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Retail market strategy

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Retail market strategy

  1. 1. CHAPTER 5 Retail Market Strategy
  2. 2. What’s Retail Strategy? A retail strategy is a statement identifying… 1. The retailer’s target market. 2. The format the retailer plans to use to satisfy the target market’s needs. 3. The bases on which the retailer plans to build a sustainable competitive advantage.
  3. 3. Target Market the market segment(s) toward which the retailer plans to focus its resources and retail mix
  4. 4. Retail Format the nature of the retailer’s operations—its retail mix
  5. 5. Sustainable competitive advantage Establishing a competitive advantage means that the retailer, in effect, builds a wall around its position in a retail market, that is, around its present and potential customers and its competitors
  6. 6. Relationships with Customers Customer Loyalty means that Customers will be reluctant to patronize competitive retailers Retailers build loyalty by: • Developing a strong brand image • Having a clear and consistent positioning • Developing a unique Merchandise • Providing outstanding customer service • Undertaking customer relationship management (CRM) programs
  7. 7. Relationships with Suppliers Vender Relations • Low Cost - Efficiency Through Coordination - Electronic Data Interchange (EDI) - Collaborative Planning and Forecasting to Reduce Inventory and Distribution Costs • Exclusive Sale of Desirable Brands • Special Treatment - Early Delivery of New Styles - Shipment of Scare Merchandise
  8. 8. Efficiency of Internal Operations Human resource Management Distribution and Information Systems “Employees are key to build a sustainable competitive advantage” Flow of Information Recruiting, Training and Retaining great employees are challenge. Vendor  Distribution Center  Store By decreasing costs here, the is more money available to invest in: • Better services • Increase in breadth and depth • Decrease in prices
  9. 9. Location is a critical opportunity for developing competitive advantage for 2 reason. First, location is the most important factor determining which store a consumer patronize. Second, location is sustainable competitive advantage. Starbucks creates a competitive advantage by picking multiple good locations that saturate area.
  10. 10. Multiple Sources of Advantage Retailers cannot rely on a single approach. Instead, the use multiple approaches to build as high a wall around their position as possible For Example
  11. 11. Growth Strategies Four types of growth opportunities that retailers may pursue. Opportunities
  12. 12. Market Penetration Existing Target Markets – Existing Retail Format Market penetration approach Include:  Opening more store in the target market  Keeping existing stores open for longer hours  Cross-selling – sales associates in one department sell complimentary merchandise from other departments Opportunities
  13. 13. Market Expansion New Target Markets – Existing Retail Format Example Opportunities
  14. 14. Retail Format Development Existing Target Markets – New Retail Format Example Tesco U.K. The smallest is Tesco Express up to 3,000 Square feet Tesco Metro Stores are Square feet Tesco superstores up to 50,0 Square feet Tesco Extra stores more than , Square feet Opportunities
  15. 15. Diversification New Target Markets – New Retail Format Related diversification growth opportunity, The retailer’s present target market or retail format shares something in common with the new opportunity Unrelated diversification growth opportunity has little commonality between the retailer’s present business and the new growth opportunity Opportunities
  16. 16. Global Growth Opportunities Expending operations to international markets. Retailers can increase:  sales  knowledge and systems  bargaining power with vendors
  17. 17. Attractiveness of International Market Two factors 1. The potential size of the retail market in the country 2.The degree to which the country does and can support the entry of foreign retailers.
  18. 18. Indicator of the Attractiveness of International Markets
  19. 19. A retailer of video games GameStop, would find a country with a large percentage of people under 19 to be more attractive than a country with a large percentage of people over 65.
  20. 20. India The retail industry is divided into organized and unorganized sectors Problems:     The world’s largest pluralistic democracy Myriad cultures 22 official languages Restricts foreign investment
  21. 21. China China is rapidly developing the infrastructure to support modern retailing Problems:  Operating costs are increasing  Managerial talent is becoming more difficult to find and retain  Underdeveloped and inefficient supply chain predominates
  22. 22. Globally Sustainable Competitive Advantage  Low cost, efficient operations: Wal-Mart, Carrefour  Strong private label brands: Starbucks, KFC  Fashion Reputation: The Gap, Zara, H&M  Category dominance: Best Buy, IKEA, Toys R Us
  23. 23.  Color preference, the preferred cut of apparel, and sizes differ across cultures  Peak selling seasons  Store designs and layouts  Government regulations and cultural values can affect store operations.
  24. 24. Global Culture It is not sufficient to transplant a home-country culture and infrastructure to another country more than 30 years of international experience in 30 countries, both developed and developing.
  25. 25. Financial Resource the large firms generally are in a strong financial position and therefore have the ability to keep investing in projects long enough to become successful.
  26. 26. Entry Strategies     Direct Investment Joint Venture Strategic Alliance Franchising
  27. 27. Direct Investment Direct Investment occurs when a retail firm invests in and owns a retail operation in a foreign country. Advantages: the highest potential returns the retailer has complete control of the operations Disadvantages: the highest level of investment exposes the retailer to the greatest risks
  28. 28. Joint Venture • • • • • More resources reduces the entrant’s risks Increased productivity and greater profits Sharing of costs and risks with partners ownership, control, and profits are shared Problems with this entry approach can arise if the partners disagree or the government places restrictions on the repatriation of profits.
  29. 29. Strategic Alliance EXAMPLE A strategic alliance is a collaborative relationship between independent firms.
  30. 30. Franchising Advantages:  the lowest risk  the least investment Disadvantages:  the retailer has limited control Country  potential profit is reduced  local domestic competitor increases
  31. 31. Top 5 Global Franchises - 2013 Rankings Source:
  32. 32. 1. Define the business mission 2. Conduct a situation audit: - Market attractiveness analysis - Competitor analysis - Self-analysis 7 Steps 3. Identify strategic opportunities The Strategic Retail Planning Process 4. Evaluate strategic alternatives The set of steps a retailer goes 5. Establish specific objectives and allocate resource 6. Develop a retail mix to implement strategy 7. Evaluate performance and make adjustments through to develop a strategy and plan
  33. 33. Step 1: Define the Business Mission The mission statement is a broad description of a retailer’s objectives and the scope of activities it plans to undertake. Managers need to answer QUESTIONS: I. II. III. IV. V. What business are we in? What should our business be in the future? Who are our customer? What are our capabilities? What do we want to accomplish?
  34. 34. Step 2: Conduct a situation Audit Elements in a Situation Audit
  35. 35. Step 3: Identify Strategic Opportunities for increasing retail sales Step 4: Evaluate Strategic Opportunities A retailer must focus on opportunities that utilize its strengths and its competitive advantage. Step 5: Establish Specific Objectives and Allocate Resources The retailer’s overall objective is included in the mission statement; the specific objectives are goals against which progress toward the overall objective can be measured. These specific objectives have three component: 1. The performance sought 2. A time frame 3. The levels of investment
  36. 36. Step 6: Develop a retail mix to implement strategy Step 7: Evaluate performance and make adjustments The planning process is to develop a retail mix for each opportunity in which an investment will be made and control and evaluate performance. If the retailer is meeting or exceeding its objectives, change aren’t needed. But if the retailer fails to meet its objectives, reanalysis is required.
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