Module 2

Importance of Planning:

● A well defined “action plan” signifies two difference between “success and Failure”
● Examples:
○ Political candidates develop campaign plans together with their consultants
long before the election.
○ Similarly, a clearly defined plan of action is an important ingredient in all
forms of business management.
○ Planning therefore, is the anticipation and organization of what needs to be
done in order to reach an objective.

> Due to Circuit City’s poor assumptions in developing its strategic plans, it had to declare
bankruptcy in early 2009.

Strategic Planning:

● Involves adapting the resources of the firm to the opportunities and threats of an
ever-changing retail environment;
● It hopes to achieve and maintain a balance between resources available and
opportunities ahead;
● Retailers want to be among the minority of firms that are able to change the rules of
the game;
● If they can’t change the Rules, to have a strategy to win the game as it is currently
being played.

Components of Strategic Planning

● Development of a Mission (or purpose) statement

- Basic description of the fundamental nature, rationale, and direction of the
firm.
- Three Elements: use of its resources, relation to the ever-changing
environment, values to serve the needs and wants of the customer
- Starbuck Mission Statement: “to inspire and nurture the human spirit– one
person, one cup, and one neighborhood at a time.”
● Definitions of specific goals and objectives
- It must be derived from and give precision and direction to the retailer’s
mission statement
- It provides specific direction and guidance to the firm in the formulation of its
strategy
- Provides a control mechanism by establishing a standard against which the
firm can measure and evaluate its performance.
● SWOT analysis
● Development of basic strategies that will enable the firm to reach its objectives and
fulfill its mission.

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Dimensions of Goals and Objectives:

● Market performance - compares a firm’s actions to its competitors

● Financial performance - analyzes the firm’s ability to provide a profit level adequate
to continue the business
● Societal objectives - helping society fulfill some of its needs
● Personal objectives - helping people employed in retailing to fulfill some of their
needs.

Market Performance Objectives:

● To establish the amount of dominance the retailer seeks in the marketplace;

○ Measurement of Sales Volume and Market Share = Total Sales / Total Market
Sales
○ Proportion of Total Sales in a particular geographic or product market that
the retailer has been able to capture.

Financial Objectives:

● Profitability (Bottom Line and ROI)

○ Different ways to define investment:
- Return on Assets (ROA) reflects all the capital used in the business,
whether provided by owners or creditors
- Return on Net Worth (RONW) reflects only the amount of capital that
the owners have actually invested in the business.

Productivity objectives:

● Space productivity - ratio of net sales/ total square feet of retail floor space
● Labor productivity - ratio of net sales / number of full time equivalent employees
● Merchandise productivity - Ratio of Net Sales / average investment in inventory

Societal Objectives:

● Employment - Hiring disabled, social minorities and students.

● Payment of Taxes - Finance societal needs
● Consumer choice - objective of competing to give consumer a real alternative
● Equity - treating customer and suppliers fairly and not endanger their living
conditions
● Being a benefactor - CSR

Personal Objectives:

● Self Gratification - Focuses on the needs and desires of owners and employees and
pursuit in life.
● Status and Respect - by way of awarding outstanding employees
● Power and Authority - need of managers and other employees to be in positions of
influence

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Market Performance Oriented

● Open or acquire one store over the next four years

● Remodel one existing store every three years
● Improve the quality of promotion activities, including in-store appearances,
publicity, contests, cross-promotions, school promotions, and in-store circulars.
● Increase awareness and recognition levels of consumers in each new location to
equal that of previous locations within two years.

Financial Performance Oriented

● Increase the operating profit margin in each store by a quarter (0.25) percent for
each six-month period.
● Increase awareness and recognition levels of consumers in each new location to
equal that of previous existing locations within two years.
● Increase the operating profit margin in each store by a quarter (0.25) percent for
each six-month period.
● Maintain payroll costs between 20.5 and 22 percent of sales

Societal Orientation

● Target 2 percent of each store’s profits to the store manager’s favorite local charity
● Hire at least two minority applicants nationwide each year

Strategies

● It is a carefully designed plan for achieving the retailer’s goals and objectives. It is a
course of action that when executed will produce the desired levels of performance.
○ Get shoppers into your store
○ Convert these shoppers into customers by having them purchase
merchandise
○ Do the aforementioned strategies at the lowest operating cost possible that
is consistent with the level of service that your customer expect.

Differentiation

● Physical differentiation of the product

● The selling process
● After-purchase satisfaction
● Location
● Never being out of Stock

How to develop strategy to differentiate itself (SWOT)

● Strengths (competitive advantage: Lower prices, better locations, better personnel,

etc.; ability to anticipate customer demands better than competition; customer’s
strong perception of the store.
● Weakness (identify major competitive advantage against competitors; market
demand, merchandise selection, store design, personnel trainings.
● Opportunities (market size growth, income levels, correct pricing for target market)

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 ● Threats (Technology, forces of competition, economic business cycle factors)

Retail Marketing Strategy

● Specific Target Market

● Location
● Retail Mix
● Value Proposition

Retail Mix

● Price
● Merchandise
● Advertising and Promotion
● Store Layout and Design
● Customer Services and Selling
● Location

Competitive Environment:

- Behavior of Consumers, Competition, Supply Chain Members

Social and Legal Environment:

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