Current Management Issues in the Retail Industry

1. Current Management Issues in the Retail Industry TEAM 1

2. What is Retail? • Sale of physical goods, merchandise, or services • Sold from a fixed location, ex. department store • Stores act as middlemen • Publicly or privately owned • Classification examples: - Food products - Hard goods or durable goods   (Ex. appliances, electronics, furniture, sporting goods, etc.) - Soft goods or consumables (Ex. clothing, apparel, and other fabrics) 

3. Main Functions of Management • Strategic Planning • Organizing/Decision Making • Leading • Controlling  “Management is the coordination and oversight of the work activities of others so that their activities are completed efficiently and effectively. ” ¹ 1. Management by Stephen P. Robbins and Mary Coulter

4. Issues Confronting the U.S. Retail Industry • Revenue growth & margin improvement • Cost management • Reporting, risk, compliance, and control

5. Revenue Growth & Margin Improvement How to continue to generate growth in the current, challenging economy? • Issues: Importance of successfully managing margins - input costs are rising (commodity and energy) - creates inability to pass costs along due to inflation - consolidation in the industry is cutting out the need for retail stores • Management’s ability to formulate/execute strategically aligned cost initiatives • Imperative to moderate pricing pressures with: - product innovation - supply agreements - changing product mix - distribution channel collaboration • Proper planning / implementation of effective cost reduction programs

6. Cost Management How to develop a cost management strategy that maximizes efficiency without compromising growth potential? • Issue: - Traditional cost reduction methods are: • Failing to achieve the targeted reduction • Taking longer • Becoming more expensive than expected • Management Solutions: • Understand what money is spent and why on a functional basis - Ensure functional costs are aligned to company financial plans / budgets • Change the way money is spent - Make cost reductions sustainable - Create cost consciousness culture that will promote further cost reductions

7. Reporting, Risk, Compliance, and Control How to safeguard a company from risk in this world of constant change? • Strategic risk management: - sets strategy / direction to effectively balance growth goals with risks - effectively deploy resources in pursuit of this objective • Effective risk management: - looks beyond vulnerabilities to consider sources of both risk and opportunity - provides a process for balancing growth, risk, and return - establish policies to promote a risk-management culture • Proper risk management protects: - company reputation - brand image - shareholder value

8. Additional Issues Confronting the U.S. Retail Industry • Regulatory barriers: - Restrictions on real estate purchases - Restrictions on foreign investment in retailers • Unfavorable taxation structures • Absence of developed supply chain and integrated IT management • High competitiveness resulting in low profit margins • Lack of properly educated / trained work force, often including management http://en.wikipedia.org/wiki/Retail#Challenges

9. Examples of How to Manage Retail Industries • Blockbuster vs. Netflix

10. Early History Business and Company Resource Center Database

11. Expansion and Phenomenon Business and Company Resource Center Database

12. SWOT Analysis of Internal External

13. SWOT Analysis of Internal External

14. An Industry Replaced by a More Efficient Version of Itself http://go-digital.net/blog/2011/02/netflix-vs-blockbuster-perfect-example-of-an-industry-replaced-by-a-more-efficient-version-of-itself/

15. Strategic Planning

16. Strategic Planning • What do we do? Create a more effective and cost efficient rental business • For whom do we do it? Video and DVD rental consumer market • How do we expand? Movie, gaming, TV shows; online and mail-delivery services, rental kiosks

17. Leading

18. Leading Blockbuster • Leadership issues • Disgraceful leadership • John Antioco disagreement • Plans to eliminate late fees • This debacle lowered investor confidence • Created poor public perception of the brand

19. Leading Style • Blockbuster had two CEO’s - John Antioco (1997-2007) - Jim Keyes (2007-2010) • No teamwork • Jim Keyes, had been constantly insulting his competition and disrespecting them • "Between the time Keyes took the reins as CEO of Blockbuster and today, the price of Netflix stock is up 500% and the price of Blockbuster stock is down about 90%” • hurting Blockbuster’s image

20. Decision Making

21. Organizing/ Decision Making Upper Management Conflicts • Frequent turnover in upper management positions • Poor repositioning of Blockbuster brand • Headquarters moved from Florida to Dallas, Texas • Loss of valuable upper management due to move

22. Netflix vs. Blockbuster Shares 2008-2011 http://retailexaminer.co.nz/2011/03/technology-and-the-dvd-market/

23. Enron/ “No Late Policy” • Blockbuster’s Decisions to team up with Enron, and the “No Late Policy” scandal • Enron signed a deal with blockbuster • DSL, Online streaming • Enron scandal • Terminated deal • 2005 Blockbuster introduced “No Late Policy”

24. No TO NETFLIX

25. Present Price Comparison

26. Conclusion Blockbuster is staring to make improvements: • Blockbuster acquired with Dish Network - No longer an independent stock • Improving business model since bankruptcy • Implementing ways to keep remain a top competitor, adjusting to modern technology and online demands

27. Thank You!