retail planning and management

8/8/2019 Retail Planning and Management

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Retail Planning and Management

Chapter 2


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Goals for Chapter 2

Discuss need for Retail Strategic Management

Identify Organizatio

n Missio

n Co

nsideratio

ns Identify Organizational Objectives

Discuss two Strategic Profit Models

Discuss SWOT Approach

Note: Most of discussion in this chapter relates tolarge retailers (especially those with multiple chainswith different approaches)


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Retail Strategic Management

the process of planning the organization,implementation, and control of all the firms activity.

Strategic Planning - long-term, broad based intentions. Anoutline of what the retail firm hopes to accomplish

Develop a mission statement for the firm

Define specific goals and objectives of the firm

Develop basic strategies to reach objectives and fulfill mission

Identify Strengths,Weaknesses,Opportunities and Threats

Plans are usually different for each strategic business unit (often a chain with a separate name) within the overallretail organization


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Organization Mission

All employees of a retailer (from top to

bottom) need to know the organizations

future direction, its core business, its core

customers, its philosophy ofoperation. These should be able to be concisely

summarized in a short mission statement

The mission statement must consider:

the Retail Environment

the Organizations Resources

any Distinctive Competencies

and Management Preferences


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Market Objectives ( 1 of 2)

Sales Objectives - Volume or

growth goals are often seen

Customer Traffic Objectives -Get new people into the

store through promotions,

sales, special services

Custo

mer Lo

yalty -G

etcustomers for life. The sale is

the beginning of customer

contact not the end


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Market Objectives (2 of 2)

Market Share - sales goalsstated in terms of share ofmarket in comparison to localcompetitors

Retail Image - Re-identifyingthe target market and thefuture growth potential (e.g.

Sears) Vendor relations - increasesales through bettercoordination with vendors


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Financial Objectives (1 of 2)

Targeted Returns - Ratio

of calculated net income

to sales (ROS) or to totalassets (ROA) or to equity

(ROE)

Earnings per share -

Important consideration

for publicly traded retail

firms

Stockholder dividends


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Financial Objectives (2 of 2)

Labor productivity - Salesper employee is acommon retailmeasurement

Space productivity - Salesper square foot of space(or per square foot ofselling space) is anothercommon measurement

Merchandise productivity- Inventory turnover goals


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Strategic Profit Model

Primary financial goal of a corporation is tomaximize shareholders wealth

Achieved by planning fo

r the future andachieving high current return on net worth

Components of return on net worth areoutlined in Strategic Profit Model

Net profit Margin

Asset Turnover

Return on Assets

Financial Leverage

S

P

M


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Exhibit 2.1

Strategic Profit Model

Net Profit

Margin

Net Profit*z

Total Sales

Asset Turnover

Total Salesz

Total Assets

x

*Net profit after taxes

=

Return on

AssetsNet Profit*

z

Total Assets

Financial

LeverageTotal Assets

z

Net Worth

Return on

Net WorthNet Profit*

z

Net Worth

x =

Retailing, 3rd Edition, Dunne and Lusch Copyright 1999 by Harcourt Brace & Company

All rights reserved.


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Exhibit 2.4

The SPM for Some of the Countrys TopRetailers

Retailer Net Profit*/ Total Sales/ Net Profit*/ Total Assets/ Net Profit*/

Net Sales Total Assets Total Assets Net Worth Net WorthComp USA,

Inc. 2.0% 4.2 8.3% 3.2 26.2%

Home Depot,,

Inc. 5.0% 2.3 11.4% 1.6 18.5%

LIMITED, Inc. 4.8% 2.2 10.5% 2.2 23.4%

May DepartmentStores 5.9% 1.3 7.6% 2.7 20.2%

McDonalds

Corp. 15.0% 0.6 9.6% 2.0 19.5%

Safeway Inc. 2.7% 3.2 8.7% 4.6 39.8%

WalgreenCompany 3.2% 3.5 11.1% 1.8 19.9%

Wal-Mart

Stores, Inc. 2.9% 2.8 8.0% 2.4 19.3%

*Net Profit After Taxes

Based on corporate annual reports to stockholders of the respective firms and on computations by authors.




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Societal Objectives

Social responsibilities arebecoming more important

The amo

unto

f so

cial respo

nsibilitythat comes from a true concern forsociety (e.g. Ben & Jerrys) versusthe amount that is triggered by thedesire for positive publicity andpromotion (Drug store health fairs)is unknown

Societal concerns often are at theexpense of financial objectives


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Personal Objectives

Self-Gratification - Owners,managers, and employees willprobably choose working in a

retail environment they enjoy Status and Respect - Managing

a store or being an employee ofthe month adds to individualsstatus and self-respect

Power and authority - Retailemployment usually providesfor more responsibility thanfactory employment


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SWOT Analysis

Strengths

Weaknesses

Opportunities

Threats

S - What competitive advantages do wehave over the competition?

W - What competitive advantages doour competitors have over us?

O - What favorable environmentaltrends exist that may benefit our firm?

T - What unfortunate environmentaltrends exist that may hurt our futureperformance?


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Retail Strategies ( 1 of 2)

Get consumers into

Store

Convert consumers

into Customers

Keep operating costs

lo

w while maintainingappropriate level of

customer service


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Retail Strategies ( 2 of 2)

Differentiate

Physical difference of

product Different selling

process

Post-purchase

satisfaction specialized location

never out of stock


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Exhibit 2.3

Retail Planning andManagement Model

Competitive Environment:

Behavior of Consumers, Competition and Channel Members

MissionGoals and

Objectives

SWOT

Strengths

Weaknesses

Opportunities

Threats

Strategic Planning

Social and Legal Environment:

Socioeconomic Environment, State of Technology, Legal System, Ethical Behavior




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Exhibit 2.3

Retail Planning andManagement Model

Competitive Environment:

Behavior of Consumers, Competition and Channel Members

RetailMarketing

Strategy

TargetMarket(s)

Location(s) RetailMix Merchandise

Pricing Advertising

& Promotion

Customer Service &

Selling Store

Layout & Design

Operations

Management

Buying & Handling

Merchandise PricingAdvertising &

Promotion Customer

Services & Selling

Facilities

Administration of

Resources

People

Information

Management

Social and Legal Environment:

Socioeconomic Environment, State of Technology, Legal System, Ethical Behavior

High

Performance

Retailing

Profit




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Summary

Success of Retail Store is not justa process of having

the 4 Ps. It requires strategic planning.

Strategic Planning Includes Develop a mission statement for the firm

Define specific goals and objectives of the firm

Develop basic strategies to reach objectives and fulfill mission

Identify Strengths, Weaknesses,Opportunities and Threats

SPM model helps calculate howa retail firm

brings profitability to its stockholders

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