Professional Documents
Culture Documents
2 Module
2 Module
(Module 2)
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According to webster’s dictionary
Strategy is ‘the science of planning and directing
large scale military operations of manoeuvring forces
into the most advantageous position prior to actual
engagement with the enemy.
More attention to long-term strategic planning
4
than ever before
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Dr. Anupamaa S. Chavan
Due to the emergence of
New competitors
New formats
New technologies
Shifts in customer
needs
Elements in Retail Strategy 5
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Dr. Anupamaa S. Chavan
Target Market
themarket segment(s) toward which the retailer plans to focus its resources and
retail mix
Criteria For Selecting A Target Market:
Attractiveness –Large, Growing, Little Competition
More Profits
Retail Format
the
nature of the retailer’s
operations—its retail mix
Sustainable Competitive Advantage © image100 Ltd
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Dr. Anupamaa S. Chavan
Dropping the 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 by Paying Higher Wages?
Providing Better Customer Service?
Sources of Competitive Advantage 7
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More Sustainable Less Sustainable
Location
Better Computers
Customer Loyalty
More Employees
Customer Service
More Merchandise
Exclusive Merchandise/Private Labels
Greater Assortments
Low Cost Supply Chain Management
Lower Prices
Information Systems
More Advertising
Buying Power with Vendors
More Promotions
Committed Employees
Cleaner Stores
Save a Lot – Limited assortment supermarket 8
1250 SKUs
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More Private labels
Prices 40% less than conventional
supermarkets
Low overheads:
• Card board Shipping Cases
• Own bags/ extra charges for
carry bags
Example of Positioning
More Sustainable Competitive Adv 10
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Customer Loyalty
Vendor Relations
HRM
Information System
Location
Customer Loyalty 11
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Jeff Bezos
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Low Cost - Efficiency Through
Coordination
Electronic Data Interchange (EDI)
Collaborative Planning and
Forecasting to Reduce Inventory and
Distribution Costs
Special Treatment
EarlyDelivery of New Styles
Shipment of Scares Merchandise
Human Resources Management 13
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“Employees are key to build a sustainable competitive advantage”
Employee Branding
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Flow of Information
By decreasing costs here, there is
Vendor
more money available to invest
Distribution Center in:
Store
-Better services
-Increase in breadth and depth
-Decrease in prices
Location 15
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What are the three most important things in
retailing?
“location, location, location”
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Market Penetration
Market Expansion
Diversification
Related vs. Unrelated
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Growth Opportunities
Market Penetration 18
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“on every corner”- Opening more store for same
target market
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Market expansion growth
opportunity involves using the
existing retail format in new market
segments
Dunkin’ Donuts – new stores (and at
gas stations) outside northeastern
Abercrombie & Fitch (for college
students) opens lower-priced chain
Hollister Co. for high school students
Retail Format Development 20
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different retail mix for the same
target market
Multi-channel retailing
UK based TESCO:
Tesco Express: small stores located close
to where customers live and work
Tesco Metro: bring convenience to city
center location by specializing in ready-
to-eat meals
Tesco Superstores: traditional stores
Tesco Extra: one-stop destination with
the widest range of food & non-food
products and consumer
durable/electronic items
Diversification 21
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Introduces a new retail format toward
a market segment that is not currently
served by the retailer
Related diversification
Unrelated diversification
Vertical
integration into wholesaling
or manufacturing
Global Growth Opportunities
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Globally sustainable competitive advantage
Low cost, efficient operations - Wal-Mart, Carrefour
Strong private label brands: Starbucks, KFC
Fashion Reputation - The Gap, Zara, H&M
Category dominance – Best Buy, IKEA, Toys R Us
Adaptability
Global Culture
Financial Resources
International Market Entry 24
Strategies
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Direct Investment
Joint Ventures
Strategic Alliances
Franchising
Stages in the Strategic Retail Planning Process
25
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1. Business Mission 27
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•In developing the mission statement, managers must answer five
questions:
(1) What business are we in?
(2) What should be our business in the future?
(3) Who are our customers?
(4) What are our capabilities?
(5) What do we want to accomplish?
Dr. Anupamaa S. Chavan
28
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2. Elements in a Situation Audit
3. Identify Strategic Opportunities 29
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After completing the situation audit, the next
step is to identify opportunities for increasing
retail sales.
4. Evaluate Strategic Opportunities 30
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A retailer must focus on opportunities that utilize its strengths and its area of
competitive advantage.
Both the market attractiveness and the strengths and weaknesses of the
retailer need to be considered in evaluating strategic opportunities.
The greatest investments should be made in market opportunities where the
retailer has a strong competitive position.
5. Establish Specific Objectives and Allocate31
Resources
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Dr. Anupamaa S. Chavan
Specific objectives have three components:
(1) the performance sought, including a numerical index against
which progress may be measured,
(2) a time frame within which the goal is to be achieved, and
(3) the level of investment needed to achieve the objective.
Typically, the performance levels are financial criteria such as return
on investment, sales, or profits.
6. Develop a Retail Mix to Implement 32
Strategy
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Dr. Anupamaa S. Chavan
The next step is to develop a retail mix for each
opportunity in which investment will be made
and to control and evaluate performance.
7. Evaluate Performance and Make 33
Adjustments
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Dr. Anupamaa S. Chavan
The final step in the planning process is evaluating the results of the
strategy and implementation program.
If the retailer fails to meet its objectives, reanalysis is needed. This
reanalysis starts with reviewing the implementation programs; but it
may indicate that the strategy (or even the mission statement)
needs to be reconsidered.
This conclusion would result in starting a new planning process,
including a new situation audit
Case Study - Tesco 34
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Why did Tesco fail in US Market? Give suggestions pertaining to the retail strategy of
Tesco.
35
Traffic
Types of Locations
41
Matching Location to Retail Strategy 42
Comparison shopping:
Customers have a good idea of what type of product they want, but don’t have a strong preference for brand, model
or retailer.
Competing retailers locate
Typical for furniture, appliances,
Near one another apparel, consumer electronics,
hand tools and cameras
Specialty shopping:
Customers know what they want
Costly /Designer labels
Convenient location matters less
44
Shopping Behavior of Consumers in Retailer’s
Target Market
Signs
Restrictions on the use of signs can also impact a particular site’s desirability
Licensing Requirements
Some areas may restrict or require a license for alcoholic beverages
Evaluating Specific Areas for Locations 46
Economic Conditions 47
The growth of population and employment
How long the growth will continue, and how it will effect demand
for merchandise sold in its stores
Which areas growing quickly and why
Competition 48
Royalty-Free/CORBIS
REI – outdoor enthusiasts
The McGraw-Hill Companies, Inc./John Flournoy,
photographer
Affected by proximity
of area considered vs.
other areas where
retailer operates
Stockbyte/Punchstock Images
Evaluating a Site 53
Location -
Parking,
Visibility,
Adjacent Tenants ,
Restrictions, Costs
Evaluating a Site for Locating a Retail Store 54
The probability of Oak Hammock residents’ shopping at the new location, POH , is
POH =
10,000/152
10,000/152 + 5,000/52
= .182
PRC = 10,000/5 2 =
10,000/52 + 5,000/102
= .889
The probability of Oak Hammock residents’ shopping at the new location,
POH , is
POH = 10,000/152
10,000/152 + 5,000/52
= .182
The expected sales for the new location thus would be :
.889 x $5million + .182 x $3 million = $4,991,000
Exercise - 2 62
Market size is Rs. 3,00,000 per annum for location A. Lamda is 2 (ie time taken is twice
significant than the size of the store). Calculate
1. the probability of traffic moving to various stores
2. The expected sales of each store
Travel time (t)
Store A 1 min
Store B 5 mins
Store C 10 mins
You need to find the probability of a consumer shopping at Store C. Also, provide your interpretation for the same.
Calculate the sales at each store if the market size of Kia is Rs 35,00,000 per annum
Expected Sales=
Store A : 0.9523 X 35,00,000 = Rs. 33,33,050
Store B : 0.0381 X 35, 00,000 = Rs. 1,33,350
Store C : 0.0096 X 35,00,000 = Rs. 33,600
1.0000 35, 00, 000
Exercise - 4 64
A Drugstore is considering opening a new location at shopping center A, with hopes
of capturing sales from a new neighborhood under construction. Two nearby
shopping centers, B and C, will provide competition. Using the following information
and the Huff gravity model, determine the probability that residents of the new
neighborhood will shop at shopping center A:
Percentage
Fixed - Rate
Percentage leases – lease based on a % of sales.
Retailersalso typically pay a maintenance fee-based on a percentage of
their square footage of leased space.
Most malls use some form of percentage lease.
Exercise 66
Site Selection: Retailers use GIS to analyze demographic data, traffic patterns, and competition in an
area to identify the best location for a new store.
Inventory Management: Retailers use GIS to optimize inventory management by analyzing sales data
and customer demand to determine the best product mix for each store location.
Supply Chain Management: Retailers use GIS to optimize supply chain management by analyzing
transportation routes, delivery times, and inventory levels to ensure timely and efficient delivery of
products to stores
Customer Segmentation: GIS can be used to segment customers based on demographics, purchase
history, and other data to identify target markets and tailor marketing strategies accordingly.
Market Share Analysis: GIS can be used to map competitor locations and market saturation to
determine a retailer's market share and identify opportunities for growth.
Overall, GIS is a valuable tool for retailers to gain insights into customer behavior, sales trends, and
market conditions, which can help them make data-driven decisions and improve business performance
These brands use GIS to analyze and visualize data related to their customers, competitors, and store
locations to make informed decisions about their business strategies.
Supply Chain Management & Information
70
Technology …
Efficient
and effective integration of suppliers,
manufacturers, warehouses, stores, and
transportation intermediaries into a seamless
value chain.
Improved product
availability
Wal-Mart’s success
is from its information and supply chain
management systems
Why are competitor’s lagging behind?
Made a substantial investment in developing its systems and has the scale
economies
Through experience and learning, changes are always made to improve the
system
Coordinated effort of employees and functional areas throughout the
company
Improved Product Availability 76
= Net profit
Total assets
Sales transaction data are sent directly from the store to the
vendor, and the vendor decides when to ship more toaster
ovens to the distribution center and stores (Flow 3)
PhotoLink/Getty Images
EDI is the computer-to-computer exchange of business documents between retailers and vendors
Merchandise sales, Inventory On Hand, Orders
Advanced shipping notices,
Receipt of merchandise, Invoices for payment
EDI is the computer-to-computer exchange of business documents between retailers and vendors
Standards:
UCS (Uniform Communication Standard)
VICS (Voluntary Inter Industry Commerce Solutions)
Transmission system:
Intranet: local area network (LAN) that employs Internet technology
Extranet: collaborative network that uses Internet technology to link businesses with
suppliers, customers, etc.
EDI Security 85
Logistics:
The aspect of supply chain that refers to the planning,
implementation, and control of the efficient flow and
storage of goods, services, and related information from
the point of origin to the point of consumption to meet
customers’ requirements
Merchandise Flow 87
• Less costly than a pull supply chain • Less likely to be overstocked or out
• Less sophisticated information of stock
needed system to support it • Increases inventory turnover
• Efficient for merchandise that has • Responsive to changes in customer
steady, predictable demand demand
• Efficient when demand is uncertain,
and hard to forecast
Advantages of Direct Store Delivery 92
Over-reacting to shortages
Use EDI
Share information to reduce need for backup inventory, improve
sales forecasts and production efficiency
Vendor manage inventory (VMI)
Collaborative planning, forecasting and replenishment (CPFR)
Vendor Managed Inventory (VMI) 99
Common goals
A single demand forecast developed collaboratively
Collaborative Promotional planning & execution
A single, shared data source
Improved inventory management across Supply Chain
Optimized replenishment strategies with joint
ownership
Process simplicity creates optimal framework for
success
Radio Frequency Identification (RFID)
102
Retail Franchising
Refer Notes Given
105
Thank you