Strategic Retail Report: Strategic Recommendations

SRR: STRATEGIC RECOMMENDATIONS

AN EXPLANATION OF THE PROCESS

STRATEGY PROCESS: APIC ANALYSIS – Where are we now? In the SRR: Status Report, you analyzed the 4 Cs and TREES 4 Cs:

• Company • Customers • Competitors • Channel (Suppliers and Intermediaries)

TREES: • Technology • Regulatory (Political and Legal)

• Economic • Environmental (Supplies, footprint)

• Social / Cultural

SWOT SWOT – Strengths, Weaknesses, Opportunities, Threats

Strengths and Weaknesses include company factors such as:

• Management capabilities • Financial resources • Locations • Operations • Merchandise mix, turnover • Customer loyalty

Careful of ”Opportunities” – many get this confused.

SRR: STRATEGIC RECOMMENDATIONS In this part of the project, you are moving from the A of APIC to the P and I parts.

SWOT – Strengths, Weaknesses, Opportunities, Threats

Strengths and Weaknesses include company factors such as:

• Management capabilities • Financial resources • Locations • Operations • Merchandise mix, turnover • Customer loyalty

Careful of ”Opportunities” – many get this confused.

SWOT EXAMPLE

Strength Weakness • Extensive service offerings coupled

by rewards • Liquidity position

• Significant dependence on the US • Revenue decline

Opportunity Threat • Positive outlook for e-retail market in

Canada • Strategic initiatives to expand the

business operations • Expanding retail market in Canada

• Stringent regulations • Intense competition in the

Canadian retail market • Shortage of manpower in Canada

Hudson’s Bay SWOT Source: Hudson’s Bay Company SWOT Analysis. (2018). Hudson’s Bay Company SWOT Analysis, 1–7.

SWOT EXAMPLE

Strength Weakness • Operational Network • Inventory Turnover Ratio • Revenue Growth

• Liquidity Position

Opportunity – these things exist to create an opportunity

Threat

• Growth of E-Commerce • New Product Launches • Expanding Retail Market in

the US • Strategic Partnerships

• Increasing Manpower Costs in US

• Stringent Regulations • Dependence on Third Parties

Target SWOT Source: Target Corp SWOT Analysis. (2018). Target Corporation SWOT Analysis, 1–7. )

Opportunity – things exist to create an opportunity

IDENTIFY STRATEGIC ALTERNATIVES

From the SWOT, strategic alternatives (possible choices) can be determined and evaluated.

We want to • Maintain and build on our strengths, • Overcome our weaknesses, • Take advantage of opportunities, and • Avoid or confront threats.

IDENTIFY STRATEGIC ALTERNATIVES Example: The Gap Strength • Global Presence • Store Network • Liquidity Position

Weakness • Financial Performance • Dependence on

Merchandise Vendors Opportunity • Online Retail Market in

US • Global Apparel Industry • Acquisition of Janie and

Jack

Threat • COVID-19 Outbreak • Foreign Exchange Risks • Manpower Costs in US • Intense Competition

The Gap Inc SWOT Analysis. (2020). Gap, Inc. SWOT Analysis, 1–7.

APIEC: PLANNING FOR A SUSTAINABLE COMPETITIVE ADVANTAGE

Sources of Competitive Advantage: • Relationships – suppliers and customers • Brand strength and salience • Buying power • Efficiencies of operations • Positioning on all points that resonate with target

markets • Locations • Information access and management

WHAT DOES THE GAP SWOT REVEAL? - ALTERNATIVES Strengths (maintain, build) • Global Presence – build brand image, maintain

market position • Store Network – realize synergies, serve customers

efficiently • Liquidity Position – high liquidity can be used to

fund operations and growth

WHAT DOES THE GAP SWOT REVEAL? - ALTERNATIVES Weaknesses (overcome, fix) • Financial Performance – focus on cost management • Dependence on Merchandise Vendors – diversify,

watch regulations, health, safety, labour issues.

WHAT DOES THE GAP SWOT REVEAL? - ALTERNATIVES Opportunities (leverage) • Online Retail Market in US – growing • Global Apparel Industry – women’s wear is 53% of

global revenues, Asia-Pacific region accounts for 37.1% of apparel market, Europe 28.5%, US 23.6%

• Acquisition of Janie and Jack – enhance global reach, augment offerings, drive growth

WHAT DOES THE GAP SWOT REVEAL? - ALTERNATIVES Threats (avoid/adapt, confront) • COVID-19 Outbreak – impacts manufacturers and brick-and-

mortar retailers. Supply chain issues, marketing, and sales • Foreign Exchange Risks – fluctuations require hedging

through forward contracts • Manpower Costs in US – increase in wages, full-time

employee benefits

• Intense Competition – note bases of competition (service, performance, price, sales, distribution, supplier relationships, brand strength, financial resources)

STEP 4: EVALUATE STRATEGIC OPPORTUNITIES Evaluate the opportunities that have been identified in the situation audit. You can’t do it all – limits on time, money, human resources…

Criteria for evaluation includes: • Establishing a sustainable competitive advantage

• Reaping long-term profits • Social responsibility (ethics, environment…)

Focus on opportunities that use company strengths and areas of competitive advantage against the evolving situations.

STRATEGIC POSSIBILITIES USING THE BUSINESS MODEL CANVAS One way to think of strategy creation is to ask yourself what goals and actions can be built around the 9 areas of the Business Model Canvas (https://www.strategyzer.com/canvas/business-model- canvas).

Only choose directions that make sense in light of what you have discovered through your SRR Status Report analysis.

STRATEGIC POSSIBILITIES USING THE BUSINESS MODEL CANVAS

The Business Model Canvas

designed by: Strategyzer AG The makers of Business Model Generation and Strategyzer

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Revenue Streams

Customer SegmentsValue PropositionsKey ActivitiesKey Partners

Cost Structure

Customer Relationships

Designed by: Date: Version:Designed for:

ChannelsKey Resources

STRATEGIC POSSIBILITIES USING THE BUSINESS MODEL CANVAS 1. Customer Segments. Who are you selling to or serving?

• Find a new segment. • Penetrate an existing segment further.

2. Value Proposition. Why do customers buy from you? What is the gain that you provide?

• Add another attribute (feature, benefit, service) to the offering.

• Educate customers about how your offering fills certain salient needs/wants.

STRATEGIC POSSIBILITIES USING THE BUSINESS MODEL CANVAS 3. Channels. How are your products and services delivered to the market? How do you reach the customers, and how to they reach you?

• Strengthen and improve existing channels. • Create a new channel.

4. Customer Relationships. How do you get, keep, and grow your customers?

• Improve the relationship in an existing segment (loyalty program, perhaps)

• Streamline the customer journey at key touchpoints.

STRATEGIC POSSIBILITIES USING THE BUSINESS MODEL CANVAS 5. Revenue Streams. How does your business earn money?

• Develop a new revenue stream. (For example, the sale of products, membership fees, services, add-ons, etc.)

• Improve the cost structure of a given revenue stream (for example, automate parts of the system)

6. Key Resources. What unique resources does your business have?

• Capitalize on underutilized resources. (Key resources include physical, intellectual, human, and financial.)

STRATEGIC POSSIBILITIES USING THE BUSINESS MODEL CANVAS 7. Key Activities. How (through what activities) does your business deliver your value proposition?

• Improve the design, delivery, service, or other operations area of the business (think about how the supply chain management is a key activity for Zara)

• Utilize technology (or other resource) to improve the customer experience

STRATEGIC POSSIBILITIES USING THE BUSINESS MODEL CANVAS 8. Key Partnerships. What activities can/should you outsource to other companies?

• Find new partners. (Joint ventures, suppliers, marketing intermediaries…)

• Build more value into an existing partnership. • Look at what can be outsourced.

9. Cost Structure. What are the major costs incurred by your business?

• Reduce costs in an area of the business (careful with this – you don’t want to reduce value to the customer)

• Outsource • Bring outsourced functions into the business

ESTABLISH SPECIFIC RECOMMENDATIONS For each strategic opportunity chosen, create a specific objective. Specific objectives have three components:

• The performance sought, including a numerical index against which progress may be measured

• A time frame within which the goal is to be achieved • The level of investment needed to achieve the objective

Examples: • To build brand awareness of The Gap in Asia-Pacific from x% to x%

through a marketing communications spend of $XX over the next year

• To reduce labour costs by 8% by reducing the numbers of full-time employees in the US operations by 15% over the next three years through attrition and layoffs.

ESTABLISH SPECIFIC RECOMMENDATIONS 1. List your recommendations. 2. STOP and LOOK at them. and think about whether they

make sense based on your 4Cs and TREES analysis. Order them logically.

3. Justify each recommendation – state how they will address what you have found (SWOT)

• Does it build on a strength? • Does it fix a weakness? • Does it capitalize on an opportunity? • Does it avoid or attack a threat?

4. Explain what the retailer would need to do (actions, investments, etc.) to implement the recommendations. Consider which of the 7 Ps would be impacted.