RMG 500 - FALL 2021

Retail Strategy

ASSIGNMENT: FINAL PROJECT

Submission by:

Words:

Submitted to:

Dr. Frances Gunn

Ted Rogers School of Retail Management

Date (10,22,2021)
Strategy

Our company that we as team red, located in universe 2 ran was a clothing store. This

store sold clothing and shoes for men, women, and children. Over the 8 periods, we

updated and added services that would help to increase sales. As we moved through

the periods we focused greatly on strategy. More specifically our original strategy which

was to focus on providing our customers with high quality clothing for reasonable prices

and the retrenchment defensive strategy. As a team, we collectively worked to make

sure we were doing everything in our power to be transparent with that strategy. We

implemented it throughout each round and took great detail in pinpointing issues to why

sales were not increasing. As well as we made changes to better fit our strategy and

mission. Decisions such as providing more staff to ensure customers have all the help

they need. Or by increasing inventory to help accommodate for customer demand. The

strategic plan to focus more on a defensive strategy was what we heavily focused on

trying to execute. By weaning out products and inventory that are making less profits

and belong in the dog quadrant in the BCG matrix. This strategy we hoped would allow

our company to entirely focus on our cash cows and rising stars by ensuring the right

amount of inventory in the next round.. Which ultimately, will provide our customers with

a more enjoyable and convenient experience.

Performance

Period 4

During period 4 the company performance was mediocre. While there was positive

growth there were also some areas where improvements could be made. The four
areas that were the most prominent were in the pricing of men’s shoes, women’s basics,

operating hours, and discounts for the products. The average spending per customer for

men’s shoes in comparison to women’s was considerably lower. In figure 1. Here we

can see men’s depa reached $10.49 where women’s reached $17.63. This number in

my opinion should be a lot closer. In the women’s basic category we had lost sales due

to inventory shortages. This is something we cannot have as our strategy and mission is

based on being accommodating. The Next for operating hours. Our store wanted to

ensure we had long enough store hours to be accommodating to customers, though as

we look closer at the data our team (red) had the lowest store hours. Now

understandably this is not the deciding factor on whether the company is successful, it

is interesting to speak upon. For the reason that our closest competitor in this universe

being GreenPeace, has operating hours of 14.0 where we only have 11.5. In figure 1.

below you can see this data represented. Last, we noticed that the number of discounts

we had played a factor on our success in this round. Or better yet the lack of discounts.

During the first 3 periods we utilized the discounts to help us sell more product. Though

in period 3 specifically we noticed we were doing quite well and decided not to do any

discounts. The results really reflected this decision by the number of people that came

into the store. In Period 3 we had 10,669 people visit versus in period 4 only 10,189.

Discounts clearly are a great way to attract customers to visit our store. In my opinion,

when we saw that we had done well in Period 3 we got a little greedy by removing the

discounts.

Period 7
In Period 7 the results were great. We had the highest Cumulative earnings. All of our

numbers had gone up. We were happy with the results so we decided to leave all of our

stats the same. Something to mention is during Period 4, a big question for our group

was the store hours. Whether us having such a low operating hour window was

beneficial or harmful. We quickly realized that it was harming us, and that was evident

when our competitors also decreased their hours and their numbers began to drop.

We kept ours the same because as mentioned we kept everything the same. So there

was not much to reflect on.

Critical moments

Period 4

Critical moments in period four I would have to say would be in regards to the discounts.

Figuring out that by not having any discounts really affected the number of people who

came in our store, and as we know relating back to our mission and strategy we want to

provide an affordable and accommodating place to shop. Though by having no

discounts it went against our beliefs. After looking at the performance of Period 4, we as

a group collectively decided that moving forward we will provide discounts.

Period 7

Since we did not change anything from the round before there was not much to critique.

Besides the fact that as mentioned we were doing well so we thought we would

continue with our current numbers. Though after seeing the results for period 7 we

realized this strategy was not a good one and moving forward we decided that Period 8,

we would be making changes unlike Period 7.

Recommendations
My recommendations for the periods going forward is to really focus on our original

strategy. As mentioned earlier the retrenchment strategy will help us to figure out what

products are working and which ones are not. As mentioned earlier we had a loss in

sales for women's basics. This is an indicator that we need to increase the inventory

units of this product. By doing so we will be able to meet our customers' demand. Which

as we know is a main mission of the company, to be providing customers with they

want. Though not only what they want but at a fair price. We ran into an issue with the

pricing since. As well as discounts, we need to continue providing our customers with

them. No matter the round discounts have shown to be worthy of our time. As well as

ensuring we have enough inventory is very important, no matter the round.

Financial Analysis

Net Profit Margin (Operating Ratio)

The net profit margin is a percentage measurement that is used to look at how much

profit a company can expect to make from its total sales.

Period 4

Sales/Net income

Sales= 69,971

Net Income= 277,596

69,971/277,596=0.2521

When we lowered our price levels which in turn cost us money, because we were

making as much profit. Overall we did pretty well and hope to continue at this rate as we

were very similar to our competitors numbers.

Period 7
Sales/Net income

Sales= 35,582

Net Income= 223,845

35,582/223845=0.159

This period we decreased significantly from period 4. This round as mentioned we

decided to not change anything and this hurt us. We should have made sure the

company had enough revenue that was coming in to re-invest in big projects. This

would help us to start increasing again and avoid going into the negatives like some

companies in other universes.

Current Ratio (Liquidity Ratio)

This ratio helps an investor show that it is able to cover its short-term debts with its

current assets.

Period 4

Current Assets= 522,152

Current Liabilities= 15,288

522152/15288=34.1544

Overall, we did well in terms of our current ratio. Investors would clearly be able to see

that we have a high ability to pay off short-term debts with our assets.

Period 7

Current Assets= 795,206

Current Liabilities= 13,300

795,206/13,300=59.7899
Again we had ample assets so the investors would be able to see that we have the

capabilities of paying off short-term debts with our assets.

Net Return on Assets Profit After Taxes/Total Assets (Operating Ratio)

This financial ratio shows the percentage of profit a company makes in relation to its

overall resources. The higher the ROA the more efficient the company is a generating

profits. A company with an ROA of 5% or better is typically considered good, while 20%

or more is considered to be really good.

Period 4

Total Assets= 69,971

Profit After Taxes= 614,652

69,971/614,652=0.1138

In this period we are on general terms well. In this period we prioritized keeping things

consistent. We had the most assets of any team in our universe.

Period 7

Total Assets= 35,582

Profit After Taxes= 871,206

35,582/871,206=0.0408 = 4.1%

In this period we can see that our company does not have the highest ROA and that

there is room for us to have utilised our assets more efficiently to generate more

earnings. We had the most assets of any team in this universe so there was definitely

room for improvements.

Quick Ratio (assets-inventory)/Current Liabilities

Another one of the liquidity ratios is the quick ratio. This ratio assesses the company’s

ability to obtain funds quickly in order to meet immediate needs. The quick ratio is also

sometimes called the acid test, and is calculated by dividing current assets (excluding

inventory) by current liabilities (excluding current portion of long-term debts). Similar to

current ratio, but current ratio

would include what was not included in the calculation of quick ratio.

Period 4

Current Assets= 522,152

Inventory= 3,126

Current Liabilities= 15,288

(522,152-3,126)/15,288=33.9499

Period 7

Current Assets= 795,206

Inventory= 3,879

Current Liabilities= 13300

(795,206-3,879)/13,300=59.4983

Overall the scores for both periods were good and always could be improved. We

showed that we have the ability to meet immediate needs.

Debt to Net Worth

The debt ratio is a financial statistic that determines how much debt a firm has. A lower

value in this financial ratio is what all firm's aim for in the long term since the greater it

is, the more the company is reliant on borrowing money, putting them further into debt.

Period 4
Debt to net worth = Total Liabilities/shareholders equity

Total Liabilities = 150,288

Total Equity = 464,364

150,288/464,364=0.3236

In this period our debt ratio was very attractive. In general when an investor is looking at

a company they look in the range of 0.3 and 0.6. This is from a pure risk perspective.

Ideally debt ratios 0.4 or lower companies have the least difficulty borrowing money.

Overall, the company in this period did very well.

Period 7

Total Liabilities = 148,300

Total Equity = 722,906

148,300/722,906=0.2051

Again similar to period 4 our debt ratio was very low which is a good thing. If our

company wanted to borrow money we would have very high chances as investors

would see our company as low risk.