Chapter 2

Retail Strategic Planning

and Operations
Management
 Learning Objectives
• Explain why strategic planning is important
and describe the components of strategic
planning
• Describe the retail strategic planning and
operations management model
 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

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 Components of Strategic Planning
• Development of a mission statement for the
firm
• Definition of specific goals and objectives for
the firm
• SWOT analysis
• Development of strategies that will enable the
firm to reach its objectives and fulfill its
mission

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 Mission Statement
• Basic description of the fundamental nature,
rationale, and direction of the firm
• Elements of a mission statement
• 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

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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

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Statement of Goals and Objectives
• Dimensions
• Market performance
• Financial performance
• Societal objectives
• Personal objectives

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 Market Performance Objectives
• Establish the amount of dominance the
retailer seeks in the marketplace
• Market share: Retailer’s total sales divided by
total market sales
• High sales growth retailing is directly linked to
expanding the size of the retail stores
• Disney

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Exhibit 2.1 - The Market Share-
Profitability Relationship

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 Financial Objectives
• Profit-based objectives: Deal directly with the
monetary return a retailer desires from its
business
• Profit - Aggregate total of net profit after taxes
• Profit can be expressed as a percentage of net
sales
• It can also be defined in terms of return on
investment (ROI)
• Stockouts: Products that are out of stock and
unavailable to customers when required
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Exhibit 2.2 - Elements of Strategic
Profit Model

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 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

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 Societal Objectives
• Reflect the retailer’s desire to help society
fulfill some of its needs
• Employment objectives - Provision of employment
opportunities for the members of the retailer’s
community
• Payment of taxes - Helping finance societal needs
that the government deems appropriate
• Consumer choice - Provide the consumer with
choices that previously were not available in the
trade area
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 Societal Objectives
• Equity - Retailer’s desire to treat the consumer
and suppliers fairly
• Being a benefactor - Retailer may desire to
underwrite certain community activities

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 Personal Objectives
• Reflect the retailers’ desire to help individuals
employed in retailing fulfill some of their
needs
• Self-gratification - Focuses on the needs and
desires of the owners, managers, or employees of
the enterprise
• Status and respect - Recognizes that the owners,
managers, and employees need status and respect
in their community
• Power and authority - Need of managers and
other employees to be in positions of influence
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 Strategies
• Carefully designed plan for achieving the
retailer’s goals and objectives
• Retailers can operate with three strategies
• Get shoppers into the 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 customers expect

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 Strategies
• Forms of differentiation for a retailer
• Outstanding design of the market offering
• The selling process
• After-purchase satisfaction
• Location
• Never being out of stock

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

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 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?

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 SWOT Analysis
• 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?

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 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?

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 Strategies
• A fully developed marketing strategy should
address the following considerations
• Target market: Groups of customers that the
retailer is seeking to serve
• Location
• Retail mix: Combination of merchandise, price,
advertising and promotion, location, customer
service and selling, and store layout and design
• Value proposition: Statement of the tangible and
intangible results a customer receives from
shopping
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Exhibit 2.8 - Retail Strategic Planning and
Operations Management Model

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 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
• Referred to as day-to-day management
• The need to strive for a high profit is tied to
the extremely competitive nature of retailing

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Which is better? (Patchi Brunei)

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 Tutorial Exercise
Case: Rethinking Strategy at Macy’s
Pg 78-79

Answer All Questions.

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