4. PPT 5-4
Retailing Strategy
Retail Market Strategy
Chapter 5
Financial Strategy
Chapter 6
Retail Locations
Chapters 7,8
Human Resource
Management
Chapter 9
Information and
Distribution
Systems
Chapter 10
Customer
Relationship
Management
Chapter 11
5. PPT 5-5
“Strategy” Is Over Used
Retailers Talk About A Lot of Different
“Strategies”
Sales Strategy
Advertising Strategy
Merchandise Strategy
Location Strategy
Strategy Is Not Just Another Term for
A Management Decision
6. PPT 5-6
Strategic vs. Tactical Decisions
Strategic Tactical
Direction Implementation
Strategy statement Annual plan
Broad Specific, detailed
Unstructured Structured
Problem solving Problem solving
Creativity Analytical
External focus Internal focus
Irregular Regular
Long-term Short-term
Difficult to evaluate Easy to evaluate
Note: Success Comes for Having a Good Strategy and Executing It Well
7. PPT 5-7
Elements in Retail Strategy
• Target Market
Customer Needs
• Retail Format
Method for Satisfying Needs
• Bases for Building Sustainable Competitive Advantage
Defending Position Against Competitors
8. PPT 5-8
Chico’s Strategy
Target Market
Woman 35 to 55 Who Want Comfortable,
Casual, But Stylish Apparel
Retail Format
Specialty Apparel Stores in Malls and Strip
Centers Selling Private Label, Coordinated
Outfits
Bases for Building Sustainable Competitive
Advantage
Unique Merchandise Sized 0,1,2,3
9. PPT 5-9
Analyzing McDonalds’ Retail Strategy
What Is McDonalds’:
-Target market?
-Retail offering (format)?
-Bases for competitive advantage?
What Threats Might McDonald’s Face in the Future?
10. PPT 5-10
Examples of Retail Strategies
• Starbucks
• Target
• 7 Eleven
• Olive Garden
What is the target market, retail offering, and
source of competitive advantage for each
retailer?
11. PPT 5-11
Strategy for Looking for a Job
Determine Your Target
Market
Area of Country
Type of Company
Type of Position
Assess and Exploit Your
Competitive Advantage
Unique Skills,
Experience,
Knowledge
12. PPT 5-12
Why Does a Retailer
Need to Focus on a
Specific Target Market?
Why Not Sell to
Everyone?
15. PPT 5-15
Criteria For Selecting A Target Market
Attractiveness --
Large, Growing,
Little Competition
More
Profits
Consistent with Your
Competitive
Advantages
16. PPT 5-16
Can A Retailer Develop a Sustainable
Competitive Advantage by:
Dropping the Price of Your
Merchandise?
Building a Store at the Best
Location?
Deciding to Sell Some Hot
Merchandise?
Increasing Your Level of
Advertising?
Attracting Better Sales Associates by
Paying Higher Wages?
Providing Better Customer Service?
17. PPT 5-17
Internal and External Bases for Competitive
Advantage
Retail Firm
•Low Cost
•Large Size
•Efficient
Distribution,
Operations
• Unique
Knowledge
• Loyal Employees
Sources of
Capital
Vendors,
Suppliers Customers
18. PPT 5-18
Sources of Competitive Advantage
More Sustainable
Location
Customer Loyalty
Customer Service
Exclusive Merchandise
Low Cost Supply Chain
Management
Information Systems
Buying Power with
Vendors
Committed Employees
Less Sustainable
Better Computers
More Employees
More Merchandise
Greater Assortments
Lower Prices
More Advertising
More Promotions
Cleaner Stores
19. PPT 5-19
What does loyalty mean?
Is It the same as liking a store?
…Going to the store frequently?
Loyalty
20. PPT 5-20
Approaches for Building Customer Loyalty
Unique Positioning
Customer Service
Information About Customers (Database
Retailing)
Unique Merchandise
Location
23. PPT 5-23
Creating Store Loyalty
Mental and Emotional Attachments
Elements in a Strong
Brand
Top of the Mind
Awareness
Associations with
Brand/Store Name
Methods Used to
Develop a Strong
Brand
Massive Exposure
Symbols to Reinforce
Image
Consistent
Positioning Creating
Strong Associations
Limited Brand
Extensions
24. PPT 5-24
Vendor Relationships
Low Cost - Efficiency Through
Coordination
Electronic Data Interchange (EDI)
Collaborative Planning and Forecasting
to Reduce Inventory and Distribution
Costs
Exclusive Sale of Desirable Brands
Special Treatment
Early Delivery of New Styles
Shipment of Scare Merchandise
25. PPT 5-25
High Quality Customer Service
Difficult to Achieve
People Are Not Machines --
Inconsistent
Retail Sales Associates At Bottom of
Labor Pool
Goes Beyond Hiring Good People at High
Wages and Training Them --
Organizational Culture
26. PPT 5-26
Critical Tradeoff In Developing
Strategic Advantage
Focus Leads to Developing
A Competitive Advantage
But
Focus Reduces Flexibility
Low Cost, Consistent Image, Vendor
Relationships Reduces Flexibility
Similar to Dating and Marriage –
Commitment to a Relationship (Vendor)
Reduces Flexibility
32. PPT 5-32
Steps in the Strategic
Retail Planning Process
1. Define the business mission
2. Conduct a situation audit:
Market attractiveness analysis
Competitor analysis
Self-analysis
3. Identify strategic opportunities
5. Establish specific objectives and allocate resources
7. Evaluate performance and make adjustments
6. Develop a retail mix to implement strategy
4. Evaluate strategic alternatives
33. PPT 5-33
Elements in a Market Analysis
0
5 0
1 0 0
1 s t Qt r 2 nd Qtr 3 r d Qtr 4 t h Qt r
MARKET
MARKET
FACTORS
FACTORS
COMPETITIVE
COMPETITIVE
FACTORS
FACTORS
ENVIRONMENTAL
ENVIRONMENTAL
FACTORS
FACTORS
ANALYSIS OF
ANALYSIS OF
STRENGTHS &
STRENGTHS &
WEAKNESSES
WEAKNESSES
Barriers to entry
Bargaining power of
vendors
Competitive rivalry
Threat of superior
new formats
Technology
Economic
Regulatory
Social
Size
Growth
Seasonality
Business cycles
Management
capabilities
Financial resources
Locations
Operations
Merchandise
Store Management
Customer loyalty
34. PPT 5-34
Questions for
Analyzing the Environment
• New developments or changes --
technologies, regulations, social
factors, economic conditions
• Likelihood changes will occur
• Key factors determining change
• Impact of change on retail market
firm, competitors
35. PPT 5-35
Porter’s Five Forces
Competitiv
e
Rivalry
Bargaining
Power of
Vendors
Barriers to
Entry
Large
Customers
Threat of
Substitution
36. PPT 5-36
Strengths and Weaknesses Analysis
Management Capability:
Capabilities and experience of top management
Depth of Management--capabilities of middle management
Management’s commitment to firm
Financial Resources:
Cash flow from existing business
Ability to raise debt or equity financing
Operations:
Overhead cost structure
Quality of operating systems
Distribution capabilities
Management information systems
Loss prevention systems
Inventory control system
Merchandising Capabilities:
Knowledge and skills of buyers
Relationships with vendors
Capabilities in developing private
capabilities
Store Management Capabilities
Management capabilities
Quality of sales associates
Commitment of sales associates to firm
Locations
Customers
Loyalty of customers
37. PPT 5-37
Illustration of the
Strategic Retail Planning Process
Kelly Bradford – Owner of Gifts To Go
Two Store Chain in Chicago
Target Market – Upper Income Men and
Women Looking for Gifts between $50
and $500
Strong Customer Loyalty Based on
Knowing What Customers Want,
Providing Good Customer Service
Low Turnover Among Associates
38. PPT 5-38
Mission Statement for Gifts To Go
“The mission of Gifts to Go is to be the
leading retailers of higher-priced gifts in
the Chicago and provide a stable income
of $100,000 per year for the owner.”
Define growth opportunities will and won’t
consider
Indicates objective of company
39. PPT 5-39
Situation Analysis of Gifts to Go
Market Factors
Chicago is an attractive market. (+)
Relatively expensive gifts are not affected
much by the economy. (+)
Gifts are highly seasonal. (-)
Competitive Factors
Many in area. Primary department stores,
craft galleries, catalogs, and Internet
retailers (-)
Lack of large suppliers, customer (+)
Opportunities for differentiation (+)
Limited competitive rivalry. (+)
40. PPT 5-40
Environmental Factors
Potential Threat - Development of electronic
channel by traditional bricks and mortar
retailers (-)
Strengths and Weaknesses
Management Capability – Limited
Financial Resources – Good
Operations – Poor
Merchandise Capabilities – Good
Store Management Capabilities – Excellent
Locations – Excellent
Customer Loyalty – Good
Customer Database - Good
Situation Analysis of Gifts to Go
41. PPT 5-41
Market Penetration
Increase size of present stores
Open additional gifts stores in Chicago
area
Market Expansion
Open gift stores outside Chicago area
Sell lower priced gifts in present stores
Growth Opportunities for
Gifts to Go
42. PPT 5-42
Growth Opportunities for
Gifts to Go
Retail Format Development
Sell non-gift merchandise to same customers
in present or new stores
Sell similar gifts to same customers through
an electronic channel
Diversification
Manufacture craft gifts
Open an apparel store targeting teenagers
Open a category killer store selling a broader
assortment of gifts
43. PPT 5-43
Evaluating Growth Opportunities for Gifts to Go
Market Attractiveness
Market Penetration
Increase size of present stores (low)
Open additional gifts stores in Chicago area
(medium)
Market Expansion
Open gift stores outside Chicago area – new
geographic segment (medium)
Sell lower priced gifts in present stores – new
benefit segment (medium)
44. PPT 5-44
Evaluating Growth Opportunities for
Gifts to Go (continued)
Market Attractiveness
Retail Format Development
Sell non-gift merchandise to same
customers in present or new stores
(High)
Sell similar gifts to same customers
through an electronic channel (High)
Diversification
Manufacture craft gifts (High)
Open an apparel store targeting
teenagers (High)
Open a category killer store selling a
broader assortment of gifts (High)
45. PPT 5-45
Evaluating Growth Opportunities for
Gifts to Go
Competitive Position
Market Penetration
Increase size of present stores
(High)
Open additional gifts stores in
Chicago area (Medium)
Market Expansion
Open gift stores outside Chicago
area (Low)
Sell lower priced gifts in present
46. PPT 5-46
Evaluating Growth Opportunities for
Gifts to Go (continued)
Competitive Position
Retail Format Development
Sell non-gift merchandise to same customers in
present or new stores (Low)
Sell similar gifts to same customers through an
electronic channel (Medium)
Diversification
Manufacture craft gifts (Low)
Open an apparel store targeting teenagers
(Low)
Open a category killer store selling a broader
assortment of gifts (Low)
47. PPT 5-47
Market Attractiveness/Competitive
Position Matrix
Market
Attractiveness
Competitive Position
High Low
Medium
Maximum
investment
Consolidate
position
Invest to
challenge leader
Opportunities
investment
Build strength or
exit
Selective
investment
Build on strengths
Cautious
investment
Harvest
or
divest
Protect
position
Manage for cash
generation
Harvest or
divest
Harvest
or
divest
Aggressive
investment
Cautious
investment
Minimal
investment
48. PPT 5-48
Steps in Using Market Attractiveness -
Competitive Position Matrix
• Define strategic opportunities
• Identify market attractiveness and competitive
position factors
• Assign weight based on importance of factors
• Rate opportunities on market attractiveness
and competitive position
• Calculate scores and evaluate opportunities
49. PPT 5-49
Characteristics of International Markets
U.S. Germany Japan
Population (Millions) 266 82 126
Business Climate 3 10 24
Logistical Infrastructure Exc. Good Avg.
53. PPT 5-53
Risk and Rewards in Latin America:
Country Risk Assessment
Source: Coopers & Lybrand Analysis, “Global Retailing: Assignment Latin
America,” Chain Store Age Executive, April 1996, seciton 2, p. 4.
RISK
Market
Size
(GDP
Billions)
400
350
300
250
200
150
100
50
0
Low Medium High
Short-Term Risk
Long-Term Risk
Chile
Colombia
Peru
Venezuela
Argentina
Mexico
Brazil
54. PPT 5-54
Evaluation of Retail Market
Opportunities in European Community
High Low
UNITED KINGDOM
NETHERLANDS
Open
Restricted
MARKETS
SPAIN
ITALY
FRANCE
GERMANY
BELGIUM
PORTUGAL
LUXEMBOURG
IRELAND
GREECE
DENMARK
GROWTH
