Lect 3 - Retail Strategy

Question 1

What is a strategy according to Johnson 2005?

Answer 1

The direction and scope of an organisation over the long term; which achieves advantage in an changing environment through its configuration of resources and competencies with the aim of fulfilling stake holder expectations - Johnson et al 2005

Question 2

According to Johnson and Scholes 1999. what are the four main characteristics of a strategy?

Answer 2

1) Long term direction
2) Achieving some advantage over competitors
3) Scope of an organisations activities - the boundaries of a business in terms of products, design functions etc
4) Search for Strategic fit - matching the activities of an organisation to its environment

Question 3

What is a retail strategy according to Berman and Evans 2013?

Answer 3

-overall plan or framework of action that guides a retailer which outlines the goals and objectives the retailer wants to achieve and determines how they will achieve them

Question 4

How long is a retail strategy?

Answer 4

• Ideally one year long and it outlines retailers mission, goals and consumer market, without this strategy they may struggle to cope in the market place

Question 5

What are strategic decisions?

Answer 5

• Normally in regards to gaining an advantage for an organisation over the long term
• By clarifying your company’s big picture aims, you’ll have the opportunity to align your shorter term plans with this deeper, broader mission – giving your operations clarity and consistency.

Question 6

What is a strategic fit?

Answer 6

Matching the activities of a business to the environment in which it operates

Question 7

What are the three strategic management stages put forward by Johnson et al in 2005?

Answer 7

1) The strategic position
2) Strategy choices
3) Strategy in action

Question 8

What is the strategic position in Johnson stages?

Answer 8

This is concerned with understanding the strategic position of the organisation in terms of

• Where are we now?
• Its external environment, including the macro environment which includes PESTLE
• Internal resources and capabilities e.g what the firm is capable of - SWOT analysis
• The expectations and influence of stakeholders

Question 9

What is the strategic choices section of Johnson et als stages?

Answer 9

Involves understanding the the bases guiding future strategy and whats best for corporate, business and operational stages
- Generating strategic options based on whats available in the external environment

Question 10

What is meant by strategy in action section of Johnson et als stages?

Answer 10

This is concerned with translating strategy into organisational action through organisational structure, design and resource planning
- All about managing and enabling the change

Question 11

What is a strategic mission? (Mission Statement)

Answer 11

• A broady defined, enduring statement of purpose that distinguishes a business from others of its type (Ackoff 1987)
• Answers two questions, what business are we in? and what business do we want to be in?
• Can sometimes be within corporate objectives such as Sainsbury’s

Question 12

What is Asda mission statement?

Answer 12

To be Britain’s best value retailer exceeding customer needs, every day.

Question 13

What is a situational audit?

Answer 13

This is a type of SWOT analysis where specific elements of the business are analysed

Question 14

What is Micheal Porters 5 forces?

Answer 14

This is a business analysis model that helps explain why different industries are able to sustain different levels of profitability

Question 15

What are the 5 forces of porters model?

Answer 15

1) Competition Rivalry
2) Supplier power
3) Buyer power
4) Threat of substitution
5) Threat of new entry

Question 16

What is meant by Supplier power?

Answer 16

• supplier power is higher when many suppliers are present with established brands
• It determines how easy it is for suppliers to raise prices
• The more suppliers there are the harder it is for them to charge higher prices

Question 17

What is meant by buyer power?

Answer 17

• When dealing with a few savvy customers they have more power over your prices, yet when dealing with more , power increases if u have more customers

Question 18

What is competition rivalry?

Answer 18

• Rivalry increases when barriers to entry are low supplier or buyer power is high, and there is a high threat of substitutes.
• Where rivalry is intense, companies can attract customers with aggressive price cuts and high-impact marketing campaigns.
• In markets with lots of rivals, your suppliers and buyers can go elsewhere if they feel they’re not getting a good deal from you.
• On the other hand, where competitive rivalry is minimal, and no one else is doing what you do, then you’ll likely have tremendous strength and healthy profits.

Question 19

What is bargaining power of retailers?

Answer 19

• This is high when there is a high concentration of buyers and large amount of purchases

Question 20

What is threat of substitution?

Answer 20

• This refers to the likelihood of your customers finding a different way of doing what you do
• A substitution that is easy and cheap to make can weaken your position and threaten your profitability.

Question 21

What is threat of new entrants?

Answer 21

• position in the market can be impacted by how easy it is to get into your market
• If it takes little money and effort to enter your market and compete effectively, or if you have little protection for your key technologies, then rivals can quickly enter your market and weaken your position. If you have strong and durable barriers to entry, then you can preserve a favorable position and take fair advantage of it.
• Need to take barriers to entry, government regulations etc into consideration

Question 22

What is a competitive advantage?

Answer 22

An advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher price

Question 23

What does Porter 1985 suggest about competitive advantage?

Answer 23

• He observed that sustainable competitive advantage is the key to long term, above average performance

Question 24

What did Porter say were the two types of competitive advantage ?

Answer 24

1) Low Cost

2) Differentiation

Question 25

What are porters three generic strategies to competitive advantage?

Answer 25

1) Overall cost leadership
2) Differentiation
3) Focus

Question 26

What is overall cost leadership in regards to competitive advantage?

Answer 26

• Often associated with sustained investment and access to capital, intense supervision of labour, low cost distribution and tight control systems, would have highly efficient store management controls.

Question 27

What is meant by differentiation in regards to competitive advantage?

Answer 27

• Associated with strong marketing capabilities, creative flair and good reputation for quality and/or innovation

Question 28

What is focus in regards to competitive advantage?

Answer 28

• Likely to involve cost leadership of differentiation attributes nut directed at a particular target market segment

Question 29

What is the main growth Strategy?

Answer 29

Ansoffs matrix

Question 30

What are the four growth options according to Ansoff?

Answer 30

1) Market penetration
2) Market development
3) Product development
4) Diversification

Question 31

What is market penetration/ expansion?

Answer 31

• Companies tries to increase its market share by targetting the same segments with similar products
• Trying to increase sales and how often they visit
• Could be done through price reductions, increasing promotions, store extensions
• Expansion include opening new stores e.g Sainsbury’s Local, Tesco Express

Question 32

What is meant by Product development?

Answer 32

Same segment, new product/ service to cater for the wider needs of customers
- New packaging etc

Question 33

What is meant by market development?

Answer 33

Entering a new market with an existing product

- Market research and further segmentation helps to identify new groups of target customers

Question 34

What is diversification?

Answer 34

• New markets with new products and retail formats
• Can be either related or unrelated to the current business
• Carries the highest risk
• e.g Disney moving from films to theme parks
• Going into an unknown market with an unfamiliar product offering means a lack of experience in the new skills and techniques required. Therefore, the company puts itself in a great uncertainty
• Therefore, a firm should choose this option only when the current product or current market orientation does not offer further opportunities for growth
• E.g virgin moved from music to mobile and travel

Question 35

What is specialisation?

Answer 35

E.g Ann summers have narrow product range and target market
- Retail accordion theory

Question 36

How do companies build and maintain relationships in retailing?

Answer 36

Meeting expectations = Long term Customer satisfaction

Question 37

What do Berman and Evans say about maintaining relationships in retailing?

Answer 37

Companies must do everything they can to generate and maintain a distinctive edge. To attract customers and gain their loyalty, it’s no longer enough to “satisfy” them: they need to be ‘wowed’, by:

• An in-depth understanding of target shoppers desires.
• The proper mix of merchandise, customer service, and prices for those shoppers; and
• Supportive, ongoing customer interaction.

Not an easy task