1 Introduction to International Retail Strategy Module David

1. Introduction to International Retail Strategy Module David F. Miller Center for Retailing Education and Research page 1

Questions 4 What is a retailing strategy? 4 How can a retailer build a sustainable competitive advantage? 4 What different strategic growth opportunities can retailers pursue? Retail Strategy Module David F. Miller Center for Retailing Education and Research 5 -2 page 2

“Strategy” Is Over Used Retailers Talk About A Lot of Different “Strategies” < Sales Strategy < Advertising Strategy < Merchandise Strategy < Location Strategy Is Not Just Another Term for A Management Decision Retail Strategy Module David F. Miller Center for Retailing Education and Research 5 -3 page 3

Elements in International Retail Strategy 4 Target Market < Countries and market segment(s) toward which the retailer plans to focus its resources and retail mix 4 Retail Format – Offering to customer < the nature of the retailer’s operations—its retail mixthe skills and resou 8 rces that the retailer has 4 Sustainable Competitive Advantages < advantages over the competition Retail Strategy Module David F. Miller Center for Retailing Education and Research 5 -4 © image 100 Ltd 4 page

Target Market Why Does a Retailer Need to Focus on a Specific Counties Target Market? Why Not Sell to Everyone? Military Analog Retail Strategy Module David F. Miller Center for Retailing Education and Research 5 -5 page 5

Criteria For Selecting A Target Market 4 Attractiveness -Large, Growing, Little Competition More Profits 4 Consistent with Your Competitive Advantages Rim Light/Photo. Link/Getty Images Retail Strategy Module David F. Miller Center for Retailing Education and Research 5 -6 page 6

Internal and External Bases for Competitive Advantage Vendors, Suppliers Retail Firm • Low Cost • Large Size • Efficient Distribution, Operations • Unique Knowledge • Loyal Employees Customers Sources of Capital Retail Strategy Module David F. Miller Center for Retailing Education and Research 5 -7 page 7

Can A Retailer Develop a Sustainable Competitive Advantage by: 4 Dropping the Price of Your Merchandise? 4 Building a Store at the Best Location? 4 Deciding to Sell Some Hot Merchandise? 4 Increasing Your Level of Advertising? 4 Attracting Better Sales Associates by Paying Higher Wages? 4 Providing Better Customer Service? Retail Strategy Module David F. Miller Center for Retailing Education and Research 5 -8 page 8

Sources of Competitive Advantage More Sustainable Less Sustainable Location Customer Loyalty Customer Service Exclusive Merchandise Low Cost Supply Chain Management 4 Information Systems 4 Buying Power with Vendors 4 Committed Employees (HR) 4 4 4 4 Retail Strategy Module Better Computers More Employees More Merchandise Greater Assortments Lower Prices More Advertising More Promotions Cleaner Stores David F. Miller Center for Retailing Education and Research 5 -9 page 9

Approaches for Building a Sustainable Competitive Advantage 4 Customer Loyalty 4 Relationship with Suppliers 4 Internal Efficiencies Retail Strategy Module David F. Miller Center for Retailing Education and Research page 10

Approaches for Building Customer Loyalty 4 Unique Positioning 4 Location 4 Customer Service 4 Personalization using Information About Customers (Database) 4 Unique Merchandise Retail Strategy Module David F. Miller Center for Retailing Education and Research 5 -11 page 11

Location 4 What are three most important things in retailing? < “location, location” 4 Why is location is a competitive advantage? Retail Strategy Module David F. Miller Center for Retailing Education and Research 5 -12 page 12

Rob Melnychuk/Getty Images Unique Merchandise: Private Labels Sears’ Kenmore -- appliances Macy’s ING. – fine apparel Kmart’s Martha Stewart -- home JCPenney’s Arizona -- jeans Retail Strategy Module Jacobs David Photography/Getty Images Education and Research Stock F. Miller Center for Retailing Jules Frazier/Getty Images 5 -13 page 13

High Quality Customer Service 4 Difficult to Achieve < People Are Not Machines -- Inconsistent < Retail Sales Associates At Bottom of Labor Pool 4 Goes Beyond Hiring Good People at High Wages and Training Them -- Organizational Culture Retail Strategy Module David F. Miller Center for Retailing Education and Research 5 -14 page 14

Internal Efficiencies Human Resources 4 “Employees are key to build a sustainable competitive advantage” 4 Strategies for Recruiting and Retaining Talented Employees 4 Employee Branding 4 Develop positive organizational culture Retail Strategy Module David F. Miller Center for Retailing Education and Research 5 -15 page 15

Internal Efficiencies - Distribution and Info Systems Flow of Information Vendor Distribution Center Store Retail Strategy Module By decreasing costs here, the is more money available to invest in: -Better services -Increase in breadth and depth -Decrease in prices David F. Miller Center for Retailing Education and Research 5 -16 page 16

Vendor Relationships 4 Low Cost - Efficiency Through Coordination < Electronic Data Interchange (EDI) < Collaborative Planning and Forecasting to Reduce Inventory and Distribution Costs 4 Exclusive Sale of Desirable Brands 4 Special Treatment < Early Delivery of New Styles < Shipment of Scare Merchandise Retail Strategy Module David F. Miller Center for Retailing Education and Research 5 -17 page 17

Critical Tradeoff In Developing Strategic Advantage Focus Leads to Developing A Competitive Advantage But Focus Reduces Flexibility 4 Low Cost, Consistent Image, Vendor Relationships Reduces Flexibility 4 Similar to Dating and Marriage – Commitment to a Relationship (Vendor) Reduces Flexibility Retail Strategy Module David F. Miller Center for Retailing Education and Research 5 -18 page 18

Criteria for Selecting a Country 4 Economic Environment

Opportunities U. S Population (billions) Germany France China Brazil India Russia 0. 3 0. 1 1. 3 0. 2 1. 2 0. 1 GDP ($ trillion) 14. 7 3. 0 2. 2 9. 8 2. 2 4. 0 2. 3 GDP per capita) ($/000) 47. 4 35. 9 33. 3 7. 4 10. 9 3. 4 15. 9 telephones (billions) 141. 0 48. 7 39. 5 314. 0 41. 5 35. 8 44. 8 Mobile Telephone (millions) 280. 0 105. 0 61. 0 747. 0 174. 0 570. 0 330. 0 Internet users (millions) 245. 0 65. 1 45. 3 389. 0 76. 0 61. 3 40. 9 Internet hosts (millions) 439. 0 21. 7 15. 1 15. 2 19. 3 4. 5 10. 4 Railway (000 miles) 227. 0 42. 0 29. 0 78. 0 29. 0 64. 0 87. 0 6. 5 0. 6 1. 0 3. 6 1. 8 3. 3 1. 0 15. 1 0. 5 4. 1 0. 4 1. 2 Roadways (000 trilllions) Airports (thousands) Retail sales ($ trillions) Growth in sales (%) 10. 9 12. 8 7. 6 10. 5 Concentration (% sales top 4) 3. 5 16 1. 5 10. 4 82. 1 72. 6 69. 8 62. 8 61. 5 Risk (100 least risky) Retail Strategy Module David F. Miller Center for Retailing Education and Research page 20

Retail Strategy Module David F. Miller Center for Retailing Education and Research page 21

2010 Global Retail Development Index (A. T. Kearney) Retail Strategy Module David F. Miller Center for Retailing Education and Research page 22

2010 Global Retail Development Index (A. T. Kearney) Retail Strategy Module David F. Miller Center for Retailing Education and Research page 23

International Expansion Opportunities Why China? 4 Economic Factors < The Largest Market Size =The market size of China is the sum of the other three BIRC countries in 2010. < Stable High Market Growth =China has continued a double digit growth rate from 2005 to 2010. Retail Strategy Module David F. Miller Center for Retailing Education and Research page 24

International Expansion Opportunities Why China? (Cont. ) 4 Industry Structure < The market is largely fragmented. < Chinese retailers are regional. < The sizes of Chinese retailers are relatively small. < Huge opportunities foreign retailers. Retail Strategy Module David F. Miller Center for Retailing Education and Research page 25

International Expansion Opportunities Why China? (Cont. ) 4 Political Environment < Socialist market economy with Chinese characteristics < Focus on reforms and economic development 4 Technological Environment < China has better infrastructure than other developing countries. < Chinese government encourages retailers to adopt advanced information system Retail Strategy Module David F. Miller Center for Retailing Education and Research page 26

International Expansion Opportunities Video on the interview with the CEO of Wal-Mart, China (Ed Chan) http: //www. mckinseyquarterly. com/Retail_Consumer_Goo ds/Sectors_Regions/Chinas_retail_revolution_An_interview _with_Wal-Marts_Ed_Chan_2459 Retail Strategy Module David F. Miller Center for Retailing Education and Research page 27