MRKT105 L2 — Strategic Planning & OM

Strategic Planning

• Adapting firm’s resources to opportunities and threats of an ever-changing retail environment

4 Components of Strategic Planning

• Mission Statement

• specific goals & objectives

• SWOT analysis

• basic strategies that enable firm to reach objectives and fulfill mission

Mission Statement

• A component of strategic planning

• basic description of the fundamental nature, rationale, direction of the firm

Use its resources

• an element of the mission statement

• How the retailer intends to __________

Relate, ever-changing environment

• an element of the mission statement

• How it expects to ______ to the ________

Value, Needs & Wants

• an element of the mission statement

• The kind of ____ it intends to provide to serve the ______ of the customer

Goals & Objectives

• A component of strategic planning

• provide specific direction in the strategy formulation of the firm

• A control mechanism; standard firm can use to measure & evaluate performance

Market Perf, Financial Perf, Societal, Personal

4 Broad types of objectives.

Market Performance Objectives

• amount of dominance the retailer seeks in the marketplace

Market share

$$=\frac{total\cdot sales}{total\cdot market\cdot sales}$$

Profitability & Productivity Objectives

2 Subtypes of Financial Performance Objectives

Profitability/ Profit-Based Objectives

• a financial performance objective

• Deals directly with the monetary return a retailer desires from its business

Net Profit

• bottom line of the income statement

• Aggregate total of _______ after taxes

Net Profit Margin

• A percentage of net sales (%)

• Ration of net profit after taxes to net sales

Return on Investment (ROI)

• how much profit or loss an investment generates relative to its cost

Return on Assets (ROA)

• a type of ROI; reflects all capital used in business

• $$\frac{Annual\cdot Net\cdot Profit}{Total\cdot Assets}$$

Return on Net Worth

• a type of ROI; amount of capital owners have invested in business

• $$\frac{Net\cdot Profit}{Net\cdot W\operatorname{orth},\cdot or\cdot Owner^{\prime}s\cdot Equity}$$

Asset Turnover

• How productively retailer’s assets are being used

• $$\frac{Annual\cdot Net\cdot Sales}{Total\cdot Assets}$$

Financial Leverage

• Extent to which a retailer is using debt in its total capital structure

• $$\frac{Total\cdot Assets}{Net\cdot W\operatorname{orth},\cdot or\cdot Owner^{\prime}s\cdot Equity}$$

Stockouts

• Products that are out of stock

• Unavailable when customers demand (dissatisfaction)

Productivity Objectives

• a financial performance objective

• State the sales objectives the retailer desires for each unit of resource input

Space, Labor, Merchandise Productivity

3 Types of Productivity

Space Productivity

• How many dollars in sales retailer wants to generate per square foot of space

Labor Productivity

• How many dollars in sales retailer wants to generate per full time equivalent employee

40 hours per week

• How long does a full-time equivalent employee work

Merchandise Productivity

• Annual dollar sales retailer wants to generate per dollar invested in inventory

Societal Objectives

• Highlight the retailer’s concern with broader issues in our society.

  • Employment Objectives

  • Payment of taxes

  • Consumer choice

  • Equity

  • Being a benefactor

Employment Objectives

• Societal objective

• More opportunities for the good of the community

Payment of taxes

• Societal objective

• Retailers role in helping finance social needs

Consumer choice

• Societal objective

• Gives customers a real alternative

Equity

• Societal objective

• Treat consumers and suppliers fairly

• Do not endanger living conditions

Being a benefactor

• Societal objective

• Underwrite community activities

  • Ex. Performing arts, social events, food drives…

Personal Objectives

• the personal goals of any of the employees, managers, or owners of the retail establishment

  • Self gratification

  • Status and respect

  • Power and authority

Self gratification

• Personal objective

• What owners/ managers/ employees want out of life

Status & Respect

• Personal objective

• _______ within one’s circle of friends

• Ex. Annual awards, recognition

Power & Authority

• Personal objective

• Need to be in positions of influence

Stategy

• carefully designed plan for achieving the retailer’s goals and objectives

4 Considerations of a Fully Developed Marketing Strategy

• Target market

• Location

• Retail mix

• Value proposition

Traffic Strategy

• how you get customers in your store

Retailer’s Conversion/ Closure Strategy

• how to convert shoppers to customers

Retailer’s cost management strategy

• Implement strategies at the lowest operating cost possible, consistent with expected level of service

Operations Management/ Day-to-Day management

Deals w/ activities directed at maximizing efficiency of retailer’s use of resources