1. Chapter 5
The Retail
Market
Strategy
Becky, Sarah, Preston

2. Elements in Retail Strategy
 Target Market
 the market segment(s) toward which the retailer
plans to focus its resources
and retail mix
 Retail Format
 the nature of the retailer’s
operations—its retail mix
 Sustainable Competitive
Advantage
 an advantage over the competition

3. Criteria For Selecting A Target
Market
 Attractiveness --
Large, Growing, Little
Competition More
Profits
 Consistent with Your
Competitive
Advantages

4. Can A Retailer Develop a
Sustainable
Competitive Advantage by:
 Dropping the Price of Your Merchandise?
 Building a Store at the Best Location?
 Deciding to Sell Some Hot Merchandise?
 Increasing Your Level of Advertising?
 Attracting Better Sales Associates by
Paying Higher Wages?
 Providing Better Customer Service?

5. Sources of Competitive
Advantage
More Sustainable Less Sustainable
 Location  Better Computers
 Customer Loyalty  More Employees
 Customer Service
 More Merchandise
 Exclusive Merchandise
 Greater Assortments
 Low Cost Supply Chain
 Lower Prices
Management
 Information Systems  More Advertising
 Buying Power with  More Promotions
Vendors  Cleaner Stores
 Committed Employees

6. Customer Loyalty
 More than simply liking one retailer over
another
 Customers will be reluctant to patronize
competitive retailers
 Retailers build loyalty by:
 Developing a strong brand for the store or store
brands
 Developing clear and precise positioning
strategies
 Creating an emotional attachment with
customers through loyalty programs

7. Retail Branding
Stores use brand (store’s name and store brands –
private label brands) to build customer loyalty
 Retail brand
 Can create an
emotional tie with
customers that build
their trust and loyalty
 Facilitates store loyalty
because it stands for a
predictable level of
quality

8. Approaches for Building
Customer Loyalty
 Brand Image
 Positioning
 Unique Merchandise
 Customer Service
 Customer Relationship Management
Programs

9. Vendor Relationships
 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

10. Human Resources
Management
 “Employees are key to build a sustainable
competitive advantage”
 Strategiesfor Recruiting and Retaining
Talented Employees
 Employee Branding
 Develop positive organizational culture

11. Distribution and Info Systems
Flow of Information
By decreasing costs
Vendor
here, there is more money
Distribution Center available to invest in:
Store
-Better services
-Increase in breadth and depth
-Decrease in prices

12. Location
 What are the three most important things
in retailing?
 “location, location, location”
 Location is a competitive advantage
 A high density of Starbucks stores
 Creates a top-of-mind awareness
 makes it very difficult for a competitor to
enter a market and find a good locations

13. Growth Strategies
Target Markets
Existing New
Market Market
Existing
Penetration Expansion
Retail Format
Diversification
Format
New
(unrelated/
Development
related)
Exhibit 5-4; Pg. 123

14. Growth Strategies
 Market Penetration
 Market Penetration Growth Opportunity- directed
toward existing customers using the retailer’s present
retailing format
 Ex. Opening more stores in the target market.
 Cross-selling- sales associates sell items that are not in
their department
 Ex.
Electronics Associate take a customer to clothing
and sells them a pair of pants.

15. Growth Strategies
 Market Expansion
 Market Expansion Growth Opportunity- directed
toward new customers using the retailer’s present
retailing format
 Ex. Dunkin’ Donuts opening outside the US

16. Growth Strategies
 Retail Format Development
 Retail Format Development Growth Opportunity-
directed towards existing customers using the
retailer’s newly developed retailing format
 Ex. Tesco having both Tesco Metro and Tesco Express
stores

17. Growth Strategies
 Diversification
 Diversification Growth Opportunity- directed toward
new customers using the retailer’s newly developed
retailing format; either Related or Unrelated
 Related Diversification Growth Opportunity- retailer’s
present target market or retail format shares
something in common with the market or format
being considered

18. Growth Strategies
 Diversification
 Unrelated Diversification Growth Opportunity-
retailer’s present target market or retail format and its
new market or format have nothing in common
 Vertical Integration- retailers go into wholesaling or
manufacturing

19. Global Growth
Opportunities
 Attractiveness of International Markets
 Only 12 of the 50 largest retailers internationally have
stores in one country.
 Two Factors used to determine the Attractiveness of
Different International Opportunities
 PotentialSize of Retail Market in the country
 Degree of Support form the country
 See Exhibit 5-5 (page 126)

20. Global Growth
Opportunities
 Keys to Success
 Globally Sustainable Competitive Advantage
 Most successful when then expansion opportunity builds
on the retailer’s core bases of competitive advantage
 Ex. Walmart
 Some retailers have a competitive advantage due to
emulation of American culture
 Adaptability
 Retailersrealize they must adapt their core strategy and
store designs/layouts to the needs of the local market
 Ex. Color preferences, sizes
 Government regulations and cultural values may also
affect how a store is operated.

21. Global Growth
Opportunities
 Keys to Success
 Global Culture
 Retailers must thing globally
 Ex. Carrefour’s global management structure
 Financial Resources
 Long-term commitment with considerable up-front
planning
 Can be difficult to generate short-term profits.
 All stores initially have difficulty achieving success in new
global markets

22. Global Growth
Opportunities
 Entry Strategies
 Direct Investment
 Retailfirm invests and owns a retail operation in a
foreign country
 Joint Venture
 Entering
retailer teams up with a local retailer to form a
new company in which profits are shared
 Strategic Alliance
 Collaborative relationship between two firms for a single
project
 Franchising

23. The Strategic
Retail Planning Process
 This is a set of steps a retailer goes through to
develop, strategize, and plan.
 It describes how retailers select target market
segments, determine the appropriate retail
format, and build a sustainable competitive
advantage.
 It is not always necessary to go through the entire
process each time a strategy and plan are
developed.

24. The Strategic
Retail Planning Process
1. Define the business mission
2. Conduct a Situation Audit:
Market Attractiveness Analysis
Competitor Analysis
Self-analysis
3. Identify Strategic Opportunities
4. Evaluate Strategic Alternatives
5. Establish Specific Objectives and
Allocate Resources
6. Develop a Retail Mix to
Implement Strategy
7. Evaluate Performance and
Make Adjustments
Exhibit 5-7; Pg. 131

25. The Strategic
Retail Planning Process
 Step 1: Define Business Mission
 The mission statement is a broad description of
retailer’s objectives and the scope of activities it
plans to undertake.
 Itdefines the general nature of the target segments and
retail formats on which the firm will focus on.
 The principle objective of a publically held firm is to
maximize stockholder wealth. Firms are concerned
about their impact on society.

26. The Strategic
Retail Planning Process
 Step 1: Define Business Mission
 When developing a mission statement, managers
need to answer five questions:
 What business are we in?
 What should our business be in the future
 Who are our customers
 What are our capabilities
 What do we want to accomplish

27. The Strategic
Retail Planning Process
 Step 2: Conduct a Situation Audit (SWOT Analysis)
 This is an analysis of the opportunities and threats in
the retail environment, and the strengths and
weaknesses of the retail business relative to its
competition.
 The elements analyzed include:
 Market Factors: Sixe, Growth, Seasonality, Business
Cycles
 Competition Factors: Barriers to entry, Bargaining Power
of Vendors, Competition Rivalry
 Internal Factors: Management Capabilities, Financial
Resources, Location, Operations, Merchandise, Store
Management, Customer Loyalty

28. The Strategic
Retail Planning Process
 Step 3: Identify Strategic Opportunities

29. The Strategic
Retail Planning Process
 Step 4: Evaluate Strategic Alternatives
 The evaluation determines the retailer’s potential to
establish a sustainable competitive advantage and
reap long-term profits from opportunities being
evaluated The retailer must focus on opportunities
that utilize its strengths and its competitive
advantage.

30. The Strategic
Retail Planning Process
 Step 4: Evaluate Strategic Alternatives
 Market attractiveness, strengths, and weaknesses
need to be considered in this process.
 The greatest investments should be made in market
opportunities in which the retailer has a strong
competitive position.

31. The Strategic
Retail Planning Process
 Step5: Establish Specific Objectives and Allocate
Resources
 The specific objectives are goals against which
progress toward the overall objective can be
measured.
 The specific objectives have three components:
 The performance sought, including a numerical index
against which progress may be measured.
 A time frame which the goal is to be achieved.
 The level of investment needed to achieve the
objective.

32. The Strategic
Retail Planning Process
 Step 6: Develop a Retail Mix to Implement Strategy
 Investments will be made and control and evaluate
performance.
 [This will be covered in Sections III and IV]

33. The Strategic
Retail Planning Process
 Step7: Evaluate Performance and Make
Adjustments
 If the retailer is meeting or exceeding its objectives,
changes aren’t needed.
 If the retailer fails to meet its objectives, reanalysis is
required.
 Reanalysis starts with reviewing the implementation
programs but may indicate that the strategy or
mission statement needs to be reconsidered.
Conclusions may result in starting a new planning
process, including a new situation audit.

34. Assignment 1
Groups 1 & 2
 Using a technology of your choice, find different
companies that is a good example of each
advantage (Customer Loyalty, Relationships with
Suppliers, Efficiency of Internal Operations, and
Location).
 Give specific examples as to why each firm is
successful in its advantage.
 Be sure to use a different business for each
advantage.

35. Assignment 2
Groups 4 & 5
 Find an example of Market Penetration.
 Find an example of Market Expansion.
 Find an example of Format Development.
 Find an example of Diversification.
 Using a technology of your choice, explain how
the business is using each growth strategy and why
the business is doing so.
 You must use a different business for each
example.
 Be sure to give specific examples!

36. Assignment 3
Groups 6 & 7
 Using a technology of your choice, layout Steps 1
through 6 of the Strategic Planning Process for an
existing business of your choosing.
 Then, choose the step in the Strategic Retail
Planning Process that you believe is the most
important and explain why you believe it is the
most important.
 Back up your explanations with specific examples.