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Retail Strategy

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about the strategy of retail

about the strategy of retail

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  • 1. RETAIL STRATEGY
    • RETAIL STRATEGY
    • A clear and definite plan outlined by the retailer to tap the market
    • A plan to build a long-term relationship with the consumers
    • Process of strategy formulation in retail is the same as that for any other industry
    • It starts with the retailer defining or stating the mission for the organization
    • The mission is at the core of the existence of the retailer
    • Other aspects of the strategy may change over a period of time or vary for different markets
  • 2. RETAIL STRATEGY
    • Establish Mission
    • Analyze Situation Objectives
    • Identify Options
    • Set Objectives
    • Obtain & Allocate Resources
    • Develop Implementation Plan
    • Monitor Progress & Control
  • 3. RETAIL STRATEGY
    • DEFINE MSSION OR PURPOSE
    • Mission statement is a long term purpose of the organization
    • It describes what the retailer wishes to accomplish in the markets in which he chooses to operate
    • Retailers mission statement would normally highlight the following
    • The products and services that will be offered
    • The customers who will be served
    • The geographic areas that the organization chooses to operate in
    • The manner in which he firm intends to compete
  • 4. RETAIL STRATEGY
    • CONDUCT A SITUATION ANALYSIS
    • Once the retail mission is defined, the retail organization needs to look inwards
    • Understand what its strengths and weaknesses are
    • Look outwards to analyze its opportunities and threats
    • Situation analysis helps the retailer determine his position and his strengths and weaknesses
    • Helps formulate a clear picture of the advantages and opportunities which can be exploited
    • The weaknesses need to be worked upon
    • This forms the basis or he core element of any strategy
  • 5. RETAIL STRATEGY
    • IDENTIFY OPTIONS / STRATEGIC ALTERNATIVES
    • After determining the strengths and weaknesses vis-à-vis he environment retailer needs to consider various alternatives available to tap a particular market
    • Igor Ansoff presented a matrix which looked at growth opportunities
    • He focused on firm’s present and potential products in the existing and new markets
    • Ansoff’s matrix also helps to understand the options available to a retailer
  • 6. RETAIL STRATEGY
    • IDENTIFY OPTIONS / STRATEGIC ALTERNATIVES
    • The alternatives available to a retailer are :
    • Market Penetration
    • Market Development
    • Retail Format Development
    • Diversification
  • 7. RETAIL STRATEGY
  • 8. RETAIL STRATEGY
    • MARKET PENETRATION
    • Strategy may focus either on:
    • - Increasing the number of customers
    • - Increasing the quantity purchased by customers(basket
    • size)
    • - Increasing the frequency of purchase
    • Increasing the number of customers can be achieved by adding new stores and by modifying the product mix
    • Another approach is to encourage salespeople to cross sell
    • Market penetration strategy is the least risky one, since it leverages many of the firm’s resources and capabilities
    • However, market penetration has limits
    • Once the market approaches saturation, a new strategy needs to be pursued if the firm is to continue growth
  • 9. RETAIL STRATEGY
    • MARKET EXPANSION / DEVELOPMENT
    • When a retailer is said to reach out to new market segments or
    • completely changes his customer base
    • This strategy involves :
    • - Tapping new geographical markets
    • - Introducing new products to the existing range that appeal to a
    • wider audience
    • Expansion by adding new retail stores to existing network is an example of geographical expansion
    • Introducing a pharmacy in a supermarket (eg. The medicine Shoppe at the Haiko Supermarket in Mumbai) is an example of a retailer introducing new products, appealing o a different audience
    • Another example is McDonald’s who introduced ice creams for Rs.7
    • This not only created add on sales, but also brought in customers who had the perception that McDonald’s is an expensive fast food restaurant
  • 10. RETAIL STRATEGY
    • RETAIL FORMAT DEVELOPMENT
    • When a retailer is said to introduce new retail format to customers
    • Example fast food retailers like McDonald’s and Subway offer limited menus inside large department stores
    • Another example is bookstore chain Crosswords, opening smaller format stores by the name Crossword Corner at Shopper’s Stop
    • Strategy may be appropriate if the retailer’s strengths are related to specific customers, rather than to specific products
    • In this situation retailer can leverage its strengths by developing a new product targeted to his existing customers
  • 11. RETAIL STRATEGY
    • SET OBJECTIVES
    • Translation of mission statement into operational terms
    • Indicate
    • Results to be achieved
    • Give direction to and set standards for the measurement of performance
    • Management sets both long term and short term objectives
    • One or two year time frames for achieving specific targets are short term objectives
    • Long term objectives are less specific and reflect the strategic dimension of the firm
    • Two important focus areas of retailers - Market Performance
    • - Financial Performance
    • Objectives are set keeping these focus areas in mind
    • Sales volume targets
    • Market hare targets
    • Profitability targets
    • Liquidity targets
    • Returns on investment targets
  • 12. RETAIL STRATEGY
    • OBTAIN AND ALLOCATE RESOURCES NEEDED TO COMPETE
    • Resources needed by a retailer - Human Resources
    • - Financial Resources
    • 1. Human Resource
    • HR plan must be consistent with overall strategy of the organization
    • HR management focuses on issues such as recruiting, selecting, training,
    • compensating, and motivating personnel
    • These activities must be managed effectively and efficiently
    • 2. Financial Resources
    • Takes care of the monetary aspects of business
    • Shop rent, salaries and payments for merchandise
  • 13. RETAIL STRATEGY
    • DEVELOP THE STRATEGIC PLAN
    • At this stage strategy is determined through which retailer will achieve objectives
    • The retailer determines and defines his target market
    • The retailer finalizes the retail mix that will serve the audience
    • Target Market – that segment of consumer market that the retail orgn.decides to serve
    • No definite process of deciding and selecting the target market
    • Most retailers look at the entire market in terms of both size and consumer segments to
    • which it might appeal
    • From these segments he identifies smaller number of segments that appear promising
    • These become possible targets
    • Variables like growth potential, investment needed to compete, the strength of competition, etc are evaluated.
    • This enables the retailer to arrive at the best alternative that is most compatible with the organizations resources and skills
  • 14. RETAIL STRATEGY
    • DEVELOP THE STRATEGIC PLAN
    • Considerations for successful market segmentation
    • Measurable : The segment should be measurable and identifiable?
    • Accessible : Focusing market marketing efforts on a particular market segment should have a positive impact towards eliciting the desired response
    • Economically viable : The expense and efforts of focusing the marketing efforts in potential segments should be justified.
    • Stable : The consumer characteristics are indicators of market potential. Hence stable indicators to be considered.
  • 15. RETAIL STRATEGY
    • DEVELOP THE STRATEGIC PLAN
    • After choosing the target market the retail mix needs to be developed
    • This process involves
    • the determination of the merchandise mix
    • the pricing policy
    • types of location the retail stores would be located at -
    • services to be offered -
    • communication platform that would be adopted by the retailer
    • Next is the formulation of positioning strategy. This refers to
    • the image the retailer wants the customers to have in their minds about
    • the products and services
  • 16. RETAIL STRATEGY
    • IMPLEMENT THE STRATEGY, EVALUATE AND CONTROL
    • Implementation is the key to success of any strategy
    • Effective implementation of the retailers desired positioning requires
    • Every aspect of stores to be focused on the target market
    • Merchandising must be single-minded
    • Displays must appeal to target market
    • Advertising must talk to the target market
    • Personnel must have empathy for the target market
    • Customer service must be designed with the target customer in mind
  • 17. RETAIL STRATEGY
    • IMPLEMENT THE STRATEGY, EVALUATE AND CONTROL
    • After implementation the management needs feedback and should focus on
    • Performance
    • Effectiveness of long term strategy by periodic evaluation
    • Ensuring that the plans do not degenerate into fragmented ad-hoc efforts
    • Ensuring that all efforts are in harmony with he overall competitive strategy of business
    • Management can also use the process to decide on
    • Any future policy change
    • Modifications if any, in the plan, to ensure that the combination of the retailing mix variables support the firms strategy
  • 18. RETAIL STRATEGY
    • INTERNATIONAL EXPANSION – A GROWTH STRATEGY
    • Factors facilitating the rise of international retail trade
    • Removal of trade barriers between countries
    • The rise of consumerism
  • 19. RETAIL STRATEGY
    • Concept of international retailing (RETAIL INTERNATIONALIZATION)
    • More than just replicating retail stores in other countries and markets
    • Defined as “The management of retail operations in markets which are different from each other in their regulation, economic development, social conditions, cultural environment and retail structure.”
    • Typically retailers start as regional players
    • They develop operational efficiencies as they expand in size
    • Growth in size gives them financial resources
    • International expansion happens when retailer reaches a dominance in domestic market
    • Saturation in domestic market is also a reason for retailer to look at international expansion
  • 20. RETAIL STRATEGY
    • INTERNATIONAL EXPANSION – A GROWTH STRATEGY
    • Decision on entering a new market
    • Confidence of having a sound understanding of that market
    • Understanding of the cultural and buying habits of the local population
    • Ability to use technology, systems and processes available in that market
    • Understanding of the expected growth rates, density of population, income levels
  • 21. RETAIL STRATEGY
    • METHODS OF ENTERING A NEW MARKET
    • Export
    • Retailer having a distinct product / own brand that may be attractive
    • Franchising / licensing
    • Granting permission/license to a company in target country to use the property of the licensor
    • Property is intangible such as trade marks, patents and production techniques
    • Licensee pays a fee in exchange for the rights to use the intangible property
    • For franchising to be successful it is necessary for careful selection of partners
    • Partners should share the same understanding of the parent organizations vision mission, goals and the marketing plans and strategies
  • 22. RETAIL STRATEGY
    • METHODS OF ENTERING A NEW MARKET
    • Joint Venture
    • Strategic partnership between a local retailer and a international / foreign player
    • Benefits / Advantages
    • International player learns from expertise of domestic partner
    • Domestic retailer learns from foreign player the international practices
    • Key issues
    • Ownership, control, length of agreement, pricing, technology transfer, government regulations.
    • Many joint ventures involve one local partner and one foreign player
    • At times for convenience two retailers can also form a JV company to enter new market
  • 23. RETAIL STRATEGY
    • METHODS OF ENTERING A NEW MARKET
    • Acquisitions
    • One organization acquiring another organization
    • Easy way of entering non domestic market without any complications
    • Considerations : management structure
    • new operating culture
    • financial burden
    • Example : Shopper’s stop acquiring bookstore chain Crossword,
    • Wal-mart acquiring ASDA
    • Mergers
    • Imply : Coming together of two organizations to form a combined entity
    • Example : Retail giants Carrefour and Promodes in Europe
  • 24. RETAIL STRATEGY
    • METHODS OF ENTERING A NEW MARKET
    • Organic growth
    • Replication of retail format in a new non domestic market within the
    • regulatory framework of the new market.
    • It gives retailer the kind of control that he requires
    • It also requires a great deal of investment
    • Factors affecting decisions on entry in particular markets
    • Position in the domestic market : Expertise, leader, new entrant
    • Access to global systems
    • Ability to adapt to requirements of global markets
    • Long term commitment towards business
  • 25. RETAIL STRATEGY
    • RETAIL VALUE CHAIN
    • Retail Field : Very challenging and dynamic
    • Growth : Retailer grows from a single shop to a chain of retail stores.
    • From a local to a regional and national presence.
    • Strategy and planning becomes very important
    • Retailer should have a clear focus and strategy
    • Retail Strategy Models : Retailer can either become a pentagon player or a triangle
    • player
    • Pentagon : The retailer’s focus on
    • - Product Image
    • - Place
    • - Price / Value
    • - People
    • - Communications
  • 26. RETAIL STRATEGY
    • RETAIL VALUE CHAIN
    • Triangle : The retailer’s focus on
    • - Systems
    • - Logistics
    • - Suppliers
    • Above approaches to developing strategies are perhaps appropriate in mature marketplace
    • At present , retail in India is oriented towards the mass market
    • As such the retailer must consider all aspects of strategy development, such as product , price, place, communication and the supply chain
    • There is an absence of a robust infrastructure and inadequate capabilities of the service providers in India
    • Thus the retailer must necessarily invest in creating the appropriate support structure for its operations
  • 27. RETAIL STRATEGY
    • RETAIL VALUE CHAIN
    SUPPORT FUNCTION SUPPLIERS THIRD PARTY LOGISTICS RETAIL OPERATIONS CUSTOMER MGMT CUSTOMERS SYSTEMS

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