14 Jan Walmart Stores, Inc., with its first discount department store in 1962, currently operates retail stores in various formats around the world and is committed to saving people money
Walmart Stores, Inc., with its first discount department store in 1962, currently operates retail stores in various formats around the world and is committed to saving people money so they can live better. Currently, the company’s operations comprise three reportable business segments: the Walmart U.S. segment, the Walmart International segment, and the Sam’s Club segment. Target Corporation was incorporated in Minnesota in 1902. The company operates as three reportable segments: U.S. Retail, U.S. Credit Card, and Canadian.
Write a minimum 2-page report answering the following:
- Discuss why Walmart has been growing more rapidly than Target over the last decade. Do you see this trend continuing? Explain your rationale.
- Develop a summary of the mission and corporate culture of these two retailers. Note a corporate culture reflects the core values, norms, and behaviors that reflect how it behaves toward employees, customers and suppliers.
Note the above questions require you to do additional research on these two retailers. Research the library's LIRN Databases for more information on the 2 companies. Base your answers on facts and actual financial results.
Chapter 2
Retail Strategic Planning and Operations Management
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Learning Objectives
Explain why strategic planning is important and describe the components of strategic planning
Describe the retail strategic planning and operations management model
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2
Components of Strategic Planning (1 of 2)
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
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Components of Strategic Planning (2 of 2)
Development of a mission statement for the firm
Definition of specific goals and objectives for the firm
S W O T analysis
Development of strategies that will enable the firm to reach its objectives and fulfill its mission
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Statement of Goals and Objectives (1 of 2)
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
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Statement of Goals and Objectives (2 of 2)
Dimensions
Market performance
Financial performance
Societal objectives
Personal objectives
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 2.1 – The Market Share-Profitability Relationship
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Financial Objectives (1 of 2)
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 (R O I)
Stockouts: Products that are out of stock and unavailable to customers when required
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 2.2 – Elements of Strategic Profit Model
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Financial Objectives (2 of 2)
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
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Societal Objectives (1 of 2)
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
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Societal Objectives (2 of 2)
Equity – Retailer’s desire to treat the consumer and suppliers fairly
Being a benefactor – Retailer may desire to underwrite certain community activities
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Strategies (1 of 3)
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
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Strategies (2 of 3)
Forms of differentiation for a retailer
Outstanding design of the market offering
The selling process
After-purchase satisfaction
Location
Never being out of stock
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
S W O T Analysis (1 of 4)
Strengths:
What major competitive advantage(s) do we have?
What are we good at?
What do customers perceive as our strong points?
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
S W O T Analysis (2 of 4)
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?
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
S W O T Analysis (3 of 4)
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?
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
S W O T Analysis (4 of 4)
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?
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Strategies (3 of 3)
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
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 2.8 – Retail Strategic Planning and Operations Management Model
Competitive Environment: Behavior of Consumers, Competition, Supply Chain Members
Social and Legal Environment: Socioeconomic Environment, State of Technology, Legal System, Ethical Behavior
L O 2
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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
L O 2
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Chapter 1
Perspectives on Retailing
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Learning Objectives
Explain what retailing is and why it is undergoing so much change today
Describe the five methods used to categorize retailers
Understand what is involved in a retail career and be able to list the prerequisites necessary for success in retailing
Explain the different methods for the study and practice of retailing
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2
What is Retailing, and Why is it Undergoing so Much Change Today? (1 of 2)
Retailing: Consists of the final activities and steps needed to place merchandise made elsewhere into the hands of the consumer or to provide services to the consumer
Any firm that sells a product or provides a service to the final consumer is said to be performing the act of retailing
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
What is Retailing, and Why is it Undergoing so Much Change Today? (2 of 2)
Anything that affects how consumers choose to spend money affects the retailing industry
Retailers must consider the changes in the external environment
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
E-Tailing (1 of 4)
The great unknown for retail managers will be the ultimate role of the Internet
Bricks-and-mortar retailers: Operate out of a physical building
M-tailing – Shoppers use their smartphones to purchase merchandise and services
Apps – Digital services that can be downloaded
Fastest growing form of e-tailing
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
E-Tailing (2 of 4)
Growth of the Web 2.0 has important implications for retailers with the Internet becoming interactive
To combat e-tailing, bricks-and-mortar retailers must give their customers more control over the shopping experience
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
E-Tailing (3 of 4)
Has caused a shift in power between retailers and consumers
Traditionally, the retailers’ control over pricing information provided them the upper hand in most transactions
Today, the information dissemination capabilities of the Internet are making consumers better informed
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
E-Tailing (4 of 4)
Channel surfing: Occurs when the customer gets needed information in the stores and then orders it online for a lower price
To avoid paying state sales tax
Retailers must keep experimenting with various strategies
Next generation of technology will change the consumers’ expectations of what they demand from retailers
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Price Competition
Sam Walton forever changed the face of retailing by realizing that most of any product’s cost gets added after the item is produced
Walton made a major commitment to computerizing WalMart as a means to reduce expenses
Operating efficiency: Operating costs as a percentage of sales
Costco, a retailer, seeks to boost store traffic by lowering prices on key products
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Demographic Shifts (1 of 5)
Significant changes in retailing over the past decade have resulted from changing demographic factors such as:
The fluctuating birthrate
The growing importance of the 70 million Generation Y consumers
The move of Generation X into middle age
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Demographic Shifts (2 of 5)
The beginning movement of the baby boomer generation into retirement
The increasing number of women relative to men graduating from college and concurrent rise in unemployment among men relative to women
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Demographic Shifts (3 of 5)
Successful retailers must:
Become more service-oriented
Offer better value in price and quality
Have more convenient store hours
Be more promotion-oriented
Be better attuned to their customers’ needs
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Demographic Shifts (4 of 5)
Profit growth must come by either:
Increasing same-store sales at the expense of the competition’s market share
Reducing expenses without reducing services to the point of losing customers
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Demographic Shifts (5 of 5)
Same-store sales: Compares an individual store’s sales to its sales for the same month in the previous year
Market share: The retailer’s total sales divided by total market sales
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Store Size (1 of 4)
As stores increase in size the retailer often employs a scrambled merchandising strategy
Scrambled merchandising: Exists when a retailer handles many different and unrelated items
It is the result of the pressure being placed on many retailers to increase profits
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Store Size (2 of 4)
Retailers have found that reducing their store size is a pathway to improved profitability
Consumers prefer smaller stores due to the convenience of getting in and out faster
More personalized service
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Store Size (3 of 4)
Retailer needs a smaller geographic area to draw its customers
Retailer can easily find a location than if it had a larger store that requires more parking
Retail formats that have seen a significant decrease in average store size and a decrease in number of stores are:
Department stores
Category killers
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Store Size (4 of 4)
Category killer: Retailer that carries such a large amount of merchandise in a single category at such good prices that it makes it impossible for the customers to walk out without purchasing what they need, thus killing the competition
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Experience and Niche Retailing
A trend occurring in shopping malls is to transform them into exciting experience platforms
Eu Yan Sang is a major health-care brand in Asia, and it has created a Chinese medicine clinic that includes a yoga studio, spa, and health food café
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 1.2 – External Environmental Forces Confronting Retail Firms
L O 1
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Categorizing Retailers
Census bureau
Number of outlets
Margin versus turnover
Location
Size
L O 2
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Census Bureau
The U.S. Bureau of the Census, for purposes of conducting the Census of Retail Trade, classifies all retailers using three-digit North American Industry Classification System (N A I C S) codes
Shortcoming of using the N A I C S codes:
They do not reflect all retail activity
Comparisons between years may not be accurate
L O 2
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Number of Outlets (1 of 5)
Retailers with several units are a stronger competitive threat because they can:
Spread many fixed costs over a larger number of stores
Achieve economies in purchasing
Advantages of single-unit retailers:
They have harder-working, more motivated employees
They can focus and tailor their efforts and merchandise in one trade area
L O 2
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Number of Outlets (2 of 5)
Standard stock list: All stores in a retail chain stock the same merchandise
Optional stock list: Each store in a retail chain is given the flexibility to adjust its merchandise mix to local tastes and demands
L O 2
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Number of Outlets (3 of 5)
Channel advisor or channel captain: Institution in the marketing channel who is able to plan for and get other channel institutions to engage in activities they might not otherwise engage in
Large store retailers are able to perform the role of channel captain
L O 2
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Number of Outlets (4 of 5)
Private label branding: Occurs when a retailer develops own brand name and contracts with a manufacturer to produce the merchandise with the retailer’s brand on it instead of the manufacturer’s name
Also called store branding
L O 2
Dunne/Lusch/Carver, Retailing, 8th Edition. © 2018 Cengage. All Rights Res
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