This document discusses elements of retail strategy, including target market, retail format, and sustainable competitive advantage. It examines criteria for selecting target markets and potential sources of competitive advantage. The document also outlines the strategic retail planning process and provides examples of strategies for growth, global expansion, and building customer loyalty.

1. Chapter 5
The Retail
Market
Strategy
Becky, Sarah, Preston

2. Elements in Retail Strategy
 Target Market
 the market segment(s) toward which the retailer
plans to focus its resources
and retail mix
 Retail Format
 the nature of the retailer’s
operations—its retail mix
 Sustainable Competitive
Advantage
 an advantage over the competition

3. Criteria For Selecting A Target
Market
 Attractiveness --
Large, Growing, Little
Competition More
Profits
 Consistent with Your
Competitive
Advantages

4. 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?

5. Sources of Competitive
Advantage
More Sustainable Less Sustainable
 Location  Better Computers
 Customer Loyalty  More Employees
 Customer Service
 More Merchandise
 Exclusive Merchandise
 Greater Assortments
 Low Cost Supply Chain
 Lower Prices
Management
 Information Systems  More Advertising
 Buying Power with  More Promotions
Vendors  Cleaner Stores
 Committed Employees

6. Customer Loyalty
 More than simply liking one retailer over
another
 Customers will be reluctant to patronize
competitive retailers
 Retailers build loyalty by:
 Developing a strong brand for the store or store
brands
 Developing clear and precise positioning
strategies
 Creating an emotional attachment with
customers through loyalty programs

7. Retail Branding
Stores use brand (store’s name and store brands –
private label brands) to build customer loyalty
 Retail brand
 Can create an
emotional tie with
customers that build
their trust and loyalty
 Facilitates store loyalty
because it stands for a
predictable level of
quality

8. Approaches for Building
Customer Loyalty
 Brand Image
 Positioning
 Unique Merchandise
 Customer Service
 Customer Relationship Management
Programs

9. 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

10. Human Resources
Management
 “Employees are key to build a sustainable
competitive advantage”
 Strategiesfor Recruiting and Retaining
Talented Employees
 Employee Branding
 Develop positive organizational culture

11. Distribution and Info Systems
Flow of Information
By decreasing costs
Vendor
here, there is more money
Distribution Center available to invest in:
Store
-Better services
-Increase in breadth and depth
-Decrease in prices

12. Location
 What are the three most important things
in retailing?
 “location, location, location”
 Location is a competitive advantage
 A high density of Starbucks stores
 Creates a top-of-mind awareness
 makes it very difficult for a competitor to
enter a market and find a good locations

13. Growth Strategies
Target Markets
Existing New
Market Market
Existing
Penetration Expansion
Retail Format
Diversification
Format
New
(unrelated/
Development
related)
Exhibit 5-4; Pg. 123

14. Growth Strategies
 Market Penetration
 Market Penetration Growth Opportunity- directed
toward existing customers using the retailer’s present
retailing format
 Ex. Opening more stores in the target market.
 Cross-selling- sales associates sell items that are not in
their department
 Ex.
Electronics Associate take a customer to clothing
and sells them a pair of pants.

15. Growth Strategies
 Market Expansion
 Market Expansion Growth Opportunity- directed
toward new customers using the retailer’s present
retailing format
 Ex. Dunkin’ Donuts opening outside the US

16. Growth Strategies
 Retail Format Development
 Retail Format Development Growth Opportunity-
directed towards existing customers using the
retailer’s newly developed retailing format
 Ex. Tesco having both Tesco Metro and Tesco Express
stores

17. Growth Strategies
 Diversification
 Diversification Growth Opportunity- directed toward
new customers using the retailer’s newly developed
retailing format; either Related or Unrelated
 Related Diversification Growth Opportunity- retailer’s
present target market or retail format shares
something in common with the market or format
being considered

18. Growth Strategies
 Diversification
 Unrelated Diversification Growth Opportunity-
retailer’s present target market or retail format and its
new market or format have nothing in common
 Vertical Integration- retailers go into wholesaling or
manufacturing

19. Global Growth
Opportunities
 Attractiveness of International Markets
 Only 12 of the 50 largest retailers internationally have
stores in one country.
 Two Factors used to determine the Attractiveness of
Different International Opportunities
 PotentialSize of Retail Market in the country
 Degree of Support form the country
 See Exhibit 5-5 (page 126)

20. Global Growth
Opportunities
 Keys to Success
 Globally Sustainable Competitive Advantage
 Most successful when then expansion opportunity builds
on the retailer’s core bases of competitive advantage
 Ex. Walmart
 Some retailers have a competitive advantage due to
emulation of American culture
 Adaptability
 Retailersrealize they must adapt their core strategy and
store designs/layouts to the needs of the local market
 Ex. Color preferences, sizes
 Government regulations and cultural values may also
affect how a store is operated.

21. Global Growth
Opportunities
 Keys to Success
 Global Culture
 Retailers must thing globally
 Ex. Carrefour’s global management structure
 Financial Resources
 Long-term commitment with considerable up-front
planning
 Can be difficult to generate short-term profits.
 All stores initially have difficulty achieving success in new
global markets

22. Global Growth
Opportunities
 Entry Strategies
 Direct Investment
 Retailfirm invests and owns a retail operation in a
foreign country
 Joint Venture
 Entering
retailer teams up with a local retailer to form a
new company in which profits are shared
 Strategic Alliance
 Collaborative relationship between two firms for a single
project
 Franchising

23. The Strategic
Retail Planning Process
 This is a set of steps a retailer goes through to
develop, strategize, and plan.
 It describes how retailers select target market
segments, determine the appropriate retail
format, and build a sustainable competitive
advantage.
 It is not always necessary to go through the entire
process each time a strategy and plan are
developed.

24. 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
4. Evaluate Strategic Alternatives
5. Establish Specific Objectives and
Allocate Resources
6. Develop a Retail Mix to
Implement Strategy
7. Evaluate Performance and
Make Adjustments
Exhibit 5-7; Pg. 131

25. The Strategic
Retail Planning Process
 Step 1: Define Business Mission
 The mission statement is a broad description of
retailer’s objectives and the scope of activities it
plans to undertake.
 Itdefines the general nature of the target segments and
retail formats on which the firm will focus on.
 The principle objective of a publically held firm is to
maximize stockholder wealth. Firms are concerned
about their impact on society.

26. The Strategic
Retail Planning Process
 Step 1: Define Business Mission
 When developing a mission statement, managers
need to answer five questions:
 What business are we in?
 What should our business be in the future
 Who are our customers
 What are our capabilities
 What do we want to accomplish

27. The Strategic
Retail Planning Process
 Step 2: Conduct a Situation Audit (SWOT Analysis)
 This is an analysis of the opportunities and threats in
the retail environment, and the strengths and
weaknesses of the retail business relative to its
competition.
 The elements analyzed include:
 Market Factors: Sixe, Growth, Seasonality, Business
Cycles
 Competition Factors: Barriers to entry, Bargaining Power
of Vendors, Competition Rivalry
 Internal Factors: Management Capabilities, Financial
Resources, Location, Operations, Merchandise, Store
Management, Customer Loyalty

28. The Strategic
Retail Planning Process
 Step 3: Identify Strategic Opportunities

29. The Strategic
Retail Planning Process
 Step 4: Evaluate Strategic Alternatives
 The evaluation determines the retailer’s potential to
establish a sustainable competitive advantage and
reap long-term profits from opportunities being
evaluated The retailer must focus on opportunities
that utilize its strengths and its competitive
advantage.

30. The Strategic
Retail Planning Process
 Step 4: Evaluate Strategic Alternatives
 Market attractiveness, strengths, and weaknesses
need to be considered in this process.
 The greatest investments should be made in market
opportunities in which the retailer has a strong
competitive position.

31. The Strategic
Retail Planning Process
 Step5: Establish Specific Objectives and Allocate
Resources
 The specific objectives are goals against which
progress toward the overall objective can be
measured.
 The specific objectives have three components:
 The performance sought, including a numerical index
against which progress may be measured.
 A time frame which the goal is to be achieved.
 The level of investment needed to achieve the
objective.

32. The Strategic
Retail Planning Process
 Step 6: Develop a Retail Mix to Implement Strategy
 Investments will be made and control and evaluate
performance.
 [This will be covered in Sections III and IV]

33. The Strategic
Retail Planning Process
 Step7: Evaluate Performance and Make
Adjustments
 If the retailer is meeting or exceeding its objectives,
changes aren’t needed.
 If the retailer fails to meet its objectives, reanalysis is
required.
 Reanalysis starts with reviewing the implementation
programs but may indicate that the strategy or
mission statement needs to be reconsidered.
Conclusions may result in starting a new planning
process, including a new situation audit.

34. Assignment 1
Groups 1 & 2
 Using a technology of your choice, find different
companies that is a good example of each
advantage (Customer Loyalty, Relationships with
Suppliers, Efficiency of Internal Operations, and
Location).
 Give specific examples as to why each firm is
successful in its advantage.
 Be sure to use a different business for each
advantage.

35. Assignment 2
Groups 4 & 5
 Find an example of Market Penetration.
 Find an example of Market Expansion.
 Find an example of Format Development.
 Find an example of Diversification.
 Using a technology of your choice, explain how
the business is using each growth strategy and why
the business is doing so.
 You must use a different business for each
example.
 Be sure to give specific examples!

36. Assignment 3
Groups 6 & 7
 Using a technology of your choice, layout Steps 1
through 6 of the Strategic Planning Process for an
existing business of your choosing.
 Then, choose the step in the Strategic Retail
Planning Process that you believe is the most
important and explain why you believe it is the
most important.
 Back up your explanations with specific examples.