September 15, 2015

THE STRATEGIC PLANNING PROCESS

Retailers Mission Statement Specific Goods SWOT Strategy
COMPONENTS OF STRATEGIC PLANNING
Planning: Is the anticipation and organization of what needs to be done to reach
an objective
Planning is the difference between success and failure
In retailing this is not easy anticipating consumer demand or styles, quantities,
colours, sizes KRAFT, GAP, TELECOM
E.g. of failure:
o Eatons move to EDLP when consumers were getting brand and statues
conscious; shift from upscale department store for discriminating families
o Barns & Nobles established 5 or 6 MM online consumers who
cannibalized sales from tens of millions trhough the store
CANNIBALIZING
When a retailer steals consumers from its other stores.
www.chapters.ca has done a good job of integrating its brick-and-motor and
online operations
When an activity that you do takes something from what you already have
STRATEGIC PLANNING
Involves adapting the resources of the firm to the opportunities and threats of
constantly changing retail environment
COMPONENTS OF STRATEGIC PLANNING
A. Mission Statement
B. Specific Goals
o 1. Market Performance Goals
o 2. Financial Goals
o 3. Societal Goals
o 4. Personal Goals
C. SWOT Analysis
D. Strategy
A. MISSION STATEMENT
A basic description of the fundamental nature, rationale, and direction of the
firm
ELEMENTS OF A MISSION STATEMENT
Where future growth is coming from
Overall direction
Corporate values
= What business should the retailer be in?
MISSION STATEMENT (E.G.)

Le Chateau
o Our mission is to translate at lightning speed, the latest runway fashion
and global trends into must-have looks that clearly coordinate into a
continuous flow of new collections, quickly delivered to an ageless
customer by our dynamic sales team

RALPH LAUREN MISSION STATEMENT

Ralph Laurens statement is to redefine American style, provide quality
products, create worlds and invite people to take part in our dreams.
RONA MISSION STATEMENT
24,000 employees in nine provinces
To offer the best service and the right products at the right price to North
American consumers of housing and home improvement products We do this
through a strong network of affiliated, franchised and corporate stores which
are leaders in their respective markets with a specific format and banner and
an efficient management and distribution support
B. SPECIFIC GOALS
The performance results intended to be brought about through the execution of
a strategy
Provide a specific direction and guidelines
Provides a standard to measure and evaluate performance
SMART GOALS
Specific
Measurable
Attainable
Realistic
Timely
B. SPECIFIC GOALS
1. Market performance goals
2. Financial performance goals
3. Societal goals
4. Person goals
B1. MARKET PERFORMANCE GOALS
How a retailer desires to be compared to its competitors
Compares a firms actions with competitors
MARKET PERFORMANCE GOALS: MARKET SHARE
Market share: the retailers total sales divided by total market sales
B2. FINANCIAL PERFORMANCE A) PROFITABILITY
A retailer analyzes its ability to provide an adequate profit level to continue in
business

Profit-based goals that deal directly with the monetary return a retailer desires
from its business. The most frequently encountered profit goals in a retail
enterprise are:
o i. Net profit margin
o ii. Asset Turnover
o iii. Return on Assets (ROA)
o iv. Financial Leverage
o v. Return on Net Worth (RONW)

STRATEGIC PROFIT MODEL (SPM)

FINANCIAL PERFORMANCE GOALS: 2Ai) NET PROFIT MARGIN

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
Retailers generally make less net profit than manufacturers
E.g. Net Profit Margin of 2% = two cents per dollar

FINANCIAL PERFORMANCE GOALS 2Aii) ASSET TURNOVER

The ratio of total sales to total assets show much sales the retailer manages
from the assets available
Generally retailers have higher asset turnover than manufacturers
Let us say that sales is four times assets = 4
FINANCIAL PERFORMANCE GOALS 2Aiii) RETURN ON ASSETS (ROA)
= Net Profit (AT) / Total Assets
2% Net Profit Margin and Asset Turnover of 4 = 8% ROA (2%*4)
FINANCIAL PERFORMACE GOALS 2Aiv) Financial Leverage
= Total Assets/ Net Worth (OE)
Shows the extent to which a retailer is utilizing debt in its total capital structure
Low end of ratio is 1.0 = retailer is using no debt
Ration 2.0 indicated the retailer has $2 in assets for every dollar in net worth
FINANCIAL PERFORMANCE GOAL 2Av) RETURN ON NETWORTH (RONW)
= Net Profit (AT)/ Owners Equity
RONW = ROA * Financial Leverage
8% ROA and 2.0 FL = 16% RONW
FINANCIAL PERFORMANCE GOALS
Specialty stores have higher net profit margin, lower asset turnover than
discounter s
Increasing asset turnover by reducing inventory has to be done carefully so as
not to create stock outs and dissatisfied customers
Manager are usually evaluated on return on assets
Another measure of profitability is gross margin percentage
2B. PRODUCTIVITY GOALS
The sales goals the retailer desires for each unit of resource input: floor space,
labour, and inventory investment
o i. Space Productivity
o ii. Labour Productivity
o iii. Merchandise Productivity
PRODUCTIVITY GOALS 2Bi) SPACE PRODUCTIVITY
= Annual net sales/ Total Square feet (store space)
States how many dollars in annual sales the retailer wants to generate for each
square foot of store space
Influenced by shelf price and velocity
PRODUCTIVITY GOALS 2Bii) LABOUR PRODUCTIVITY
= Annual net sales / Number of FTE employees (full time equivalent)
Reflects how many dollars in annual sales the retailer desires to generate for
each FTE employee

PRODUCTIVITY GOALS 2Biii) MERCHANDISE PRODUCTIVITY

= Annual net sales/ Average dollar investment in inventory
Also known as Sales-to-Stock Ratio
Sates the dollar annual sales the retailer desires to generate for each dollar
invested in inventory
3. SOCIETAL GOALS
Reflects the retaielrs desire to help society fulfill some of its needs
o i. Employment goals handicapped, social minorities, students
o ii. Payment of taxes
o iii. Consumer choice through innovation, choices
o iv. Equity be fair even during shortages, give full and fair information
o v. Benefactor Chapters Indigo Love of reading Fund, Starbucks literacy,
Jumpstart programmes
4.PERSONAL GOALS
Reflects the retailers desire to help individuals employed in retail fulfill some of
their needs
i. Self-gratification a sports store may employ athletes
ii. Status and respect awards and media, POS coverage of this, employee of
the month
iii. Power and authority managers are given authority to allocate scarce
resources

RETAIL GOALS

RONAS SPECIFIC GOALS

Specific goals included:
o 1. Organic Growth renovate 122 stores, roll out installation services
o 2. New stores open 20 new stores
o 3. Recruitment to recruit $400 MM in dealer sales
o 4. Acquisitions confidential
QUESTIONS TO PONDER
How should a retailer determine the proportion and the number of:
o 1. Market performance
o 2. Financial performance
o 3. Productivity
o 4. Society
o 5. Personal goals
SWOT ANALYSIS
Strengths
Weaknesses
Opportunities
Threats

SWOT ANALYSIS
STRENGTHS
Competitive advantage?
What are we good at?
Customer perceptions?

WEAKNESSES
Competitors competitive
advantages?
What are our competitors good at?
Internal weaknesses

OPPORTUNITIES
Environmental trends?
Competition actions?
Underdeveloped businesses

THREATS
Unfortunate environmental trends
New technology

D. STRATEGY
After understanding the SWOT Analysis, creating a Mission Statement, and
SMART goals; the retailer must develop a strategy
A strategy Is a carefully designed plan for achieving the retailers goals and
objectives
MINIMAL RETAIL STRATEGIES
Get shoppers into your store most difficult job for a retailer
Convert these consumer s into customers right merchandise, right layout,
right display, right sales force, 20 to 40% customers are lost after they are in
store because they are not looked after, it costs 5 times as much to get a
customer to a store as ervice them when they are there
Do this at the lowest operating cost possible
o E.g. Sam Walton and James Cash Penney in Iowa store
o Young man, you know we dont make money on the merchandise we
sell; we make profit on the paper and string we save.
Consistent with the level of service that your customers expect
DIFFERENTIATION STRATEGIES
Price differentiation e.g. No Frills
o This strategy can attract customers but you may not be able to retain
them for long
Physical differentiation of product e.g. Fruits & Passion differentiates with
scents no found elsewhere
Differentiation of the selling process Holt Renfrew
Differentiation of the selling process Sears Never out of stock
Differentiation of location The Great Canadian Dollar Store
o 100 locations
o Impressive sales increase with compelling price/value/convenience
o In strip centres en route to malls

o Reduced operating costs

Differentiation helps get more consumers into store, opportunity to sell more to
them once they are in the store, develop a niche and avoid price wars

MARKETING STRATGIES
Target Market: the group(s) of customers that the retailer is seeking to serve
Best Buy Example:

Customer type

Feature offering by store

Home theatre enthusiast

Magnolia Home Theatre, Geek Squad

Busy mom

Personal shopping assistant, Geek Squad

Business owner

Business pros, Geek Squad

Young technology enthusiast

Interactive displays, tailored market

assortments, Geek Squad

Family man seeking good

value

Geek Squad, special offers

Location: the geographic space of cyberspace where the retailer conducts

business
Retail mix: the combination of merchandise, assortment, price, promotion,
customer service, and store layout that best serves the segments targeted by
the retailer
Value proposition: clear statement of tangible and /or intangible results a
customer gets from using the retailers product or service

MARKETING STRATEGY
Value proposition : clear statement of tangible and / or intangible results a
customer gets form using the retailers product or service
Westjet
o 1996 4 Calgary entrepreneurs
o Profitable
o Focus on customer service
o Target cost conscious leisure/ business travel
o Standardized aircraft Boeing 737
o Low price
o Promotes through media and WOM
RETAIL STRATEGIC PLANNING AND OPERATIONAL MANAGEMENT MODEL
A retailer must engage in the following management tasks:
o 1. Strategic Planning
o 2. Operations Management

o 3. High-profit retailing
RETAIL STRATEGIC PLANNING AND OPERATIONAL MANAGEMENT MODEL:
1. Strategic Planning:
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.
Steps include mission, goals, SWOT analysis, Target Market, Location(s), Retail
Mix

PLANNING FRAMEWORK

RETAIL STRATEGIC PLANNING AND OPERATIONAL MANAGEMENT MODEL:

Environmental Forces should be assessed in the Competitive Environment:
1. Consumer Behaviour
2. Competitive Behaviour
3. Supply Chain Behaviour
4. Socioeconomic Environment
5. Technological Environment
6. Legal and Ethical Environment
RETAIL STRATEGIC PLANNING AND OPERATIONAL MANAGEMENT MODEL:

2. Operations Management:
Deals with activities directed at maximizing the efficiency of the retailers use
of resources. It is frequently referred to as day-to-day management.
Involves buying, handling merchandise, pricing, advertising and promotion,
selling and servicing customers, and facility maintenance.
Running the store.
RETAIL STRATEGIC PLANNING AND OPERATIONAL MANAGEMENT MODEL:
3. High-Profit Retailing:
To be a high profit retailer, the retailer needs good strategic planning coupled
with strong operations management.
Rule of thumb for the Strategic Profit Model:
o 1. Net Profit Margin of 2.5 3.5%
o 2. Asset Turnover 2.5 3.0 times
o 3. Financial Leverage 2.0 3.0 times
o 4. ROA 8 10 %
o 5. RONW 18 25%
RETAIL STRATEGIC PLANNING AND OPERATIONAL MANAGEMENT MODEL:
The Gap
In early 1990s hailed as most successful innovator in the retail apparel industry
By 2000 the Baby Boomers reached middle age and had all the clothes they
needed
Total home furnishing sales exceeded total apparel sales
Younger adults found that The Gap was oriented toward teenagers
GLOBAL RETAILING
Toys R Us Commitment to the Japanese Marketplace
In Global Retailing, Toys R Us discusses how they strategically planned their
move into the Japanese marketplace
Using the Retail Strategic Planning and Operations Management Model, discuss
what had to be strategically planned.