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Chapter 4

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Ryerson University
Retail Management
RMG 200
Ken Wong

RMG200 Chapter 4 Building a Sustainable Competitive Advantage - The micro-environment (internal)  All of the things that are within your control and can be changed - The macro-environment (external)  All of the things that retailers cannot control  Competition  Economic stability of a trade area  Technology that will make retailing more efficient  Regulatory and ethical environment  Social trends (consumer behaviour, demographic and lifestyle trends) Seven important opportunities for retailers to develop sustainable competitive advantages are: - Customer loyalty - Location  Critical factor in consumer selection of a store – Competitive advantage - Human resource management  Knowledgeable and skilled employees committed to the retailer’s objectives are critical assets - Distribution and information systems  Controlling inventory - Unique merchandise  Competitive advantage by developing private-label brands (store brands) - Vendor relations (develop strong relationship with vendor)  Sell merchandise in a specific region  Obtain special terms of purchase that are not available to competitors who lack such relations  Receive popular merchandise in short supply - Customer service (excellent customer service) Customer Loyalty: Customers are committed to shopping at a particular retailer Ways to build loyalty - Developing clear and precise positioning strategies - Developing a strong brand for the store or store brands - Creating an emotional attachment with customers through loyalty programs Positioning - is the design and implementation of a retail mix to create an image of the retailer in the customer’s mind relative to its competitors - Emphasizes that the image in the customer’s mind is critical Growth Strategies 1. Market Penetration  Involves directing efforts toward existing customers by using the present retailing format  Either by attracting consumers in its current target market who don’t shop at its outlets or by devising strategies to make consumer shop more at a store  Cross-selling: sales associates in one department attempt to sell complementary merchandise from other departments to their customers 2. Market Expansion  Employs the existing retail format in new market segments  Eg. Abercrombie&Finch-University students, Hollister- High schoolers 3. Retail Format Development  Involves offering a new retail format- a format with a different retail mix- to the same target market 4. Diversification  The present target market or retail format shares something in common with new opportunity Strategic Retail Planning Process 1. Define the business mission  Mission statement o What business are we in? o What should be our business in the future? o Who are our customers? o What are our capabilities? o What do we want to accomplish? 2. Conduct a situation audit: (SWOT Analysis) a. Market attractiveness analysis b. Competitor analysis (Competitive Factors) i. Barriers to entry – difficult for firms to enter the market Such as scale economies, customer loyalty and availability of great locations ii. Scale economies- cost of advantages due to the size of a retailer iii. Bargaining power of vendors –selling at low prices – reducing retailer’s profits iv. Competitive rivalry  A large number of competitors that are all about the same size  Slow growth  High fixed costs  Lack of perceived differences between competing retailers c. Self-analysis 3. Identify strategic opportunities 4. Evaluate strategic attractiveness 5. Evaluate specific objectives and allocate resources 6. Develop a retail mix to implement strategy 7. Evaluate performance and make adjustments - omen are the dominant consumer - -12) are a growing segment - - - - -invent themselves - Online shopping - Types of needs Utilitarian needs: Needs motivating consumers to go shopping to accomplish a specific task Hedonic needs: Needs motivating consumers to go shopping for pleasure The Buying Process (eg. Custo
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