PPT 5-1
Chapter 5
cGraw-Hill/Irwin
PPT 5-2
vy/Weitz: Retailing Management, 5/e Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
Retailing Strategy
Human Resource
Retail Locations Management
Chapters 7,8 Chapter 9
PPT 5-4
Strategic vs. Tactical Decisions
Strategic Tactical
Direction Implementation
Strategy statement Annual plan
Broad Specific, detailed
Unstructured Structured
Problem solving Problem solving
Creativity Analytical
External focus Internal focus
Irregular Regular
Long-term Short-term
Difficult to evaluate Easy to evaluate
Note: Success Comes for Having a Good Strategy and Executing It Well
PPT 5-5
Elements in Retail Strategy
• Target Market
Customer Needs
• Retail Format
Method for Satisfying Needs
• Bases for Building Sustainable Competitive Advantage
Defending Position Against Competitors
PPT 5-6
Chico’s Strategy
Target Market
Woman 35 to 55 Who Want Comfortable, Casual, But
Stylish Apparel
Retail Format
Specialty Apparel Stores in Malls and Strip Centers
Selling Private Label, Coordinated Outfits
Bases for Building Sustainable Competitive Advantage
Unique Merchandise Sized 0,1,2,3
PPT 5-7
Analyzing McDonalds’ Retail Strategy
What Is McDonalds’:
-Target market?
• Starbucks
• Kohls
• Restoration Hardware
• Ukrop’s
PPT 5-12
Methods for Segmenting Markets
Lifestyle, Psychographics
Demographics
PPT 5-13
Criteria For Selecting
A Target Market
• Attractiveness -- Large,
Growing, Little
Competition More
Profits
PPT 5-14
Can A Retailer Develop a Sustainable
Competitive Advantage by:
PPT 5-15
Internal and External Bases for
Competitive Advantage
Retail Firm
•Low Cost
•Large Size
•Efficient
Distribution,
Operations
Vendors,
• Unique Customers
Suppliers
Knowledge
• Loyal Employees
Sources of
PPT 5-16
Capital
Sources of Competitive Advantage
PPT 5-17
Loyalty
PPT 5-18
Approaches for Building
Customer Loyalty
Unique Positioning
Customer Service
Information About Customers (Database Retailing)
Unique Merchandise
Location
PPT 5-19
Example of Positioning
PPT 5-20
Basis of Loyalty, Commitment
• Costs
– Location
– Frequent Shopper Programs
– Unique Merchandise
• Mental, Emotional Attachment
PPT 5-21
Creating Store Loyalty
Mental and Emotional Attachments
• Elements in a Strong Brand
– Top of the Mind Awareness
– Associations with
Brand/Store Name
• Methods Used to Develop a
Strong Brand
– Massive Exposure
– Symbols to Reinforce
Image
– Consistent Positioning
Creating Strong
Associations
– Limited Brand Extensions
PPT 5-22
Vendor Relationships
PPT 5-23
High Quality Customer Service
• Difficult to Achieve
– People Are Not Machines -- Inconsistent
– Retail Sales Associates At Bottom of Labor Pool
PPT 5-24
Critical Tradeoff In Developing
Strategic Advantage
Focus Leads to Developing
A Competitive Advantage
But
Focus Reduces Flexibility
PPT 5-25
Growth Opportunities
•Market Penetration
•Market Expansion
•Diversification
PPT 5-27
International Growth Opportunities
Europe
China
Mexico, Latin America
Japan
PPT 5-28
Key to Success in
Global Retailing
PPT 5-29
International Market
Entry Strategies
Direct Investment
Joint Ventures
Strategic Alliances
Franchising
PPT 5-30
Steps in the Strategic
Retail Planning Process
100
50
0
1st Q tr 2 nd Q tr 3 r d Q tr 4th Q tr
PPT 5-32
Questions for
Analyzing the Environment
Barriers to
Entry
Bargaining
Power of Competitiv Large
Vendors e Customers
Rivalry
Threat of
Substitution
PPT 5-34
Strengths and Weaknesses Analysis
Management Capability:
Capabilities and experience of top management
Depth of Management--capabilities of middle management
Management’s commitment to firm
Financial Resources:
Cash flow from existing business
Ability to raise debt or equity financing
Operations: Store Management Capabilities
Overhead cost structure Management capabilities
Quality of operating systems Quality of sales associates
Distribution capabilities Commitment of sales associates to firm
Management information systems
Loss prevention systems Locations
Inventory control system
Merchandising Capabilities:
Knowledge and skills of buyers Customers
Relationships with vendors Loyalty of customers
Capabilities in developing private
capabilities
PPT 5-35
Illustration of the
Strategic Retail Planning Process
PPT 5-36
Mission Statement for
Gifts To Go
PPT 5-37
Situation Analysis of
Gifts to Go
• Market Factors
– Chicago is an attractive market. (+)
– Relatively expensive gifts are not affected much by the
economy. (+)
– Gifts are highly seasonal. (-)
• Competitive Factors
– Many in area. Primary department stores, craft galleries,
catalogs, and Internet retailers (-)
– Lack of large suppliers, customer (+)
– Opportunities for differentiation (+)
– Limited competitive rivalry. (+)
PPT 5-38
Situation Analysis of
Gifts to Go (continued)
• Environmental Factors
– Potential Threat - Development of electronic channel by traditional bricks
and mortar retailers (-)
PPT 5-39
Growth Opportunities for
Gifts to Go
• Market Penetration
– Increase size of present stores
– Open additional gifts stores in Chicago area
• Market Expansion
– Open gift stores outside Chicago area
– Sell lower priced gifts in present stores
PPT 5-40
Growth Opportunities for
Gifts to Go (continued)
• Diversification
– Manufacture craft gifts
– Open an apparel store targeting teenagers
– Open a category killer store selling a broader assortment
of gifts
PPT 5-41
Evaluating Growth Opportunities for
Gifts to Go
Market Attractiveness
• Market Penetration
– Increase size of present stores (low)
– Open additional gifts stores in Chicago area (medium)
• Market Expansion
– Open gift stores outside Chicago area – new geographic
segment (medium)
– Sell lower priced gifts in present stores – new benefit
segment (medium)
PPT 5-42
Evaluating Growth Opportunities for
Gifts to Go (continued)
Market Attractiveness
• Retail Format Development
– Sell non-gift merchandise to same customers in present or new
stores (High)
– Sell similar gifts to same customers through an electronic
channel (High)
• Diversification
– Manufacture craft gifts (High)
– Open an apparel store targeting teenagers (High)
– Open a category killer store selling a broader assortment of gifts
(High)
PPT 5-43
Evaluating Growth Opportunities for
Gifts to Go
Competitive Position
• Market Penetration
– Increase size of present stores (High)
– Open additional gifts stores in Chicago area
(Medium)
• Market Expansion
– Open gift stores outside Chicago area (Low)
– Sell lower priced gifts in present stores (low)
PPT 5-44
Evaluating Growth Opportunities for
Gifts to Go (continued)
Competitive Position
• Retail Format Development
– Sell non-gift merchandise to same customers in present or new
stores (Low)
– Sell similar gifts to same customers through an electronic
channel (Medium)
• Diversification
– Manufacture craft gifts (Low)
– Open an apparel store targeting teenagers (Low)
– Open a category killer store selling a broader assortment of gifts
(Low)
PPT 5-45
Market Attractiveness/Competitive
Position Matrix
High Medium Low
Maximum Invest to Opportunities
investment challenge leader investment
Aggressive
Market Attractiveness
Competitive Position
PPT 5-46
Steps in Using Market Attractiveness -
Competitive Position Matrix
PPT 5-47
Characteristics of
International Markets
U.S.
U.S. Germany
Germany Japan
Japan
Population
Population(Millions)
(Millions) 266
266 82
82 126
126
Business
BusinessClimate
Climate 33 10
10 24
24
Logistical
LogisticalInfrastructure
Infrastructure Exc.
Exc. Good
Good Avg.
Avg.
PPT 5-48
Attractiveness Ratings for
International Growth Opportunities
PPT 5-49
Competitive Position in International
Growth Opportunities
PPT 5-50
Evaluation of International
Growth Opportunities
PPT 5-51
Risk and Rewards in Latin America:
Country Risk Assessment
Short-Term Risk
Long-Term Risk
400 Brazil
Market Size (GDP Billions)
Mexico
350
300
250
Argentina
200
150
100
Colombia Venezuela
50 Chile Peru
0
Low Medium High
RISK
Source: Coopers & Lybrand Analysis, “Global Retailing: Assignment Latin
PPT 5-52 America,” Chain Store Age Executive, April 1996, seciton 2, p. 4.
Evaluation of Retail Market
Opportunities in European Community
High Low
SPAIN
ITALY UNITED KINGDOM
Open
FRANCE NETHERLANDS
MARKETS
GERMANY
Restricted
LUXEMBOURG
BELGIUM
IRELAND
PORTUGAL
GREECE
DENMARK
GROWTH
PPT 5-53
Market Attractiveness Ratings for
Growth Opportunities in Merchandise Categories
PPT 5-54
Competitive Position Ratings
in Merchandise Categories
PPT 5-55
Evaluation of Merchandise
Category Opportunities
1,000
High Medium Low
Soft home
High
Market Attractiveness
Men’s clothing
667
Women’s Children’s
Medium
clothing clothing
Consumer
Junior’s Furniture electronics
clothing
333
Low