retail management game simulation

Simulation Report for Adler (Zest)Global Retail Strategy – Group Assignment

Group - 1:Prajakta TalathiManish BarapatreAbhinav ChoudhryArjun Gidwani

2014

Simulation Report for Adler (Zest)

Table of ContentsQuarter by Quarter Analysis of Performance........................................................................................2

Financial Ratios..................................................................................................................................2

Inventory Turnover............................................................................................................................2

Strategies, Outcomes and Learnings.....................................................................................................2

Key Learnings.....................................................................................................................................4

Changes in Business Environment.........................................................................................................4

Economic Indicators..........................................................................................................................4

Seasonal Forecast..............................................................................................................................4

Competitor’s Strategy........................................................................................................................5

Balance Scorecard Analysis and Key Learnings......................................................................................5

Individual...........................................................................................................................................5

Cumulative.........................................................................................................................................5

Factors composing Balance Scorecard...............................................................................................6

1. Asset Management................................................................................................................6

2. Wealth...................................................................................................................................6

3. Merchandising Effectiveness.................................................................................................6

4. Investment in Future.............................................................................................................7

5. Financial Performance...........................................................................................................7

6. Market Performance..............................................................................................................7

7. Financial Risk.........................................................................................................................8

Retail Management Game Experience..................................................................................................8

Group 1 Page 1


Quarter by Quarter Analysis of PerformanceQuarter-by-Quarter analysis of Team’s performance can be determined by considering the various financial ratios and market share with respect to assortment mix, promotions and inventory.

Financial Ratios

Inventory Turnover

Group 1 Page 2


Strategies, Outcomes and LearningsBelow are the key decisions taken for each quarter, their outcomes and key learnings:

Quarter Strategies Outcome Key Learnings1 Target Segment – 25% Market

Potential for Gold Customers, Niche segment

Maximum mark-on as Customers are price insensitive and sensitive towards trend and stock availability

Low Market share because of heavy competition

77% High Ending Inventory as compared to Planned Sales

Inventory Management is very critical; High ending inventory increases mark down and overheads

2 Based on last year sales planned saleswere calculated

Aggressive recruitment efforts and recruitment training

Planned sales was overestimated by 38%

Did not have much impact on sales and market performance

Last quarter sales along with seasonal and economic factors need to be considered

Sales force was basic necessity but the key criteria to increase market performance

3 As customer was interested in high quality trendy products, changed the assortment mix to have best quality products

Market performance improved by approximately 20%Financial performance was improved

Give customer what they want

4 Tried to improve assortment mix in the ratio Best:Better::90:10

High promotions caused heavy demands and lost sales were observed because profits reduced.

Planned sales were less as compared to winter season forecasted demand

Plan inventory in proportion to promotions. Customer psychology is higher the price, better the product.

5 Encouraged e-marketing (direct sales) and reduced margins to attract customers

Expansion (Store 5 and web channel) and remodelling (Store 1, Store 2 and Store 4) to capture market share

Delayed outcome, observed from next quarter – First mover advantage for Century Store

Expansion plans affect asset management due to liabilities

Improved investment in future

6 Remodelling of Store 6

Bottom-up approach of department level planning

Assortment mix resulted into poor merchandise effectiveness

Gaining customer insights while expanding or opening new stored is important

Group 1 Page 3


New stores and Web channel so promotions were higher but estimated low sales

Unexpectedly high demand caused huge lost sales

New store and promotions attract more customers

7 Aggressive promotions

Planned heavy inventory for E-commerce and Century

Another quarter of unexpectedly high demand at ecommerce caused huge lost sales

High market share for ecommerce

Not enough competitors at ecommerce platform so demand was high

8 Avoid lost sales and maintain the market position

Moderate promotions, best quality assortment mix

Ending inventory increased

Lost Century market share to competition

Competitor’s strategies cannot be controlled. Competitions can sometimes out do your best strategy

Key Learnings1. Planned sales were calculated based on same quarter of last year which proved irrelevant to

present scenario. We learnt and started forecasting based on recent quarter sales, seasonality and economic growth in Quarter 2, 3 and 4.

2. Inventory management is most important factor for profitability in retail.3. Assortment mix plays an important role in Merchandising Effectiveness, therefore Market

Performance and Balance Scorecard. The mix must resonate with the target segment and pricing strategy.

4. Customer insights are critical while launching new stores. New stores may perform differently than the other stores based on market and competitive scenario.

5. It proved difficult to beat the first-mover advantage in later stages. Right first time is very important and is a competitive advantage against customers.

6. Market research reports are highly valuable in providing insights and planning and forecasting. Rather than cost they should be looked as investment.

7. Good margins help to gain profits and develop wealth for price insensitive segments.8. Balance Scorecard is the holistic performance indicator of the company. It clubs all

important factors therefore is very useful for daily tracking.

Changes in Business EnvironmentChanges in Business Environment are not under our direct control. Market research reports play an important source of insights. Hoping for the best and preparing for the worst is the key!

Economic IndicatorsMarkets react to external economic factors. Drastic variations in sales are observed.

Group 1 Page 4


Seasonal ForecastMaximum sales are observed in winter season. Forecasting demand and managing inventory accordingly should be the retail strategy.

Competitor’s StrategyCompetitor’s strategies are out of control. Competitive intelligence is important in order to anticipate possible moves. Price wars do not play part in high end products. Rather customers believe the higher the price better the product.

Balance Scorecard Analysis and Key LearningsTrend of Balance Scorecard for each quarter based on the parameters is as follows:

Individual

Cumulative

Group 1 Page 5


Factors composing Balance Scorecard

1. Asset Management

2. Wealth

3. Merchandising Effectiveness

Group 1 Page 6

Improper decisions of

Inventory led to fluctuations in

Asset Management

Steady growth in wealth due to

increasing profits and net equity

Planned sales and actual sales

differed significantly but towards the end

of year 2, effectiveness was

better


4. Investment in Future

5. Financial Performance

6. Market Performance

Group 1 Page 7

Invested in new department

stores, remodelling and

web channel. Hence sudden

increase in Firm’s future

Overheads at a point were huge

and sales decreased.

Increased sales helped in

improving financial performance

Poor assortment failed to create

demand;

After adjusting the assortment lost sales was experienced due to poor anticipation

of demand


7. Financial Risk

Retail Management Game ExperienceThe unique benefits of the Retail Management Simulation:

Real World Scenario – Real world experience of how retail industry works and how it generates sales and profits

Recall ability with learning experience – Experience is the best teacher

External factors experienced – Some uncontrollable external factors were experienced. This gave an exposure to real life scenarios

Team Building – Team came up with ideas and strategies which helped in team building and brainstorming

Metrics – Learnt the importance of different functions such as operations including marketing, promotions, propositions, sales, stock management, staff management, store management, overheads and managing P&L

Holistic Overview of Retail Business – Dynamic nature of simulations enabled us to see the true impact of each decision we made and how it impacted all elements of the retail operation and also the overall business performance. We had to identify target markets and developing an overall strategy that will allow them to gain a competitive advantage over competitors. Decisions were to be made on Merchandise Planning & Allocation, Pricing, Promotion, Store Operations, Human Resource and ecommerce.

Fear of taking Risk – Fear of taking risk and landing into uncharted target segment prohibited people from changing strategies

Merchandise – Game did not allow controlling merchandise on product plus store level

Group 1 Page 8

Debt increased because of heavy

investments in firm’s future.