”One day if I do go to heaven, I’m
going to do what every San
Franciscan does who goes to
heaven, I’ll look around and say, ‘it
ain’t bad, but it ain’t San Francisco.’ “
- Herb Caen, June 14, 1998
Chapter Two:
Strategic
Planning and
Operations
Management
In Retailing
“After you've done a thing the same way for two years,
look it over carefully. After 5 years, with suspicion. And
after 10 years, throw it away and start all over.”
- Alfred Perlman
Railroad Executive
1902-1983
A Retail Strategic Plan is…
… a comprehensive plan that directs all
aspects of a retail company including
marketing, product & service assortment,
market selection, branding, and pricing. The
RMS identifies the target market, retail format,
and sustainable competitive advantages. It
analyzes opportunities and threats which
suggest initiatives that are consistent with
company values and will fuel growth and
success of the company.
4 Components
of a Typical
Strategic Plan
Mission Statement
Goals & Objectives
SWOT Analysis
Develop Strategies
to Meet Gs & Os
Review & Control
So We Want to Develop a Strategy.
Where Do We Begin?
Process of Strategic Planning
Define the Mission
Set Business Goals
Conduct a SWOT &
Environmental Analysis
Set Marketing Strategy
Manage Op’ns to Goals
Mission Statement
The mission describes
the retailer’s
business, what values
it embraces, and how
it measures success in
the market.
Fast Co Missions Don’t Suck
Let’s Check out Some Mission
Statements
What Elements are Often Included in
Effective Mission Statements?
 Memorable and succinct
 Clear in plain language
and grammatically correct
 How the retailer will deliver
value to its customers
 Identifies stakeholders
 Realistic & inspiring
 Allows for flexibility
First, let’s look at some
crummy mission statements.
"To be the best-loved provider of books, music, movies, and other
entertainment and informational products and services. To be the world
leader in selection, service, innovation, ambiance, community
involvement, and shareholder value. We recognize people to be the
cornerstone of the Borders experience by building internal and external
relationships, one person at a time."
“For our customers, a compelling place to shop by
providing convenience and low prices. For our
associates a compelling place to work by providing
exceptional opportunities and rewards for achievement.
For our investors a compelling place to invest by
providing outstanding returns”
“Our mission is to operate the best specialty retail
business in America, regardless of the product we sell.
Because the product we sell is books, our aspirations must
be consistent with the promise and the ideals of the
volumes which line our shelves. To say that our mission
exists independent of the product we sell is to demean the
importance and the distinction of being booksellers.”
“McDonald's brand mission is to be our
customers' favorite place and way to eat
and drink. Our worldwide operations are
aligned around a global strategy called
the Plan to Win, which center on an
exceptional customer experience –
People, Products, Place, Price and
Promotion.”
"To create a shopping experience that pleases our
customers; a workplace that creates opportunities and
a great working environment for our associates; and a
business that achieves financial success."
It makes you wonder if some
companies use a mission statement
generator to develop their “mission”.
What Elements are Often Included in
Effective Mission Statements?
 Memorable and succinct
 Clear in plain language
and grammatically correct
 How the retailer will deliver
value to its customers
 Identifies stakeholders
 Realistic & inspiring
 Allows for flexibility
Now, let’s look at some
great mission statements.
“Build the best outdoor products, cause no
harm, use business to inspire and implement
solutions to the environmental crisis.”
“To create content that educates,
informs and inspires.”
“Fashion And Quality At
The Best Price.”
TB & LG
In our store or online Nordstrom works
relentlessly to give customers the most
compelling shopping experience possible by
offering the best service, selection, quality
and value.
”To be earth's
most customer
centric company;
to build a place
where people can
come to find and
discover anything
they might want
to buy online."
JB & CR
“To inspire and nurture the human
spirit – one person, one cup, and one
neighborhood at a time.”
“To bring inspiration and innovation
to every athlete in the world. If you
have a body, you are an athlete.”
“To make a
contribution to
the world by
making tools for
the mind that
advance
humankind."
“To continually provide our members
with quality goods and services at the
lowest possible prices.”
Our mission is to make Target the preferred
shopping destination for our guests by delivering
outstanding value, continuous innovation and an
exceptional guest experience.
“The YMCA builds strong kids, strong families and
strong communities by enriching spirit, mind and
body for all.”
“Our mission is to
provide highquality, affordable
health care services
and to improve the
health of our
members and the
communities we
serve”
“Our mission
is Caring,
Healing,
Teaching and
Discovering.”
“To provide outstanding products and
services that support and/or enhance
the academic experience at San
Francisco State University.”
Guy Kawasaki Has a Different Philosophy
About Mission Statements
Now, Let’s Take Roll!
Process of Strategic Planning
Define the Mission
Set Business Goals
Conduct a SWOT &
Environmental Analysis
Set Marketing Strategy
Manage Opn’s to Goals
Goals & Objectives
Goals & Objectives
Give me a stock clerk with a goal and I’ll give
you a man who will make history. Give me a
man with no goals and I’ll show you a stock
clerk.
-James Cash (JC) Penney
Founder of JC Penney
S.M.A.R.T. Goals
• Specific
• Measurable
• Attainable
• Realistic
• Timely
Market Performance Objectives:
Sales Volume & Market Share
Retail Sales Growth
Financial (Profit) – Based Objectives
Return on
Net Worth
Asset
Turnover
Net Profit
Financial
Leverage
Return on
Assets
Return on Net Worth
= Profit / Owner’s Equity
Assets - Liabilities
Financial Leverage
= Total Assets / Owner’s
Equity
The higher the number the
higher the debt financing
the business
Return on Assets
= Net Profit / Total Assets
Measures how productive your assets
are in terms of making a profit.
Net Profit
= (Net Sales + Other
Income) – (Total
Expenses)
Asset Turnover
= Net Sales / Total Assets
The Strategic Profit
Model combines metrics
used to measure both
profit management and
asset management.
Strategic Profit Model
= Net Profit Margin
x Asset Turnover
= Return on Assets
x Financial Leverage
= Return on Net Worth
Strategic Profit Model
= (Net Profit/Total Sales) or “Net Profit Margin”
x Asset Turnover
= Return on Assets
x Financial Leverage
= Return on Net Worth
Strategic Profit Model
= (Net Profit/Total Sales) or “Net Profit Margin”
x (Total Sales/Total Assets) or “Asset Turnover”
= Return on Assets
x Financial Leverage
= Return on Net Worth
Strategic Profit Model
= (Net Profit/Total Sales) or “Net Profit Margin”
x (Total Sales/Total Assets) or “Asset Turnover”
= (Net Profit/Total Assets) or “Return on Assets”
x Financial Leverage
= Return on Net Worth
Strategic Profit Model
= (Net Profit/Total Sales) or “Net Profit Margin”
x (Total Sales/Total Assets) or “Asset Turnover”
= (Net Profit/Total Assets) or “Return on Assets”
x (Total Assets/Net Worth) or “Financial Leverage”
= Return on Net Worth
Strategic Profit Model
= (Net Profit/Total Sales) or “Net Profit Margin”
x (Total Sales/Total Assets) or “Asset Turnover”
= (Net Profit/Total Assets) or “Return on Assets”
x (Total Assets/Net Worth) or “Financial Leverage”
= (Net Profit/Net Worth) or “Return on Net Worth”
Strategic Profit Model
= (Net Profit/Total Sales) or “Net Profit Margin” IS only
x (Total Sales/Total Assets) or “Asset Turnover”
= (Net Profit/Total Assets) or “Return on Assets”
x (Total Assets/Net Worth) or “Financial Leverage”
= (Net Profit/Net Worth) or “Return on Net Worth”
Strategic Profit Model
= (Net Profit/Total Sales) or “Net Profit Margin” IS only
x (Total Sales/Total Assets) or “Asset Turnover” IS + BS
= (Net Profit/Total Assets) or “Return on Assets”
x (Total Assets/Net Worth) or “Financial Leverage”
= (Net Profit/Net Worth) or “Return on Net Worth”
Strategic Profit Model
= (Net Profit/Total Sales) or “Net Profit Margin” IS only
x (Total Sales/Total Assets) or “Asset Turnover” IS + BS
= (Net Profit/Total Assets) or “Return on Assets” IS + BS
x (Total Assets/Net Worth) or “Financial Leverage”
= (Net Profit/Net Worth) or “Return on Net Worth”
Strategic Profit Model
= (Net Profit/Total Sales) or “Net Profit Margin” IS only
x (Total Sales/Total Assets) or “Asset Turnover” IS + BS
= (Net Profit/Total Assets) or “Return on Assets” IS + BS
x (Total Assets/Net Worth) or “Financial Leverage” BS only
= (Net Profit/Net Worth) or “Return on Net Worth”
Productivity-Based
Objectives consider how
efficiently & effectively
your resources are
generating sales.
Productivity – Based Objectives
 SPACE: Sales per square foot (or
per shelf foot or per store…)
Space
 LABOR: Sales per hour (or per
shift or per FTE…)
Labor
MERCHANDISE: Sales per
inventory dollar (or per vendor or
per dept)
Merchandise
Bucks From Bricks: These Retailers Make The Most
Money Per Square Foot On Their Real Estate
Source: CNBC July 29, 2017
Productivity – Service Retailers
Fixed capacity
Low marginal cost
Perishable product
Fluctuating demand
Different market segments
Yield Management
“The understanding,
forecasting and
reacting to changing
customer needs in
order to maximize
revenue from a fixed
capacity of available
services.”
Let’s Look at Some Examples of How
Yield Management Works…
ResDiary
Yield Management at Cole Hardware
Societal Objectives
• Job creation
• Tax support
• Choice
• Equity
• Philanthropy
Socially
Responsible
Retailers
“Men's Wearhouse Suit Drive For
Jobless Says Clothes Make The Man”
Source: Marketing Daily, June 29, 2018
Selfgratification
Personal
Objectives
Power &
authority
Status and
Respect
Process of Strategic Planning
Define the Mission
Set Business Goals
Conduct a SWOT &
Environmental Analysis
Set Marketing Strategy
Manage Op’ns to Goals
Apply a SWOT Analysis
• Consumer behavior
• Competitors actions
• Supply chain
• Socioeconomic factors
• Emerging technology
• Legal developments
• Ethical considerations
•
•
•
•
Product Selection
Clean Stores
Safety and Security
Competitive PricIng
• Product Selection
• Brick & Mortar Based
SWOT for Target
•
•
•
•
•
More Omnichannel
Endless Aisle
Next Gen
Grocery Business
Smaller Formats
• Online Competitors
• Economic Cycle
• Retail Saturation
Process of Strategic Planning
Define the Mission
Set Business Goals
Conduct a SWOT &
Environmental Analysis
Set Marketing Strategy
Manage Op’ns to Goals
“The competitive advantage of a company
is its ability to transform knowledge into
action.”
- Jack Welch, Former CEO, G.E.
STRATEGY…
… is a plan for a course of action
that will enable the retailer to
achieve its goals and objectives
while fulfilling its mission.
And Now 3 Different Strategy Models…
First, A Very Simple Strategy:
GET ‘EM
IN THE
STORE
DO IT
EFFICIENTLY
GET ‘EM
TO BUY
And Another Look at Retail Market
Strategy…
think of retail strategy as…
Retail Location
+ Target Market
+ Value Proposition
+ Retail Mix
= Retail Strategy
And Another Perspective on Retail
Market Growth Strategy…
Selected Retail Growth Strategies
Exist ing
Cust om ers
N ew
Cust om ers
Exist ing
Produ ct M ix
M ark et
Penet rat ion
M ark et
Developm ent
N ew Product
M ix
Produ ct
Developm ent
Diversificat ion
Selected Retail Growth Strategies
Exist ing
Cust om ers
N ew
Cust om ers
Exist ing
Produ ct M ix
M ark et
Penet rat ion
M ark et
Developm ent
N ew Product
M ix
Produ ct
Developm ent
Diversificat ion
Lunch Will Be A Big Focus For Us In
Food, Starbucks CFO Scott Maw Says
Source: CNBC, June 26, 2017
“Target Expands into Canada”
Source: Financial Times - Jan 13, 2011
“ Target to Abandon Canada After Racking Up
Billions in Losses “
Source: Huffington Post – Jan 15, 2015
“Nordstrom Better Positioned Than Target To Take
On Canadian Expansion“
Nordstrom opened its first international store at Chinook Centre in Calgary,
Alberta.
Source: Puget Sound Business Journal – Jan 21st, 2015
Selected Retail Growth Strategies
Exist ing
Cust om ers
N ew
Cust om ers
Exist ing
Produ ct M ix
M ark et
Penet rat ion
M ark et
Developm ent
N ew Product
M ix
Produ ct
Developm ent
Diversificat ion
“Taco Bell Begins Selling Beer, Wine
And Booze At Chicago Location”
Source USA Today, Sept 15, 2015
Arby’s pokes fun at Starbucks with
Liger Shake
Source: Nation’s Restaurant News, Aug 29, 2017
A Revolution: Smart Textiles
4:45
Source: RoboDacta, Jan 14, 2016
Stopped Here 9/5
“Starbucks' Italy Location May Jolt
Country's Coffee Culture”
Source: RoboDacta, Jan 14, 2016
Don't Freak Out, But Wal-mart Just
Created A Designer Cantaloupe
Source: Financial Post, June 13, 2017
“We don’t like the sound, and
guitar music is on the way out.”
- Decca Recording Co., 1962
Selected Retail Growth Strategies
Exist ing
Cust om ers
N ew
Cust om ers
Exist ing
Produ ct M ix
M ark et
Penet rat ion
M ark et
Developm ent
N ew Product
M ix
Produ ct
Developm ent
Diversificat ion
“IKEA Wants You to Build Your
Own Food Now”
Source: Time Magazine, 8/31/16
Amazon’s Scrambled Merchandising
• Amazon will start selling
real, large Christmas
trees
• The trees will be 7 foot
tall Doug Fir
• Arrival guaranteed
within 10 days of harvest
• Cost will be $115 + $50
for wreath (avg mkt
price nationally is $42 to
$75)
Source: TechCrunch, Sept 11, 2018
“Report: Amazon [Buying] Landmark Theaters“
This would be a significant step for the company, akin to its entry into the grocery space
with its purchase of Whole Foods last year.
Source: GlobeSt.com, Aug 16, 2018
“Focus Brands to buy Jamba Juice
for $200M“
Source: Nation’s Restaurant News, Aug 2, 2018
Process of Strategic Planning
Define the Mission
Set Business Goals
Conduct a SWOT &
Environmental Analysis
Set Marketing Strategy
Manage Op’ns to Goals
“McDonald’s Case Study –
Strategy in Action”
Source: Bloomberg, Oct 24, 2017
Operations Management
“Operations is concerned
with maximizing the
efficiency of the
retailer’s use of
resources and with how
the retailer converts
these resources into
sales and profits.”
Operations Management
•
•
•
•
•
•
•
•
•
Labor Costs
Just in Time Inventory
Automated Ordering
Automated Receiving
Auto Replenishment
POS Technology
Shrinkage Reduction
Customer Analytics
Supply Chain Management
Operations Management
•
•
•
•
•
•
•
•
•
Labor Costs
Just in Time Inventory
Automated Ordering
Automated Receiving
Auto Replenishment
POS Technology
Shrinkage Reduction
Customer Analytics
Supply Chain Management
• Labor Costs – retail’s largest
controllable operating expense
“Walmart Unveils Grocery-picking Robots
In Test Store“
Source: Yahoo Finance, Aug 2, 2018
Operations Management
•
•
•
•
•
•
•
•
•
Labor Costs
Just in Time Inventory
Automated Ordering
Automated Receiving
Auto Replenishment
POS Technology
Shrinkage Reduction
Customer Analytics
Supply Chain Management
• Just in Time
Inventory – or “quick
response” (QR) – reduces
average inventory on hand
and therefore increases….?
INVENTORY TURNOVER!
Operations Management
•
•
•
•
•
•
•
•
•
Labor Costs
Just in Time Inventory
Automated Ordering
Automated Receiving
Auto Replenishment
POS Technology
Shrinkage Reduction
Customer Analytics
Supply Chain Management
•Automated Ordering
•Automated Receiving
Operations Management
•
•
•
•
•
•
•
•
•
Labor Costs
Just in Time Inventory
Automated Ordering
Automated Receiving
Auto Replenishment
POS Technology
Shrinkage Reduction
Customer Analytics
Supply Chain Management
• Auto Replenishment
Operations Management
•
•
•
•
•
•
•
•
•
Labor Costs
Just in Time Inventory
Automated Ordering
Automated Receiving
Auto Replenishment
Technology
Shrinkage Reduction
Customer Analytics
Supply Chain Management
“Inside Alibaba's New Kind Of Superstore:
Robots, Apps And Overhead Conveyor Belts”
Source: CNBC, Aug 30, 2018
Operations Management
•
•
•
•
•
•
•
•
•
Labor Costs
Just in Time Inventory
Automated Ordering
Automated Receiving
Auto Replenishment
POS Technology
Shrinkage Reduction
Customer Analytics
Supply Chain Management
Retail Shrinkage
• Shrinkage is the loss of inventory that can be
attributed to factors such as employee theft,
shoplifting, administrative error, vendor fraud,
damage in transit or in store, and cashier
errors that benefit the customer. Shrinkage is
the difference between recorded inventory on
a company's balance sheet and its actual
inventory.
(Source: Investopedia)
Shrinkage Reduction
Operations Management
•
•
•
•
•
•
•
•
•
Labor Costs
Just in Time Inventory
Automated Ordering
Automated Receiving
Auto Replenishment
POS Technology
Shrinkage Reduction
Customer Analytics
Supply Chain Management
Operations Management
•
•
•
•
•
•
•
•
•
Labor Costs
Just in Time Inventory
Automated Ordering
Automated Receiving
Auto Replenishment
POS Technology
Shrinkage Reduction
Customer Analytics
Supply Chain Management
• Operations
Supply Chain
Management
Management
Thank You!