January 14, 2023

Walmart Stores, Inc., with its first discount department store in 1962, currently operates retail stores in various formats around the world and is committed to saving people money

Walmart Stores, Inc., with its first discount department store in 1962, currently operates retail stores in various formats around the world and is committed to saving people money so they can live better. Currently, the company’s operations comprise three reportable business segments: the Walmart U.S. segment, the Walmart International segment, and the Sam’s Club segment. Target Corporation was incorporated in Minnesota in 1902. The company operates as three reportable segments: U.S. Retail, U.S. Credit Card, and Canadian.

Write a minimum 2-page report answering the following:

Discuss why Walmart has been growing more rapidly than Target over the last decade. Do you see this trend continuing? Explain your rationale.
Develop a summary of the mission and corporate culture of these two retailers. Note a corporate culture reflects the core values, norms, and behaviors that reflect how it behaves toward employees, customers and suppliers.

Note the above questions require you to do additional research on these two retailers. Research the library's LIRN Databases for more information on the 2 companies. Base your answers on facts and actual financial results.

Chapter 2

Retail Strategic Planning and Operations Management

Learning Objectives

Explain why strategic planning is important and describe the components of strategic planning

Describe the retail strategic planning and operations management model

Components of Strategic Planning (1 of 2)

Strategic planning: Adapting the resources of the firm to the opportunities and threats of an ever-changing retail environment

Through the proper use of strategic planning, retailers hope to achieve and maintain a balance between resources available and opportunities ahead

L O 1

Components of Strategic Planning (2 of 2)

Development of a mission statement for the firm

Definition of specific goals and objectives for the firm

S W O T analysis

Development of strategies that will enable the firm to reach its objectives and fulfill its mission

L O 1

Mission Statement

Basic description of the fundamental nature, rationale, and direction of the firm

Elements of a mission statement

How the retailer uses or intends to use its resources

How it expects to relate to the ever-changing environment

The kinds of values it intends to provide in order to serve the needs and wants of the consumer

L O 1

Statement of Goals and Objectives (1 of 2)

Provide:

Specific direction and guidance to the firm in the formulation of its strategy

A control mechanism by establishing a standard against which the firm can measure and evaluate its performance

L O 1

Statement of Goals and Objectives (2 of 2)

Dimensions

Market performance

Financial performance

Societal objectives

Personal objectives

L O 1

Market Performance Objectives

Establish the amount of dominance the retailer seeks in the marketplace

Market share: Retailer’s total sales divided by total market sales

High sales growth retailing is directly linked to expanding the size of the retail stores

Disney

L O 1

Exhibit 2.1 – The Market Share-Profitability Relationship

L O 1

Financial Objectives (1 of 2)

Profit-based objectives: Deal directly with the monetary return a retailer desires from its business

Profit – Aggregate total of net profit after taxes

Profit can be expressed as a percentage of net sales

It can also be defined in terms of return on investment (R O I)

Stockouts: Products that are out of stock and unavailable to customers when required

L O 1

Exhibit 2.2 – Elements of Strategic Profit Model

L O 1

Financial Objectives (2 of 2)

Productivity objectives: State the sales objectives that the retailer desires for each unit of resource input

Space productivity – Net sales divided by the total square feet of retail floor space

Labor productivity – Net sales divided by the number of full time-equivalent employees

Merchandise productivity – Net sales divided by the average dollar investment in inventory

L O 1

Societal Objectives (1 of 2)

Reflect the retailer’s desire to help society fulfill some of its needs

Employment objectives – Provision of employment opportunities for the members of the retailer’s community

Payment of taxes – Helping finance societal needs that the government deems appropriate

Consumer choice – Provide the consumer with choices that previously were not available in the trade area

L O 1

Societal Objectives (2 of 2)

Equity – Retailer’s desire to treat the consumer and suppliers fairly

Being a benefactor – Retailer may desire to underwrite certain community activities

L O 1

Personal Objectives

Reflect the retailers’ desire to help individuals employed in retailing fulfill some of their needs

Self-gratification – Focuses on the needs and desires of the owners, managers, or employees of the enterprise

Status and respect – Recognizes that the owners, managers, and employees need status and respect in their community

Power and authority – Need of managers and other employees to be in positions of influence

L O 1

Strategies (1 of 3)

Carefully designed plan for achieving the retailer’s goals and objectives

Retailers can operate with three strategies

Get shoppers into the store

Convert these shoppers into customers by having them purchase merchandise

Implement the above two strategies at the lowest operating cost possible that is consistent with the level of service that customers expect

L O 1

Strategies (2 of 3)

Forms of differentiation for a retailer

Outstanding design of the market offering

The selling process

After-purchase satisfaction

Location

Never being out of stock

L O 1

S W O T Analysis (1 of 4)

Strengths:

What major competitive advantage(s) do we have?

What are we good at?

What do customers perceive as our strong points?

L O 1

S W O T Analysis (2 of 4)

Weaknesses

What major competitive advantage(s) do competitors have over us?

What are competitors better at than we are?

What are our major internal weaknesses?

L O 1

S W O T Analysis (3 of 4)

Opportunities

What favorable environmental trends may benefit our firm?

What is the competition doing in our market?

What areas of business that are closely related to ours are undeveloped?

L O 1

S W O T Analysis (4 of 4)

Threats

What unfortunate environmental trends may hurt our future performance?

What technology is on the horizon that may soon have an impact on our firm?

L O 1

Strategies (3 of 3)

A fully developed marketing strategy should address the following considerations

Target market: Groups of customers that the retailer is seeking to serve

Location

Retail mix: Combination of merchandise, price, advertising and promotion, location, customer service and selling, and store layout and design

Value proposition: Statement of the tangible and intangible results a customer receives from shopping

L O 1

Exhibit 2.8 – Retail Strategic Planning and Operations Management Model

Competitive Environment: Behavior of Consumers, Competition, Supply Chain Members

Social and Legal Environment: Socioeconomic Environment, State of Technology, Legal System, Ethical Behavior

L O 2

The Retail Strategic Planning and Operations Management Model

Operations management: Deals with activities directed at maximizing the efficiency of the retailer’s use of resources

Referred to as day-to-day management

The need to strive for a high profit is tied to the extremely competitive nature of retailing

L O 2

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Chapter 1

Perspectives on Retailing

Learning Objectives

Explain what retailing is and why it is undergoing so much change today

Describe the five methods used to categorize retailers

Understand what is involved in a retail career and be able to list the prerequisites necessary for success in retailing

Explain the different methods for the study and practice of retailing

What is Retailing, and Why is it Undergoing so Much Change Today? (1 of 2)

Retailing: Consists of the final activities and steps needed to place merchandise made elsewhere into the hands of the consumer or to provide services to the consumer

Any firm that sells a product or provides a service to the final consumer is said to be performing the act of retailing

L O 1

What is Retailing, and Why is it Undergoing so Much Change Today? (2 of 2)

Anything that affects how consumers choose to spend money affects the retailing industry

Retailers must consider the changes in the external environment

L O 1

E-Tailing (1 of 4)

The great unknown for retail managers will be the ultimate role of the Internet

Bricks-and-mortar retailers: Operate out of a physical building

M-tailing – Shoppers use their smartphones to purchase merchandise and services

Apps – Digital services that can be downloaded

Fastest growing form of e-tailing

L O 1

E-Tailing (2 of 4)

Growth of the Web 2.0 has important implications for retailers with the Internet becoming interactive

To combat e-tailing, bricks-and-mortar retailers must give their customers more control over the shopping experience

L O 1

E-Tailing (3 of 4)

Has caused a shift in power between retailers and consumers

Traditionally, the retailers’ control over pricing information provided them the upper hand in most transactions

Today, the information dissemination capabilities of the Internet are making consumers better informed

L O 1

E-Tailing (4 of 4)

Channel surfing: Occurs when the customer gets needed information in the stores and then orders it online for a lower price

To avoid paying state sales tax

Retailers must keep experimenting with various strategies

Next generation of technology will change the consumers’ expectations of what they demand from retailers

L O 1

Price Competition

Sam Walton forever changed the face of retailing by realizing that most of any product’s cost gets added after the item is produced

Walton made a major commitment to computerizing WalMart as a means to reduce expenses

Operating efficiency: Operating costs as a percentage of sales

Costco, a retailer, seeks to boost store traffic by lowering prices on key products

L O 1

Demographic Shifts (1 of 5)

Significant changes in retailing over the past decade have resulted from changing demographic factors such as:

The fluctuating birthrate

The growing importance of the 70 million Generation Y consumers

The move of Generation X into middle age

L O 1

Demographic Shifts (2 of 5)

The beginning movement of the baby boomer generation into retirement

The increasing number of women relative to men graduating from college and concurrent rise in unemployment among men relative to women

L O 1

Demographic Shifts (3 of 5)

Successful retailers must:

Become more service-oriented

Offer better value in price and quality

Have more convenient store hours

Be more promotion-oriented

Be better attuned to their customers’ needs

L O 1

Demographic Shifts (4 of 5)

Profit growth must come by either:

Increasing same-store sales at the expense of the competition’s market share

Reducing expenses without reducing services to the point of losing customers

L O 1

Demographic Shifts (5 of 5)

Same-store sales: Compares an individual store’s sales to its sales for the same month in the previous year

Market share: The retailer’s total sales divided by total market sales

L O 1

Store Size (1 of 4)

As stores increase in size the retailer often employs a scrambled merchandising strategy

Scrambled merchandising: Exists when a retailer handles many different and unrelated items

It is the result of the pressure being placed on many retailers to increase profits

L O 1

Store Size (2 of 4)

Retailers have found that reducing their store size is a pathway to improved profitability

Consumers prefer smaller stores due to the convenience of getting in and out faster

More personalized service

L O 1

Store Size (3 of 4)

Retailer needs a smaller geographic area to draw its customers

Retailer can easily find a location than if it had a larger store that requires more parking

Retail formats that have seen a significant decrease in average store size and a decrease in number of stores are:

Department stores

Category killers

L O 1

Store Size (4 of 4)

Category killer: Retailer that carries such a large amount of merchandise in a single category at such good prices that it makes it impossible for the customers to walk out without purchasing what they need, thus killing the competition

L O 1

Experience and Niche Retailing

A trend occurring in shopping malls is to transform them into exciting experience platforms

Eu Yan Sang is a major health-care brand in Asia, and it has created a Chinese medicine clinic that includes a yoga studio, spa, and health food café

L O 1

Exhibit 1.2 – External Environmental Forces Confronting Retail Firms

L O 1

Categorizing Retailers

Census bureau

Number of outlets

Margin versus turnover

Location

Size

L O 2

Census Bureau

The U.S. Bureau of the Census, for purposes of conducting the Census of Retail Trade, classifies all retailers using three-digit North American Industry Classification System (N A I C S) codes

Shortcoming of using the N A I C S codes:

They do not reflect all retail activity

Comparisons between years may not be accurate

L O 2

Number of Outlets (1 of 5)

Retailers with several units are a stronger competitive threat because they can:

Spread many fixed costs over a larger number of stores

Achieve economies in purchasing

Advantages of single-unit retailers:

They have harder-working, more motivated employees

They can focus and tailor their efforts and merchandise in one trade area

L O 2

Number of Outlets (2 of 5)

Standard stock list: All stores in a retail chain stock the same merchandise

Optional stock list: Each store in a retail chain is given the flexibility to adjust its merchandise mix to local tastes and demands

L O 2

Number of Outlets (3 of 5)

Channel advisor or channel captain: Institution in the marketing channel who is able to plan for and get other channel institutions to engage in activities they might not otherwise engage in

Large store retailers are able to perform the role of channel captain

L O 2

Number of Outlets (4 of 5)

Private label branding: Occurs when a retailer develops own brand name and contracts with a manufacturer to produce the merchandise with the retailer’s brand on it instead of the manufacturer’s name

Also called store branding

L O 2

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Walmart Stores, Inc., with its first discount department store in 1962, currently operates retail stores in various formats around the world and is committed to saving people money

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