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RMG 200 (57)
Brent Barr (19)


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Retail Management
RMG 200
Brent Barr

Copycat approach to retail strategy provides no strong basis for being a competitor in the American marketplace and is a formula for disaster A more successful route for Canadian retailers has been to expand cautiously through: o Acquisition of existing U.S retailers o Developing a unique product that people want GLOBAL GROWTH OPPORTUNITIES Reasons why retailers engage in international ventures Saturated home marketplace with no room to grow Highly competitive marketplace Aging population that spends less and saves more Economic recession, which limits consumer spending High operating costs, including staff wages, rental costs, and taxes Restrictive policies on retail development Shareholder pressure International retailers must have thorough understanding of the macro-environment, including: Cultural differences Government policies Economic stability Sources of product production Distribution capabilities Factors that would encourage a retailer to enter into the international marketplace include: Limited competition in the international marketplace Rising numbers of middle-class consumers with improved standard of living Younger population with purchasing power Trade agreements including North American Free Trade Act (NAFTA). World Trade Organizational (WTO), European Union (EU) Relaxed regulatory framework Favorable operating costs, including lower wages and taxes Opportunity to diversify Opportunity to try innovative concepts The Worlds largest shopping District Launched may 2006 Badwadi in Dubailand 40 million square meters of gross leasable area Who is Successful and who Isnt specialty store retailers with strong brand names retailers targeted towards young people Category killers and hypermarket retailers because of their expertise o Leaders in use of technology to maintain inventories, control global logistical systems, and tailor merchandise assortments to local needs o Low-price provider in everyday market they enter because of their buying scale economies and efficient distribution systems o Develop unique systems and standardized formats that facilitate control over multiple stores o Communications across national boundaries and cultures are specifically focused, which improves management coordination Keys to Success A. Globally sustainable competitive advantage B. Adaptability recognize cultural differences and adapt their core strategy to the needs of local markets (eg. Colour preference, the preferred cut of apparel, sizes) Selling season vary across countries (eg. Back to school) Store designs (eg. In some cultures mens and womens clothing cannot be displayed next to each other) Government regulations and cultural values (eg. Hours of operation, regulations governing part-time employees and terminations) C. Global culture D. Deep pockets Entry Strategies A. Direct investment: the investment and ownership by a retailer firm or a division or subsidiary that builds and operated stores in a foreign country Requires the highest level of investment and exposes the retailer to significant risks, but its has highest potential results Advantage retailer has complete control of the operates B. Joint venture: an entity formed when the entering retailer pools its resources with a local retailer to form a new company in which ownership, control, and profits shared Reduces the entrants risks because sharing financial burden and local partner undemands the market and has access to resources Problem if partners disagree or the government places restrictions on the repatriation profits C. Strategic alliance: collaborative relationship between independent firms. For example, a foreign retailer might enter an international market through direct investment but develop an alliance with a local firm to perform logistical and warehousing activities D. Franchising Lowest risk and requires least investment Entrant has limited control over retail operations in foreign country, potential profit is reduced, and the risk of assisting in the creation of a local domestic competitor is increased Costs Associated with Global Sourcing Decisions Currency Fluctuations Retailers use financial instruments such as operations and futures contracts to mimize the effects of currency fluctutations Tariffs Tariffs (aka duties): a tax placed by government upon imports Longer lead times Inventory turnover is likely to be lower when purchasing from suppliers outside the U.S than from domestic suppliers, which will result in higher inventory carrying costs Increased transportation costs Global versus Multinational Retailers Global strategy: replicating a retailers standard retail format and centralized management throughout the world in each new market (Eg. McDonalds) Multinational strategy: a strategy that involves changing a retailers products and image to reflect the international marketplace, using a decentralized format, learning about the countrys culture, and changing the retail concept to adapt to cultural difference and cater to local market demands Global Location Issues Traffic flow: the balance between a substantial number of cats and not so many that congestion impedes access to the store Real estate restrictionStructure of Retailing and Distribution Channels Around the World U.S distribution has the greatest retail density and the greatest concentration of large retail firms Japanese distribution system is characterized by small stores operated by retaltively small firms and a large independent wholesale industry European distribution systems falls between North American and Japanese systems Factors that have created these differences in distributions systems are: Social and political objectives (eg. Laws protecting small local businesses) Geography (eg. Population density) Market size Counterfeiting is a global Threat Counterfeit: goods that are made and sold without permission of the owner of a trademark, a copyright or patented invention that is legally protected in the country where it is marketed Bootleg: the sale of imitation goods where there is little or no attempt at hiding the fact that the product is counterfeit Knockoff: a copy of the latest styles displayed at designer fashion shows and sold in exclusive specialty stores, these copies are sold at lower prices through retailers targeting a broader market Ch 12: Retail Pricing Value: relationship of what a customer gets (goods/services) to what he or she has to pay for it Retailers can increase value and stimulate more sales by either increasing the perceived benefits offered
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