restaurants

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Components of Strategic Planning

LO 1

Goals and Objectives Are the performance results intended to be brought about through the execution of a strategy.

Market Performance Objective Financial Performance Objective Societal Objectives Personal Objectives

Statement of Goals and Objectives

LO 1

Market Performance Objectives represents how a retailer desires to be compared to its competitors.

Sales Volume Market Share

Is the retailers total sales divided by total market sales.

Statement of Goals and Objectives

LO 1

Financial Performance Objectives Represent the profit and economic performance a retailer desires.

Net Profit Margin

Is the ratio of net profit (after taxes) to total sales and shows how much profit a retailer makes on each dollar of sales after all expenses and taxes have been met. Is the total assets and shows how many dollars of sales a retailer can generate on an annual basis with each dollar invested in assests.

Asset Turnover

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Financial Performance Objectives: Profitability

LO 1

Return on Assets (ROA) Is net profit (after taxes)

divided by total assets.

Financial Leverage Is total assets divided by net worth

or owners equity and shows how aggressive the retailer is in its use of debt.

Return on Net Worth (RONW)

Is net profit (after taxes) divided by owners equity.

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Financial Performance Objectives: Productivity

LO 1

Productivity Objectives: Space Productivity Labor Productivity

State the sales objective that the retailer desires for each unit of resource input: floor space, labor, and inventory investment. Annual net sales divided by the total square feet of retail floor space. Annual net sales divided by the number of full-time-equivalent employees. Annual net sales divided by the average dollar investment in inventory.

Merchandise Productivity

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LO1: Exhibit 2.1

Strategic Profit Model

Net Profit Margin Net Profit* Total Sales x Asset Turnover Total Sales = Return on Assets x Financial Leverage = Return on Net Worth

Net Profit*
Total Assets

Total Assets
Net Worth

Net Profit*
Net Worth

Total Assets

*Net profit after taxes

Statement of Goals and Objectives

LO 1

Societal Objectives Reflects the retailers desire to help society fulfill some of its needs.

Employment objectives Payment of taxes Consumer choice Equity Benefactor

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Statement of Goals and Objectives

LO 1

Personal Objectives Reflects the retailers desire to help individuals employed in retails fulfill some of their needs.

Self-gratification Status and respect Power and authority

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Retail Objectives
LO 1: Exhibit 2.2
Sales Volume

Profitability

Market Share

Market Performance Objectives

Financial Performance Objectives Retail Mission Societal Objectives

Productivity

SelfGratification

Personal Objectives

Employment Taxes

Power and Authority

Status and Respect Benefactor

Consumer Choice Equity

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Strategies
LO 1

Strategy Is a carefully designed plan for achieving the retailers goals and objectives.

Get shoppers into your store. Convert these consumers into customers by having them purchase merchandise. Do this at the lowest operating cost possible that is consistent with the level of service that your customers expect.

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Question to Ponder
How should a retailer determine the proportion and
the number of market performance, financial performance, societal, and personal objectives?

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Strategies
LO 1

SWOT Analysis Is the identification and analysis of a retailers strengths, weaknesses, opportunities and threats a firm faces.

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SWOT Analysis: Outback Restaurant

LO 1

Strengths? Weaknesses? Opportunities? Threats?

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Strategies
LO 1

Target Market Is the group or groups of customers that the retailer is seeking to serve.

Location Is the geographic space or cyberspace where the retailer conducts business

Retail mix Is the combination of merchandise, assortment, price, promotion, customer service, and store layout that best serves the segments targeted by the retailer
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Service Retailing
Even though many flyers tried JetBlue for the first time because of its low fares, the airlines customer service won them over.

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Retail Planning and Management

LO 2

Strategic Planning Operations Management Administration High-Profit Retailing

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Retail Planning and Management

LO 2

Strategic Planning Is a plan of action detailing how the retailer will respond to the environment in an effort to establish a long-term course of action to follow.

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Retail Strategic Planning and Operations Management Model LO 2: Exhibit 2.4

Competitive Environment: Behavior of Consumers, Competition and Channel Members Strategic Planning

SWOT Mission Goals and Objectives

Strengths Weaknesses Opportunities Threats

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

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Retail Strategic Planning and Operations Management Model LO 2: Exhibit 2.4

Competitive Environment: Behavior of Consumers, Competition and Channel Members
Retail Marketing Strategy Target Market(s) Location(s) Retail Mix Merchandise Pricing Advertising & Promotion Customer Service & Selling Store Layout & Design

Operations Management Buying & Handling Merchandise Pricing Advertising & Promotion Customer Services & Selling Facilities

High-Profit Performance Retailing

Social and Legal Environment: Socioeconomic Environment, State of Technology, Legal System, Ethical Behavior
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Retailing Truism
LO 2

Good execution can never overcome bad planning.

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Retail Planning and Management

LO 2

Operations Management Deals with activities directed at maximizing the efficiency of the retailers use of resources. It is frequently referred to as day-to-day planning. Administration Involves the acquisition, maintenance, and control of resources that are necessary to carry out the retailers strategy. High-Profit Retailing To be a high profit retailer, the retailer needs good strategic planning coupled with strong operations management

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Develop Retail Mix to Implement Strategy Merchandise Management

Planning Assortments Buying Merchandise Pricing Communication Mix

Store Management

Human Resource Issues

Store layout, design & visual merchandising

Customer service

Evaluate Performance & Make Adjustments : Controlling:

Check progress on objectives

Re-evaluate objectives

Change tactics to meet objectives

Review planning

Figure 33: Checklist to Consider When Starting a New Business

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Figure 3-4: Checklist for Purchasing an Existing Retail Business

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