1. Chapter 5 The Retail Market StrategyBecky, Sarah, Preston

2. Elements in Retail Strategy Target Market the market segment(s) toward which the retailerplans to focus its resourcesand retail mix Retail Format the nature of the retailersoperationsits retail mix Sustainable CompetitiveAdvantage an advantage over the competition 3. Criteria For Selecting A TargetMarket Attractiveness --Large, Growing, LittleCompetition MoreProfits Consistent with YourCompetitiveAdvantages 4. Can A Retailer Develop aSustainableCompetitive Advantage by: Droppingthe 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 byPaying Higher Wages? Providing Better Customer Service? 5. Sources of Competitive AdvantageMore SustainableLess Sustainable Location Better Computers Customer Loyalty More Employees Customer Service More Merchandise Exclusive Merchandise Greater Assortments Low Cost Supply Chain Lower PricesManagement Information Systems More Advertising Buying Power with More PromotionsVendors Cleaner Stores Committed Employees 6. Customer Loyalty More than simply liking one retailer overanother Customers will be reluctant to patronizecompetitive retailers Retailers build loyalty by: Developing a strong brand for the store or storebrands Developing clear and precise positioningstrategies Creating an emotional attachment withcustomers through loyalty programs 7. Retail BrandingStores use brand (stores name and store brands private label brands) to build customer loyalty Retail brand Can create anemotional tie withcustomers that buildtheir trust and loyalty Facilitates store loyaltybecause it stands for apredictable level ofquality 8. Approaches for BuildingCustomer Loyalty BrandImage Positioning Unique Merchandise Customer Service Customer Relationship ManagementPrograms 9. Vendor Relationships LowCost - Efficiency Through Coordination Electronic Data Interchange (EDI) Collaborative Planning and Forecasting toReduce Inventory and Distribution Costs Exclusive Sale of Desirable Brands Special Treatment Early Delivery of New Styles Shipment of Scare Merchandise 10. Human ResourcesManagement Employees are key to build a sustainable competitive advantage Strategiesfor Recruiting and RetainingTalented Employees Employee Branding Develop positive organizational culture 11. Distribution and Info SystemsFlow of Information By decreasing costsVendor here, there is more money Distribution Center available to invest in:Store -Better services -Increase in breadth and depth -Decrease in prices 12. Location Whatare 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 ExistingNewMarketMarket ExistingPenetrationExpansion Retail Format DiversificationFormat New(unrelated/Developmentrelated) Exhibit 5-4; Pg. 123 14. Growth Strategies Market Penetration Market Penetration Growth Opportunity- directedtoward existing customers using the retailers presentretailing format Ex. Opening more stores in the target market. Cross-selling- sales associates sell items that are not intheir department Ex.Electronics Associate take a customer to clothingand sells them a pair of pants. 15. Growth Strategies Market Expansion Market Expansion Growth Opportunity- directedtoward new customers using the retailers presentretailing format Ex. Dunkin Donuts opening outside the US 16. Growth Strategies Retail Format Development Retail Format Development Growth Opportunity-directed towards existing customers using theretailers newly developed retailing format Ex. Tesco having both Tesco Metro and Tesco Expressstores 17. Growth Strategies Diversification Diversification Growth Opportunity- directed towardnew customers using the retailers newly developedretailing format; either Related or Unrelated Related Diversification Growth Opportunity- retailerspresent target market or retail format sharessomething in common with the market or formatbeing considered 18. Growth Strategies Diversification Unrelated Diversification Growth Opportunity-retailers present target market or retail format and itsnew market or format have nothing in common Vertical Integration- retailers go into wholesaling ormanufacturing 19. Global GrowthOpportunities Attractiveness of International Markets Only 12 of the 50 largest retailers internationally havestores in one country. Two Factors used to determine the Attractiveness ofDifferent International Opportunities PotentialSize of Retail Market in the country Degree of Support form the country See Exhibit 5-5 (page 126) 20. Global GrowthOpportunities Keysto Success Globally Sustainable Competitive Advantage Most successful when then expansion opportunity builds on the retailers 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 GrowthOpportunities Keysto Success Global Culture Retailers must thing globally Ex. Carrefours global management structure Financial Resources Long-termcommitment 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 GrowthOpportunities Entry Strategies Direct Investment Retailfirm invests and owns a retail operation in aforeign country Joint Venture Entering retailer teams up with a local retailer to form anew company in which profits are shared Strategic Alliance Collaborative relationship between two firms for a singleproject Franchising 23. The StrategicRetail Planning Process Thisis a set of steps a retailer goes through todevelop, strategize, and plan. It describes how retailers select target marketsegments, determine the appropriate retailformat, and build a sustainable competitiveadvantage. It is not always necessary to go through the entireprocess each time a strategy and plan aredeveloped. 24. The StrategicRetail Planning Process1. Define the business mission 2. Conduct a Situation Audit: Market Attractiveness Analysis Competitor Analysis Self-analysis 3. Identify Strategic Opportunities4. Evaluate Strategic Alternatives 5. Establish Specific Objectives andAllocate Resources 6. Develop a Retail Mix toImplement Strategy 7. Evaluate Performance and Make AdjustmentsExhibit 5-7; Pg. 131 25. The StrategicRetail Planning Process Step 1: Define Business Mission The mission statement is a broad description ofretailers objectives and the scope of activities itplans to undertake. Itdefines the general nature of the target segments andretail formats on which the firm will focus on. The principle objective of a publically held firm is tomaximize stockholder wealth. Firms are concernedabout their impact on society. 26. The StrategicRetail Planning Process Step 1: Define Business Mission When developing a mission statement, managersneed 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 StrategicRetail Planning Process Step 2: Conduct a Situation Audit (SWOT Analysis) This is an analysis of the opportunities and threats inthe retail environment, and the strengths andweaknesses of the retail business relative to itscompetition. The elements analyzed include: Market Factors: Sixe, Growth, Seasonality, BusinessCycles Competition Factors: Barriers to entry, Bargaining Powerof Vendors, Competition Rivalry Internal Factors: Management Capabilities, FinancialResources, Location, Operations, Merchandise, StoreManagement, Customer Loyalty 28. The StrategicRetail Planning Process Step 3: Identify Strategic Opportunities 29. The StrategicRetail Planning Process Step 4: Evaluate Strategic Alternatives The evaluation determines the retailers potential toestablish a sustainable competitive advantage andreap long-term profits from opportunities beingevaluated The retailer must focus on opportunitiesthat utilize its strengths and its competitiveadvantage. 30. The StrategicRetail Planning Process Step 4: Evaluate Strategic Alternatives Market attractiveness, strengths, and weaknessesneed to be considered in this process. The greatest investments should be made in marketopportunities in which the retailer has a strongcompetitive position. 31. The StrategicRetail Planning Process Step5: Establish Specific Objectives and AllocateResources The specific objectives are goals against whichprogress toward the overall objective can bemeasured. The specific objectives have three components: The performance sought, including a numerical indexagainst which progress may be measured. A time frame which the goal is to be achieved. The level of investment needed to achieve theobjective. 32. The StrategicRetail Planning Process Step 6: Develop a Retail Mix to Implement Strategy Investments will be made and control and evaluateperformance. [This will be covered in Sections III and IV] 33. The StrategicRetail Planning Process Step7: Evaluate Performance and MakeAdjustments If the retailer is meeting or exceeding its objectives,changes arent needed. If the retailer fails to meet its objectives, reanalysis isrequired. Reanalysis starts with reviewing the implementationprograms but may indicate that the strategy ormission statement needs to be reconsidered.Conclusions may result in starting a new planningprocess, including a new situation audit. 34. Assignment 1Groups 1 & 2 Using a technology of your choice, find differentcompanies that is a good example of eachadvantage (Customer Loyalty, Relationships withSuppliers, Efficiency of Internal Operations, andLocation). Give specific examples as to why each firm issuccessful in its advantage. Be sure to use a different business for eachadvantage. 35. Assignment 2Groups 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 howthe business is using each growth strategy and whythe business is doing so. You must use a different business for eachexample. Be sure to give specific examples! 36. Assignment 3Groups 6 & 7 Usinga technology of your choice, layout Steps 1through 6 of the Strategic Planning Process for anexisting business of your choosing. Then, choose the step in the Strategic RetailPlanning Process that you believe is the mostimportant and explain why you believe it is themost important. Back up your explanations with specific examples.