Transcript Retail Strategic Planning and Operations

Chapter 2
Retail Strategic Planning
and Operations Management
Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved.
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Learning Objectives
• Explain why strategic planning is so important and be
able to describe the components of strategic planning:
statement of mission; goals and objectives; an
analysis of strengths, weaknesses, opportunities, and
threats; and strategy.
• Describe the text’s retail strategic planning and
operation management model, which explains the two
tasks that a retailer must perform and how they lead to
high profit.
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Components of Strategic Planning
LO 1

Planning
Is the anticipation and organization of what needs to
be done to reach on objective.

Strategic Planning
Involves adapting the resources of the firm to the
opportunities and threats of an ever changing retail
environment.
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Components of Strategic Planning
LO 1
•
•
•
•
Mission Statement
Statement of Goals and Objectives
Strategies
SWOT Analysis
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Components of Strategic Planning
LO 1

Mission Statement
is a basic description of the fundamental nature,
rationale, and direction of the firm.
How the retailer uses or intends to use its
resources
• How it expects to relate to the ever-changing
environment
• The kinds of values it intends to provide in order
to serve the needs and wants of the consumer
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Components of Strategic Planning
LO 1

Goals and Objectives
Are the performance results intended to be brought
about through the execution of a strategy.
•
•
•
•
Market Performance Objective
Financial Performance Objective
Societal Objectives
Personal Objectives
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Statement of Goals and Objectives
LO 1

Market Performance Objectives
represents how a retailer desires to be compared to its
competitors.
• Sales Volume
• Market Share
Is the retailer’s total sales divided by total market
sales.
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Importance of Planning - Sam’s View
LO 1
Sam M. Walton
Chairman and Chief Executive Officer
May 4, 1998
Dear Bob:
I am replying to your letter of the 19th concerning the Wal-Mart monopoly of
communities. I have realized for some time and, I suspect, many folks have in the
company, as well, how fortunate we are to have very little competition in some of the
larger communities in the country. That hasn’t always been the case, as you well know.
The history of our company has been that we have had more competition early on than
most any regional discounter in the United States. However, one by one, our
competitors weakened, were mis-managed, and have fallen out in many of the cities that
we practically no have to ourselves. That has been the case generally with Howard’s,
TG&Y, Gibson, Kuhn’s, Magic Mart, and certainly some of the variety chains which were
once active in this area. These competitors, plus Alco, Pamida, and the group in
Indiana, are on the ropes now and I don’t choose to believe those companies
disappeared because of our effectiveness. Rather, I choose to believe, for the most part,
they were mis-managed and, had they been managed well, there could and would have
been enough business in their areas for them and for us….
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Statement of Goals and Objectives
LO 1

Financial Performance Objectives
Represent the profit and economic performance a
retailer desires.
• Net Profit Margin
Is the ratio of net profit (after
taxes) to total sales and shows how much profit a
retailer makes on each dollar of sales after all
expenses and taxes have been met.
• Asset Turnover
Is the total assets and shows
how many dollars of sales a retailer can generate on
an annual basis with each dollar invested in
assests.
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Financial Performance Objectives: Profitability
LO 1
• Return on Assets (ROA) Is net profit (after taxes)
divided by total assets.
• Financial Leverage Is total assets divided by net worth
or owners’ equity and shows how aggressive the
retailer is in its use of debt.
• Return on Net Worth (RONW)
Is net profit (after taxes) divided by owners’ equity.
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Financial Performance Objectives: Productivity
LO 1
• Productivity Objectives:
State the sales objective
that the retailer desires for each unit of resource input:
floor space, labor, and inventory investment.
• Space Productivity
Annual net sales divided by the
total square feet of retail floor space.
• Labor Productivity
Annual net sales divided by the
number of full-time-equivalent employees.
• Merchandise Productivity
Annual net sales divided
by the average dollar investment in inventory.
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Statement of Goals and Objectives
LO 1

Societal Objectives
Reflects the retailer’s desire to help society fulfill some
of its needs.
• Employment objectives
• Payment of taxes
• Consumer choice
• Equity
• Benefactor
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Statement of Goals and Objectives
LO 1

Personal Objectives
Reflects the retailer’s desire to help individuals
employed in retails fulfill some of their needs.
• Self-gratification
• Status and respect
• Power and authority
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Retail Objectives
LO 1: Exhibit 2.2
Sales
Volume
Market
Share
SelfGratification
Profitability
Market
Performance
Objectives
Financial
Performance
Objectives
Retail
Mission
Personal
Objectives
Societal
Objectives
Productivity
Employment
Taxes
Power and
Authority
Consumer
Choice
Status and
Respect
Equity
Benefactor
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Strategies
LO 1

Strategy
Is a carefully designed plan for achieving the retailer’s
goals and objectives.

Get shoppers into your store.

Convert these consumers into customers by having
them purchase merchandise.

Do this at the lowest operating cost possible that is
consistent with the level of service that your
customers expect.
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Question to Ponder
• How should a retailer determine the proportion and
the number of market performance, financial
performance, societal, and personal objectives?
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Strategies
LO 1

SWOT Analysis
Is the identification and analysis of a retailer’s
strengths, weaknesses, opportunities and threats a
firm faces.
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SWOT Analysis: Outback Restaurant
LO 1

Strengths?

Weaknesses?

Opportunities?

Threats?
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Krispy Kreme

The Quest

Chick's eye
view

Donut
appreciation
page

SEC
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Strategies
LO 1

Target Market
Is the group or groups of customers that the retailer is
seeking to serve.

Location
Is the geographic space or cyberspace where the
retailer conducts business

Retail mix
Is the combination of merchandise, assortment, price,
promotion, customer service, and store layout that
best serves the segments targeted by the retailer
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Service Retailing

Even though many flyers
tried JetBlue for the first
time because of its low
fares, the airline’s
customer service won
them over.
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Retail Planning and Management
LO 2
• Strategic Planning
• Operations Management
• Administration
• High-Profit Retailing
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Retail Planning and Management
LO 2

Strategic Planning
Is a plan of action detailing how the retailer will
respond to the environment in an effort to establish a
long-term course of action to follow.
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Retail Strategic Planning and Operations Management
Model
LO 2: Exhibit 2.4
Competitive Environment:
Behavior of Consumers, Competition and Channel Members
Strategic Planning
SWOT
Mission
Goals and
Objectives
Strengths
Weaknesses
Opportunities
Threats
Social and Legal Environment:
Socioeconomic Environment, State of Technology, Legal System, Ethical Behavior
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Retail Strategic Planning and Operations Management
Model
LO 2: Exhibit 2.4
Competitive Environment:
Behavior of Consumers, Competition and Channel Members
Retail Marketing
Strategy
Target Market(s)
Location(s)
Retail Mix
Merchandise Pricing
Advertising &
Promotion
Customer Service &
Selling
Store Layout &
Design
Operations
Management
Buying & Handling
Merchandise
Pricing
Advertising &
Promotion
Customer Services
& Selling
Facilities
High-Profit
Performance
Retailing
Social and Legal Environment:
Socioeconomic Environment, State of Technology, Legal System, Ethical Behavior
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Retailing Truism
LO 2
Good execution can never overcome bad planning.
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Retail Planning and Management
LO 2

Operations Management Deals with activities directed
at maximizing the efficiency of the retailer’s use of
resources. It is frequently referred to as day-to-day
planning.

Administration Involves the acquisition, maintenance,
and control of resources that are necessary to carry
out the retailer’s strategy.

High-Profit Retailing To be a high profit retailer, the
retailer needs good strategic planning coupled with
strong operations management
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The SPM for Some of the Country’s Top Retailers
LO 2: Exhibit 2.5
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