Chapter 2
Retail Strategic Planning
and Operations
Management
Learning Objectives
• Explain why strategic planning is important
and describe the components of strategic
planning
• Describe the retail strategic planning and
operations management model
Components of Strategic Planning
• Strategic planning: Adapting the resources of
the firm to the opportunities and threats of an
ever-changing retail environment
• Through the proper use of strategic planning,
retailers hope to achieve and maintain a
balance between resources available and
opportunities ahead
LO 1
Components of Strategic Planning
• Development of a mission statement for the
firm
• Definition of specific goals and objectives for
the firm
• SWOT analysis
• Development of strategies that will enable the
firm to reach its objectives and fulfill its
mission
LO 1
Retailing Headlines…
• For a brand to have international success, online presence must speak more than 16
languages. 11 languages can only reach 80%
of the world, and monolingual sites typically
capture just 25% of the world's Net users
• Tesco owned Fresh & Easy chain offers only
self-service checkouts
• Amazon most trusted brand among
consumers
Retailing Headlines…
• Target struggles in Canada
• Target security breach bigger (Neiman Marcus
also hit)
• JC Penney expanding its kids and baby line-up
with launch of exclusive new brands
• Enough?
Mission Statement
• Basic description of the fundamental nature,
rationale, and direction of the firm
• Elements of a mission statement
• How the retailer uses or intends to use its
resources
• How it expects to relate to the ever-changing
environment
• The kinds of values it intends to provide in order
to serve the needs and wants of the consumer
LO 1
• The mission of The ________ Company is to be
one of the world's leading producers and providers
of entertainment and information. Using our
portfolio of brands to differentiate our content,
services and consumer products, we seek to
develop the most creative, innovative and
profitable entertainment experiences and related
products in the world.
• To Bring Inspiration and innovation to every athlete
in the world. (If you have a body you are an
athlete)
• “________ mission is to continually provide our
members with quality goods and services at the
lowest possible prices. In order to achieve our
mission we will conduct our business with the
following Code of Ethics in mind:Obey the law
• Take care of our members
• Take care of our employees
• Respect our vendors
• If we do these four things throughout our
organization, then we will realize our ultimate goal,
which is to reward our shareholders."
• we work to help people and businesses
throughout the world realize their full potential.
This is our mission. Everything we do reflects this
mission and the values that make it possible
• The guiding vision of The ________ Companies is
"Bringing the best to everyone we touch". By "The
best", we mean the best products, the best people
and the best ideas. These three pillars have been
the hallmarks of our Company since it was
founded… in 1946. They remain the foundation
upon which we continue to build our success
today.
• "Our mission is to make _____ the preferred
shopping destination for our guests by delivering
outstanding value, continuous innovation and an
exceptional guest experience by consistently
fulfilling our Expect More. Pay Less.® brand
promise."
• "We save people money so they can live better.“
• "We will provide customer-valued solutions with
the best prices, products and services to make
Lowe's the first choice for home improvement."
•
•
•
•
•
•
•
•
Disney
Nike
Costco
Microsoft
Estee Lauder
Target
Walmart
Lowe’s
Statement of Goals and Objectives
• Provide:
• Specific direction and guidance to the firm in the
formulation of its strategy
• A control mechanism by establishing a standard
against which the firm can measure and evaluate
its performance
LO 1
Statement of Goals and Objectives
• Dimensions
•
•
•
•
Market performance
Financial performance
Societal objectives
Personal objectives
LO 1
Market Performance Objectives
• Establish the amount of dominance the
retailer seeks in the marketplace
• Market share: Retailer’s total sales divided by
total market sales
• High sales growth retailing is directly linked to
expanding the size of the retail stores
• Disney
LO 1
Exhibit 2.1 - The Market ShareProfitability Relationship
LO 1
Financial Objectives
• Profit-based objectives: Deal directly with the
monetary return a retailer desires from its
business
• Profit - Aggregate total of net profit after taxes
• Profit can be expressed as a percentage of net
sales
• It can also be defined in terms of return on
investment (ROI)
• Stockouts: Products that are out of stock and
unavailable to customers when required
LO 1
Exhibit 2.2 - Elements of Strategic
Profit Model
LO 1
Financial Objectives
• Productivity objectives: State the sales
objectives that the retailer desires for each
unit of resource input
• Space productivity - Net sales divided by the total
square feet of retail floor space (Trader Joe)
• Labor productivity - Net sales divided by the
number of full time-equivalent employees
• Merchandise productivity - Net sales divided by
the average dollar investment in inventory
LO 1
Societal Objectives
• Reflect the retailer’s desire to help society
fulfill some of its needs
• Employment objectives - Provision of employment
opportunities for the members of the retailer’s
community
• Payment of taxes - Helping finance societal needs
that the government deems appropriate
• Consumer choice - Provide the consumer with
choices that previously were not available in the
trade area
LO 1
Societal Objectives
• Equity - Retailer’s desire to treat the consumer
and suppliers fairly
• Being a benefactor - Retailer may desire to
underwrite certain community activities
LO 1
Personal Objectives
• Reflect the retailers’ desire to help individuals
employed in retailing fulfill some of their
needs
• Self-gratification - Focuses on the needs and
desires of the owners, managers, or employees of
the enterprise
• Status and respect - Recognizes that the owners,
managers, and employees need status and respect
in their community
• Power and authority - Need of managers and
other employees to be in positions of influence
LO 1
Strategies
• Carefully designed plan for achieving the retailer’s
goals and objectives
• Retailers can operate with three strategies
• Get shoppers into the store
• Convert these shoppers into customers by having them
purchase merchandise
• Implement the above two strategies at the lowest
operating cost possible that is consistent with the level
of service that customers expect (Distribution
company? Teens in the mall? Other unwanted
customers?)
LO 1
Strategies
• Forms of differentiation for a retailer
• Outstanding design of the market offering (Target
and Torrid)
• The selling process (Nordstrom’s)
• After-purchase satisfaction
• Location
• Never being out of stock
LO 1
SWOT Analysis
• Strengths:
• What major competitive advantage(s) do we
have?
• What are we good at?
• What do customers perceive as our strong points?
LO 1
SWOT Analysis
• Weaknesses
• What major competitive advantage(s) do
competitors have over us?
• What are competitors better at than we are?
• What are our major internal weaknesses?
LO 1
SWOT Analysis
• Opportunities
• What favorable environmental trends may benefit
our firm?
• What is the competition doing in our market?
• What areas of business that are closely related to
ours are undeveloped?
LO 1
SWOT Analysis
• Threats
• What unfortunate environmental trends may hurt
our future performance?
• What technology is on the horizon that may soon
have an impact on our firm?
LO 1
Strategies
• A fully developed marketing strategy should
address the following considerations
• Target market: Groups of customers that the
retailer is seeking to serve
• Location
• Retail mix: Combination of merchandise, price,
advertising and promotion, location, customer
service and selling, and store layout and design
• Value proposition: Statement of the tangible and
intangible results a customer receives from
shopping
LO 1
Exhibit 2.8 - Retail Strategic Planning and
Operations Management Model
LO 2
The Retail Strategic Planning and
Operations Management Model
• Operations management: Deals with activities
directed at maximizing the efficiency of the
retailer’s use of resources
• Referred to as day-to-day management
• The need to strive for a high profit is tied to
the extremely competitive nature of retailing
LO 2