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Retail Strategic Planning and Operations Management. Chapter 2. Learning Objectives.

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learning objectives
Learning Objectives
  • Explain why strategic planning is so important and be able to describe the components of strategic planning: statement of mission; goals and objectives; an analysis of strengths, weaknesses, opportunities, and threats; and strategy.
  • Describe the text’s retail strategic planning and operation management model, which explains the two tasks that a retailer must perform and how they lead to high profit.
components of strategic planning
Components of Strategic Planning

LO 1

  • Planning

Is the anticipation and organization of what needs to be done to reach on objective.

  • Strategic Planning

Involves adapting the resources of the firm to the opportunities and threats of an ever changing retail environment.

components of strategic planning1
Components of Strategic Planning

LO 1

  • Mission Statement
  • Statement of Goals and Objectives
  • Strategies
  • SWOT Analysis
components of strategic planning2
Components of Strategic Planning

LO 1

  • Mission Statement

is a basic description of the fundamental nature, rationale, and direction of the firm.

elements of a mission statement
Elements of a Mission Statement

LO 1

the kinds of values

it intends to offer to serve

the needs and wants of

the consumers

how it expects to

relate to the

ever-changing

environment

how the retailer

uses or intends to use its resources

components of strategic planning3
Components of Strategic Planning

LO 1

  • Goals and Objectives

Are the performance results intended to be brought about through the execution of a strategy.

goals and objectives
Goals and Objectives

LO 1

Market

Performance

Objectives

Financial

Performance

Objectives

Societal

Objectives

Personal

Objectives

statement of goals and objectives
Statement of Goals and Objectives

LO 1

  • Market Performance Objectives

represents how a retailer desires to be compared to its competitors.

importance of planning sam s view
Importance of Planning - Sam’s View

LO 1

Sam M. Walton May 4, 1998

Chairman and Chief Executive Officer

Dear Bob:

I am replying to your letter of the 19th concerning the Wal-Mart monopoly of communities. I have realized for some time and, I suspect, many folks have in the company, as well, how fortunate we are to have very little competition in some of the larger communities in the country. That hasn’t always been the case, as you well know. The history of our company has been that we have had more competition early on than most any regional discounter in the United States. However, one by one, our competitors weakened, were mis-managed, and have fallen out in many of the cities that we practically no have to ourselves. That has been the case generally with Howard’s, TG&Y, Gibson, Kuhn’s, Magic Mart, and certainly some of the variety chains which were once active in this area. These competitors, plus Alco, Pamida, and the group in Indiana, are on the ropes now and I don’t choose to believe those companies disappeared because of our effectiveness. Rather, I choose to believe, for the most part, they were mis-managed and, had they been managed well, there could and would have been enough business in their areas for them and for us….

market performance objectives
Market Performance Objectives

LO 1

  • Sales Volume
  • Market Share

Is the retailer’s total sales divided by total market sales.

statement of goals and objectives1
Statement of Goals and Objectives

LO 1

  • Financial Performance Objectives

Represent the profit and economic performance a retailer desires.

financial performance objectives profitability
Financial Performance Objectives: Profitability

LO 1

  • Net Profit Margin
  • Asset Turnover
  • Return on Assets
  • Financial Leverage
  • Return on Net Worth
financial performance objectives profitability1
Financial Performance Objectives: Profitability

LO 1

  • Net Profit Margin

Is the ratio of net profit (after taxes) to total sales and shows how much profit a retailer makes on each dollar of sales after all expenses and taxes have been met.

financial performance objectives profitability2
Financial Performance Objectives: Profitability

LO 1

  • Asset Turnover

Is the total assets and shows how many dollars of sales a retailer can generate on an annual basis with each dollar invested in assests.

financial performance objectives profitability3
Financial Performance Objectives: Profitability

LO 1

  • Return on Assets (ROA)

Is net profit (after taxes) divided by total assets.

financial performance objectives profitability4
Financial Performance Objectives: Profitability

LO 1

  • Financial Leverage

Is total assets divided by net worth or owners’ equity and shows how aggressive the retailer is in its use of debt.

financial performance objectives profitability5
Financial Performance Objectives: Profitability

LO 1

  • Return on Net Worth (RONW)

Is net profit (after taxes) divided by owners’ equity.

strategic profit model
Strategic Profit Model

LO 1: Exhibit 2.1

Net Profit Margin

Net Profit*

Total Sales

Return on Assets

Financial Leverage

Return on

Net Worth

x

=

x

=

Net Profit*

Total Assets

Total Assets

Net Worth

Net Profit*

Net Worth

Asset Turnover

Total Sales

Total Assets

*Net profit after taxes

financial performance objectives productivity
Financial Performance Objectives: Productivity

LO 1

  • Productivity Objectives:

State the sales objective that the retailer desires for each unit of resource input: floor space, labor, and inventory investment.

financial performance objectives productivity1
Financial Performance Objectives: Productivity

LO 1

  • Space Productivity

Annual net sales divided by the total square feet of retail floor space.

financial performance objectives productivity2
Financial Performance Objectives: Productivity

LO 1

  • Labor Productivity

Annual net sales divided by the number of full-time-equivalent employees.

financial performance objectives productivity3
Financial Performance Objectives: Productivity

LO 1

  • Merchandise Productivity

Annual net sales divided by the average dollar investment in inventory.

statement of goals and objectives2
Statement of Goals and Objectives

LO 1

  • Societal Objectives

Reflects the retailer’s desire to help society fulfill some of its needs.

  • Employment objectives
  • Payment of taxes
  • Consumer choice
  • Equity
  • Benefactor
statement of goals and objectives3
Statement of Goals and Objectives

LO 1

  • Personal Objectives

Reflects the retailer’s desire to help individuals employed in retails fulfill some of their needs.

  • Self-gratification
  • Status and respect
  • Power and authority
retail objectives
Retail Objectives

LO 1: Exhibit 2.2

Sales Volume

Profitability

Market Performance Objectives

Financial Performance Objectives

Market Share

Productivity

Retail Mission

Employment

Self-

Gratification

Personal Objectives

Societal Objectives

Taxes

Power and Authority

Consumer

Choice

Status and Respect

Equity

Benefactor

strategies
Strategies

LO 1

  • Strategy

Is a carefully designed plan for achieving the retailer’s goals and objectives.

minimal retail strategies
Minimal Retail Strategies

LO 1

  • Get shoppers into your store.
  • Convert these consumers into customers

by having them purchase merchandise.

  • Do this at the lowest operating cost

possible that is consistent with the

level of service that your customers expect.

question to ponder
Question to Ponder
  • How should a retailer determine the proportion and the number of market performance, financial performance, societal, and personal objectives?
strategies1
Strategies

LO 1

  • SWOT Analysis

Is the identification and analysis of a retailer’s strengths, weaknesses, opportunities and threats a firm faces.

swot analysis
SWOT Analysis

LO 1

  • Strengths?
  • Weaknesses?
  • Opportunities?
  • Threats?
strategies2
Strategies

LO 1

  • Target Market

Is the group or groups of customers that the retailer is seeking to serve.

  • Location

Is the geographic space or cyberspace where the retailer conducts business

  • Retail mix

Is the combination of merchandise, assortment, price, promotion, customer service, and store layout that best serves the segments targeted by the retailer

service retailing
Service Retailing
  • Even though many flyers tried JetBlue for the first time because of its low fares, the airline’s customer service won them over.
retail planning and management
Retail Planning and Management

LO 2

Strategic

Planning

Administration

High-

Profit

Retailing

Operations

Management

retail planning and management1
Retail Planning and Management

LO 2

  • Strategic Planning

Is a plan of action detailing how the retailer will respond to the environment in an effort to establish a long-term course of action to follow.

retail strategic planning and operations management model
Retail Strategic Planning and Operations Management Model

LO 2: Exhibit 2.4

Competitive Environment:

Behavior of Consumers, Competition and Channel Members

Strategic Planning

SWOT

Strengths Weaknesses Opportunities Threats

Goals and Objectives

Mission

Social and Legal Environment:

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

retail strategic planning and operations management model1
Retail Strategic Planning and Operations Management Model

LO 2: Exhibit 2.4

Competitive Environment:

Behavior of Consumers, Competition and Channel Members

Retail Marketing Strategy

Target Market(s) Location(s) Retail Mix Merchandise Pricing Advertising & Promotion Customer Service & Selling Store Layout & Design

Operations Management

Buying & Handling Merchandise Pricing Advertising & Promotion Customer Services & Selling Facilities

High-Profit Performance Retailing

Social and Legal Environment:

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

retail planning and management2
Retail Planning and Management

LO 2

  • Operations Management

Deals with activities directed at maximizing the efficiency of the retailer’s use of resources. It is frequently referred to as day-to-day planning.

retail planning and management3
Retail Planning and Management

LO 2

  • Administration

Involves the acquisition, maintenance, and control of resources that are necessary to carry out the retailer’s strategy.

retail planning and management4
Retail Planning and Management

LO 2

  • High-Profit Retailing

To be a high profit retailer, the retailer needs good strategic planning coupled with strong operations management.

square feet of retail space

End Zone

End Zone

End Zone

50

50

50

End Zone

End Zone

End Zone

Square Feet of Retail Space

LO 2

Supercenters

80,000 - 100,000 sq ft.

Example: 108,000 sq ft.

Football Field

54,000 sq ft.

120 yards

360 ft.

50 yards

150 ft.