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

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chapter 2 retail strategic planning and operations management
Chapter 2

Retail Strategic Planning

and Operations Management

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 retail strategic planning and operations 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
  • 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 planning1
Components of Strategic Planning
  • Strategic planning consists of four components:
    • Development of a mission (or purpose) statement for the firm.
    • Definition of specific goals and objectives for the firm.
    • S(strengths)W(weaknesses)O(opportunities)T(threats) analysis.
    • Development of basic strategies that will enable the firm to reach its objectives and fulfill its mission.

LO 1

mission statement
MissionStatement
  • It is a basic description of the fundamental nature, rationale, and direction of the firm.
  • Elements of a mission statement are:
    • 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

statement of goals and objectives
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 objectives1
Statement of Goals and Objectives
  • Market performance objectives
    • Establish the amount of dominance the retailer seeks in the marketplace.
    • Market share - The retailer’s total sales divided by total market sales.

LO 1

statement of goals and objectives2
Statement of Goals and Objectives
  • Financial objectives
    • Profit-based objectives - Deal directly with the monetary return a retailer desires from its business.
    • Profit is the aggregate total of net profit after taxes— that is, the bottom line of the income statement.
    • Profit can be expressed as a percentage of net sales.
    • It can also be defined in terms of return on investment (ROI), which can be defined by—Return on assets (ROA) and Return on net worth (RONW).

LO 1

statement of goals and objectives3
Statement of Goals and Objectives
  • Financial objectives
    • Stockouts - Products that are out of stock and therefore unavailable to customers when they want them.

LO 1

statement of goals and objectives4
Statement of Goals and Objectives
  • 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.
      • 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.
    • Productivity objectives are vehicles by which a retailer can program its business for high-profit results.

LO 1

slide13

Open or acquire on store over the next four years

  • Remodel one existing store every three years
  • Increase operating profit margin in each story by .25 percent for each six-month period
  • Increase clothing sales in existing stores by 10 percent over the preceding year
strategies
Strategies
  • Are a carefully designed plan for achieving the retailer’s goals and objectives.
  • Retailers can operate with three strategies:
    • Get shoppers into your 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 your customers expect.

LO 1

swot analysis
SWOT Analysis
  • Strengths:
    • What major competitive advantage(s) do we have?
    • What are we good at?
    • What do customers perceive as our strong points?
    • Ikea
    • Target
    • McDonald's

LO 1

swot analysis1
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?
    • Ikea
    • Target
    • McDonald's

LO 1

swot analysis2
SWOTAnalysis
  • 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?
    • Ikea
    • Target
    • McDonald's

LO 1

swot analysis3
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

building competitive advantage
Building competitive advantage
  • Physicaldifferentiation
  • The selling process
  • After-purchase satisfaction
  • Location
  • Never being out of stock
strategies1
Strategies
  • The retailer must develop a retail marketing strategy with strong financial elements.
  • A fully developed marketing strategy should address the following considerations: the specific target market, location, the specific retail mix that the retailer intends to use, and the retailer’s value proposition.

LO 1

strategies2
Strategies
  • Target market - Group of customers that the retailer is seeking to serve.
  • Location - Geographic space or cyberspace where the retailer conducts business.
  • Retail mix - Combination of merchandise, price, advertising and promotion, location, customer service and selling, and store layout and design.

LO 1

strategies3
Strategies
  • Value proposition - A clear statement of the tangible and/or intangible results a receives from shopping at and using the retailer’s products or services.

LO 1

the retail strategic planning and operations management model
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. It is frequently 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