Retail Management Chapter 5 Retail Market Strategy

vertical integration

describes diversification by retailers into wholesaling or manufacturing I.E. some retailers go beyond designing their private label merchandise to owning factories that manufacture the merchandise.

relationships with suppliers

second approach for gaining competitive advantage most important relationships are with vendors by strengthening relationships with with each other both retailers and vendors can develop mutually beneficial assets and programs that give the retailer-vendor pair and advantage

strategic retail planning process

set of steps a retailer goes through to develop a strategy and plan describes how retailers select target segments, determine the appropriate retail format, and build sustainable competitive advantage

Retail Strategy

statement identifying the retailer's target market, the format and resources the retailer plans to use to satisfy the target market's needs, and the bases on which the retailer plans to build a sustainable competitive advantage

loyalty

Customer ____________ means that customers will be reluctant to switch and patronize a competitive retailer.

4 approaches when entering non-domestic markets

DIRECT INVESTMENT JOINT VENTURE STRATEGIC ALLIANCE FRANCHISING

Stages in the Strategic Retail Planning Process

1. Define the business mission 2. Conduct a SWOT analysis: internal environment (strengths and weaknesses analysis); external environment (opportunities and threats 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

Four types of growth oppprtunities

1. Market Penetration 2. Market Expansion 3. Retail Format Development 4. Diversification

Approaches to developing loyalty

1. building a strong brand image 2. creating a unique positioning in the target 3. market, offering unique merchandise 4. providing excellent customer service 5. implementing customer relationship programs 6. building a retail community

3 approaches for developing a sustainable competitive advantage

1. building strong relationships with customers 2. building strong relationships with supplies 3. Achieving efficient internal operations

True.

True or False. Retailers use multiple approaches to sustainable competitive advantage to build as a a wall around their position as possible.

Factors that determine attractiveness of international opportunities

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 engages in modern retail practices 3. the risks or uncertainties in sales and profits

Franchising

A contractual agreement between a franchiser and a franchisee that allows the franchisee to operate a business using a name and format developed and supported by the franchiser. offers lowest risk; requires the least investment. has the lowest potential return on investment. retailer has limited control over the retail ops in the foreign country and any potential profits must be split with the franchisee. once established there is also the threat that the franchisee will break away and operate as a competitor under a different name.

Retail Format Development Growth Opportunity

A retailer develops a new retail format - a format with a different retail mix - for the same target market I.E. The UK based retailer Tesco operates several different food store formats that all cater essentially to the same target market. (Tesco Express, Tesco Metro stores, Tesco Superstores, & Tesco Extra stores)

brand image

A retailers _________ ___________ reflects its positioning strategy.

Customer Relationship Management Programs

Consumer Shopping behavior data collected from ________________________ ___________________________ ___________________ ________________ can provide significant insights that enable retailers to build and maintain loyalty.

large

Expanding operations to international markets is particularly attractive to ______________ retailers as they saturate their domestic markets. This process is __________ however because retailers deal with different 1. government regulations 2. cultural traditions, 3. consumer preferences 4. supply chains 5. languages

Location

Most pervasive form of advantage in retailing because it is: 1. the most important factor determining which store a consumer patronizes 2. not easily duplicated (sustainable competitive advantage)

modern, advanced, urban, economic, political

Most retailers that consider entering into foreign markets find countries that have __________ retailing, more _______________ infrastructures, and significant ____________ populations to be more supportive. Also, Countries that lack strong domestic retailers but have stable _____________ and ________________ environments would be more appealing.

American culture is emulated

Some U.S. retailers have a competitive advantage in global markets because _______________ ______________ ______ _______________ in many countries, particularly by young people.

websites, social media

Some retailers use ________________ and ____________ _____________ to develop retail communities.

False. (It is difficult because most competitors can purchase and sell the same popular national brands. )

True or False. It is easy for a retailer to develop customer loyalty through its merchandise offerings.

risk

Strong brand image facilitates customer loyalty because they reduce the ______ associated with purchases.

Brazil, Russia, India and China (BRIC nations)

The emerging international markets that receive the most attention from global retailers are:

retail format

The retailers' type of retail mix (nature of merchandise and services offered, pricing policy, advertising and promotion program, approach to store design and visual merchandising, and typical location)

False. (it's related diversification because it builds on the retailer's knowledge of its customers>> actually making the merchandise is an unrelated diversification.)

True of False. Designing private label merchandise is unrelated diversification.

True

True or False. Any business activity that a retailer engages in can be the basis for a competitive advantage.

Efficient Internal Operations

____________ _____________ __________________ enable retailers to have a cost advantage over competitors or offer customers more benefits than competitors at the same cost. Larger companies typically have this because they can invest in developing sophisticated systems and spread the fixed cost of these systems over more sales. also strengthened by HR Management & Information and Supply Chain systems

Market Penetration (Typically retailers have the greatest competitive advantage and most success when they engage in opportunities that are similar to their present retail operations and markets.)

______________ ______________________ growth opportunities have the greatest chances of succeeding because they build on the retailer's present bases of advantage and don't involve entering new, unfamiliar markets or operating new, unfamiliar retail formats.

specialty stores

__________________ __________________ create loyalty by: 1. offering specific items that customers cannot find anywhere else (develop private label brands) 2. reinforcing that appeal by providing dedicated in store experiences that match the unique products

Strategic Alliance

a collaborative relationship between independent firms I.E. retailer might enter international market through direct investment but use independent firms to facilitate it local logistical and warehousing activities.

retail community

a group of consumers who have a shared involvement with a retailer members share information with respect to retailer's activities involvement can range from becoming a fan of a retailers social media page or meeting face-to-face with community members to share experiences.

Market Penetration Growth Opportunity

a growth opportunity directed toward existing customers using the retailer's present retailing format involves either attracting new consumers from the retailer's current target market who don't patronize the retailer current OR devising approaches that get current customers to visit the retailer more often and/or buy more merchandise on each visit approaches include opening new stores in the target market and/or keeping existing open for longer hours. displaying merchandise to increase impulse purchases and training salespeople to cross-sell.

Diversification Growth Opportunity

a retailer introduces a new retail format directed toward a market segment that's not currently served by the retailer either related or unrelated Related: the retailers present target market and retail format share something in common with the new opportunity. (i.e. purchasing from the same vendors, operating similar locations, using the same distribution, or adv in the same mediums to similar target markets)

involvement in retail community

can range from becoming a fan of a retailers social media page or meeting face-to-face with community members to share experiences. increased involvement by members leads to a greater emotional feeling and loyalty toward the retailer.

Four characteristics that successfully exploited international growth opportunities

globally sustainable competitive advantage entry into non-domestic markets is most successful when the expansion opportunity builds on retailers core basics of competitive advantage ADAPTABILITY successful global retailers recognize cultural differences and adapt their core strategy to the needs of local markets (I.E. adjusting offerings to different peak selling seasons in different countries; adjusting store designs and layouts in different countries; government regulations and culture values can affect store operations) GLOBAL CULTURE Retailers must think globally.>> It is not sufficient to transplant a home-country culture and infrastructure to another country. (reducing ethnocentrism; rapid development of local management; retaining few expatriates in its overseas operations) FINANCIAL RESOURCES Expansion into international markets takes considerable up-front planning. Retailers find it difficult to generate short term profits when they transition globally. Large firms are generally in a strong financial position and have the ability to keep investing in projects long enough to be come successful.

retail market segment

group of consumers with similar needs and a group of retailers that satisfy those needs using similar retail channels and format

unrelated diversification growth opportunity

has little commonality between the retailer's present business and the new growth opportunity

Market Expansion Growth Opportunity

involves using the retailer's existing retail format in new market segments I.E. When Chico's acquired WHite House Black Market, it engaged in this. They are both mall-based specialty apparel stores. But Chico's targets women over 30. WHBM targets a younger age segment.

positioning

the design and implementation of a retail mix to create an image of the retailer in the customer's mind relative to its competitors

target market

the market segment(s) toward which the retailer plans to focus its resources and retail mix

sustainable competitive advantage

the retailer maintains over its competition that is not easily copied by competitors and thus can last over a long period of time

related diversification growth opportunity

the retailers present target market and retail format share something in common with the new opportunity. (i.e. purchasing from the same vendors, operating similar locations, using the same distribution, or adv in the same mediums to similar target markets)

Direct Investment

when a retail firm invests in and owns a retail operation in a foreign country. requires the highest level of investment. exposes retailers to the greatest risk. has highest potential returns. advantage: retailer has complete control of the operations

cross selling

when sales associates in one department attempt to sell complementary merchandise from other departments to their customers

Joint Venture

when the entering retailer pools its resources with a local retailer to form a new company in which ownership, control, and profits are shared. reduces entrants risks (share of financial burden). local partner provides an understanding of the market and has access to local resources (i.e. vendors, real estate, etc.) problems can arise if partners disagree or the government places restrictions on the repatriation (the sending of money back to one's own country) of profits.