Retailing-Ch. 5

Market segments

could be defined int terms of the customers' geographic location, demographics, lifestyle, buying situation, or benefits sought

Vertical integration

describes diversification by retailers into wholesaling or manufacturing

Private-label brands (store brands or own brands)

developed by retailers that are marketed by and available only from that retailer to keep customers loyal

Retail format

Describes the nature of the retailers operations--its retail mix--that it will use to satisfy the needs of its target market

it builds on the retailers knowledge of its customers, whereas actually making the merchandise is an unrelated diversificaiton

Designing private label merchandise is a related diversification because.....

have a cost advantage over competitors or offer customers more benefits than competitors at the same cost

Efficient internal operations enable retailers to......

the expansion opportunity builds on the retailers core bases of competitive advantage

Entry into non domestic markets is most successful when...

Retail strategy

indicates ow a retailer will deal effectively with its environment, customers, and competitors

SWOT analysis

involves analysis of the retailers internal environment (strengths and weaknesses) and external environment (opportunities and threats)

Market expansion growth opportunity

involves using the retailer's existing retail format in new market segments

the retailers relationships and loyalty of present customers

A retial format opportunity builds on....

recognize cultural differences and adapt they score strategy to the needs of local markets

Although successful global retailers build on their core competencies, they also........

India

Are government regulations more strict in china or india?

1. Increase their sales 2. Leverage their knowledge and systems across a greater sales base 3. Gain more bargaining power with vendors

By expanding internationally, retailers can....

both retailers and vendors can develop mutually beneficial assets and programs that give the retailer-vendor pair an advantage over competing pairs

By strengthening relationships with suppliers and vendors,

the business cycle's impact on they sales; thus retail markets for merchandise that is affected by economic conditions are less attractive than retail market that are less affected by economic conditions

Firms are interested in minimizing...

1. A globally sustainable competitive advantage 2. Adaptability 3. A global culture 4. Financial resources

Four characteristics of retailers that have successfully exploited international growth opportunities:

Starbucks

Give an example of a successful retail community

They offer credit and installment purchases

How have brazilian retailers developed practices for retailing to low income families?

Changes are not needed; but if the retailer fails to meets its objectives, reanalysis is required

If the retailer is meeting or exceeding its objectives...

Russia

In this country corruption is rampant and various administrative authorities can impede operations if they do not receive what they regard as appropriate bribes

India

In what country is the retail industry divided into organized and unorganized sectors?

a greater emotional feeling and loyalty toward the retailer

Increased involvement in the community by its members leads to.....

Of course

Is it hard to go global financially?

Not necessarily

Is it necessary to go through each step of the strategic retail planning process?

makes operations more inefficient and therefore much less profitable

Larger firms recognize that underinvesting in employees........

organized

Less than 5% of Indias retail sales are through _________ retail channels

1. Sephora 2. Lululemon 3. Save-a-lot

List examples of retail strategies

1. Direct Investment 2. Joint Venture 3. Strategic Alliance 4. Franchising

List the four approaches that retailers can take when entering non domestic markets:

1. Define the business mission 2. Conduct a SWOT analysis 3. Identify strategic opportunities 4. Evaluate strategic opportunities 5. Establish specific objectives and allocate resources 6. Develop a retail mix to implement strategies 7. Evaluate performance and make adjustments

List the stages in the Strategic Planning Process

1. The performance sought, including a numerical index against which progress amy be measured 2. A time frame within which the goal is to be achieved 3. Th level of investment needed to a chief the objective

List the three components of specific objectives:

1. The potential size of the retail market in the country 2. The degree to which the country does and support the entry of foreign retailers engaged in some modern retail practices 3. The risks or uncertainties in sales and profits

List the three factors that are often used to determine the attractiveness of international opportunities?

opening more stores int he target market and/or keeping existing stores open for longer hours; displaying merchandise to increase impulse purchases and training salespeople to cross-sell

Market penetration approaches include....

they build on the retailers present bases of advantage and don't involve entering new, unfamiliar markets or operating new, unfamiliar retail formats

Market penetration growth opportunities have the greatest chances of succeeding because.....

it indicates a retailers opportunity to generate revenues to cover its investments

Market size is important because....

the dominant firms have sustainable most advantages

Markets dominated by large competitors with scale economies are unattractive because....

a lot of resources ar needed to accommodate the peace season and then the resourced go underutilized the rest of the year

Markets with highly seasonal sales are unattractive because....

open markets and the millions of independent small neighborhood shops

Most indians shop in...

they would find countries that have modern retailing, more advanced infrastructures, and significant urban populations to be more supportive

Most retailers considering entry into foreign markets are successful multinational retails that use sophisticated management practices, thus.......

Relationships with vendors

Of relationships with suppliers, who are the most important?

return on investment, sales, or profits

Performance levels are financial criteira such as:

an opportunity for retailers to tailor store merchandise assortments tot he market served by each of its stores and to tailer promotions to the specific needs of individual customers

Purchase data collected by information systems provide....

high

Retail markets are more attractive when barriers to entry are....

Unattractive

Retail markets dominated by a well established retailer that has developed a loyal group of customers are....

they pursue diversification opprotunities

Retailers have the least opportunity to exploit a competitive advantage when.....

they reduce the risk associated with purchases; they assure customers that they will receive a consistent level of quality and satisfaction from the retailer

Strong brand images facilitate customer loyalty because.......

TRUE

T/F Growing markets are typically more attractive than mature or declining markets

TRUE

T/F Larger firms find it easier to go global because they have the capital it takes.

TRUE

T/F Retailers and Manufacturers have different customers

TRUE

T/F direct foreign investment is encouraged in China

1. the size of the market 2. Market growth 3. Cyclicality of sales 4. Seasonality

The attractiveness of a market in which a retailer is involved or considering is affected by.....

1. Barriers to entry 2. the bargaiing power of vendors 3. Competitive rivalry

The nature of competition in retail markets is affected by....

formulate strategic plans at different levels within a retail corporation

The planning process can be used to....

an opportunity for retailers to reduce operating costs and make sure that the right merchandise is available at the right time and place

The use of sophisticated distribution and information systems offers....

think globally

To be global, retailers must...

Use multiple approaches to build as high a wall around their position as possible

To build an advantage that is sustainable for a long period of time, what must retailers do?

that are similar to their present retail operations and markets

Typically, retailers have the greatest competitive advantage and most success when they engage in opportunities.......

1. Building a strong brand image 2. creating unique positioning int the target market 3. Offering unique merchandise 4. Providing excellent customer service 5. Implementing a customer relationship management program 6. Building a retail community

What are some approaches to building brand loyalty?

1. A large number of competitors that are all about the same size 2. Slow growth 3. High fixed costs 4. Lack of perceived differences between competing retailers

What are some conditions that may lead to intense rivalry?

1. Sales economies 2. Customer loyalty 3. Availability of great locations

What are some conditions to barrier to entry?

1. Management capability 2. Financial resources 3. Operations 4. Merchandising capabilities 5. Store management capabilities 6. Locations 7. Customers

What are some elements in a strengths and weaknesses analysis?

1. Market size 2. Market growth 3. Cyclicality of sales 4. Seasonality 5. Barriers to entry 6. Bargaining power of vendors 7. Competitive rivalry 8. Technological changes 9. Economic/ consumer/ social changes 10. Regulatory changes

What are some elements to consider when doing an opportunities and threats analysis?

1. Technological 2. Economic/ consumer/social and regulatory changes

What are some environmental dynamics that can affect market attractiveness?

if the partners disagree or the government places restrictions on the repatriation of profits

What are some problems encountered with joint ventures?

the franchisee might break away and operate as a competitor under a different name; in this case, the expanding retailer runs the risk of creating its own local retailer

What are some risks that come with franchising?

1. Market penetration 2. Market expansion 3. Retail format development 4. Diversification

What are the four types of growth opportunities that retailers may pursue?

some regulations have been relaxed, foreign retailers still must comply with myriad regulations before opening stores and shipping merchandise

What are the government regulations today in india?

1. Target market segment 2. Retail format 3. Retailers bases of sustainable competitive advantage

What are the three important elements of retail strategy?

1. Building strong relationships with customers 2. Building strong relationships with suppliers 3. Achieving efficient internal operations

What are three approaches to developing a sustainable competitive advantage?

The retailer builds a wall around its battle position--that is, around its present and potential customers and its competitors. When the wall is high, it will be hard for external competitors to scale the wall and enter the market to compete for the retailer's target customers

What does it mean to establish a sustainable competitive advantage?

A retail market with high entry barriers is very attractive for retailers presently competing in that market because those barriers limit competition. However, markets with high entry barriers are unattractive for retailers not already in the market

What does it mean when we say entry barriers are a double-edged sword?

the retailer has complete control of operations

What is a key advantage of direct investment?

Apple, Victoria's Secret, Lululemon

What is an example of a specialty store that offers unique merchandise?

A retailer might enter an international market through direct investment but use independent firms to facilitate its local logistical and warehousing activities

What is an example of a strategic alliance?

to develop strong relationships with companies that provide merchandise and services to the retailer

What is another approach for gaining a competitive advantage?

Establishing a sustainable competitive advantage

What is considered the key to long term financial performance?

Location

What is the most persuasive form of advantage in retailing?

Its booming e-commerce, which attracts retailers

What might be a solution to ruses poor quality?

both the market attractiveness and the strengths and weakenesses of the retailer

What needs to be considered when evaluating strategic opportunities?

1. What type of business are we? 2. What do we need to do to accomplish our goals and objectives

What two questions does the mission statement attempt to answer?

greatly restricted foreign investments

What was the previous government regulations in india?

Chicos and White house Black market

What would be an example of a market expansion growth opportunity?

some retailers go beyond designing their private-label merchandise to owning factories that manufacture the merchandise

What would be an example of vertical integration?

1. What business are we in? 2. What should our business be in the future? 3. Whoa re out customers? 4. What are our capabilities? 5. What do we want to accomplish?

When developing a mission statement, what questions do managers need to answer?

1. What new developments or changes might occur, such s new technologies and regulations or different social factors and economic conditions? 2. What is the liklihood that these environmental changes will occur? What key factors affect whether these changes will occur? 3. How will these changes affect each retail market, the firm, and its competitors?

When it comes to various environmental factors they encounter, retailers need to answer these questions:

they are making risky investments because the requisite skills to make products are different from those associated with retailing them

When retailers integrate backward and manufacture products........

build on their advantage in operating a retail format and apply this competitive advantage in a new market

When retailers pursue market expansion opportunities, they....

with reviewing the implementation programs, but it may indicate that the strategy (or even the mission statement) needs to be reconsidered; the conclusion results in a new planning process (including and new SWOT analysis)

Where does reanalysis start?

Consumers

Who are retailers customers?

Retailers

Who are the immediate customers for a manufacturers products?

Because quality of domestic products made in russia tends to be poor

Why can't retailers rely on local suppliers in russia?

because retailers must deal with different government regulations, cultural traditions, consumer preferences, supply chains, and languages

Why is international expansion risky?

1. Operating costs are increasing 2. Managerial talent is becoming more difficult to find and retian 3. An underdeveloped and inefficient supply chain predominates

Why is it challenging to do business in China?

Because retail employees will always be less consistent than machines

Why is it difficult to offer consistently good service?

1. Location is the most important factor determining which store a consumer patronizes 2. Location is a sustainable competitive advantage because its not easily duplicated

Why is location a critical opportunity for developing a competitive advantage?

because the targeted customers would be similar, and the new large contractor market could be served using a retail mix similar to home depots present retail mix, in addition, home depot would realize cost savings by placing larger orders with vendors because it would be selling to both retail and wholesale large and small customers

Why was home depot viewed their growth opportunity as related diversification?

India

Worlds largest pluralistic democracy, with myriad cultures and 22 official languages

Mission statement

a broad description of a retailers objectives and the scope of activities it plans to undertake; defines the general nature of the target segments and retail formats on which the firm will focus

Strategic alliances

a collaborative relationship between independent firms

Retail community

a group of consumers who have shared involvement with a retailer; members of the community share information with respect to the retailer's activities

Retail market segment

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

Retail format development growth opportunity

an opportunity in which a retailer develops a new retail format-a format with a different retail mix-for the same target market

Customer relationship management programs

are activities that focus on identifying and building loyalty with a retailer's most valued customers; these programs typically involve offering customers rewards based not he amount of service or merchandise they purchase

Barriers to entry

are conditions in a retail market that make it difficult for other firms to enter the market

Sales economies

cost advantages due to a retailers size

Joint ventures

formed 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 the entrants risk; the local partner provides an understanding of the market and has access to local resources such as vendors and real estate

Competitive rivalry

frequency and intensity of reactions to actions undertaken by competitors; when rivalry is high, price wars erupt, retailers attempt to steal employees from one anther, advertising and promotion expenses increase, and profit potential falls

Perceptual map

frequently used to represent the customer's image and preferences for retailers

Specific objectives

goals against which progress toward the overall objective can be measured

Unrelated diversification growth opprotunity

has little commonality between retailers present business and new growth opportunity

Brazil

has the largest population and strongest economy in Latin America

External analysis

identifies the retailer's opportunities and threats--the aspects of the environment that thigh positively or negatively affect the retailer's performance; factors associated with he market, competition, and environment dynamics are typically beyond the retailers control

Unorganized retialing

includes small independent retailers--local shops, owner-operated general stores, shops, convenience stores, and handcart street vendors

Market penetration growth opportunity

is a growth opportunity directed toward existing customers using the retailers present retailing format; involve attracting new customers from he retailers current target market who don't patronize the retailer currently or devising approaches that get current customers to visit the retailer more often and/or buy more merchandise on each visit

Postitioning

is the design and implementation of a retail mix to create an image of the retailer in the customers mind relative to its competitors

Strategic retail planning process

is the set of steps a retailer goes through o develop a strategic plan; it describes who retailers select target market segments, determine the appropriate retail format, and build sustainable advantages

Bargaining power of vendors

markets are less attractive when only a few vendors control the merchandise sold in the market; in these situations, vendors have the opportunity to dictate process and other terms, reducing the retailers profit

Customer loyalty

means that customers are committed to buying merchandise and services from a particular retailer; customers will be reluctant to switch and patronize a competitive retailer

Cross-selling

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

Direct investment

occurs when a retail firm invests in and owns a retail operation in a foreign country; this strategy requires the highest level of investment and exposes the retailer to the greatest risks, but it also has the highest potential returns

Franchising

offers the lowest risk and requires the least investment but also has the lowest potential return on investment; retailer has limited control ove rate retail operations int he foreign country, and any potential profits must be split with the franchisee

Sustainable competitive advantage

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

Diversification growth opprotunitity

one which a retailer introduces a new trial format directed toward a market segment that is not currently served by the retailer

Internal analysis

strengths and weaknesses--the retailers unique strategic capabilities relative to competition; are the assets, knowledge, and skills that the retailer possesses, such as the loyalty of its customers and the quality of tis relationships with its vendors

Target market

the market segments toward which the retailer plans to focus its resources and retail mix

Related diversification growth opprotunity

the retailers present target market and retail format share something in common with new opportunity--commonality might entail purchasing form the same vendors, operating in similar locations, using the same distribution or management information system, or advertising in the same newspapers to similar target markets

Larger companies

typically have greater internal operations efficiency; they can invest in developing sophisticated systems and spread the fixed cost of these systems over more sales