External and Internal Environment factors for an MNC

• Socio-Cultural• Legal• Economic• Political

- Domestic- Local- International

• Technological

• Regulators• Competitors• Suppliers• Consumers/External

Customers• Internal Customers

Political/LegalPolitical/Legal

EconomicEconomic

TechnologicalTechnological

GlobalGlobal

DemographicDemographicSocioculturalSociocultural

CompetitiveEnvironment

Industry EnvironmentIndustry Environment

Components of the General EnvironmentComponents of the General Environment

Components of the General EnvironmentComponents of the General Environment

DemographicSegment

Population size Age structure Geographic distribution

Ethnic mix Income distribution

EconomicSegment

Inflation rates Interest rates Trade deficits or surpluses Budget deficits or surpluses

Personal savings rate Business savings rates Gross domestic product

Political/LegalSegment

Antitrust laws Taxation laws Deregulation philosophies

Labor training laws Educational philosophies and

policies

SocioculturalSegment

Women in the workforce Workforce diversity Attitudes about work life

quality

Concerns about theenvironment

Shifts in work and careerpreferences

Shifts in preferences regardingproduct and servicecharacteristics

TechnologicalSegment

Product innovations Applications of knowledge

Focus of private andgovernment-supported R&Dexpenditures

New communicationtechnologies

GlobalSegment

Important political events Critical global markets

Newly industrialized countries Different cultural and

institutional attributes

External Environmental AnalysisExternal Environmental Analysis

The external environmental analysis process should be conducted on a continuous basis. This process includes four activities:

Scanning:

Monitoring:

Forecasting:

Assessing:

Identifying early signals of environmental changes and trends

Detecting meaning through ongoing observations of environmental changes and trends

Developing projections of anticipated outcomes based on monitored changes and trends

Determining the timing and importance of environmental changes and trends for firms' strategies and their management

Scanning models

• Delphi Technique• Spire Approach – Systematic Probing and

Identification of the Relevant Environment*1) fgfgf2) kk

*Klein and Newman

Environment Scanning

• Competitor Intelligence• Strategic Analysis• The SPIRE Approach (Systematic Probing and

Identification of the Relevant Environment)*- Detailed list of environment variables- Set out strategic marketing components- Facilitate interactions of different factors for any linkages

• Scenario Building* Klein and Newman, How to Integrate New Environmental Forces into Strategic Planning, “Management Review”, Volume 69, July 1980, pp.40-48

Scenario Building

• Stage 1: Analysis of the Decisions• Stage 2: Identification of Key Decision Factors• Stage 3: Identifying the Socio-Cultural Factors• Stage 4: Analysis of each of the key variables

separately• Stage 5: Selection of Scenario Logics

Franchising

Franchising

• Almost exclusively concerned with small business

• Holds at offer of Individual ownerships• Fastest growing business segment, and market

entry methods• 1851…Singer Sewing Machine Co.• Became popular after WW-II in the US• Offer: proven products, business know-ow,

financial help

Franchising: a definition

It’s a legal document, a contractual agreement between the Franchiser (Manufacturer, Wholesaler, Service Sponsor) and

the Franchisee (Retailer) to conduct a given business in accordance with prescribed operating methods, financing

systems, territorial domain, commission fees/royalty

Holder is given the benefit of Franchiser’s experience, and help in the choice of locations, financing, marketing, record

keeping, promotional techniques, brand name and standardization

Thank You

Merchandise Management

PLANNING MERCHANDISE ASSORTMENT

Merchandise Management Involves:

• Buy Merchandise• Control merchandise inventory• Price merchandise

Merchandise Buying Involves:

• Locate Vendors• Evaluate vendors• Negotiate with vendors• Place orders

Merchandise inventory control involves:

• Develop merchandise budget plans• Allocate merchandise to stores• Review open-to-buy & stock position

Pricing merchandise

• Set initial price• Adjust price

A few retail definitions

STOCK BALANCE:

A strategic decision that defines the degree to which a retailer wishes to be a specialist with a narrow range of

merchandiseOR

A generalist with many different types of merchandise.A store’s stock balance results in a trade-off amongst three

factors:- Varieties

- Assortments- Service levels

Stock balance: increasingly it is a strategic issue

Organising the buying process by categories:-

• The category• Category Management• The Category Captain

The Buying organization

• Department• Classification• Categories• SKU (Stock Keeping Units)

Setting Objective for the Merchandise Plan

• Putting Margin, Sales, and Turnover together:

• GMROI- Gross Margin Return On Investment

• Measuring Inventory Turnover – Stock Turn

Advantage of High Inventory Turnover

• Increased Sales Volume• Less Risk of Obsolescence and Markdowns• Improved Sales Person Morale• More money for market opportunities

Relation between Cycle Stock & Base Stock

Units

Availability

WEEKS

Cycle Stocks

Safety/ Base Stock

Lead Time

Time for Replenishment

The Category Life Cycle

• Variations on the category Life Cycle• Seasonal Merchandise

IntroductoryStage

GrowthStage

MaturityStage

Decline Stage

TotalMarketSales

Time

Developing a Sales Forecast

• Sources of information for category Level Forecast• Previous Sales volume• Published sources• Customer Information• A focus group• Shop competition• Vendors & Buying residing office• Store level Forecasting• CPFR- Collaboration, Planning Forecasting, and

Replenishment

The Assortment Planning Process

• Variety• Assortment• Product Availability-Assortment Process for

service retailers

Trade-Offs between Variety, Assortment & Product Availability

• Determining Variety and Assortment• Profitability of Merchandise Mix• Corporate Strategy and positioning toward the

assortment• Physical Characteristics of the store layout of the

internet site• Balance between Too much versus Too little

assortment• Determining product availability• Cycle stock

Buying Systems

• Staple Merchandise Buying Systems• The Inventory Management Report• Basic Stock List• Inventory Turnover• Product availability• Backup stock• Forecast• Order Point

Buying Systems (contd..)

• Order Quantity• Monthly Reductions• BOM- Beginning of Month Stock to Sales Ratio• EOM- End of Month stock ratio• Monthly additions to stock• Evaluating the Merchandise Budget Plan• Calculating Open-To-Buy for past periods & Current

period

Allocating merchandise to stores

• Analyzing Merchandise Performance• ABC Analysis• Sell through Analysis• Multi attribute Method

Buying Merchandise

• Private –Label Brands• Private Label Options• Bargain branding• Premium Branding• A Brand or a store?

INTERNATIONAL SOURCING DESCISIONS

• Cost Associated with Global Sourcing decisions

• Country-of-Origin effect• Foreign Currency Fluctuations• Tariffs• WTO• NAFTA - North American Free Trade

Agreement

Free Trade Zones

• Managerial issues associated with global sourcing decisions

• Building of Strategic Partnerships• Source close to Home or buy Made in America

Connecting with Vendors

• Internet Exchanges• Wholesale Market Centres• Trade shows• Buying on their turf• Resident Buying Offices

Negotiating with Vendors

• Guidelines for Planning Negotiations with Vendors

• Knowledge is Power• Consider History• Assess where things are today• Set goals• Additional Markup opportunities• Terms of Purchase• Transportation

Negotiating with Vendors (contd..)

• Delivery & Exclusivity• Communications• Advertising allowances• Know the vendor’s goals & Constraints• A Continuous relationship• Testing new items• Communications• Showcase

Negotiating with Vendors (contd..)

• Plans to have as many negotiations as the vendor

• Choose a good place to negotiate• Don’t burn bridges• Don’t assume

Establishing & Maintaining strategic relationships with vendors

• Defining strategic relationships• Maintaining strategic relationships mutual

trust• Open Communication• Common Goals• Credible commitments• Building Partnering relationships

Pricing

• Pricing Strategy• Everyday Low Price• High Low Pricing- Deciding which strategy is

best

Approaches for setting prices

• The cost oriented method• Determining the initial markup from maintained markup

and gross margin• Determining the initial retail price under cost oriented

pricing• The demand oriented method• The competition oriented method• Profit impact of setting a retail price • The us e of break-even analysis• Calculating Break-even for a new product• Calculating Break-even sales

Price Adjustments

• Markdowns• Reasons for taking markdowns• Liquidating markdown merchandise• Markdowns and price discrimination• Coupons• Rebates• Price bundling

Price Adjustments (contd..)

• Multiple Unit-pricing• Variable pricing• Pricing on the internet• Leader pricing• Price lining• Odd pricing

Are you a smart merchandiser now??