2. Strategic Planning

Question 1

Strategic planning

Answer 1

Strategy determines what should be done.
Strategic plans determine how the strategy will be implemented. Plans act as a guide as how objectives are to be met.

Planning is the “business activity that provides a systematic structure and framework for considering the future, appraising options and opportunities and then selecting and implementing the resources available for achieving the objectives e ciently and e ectively”.

Strategic planning will identify the necessary tactics and methods that equip the retailer to make the most of the opportunities and reduce the effect of possible threats.

Question 2

Elements of a retail strategy

Answer 2

Step 1: Conduct a situational analysis
Step 2: develop short- and long-term objectives
Step 3: identify the consumer’s characteristics and needs
Step 4: develop the retail strategy
Step 5: conduct specific activities
Step 6: control and evaluate performance
Step 7: Continuous feedback

Question 3

Step 1: Conduct a situational analysis

Answer 3

It is advisable that a situational analysis of the external environment be conducted on a continuous basis. This will help to highlight positive opportunities and any negative threats that may exist. The retailer will thus be better equipped to develop an organisational mission, select the ideal ownership structure and management alternative that will allow it to successfully determine its goods or service category.

Question 4

Step 1: conduct a situational analysis

1 Formulating the organisation’s mission

Answer 4

• Formulating the organisation’s mission means that the organisation must determine where its rm is today and where it would like to be in the future. The mission helps the retailer to gain strategic direction.

Question 5

Step 1: conduct a situational analysis

2 Various ownership structures

Answer 5

• Various ownership structures (ie sole proprietor, partnership, corporation, franchise and so on) may be selected by retailers, depending on their skills, resources and personal preferences.

Question 6

Step 1: conduct a situational analysis

3 The ideal management alternative

Answer 6

• The owner must also consider the ideal management alternative, which may include one of the following: owner-management (ie the owner performs the management tasks), professional management (ie professional managers perform the management tasks) and centralised management (ie management tasks are assigned to top management).

Question 7

Step 1: conduct a situational analysis

4 Goods or Service

Answer 7

• The retailer must now decide whether it will operate in a goods category (ie predominately sell durable and/or nondurable products) or a service category (ie mainly o er intangible services). When making this choice, retailers must determine their personal abilities (ie do they have skills, knowledge, formal training and practical industry experience), the financial resources required to open and operate the chosen category and the demands it will make on the retailer’s time.

Question 8

Step 2: develop short- and long-term objectives

.

Answer 8

As mentioned in the previous study unit, objectives are the various short- and long-term performance targets that the retail firm wishes to reach. A retailer may wish to develop one or more of the following SMART objectives:

Question 9

Step 2: develop short- and long-term objectives

• Sales objective

Answer 9

• Sales objective. Clicks may want to increase its market share by increasing its sales volumes. It there fore intends selling a further 75 000 units in the last quarter of 2011. This type of objective may be expressed in units or rand amounts.

Question 10

Step 2: develop short- and long-term objectives

• Profit objectives

Answer 10

• Profit objectives. Woolworths wants to capture its returns on investment in the first financial quarter by earning pro ts that exceed R2 500 000. This type of objective may also be expressed in units or rand amounts.

Question 11

Step 2: develop short- and long-term objectives

• Stakeholder satisfaction objectives.

Answer 11

• Stakeholder satisfaction objectives. Shoprite wishes to improve its stakeholders’ (ie employees, governments, shareholders and so on) satisfaction levels by developing a productive work environment that upholds government policies. You will note that the above hypothetical objective endeavours to satisfy employee and government stakeholders.

Question 12

Step 2: develop short- and long-term objectives

• Positioning (image) objectives

Answer 12

• Positioning (image) objectives McDonalds wants to be a market leader in the fast-food industry by occupying prime real estate in its consumers’ minds.

seek a fast-food dining experience

Question 13

Step 3: identify the consumer’s characteristics and needs

Answer 13

The marketplace is full of consumers with different needs and characteristics. Consumers, for example, have different income levels, are of different ages and gender, have different purchase habits and so on. It is thus necessary for retailers to segment the market into internally homogeneous segments and externally heterogeneous segments. In so doing, the retailer will be able to target a market that responds consistently to its offering because the segment’s members have similar needs and purchase behaviour.

Question 14

Step 3: identify the consumer’s characteristics and needs

When selecting the ideal target market, retailers will need to decide whether to opt for one of the following:

Answer 14

Mass marketing.
Concentrated (niche) marketing.
Differentiated marketing.

Question 15

When selecting the ideal target market, retailers will need to decide whether to opt for one of the following:
• Mass marketing.

Answer 15

The retailers serve the market as a whole. For example, Wimpy renders services to all consumers who

Question 16

When selecting the ideal target market, retailers will need to decide whether to opt for one of the following:• Concentrated (niche) marketing.

Answer 16

The retailer serves only one market. For example, the Wimpy outlet on campus provides services for students seeking a fast-food dining experience.

Question 17

When selecting the ideal target market, retailers will need to decide whether to opt for one of the following:
Differentiated marketing.

Answer 17

The retailer serves various target markets with different retail strategies, which are customised to the characteristics and needs of the respective target markets. For example, Steers has two target markets (ie students and families). Each target market will therefore be reached via two personalised retail strategies.

Question 18

Step 4: develop the retail strategy

Answer 18

In order for the retail strategy to be effective, the retailer must consciously identify and manage the various controllable and uncontrollable variables that exist.
By appreciating the various controllable and uncontrollable variables that may positively or negatively affect the performance of the retailing strategy, you will be able to manage the effects (ie maximise positive effects, while limiting negative influences). You will thus be better equipped to conduct speciffic activities that will help you to successfully implement the retail strategy.

Question 19

Step 4: develop the retail strategy

Controllable variables are manageable factors that directly affect the retail rm, and may include the following:

Answer 19

• Store location.
• Business management.
• Merchandise management and pricing.
• Communication activities.

Question 20

Controllable variables are manageable factors that directly affect the retail , and may include the following:
• Store location.

Answer 20

The retailer can control the store’s location in relation to its suppliers, available transportation media, competing retailers and its target market.

Question 21

Controllable variables are manageable factors that directly affect the retail rm, and may include the following:
• Business management.

Answer 21

The retailer can control how it manages its financial and human resources, operations and policies.

Question 22

Controllable variables are manageable factors that directly affect the retail rm, and may include the following:
• Merchandise management and pricing.

Answer 22

The retailer can control its merchandise quality, product assortment to carry, buying decisions and pricing policies.The retailer can control how it communicates with its consumers (eg advertising, personal selling, publicity and so on).

Question 23

Step 4: develop the retail strategy
Uncontrollable variables are unmanageable factors that the retailer needs to pre-emptively adapt to, as highlighted below:

Answer 23

• Consumers are dynamic and informed
• Competitor action
• Technology innovation
• Economic conditions.
• Seasonality occurs

Question 24

Step 4: develop the retail strategy
Uncontrollable variables are unmanageable factors that the retailer needs to pre-emptively adapt to, as highlighted below:
• Consumers are dynamic and informed

Answer 24

• Consumers are dynamic and informed and retailers cannot therefore control what they do. It is thus advisable for consumer trends and desires to be incorporated into the retail strategy.

Question 25

Step 4: develop the retail strategy
Uncontrollable variables are unmanageable factors that the retailer needs to pre-emptively adapt to, as highlighted below:
• Competitor action

Answer 25

• Competitor action cannot be controlled but can be managed. Hence retailers need to be aware of who its competitors are and what they are doing. Retails should never be complacent about this variable.

Question 26

Step 4: develop the retail strategy
Uncontrollable variables are unmanageable factors that the retailer needs to pre-emptively adapt to, as highlighted below:
• Technology innovation

Answer 26

• Technology innovation allows retailers to become more efficient and effective. It may thus be wise to update the technological infrastructure of the firm in order to keep abreast of trends.

Question 27

Step 4: develop the retail strategy
Uncontrollable variables are unmanageable factors that the retailer needs to pre-emptively adapt to, as highlighted below:
• Economic conditions.

Answer 27

As you are well aware, the current economic recession has negatively affected unemployment rates, business failures and the like. To prevent such a scenario in the retailer’s firm, the economic environment must be constantly analysed to ensure that effective response mechanisms are developed and put in place.

Question 28

Step 4: develop the retail strategy
Uncontrollable variables are unmanageable factors that the retailer needs to pre-emptively adapt to, as highlighted below:
• Seasonality

Answer 28

• Seasonality occurs when consumer demand fluctuates according to trends or seasons. For example, the sale volumes for swimsuits increase during the summer months and taper o during the colder months. Retailers should therefore manage the adverse effects of seasonality by offering a broader product mix that includes products and services that have constant sales volumes.

Question 29

Step 5: conduct specific activities

Answer 29

In order for you to conduct these specific activities, you need to be aware of what they are. For the purpose of this discussion, specific activities are the short-term tactics and methods needed to conduct each controllable part of the retail strategy. This will allow the retail firm to be responsive to the uncontrollable variables.
For example, Mr Price needs to open its store in an area where the target market may conveniently access the store, while ensuring that there are sufficient transport available to those who depend on public transport. Can you identify which controllable variable was referred to in the previous suggestion? If you answered “store location”, then you are correct. Let us proceed to the final step.

Question 30

Step 6: control and evaluate performance

Answer 30

In this step, each retailer must continuously evaluate the success of its retail strategy. In other words, the retailer will assess whether the specifc activities (step 5) succeeded in conducting the developed retail strategy (step 4) aimed at the target market (step 3). This would enable the retailer to determine whether or not the SMART objectives (step 2) have been achieved.
If upon reflection, the retail strategy failed to perform according to expectations, it is necessary for the retail firm to identify any weaknesses and take corrective action before further costs and damages are incurred.
Hopefully this will not be the case. However, this can easily happen because the environment in which the retailer operates is constantly changing - hence the need for continuous feedback.

Question 31

Step 7: Continuous feedback

Answer 31

An attentive manager must seek feedback at each stage of the retail strategy development process. This may be either positive or negative feedback. Positive feedback may include high sales volumes and low employee turnover, while negative feedback may communicate government sanctions, declining pro t margins and unsatisfied consumers.
By being informed of the strategy’s performance, the manager will be able to assess the source of the success or failure of that component of the strategy. The retailer will then be able to take timely corrective action to rectify any problems