Chapter- 5 Retail Market Strategy (Entire
2. The formate the retailer plans to use to satisfy the target markets needs
3. The bases on which the retailers plans to build a sustainable competitive advantage
– Succesful retailers are customer centric/ they focus on the needs of their customers and satisfy those needs better than their competitors do.
– when the walls is high it will be hard for competitors outside the wall ( retailers operating in other markets or entrepreneurs) to enter the market and compete for the retailers target customers.
1. Building Strong relationships with customers
2. Buidling strong relationships with suppliers
3. Achieving effcient internal operations
Steps in developing loyalty:
1. Developing a strong brand image
2. Having a clear and consistent positioning
3. Providing outstanding customer service
4. Undertaking customer relationship mgmt (CRM) programs
In addition- providing convenient locations encourages patronage- which can develop loyalty/ having human resource mgmt practices develops competent.. committed sales assoaciated leading to better customers service and loayility.
For example- McDonalds includes many favorable beleifs such as fast service, quality
– Strong brand images facility customer loyalty because they reduce the risks associated with purchases/ they assure customers will receive constant level of quality
– A perceptual maps are developed so that the distance between two retailers positions on the map indicates how similar the stores appear to consumers.
Example- Costcos powerful private label brand Kirkland Signature, engenders strong brand loyalty among a significant group of consumers.
– Programs typically involve offering customers reward based on amount of service or mchandise they purchase.
Example- airlines offer free tickets to travelers who have flown prescribed number of miles., subway gives customers a free sandwich for each 10 they purchase
example- Ralph Lauren and JCPenny collaborated to develop the American Living merchandise sold exuclisculy at JCpenney.
– These collaborations are a win- win situations. By working together, both parties develop sustainable competitive advantage and increase their sales and profits.
– the sate about its customor buying buying behavior are valuable asset offering advantage that is not easily duplicated by competitors.
– Critical opportunity for developing competitive advantage for two reasons
1. Locations is the most important factor determine which store a consumer patronizes” For example, most people shop at supermarket closes to where they live
2. Location is a sustainable competitive advantage because it is not easily duplicated. Once walgreens has put a store at the best location at an intersection, CVS is relegated to the second best location
– Starbucks has many locations- makes it hard for other businesses to enter the market.
1. Market Penetration
2. Market Expansions
3. Retail format developments
-Vertical axis indicates the synergies between the retailers present markets and the growth opportunity
– The horizontal axis indicates the synergies between the retailers present retail mix and the retail mix of the growth opportunity
– Such opportunities involve either attracting new consumers from the retailers current target market who don’t patronize the retailer currently/ or by devising approaches that get current customers to visit the retailer more often or buy more merchandise on each visit.
– Market pentration approaches include opening more stores in the target market/ or keeping existing stores open for longer hours.
Example- a sales associate who has just sold a Blue- ray player to a customer will take the customer to the accessories department to sell special cables to impprove the performance of the player
-a format with a different retail mix- for the same target market.
Example- Tesco has employed a retail formats that all cater to essentially the same target market
– This commonality higher entail purchasing from the same vendors, operating in similar locations, using the same distribution or mgmt information system, or advertising in the same newspappers to similar target market
Example- Home depot bilt a wholesale building business called HD Supply. Mgmt felt that this growth opportunity would be synergistic with the firms retail business, because its stores were already selling similar merchandise to contractors. Viewed as related diversification, because the target customers would be similar, and the new large contractor market could be served using warehouse similar to home Depot present retail stores
– Example- HD supply actually was an unrelated diversification. The large contractor market served by HD supply sold primarily pipes, lumber and concrete- products with limited sales in Home Depots rails stores. Selling these supply to large contractors involved competitive bidding and transporting large bulky order to job sites- skills Home depot lacked.
– Example- some retailers go beyond designing their private-label merchandise to owning factories that manufacture the merchandise.
– When retailers integrate backward and manufacture products, they are making risky investments because the require skills tom make products that are different from those associated with retailing them.
– By expanding internationally retailers can increase their sales, leverage their knowledge and systems across a greater sales bases, and gain more bargaining power with vendors.
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
– Most attractive countries are those with large growing potential sales as indicated by the level and growth rate of present retail sales and the amount of people in the country to spend on services and merchandise as GDP.
– China and India are by far the largest retail markets in emerging economies. 1. China 2. Russia 3. United States
1.The unorganized retailing includes the small independent retailers- the local kirama shops, owner operated stores.
– Non-Indian firms cannot have controlling interest in retail firms and thus partners with an Indian Firm.
Example- Walmarts Entry into India is a partnership with Bharti Enterprises to open wholesale outlets called Best Price Modern Wholesale. The outlets are allowed to sell only to firms that register by showing tax documents that prove they own retail outlets.
1. A globally sustainable competitive advantage
3. Global culture
4. Financial Recources
– This entry strategy requires the highest level of investment and exposes the retailer to the greatest risks, but it also has the highest potential returns
** A key advantage of direct investment is that retailer has complete control of the operations
Example- mcDonalds chose this entry strategy for the U.K market, building a plant to produce buns when local suppliers could not meet its specifications
– Reduces the entrants risks.
– In adition to sharing the financial burden, the local partner provides an understanding of the market and has access to local resources, such as vendors and real estate
Disadvantages- problems with this entry approach can arise if the partners disagree or the government places restrictions on the repatriation profits
Example- a retailer might enter an international market through direct investment but use independent firms to facilitate its local logistical and warehousing activities.
– Retailers has limited control over the retail operations in the foregin country, its potential profit is reduced, and the risk of assisting in the creation of a local domestic computer increases.
Mission Statement- is a broad description of a retailers objectives and the scope of activities it plans to undertake
– The mission statement defined the general nature of the target segments and retail formate on which the firm will focus. In developing mission statement:
1. What business are we in?
2. What should our business be in the future?
3. who are our customers
4. What are out capabilities?
5. What do we want to accomplish
– Defines the retailers onkectives and the scope of activities it plans to undertake
a. Market Factors
Situation Audit- an analysis of the opportunities and threats in the retail environments and the strengths and weaknesses of the retail business relative to its competitors.
Market size- typically measured in retail sales dollars.
a. Barries To Entry
b. Scale Economies
C. Bargaining Power Of Vendors
D. Competitive Rivalry
2. Customer loayility 3. Availability of great locations
b. Scale Economies- are cost advantages due to a retailers size. Markets dominated by large competitors with scale economies are typically unattractive because the dominant firms have sustainable cost advantages.
Example- an entrepreneur would view the drugstoe market as unattractive because it is dominated by three large firms, Walgreen CVS and rite aid.
– these firms have considerable costs advantages over an entrepreneur because they have significant bargaining power over supplies and can buy merchandise at lower prices.
C. Bargaining Power Of Vendors- markets are less attractive when only a few vendors control the merchandise sold in the market. In such situations vendors have the opportunity to dictate prices and other terms( like delivery dates) reducing the retailer profits
For example, markets for retailing fashionable cosmetics is less attractive because two suppliers, Estee Launder , provide most of the desirable image, the suppliers have the power to sell their products to retailers at high prices.
Conditions that may lead to intense rivalry:
1. 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. For example. Home Depot And Lowes have an intense rivalry in many markets
– The evaluation determines the retailers potential to establish a sustainable competitive advantage and reap long term profits from the opportunities being evaluated.
– Both market acttractiness and strengths/ weakness need to be considered in evaluating strategic opportunities.
1. The performance sought, including a numerical index against which process may be measures
2. A time frame within which the goal is to be a chivied
3. The level of investment needed to achieve the objective
– typically this reanalysis starts with reviewing the implementation programs, but it may indicate that the strategy or even mission statemnt needs to be reconsidered.