1. Simulation Report for
Adler (Zest)
Global Retail Strategy – Group Assignment
Group - 1:
PrajaktaTalathi
ManishBarapatre
AbhinavChoudhry
ArjunGidwani
2014
2. Simulation Report for Adler (Zest)
Group 1 Page 1
Table of Contents
Quarter by Quarter Analysis of Performance.................................................................................. 2
Financial Ratios......................................................................................................................... 2
Inventory Turnover................................................................................................................... 2
Strategies, Outcomes and Learnings .............................................................................................. 2
Key Learnings ........................................................................................................................... 4
Changes in Business Environment..................................................................................................4
Economic Indicators.................................................................................................................. 4
Seasonal Forecast..................................................................................................................... 4
Competitor’s Strategy............................................................................................................... 5
Balance Scorecard Analysis and Key Learnings................................................................................ 5
Individual .................................................................................................................................5
Cumulative............................................................................................................................... 5
Factors composing Balance Scorecard........................................................................................ 6
1. Asset Management........................................................................................................6
2. Wealth.......................................................................................................................... 6
3. Merchandising Effectiveness .......................................................................................... 6
4. Investmentin Future......................................................................................................7
5. Financial Performance....................................................................................................7
6. Market Performance......................................................................................................7
7. Financial Risk................................................................................................................. 8
Retail Management Game Experience ........................................................................................... 8
3. Simulation Report for Adler (Zest)
Group 1 Page 2
Quarter by Quarter Analysis of Performance
Quarter-by-Quarteranalysis of Team’s performance can be determined by considering the various
financial ratios and market share with respect to assortment mix, promotions and inventory.
Financial Ratios
Inventory Turnover
Strategies, Outcomes and Learnings
Beloware the keydecisionstakenforeachquarter,theiroutcomesandkeylearnings:
4. Simulation Report for Adler (Zest)
Group 1 Page 3
Quarter Strategies Outcome Key Learnings
1 Target Segment–25% Market
Potential forGoldCustomers,Niche
segment
Maximummark-onas Customersare
price insensitiveandsensitive towards
trendand stockavailability
Low Market share
because of heavy
competition
77% HighEnding
Inventory ascompared
to Planned Sales
Inventory
Managementisvery
critical;Highending
inventoryincreases
mark downand
overheads
2 Basedon lastyear sales plannedsales
were calculated
Aggressive recruitmenteffortsand
recruitmenttraining
Plannedsaleswas
overestimatedby38%
Didnot have much
impacton salesand
marketperformance
Last quartersales
alongwithseasonal
and economicfactors
needtobe considered
Salesforce wasbasic
necessitybutthe key
criteriato increase
marketperformance
3 As customerwasinterestedinhigh
qualitytrendyproducts,changedthe
assortmentmix tohave best quality
products
Market performance
improved by
approximately20%
Financial performance
was improved
Give customerwhat
theywant
4 Triedto improve assortmentmix in
the ratio Best:Better::90:10
Highpromotions
causedheavydemands
and lostsaleswere
observed because
profitsreduced.
Plannedsaleswere
lessas comparedto
winterseason
forecasteddemand
Planinventoryin
proportionto
promotions.Customer
psychologyishigher
the price,betterthe
product.
5 Encouragede-marketing(directsales)
and reducedmarginstoattract
customers
Expansion (Store 5and webchannel)
and remodelling(Store 1,Store 2 and
Store 4) to capture marketshare
Delayedoutcome,
observedfromnext
quarter– Firstmover
advantage forCentury
Store
Expansion plansaffect
assetmanagementdue
to liabilities
Improvedinvestment
infuture
6 Remodellingof Store 6
Bottom-upapproachof department
level planning
NewstoresandWeb channel so
promotionswere higherbut
estimatedlowsales
Assortmentmix
resultedintopoor
merchandise
effectiveness
Unexpectedlyhigh
demandcausedhuge
lostsales
Gainingcustomer
insightswhile
expandingoropening
new storedis
important
New store and
promotionsattract
more customers
5. Simulation Report for Adler (Zest)
Group 1 Page 4
7 Aggressive promotions
PlannedheavyinventoryforE-
commerce andCentury
Anotherquarterof
unexpectedlyhigh
demandat ecommerce
causedhuge lostsales
Highmarket share for
ecommerce
Notenough
competitorsat
ecommerce platform
so demandwashigh
8 Avoidlostsalesand maintainthe
marketposition
Moderate promotions,bestquality
assortmentmix
Endinginventory
increased
Lost Centurymarket
share to competition
Competitor’sstrategies
cannot be controlled.
Competitionscan
sometimesoutdoyour
beststrategy
Key Learnings
1. Plannedsaleswere calculatedbasedonsame quarterof lastyear whichprovedirrelevant to
present scenario. We learnt and started forecasting based on recent quarter sales,
seasonality and economic growth in Quarter 2, 3 and 4.
2. Inventory management is most important factor for profitability in retail.
3. Assortment mix plays an important role in Merchandising Effectiveness, therefore Market
Performance and Balance Scorecard. The mix must resonate with the target segment and
pricing strategy.
4. Customer insights are critical while launching new stores. New stores may perform
differently than the other stores based on market and competitive scenario.
5. It proved difficult to beat the first-mover advantage in later stages. Right first time is very
important and is a competitive advantage against customers.
6. Market research reports are highly valuable in providing insights and planning and
forecasting. Rather than cost they should be looked as investment.
7. Good margins help to gain profits and develop wealth for price insensitive segments.
8. Balance Scorecard is the holistic performance indicator of the company. It clubs all
important factors therefore is very useful for daily tracking.
Changes in Business Environment
ChangesinBusinessEnvironment are not under our direct control. Market research reports play an
important source of insights. Hoping for the best and preparing for the worst is the key!
Economic Indicators
Markets react to external economic factors. Drastic variations in sales are observed.
Seasonal Forecast
Maximum sales are observed in winter season. Forecasting demand and managing inventory
accordingly should be the retail strategy.
6. Simulation Report for Adler (Zest)
Group 1 Page 5
Competitor’s Strategy
Competitor’s strategies are out of control. Competitive intelligence is important in order to
anticipate possible moves. Price wars do not play part in high end products. Rather customers
believe the higher the price better the product.
Balance Scorecard Analysis and Key Learnings
Trendof Balance Scorecardfor eachquarter basedonthe parametersisas follows:
Individual
Cumulative
7. Simulation Report for Adler (Zest)
Group 1 Page 6
Factors composing Balance Scorecard
1. AssetManagement
2. Wealth
3. MerchandisingEffectiveness
Improper
decisions of
Inventory led to
fluctuations in
Asset
Management
Steady growth in
wealth due to
increasing profits
and net equity
Planned sales
and actual sales
differed
significantly but
towards the end
of year 2,
effectivenesswas
better
8. Simulation Report for Adler (Zest)
Group 1 Page 7
4. Investment in Future
5. Financial Performance
6. MarketPerformance
Invested in new
department
stores,
remodelling and
web channel.
Hence sudden
increase inFirm’s
future
Overheads at a
point were huge
and sales
decreased.
Increased sales
helped in
improvingfinancial
performance
Poor assortment
failed to create
demand;
After adjusting the
assortmentlostsales
was experienceddue
to poor anticipation
of demand
9. Simulation Report for Adler (Zest)
Group 1 Page 8
7. Financial Risk
Retail Management Game Experience
The unique benefits of the Retail Management Simulation:
Real WorldScenario – Real worldexperience of how retail industry worksandhow itgeneratessales
and profits
Recall ability with learning experience – Experience is the best teacher
External factors experienced –Some uncontrollable externalfactorswere experienced.Thisgave an
exposure to real life scenarios
Team Building – Team came up with ideas and strategies which helped in team building and
brainstorming
Metrics – Learnt the importance of different functions such as operations including marketing,
promotions, propositions, sales, stock management, staff management, store management,
overheads and managing P&L
Holistic Overview of Retail Business – Dynamic nature of simulations enabled us to see the true
impactof eachdecision we made andhow it impacted all elements of the retail operation and also
the overall business performance. We had to identify target markets and developing an overall
strategythat will allow them to gain a competitive advantage over competitors. Decisions were to
be made on Merchandise Planning & Allocation, Pricing, Promotion, Store Operations, Human
Resource and ecommerce.
Fear of taking Risk – Fearof takingriskand landingintounchartedtargetsegmentprohibitedpeople
from changing strategies
Merchandise – Game did not allow controlling merchandise on product plus store level
Debt increased
because of heavy
investments in
firm’s future.