CHAPTER 2: STRATEGIC PLANNING & OPERATION MANAGEMENT Flashcards
What is the primary purpose of strategic planning in retail?
The primary purpose of strategic planning is to adapt a retailer’s resources to effectively respond to the opportunities and threats presented by a constantly changing retail environment.
What are the four key components of strategic planning?
The four key components are:
1. Mission Statement: Defines the firm’s fundamental nature and direction.
2. Goals and Objectives: Provide guidance for strategy formulation.
3. SWOT Analysis: Evaluates strengths, weaknesses, opportunities, and threats.
4. Strategy: A structured plan for achieving the established goals and objectives.
What are the three essential elements of a sound mission statement?
The three essential elements are:
1. How the retailer intends to use its resources.
2. How it plans to relate to the changing environment.
3. The values it aims to provide to meet consumer needs.
How do goals and objectives function in strategic planning?
Goals and objectives serve two main purposes: they provide direction for strategy formulation and establish standards for measuring future performance, thereby minimizing potential justifications for decisions made after the fact.
What are market performance objectives, and how are they measured?
Market performance objectives determine the level of market dominance a retailer seeks, commonly measured by sales volume and market share, which is calculated as total sales divided by total market sales.
What is the relationship between market share and profitability?
While there is a positive correlation between market share and profit, this relationship may become curvilinear; at some point, increasing market share could lead to diminished profit margins if not offset by corresponding sales volume increases.
Describe financial performance objectives in retail management.
Financial performance objectives analyze a retailer’s ability to generate sufficient profit levels for future sustainability, categorized into profitability objectives (monetary returns) and productivity objectives (output per resource input).
What does profitability mean in a retail context?
Profitability typically refers to net profit after taxes but can also be expressed as a percentage of sales or return on investment (ROI), with considerations on how investments are defined based on their source (creditors vs. owners).
What are productivity objectives, and what measures are commonly used?
Productivity objectives focus on maximizing output per unit of resource input, commonly measured by:
1. Space Productivity: Sales per square foot of retail space.
2. Labor Productivity: Sales per full-time equivalent employee.
3. Merchandise Productivity: Sales per average dollar investment in inventory at cost.
What constitutes a strategy in retail management?
A strategy is a carefully crafted plan aimed at achieving specific goals and objectives, encompassing three critical strategies: traffic generation (getting customers into stores), conversion (turning visitors into buyers), and cost management (operating efficiently).
Identify potential areas for differentiation in retailing.
Areas for differentiation include:
1. Price
2. Product quality
3. Selling processes
4. After-purchase support
5. Location
6. Service level
How does a SWOT analysis contribute to developing a differentiation strategy?
A SWOT analysis helps retailers identify internal strengths and weaknesses alongside external opportunities and threats, enabling them to leverage strengths against threats while addressing weaknesses that coincide with market opportunities.
What critical components should be included in a marketing strategy checklist?
A marketing strategy checklist should include:
1. Target Market(s): The specific group of customers being served.
2. Location(s): The geographical or digital spaces where business occurs.
3. Retail Mix: Elements such as merchandise, pricing, advertising, customer service, and store layout/design.
4. Value Proposition: A statement detailing what customers gain from shopping at the retailer.
Define operations management in the context of retailing.
Operations management refers to the day-to-day oversight of retail activities aimed at maximizing efficiency across various functions such as buying merchandise, pricing strategies, advertising efforts, customer service, and personnel management.
