External and Internal Environment factors
for an MNC
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Socio-Cultural
Legal
Economic
Political
- Domestic
- Local
- International
• Technological
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Regulators
Competitors
Suppliers
Consumers/External
Customers
• Internal Customers
Components of the General Environment
Economic
Demographic
Sociocultural
Industry
Environment
Competitive
Environment
Political/
Legal
Global
Technological
Components of the General Environment
Demographic
Segment
 Population size
 Age structure
 Geographic distribution
 Ethnic mix
 Income distribution
Economic
Segment
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 Personal savings rate
 Business savings rates
 Gross domestic product
Political/Legal
Segment
 Antitrust laws
 Taxation laws
 Deregulation philosophies
 Labor training laws
 Educational philosophies and
policies
Sociocultural
Segment
 Women in the workforce
 Workforce diversity
 Attitudes about work life
quality
 Concerns about the
environment
 Shifts in work and career
preferences
 Shifts in preferences regarding
product and service
characteristics
Technological
Segment
 Product innovations
 Applications of knowledge
 Focus of private and
government-supported R&D
expenditures
 New communication
technologies
Global
Segment
 Important political events
 Critical global markets
 Newly industrialized countries
 Different cultural and
institutional attributes
Inflation rates
Interest rates
Trade deficits or surpluses
Budget deficits or surpluses
External Environmental Analysis
The external environmental analysis process should be
conducted on a continuous basis. This process includes
four activities:
Scanning:
Identifying early signals of environmental
changes and trends
Monitoring: Detecting meaning through ongoing observations
of environmental changes and trends
Forecasting: Developing projections of anticipated outcomes
based on monitored changes and trends
Assessing:
Determining the timing and importance of
environmental changes and trends for firms'
strategies and their management
Scanning models
• Delphi Technique
• Spire Approach – Systematic Probing and
Identification of the Relevant Environment*
1) fgfgf
2) kk
*Klein and Newman
Environment Scanning
• Competitor Intelligence
• Strategic Analysis
• The SPIRE Approach (Systematic Probing and
Identification of the Relevant Environment)*
- Detailed list of environment variables
- Set out strategic marketing components
- Facilitate interactions of different factors for any
linkages
• Scenario Building
* Klein and Newman, How to Integrate New Environmental Forces into Strategic
Planning, “Management Review”, Volume 69, July 1980, pp.40-48
Scenario Building
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Stage 1: Analysis of the Decisions
Stage 2: Identification of Key Decision Factors
Stage 3: Identifying the Socio-Cultural Factors
Stage 4: Analysis of each of the key variables
separately
• Stage 5: Selection of Scenario Logics
Franchising
Franchising
• Almost exclusively concerned with small
business
• Holds at offer of Individual ownerships
• Fastest growing business segment, and market
entry methods
• 1851…Singer Sewing Machine Co.
• Became popular after WW-II in the US
• Offer: proven products, business know-ow,
financial help
Franchising: a definition
It’s a legal document, a contractual agreement between the
Franchiser (Manufacturer, Wholesaler, Service Sponsor) and
the Franchisee (Retailer) to conduct a given business in
accordance with prescribed operating methods, financing
systems, territorial domain, commission fees/royalty
Holder is given the benefit of Franchiser’s experience, and
help in the choice of locations, financing, marketing, record
keeping, promotional techniques, brand name and
standardization
Thank You
Merchandise Management
PLANNING MERCHANDISE ASSORTMENT
Merchandise Management Involves:
• Buy Merchandise
• Control merchandise inventory
• Price merchandise
Merchandise Buying Involves:
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Locate Vendors
Evaluate vendors
Negotiate with vendors
Place orders
Merchandise inventory control involves:
• Develop merchandise budget plans
• Allocate merchandise to stores
• Review open-to-buy & stock position
Pricing merchandise
• Set initial price
• Adjust price
A few retail definitions
STOCK BALANCE:
A strategic decision that defines the degree to which a
retailer wishes to be a specialist with a narrow range of
merchandise
OR
A generalist with many different types of merchandise.
A store’s stock balance results in a trade-off amongst three
factors:
Varieties
Assortments
Service levels
Stock balance: increasingly it is a strategic issue
Organising the buying process by
categories:• The category
• Category Management
• The Category Captain
The Buying organization
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Department
Classification
Categories
SKU (Stock Keeping Units)
Setting Objective for the Merchandise
Plan
• Putting Margin, Sales, and Turnover
together:
• GMROI- Gross Margin Return On
Investment
• Measuring Inventory Turnover – Stock Turn
Advantage of High Inventory Turnover
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Increased Sales Volume
Less Risk of Obsolescence and Markdowns
Improved Sales Person Morale
More money for market opportunities
Relation between Cycle Stock & Base Stock
Lead Time
Cycle Stocks
Time for Replenishment
Safety/ Base Stock
WEEKS
The Category Life Cycle
• Variations on the category Life Cycle
• Seasonal Merchandise
Introductory
Stage
Growth
Stage
Maturity
Stage
Decline Stage
Total
Market
Sales
Time
Developing a Sales Forecast
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Sources of information for category Level Forecast
Previous Sales volume
Published sources
Customer Information
A focus group
Shop competition
Vendors & Buying residing office
Store level Forecasting
CPFR- Collaboration, Planning Forecasting, and
Replenishment
The Assortment Planning Process
• Variety
• Assortment
• Product Availability-Assortment Process for
service retailers
Trade-Offs between Variety, Assortment &
Product Availability
• Determining Variety and Assortment
• Profitability of Merchandise Mix
• Corporate Strategy and positioning toward the
assortment
• Physical Characteristics of the store layout of the
internet site
• Balance between Too much versus Too little
assortment
• Determining product availability
• Cycle stock
Buying Systems
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Staple Merchandise Buying Systems
The Inventory Management Report
Basic Stock List
Inventory Turnover
Product availability
Backup stock
Forecast
Order Point
Buying Systems (contd..)
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Order Quantity
Monthly Reductions
BOM- Beginning of Month Stock to Sales Ratio
EOM- End of Month stock ratio
Monthly additions to stock
Evaluating the Merchandise Budget Plan
Calculating Open-To-Buy for past periods & Current
period
Allocating merchandise to stores
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Analyzing Merchandise Performance
ABC Analysis
Sell through Analysis
Multi attribute Method
Buying Merchandise
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Private –Label Brands
Private Label Options
Bargain branding
Premium Branding
A Brand or a store?
INTERNATIONAL SOURCING
DESCISIONS
• Cost Associated with Global Sourcing
decisions
• Country-of-Origin effect
• Foreign Currency Fluctuations
• Tariffs
• WTO
• NAFTA - North American Free Trade
Agreement
Free Trade Zones
• Managerial issues associated with global
sourcing decisions
• Building of Strategic Partnerships
• Source close to Home or buy Made in America
Connecting with Vendors
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Internet Exchanges
Wholesale Market Centres
Trade shows
Buying on their turf
Resident Buying Offices
Negotiating with Vendors
• Guidelines for Planning Negotiations with
Vendors
• Knowledge is Power
• Consider History
• Assess where things are today
• Set goals
• Additional Markup opportunities
• Terms of Purchase
• Transportation
Negotiating with Vendors (contd..)
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Delivery & Exclusivity
Communications
Advertising allowances
Know the vendor’s goals & Constraints
A Continuous relationship
Testing new items
Communications
Showcase
Negotiating with Vendors (contd..)
• Plans to have as many negotiations as the
vendor
• Choose a good place to negotiate
• Don’t burn bridges
• Don’t assume
Establishing & Maintaining strategic
relationships with vendors
• Defining strategic relationships
• Maintaining strategic relationships mutual
trust
• Open Communication
• Common Goals
• Credible commitments
• Building Partnering relationships
Pricing
• Pricing Strategy
• Everyday Low Price
• High Low Pricing- Deciding which strategy is
best
Approaches for setting prices
• The cost oriented method
• Determining the initial markup from maintained
markup and gross margin
• Determining the initial retail price under cost oriented
pricing
• The demand oriented method
• The competition oriented method
• Profit impact of setting a retail price
• The us e of break-even analysis
• Calculating Break-even for a new product
• Calculating Break-even sales
Price Adjustments
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Markdowns
Reasons for taking markdowns
Liquidating markdown merchandise
Markdowns and price discrimination
Coupons
Rebates
Price bundling
Price Adjustments (contd..)
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Multiple Unit-pricing
Variable pricing
Pricing on the internet
Leader pricing
Price lining
Odd pricing
Are you a smart merchandiser
now??