Retail Management4sem

Retail
Retail
Management
Management
MBA-MK4
MBA-MK4
IV Semester
IV Semester
Academic Consultant: Garima
Academic Consultant: Garima
Tiwari
Tiwari
2
Unit:
Unit:
I
I
(8
(8
Sessions)
Sessions)

Overview of Retailing Environment Overview of Retailing Environment
Retailing, Definition and Concept Retailing, Definition and Concept
Functions of Retailing Functions of Retailing
Driving Forces for Retailing Driving Forces for Retailing
Building and Sustaining Relationships Building and Sustaining Relationships
Strategic Planning Strategic Planning
Structural Change Structural Change
Type of Retail Outlets Type of Retail Outlets
Market Structure Market Structure
Retail Planning: Development and Control Retail Planning: Development and Control
The Customer and Retail Business: Knowing your The Customer and Retail Business: Knowing your
Customers Customers
Focusing on the Consumer Focusing on the Consumer
Mapping Out Society Mapping Out Society
Learning Learning
Attitude Attitude
Motivation Motivation
Perception Perception
3
Sno
Unit Lecture
no
Contents (sub topics) Slide no
(1) I 1
Overview of Retailing Environment
4-11
(2) 2
Retail definition , concept & Driving
Forces for Retailing, Functions of
retailer
12-28
(3) 3
Building & sustaining relations
29-35
(4) 4
Strategic Retail Planning, Development
& control
36-64
(5) 5
Type of retail stores
65-71
(6) 6
Market structure & structural change
72-87
(7) 7
The Customer and Retail Business:
Knowing & focusing your Customers
88-107
(8) 8
Learning, Attitude, Motivation,
Perception
108-146
FAQS, CASE STUDY, ASSIGNMENTS
147-155
LECTURE PLAN
Unit-I Sub: Retail Management (MBA-MK4)
Academic Consultant: Garima Tiwari
Session -I
Session -I
Overview of Retailing
Overview of Retailing
Environment
Environment
5
Introduction
Introduction
Retailing
Retailing
a set of business activities that
a set of business activities that
adds value to the products and services sold to
adds value to the products and services sold to
consumers for their personal or family use.
consumers for their personal or family use.
A
A
retailer
retailer
is a person who sells products
is a person who sells products
and/or services to consumers for personal or
and/or services to consumers for personal or
family use.
family use.
Key points are:

Key points are:
business that provides offerings in required format (size) business that provides offerings in required format (size)
Provides to the end users Provides to the end users
For own personal use For own personal use

6
Retailers add value to the offerings by:
Retailers add value to the offerings by:
Breaking Bulk
Breaking Bulk
-Buy it in quantities customers want
-Buy it in quantities customers want
Holding Inventory
Holding Inventory
-Buy it at a convenient place when you want it
-Buy it at a convenient place when you want it
Providing Assortment
Providing Assortment
-Buy other products at the same time
-Buy other products at the same time
Offering Services
Offering Services
-See it before you buy, get credit
-See it before you buy, get credit
7
Top 10 retail brands in the world
Top 10 retail brands in the world
1. 1. Wal-Mart Wal-Mart ( (www.walmart.com www.walmart.com) full line discount stores, membership ) full line discount stores, membership
clubs clubs
2. 2. Home Depot Home Depot ( (www.homedepot.com www.homedepot.com) Home centers, design centers ) Home centers, design centers
3. 3. Kroger Kroger ( (www.kroger.com www.kroger.com) Super markets, convenience stores, jewelry ) Super markets, convenience stores, jewelry
stores stores
4. 4. Sears Roebuck Sears Roebuck ( (www.sears.com www.sears.com) Department stores, specialty stores ) Department stores, specialty stores
5. 5. Target Target ( (www.target.com www.target.com) Full-line discount stores, department stores ) Full-line discount stores, department stores
6. 6. Albertsons Albertsons ( (www.albertsons.com www.albertsons.com) Supermarket, drug stores ) Supermarket, drug stores
7. 7. Kmart Kmart ( (www.kmart.com www.kmart.com) Full-line discount stores ) Full-line discount stores
8. 8. Costco Costco ( (www.costco.com www.costco.com) Membership clubs ) Membership clubs
9. 9. Safeway Safeway ( (www.safeways.com www.safeways.com) Supermarkets ) Supermarkets
10. 10. J.C.Penney J.C.Penney ( ( www.jcpenny.com www.jcpenny.com) Department stores , drug stores, ) Department stores , drug stores,
catalog catalog
8
Indian Retail Scene
Retail Philosophy By The People, For The People and Of The People
Retailing involves selling products and services to consumers for their individual or
family use. As the final link between consumers and manufacturers, retailers are a vital
part of the business world. Retailers add value to products by making it easier for
manufactures to sell and consumers to buy.
The Indian Retail Sector can be broadly
classified into
Indian Retail Sector
Food Retailers
Health & Beauty
Products
Home Furniture &
Household Goods
Clothing &
Footwear
Durable Goods
Leisure &
Personal Goods
9
Retail in India picked up in the 1980s, when the country started to open its economy.
Today, the Indian retail industry is evolving at a fast pace.
Potential Goldmine-India ranks first in the 2005 Global Retail Development Index
(GRDI) released by AT Kearney, and is rated the fifth most attractive emerging
retail market.
AT Kearney has projected Indias total retail market to grow at a compounded 30
percent over the next five years.
With the organised retail segment growing at 25-30 p.c.p.a, revenues may
triple from the current US$ 7.7 billion to US$ 24 billion by 2010.
The share of modern retail is likely to grow from its current 2 percent to 15-20
percent over the next decade, analysts feel. No wonder a heavyweight like
Reliance is planning to do a Wal-Mart in India!
In the next few years, India will see at least two domestic retail businesses attain
the magic figure of US$ 218 million in sales.
10
Fast Facts
Wal-Mart is moving a senior official from its headquarters (US), to head its market
research and business development functions pertaining to its retail plans in India.
The New York based high-end fashion retailer Saks Fifth Avenue has tied up with realty
major DLF Properties to set up shop in a mall in New Delhi.
Mukesh Ambani has announced a separate company, Reliance Retail Limited, which
would be 100 percent owned and would invest Rs.25, 000 crore in the retail business over
the years. Stores will be set up in phases, and around 1,600 stores will be in place by
2007.
Internet retailing will thrive in the coming decade.
Several 24-hour retail stores would emerge to cater to consumers.

11
Career in Retail
Career in Retail
(Skill set required) (Skill set required)
Retailing is not just about Retailing is not just about
selling or filling shelves, and selling or filling shelves, and
by no means are all the job by no means are all the job
opportunities in the stores opportunities in the stores
themselves. themselves. Being a people- Being a people-
oriented business, it is oriented business, it is
imperative that anybody imperative that anybody
interested in having a long interested in having a long
stint in retail must have the stint in retail must have the
following skills following skills
Commercial Commercial
awareness awareness
Self-confidence Self-confidence
Flexibility Flexibility
Strong time Strong time

management skills management skills
Team work Team work
Leadership qualities Leadership qualities
Communication Communication
skills skills
Analysis and Analysis and

problem-solving problem-solving
skills skills
Numeric skills Numeric skills
Attention to detail Attention to detail

Session-II
Session-II
Retail definition , concept &
Retail definition , concept &
Driving Forces for Retailing,
Driving Forces for Retailing,
Functions of retailer
Functions of retailer
13
Definition
Definition
+
The word retail has its origin in French
The word retail has its origin in French
word
word
retaillie
retaillie
r and means
r and means
to cut a
to cut a
piece
piece
or
or
to break bulk.
to break bulk.
+
Retailing is the sale of goods and

Retailing is the sale of goods and
services to the ultimate consumer
services to the ultimate consumer
for personal, family or household
for personal, family or household
use.
use.
+
According to Kotler: Retailing
According to Kotler: Retailing
includes all the activities
includes all the activities
involved in selling goods or
involved in selling goods or
services to the final consumers
services to the final consumers
for personal, non business use
for personal, non business use
14
+
Retailing may be understood as the final step
Retailing may be understood as the final step
in the distribution of merchandise for
in the distribution of merchandise for
consumption by the end consumers.
consumption by the end consumers.
+
Retailing is responsible for matching final
Retailing is responsible for matching final
consumer demand with supplies of different
consumer demand with supplies of different
marketers.
marketers.
+
Retailing is high intensity competition
Retailing is high intensity competition
industry, The reasons for its popularity lie in
industry, The reasons for its popularity lie in
its ability to provide easier access to variety
its ability to provide easier access to variety
of products, freedom of choice and many
of products, freedom of choice and many
services to consumers.
services to consumers.
+
The Indian retail is dotted by traditionally
The Indian retail is dotted by traditionally
market place called
market place called
bazaars or haats
bazaars or haats
comprises of numerous small and large
comprises of numerous small and large
shops, selling different or similar
shops, selling different or similar
merchandise
merchandise

15
Traditional
Formats
Itinerant Salesman
Haats
Melas
Mandis etc.
Established
formats
Kirana shops
Convenience/
department stores
PDS/
fair price shops
Pan/ Beedi shops
Emerging
Formats
Exclusive retail outlets
Hypermarket
Internal retail
Malls / Specialty Malls
Multiplexes
Fast food outlets
Service galleries
Concept
Concept
16
The Evolution of Retail in India
The Evolution of Retail in India
+
Retail in India has evolved to support the
Retail in India has evolved to support the
unique needs of our country, given its size and
unique needs of our country, given its size and
complexity
complexity
Haats, Mandis
Haats, Mandis
and
and
Melas
Melas
have
have
always been a part of the Indian landscape.
always been a part of the Indian landscape.
They still continue to be present in most parts
They still continue to be present in most parts
of the country and form an essential part of life
of the country and form an essential part of life
and trade in Various areas.
and trade in Various areas.
+
The
The
PDS (Public Distribution System)
PDS (Public Distribution System)
would easily
would easily
as the single largest retail chain existing in the
as the single largest retail chain existing in the
country. the evolution of the PDS of Grains in
country. the evolution of the PDS of Grains in
India has its origin in the
India has its origin in the
rationing system
rationing system

introduced by the British during world war II
introduced by the British during world war II
17
+
The system was started in 1939 in Bombay
The system was started in 1939 in Bombay
and subsequently extended to other cities
and subsequently extended to other cities
and towns. the system was abolished post
and towns. the system was abolished post
war but however attaining independence
war but however attaining independence
India was forced to reintroduce it in 1950.
India was forced to reintroduce it in 1950.
+
There was rapid increase in the ration shops
There was rapid increase in the ration shops
( being increasingly called the Fair Price
( being increasingly called the Fair Price
Shop or FPSs)
Shop or FPSs)
+
The
The
Canteen Stores Department
Canteen Stores Department
and the
and the
Post
Post
Offices
Offices
in India are also among the largest
in India are also among the largest
network of outlets in the country reaching
network of outlets in the country reaching
population across the country.
population across the country.
18
+
The The
Khadi & Village industries (KVIC)
Khadi & Village industries (KVIC) was also set up was also set up
post independence. The cooperative movement was post independence. The cooperative movement was
again championed by the government. again championed by the government.

India's Largest retail Chains:
India's Largest retail Chains:
1. 1.
PDS: 463,000
PDS: 463,000
2. 2.
Post offices: 160,000
Post offices: 160,000
3. 3.
KVIC: 7,000
KVIC: 7,000
4. 4.
CSD Stores:3,400
CSD Stores:3,400
(source business world marketing White book 2005) (source business world marketing White book 2005)
19
+
In the past decade, the Indian marketplace
In the past decade, the Indian marketplace
has transformed dramatically. However from
has transformed dramatically. However from
the 1950,s to the 80,s, investment in various
the 1950,s to the 80,s, investment in various
industries was limited due to low
industries was limited due to low
purchasing power in the hands of the
purchasing power in the hands of the
consumer and the governments policies
consumer and the governments policies
favoring the small scale sector.
favoring the small scale sector.
+
The first attempts at organized retailing
The first attempts at organized retailing
were noticed in the textiles sector. One of
were noticed in the textiles sector. One of
the pioneers in this field was Raymonds
the pioneers in this field was Raymonds
which set up stores to retail fabric.
which set up stores to retail fabric.
20
+
Raymonds distribution network today
Raymonds distribution network today
comprises 20,000 retailers and over 256
comprises 20,000 retailers and over 256
exclusive showrooms in over 120 cities of
exclusive showrooms in over 120 cities of
the country
the country
+
Other textile manufacturing who set up their
Other textile manufacturing who set up their
own retail chains wee Reliance- which set up
own retail chains wee Reliance- which set up
Vimal showrooms and Garden Silk Mills,
Vimal showrooms and Garden Silk Mills,
which set up Garden Vareli showrooms.
which set up Garden Vareli showrooms.
21
Drivers of Retail change in India
Drivers of Retail change in India

major drivers :
major drivers :
1. 1. Changing Income Profiles Changing Income Profiles: Steady economic growth : Steady economic growth
fuelled the increase in disposable income in India. fuelled the increase in disposable income in India.
The average middle class family's disposable The average middle class family's disposable
income rose by more than 20% between 1999-2003. income rose by more than 20% between 1999-2003.
2. 2. Diminishing difference between Rural and urban India: Diminishing difference between Rural and urban India:
Rural Rural
India accounts for over 75% of India population and India accounts for over 75% of India population and
this in itself offers a tremendous opportunity for this in itself offers a tremendous opportunity for
generating volume driven growth. Tax benefit. In generating volume driven growth. Tax benefit. In
year 2002-03 LIC sold 50% of its policies in rural year 2002-03 LIC sold 50% of its policies in rural
India. Same BSNL also sold its 50% connection in India. Same BSNL also sold its 50% connection in
small towns . small towns .
22
3. 3.
Changes in Consumption patterns:
Changes in Consumption patterns:
Occupational
Occupational
changes and expansion of media have
changes and expansion of media have
caused a significant change in the way the
caused a significant change in the way the
consumer lives and spends his money.
consumer lives and spends his money.
o
The changes in income brought about
The changes in income brought about
changes in the aspirations and the spending
changes in the aspirations and the spending
patterns of the consumers. the buying
patterns of the consumers. the buying
basket of the consumer changed
basket of the consumer changed
4. 4.
The emergence of a young Earning India
The emergence of a young Earning India
:
:
Nearly 70%
Nearly 70%
of the Indian population is below the age of
of the Indian population is below the age of
34. taking advantages of employment
34. taking advantages of employment
opportunity in the booming service sector
opportunity in the booming service sector
these young Indians are redefining service
these young Indians are redefining service
and consumption patterns
and consumption patterns
23
Prominent sector in Indian retail
Prominent sector in Indian retail
1. 1.
Clothing, textiles and fashion Accessories:
Clothing, textiles and fashion Accessories:
2. 2.
Food & food Services:
Food & food Services:
3. 3.
Consumer Durables:
Consumer Durables:
4. 4.
Books & Music:
Books & Music:
Other emerging sectors
Other emerging sectors
5. 5.
Jewellery retail
Jewellery retail
6. 6.
Footwear retail
Footwear retail
7. 7.
Time Wear Retail
Time Wear Retail
8. 8.
Fuel Retail/ petro retail
Fuel Retail/ petro retail
24
Functions of a retaillier
Functions of a retaillier
+
From the customer point of view, the retailer
From the customer point of view, the retailer
serves him by providing the goods that he
serves him by providing the goods that he
needs in the required assortment, at the
needs in the required assortment, at the
required place and time.
required place and time.
+
From an economic standpoint, the role of a
From an economic standpoint, the role of a
retailer is to provide real added value or
retailer is to provide real added value or
utility to the customer. This comes four
utility to the customer. This comes four
different perspectives
different perspectives
25
1. 1.
Form
Form
:
:
First is utility regarding the
First is utility regarding the
form
form
of a
of a
product that is acceptable to the customer.
product that is acceptable to the customer.
The retailer does not supply raw material,

The retailer does not supply raw material,
but rather offers finished goods and
but rather offers finished goods and
services in a form that the customers want.
services in a form that the customers want.
The retailer performs the function of

The retailer performs the function of
sorting the goods and providing us with an
sorting the goods and providing us with an
assortment of product in various
assortment of product in various
categories.
categories.
2. 2.
Time:
Time:
He cerates
He cerates
Time
Time
utility by keeping
utility by keeping
the store open when the consumers prefer
the store open when the consumers prefer
to shop.
to shop.
preferable shopping hours.

preferable shopping hours.
26
5. 5.
Place:
Place:
By being available at a convenient
By being available at a convenient
location, he creates
location, he creates
place
place
utility.
utility.
1. 1.
Ownership
Ownership
:
:
Finally, when the product is sold,
Finally, when the product is sold,
ownership
ownership
utility is created.
utility is created.
Apart from these functions retailer also
Apart from these functions retailer also
performs like:
performs like:
1. Arranging Assortment:
1. Arranging Assortment:
manufacturers usually
manufacturers usually
make one or a variety of products and
make one or a variety of products and
would like to sell their entire inventory to
would like to sell their entire inventory to
few buyers to reduce costs. Final
few buyers to reduce costs. Final
consumers, in contrast prefer a large
consumers, in contrast prefer a large
variety of goods and services to choose
variety of goods and services to choose
from and usually buy them in small units.
from and usually buy them in small units.
27
Retailers are able to balance the

Retailers are able to balance the
demands of both sides, by collecting
demands of both sides, by collecting
an assortment of goods from different
an assortment of goods from different
sources, buying them in sufficiently
sources, buying them in sufficiently
large quantities and selling them to
large quantities and selling them to
consumers in small units
consumers in small units
2
2
Breaking Bulk:
Breaking Bulk:
to reduce
to reduce
transportation
transportation
costs, manufacturer and wholesalers
costs, manufacturer and wholesalers
typically ship large cartons of the products,
typically ship large cartons of the products,
which are then tailored by the retailers into
which are then tailored by the retailers into
smaller quantities to meet individual
smaller quantities to meet individual
consumption needs
consumption needs
28
3.Holding stock:
3.Holding stock:
Retailers maintain an inventory
Retailers maintain an inventory
that allows for instant availability of the
that allows for instant availability of the
product to the consumers. It helps to keep
product to the consumers. It helps to keep
prices stable and enables the manufacture
prices stable and enables the manufacture
to regulate production.
to regulate production.
4.Promotional support:
4.Promotional support:
small manufacturers can
small manufacturers can
use retailers to provide assistance with
use retailers to provide assistance with
transport, storage, advertising, and pre-
transport, storage, advertising, and pre-
payment of merchandise.
payment of merchandise.
Session-III
Session-III
30
What is relationship building all
What is relationship building all
about?
about?
Relationships are the building blocks for all Relationships are the building blocks for all
community organizing activities. community organizing activities. Whether you Whether you
want to organize a volleyball game or get rid of want to organize a volleyball game or get rid of
unfair housing practices in your town, you will unfair housing practices in your town, you will
need lots of good relationships. need lots of good relationships.
The relationships we have with our coworkers, the The relationships we have with our coworkers, the
communities we serve, and even our adversaries communities we serve, and even our adversaries
are the are the means means for achieving our goals. It is our for achieving our goals. It is our
relationships all added together that are the relationships all added together that are the
foundation of an organized effort for change. foundation of an organized effort for change.
It is also the It is also the people people who motivate us to reach our who motivate us to reach our
goals. As community builders, we care deeply goals. As community builders, we care deeply
about people and caring is part of our work. about people and caring is part of our work.
31
Why do we need to build and sustain
Why do we need to build and sustain
relationships?
relationships?
Community building occurs one-to-one Community building occurs one-to-one. You need . You need
to build relationships with people one-to-one if you to build relationships with people one-to-one if you
want them to become involved in your group or want them to become involved in your group or
organization. Many people become involved in a organization. Many people become involved in a
community group or organization, just because community group or organization, just because
they have a relationship with another person who they have a relationship with another person who
is already involved. is already involved.
We need relationships in order to win allies to our We need relationships in order to win allies to our
cause cause. In order to get support from people outside . In order to get support from people outside
our organizations, we need to build relationships in our organizations, we need to build relationships in
which people know and trust us. which people know and trust us.
Our relationships give meaning and richness to our Our relationships give meaning and richness to our
work and to our lives. work and to our lives. We all need a community of We all need a community of
people to share the joys and the struggles of people to share the joys and the struggles of
organizing and making community change. A little organizing and making community change. A little
bit of camaraderie goes a long way. bit of camaraderie goes a long way.
32
When do you build and sustain
When do you build and sustain
relationships?
relationships?
Relationships are the groundwork. Often Relationships are the groundwork. Often
building relationships is the groundwork that must building relationships is the groundwork that must
be laid before anything else gets done on a be laid before anything else gets done on a
project. The bigger the project, the more project. The bigger the project, the more
relationships you will usually need as a foundation. relationships you will usually need as a foundation.
Establish relationships before you need them Establish relationships before you need them
It's always better to build relationships It's always better to build relationships before before you you
need them or before a conflict arises. need them or before a conflict arises.
Establishing relationships in a crisis Establishing relationships in a crisis

It is not impossible to establish relationships It is not impossible to establish relationships
during a crisis, and often a crisis can bring people during a crisis, and often a crisis can bring people
together together
33
How do you sustain
How do you sustain
relationships?
relationships?
Pay attention to people. Pay attention to people.

Check in with people when you need to. This may take only Check in with people when you need to. This may take only
a few minutes a week, but those few minutes can make the a few minutes a week, but those few minutes can make the
difference in helping your friend or co-worker remember the difference in helping your friend or co-worker remember the
importance of the work you are doing together. importance of the work you are doing together.
Communicate openly Communicate openly

People need to communicate. It's a good idea to set aside People need to communicate. It's a good idea to set aside
some time just to talk about the way things are going. some time just to talk about the way things are going.
When people don't have a chance to talk about important When people don't have a chance to talk about important
issues, misunderstandings can occur and tensions often issues, misunderstandings can occur and tensions often
build up. build up.
Appreciate each other Appreciate each other

Everyone needs to be appreciated in order to keep Everyone needs to be appreciated in order to keep
relationships going. If you notice that someone did a stellar relationships going. If you notice that someone did a stellar
job of collecting the necessary data for the committee, say job of collecting the necessary data for the committee, say
so. so.
34
How do you sustain
How do you sustain
relationships?
relationships?
Extend yourself Extend yourself

Go a little out of your way, at least once in a while. If your Go a little out of your way, at least once in a while. If your
co-worker needs to spend some extra time with his co-worker needs to spend some extra time with his
daughter, you might tell him go home early and you'll finish daughter, you might tell him go home early and you'll finish
up the grant proposal. up the grant proposal.
Volunteer to do some work for their organization (if they are Volunteer to do some work for their organization (if they are
not already in yours) not already in yours)
If you lend them a hand, they are likely to think well of you If you lend them a hand, they are likely to think well of you
and give something back in return. and give something back in return.
Challenge each other to do better Challenge each other to do better

We all need a buddy to help us stretch ourselves beyond We all need a buddy to help us stretch ourselves beyond
what we think we can do. We can also build stronger what we think we can do. We can also build stronger
relationships by challenging our work partners to take on relationships by challenging our work partners to take on
bigger challenges. bigger challenges.
35
Steps in managing
Steps in managing
relations
relations
Build relationships one at a time

Build relationships one at a time
Be friendly and make a

Be friendly and make a
connection
connection
Ask people questions

Ask people questions
Tell people about yourself

Tell people about yourself
Be persistent
Be persistent
Invite people to get involved

Invite people to get involved
Learn about the person's culture

Learn about the person's culture
Listen and withhold judgment

Listen and withhold judgment
Session-IV
Session-IV
Strategic Retail Planning,
Strategic Retail Planning,
Development & control
Development & control
37
Planning
Planning
Retail marketing plan consists of:

Retail marketing plan consists of:
Setting objectives
Setting objectives
Systematic way of identifying a

Systematic way of identifying a
range of options.
range of options.
Formulation of plans for achieving

Formulation of plans for achieving
goals
goals
Logical sequence of retailing

Logical sequence of retailing
activities.
activities.
38
Importance of planning
Importance of planning
Hostile and complex retail marketing

Hostile and complex retail marketing
environment
environment
External and internal retail organisation

External and internal retail organisation
factors interact
factors interact
Maximising revenue Maximising revenue
Maximising profit Maximising profit
Maximising return on investment Maximising return on investment
Minimising costs Minimising costs
Each element has conflicting needs

Each element has conflicting needs
All these variables interact

All these variables interact
All these variables result in optimum

All these variables result in optimum
compromise.
compromise.
39
Approaches to planning
Approaches to planning
Top down approach
Top down approach
Retail management sets goals and

Retail management sets goals and
plans for all levels of management.
plans for all levels of management.
Bottom up approach
Bottom up approach
Various units prepare own goals and

Various units prepare own goals and
plans sent up for approval.
plans sent up for approval.
40
Types of planning
Types of planning
Annual plan short term and

Annual plan short term and
tactical.
tactical.
Long range three to five years

Long range three to five years
relating to strategic retail
relating to strategic retail
management.
management.
Strategic plans five to ten years

Strategic plans five to ten years
long term plans relating to the
long term plans relating to the
adaptation of the retailing
adaptation of the retailing
approach.
approach.
41
Short-term Retail Planning
Short-term Retail Planning
Short-term
Short-term
Tactical planning relating to:
Tactical planning relating to:
Current retail marketing position

Current retail marketing position
Strategy for the year

Strategy for the year
Objectives for the year

Objectives for the year
Action , budgets and controls.

Action , budgets and controls.
Coordinating retail activities within

Coordinating retail activities within
departments.
departments.
42
Long-term plan
Long-term plan
Long-term
Long-term
Medium range planning relating to:
Medium range planning relating to:
Major factors and forces affecting the

Major factors and forces affecting the
retailer.
retailer.
Long-term objectives.
Long-term objectives.
Resources required.
Resources required.
Reviewed and updated regularly.

Reviewed and updated regularly.
Deals with current business

Deals with current business
43
Strategic retail planning
Strategic retail planning
This is the process of developing

This is the process of developing
and maintaining a strategic fit
and maintaining a strategic fit
between the retail organisations
between the retail organisations
capabilities and its changing
capabilities and its changing
marketing opportunities.
marketing opportunities.
It relies on developing a clear

It relies on developing a clear
corporate mission, supporting
corporate mission, supporting
objectives, creating a sound
objectives, creating a sound
business portfolio, and
business portfolio, and
coordinating functional strategies.
coordinating functional strategies.
44
Corporate level planning
Corporate level planning
Retail management should plan

Retail management should plan
which business the retailer should
which business the retailer should
stay in and which new areas to
stay in and which new areas to
pursue.
pursue.
Design the retail organisation to

Design the retail organisation to
withstand shocks.
withstand shocks.
Adapt the organisation to take

Adapt the organisation to take
advantage of market opportunities.
advantage of market opportunities.
Define the corporate mission.

Define the corporate mission.
45
Mission statement
Mission statement
A strategic plan should begin with a

A strategic plan should begin with a
mission statement.
mission statement.
A mission statement is a statement of

A mission statement is a statement of
the retail organizations purpose, what
the retail organizations purpose, what
it wants to achieve in the large
it wants to achieve in the large
environment.
environment.
It guides people in the retail

It guides people in the retail
organization so that they can work
organization so that they can work
independently and yet collectively
independently and yet collectively
towards overall organizational goals.
towards overall organizational goals.
46
Exam type question
Exam type question
It is the effective blending of all the elements It is the effective blending of all the elements
of retail marketing mix activities within the of retail marketing mix activities within the
retail organization that determines the retail organization that determines the
success of retail marketing management. success of retail marketing management.
Discuss this statement and explain with retail Discuss this statement and explain with retail
examples how the elements of retail examples how the elements of retail
marketing mix could be blended to ensure the marketing mix could be blended to ensure the
success of retail operation. success of retail operation.
Mastering the process of trying to optimise Mastering the process of trying to optimise
the retail marketing mix still defies and the retail marketing mix still defies and
frustrates most retail managers. Explain why frustrates most retail managers. Explain why
personal guesswork and intuitions are used personal guesswork and intuitions are used
by retail managers most of the time. by retail managers most of the time.
47
STRATEGIC RETAIL MANAGEMENT
STRATEGIC RETAIL MANAGEMENT
What is retail management and retail

What is retail management and retail
strategy
strategy
Steps in strategic planning

Steps in strategic planning
Creating the desired market position

Creating the desired market position
48
Strategic Retail
Strategic Retail
Management
Management
Is both an art and science

Is both an art and science
Requires both creative and analytical

Requires both creative and analytical
skills
skills
Involves an overall framework of action

Involves an overall framework of action
Is intended to help:
Is intended to help:
The retail manager step back and take a

The retail manager step back and take a
fresh look at the business
fresh look at the business
Create the desired position or image in

Create the desired position or image in
the marketplace
the marketplace

49
STRATEGIC RETAIL
STRATEGIC RETAIL
MANAGEMENT PROCESS
MANAGEMENT PROCESS
INVOLVES
INVOLVES
-
Planning the organization
Planning the organization
-
Implementing strategic and
Implementing strategic and
tactical decisions at all
tactical decisions at all
organizational levels
organizational levels
-
Controlling all the firms activities.
Controlling all the firms activities.
Retailing is such a nitty-gritty
business it is often difficult
tosee the forest for the trees
50
Retail Strategy: is an overall plan to
gain a competitive advantage
through the use of a distinctive
retail mix to capture the patronage
of one or more target markets
51
STEPS IN STRATEGIC
STEPS IN STRATEGIC
PLANNING
PLANNING
1.Develop Mission Statement
1.Develop Mission Statement
2.Establish Objectives
2.Establish Objectives
3.Conduct A Situation Analysis
3.Conduct A Situation Analysis
4.Select Markets In Which To
4.Select Markets In Which To
Compete
Compete
5.Obtain Resources Needed To
5.Obtain Resources Needed To
Compete
Compete
6.Develop A Positioning Strategy
6.Develop A Positioning Strategy
7.Implement Strategy
7.Implement Strategy
8.Evaluate Results
8.Evaluate Results
52
THE MISSION STATEMENT
THE MISSION STATEMENT
Defines the retail concept

Defines the retail concept
Is a generalized, yet meaningful

Is a generalized, yet meaningful
expression of the firms future direction
expression of the firms future direction
Often reflects the organizations values

Often reflects the organizations values
or corporate culture
or corporate culture

It should:
It should:
Identify both the business and the

Identify both the business and the
customer domains
customer domains
Identify the organizations

Identify the organizations
responsibilities to stakeholders
responsibilities to stakeholders
Provide a general blueprint for

Provide a general blueprint for
accomplishing the mission
accomplishing the mission
53
ORGANIZATIONAL
ORGANIZATIONAL
OBJECTIVES
OBJECTIVES
O
Market Objectives
Market Objectives
+

are aimed at securing customer
are aimed at securing customer
patronage and achieving competitive
patronage and achieving competitive
positions within the general
positions within the general
marketplace
marketplace
O
Financial Objectives
Financial Objectives
+

are directed at ensuring that the
are directed at ensuring that the
retail organization operates profitably
retail organization operates profitably
and productively
and productively
O
Social Objectives
Social Objectives
+

are concerned with identifying the
are concerned with identifying the
firms relationships with and reactions
firms relationships with and reactions
to social, cultural, and ethical
to social, cultural, and ethical
environments that are both internal and
environments that are both internal and
external to the firms operations
external to the firms operations
54
MARKET OBJECTIVES
MARKET OBJECTIVES
Customer Patronage
Customer Patronage
-
Sales Objectives
Sales Objectives
-
Customer Traffic
Customer Traffic
-
Customer Loyalty
Customer Loyalty
55
MARKET OBJECTIVES
MARKET OBJECTIVES
Competitive Position
Competitive Position
-
Market Share
Market Share
-
Retail Image
Retail Image
-
Vendor Relations
Vendor Relations
56
FINANCIAL OBJECTIVES
Profitability
Profitability
-
Targeted Returns
Targeted Returns
-
Earning Per Share
Earning Per Share
-
Stockholder Dividends
Stockholder Dividends
57
Productivity
Productivity
-
Labor
Labor
-
Space
Space
-
Merchandise
Merchandise

58
SOCIETAL OBJECTIVES
SOCIETAL OBJECTIVES
Social Responsibility
Social Responsibility
Corporate Values
Corporate Values
59
CONDUCT A SITUATION
CONDUCT A SITUATION
ANALYSIS
ANALYSIS
+
Complete a Retail Audit
Complete a Retail Audit
+
Determine retail strengths and
Determine retail strengths and
weakness
weakness
+
Evaluate market opportunities and
Evaluate market opportunities and
threats
threats
+
Conduct a Competitive Analysis
Conduct a Competitive Analysis
60
DEVELOP STRATEGY
DEVELOP STRATEGY
Refers to the position the company

Refers to the position the company
occupies in the market relative to the
occupies in the market relative to the
competition
competition
Explains how the company will

Explains how the company will
differentiate itself from other
differentiate itself from other
organizations competing for the same
organizations competing for the same
customers
customers
Gives the retailers reason for being

Gives the retailers reason for being
Involves selling the store; not the

Involves selling the store; not the
merchandise
merchandise
Gives the customer a reason to shop at

Gives the customer a reason to shop at
your store rather than the competitors
your store rather than the competitors
store
store
61
HOW DO YOU CREATE THE
HOW DO YOU CREATE THE
DESIRED
DESIRED
POSITION IN THE MARKET
POSITION IN THE MARKET
O
Create an environment conducive to
Create an environment conducive to
exchange
exchange
O
Match your retail mix to consumer
Match your retail mix to consumer
expectations
expectations
O
Perceptual mapping can be useful to
Perceptual mapping can be useful to
identify market gaps
identify market gaps
62
What does the retailer
What does the retailer
provide in the exchange?
-
products / services
products / services
-
transfer of ownership
transfer of ownership
-
temporary use of store facilities
temporary use of store facilities
-
point of purchase information
point of purchase information
-
image / prestige
image / prestige
-
credit
credit
-
delivery
delivery
-
other
other
63
What does the customer
What does the customer
-
money
money
-
time and effort
time and effort
-
word of mouth advertising
word of mouth advertising
-
hope of repeat patronage
hope of repeat patronage
Retailer must meet or exceed customer

Retailer must meet or exceed customer
expectations!
expectations!
Retailer must put together the retail

Retailer must put together the retail
program
program
that the customer wants, that is different
that the customer wants, that is different
from
from
the competition!!
the competition!!
64
RETAIL CONTROL
RETAIL CONTROL
Check to see that objectives are

Check to see that objectives are
achieved
achieved
Evaluate strategies and tactics

Evaluate strategies and tactics
to see if they are still relevant
to see if they are still relevant
and effective
and effective
Set new performance targets

Set new performance targets
and plans as required
and plans as required
Session-V
Session-V
66
Major type of retail stores
Major type of retail stores

There is no universally accepted method of
There is no universally accepted method of
classifying retailer. Various schemes have
classifying retailer. Various schemes have
been proposed to categories retailers based
been proposed to categories retailers based
on
on
Number of outlets
Number of outlets
Margin vs. turnover

Margin vs. turnover
Location
Location
Size.
Size.
Because of overlap of classification criteria,
Because of overlap of classification criteria,
some stores may qualify as under two
some stores may qualify as under two
different categories.
different categories.
67
1. 1.
General merchandise retailer
General merchandise retailer
: general
: general
merchandise retailer carry a variety of
merchandise retailer carry a variety of
product lines, with considerable depth.
product lines, with considerable depth.
Some major types of these
Some major types of these
stores include
stores include
supermarkets and hypermarkets ,
supermarkets and hypermarkets ,
discount stores and department stores.
discount stores and department stores.
o
Super market
Super market
: A supermarket is a large self
: A supermarket is a large self
service retail store that carries a wide
service retail store that carries a wide
variety of consumer products under one
variety of consumer products under one
roof , such as complete line of food products
roof , such as complete line of food products
, laundry requirement, household
, laundry requirement, household
maintenance items. In India cooperative
maintenance items. In India cooperative
have managed some supermarkets for
have managed some supermarkets for
quite sometime like super bazaar in Delhi,
quite sometime like super bazaar in Delhi,
apna bazaar shakari bhandar etc.
apna bazaar shakari bhandar etc.
68
o
Discount store
Discount store
:
:
these stores are self service,
these stores are self service,
standard general merchandise retailers
standard general merchandise retailers
regularly offering brand name and private
regularly offering brand name and private
brand items at low price, earn lower
brand items at low price, earn lower
margins and push for high sales turnover.
margins and push for high sales turnover.
The characteristics of true discount stores
The characteristics of true discount stores
include
include
Selling products at discounted price

Selling products at discounted price
Carry standard international , national, or

Carry standard international , national, or
store brand toi build image
store brand toi build image
Self service stores to minimize operational

Self service stores to minimize operational
costs
costs
Preferred store location are low rent areas.

Preferred store location are low rent areas.
Like best known discount store is Wal-Mart. In
Like best known discount store is Wal-Mart. In
India almost all retail stores offer
India almost all retail stores offer
discounts, subhiksha
discounts, subhiksha
69
o
Department store
Department store
: a department store is
: a department store is
larger retail store organized into several
larger retail store organized into several
departments, offering a broad verity and
departments, offering a broad verity and
depth of product lines. The product mix may
depth of product lines. The product mix may
include food products, appliances, clothing,
include food products, appliances, clothing,
furnishing and other household goods.
furnishing and other household goods.
Like Pantaloons, shoppers stop,

Like Pantaloons, shoppers stop,
department store only for kids is Kids Kemp.

department store only for kids is Kids Kemp.
Fashion related department stores in India

Fashion related department stores in India
are Ebony, Globus, pantaloons, lifestyles.
are Ebony, Globus, pantaloons, lifestyles.
70
2. 2.
Specialty Stores:
Specialty Stores:
specialty stores carry a
specialty stores carry a
narrow product mix with depth of
narrow product mix with depth of
assortment within the line.
assortment within the line.
The emphasis is on a limited number of

The emphasis is on a limited number of
complimentary products and high level of
complimentary products and high level of
customer service
customer service
Specialty store often sell shopping goods

Specialty store often sell shopping goods
such as Jewelry, apparel, computers, music
such as Jewelry, apparel, computers, music
systems, sporting goods.
systems, sporting goods.
Like; Tanishq, Titan watches, Van Heusen,

Like; Tanishq, Titan watches, Van Heusen,
Raymond's.
Raymond's.
3. 3.
Shopping Malls:
Shopping Malls:
shopping malls typically
shopping malls typically
deal with several bases and product
deal with several bases and product
categories and provide a large variety of
categories and provide a large variety of
merchandise abs service. There are 96
merchandise abs service. There are 96
operational malls in India and expected to
operational malls in India and expected to
grow 158 by this current year.
grow 158 by this current year.
71
Ansal plaza (Delhi), Garuda mall

Ansal plaza (Delhi), Garuda mall
(Bangalore) Sahara plaza Gurgaon
(Bangalore) Sahara plaza Gurgaon
Spenser Plaza Chennai
Spenser Plaza Chennai
E
Retail chains:
Retail chains:
a retail chain operates
a retail chain operates
multiple retail outlets under common
multiple retail outlets under common
ownership in different cities and
ownership in different cities and
towns.
towns.
To some extent the purchasing
To some extent the purchasing
function and decision making are
function and decision making are
coordinated or centralized.
coordinated or centralized.
Like Westside, Globus, Food world,

Like Westside, Globus, Food world,
McDonald's retail petrol outlets. Etc.
McDonald's retail petrol outlets. Etc.
Session-VI
Session-VI
Market structure & structural
Market structure & structural
change
change
73
The Marketing Strcture
The Marketing Strcture
Manufacturer
Retailer
Consumer
Manufacturer
Consumer
Manufacturer
Wholesaler
Retailer
Consumer
F
e
e
d
b
a
c
k
74
Retailing in India
Retailing in India
.
.
+
Retail is the new buzzword in India.
Retail is the new buzzword in India.
+
The global Retail development Index has
The global Retail development Index has
ranked India first, among the top 30
ranked India first, among the top 30
emerging markets in the world.
emerging markets in the world.
+
It is believed that India has the potential to
It is believed that India has the potential to
deliver the fastest growth over the next 50
deliver the fastest growth over the next 50
years.
years.
+
While barter would be considered to be
While barter would be considered to be
oldest form of retail trade, since
oldest form of retail trade, since
independence , retail in India has evolved
independence , retail in India has evolved
to support the unique needs of country,
to support the unique needs of country,
given its size and complexity
given its size and complexity
75
+
Second largest sector after Agriculture.
Second largest sector after Agriculture.
Contributes about 10 11 % of the GDP
Contributes about 10 11 % of the GDP
+
The estimated size of the organized retail
The estimated size of the organized retail
industry in India is Rs. 16,000 crores. This
industry in India is Rs. 16,000 crores. This
is 2 % of the total estimated retail trade.
is 2 % of the total estimated retail trade.
+
Indian Retail trade increased from Rs. 2200
Indian Retail trade increased from Rs. 2200
billion in 2000 to Rs 3300 billion by the year
billion in 2000 to Rs 3300 billion by the year
2005
2005
+
India's first true shopping mall complete
India's first true shopping mall complete
with food courts, recreation facilities and
with food courts, recreation facilities and
large car parking space was inaugurated
large car parking space was inaugurated
as lately as in 1999 in Mumbai. (this mall is
as lately as in 1999 in Mumbai. (this mall is
called "Crossroads").
called "Crossroads").
76
CHANGE IN CUSTOMER MINDSET/EXPECTATION.
GREATER COMPETITION
LOW AVERAGE THROUGHPUT PER RE-SELLER AND

HENCE GREATER RELIANCE ON MARGINS & RANGE.
LOW EMPHASIS ON PRODUCT DIFFERENTIATION

GREATER EMPHASIS ON RELATIONSHIP, SERVICE,
CONVENIENCE
US AND THEM VS PARTNERSHIPS
RETAILING THE CUSTOMER FOCUS

Structural Change
Structural Change
77
THE CUSTOMER
IS
WHY
78
HQ
COOS
DIVISIONS
AREAS
FRONTLINE
CUSTOMERS
CUSTOMERS
FRONTLINE
AREAS
DIVISIONS
SUPPORT
CENTRE
ORGANIZATIONS TO BE DELAYERED TO BE MORE
CLOSELY ALIGNED TO CUSTOMER NEEDS
COOS
79
CUSTOMERS
FRONTLINE
TERRITORY
MANAGER
MARKET UNIT
FUNCTION
FUNCTION
CEO
ONLY 3 LAYERS BETWEEN CEO AND CUSTOMER
EVERYONE ELSE IN THE ORGANIZATION SUPPORTS THE

FRONTLINE
80
SOME FUNDAMENTALS
LET THE CUSTOMER DECIDE WHAT SATISFIES HIM
CUSTOMER SATISFACTION GET DRIVEN BY MIND &

NOT PURSE
CUSTOMER SATISFACTION WORKS AS A

MULTIPLIER FOR YOUR INITIATIVES
BALANCE CUSTOMER EXPECTATION

WITH BUSINESS PRUDENCE
DRIVING CUSTOMER SATISFACTION
81
WHAT DRIVES CUSTOMER SATISFACTION
TRUST
TRANSPAARENCY
TOGETHERNESS
82
TRUST -PRODUCT IS PURE

-PRODUCT QUANTITY IS RIGHT
-COMPLIANCE WITH COMMITMENTS
AND AGREEMENTS
-AVAILABLE WHEN THE CUSTOMER
WANTS
-REGULARITY OF VISIT
TRANSPARENCY -CONSISTENCY OF TRADING TERMS

AND POLICIES
-CONSISTENCY ACROSS LEVELS &
TIME
83
TOGETHERNESS -ATTITUDE
-UNDERSTANDS MY NEEDS
-SUPPORTS AND GUIDES
-SAFEGUARDS MY INTERESTS
-PERSONAL BOND (KNOWLEDGE
OF CUSTOMERS/ FAMILY DETAILS
-READY TO HELP CUSTOMER MAKE
MORE MONEY (PROMOTION,
PRICING, ETC.)
84
CUSTOMER SATISFACTION SURVEY

-
IN THE EYES OF CUSTOMER WHAT ARE THE FACTORS
WHICH DRIVE CUSTOMER SATISFACTION
-WHICH ATTRIBUTES OF OUR SERVICE IMPACT OUR
CUSTOMERS MOST
-HOW DO OUR CUSTOMERS RATE US ON THESE ATTRIBUTES
-WHOM DO THE CUSTOMERS RATE AS THE BEST IN TRADE
-HOW DO WE COMPARE OUR ATTRIBUTES VS BEST IN
TRADE
85
DRIVING CUSTOMER SATISFACTION DRIVING CUSTOMER SATISFACTION
CUSTOMER SATISFACTION IS INTEGRAL PART OF RETAIL

TRACKING MECHANIM
CUSTOMER SATISFACTION SCORES ARE PART OF

EMPLOYEE APPRAISAL OBJECTIVE\CUSTOMER.
CUSTOMER SERVICE CELL AT EACH LOCATION. SERVICE

STANDARDS/ KPIS SPECIFIED AND TRACKED
SALES TOOLS AND TRAINING PROGRAMS GEARED

TOWARDS BETTER EXECUTION AND BUILDING
PARTNERSHIP WITH CUSTOMERS
86
THE BIGGEST CHALLENGE --PEOPLE
TRAINING, TRAINING & TRAINING AT ALL LEVELS
CUSTOMERS SATISFACTION FOCUS AS OPPOSED TO

DELIVERY
CAPTURE IMPULSE BUYING THROUGH OUTSTANDING

MERCHANDISING
PASSION TO WIN
COMMITMENT TO OWNERSHIP
TEAM ABOVE INDIVIDUAL SUCCESS
RECOGNIZING AND REWARDING SUCCESS

87
THE KEY STRATEGY
CONSUMER PULL (MARKETING) SHOULD BENEFIT

CUSTOMERS
CONSUMER PUSH SHOULD BE FRONTLINE FOCUS
TOM NEEDS CONTINUOUS FOCUS
EYE FOR EXCELLENCE AND QUALITY WILL

PROVIDE WINNING EDGE.
Session-VII
Session-VII
The Customer and Retail
The Customer and Retail
Business: Knowing &
Business: Knowing &
focusing your Customers
focusing your Customers
89
Customer Analysis
Customer Analysis
Who
Who
Where
Where
When
When
What
What
How
How
90
Customer Analysis
Customer Analysis
Consumers
Consumers
Business to Business
Business to Business
91
Customer Analysis
Customer Analysis
Consumers
Consumers
End use customers

End use customers
Brand loyalty
Brand loyalty
Repurchase
Repurchase
92
Customer Analysis
Customer Analysis
Business to Business requires special

Business to Business requires special
considerations
considerations
derived demand
derived demand
purchaser is often NOT the user

purchaser is often NOT the user
93
Customer Analysis
Customer Analysis
Where are my customers?

Where are my customers?
Invoice data
Invoice data
Warranty cards
Warranty cards
94
Customer Analysis
Customer Analysis
When Do My Customers Buy?

When Do My Customers Buy?
Demand variation
Demand variation
Changing customer buying patterns

Changing customer buying patterns
95
Customer Analysis
Customer Analysis
What Do My Customers Want?

What Do My Customers Want?
Recording sales by price range, size

Recording sales by price range, size
and color
and color
Competitive information from

Competitive information from
independent research firms
independent research firms
96
Customer Analysis
Customer Analysis
How Do My Customers Buy?

How Do My Customers Buy?
Recognition of problem
Recognition of problem
Search for alternatives and info

Search for alternatives and info
Buyers mental evaluation of

alternatives
alternatives
Purchase
Purchase
Postpurchase behavior
Postpurchase behavior
97
Customer Analysis
Customer Analysis
Problem recognition
Problem recognition
Depleted inventory
Depleted inventory
Advertising
Advertising
Promotions
Promotions
Store display
Store display
98
Customer Analysis
Customer Analysis
Search for alternatives and

Search for alternatives and
information
information
Past experience
Past experience
Brochures
Brochures
Catalogs
Catalogs
99
Customer Analysis
Customer Analysis
Evaluation of alternatives
Evaluation of alternatives
Standard Learning Hierarchy

Standard Learning Hierarchy
Dissonance-Attribution Hierarchy
Dissonance-Attribution Hierarchy
Low - Involvement Hierarchy

Low - Involvement Hierarchy
100
Standard Learning
Standard Learning
Theory
Theory
Cognitive (Perceptual)
Affective (Like - Dislike)

Conative (Purchase)
Conative (Purchase)
Buyers are highly involved

Buyers are highly involved
Products are clearly differentiated

Products are clearly differentiated
Mass media/Early PLC

Mass media/Early PLC
101
Dissonance-Attribution
Dissonance-Attribution
Theory
Theory
Conative (Purchase)
Conative (Purchase)
Affective (Like-Dislike)
Affective (Like-Dislike)
Buyers highly involved/products

Buyers highly involved/products
similar
similar
Salesperson important
Salesperson important
Early Maturity
Early Maturity
102
Low-Involvement Theory
Low-Involvement Theory
Conative (Purchase)
Conative (Purchase)

Low involvement/similar products

Low involvement/similar products
Broadcast/Late maturity
Broadcast/Late maturity
103
Customer Analysis
Customer Analysis

alternatives
alternatives
Friends
Friends
Social class
Social class
Personality
Personality
Lifestyle
Lifestyle
104
Customer Analysis
Customer Analysis
Purchase
Purchase
Store location
Store location
Skill of the salesperson

Skill of the salesperson
Availability of credit
Availability of credit
105
Customer Analysis
Customer Analysis
Postpurchase Behavior
Postpurchase Behavior
Speed of repairs
Speed of repairs
Product durability
Product durability
Extended warranty
Extended warranty
106
Customer Analysis
Customer Analysis
How Does My Firm Become Customer

How Does My Firm Become Customer
Oriented?
Oriented?
Customer Checklist
Customer Checklist
Plant tours
Plant tours
Customer visits
Customer visits
107
Customer Analysis
Customer Analysis
Action and results driven

Action and results driven
Encourages initiative
Encourages initiative
Increases role of staff to customers

Increases role of staff to customers
Builds trust
Builds trust
Session-VIII
Session-VIII
Perception
Perception
109
Learning
Learning
The process by which individuals

The process by which individuals
acquire the purchase and
acquire the purchase and
consumption knowledge and
consumption knowledge and
experience that they apply to future
experience that they apply to future
related behavior
related behavior
Marketers must teach consumers:

Marketers must teach consumers:
where to buy
where to buy
how to use
how to use
how to maintain
how to maintain
how to dispose of products

how to dispose of products
110
Learning Theories
Learning Theories
Behavioral
Behavioral
Theories
Theories
Based on Based on
observable observable
behaviors behaviors
(responses) that (responses) that
occur as the result occur as the result
of exposure to of exposure to
stimuli stimuli
Cognitive
Cognitive
Theories
Theories
Learning based on Learning based on

mental information mental information
processing processing
Often in response to Often in response to

problem solving problem solving
111
Elements of
Elements of
Learning Theories
Learning Theories
Motivation
Motivation
Cues
Cues
Response
Response
Reinforcement
Reinforcement
112
Behavioral Learning
Behavioral Learning
Theories
Theories
Classical Conditioning
Instrumental Conditioning
Instrumental Conditioning
Modeling or Observational Learning

Modeling or Observational Learning
113
Classical
Classical
Conditioning
Conditioning
A behavioral
learning theory
according to which a
stimulus is paired
with another stimulus
that elicits a known
response that serves
to produce the same
response when used
alone.
114
Strategic Applications of
Repetition
Repetition
Stimulus
Stimulus
generalization
generalization
Stimulus
Stimulus
discrimination
discrimination
Increases the
Increases the
association
association
between the
between the
conditioned and
conditioned and
unconditioned
unconditioned
stimulus
stimulus
Slows the pace of

Slows the pace of
forgetting
forgetting
Advertising
Advertising
wearout is a
wearout is a
problem
problem
Basic Concepts
115
Repetition
Repetition
Stimulus
Stimulus
generalization
generalization
Stimulus
Stimulus
discrimination
discrimination
Having the same

Having the same
response to slightly
response to slightly
different stimuli
different stimuli
Helps me-too
Helps me-too
products to
products to
succeed
succeed
Useful in product
Useful in product
extensions
extensions
Basic Concepts
116
Repetition
Repetition
Stimulus
Stimulus
generalization
generalization
Stimulus
Stimulus
discrimination
discrimination
Selection of a
Selection of a
specific stimulus
specific stimulus
from similar stimuli
from similar stimuli
This discrimination
This discrimination
is the basis of
is the basis of
positioning which
positioning which
looks for unique
looks for unique
ways to fill needs
ways to fill needs
Basic Concepts
117
Instrumental
Instrumental
(Operant)
(Operant)
Conditioning
Conditioning
A behavioral theory of
learning based on a
trial-and-error process,
with habits forced as
the result of positive
experiences
(reinforcement)
resulting from certain
responses or
behaviors.
118
Types of Reinforcement
Types of Reinforcement
Positive
Positive
Negative
Negative
Forgetting
Forgetting
Extinction
Extinction
iWon Video
119
Instrumental
Instrumental
Conditioning and
Conditioning and
Marketing
Marketing
Customer Satisfaction
(Reinforcement)
(Reinforcement)
Reinforcement Schedules
Reinforcement Schedules
Shaping
Shaping
Massed versus Distributed Learning

Massed versus Distributed Learning
120
Observational
Observational
Learning
Learning
A process by which
individuals observe
how others behave
in response to certain
stimuli and
reinforcements.
Also known as
modeling or
vicarious learning.
121
Cognitive
Cognitive
Learning
Learning
Theory
Theory
Holds that the kind
of learning most
characteristic of
human beings is
problem solving,
which enables
individuals to gain
some control over
their environment.
122
Information Processing
Relates to cognitive ability and the

Relates to cognitive ability and the
complexity of the information
complexity of the information
Individuals differ in imagery their

Individuals differ in imagery their
ability to form mental images which
ability to form mental images which
influences recall
influences recall
123
Movement from short-term to long-

Movement from short-term to long-
term storage depends on
term storage depends on
Rehearsal
Rehearsal
Encoding
Encoding
124
Motivation
Motivation
Motivation refers to an activated

Motivation refers to an activated
state within a person that leads to
state within a person that leads to
goal-directed behavior.
goal-directed behavior.
It consists of the drives, urges, wishes,

It consists of the drives, urges, wishes,
or desires that initiate the sequence of
or desires that initiate the sequence of
events leading to a behavior.
events leading to a behavior.
125
Motivation begins with the presence of

Motivation begins with the presence of
a stimulus that spurs the recognition of
a stimulus that spurs the recognition of
a need.
a need.
Need recognition occurs when a

Need recognition occurs when a
perceived discrepancy exists between
perceived discrepancy exists between
an actual and a desired state of being
an actual and a desired state of being
Needs can be either innate or learned. Needs can be either innate or learned.
Needs are never fully satisfied. Needs are never fully satisfied.
Feelings and emotions (I.e., affect) Feelings and emotions (I.e., affect)
accompany needs accompany needs
Expressive needs involve desires by

Expressive needs involve desires by
consumers to fulfill social and/or
consumers to fulfill social and/or
aesthetic requirements.
aesthetic requirements.
Utilitarian needs involve desires by

Utilitarian needs involve desires by
consumers to solve basic problems (e.g.
consumers to solve basic problems (e.g.
filling a cars gas tank).
filling a cars gas tank).
126
The Structure of
The Structure of
Emotions
Emotions
Ten Fundamental Emotions People

Ten Fundamental Emotions People
Experience:
Experience:
Disgust Interest
Disgust Interest
Joy Surprise
Joy Surprise
Sadness
Sadness
Anger
Anger
Fear
Fear
Contempt
Contempt
Shame
Shame
Guilt
Guilt
127
Some General Theories of
Some General Theories of
Motivation
Motivation
Maslow hierarchy: physical, safety,

Maslow hierarchy: physical, safety,
belongingness, ego, and self-actualiation
belongingness, ego, and self-actualiation
McClellands Theory of Learned Needs

McClellands Theory of Learned Needs
Achievement motivation is seeking to get ahead, Achievement motivation is seeking to get ahead,
to strive for success, and to take responsibility to strive for success, and to take responsibility
for solving problems. for solving problems.
Need for affiliation motivates people to make Need for affiliation motivates people to make
friends, to become members of groups, and to friends, to become members of groups, and to
associate with others. associate with others.
Need for power refers to the desire to obtain and Need for power refers to the desire to obtain and
exercise control over others. exercise control over others.
Need for uniqueness refers to desires to perceive Need for uniqueness refers to desires to perceive
ourselves as original and different. ourselves as original and different.
128
A neutral
A neutral
stimulus, such as
stimulus, such as
a brand name, is
a brand name, is
paired with a
paired with a
stimulus that
stimulus that
elicits a response.
elicits a response.
Through a
Through a
repetition of the
repetition of the
pairing, the
pairing, the
neutral stimulus
neutral stimulus
takes on the
takes on the
ability to elicit the
ability to elicit the
response.
response.
129
The conditioned stimulus (CS) is a

The conditioned stimulus (CS) is a
previously neutral stimulus which
previously neutral stimulus which
is repeatedly paired with the
is repeatedly paired with the
eliciting stimulus.
eliciting stimulus.
The unconditioned stimulus (UCS)

The unconditioned stimulus (UCS)
is an eliciting stimulus.
is an eliciting stimulus.
The conditioned response (CR) is

The conditioned response (CR) is
the response elicited by the CS.
the response elicited by the CS.
The unconditioned response (UCR)

The unconditioned response (UCR)
is the reflexive response elicited by
is the reflexive response elicited by
the unconditioned stimulus.
130
Relations
Relations
Unconditioned/Secondary Stimulus
Unconditioned Response
Pairing
Conditioned Stimulus Conditioned Response
Flag
Emotions
Political
candidate
Emotions
131
Requirements for Effective
Requirements for Effective
Conditioning
Conditioning
The neutral stimulus should precede in

The neutral stimulus should precede in
time the appearance of the
time the appearance of the
unconditioned stimulus.
unconditioned stimulus.
The product is paired consistently with

The product is paired consistently with
Both the conditioned stimulus and the

Both the conditioned stimulus and the
unconditioned stimulus are highly
unconditioned stimulus are highly
salient to the consumer.
salient to the consumer.
132
Applications of Classical Conditioning
Applications of Classical Conditioning
Applications: communications--advertising, Applications: communications--advertising,

public relations, personal selling. public relations, personal selling.
Goal: identify powerful positive stimulus and Goal: identify powerful positive stimulus and
associate brand with it. associate brand with it.
Examples of powerful, emotion causing stimuli: Examples of powerful, emotion causing stimuli:
beautiful, sexy people beautiful, sexy people
patriotic themes, religious symbols patriotic themes, religious symbols
Music, beautiful scenes Music, beautiful scenes
Also, negative stimuli can be associated with Also, negative stimuli can be associated with
competitors. competitors.
Credit card insignia may elicit spending Credit card insignia may elicit spending
responses responses
133
Perception
Perception
Perception is the way in which an

Perception is the way in which an
individual gathers, processes, and
individual gathers, processes, and
interprets information from the
interprets information from the
environment.
environment.
Two views of consumer perception

Two views of consumer perception
Sensory perception
Sensory perception
Gestalt theory of perception

Gestalt theory of perception
134
Sensory Perception
Sensory Perception
It is governed by
It is governed by
the five senses:
the five senses:
sight, smell, sound,
sight, smell, sound,
touch, and taste
touch, and taste
It focuses on
It focuses on
product specific
product specific
sense attributes
sense attributes
and how these are
and how these are
understood and
understood and
evaluated by
evaluated by
consumers
consumers
.
.
135
Factors Affecting
Factors Affecting
Sensory Perception
Sensory Perception
Stimulus factors (examples) Stimulus factors (examples)
Visual cues: color, shape, and size Visual cues: color, shape, and size
Aural cues: tempo and pitch Aural cues: tempo and pitch
Olfactory cues (taste + smell): sweet, bitter, salty, and Olfactory cues (taste + smell): sweet, bitter, salty, and
floral floral
Tactile cues: soft, coarse, and silky Tactile cues: soft, coarse, and silky
Individual Response Factors Individual Response Factors
Sensory acuity: the capacity to recognize and Sensory acuity: the capacity to recognize and
differentiate among certain sensory cues; the limin differentiate among certain sensory cues; the limin
Sensory preferences: sensory product features are Sensory preferences: sensory product features are
perceived and evaluated based on those liked or disliked perceived and evaluated based on those liked or disliked
Consumer expectation: affects how product features are Consumer expectation: affects how product features are
likely to be perceived/evaluated. When features match likely to be perceived/evaluated. When features match
expectations this yields more positive preference expectations this yields more positive preference
outcomes outcomes
136
Gestalt Theory of
Gestalt Theory of
Perception
Perception
Gestalt principle: the whole adds up

Gestalt principle: the whole adds up
to more than the sum of its parts
to more than the sum of its parts
People perceive form above all else

People perceive form above all else
The form may remain constant even

The form may remain constant even
though some specific features of it
though some specific features of it
may change (color, tempo, etc.)
may change (color, tempo, etc.)
variations on the same theme
variations on the same theme
Applications: size, actual/illusion of

Applications: size, actual/illusion of
motion, bordering for ads or displays
motion, bordering for ads or displays
while really the same
while really the same
137
What do you perceive?
What do you perceive?
138
Factors Influencing
Factors Influencing
Gestalt Perception
Gestalt Perception
Stimulus factors: color and contrast,

Stimulus factors: color and contrast,
size, intensity, position, isolation, and
size, intensity, position, isolation, and
unity
unity

Individual response factors:

Individual response factors:
interest, involvement, needs, values,
interest, involvement, needs, values,
and cognitive set
and cognitive set
139
How consumers Interpret
How consumers Interpret
Perceptions
Perceptions
Categorization: the psychological

Categorization: the psychological
process through which a consumer
process through which a consumer
compares the perception of a
compares the perception of a
product with a mental representation
product with a mental representation
of that product in memory.
of that product in memory.
Analytic versus non-analytic (meeting or

Analytic versus non-analytic (meeting or
not meeting required attributes to fit)
not meeting required attributes to fit)
Marketing implications for new products

Marketing implications for new products
or innovations
or innovations
140
Consumer Attributions
Consumer Attributions
It refers to the process through which

It refers to the process through which
people connect events and behavior
people connect events and behavior
with causes.
with causes.
Forms of attribution
Forms of attribution
Product perception (a product problem)

Product perception (a product problem)
Self-perception (questioning oneself)

Self-perception (questioning oneself)
Person perception (questioning others

Person perception (questioning others
motives)
motives)
141
Perceptions of
Perceptions of
Product/Service Quality
Product/Service Quality
Perceived quality a perceptual outcome

Perceived quality a perceptual outcome
generated from processing product or
generated from processing product or
service features (benefits delivered) that
service features (benefits delivered) that
leads the consumer to make inferences
leads the consumer to make inferences
about the quality of that product or service
about the quality of that product or service
Dimensions of perceived quality for

Dimensions of perceived quality for
durable goods: ease of use, versatility,
durable goods: ease of use, versatility,
durability, serviceability, performance, and
durability, serviceability, performance, and
prestige
prestige
Perceived high quality

Perceived high quality
product
product
satisfaction
satisfaction
142
Risk Perception/Risk
Risk Perception/Risk
Reduction
Reduction
It refers to a perceptual process and

It refers to a perceptual process and
behavior outcomes generated from the
behavior outcomes generated from the
perception of risk in the purchase or a
perception of risk in the purchase or a
product or service
product or service
Components of risk:
Components of risk:
Severity of consequences (how bad will it be) Severity of consequences (how bad will it be)
Uncertainty related to those consequences Uncertainty related to those consequences

(what are the chances the consequence will (what are the chances the consequence will
occur) occur)
Risk reduction strategies: behaviors to

Risk reduction strategies: behaviors to
reduce their perception of risk in purchase
reduce their perception of risk in purchase
situations
situations
143
Price Perception
Price Perception
Consumers perceive a price as either

Consumers perceive a price as either
high or low on the basis of a
high or low on the basis of a
comparison with an internal price (or
comparison with an internal price (or
referent price
referent price
).
).
Price perceptions and the social

Price perceptions and the social
judgment theory regions
judgment theory regions
Assimilation (acceptable)
Assimilation (acceptable)
and contrast (too high or low)
and contrast (too high or low)
144
Attitude
Attitude
Attitudes are Learned We are not born with Attitudes are Learned We are not born with
Attitudes relative to purchase behavior are formed Attitudes relative to purchase behavior are formed
as a result of direct experience with the product as a result of direct experience with the product
word-of-mouth exposure to mass media word-of-mouth exposure to mass media
advertising, the internet, and direct marketing advertising, the internet, and direct marketing
Attitudes are not synonymous with behavior Attitudes are not synonymous with behavior
Attitudes may result from behavior Attitudes may result from behavior
Attitudes Have Consistency Attitudes are not Attitudes Have Consistency Attitudes are not
permanent and can and do change Once attitudes permanent and can and do change Once attitudes
develop, they are not always easy to change develop, they are not always easy to change
Often the goal of marketing is to change attitudes Often the goal of marketing is to change attitudes
about a product or company Circumstances about a product or company Circumstances
sometimes preclude consistency between sometimes preclude consistency between
attitudes and behavior attitudes and behavior
145
Attitudes Occur Within a
Attitudes Occur Within a
Situation
Situation
How attitudes affect behavior depends on

How attitudes affect behavior depends on
the situation in which the behavior occurs
the situation in which the behavior occurs
Thus a specific situation may cause
Thus a specific situation may cause
consumers to behave in ways that are
consumers to behave in ways that are
inconsistent with their attitudes From a inconsistent with their attitudes From a
marketers perspective, it is important to marketers perspective, it is important to
consider the situation in which the consider the situation in which the
behavior takes place, or one might misinterpret behavior takes place, or one might misinterpret
the relationship between attitude and behavior the relationship between attitude and behavior
146
Sources of Attitudes
Sources of Attitudes
Personal Experience The primary basis on which attitudes Personal Experience The primary basis on which attitudes
towards goods and services are formed Free products, towards goods and services are formed Free products,
cents-off promotions, etc. Marketers goal is to get cents-off promotions, etc. Marketers goal is to get
consumers to try a product and, hopefully, develop a consumers to try a product and, hopefully, develop a
positive attitude towards it positive attitude towards it
Influence of Family & Friends Family and friends are a Influence of Family & Friends Family and friends are a
major influence on our values, beliefs and attitudes We major influence on our values, beliefs and attitudes We
carry over into adulthood many of the attitudes we carry over into adulthood many of the attitudes we
developed as children Our peer and social groups also developed as children Our peer and social groups also
influence our attitudes influence our attitudes
Direct Marketing & Mass Media Direct marketers are able Direct Marketing & Mass Media Direct marketers are able
to use new technologies to target smaller and smaller to use new technologies to target smaller and smaller
market segments As a result, many solicitations are highly market segments As a result, many solicitations are highly
personalized and have the capacity to create favorable personalized and have the capacity to create favorable
attitudes towards their products attitudes towards their products
FAQs
FAQs
148
Questions
Questions
Q1: What is Retail management? Name top ten retail brands in the Q1: What is Retail management? Name top ten retail brands in the
world. world.
Ans: Retailing encompasses business activities involved in selling Ans: Retailing encompasses business activities involved in selling
goods & services to the final consumer for their personal, family or goods & services to the final consumer for their personal, family or
house hold use. house hold use.
Top ten brands are: Wal-Mart, Home Depot, Kroger, Sears Roebuck, Top ten brands are: Wal-Mart, Home Depot, Kroger, Sears Roebuck,
Target, Albertsons, Kmart, Costco, Safeway and J.C.Penney. Target, Albertsons, Kmart, Costco, Safeway and J.C.Penney.
Q2: What qualities should a one possess to pursue retail as career? Q2: What qualities should a one possess to pursue retail as career?
Ans: People person, effective team member, able to perform variety of Ans: People person, effective team member, able to perform variety of
tasks, make quick decisions, analytical skills, can work under tasks, make quick decisions, analytical skills, can work under
pressure. pressure.
Q3: What are the specific characteristics of retail? Q3: What are the specific characteristics of retail?
Ans: Small average sale, Impulse purchase, popularity of stores. Ans: Small average sale, Impulse purchase, popularity of stores.
Q4: Regardless of size & type, what are the retail strategies a retailer Q4: Regardless of size & type, what are the retail strategies a retailer
should employ? should employ?
Ans: Define the type of business, set long term & short term goals, Ans: Define the type of business, set long term & short term goals,
determine customer market to target, device a long run plan of determine customer market to target, device a long run plan of
general directions, Implement an integrated strategy, regularly general directions, Implement an integrated strategy, regularly
evaluate performance. evaluate performance.
149
Questions
Questions
Q5: What are the key success points for a target stores strategy? Q5: What are the key success points for a target stores strategy?
Ans: Growth oriented objectives, appeal to a prime market, distinctive Ans: Growth oriented objectives, appeal to a prime market, distinctive
company image, Strong customer service, multiple point of contact, company image, Strong customer service, multiple point of contact,
employee relation, innovation, commitment to technology, employee relation, innovation, commitment to technology,
community involvement, constant performance monitering. community involvement, constant performance monitering.
Q6: What is the retailing concept? Q6: What is the retailing concept?
Ans: Customer orientation, coordinated efforts, value driven, goal Ans: Customer orientation, coordinated efforts, value driven, goal
oriented. oriented.
Q7: Why value is an important concept for every retailer in any kind of Q7: Why value is an important concept for every retailer in any kind of
settings? settings?
Ans: Customer believes, they got their money worth, retail efforts are Ans: Customer believes, they got their money worth, retail efforts are
required in the manner the firm intends, value is different to required in the manner the firm intends, value is different to
different customers( for some: money, benefits drawn, satisfaction, different customers( for some: money, benefits drawn, satisfaction,
extra benefits etc.) customer comparison shopping for price, retail extra benefits etc.) customer comparison shopping for price, retail
differential is required, specific value/ price must be set for the differential is required, specific value/ price must be set for the
offerings. offerings.
Q8: What are the aspects of value based retail strategy? Q8: What are the aspects of value based retail strategy?
Ans: Expected retail strategy, augmented retail strategy, potential Ans: Expected retail strategy, augmented retail strategy, potential
retail strategy retail strategy
150
Questions
Questions
Q9: What are the pitfalls to be avoided while planning a value-oriented retail Q9: What are the pitfalls to be avoided while planning a value-oriented retail
strategy? strategy?
Ans: Planning value with just a price perspective, providing value added Ans: Planning value with just a price perspective, providing value added
services which customer doesnt need, competing in wrong value/price services which customer doesnt need, competing in wrong value/price
segment, believing augmented elements alone create value, paying lip segment, believing augmented elements alone create value, paying lip
service to customer service. service to customer service.
Q10: What fundamental decisions to be considered while developing a customer Q10: What fundamental decisions to be considered while developing a customer
service strategy? service strategy?
Ans: What customer service is expected & what is augmented to a particular Ans: What customer service is expected & what is augmented to a particular
retailer, what customer service is proper to complement a firms image, retailer, what customer service is proper to complement a firms image,
should their be a choice of customer service, should customer service be should their be a choice of customer service, should customer service be
free, how to measure the benefits of customer service against their costs, free, how to measure the benefits of customer service against their costs,
how customer services be terminated. how customer services be terminated.
Q11: Give examples of customer services provided in retail? Q11: Give examples of customer services provided in retail?
Ans: credit, delivery, alteration & installation, packaging (gift wrapping), Ans: credit, delivery, alteration & installation, packaging (gift wrapping),
complaints & returns handling, gift certificates, trade-ins, trial purchase, complaints & returns handling, gift certificates, trade-ins, trial purchase,
special sales for regular customers, extended store hours, mail and phone special sales for regular customers, extended store hours, mail and phone
orders. orders.
Q12: What are the customer loyalty programs? Q12: What are the customer loyalty programs?
Ans: Focus on customer concerns, empower frontline employees, show that you Ans: Focus on customer concerns, empower frontline employees, show that you
are listening, express sincere understanding, apologize & rectify the are listening, express sincere understanding, apologize & rectify the
situation situation
151
CASE STUDY
CASE STUDY
Maintenance & Enhancements to a Retail Banking Product Maintenance & Enhancements to a Retail Banking Product
The customer is one of the world's largest independent applications software product groups The customer is one of the world's largest independent applications software product groups
serving the international banking services market in separate geographical and functional areas. serving the international banking services market in separate geographical and functional areas.
They have been in the business for over 20 years, since formation in 1984. They have grown into They have been in the business for over 20 years, since formation in 1984. They have grown into
a worldwide organization with clients in more than 120 countries, supported by over 19,400 a worldwide organization with clients in more than 120 countries, supported by over 19,400
employees. They offer solutions around the world, including Europe, Asia-Pacific, Latin employees. They offer solutions around the world, including Europe, Asia-Pacific, Latin
America, Middle East and the USA. America, Middle East and the USA.
The customer serves more than 13,000 clients worldwide, including banks, broker-dealers, The customer serves more than 13,000 clients worldwide, including banks, broker-dealers,
credit unions, financial planners and investment advisers, insurance companies and agents, credit unions, financial planners and investment advisers, insurance companies and agents,
leasing companies, and mortgage lenders. leasing companies, and mortgage lenders.
BACKGROUND BACKGROUND
The customer has Retail Banking products (one product for US domestic banks and other for The customer has Retail Banking products (one product for US domestic banks and other for
, which cater to the needs of domestic banks in US and other international , which cater to the needs of domestic banks in US and other international
international banks) international banks)
banks. banks.

The Retail Banking product is available on IBMs mid-range platform - AS/400. Satyam The Retail Banking product is available on IBMs mid-range platform - AS/400. Satyam
developed the applications on AS/400, using tools such as RPG/400 and CL/400. All developed the applications on AS/400, using tools such as RPG/400 and CL/400. All
assignments were performed on the customers AS/400 machine using VPN. assignments were performed on the customers AS/400 machine using VPN.

152
The Retail Banking product supports multi-currency. Due to introduction of the new Euro The Retail Banking product supports multi-currency. Due to introduction of the new Euro
currency, there was a need to migrate legacy currency data to Euro currency at all affected currency, there was a need to migrate legacy currency data to Euro currency at all affected
customer installations. customer installations.
CHALLENGES To redesign and customize their Retail Banking product without disrupting application CHALLENGES To redesign and customize their Retail Banking product without disrupting application
integrity and functionality To deliver and implement application within three months Critical fields integrity and functionality To deliver and implement application within three months Critical fields
such as Balances and transaction Amounts needed to be converted Also to cater to banks outside such as Balances and transaction Amounts needed to be converted Also to cater to banks outside
the European Monetary Union (EMU) Grasping the linkages and application integrity of the the European Monetary Union (EMU) Grasping the linkages and application integrity of the
product within a short period product within a short period
THE SOLUTION Automation of conversion process of all the accounts in legacy currencies of 11 in THE SOLUTION Automation of conversion process of all the accounts in legacy currencies of 11 in
countries to Euro Implementation at various customer sites in various European countries countries to Euro Implementation at various customer sites in various European countries

TECHNOLOGY HIGHLIGHTS TECHNOLOGY HIGHLIGHTS
Hardware: IBM AS/400, OS/400 V4R4 Hardware: IBM AS/400, OS/400 V4R4
Software: RPG LE, CLLE, SQL RPG Software: RPG LE, CLLE, SQL RPG
Databases: DB2/400 Databases: DB2/400
Tools: Aldon Change Management System Tools: Aldon Change Management System
SATYAMS CONTRIBUTION AND VALUE DELIVERED Participated in Requirement Analysis, Functional SATYAMS CONTRIBUTION AND VALUE DELIVERED Participated in Requirement Analysis, Functional
Design, Technical Design and Coding Design, Technical Design and Coding
/ Unit Testing / System Testing Implementation across various financial institutions in the Europe (UK, / Unit Testing / System Testing Implementation across various financial institutions in the Europe (UK,
Poland, France, Poland, France,
Italy, Netherlands, Greece, Slovakia, Romania, Belgium, Cyprus) Implementation within scheduled Italy, Netherlands, Greece, Slovakia, Romania, Belgium, Cyprus) Implementation within scheduled
time at all locations time at all locations
CUSTOMER TESTIMONIALS Your team has performed an outstanding job in regard to the service, CUSTOMER TESTIMONIALS Your team has performed an outstanding job in regard to the service,
professionalism and competence that they have displayed in the work completed for the professionalism and competence that they have displayed in the work completed for the
UK office and that I am proud to be involved in the project. UK office and that I am proud to be involved in the project.
Sr. Business Analyst, Business Unit Support, A Banking Products Major Sr. Business Analyst, Business Unit Support, A Banking Products Major

153
Objective Questions
Objective Questions
__________________ is the process of evaluating each market __________________ is the process of evaluating each market
segment's attractiveness and selecting one or more segment's attractiveness and selecting one or more
segments to enter. segments to enter.
a. a. Mass marketing Mass marketing
b. b. Market segmentation Market segmentation
c. c. Market targeting Market targeting
d. d. Market positioning Market positioning
It is a fact that there are 24 million left-handed people in the It is a fact that there are 24 million left-handed people in the
United States, however, most marketers do not attempt to United States, however, most marketers do not attempt to
appeal to or design products for this group because there is appeal to or design products for this group because there is
little in the way of census data about this group. Therefore, little in the way of census data about this group. Therefore,
this group fails in one of the requirements for effective this group fails in one of the requirements for effective
segmentation. Which of the following is most likely to apply segmentation. Which of the following is most likely to apply
in this case? in this case?
a. a. actionable actionable
b. b. substantial substantial
c. c. differentiable differentiable
d. d. measurable measurable
The fact that services are sold, produced, and consumed at The fact that services are sold, produced, and consumed at
the same time refers to which of the following service the same time refers to which of the following service
characteristics? characteristics?
a. a. Intangibility Intangibility
b. b. Inseparability Inseparability
c. c. Variability Variability
d. d. Perishability Perishability
_______________ factors are the most popular bases for _______________ factors are the most popular bases for
segmenting customer groups. segmenting customer groups.
a. a. Geographic Geographic
b. b. Demographic Demographic
c. c. Psychographic Psychographic
d. d. Behavioral Behavioral
A manufacturer has four sponsorship options. A A manufacturer has four sponsorship options. A
_________________ is a brand created and owned by a reseller _________________ is a brand created and owned by a reseller
of a product or service. of a product or service.
a. a. licensed brand licensed brand
b. b. manufacturer's brand manufacturer's brand
c. c. private brand private brand
d. d. co-brand co-brand
When Michael Jordan and Tiger Woods use marketing to When Michael Jordan and Tiger Woods use marketing to
promote their careers and improve their impact and promote their careers and improve their impact and
incomes, they are using: incomes, they are using:
a. a. cause-related marketing. cause-related marketing.
b. b. idea marketing. idea marketing.
c. c. nonprofit marketing. nonprofit marketing.
d. d. person marketing. person marketing.
3M runs a Pollution Prevention Pays program that has led to 3M runs a Pollution Prevention Pays program that has led to
a substantial reduction in pollution and costs. This would be a substantial reduction in pollution and costs. This would be
an example of responding to which of the following? an example of responding to which of the following?
a. a. Nader's raiders. Nader's raiders.
b. b. The "green movement." The "green movement."
c. c. Governmental regulation. Governmental regulation.
d. d. International competition. International competition.
When an international seller sells a plant, equipment, or When an international seller sells a plant, equipment, or
technology to another country and agrees to take payment technology to another country and agrees to take payment
in the resulting products, it is called: in the resulting products, it is called:
a. a. barter. barter.
b. b. buy-back. buy-back.
c. c. counterpurchase. counterpurchase.
d. d. like-value exchange. like-value exchange.
154
Objective questions
Objective questions
The stage is the product life cycle that focuses on The stage is the product life cycle that focuses on
expanding market and creating product awareness and expanding market and creating product awareness and
trial is the: trial is the:
a. a. decline stage. decline stage.
b. b. introduction stage. introduction stage.
c. c. growth stage. growth stage.
d. d. maturity stage. maturity stage.
52. 52. Which of the following promotional budget Which of the following promotional budget
methods wrongly views sales as the cause of promotion methods wrongly views sales as the cause of promotion
rather than as the result? rather than as the result?
a. a. Affordable method Affordable method
b. b. Percentage-of-Sales method Percentage-of-Sales method
c. c. Competitive-parity method Competitive-parity method
d. d. Objective-and-task method Objective-and-task method
If the field salesforce has been supplied with new leads If the field salesforce has been supplied with new leads
(via the telephone) that have been qualified, they have (via the telephone) that have been qualified, they have
probably been assisted by: probably been assisted by:
a. a. master salespersons. master salespersons.
b. b. sales assistants. sales assistants.
c. c. technical support persons. technical support persons.
d. d. telemarketers. telemarketers.
________________ is setting the price steps between ________________ is setting the price steps between
various products in a product line based on cost various products in a product line based on cost
differences between the products, customer evaluations differences between the products, customer evaluations
of different features, and competitors' prices. of different features, and competitors' prices.
a. a. Optional-product pricing Optional-product pricing
b. b. Captive-product pricing Captive-product pricing
c. c. Product line pricing Product line pricing
d. d. By-product pricing By-product pricing
Rolls Royce uses which of the following distribution Rolls Royce uses which of the following distribution
formats? formats?
a. a. Intensive distribution Intensive distribution
b. b. Exclusive distribution Exclusive distribution
c. c. Selective distribution Selective distribution
d. d. Open distribution Open distribution
Drop shippers perform which of the following functions? Drop shippers perform which of the following functions?
a. a. Assumes title and ships coal, lumber, or heavy Assumes title and ships coal, lumber, or heavy
equipment to a buyer. equipment to a buyer.
b. b. Stocks the bread rack in a grocery store. Stocks the bread rack in a grocery store.
c. c. Maintains, owns, and stocks a CD display in a Maintains, owns, and stocks a CD display in a
grocery store. grocery store.
d. d. Sells jewelry out of a catalog. Sells jewelry out of a catalog.
A set of interdependent organizations involved in the A set of interdependent organizations involved in the
process of making a product or service available for use process of making a product or service available for use
or consumption by the consumer or business user is or consumption by the consumer or business user is
called a(n): called a(n):
a. a. retailer. retailer.
b. b. wholesaler. wholesaler.
c. c. distribution channel. distribution channel.
d. d. logistics. logistics.
______________ beliefs and values are open to some ______________ beliefs and values are open to some
degree of change. degree of change.
a. a. Crucial Crucial
b. b. Core Core
c. c. Primary Primary
d. d. Secondary Secondary
155
Objective questions
Objective questions
According to Engel's law, as income rises: According to Engel's law, as income rises:
a. a. the percentage spent on food rises. the percentage spent on food rises.
b. b. the percentage spent on housing increases. the percentage spent on housing increases.
c. c. the percentage spent on other categories the percentage spent on other categories
increases. increases.
d. d. the percentage spent on savings remains the percentage spent on savings remains
constant. constant.
The Wheeler-Lea Act gives the Federal Trade The Wheeler-Lea Act gives the Federal Trade
Commission the power to regulate: Commission the power to regulate:
a. a. interstate commerce. interstate commerce.
b. b. marketing ethics. marketing ethics.
c. c. unfair and deceptive acts or practices. unfair and deceptive acts or practices.
d. d. competitive advertising of objective product competitive advertising of objective product
benefits. benefits.
In evaluating messages for advertising, telling how the In evaluating messages for advertising, telling how the
product is better than the competing brands aims at product is better than the competing brands aims at
making the ad: making the ad:
a. a. meaningful. meaningful.
b. b. distinctive. distinctive.
c. c. believable. believable.
d. d. remembered. remembered.
When an importing country sets limits on the amount of When an importing country sets limits on the amount of
goods it will accept in certain product categories it is goods it will accept in certain product categories it is
called a(n): called a(n):
a. a. quota. quota.
b. b. barrier. barrier.
c. c. tariff. tariff.
d. d. embargo. embargo.
Answer: Answer:
1 1 c c
2 2 c c
3 3 d d
4 4 b b
5 5 b b
6 6 c c
7 7 d d
8 8 b b
9 9 b b
10 10 b b
11 11 b b
12 12 d d
13 13 c c
14. 14. b b
15 15 a a
16 16 c c
17 17 d d
18 18 c c
19. 19. c c
20. 20. b b
21 21 a a
156
Unit:I
Unit:I
I
I
(10
(10
Sessions)
Sessions)
1Situational Analysis: Retail Institutions 1Situational Analysis: Retail Institutions

by Ownership by Ownership
Retail Institutions by Store-based Retail Institutions by Store-based

Strategy-Mix, Web Strategy-Mix, Web
2Web, Nonstore-based and other Forms 2Web, Nonstore-based and other Forms
of Non Traditional Retailing of Non Traditional Retailing
3Targeting Customers and Gathering 3Targeting Customers and Gathering

Information Information
4Communicating with Customers: 4Communicating with Customers:

Promotional Strategies used in retailing Promotional Strategies used in retailing
6Site Selection 6Site Selection
7Store Design and Layout 7Store Design and Layout
8The Store and its Image 8The Store and its Image
9The External Store, Internal Store 9The External Store, Internal Store
10Display :Visual Merchandising and 10Display :Visual Merchandising and

Atmospherics Atmospherics
157
Sno
Unit Lecture
no
(1) II 1
Types of retail outlets
Ownership based, Store based, Non
store based
159-173
(2) 2
Web, Nonstore-based and other Forms
of Non Traditional Retailing
174-183
(3) 3
Targeting customers & gathering
information
184-212
(4) 4
Communicating with Customers:
Promotional Strategies used in retailing
213-222
(5) 5
Choosing a Store Location: Trading Area
Analysis
223-238
(6) 6
Site selection
239-249
(7) 7
Store layout & design
250-272
(8) 8
The Store and its Image
273-285
(9) 9
External & Internal store
286-293
LECTURE PLAN
158
Sno
Unit Lecture
no
(10)
II 10
Display :Visual Merchandising and
Atmospherics
294-302
303-311
LECTURE PLAN
Session-1
Session-1
Ownership based, Store
Ownership based, Store
based, Non store based
based, Non store based
160
A Classification Method for
A Classification Method for
Retail Institutions,
Retail Institutions,
I
Ownership
II
Store-based
Retail Strategy Mix
III
Nonstore-based
Retail Strategy Mix
161
Ownership Forms
Ownership Forms
Independent
Independent
Chain
Chain
Franchise
Franchise
Leased department
Leased department
Vertical marketing system

Vertical marketing system
Consumer cooperative
Consumer cooperative
162
Chain Retailers
Chain Retailers
Operates multiple outlets under

Operates multiple outlets under
common ownership
common ownership
Engages in some level of centralized

Engages in some level of centralized
or coordinated purchasing and
or coordinated purchasing and
decision making
decision making
In the U.S., there are roughly

In the U.S., there are roughly
100,000 retail chains operating about
100,000 retail chains operating about
750,000 establishments
750,000 establishments
163
Competitive State of
Chains
Chains
Advantages Advantages
Bargaining power Bargaining power
Cost efficiencies Cost efficiencies
Efficiency from Efficiency from

computerization, computerization,
sharing sharing
warehouse and warehouse and
other functions other functions
Defined Defined
management management
philosophy philosophy
Considerable Considerable
efforts in long-run efforts in long-run
planning planning
Disadvantages
Disadvantages
Limited flexibility Limited flexibility
Higher investment Higher investment

costs costs
Complex Complex
managerial managerial
control control
Limited Limited
independence independence
among personnel among personnel
164
Independents
Independents
Flexibility in Flexibility in
formats, locations, formats, locations,
and strategy and strategy
Control over Control over

investment costs investment costs
and personnel and personnel
functions, strategies functions, strategies
Personal image Personal image
Consistency and Consistency and

independence independence
Strong Strong
entrepreneurial entrepreneurial
leadership leadership
Disadvantages Disadvantages
Lack of bargaining Lack of bargaining

power power
Lack of economies Lack of economies

of scale of scale
Labor intensive Labor intensive

operations operations
Over-dependence Over-dependence
on owner on owner
Limited long-run Limited long-run

planning planning
165
Franchising
Franchising
A contractual agreement between a

A contractual agreement between a
franchisor and a retail franchisee,
franchisor and a retail franchisee,
which allows the franchisee to
which allows the franchisee to
conduct business under an
conduct business under an
established name and according to a
established name and according to a
given pattern of business
given pattern of business
Franchisee pays an initial fee and a

Franchisee pays an initial fee and a
monthly percentage of gross sales in
monthly percentage of gross sales in
exchange for the exclusive rights to
exchange for the exclusive rights to
sell goods and services in an area
sell goods and services in an area
166
Franchise Formats
Franchise Formats
Product/ Trademark Product/ Trademark
franchisee franchisee
acquires the acquires the
identity of a identity of a
franchisor by franchisor by
agreeing to sell agreeing to sell
products and/or products and/or
operate under the operate under the
franchisor name franchisor name
operates operates
autonomously autonomously
2/3 of retail 2/3 of retail

franchising sales franchising sales
Business Format Business Format
receives receives
assistance: assistance:
location, quality location, quality
control, control,
accounting accounting
systems, start-up systems, start-up
practices, practices,
management management
training training
common for common for

restaurants, real restaurants, real
estate estate
167
Wholesaler-Retailer
Wholesaler-Retailer
Structural Arrangements
Structural Arrangements
Voluntary:
Voluntary:
A wholesaler sets up a
A wholesaler sets up a
franchise system and grants
franchise system and grants
franchises to individual retailers
franchises to individual retailers
Cooperative:
Cooperative:
A group of retailers
A group of retailers
sets up a franchise system and
sets up a franchise system and
shares the ownership and operations
shares the ownership and operations
of a wholesaling organization
of a wholesaling organization
168
Franchising
Franchising
small capital small capital

required required
acquire well- acquire well-

known names known names
operating/manage operating/manage
ment skills taught ment skills taught
cooperative cooperative
marketing marketing
possible possible
exclusive selling exclusive selling

rights rights
less costly per unit less costly per unit

Disadvantages
Disadvantages
oversaturation oversaturation
could occur could occur
franchisors may franchisors may

overstate overstate
potential potential
locked into locked into

contracts contracts
agreements may agreements may

be cancelled or be cancelled or
voided voided
royalties are royalties are

based on sales, based on sales,
not profits not profits
169
From the Franchisors
From the Franchisors
Perspective
Perspective
Benefits
Benefits
national or global national or global

presence possible presence possible
qualifications for qualifications for

franchisee/ franchisee/
operations are set operations are set
and enforced and enforced
money obtained at money obtained at

delivery delivery
royalties represent royalties represent

revenue stream revenue stream
Potential
Potential
Problems
Problems
potential for harm to potential for harm to

reputation reputation
lack of uniformity lack of uniformity

may affect customer may affect customer
loyalty loyalty
ineffective ineffective
franchised units may franchised units may
damage resale damage resale
value, profitability value, profitability
potential limits to potential limits to

franchisor rules franchisor rules
170
Leased Departments
Leased Departments
A leased department is a department

A leased department is a department
in a retail store that is rented to an
in a retail store that is rented to an
outside party
outside party
The proprietor is responsible for all

The proprietor is responsible for all
aspects of its business and pays a
aspects of its business and pays a
percentage of sales as rent
percentage of sales as rent
The department store sets operating

The department store sets operating
restrictions to ensure consistency and
restrictions to ensure consistency and
coordination
coordination
171
Competitive State of Leased
Competitive State of Leased
Departments
Departments
Benefits
Benefits
provides one-
provides one-
stop shopping
stop shopping
to customers
to customers
lessees handle
lessees handle
management
management
reduces store
reduces store
costs
costs
provides a
provides a
stream of
stream of
revenue
revenue
Potential
Potential
Pitfalls
Pitfalls
lessees may
lessees may
negate store
negate store
image
image
procedures
procedures
may conflict
may conflict
with
with
department
department
store
store
problems may
problems may
be blamed on
be blamed on
department
department
store rather
store rather
than lessee
than lessee
172
Store-based Retail Strategy
Store-based Retail Strategy
Mix
Mix
Convenience
Convenience
store
store
Conventional
Conventional
supermarket
supermarket
Food-based
Food-based
superstore
superstore
Combination
Combination
store
store
Box store
Box store
Warehouse store
Warehouse store
Specialty store
Specialty store
Variety store
Variety store
Traditional
Traditional
department
department
store
store
Full-line discount
Full-line discount
store
store
Off-price chain
Off-price chain
Factory outlet
Factory outlet
Membership club
Membership club
Flea market
Flea market
173
Nonstore-based Retail
Nonstore-based Retail
Strategy Mix and
Strategy Mix and
Nontraditional Retailing
Nontraditional Retailing
Direct marketing
Direct marketing
Direct selling
Direct selling
Vending machine
Vending machine
World Wide Web

World Wide Web
Other emerging retail formats

Other emerging retail formats
Session-2
Session-2
Web, Nonstore-based and
Web, Nonstore-based and
other Forms of Non Traditional
other Forms of Non Traditional
Retailing
Retailing
175
NON-STORE IMPICATIONS:
NON-STORE IMPICATIONS:
PRODUCT PRESENTATION
PRODUCT PRESENTATION
CHALLENGES
CHALLENGES
product aesthetics not easily shown product aesthetics not easily shown
sensory elements lost sensory elements lost
not stimulating (especially websites) not stimulating (especially websites)
incorporating web atmospherics (image) incorporating web atmospherics (image)

without slowing down navigation without slowing down navigation
OPPORTUNTIES
OPPORTUNTIES
showing product in use / modelled showing product in use / modelled
good navigability can promote related sales good navigability can promote related sales
customisation of offer (internet) customisation of offer (internet)

176
NON-STORE IMPLICATIONS:
PRODUCT ASSORTMENT
PRODUCT ASSORTMENT

Non store retailers can add more space

Non store retailers can add more space
relatively easily and inexpensively
relatively easily and inexpensively
(especially internet)
(especially internet)
Considerations:
Considerations:
Who is home shopping customer and what Who is home shopping customer and what
will they buy? will they buy?
Can all products be profitably delivered? Can all products be profitably delivered?
Internet shoppers generally have higher

Internet shoppers generally have higher
socio-economic profile
socio-economic profile
Kiosks in store can provide access to

Kiosks in store can provide access to
wider product range on company
wider product range on company
website
website
177
NON-STORE IMPLCATIONS:
NON-STORE IMPLCATIONS:
THE SELLING ENVIRONMENT
THE SELLING ENVIRONMENT
Layout should be logical and product categories Layout should be logical and product categories
easy to locate easy to locate
NAVIGABILITY is an important part of web-site NAVIGABILITY is an important part of web-site

design design
Links between complementary merchandise Links between complementary merchandise

should be built in (web-site) or clearly indicated should be built in (web-site) or clearly indicated
(e.g. catalogue page number) (e.g. catalogue page number)
Design of web-site incorporates customer- Design of web-site incorporates customer-

retailer interaction (service experience) retailer interaction (service experience)
Atmosphere not easy to create, but some Atmosphere not easy to create, but some
targetted offers use artwork and effects to targetted offers use artwork and effects to
create unique image create unique image
178
NON STORE IMPLICATIONS:
NON STORE IMPLICATIONS:
PRICING
PRICING
No stores - saves running costs

No stores - saves running costs
Financing credit and stock to guarantee

Financing credit and stock to guarantee
fast delivery adds to costs
fast delivery adds to costs
Price comparison easily carried out in

Price comparison easily carried out in
home shopping (especially internet)
home shopping (especially internet)
Difficult to justify premium prices in non-

Difficult to justify premium prices in non-
store selling environment
store selling environment
Consistency across different formats is an

Consistency across different formats is an
issue
issue
Catalogues are not very flexible on price

Catalogues are not very flexible on price
179
SERVICE
SERVICE

Store retailing has advantage of immediacy: Store retailing has advantage of immediacy:
product information product information
stock position stock position
product retrieval product retrieval
Non-store retailers must provide good product Non-store retailers must provide good product
information, fulfillment and delivery service information, fulfillment and delivery service
Dissatisfaction with service more difficult to Dissatisfaction with service more difficult to
detect in non-store detect in non-store
Some Internet retailers moving to availability Some Internet retailers moving to availability
details on-line details on-line
Secure payment service is important Secure payment service is important

180
RETURNS SERVICE
RETURNS SERVICE
Home shopping retailers have to

Home shopping retailers have to
accept high levels of product returns
accept high levels of product returns
(around a third on average)
(around a third on average)
This needs to be accounted for in

This needs to be accounted for in
terms of
terms of
stock forecasting and financing

stock forecasting and financing
infrastructure for returns (reverse

infrastructure for returns (reverse
logistics)
logistics)
flexibility across retailing formats

flexibility across retailing formats
181
CONVENIENCE
CONVENIENCE

Home shopping avoids many

Home shopping avoids many
inconvenient aspects of the
inconvenient aspects of the
consumers experience that are
consumers experience that are
associated with store shopping
associated with store shopping
Home shopping only provides

Home shopping only provides
convenience if service promise is
convenience if service promise is
delivered
delivered
Retailers infrastructure must support

Retailers infrastructure must support
product offer and (stated or
product offer and (stated or
assumed) service offer
assumed) service offer
182
ORDER FULFILLMENT
ORDER FULFILLMENT
Non-store retailing offers potential to

Non-store retailing offers potential to
operate a stock-free system. Supply
operate a stock-free system. Supply
chain can be geared to responding to
chain can be geared to responding to
customer orders
customer orders
In reality suppliers will need

In reality suppliers will need
commitment from retailer in order to be
commitment from retailer in order to be
willing to hold stock of e.g. seasonal and
willing to hold stock of e.g. seasonal and
own label goods
own label goods
Forecasting can be improved with use

Forecasting can be improved with use
of
of
preview catalogues preview catalogues
web-site trials web-site trials

183
DELIVERY
DELIVERY
Early Internet successes were based on

Early Internet successes were based on
products that were easy to understand
products that were easy to understand
and easy to deliver (books, CDs etc.)
and easy to deliver (books, CDs etc.)
Delivery of more complex product

Delivery of more complex product
needs to be reliable and reflect
needs to be reliable and reflect
retailers image
retailers image
Internet retailers customers are time-

Internet retailers customers are time-
poor and so delivery arrangements
poor and so delivery arrangements
must be customer focused and accurate
must be customer focused and accurate
Tracking and pro-active order

Tracking and pro-active order
management software can be used to
management software can be used to
manage deliveries
manage deliveries
Session-3
Session-3
Targeting customers &
Targeting customers &
gathering information
gathering information
185
Selecting a Target
Selecting a Target
Market
Market
Before a marketing mix

Before a marketing mix
strategy can be implemented,
strategy can be implemented,
the marketer must identify,
the marketer must identify,
evaluate, and select a target
evaluate, and select a target
market.
market.
Market:
Market:
people or institutions
people or institutions
with sufficient purchasing power,
with sufficient purchasing power,
authority, and willingness to buy
authority, and willingness to buy
Target market:
Target market:
specific segment
specific segment
of consumers most likely to
of consumers most likely to
purchase a particular product
purchase a particular product
186
Types of Markets
Types of Markets
Consumer products:
Consumer products:
goods or
goods or
services purchased by an
services purchased by an
ultimate consumer for personal
ultimate consumer for personal
use
use
Business products:
Business products:
goods or
goods or
services purchased for use either
services purchased for use either
directly or indirectly in the
directly or indirectly in the
production of other goods and
production of other goods and
services for resale
services for resale
The key to classification is to

The key to classification is to
identify the purchaser and the
identify the purchaser and the
reasons for buying the goods.
reasons for buying the goods.
187
Segmenting Consumer
Segmenting Consumer
Markets
Markets
Geographic Segmentation:
Geographic Segmentation:

Dividing an overall market into
Dividing an overall market into
homogeneous groups on the basis of
homogeneous groups on the basis of
their locations
their locations
Does not ensure that all consumers in a

Does not ensure that all consumers in a
location will make the same buying
location will make the same buying
decision.
decision.
Help in identifying some general

Help in identifying some general
patterns.
patterns.
188
Urban Data Classified

Urban Data Classified

Core Based Statistical Area (CBSA)

Core Based Statistical Area (CBSA)
Metropolitan Statistical Area (MSA)

Metropolitan Statistical Area (MSA)
Micropolitan Statistical Area

Micropolitan Statistical Area
Consolidated Metropolitan Statistical

Consolidated Metropolitan Statistical
Area (CMSA)
Area (CMSA)
Primary Metropolitan Statistical Area

Primary Metropolitan Statistical Area
(PMSA)
(PMSA)
189
Using Geographic
Using Geographic
Segmentation
Segmentation

Demand for some goods and services

Demand for some goods and services
can vary according to the geographic
can vary according to the geographic
region
region
Most major brands get 40-80 percent

Most major brands get 40-80 percent
of their sales from what are called
of their sales from what are called
core regions
core regions
Climate is another important

Climate is another important
segmentation factor
segmentation factor
Northern consumers, for example, eat Northern consumers, for example, eat
more soup than Southerners more soup than Southerners
Southerners use more chlorine for their Southerners use more chlorine for their
swimming pools than Northern residents swimming pools than Northern residents
190
Geographic Information
Geographic Information
Service (GIS):
Service (GIS):

computer
computer
technology that records several
technology that records several
layers of data on a single map
layers of data on a single map
Simplifies the job of analyzing

Simplifies the job of analyzing
marketing information by placing
marketing information by placing
data in a spatial format . . .
data in a spatial format . . .
The result of which is a
The result of which is a
geographic map overlaid with
geographic map overlaid with
digital data about consumers in a
digital data about consumers in a
particular area.
particular area.
191
Segmenting Consumer
Segmenting Consumer
Markets
Markets
Demographic Segmentation:
Demographic Segmentation:

dividing consumer groups
dividing consumer groups
according to characteristics such
according to characteristics such
as sex, age, income, occupation,
as sex, age, income, occupation,
education, household size, and
education, household size, and
stage in the family life cycle
stage in the family life cycle
A primary source for demographic

A primary source for demographic
data in the United States is the
data in the United States is the
Census Bureau
Census Bureau
192
Segmenting by Gender
Segmenting by Gender
Marketers must ensure that

Marketers must ensure that
traditional assumptions are not
traditional assumptions are not
false
false
Recently, the lines have

Recently, the lines have
increasingly blurred
increasingly blurred
Some companies market

Some companies market
successfully to both genders
successfully to both genders
193
Segmenting by Age
Segmenting by Age
Identify market segments on the

Identify market segments on the
basis of age
basis of age
Products designed to meet the

Products designed to meet the
specific needs of certain age
specific needs of certain age
groups
groups
194
Tweens and Teens

Tweens and Teens
Rapidly growing market

Rapidly growing market
Significant purchasing power

Significant purchasing power
Cohert Effect
Cohert Effect
Tendency among members of a Tendency among members of a

generation to be influenced and drawn generation to be influenced and drawn
together by significant events occurring together by significant events occurring
during their key formative years, roughly during their key formative years, roughly
17 to 22 years of age 17 to 22 years of age
195
Baby Boomers
Baby Boomers
Born from 1946 until 1965

Born from 1946 until 1965
Nearly 42 percent of U.S. adults

Nearly 42 percent of U.S. adults
Values influenced both by the Vietnam War

Values influenced both by the Vietnam War
and the career-driven era
and the career-driven era
Huge disposable income

Huge disposable income
Seniors
Seniors
By 2025, 1 in 5 over age 65

By 2025, 1 in 5 over age 65
Median age is now 35.2 years

Median age is now 35.2 years
Life expectancy 74 for men and 79 for

Life expectancy 74 for men and 79 for
women
women
Heads of households aged 55-plus control

Heads of households aged 55-plus control
about three-quarters of the countrys total
about three-quarters of the countrys total
financial assets.
financial assets.
196
Segmenting by Ethnic Group

Segmenting by Ethnic Group
By 2050, nearly half of the

By 2050, nearly half of the
population of the US will belong to
population of the US will belong to
nonwhite minority groups.
nonwhite minority groups.
Hispanic Hispanic
African Americans African Americans
Asian Americans Asian Americans
Native Americans Native Americans
People of Mixed Race People of Mixed Race

197
Family Life Cycle Stages Segmentation

Family Life Cycle Stages Segmentation
-
The process of family formation and
dissolution
-
Life stage, not age per se, is the primary
determinant of many consumer purchases
Segmenting by Household Type

Segmenting by Household Type
-
Todays U.S. households are very diverse
Married couples and their children
Blended by divorce or loss of spouse
Headed by single parent, same-sex

parents, grandparents
198
Segmenting by Income and

Segmenting by Income and
Expenditure Patterns
Expenditure Patterns
Engels Laws,
Engels Laws,
as family income
as family income
increases:
increases:
A smaller percentage of expenditures go A smaller percentage of expenditures go

for food for food
The percentage spent on housing and The percentage spent on housing and
household operations and clothing household operations and clothing
remains constant remains constant
The percentage spent on other items The percentage spent on other items
(such as recreation and education) (such as recreation and education)
increases increases
199
Demographic Segmentation Abroad

Demographic Segmentation Abroad
-
Obtaining the data necessary for global
demographic segmentation is often
difficult
-
Many countries do not operate regularly
scheduled census programs
For example, the most recent census

of Holland is now over 20 years old,
and Germany skipped its census
from 1970 to 1987
-
Daily life cycle data is difficult to apply in
global demographic segmentation
efforts
200
Psychographic Segmentation
Divides a population into groups that

Divides a population into groups that
have similar psychological
have similar psychological
characteristics, values, and lifestyles
characteristics, values, and lifestyles
Lifestyle
Lifestyle
: peoples decisions about
: peoples decisions about
how to live their daily lives, including
how to live their daily lives, including
family, job, social, and consumer
family, job, social, and consumer
activities
activities
The most common method for

The most common method for
developing psychographic profiles of a
developing psychographic profiles of a
population is to conduct a large-scale
population is to conduct a large-scale
survey
survey
AIO statements AIO statements
VALS and VALS 2 VALS and VALS 2

Values and Lifestyles Values and Lifestyles
201
of Global Markets
of Global Markets
like those
like those
done by Roper Starch can paint
done by Roper Starch can paint
useful pictures of the residents of
useful pictures of the residents of
various countries
various countries
Roper found six psychographic

Roper found six psychographic
consumer segments that are
consumer segments that are
common to 35 nations
common to 35 nations
Strivers Strivers
Devouts Devouts
Altruists Altruists
Intimates Intimates
Fun seekers Fun seekers
Creatives Creatives
202
Product-Related Segmentation
Product-Related Segmentation
Dividing a consumer population
Dividing a consumer population
into homogeneous groups based
into homogeneous groups based
on characteristics of their
on characteristics of their
relationships to the product
relationships to the product
Can take the form of segmenting

Can take the form of segmenting
based on:
based on:
Benefits that people seek when they buy Benefits that people seek when they buy
Usage rates for a product Usage rates for a product
Consumers brand loyalty toward a product Consumers brand loyalty toward a product
203
Benefits
Benefits
Focuses on the attributes that people

Focuses on the attributes that people
seek in a good or service and the
seek in a good or service and the
benefits that they expect to receive
benefits that they expect to receive
from that good or service
from that good or service
Groups consumers into segments based

Groups consumers into segments based
on what they want a product to do for
on what they want a product to do for
them
them
Usage Rates
Usage Rates
Segmenting by grouping people

Segmenting by grouping people
according to the amounts of a product
according to the amounts of a product
that they buy and use
that they buy and use
Markets often divided into heavy-user,

Markets often divided into heavy-user,
moderate-user, and light-user segments
moderate-user, and light-user segments
The 80/20 principle (Praedos Law)

The 80/20 principle (Praedos Law)
204
Strategies for Reaching
Strategies for Reaching
Target Markets
Target Markets
Undifferentiated Marketing:
Undifferentiated Marketing:

when a firm produces only one
when a firm produces only one
product or product line and
product or product line and
promotes it to all customers with a
promotes it to all customers with a
single marketing mix
single marketing mix
Differentiated Marketing:
Differentiated Marketing:
when
when
a firm produces numerous
a firm produces numerous
products and promotes them with
products and promotes them with
a different marketing mix designed
a different marketing mix designed
to satisfy smaller segments
to satisfy smaller segments
205
Concentrated Marketing (niche

Concentrated Marketing (niche
marketing):
marketing):
when a firm commits
when a firm commits
all of its marketing resources to
all of its marketing resources to
serve a single market segment
serve a single market segment
Micromarketing:
Micromarketing:
involves targeting
involves targeting
potential customers at a very basic
potential customers at a very basic
level, such as by ZIP code, specific
level, such as by ZIP code, specific
occupation, lifestyle, or individual
occupation, lifestyle, or individual
household
household
206
Selecting and Executing a

Selecting and Executing a
Strategy
Strategy
No single, best choice strategy suits

No single, best choice strategy suits
all firms
all firms
Determinants of a market-specific
Determinants of a market-specific
strategy:
strategy:
Company resources Company resources
Product homogeneity Product homogeneity
Stage in the product life-cycle Stage in the product life-cycle
Competitors strategy Competitors strategy

207
Positioning:
Positioning:
a marketing
a marketing
strategy that emphasizes serving a
strategy that emphasizes serving a
specific market segment by
specific market segment by
achieving a certain position in
achieving a certain position in
buyers minds
buyers minds
Attributes Attributes
Price/quality Price/quality
Competitors Competitors
Application Application
Product user Product user
Product class Product class

208
Positioning map
Positioning map
Graphic illustration that shows
Graphic illustration that shows
differences in consumers perceptions of
differences in consumers perceptions of
competing products
competing products
Reposition
Reposition

Marketing strategy to change the
Marketing strategy to change the
position of its product in consumers
position of its product in consumers
minds relative to the positions of
minds relative to the positions of
competing products
competing products
209
Gathering Information
Gathering Information
The major responsibility for identifying significant The major responsibility for identifying significant
marketplace changes falls to the companys marketplace changes falls to the companys
marketers. More than any other group in the marketers. More than any other group in the
company, they must be the trend trackers and company, they must be the trend trackers and
opportunity seekers. Although every manager in opportunity seekers. Although every manager in
an organization needs to observe the outside an organization needs to observe the outside
environment, marketers have the following environment, marketers have the following
advantages: advantages:
They have disciplined methods for collecting They have disciplined methods for collecting
information. information.
Additionally, they spend more time interacting Additionally, they spend more time interacting
with customers and observing competition with customers and observing competition
210
Gathering information
Some firms have developed marketing information Some firms have developed marketing information
systems that provide management with rich detail systems that provide management with rich detail
about buyer wants, preferences, and behavior. about buyer wants, preferences, and behavior.
Marketers also have extensive information about Marketers also have extensive information about
how consumption patterns vary across countries. how consumption patterns vary across countries.
The value chain is a tool for identifying key The value chain is a tool for identifying key
activities that creates value and costs in a specific activities that creates value and costs in a specific
business. business.
211
Many business firms are not

Many business firms are not
sophisticated about gathering
sophisticated about gathering
information.
information.
Many do not have a marketing

Many do not have a marketing
research department.
research department.
Every firm must organize and

Every firm must organize and
distribute a continuous flow of
distribute a continuous flow of
information to its marketing
information to its marketing
manager.
manager.
212
A marketing A marketing
information system information system
(MIS) consists of: (MIS) consists of:
People. People.
Equipment. Equipment.
Procedures to: Procedures to:

Gather. Gather.
Sort. Sort.
Analyze. Analyze.
Evaluate. Evaluate.
Distribute needed, Distribute needed,

timely, and accurate timely, and accurate
information to information to
marketing decision marketing decision
makers. makers.
Demographic
Economic Political -Legal
Socio -Cultural Technological
Natural
Session-4
Session-4
Communicating with
Communicating with
Customers: Promotional
Customers: Promotional
Strategies used in retailing
Strategies used in retailing
214
Marketing
Marketing
communication
communication
The careful planning and strategic placement The careful planning and strategic placement
of marketing messages of marketing messages
Goals for communication include informing, Goals for communication include informing,
reminding, persuading the target consumer reminding, persuading the target consumer
about the organisations offering about the organisations offering
Integrated marketing communications can Integrated marketing communications can

include advertising, public relations, personal include advertising, public relations, personal
selling, direct marketing and sponsorship selling, direct marketing and sponsorship
Promotions may be created using Promotions may be created using

combinations of visuals, sound or other combinations of visuals, sound or other
experiences, such as product trial experiences, such as product trial
Promotions must be developed with an Promotions must be developed with an

understanding of the consumer and the understanding of the consumer and the
integrated mix effort integrated mix effort
215
Marketing
Marketing
communication
communication
Communication is the sharing of

Communication is the sharing of
information between two or more
information between two or more
individuals or groups to reach a common
individuals or groups to reach a common
understanding.
understanding.
Communication, no matter how

Communication, no matter how
electronically based, is a human endeavor
electronically based, is a human endeavor
and involves individuals and groups.
and involves individuals and groups.
Communication does not take place unless

Communication does not take place unless
a common understanding is reached.
a common understanding is reached.
216
Objectives of marketing
Objectives of marketing
communication
communication
Stimulate trials Stimulate trials
Encourage Repurchase Encourage Repurchase
Complementary Complementary
Products Products
Increase Consumption Increase Consumption
Neutralize Competitors Neutralize Competitors
Support Flexible Support Flexible

Pricing Pricing
Impulse Purchasing Impulse Purchasing
Price Deals Price Deals
Coupons Coupons
Avoid Price Reductions Avoid Price Reductions
Gain/Maintain Gain/Maintain
Distribution Distribution
Defend Against Defend Against

Competitors Competitors
Influence Reseller Influence Reseller

Promotion Promotion
Increase Reseller Increase Reseller

Inventory Inventory
Influence Price Influence Price

Discount Discount
217
Basic Elements of the
Basic Elements of the
Promotional Mix
Promotional Mix

The promotional mix is the basic tools
The promotional mix is the basic tools
used to accomplish an organizations
used to accomplish an organizations
communication objectives. These tools
communication objectives. These tools
include:
include:
Advertising Advertising any paid form of non personal any paid form of non personal
communication about an organization, product, communication about an organization, product,
service, or idea by an identified sponsor service, or idea by an identified sponsor
Direct marketing Direct marketing communication directly with communication directly with
target customers to generate a response and/or target customers to generate a response and/or
transaction transaction
Interactive/Internet marketing Interactive/Internet marketing communication communication

through interactive media such as the Internet, through interactive media such as the Internet,
CD-ROMS and kiosks. CD-ROMS and kiosks.
218
Basic elements
Basic elements
Sales promotion Sales promotion marketing activities that marketing activities that
provide extra value or incentives to sales force, provide extra value or incentives to sales force,
distributors, or consumers to stimulate distributors, or consumers to stimulate
immediate sales immediate sales
Publicity/Public Relations Publicity/Public Relations Publicity is a form of Publicity is a form of

non-personal communication not directly paid for non-personal communication not directly paid for
or run under identified sponsorship. Public or run under identified sponsorship. Public
relations is a management function which relations is a management function which
executes programs of action to earn public executes programs of action to earn public
understanding and acceptance an enhance the understanding and acceptance an enhance the
image of the company. image of the company.
Personal Selling Personal Selling person-to-person person-to-person

communication between a seller and buyer communication between a seller and buyer
219
Integrated Marketing
Integrated Marketing
Communication
Communication
Direct marketing is a form of integrated marketing Direct marketing is a form of integrated marketing
communications whereby an organization communications whereby an organization
communicates directly with target customers to communicates directly with target customers to
generate a response and/or transaction. It involves generate a response and/or transaction. It involves
a variety of activities including: a variety of activities including:
Direct mail Direct mail
Direct response advertising (on TV, radio or in Direct response advertising (on TV, radio or in
magazines or newspapers) magazines or newspapers)
Telemarketing Telemarketing
Internet Sales Internet Sales
Catalogs Catalogs
Shopping channel Shopping channel

220
Using the Internet as an IMC
Tool
Tool
The rapid changes in technology have led to The rapid changes in technology have led to
dramatic growth of communications through dramatic growth of communications through
interactive media, particularly the Internet. This interactive media, particularly the Internet. This
communication medium is unique in that it allows communication medium is unique in that it allows
for the back-and-forth flow of information in real for the back-and-forth flow of information in real
time. time.
Customers can perform a variety of functions on Customers can perform a variety of functions on
the Internet such as receive and alter information the Internet such as receive and alter information
and images, make inquires, respond to questions, and images, make inquires, respond to questions,
and, of course, make purchases. and, of course, make purchases.
221
Tool
Tool
The Internet has changed the way

The Internet has changed the way
companies communicate with their
companies communicate with their
customers. Because of its interactive
customers. Because of its interactive
nature, it is a very effective way to
nature, it is a very effective way to
communicate with customers.
communicate with customers.
In addition to advertising, companies can

In addition to advertising, companies can
offer sales promotion incentives such as
offer sales promotion incentives such as
coupons or contests, do direct marketing,
coupons or contests, do direct marketing,
and execute public relations, and personal
and execute public relations, and personal
selling functions via the Internet.
selling functions via the Internet.
222
Tool
Tool
The Internet has changed the ways

The Internet has changed the ways
companies communicate to their
companies communicate to their
customers as companies and
customers as companies and
organizations of all sizes have
organizations of all sizes have
developed websites to promote their
developed websites to promote their
products and services.
products and services.
Session-5
Session-5
Choosing a Store Location:
Choosing a Store Location:
Trading Area Analysis
Trading Area Analysis
224
Introduction
Introduction
Define Store:
Define Store:

A store is place , real or virtual , where the shoppers

A store is place , real or virtual , where the shoppers
comes to buy goods & services. The sales transaction
comes to buy goods & services. The sales transaction
occurs at this junction.
occurs at this junction.
The location of retail store has for along time been The location of retail store has for along time been
considered the most important considered the most important
P
P in retailing. in retailing.
Locating the retail store in the right place was Locating the retail store in the right place was
considered to be adequate for success. considered to be adequate for success.
225
O
Location becomes a critical decision for a retailer Location becomes a critical decision for a retailer
for several reasons. As like; for several reasons. As like;
O
Location is generally one of the most important Location is generally one of the most important
factors customers consider while choosing a store. factors customers consider while choosing a store.
O
A bad location may cause a retailer to fail even if A bad location may cause a retailer to fail even if
its strategic mix is excellent.. On the other hand , a its strategic mix is excellent.. On the other hand , a
good location may help a retailer succeed even if good location may help a retailer succeed even if
its strategic mix is mediocre. its strategic mix is mediocre.
O
Store location is least flexible element of Store location is least flexible element of
retailers strategic mix due to its fixed nature, the retailers strategic mix due to its fixed nature, the
amount of investment, and the length of lease amount of investment, and the length of lease
agreements agreements
226
Various option are available to the retailer for Various option are available to the retailer for
choosing the location of store. choosing the location of store.
The choice of the location of the store depends on The choice of the location of the store depends on
the target audience and the kind of merchandise the target audience and the kind of merchandise
to be sold. to be sold.
A retailer has to choosing among alternate types A retailer has to choosing among alternate types
of retail locations available . It may locate in an of retail locations available . It may locate in an
isolated place and pull the customer to the store isolated place and pull the customer to the store
on its own strength, such as a small grocery store on its own strength, such as a small grocery store
or paan shop in a colony which attracts the or paan shop in a colony which attracts the
customers staying close by. customers staying close by.
Types of Retail Location
Types of Retail Location
227
Typically a store location may be: Typically a store location may be:
1. 1.
Freestanding /Isolated store.
Freestanding /Isolated store.
2. 2.
Part of Business District/Centers (unplanned
Business Districts).
3. 3.
Part of a Shopping Center (Planned Shopping
Centers)
Centers)
228
1.
1.
Freestanding /Isolated store
Freestanding /Isolated store
Where there are no other outlets in the vicinity of Where there are no other outlets in the vicinity of
the store and therefore store depends on its own the store and therefore store depends on its own
pulling power and promotion to attracts pulling power and promotion to attracts
customers. customers.
A biggest advantages for freestanding stores is A biggest advantages for freestanding stores is
that there is no competition around. that there is no competition around.
This type of location has several advantages This type of location has several advantages
including no competition, low rent, often better including no competition, low rent, often better
visibility from the road, easy parking and lower visibility from the road, easy parking and lower
property . property .
Neighborhood Stores;
Neighborhood Stores; colony shops serves small colony shops serves small
locality. locality.
Highway Stores
Highway Stores :Ebony store in Ludhiana . :Ebony store in Ludhiana .
229
Business Associated Location:
Business Associated Location: These are location These are location
where a group of retail outlets offering a variety where a group of retail outlets offering a variety
of merchandise work together to attract of merchandise work together to attract
customers to their retail area, but also compete customers to their retail area, but also compete
against each other for the same customers.two against each other for the same customers.two
types includes in ; types includes in ;
1. 1.
2. 2.
Centers)
Centers)
230
2.
2.
A retail store can also be located as a part of a A retail store can also be located as a part of a
business district. Or we can refer this as unplanned business district. Or we can refer this as unplanned
business centers business centers
A business district is place of commerce in a city A business district is place of commerce in a city
which developed historically as the center of trade which developed historically as the center of trade
and commerce in the city or town. and commerce in the city or town.
A business districts can be a central, secondary or a A business districts can be a central, secondary or a
Neighborhood business district. Neighborhood business district.
A Central business District A Central business District CBD CBD is the main center of is the main center of
commerce and trade in the city. (high land rates , commerce and trade in the city. (high land rates ,
intense development) intense development)
231
A CBD is the hub of retailing activity in a city. A CBD is the hub of retailing activity in a city.
CBD served different sections of population for CBD served different sections of population for
Examples of Cannaught place in Delhi, Colaba in Examples of Cannaught place in Delhi, Colaba in
Mumbai, Commercial Street and in Bangalore are Mumbai, Commercial Street and in Bangalore are
up market CBDs. up market CBDs.
CBDs serving the upper and upper middle class CBDs serving the upper and upper middle class
customers across these cities like, chandani chowk customers across these cities like, chandani chowk
in Delhi, Kalbadevi-Bhuleswar in Mumbai, Chickpet in Delhi, Kalbadevi-Bhuleswar in Mumbai, Chickpet
in Bangalore. in Bangalore.
Secondary Business District are composed of Secondary Business District are composed of
unplanned cluster of store often located on a unplanned cluster of store often located on a
major intersection of city they a customers from a major intersection of city they a customers from a
large part large part of the city of the city
232
3.
3.
Centers)
Centers)
A shopping center has been defined as a group A shopping center has been defined as a group
of retail and other commercial establishments that of retail and other commercial establishments that
is planned , developed, owned and managed as a is planned , developed, owned and managed as a
single property single property
The basic configuration of a shopping centre is a The basic configuration of a shopping centre is a
Mall or Strip centre. Mall or Strip centre.
A mall is typically enclosed and climate controlled. A mall is typically enclosed and climate controlled.
A walkway is provided in front of the stores. A walkway is provided in front of the stores.
A strip centre is a row of stores with parking A strip centre is a row of stores with parking
provided in the front of the stores. provided in the front of the stores.
233
In India we can planned shopping centre can In India we can planned shopping centre can
categorize in two category categorize in two category
Regional shopping centers or Mall: Regional shopping centers or Mall: Regional Regional
shopping centers or mall are the largest planned shopping centers or mall are the largest planned
shopping centers.. shopping centers..
Often they are anchored by two or more major Often they are anchored by two or more major
department stores have enclosed mall serve a department stores have enclosed mall serve a
large trading area and have high rents. (ansal large trading area and have high rents. (ansal
plaza,spencers plaza crossroads, DLF city in plaza,spencers plaza crossroads, DLF city in
Gurgaon) Gurgaon)
Neighborhood/community/shopping centers: Neighborhood/community/shopping centers:

Neighborhood /community centers usually have a Neighborhood /community centers usually have a
balanced mix of stores including a few grocery balanced mix of stores including a few grocery
stores , a chemist, a verity store and a few other stores , a chemist, a verity store and a few other
stores selling convenience goods to the residents stores selling convenience goods to the residents
of the neighborhood. of the neighborhood.
234
Step involved in choosing a Retail Location
Step involved in choosing a Retail Location
In order to arrive at the decision on where to In order to arrive at the decision on where to
locate the retail store a retailer needs to first on locate the retail store a retailer needs to first on
the region that he wants to locate the store. the region that he wants to locate the store.
After identifying the region the following steps After identifying the region the following steps
Have to be followed . Have to be followed .
1. 1. Identifying the market in which to locate the Identifying the market in which to locate the
store. store.
2. 2. Evaluate the demand and supply within that Evaluate the demand and supply within that
market. i.e. determine the market potential. market. i.e. determine the market potential.
3. 3. Identify the most attractive sites Identify the most attractive sites
4. 4. Select the best site available Select the best site available
235
1. 1. Market Identification: Market Identification:
The first step in arriving at a decision on retail The first step in arriving at a decision on retail
location is to identify the market attractiveness location is to identify the market attractiveness
to a retailer. to a retailer.
This is important that retail needs to understand This is important that retail needs to understand
the market well. the market well.
2. 2. Determining the market Potential:: Determining the market Potential::
The retailer need to take into consideration The retailer need to take into consideration
various elements as shown in format. (features various elements as shown in format. (features
of population) of population)
Demographic features of the population Demographic features of the population
The characteristics of the household in the area The characteristics of the household in the area
(average household income) (average household income)
Competition and compatibility (Need to know Competition and compatibility (Need to know
compatibility & competition in market) compatibility & competition in market)
Laws & regulations:( good understanding Laws & regulations:( good understanding of the of the
laws laws
236
Trade area analysis:

Trade area analysis:
A trade area is the geographic area that A trade area is the geographic area that
generates the majority of the customers for the generates the majority of the customers for the
store. store.
Primary trade area: Primary trade area: primary trading covers primary trading covers
between 50-80% of the stores customers. between 50-80% of the stores customers.
Secondary Trading Area Secondary Trading Area: this area contains the : this area contains the
additional 15- to 25% of the stores customers. additional 15- to 25% of the stores customers.
Tertiary trading area covers Tertiary trading area covers the balance the balance
customers customers
These trading areas are dependent on distance These trading areas are dependent on distance
and do not always have to be concentric in nature and do not always have to be concentric in nature
237
Types of Trades areas.
Types of Trades areas.
238
3 & 4 3 & 4 Identify Alternate sites and select the Identify Alternate sites and select the
site: site:
After taking decision on the location and market After taking decision on the location and market
potential the retailer has to select the site to potential the retailer has to select the site to
locate the store based on these locate the store based on these
Traffic Traffic
Accessibility of the market is also a key factor Accessibility of the market is also a key factor
The total number of stores and the type of store The total number of stores and the type of store
that exist in the area that exist in the area
Amenities Amenities
To buy or to lease To buy or to lease
The product mix to be offered by the retailer The product mix to be offered by the retailer
Session-6
Session-6
Site selection
Site selection
240
Location, Location,
Location, Location,
Location!!!
Location!!!
Importance of location decision:

Importance of location decision:
Requires complex decision making

Requires complex decision making
Costs lots of $$
Costs lots of $$
Little flexibility once a location has

Little flexibility once a location has
been chosen
been chosen
Attributes of location have a strong

Attributes of location have a strong
impact on the retailers strategy
impact on the retailers strategy
241
Criteria to be
Criteria to be
considered:
considered:
Size &
Size &
characteristics of
characteristics of
population
population
Level of
Level of
competition
competition
Access to
Access to
transportation
transportation
Availability of
Availability of
parking
parking
Attributes of
Attributes of
nearby stores
nearby stores
Property costs
Property costs
Length of
Length of
agreement (if
agreement (if
lease)
lease)
Population trends
Population trends
Legal restrictions
Legal restrictions
242
Site Evaluation
Site Evaluation
Accessibility
Accessibility
Location advantages
Location advantages
Terms of occupancy
Terms of occupancy
Legal considerations (e.g.

Legal considerations (e.g.
environmental considerations, zoning
environmental considerations, zoning
restrictions, building codes, signs,
restrictions, building codes, signs,
licensing requirements)
licensing requirements)
243
Checklist for Site Evaluations
Local Demographics
Population and/or household base
Population growth potential
Lifestyles of consumers
Income potential
Age makeup
Population of nearby special markets,

that is, daytime workers, students,
and tourists, if applicable
Occupation mix
244
Traffic Flow and Accessibility
Number and type of vehicles passing location
Access of vehicles to location
Number and type of pedestrians passing

location
Availability of mass transit, if applicable
Accessibility of major highway artery
Quality of access streets
Level of street congestion
Presence of physical barriers that affect

trade area shape
245
Retail Competition
Number and types of stores in area
Analysis of key players in general area
Competitiveness of other merchants
Number and location of direct competitors

in area
Possibility of joint promotions with local

merchants
246
Site Characteristic
Number of parking spaces available
Distance of parking areas
Ease of access for delivery
Visibility of site from street
History of the site
Compatibility of neighboring stores
Size and shape of lot
Condition of existing building
Ease of entrance and exit for traffic
Ease of access for handicapped customers
Restrictions on sign usage
Building safety code restrictions
Type of zoning
247
Cost Factors
Terms of lease/rent agreement
Basic rent payments
Length of lease
Local taxes
Operations and maintenance cost
Restrictive clauses in lease
Membership in local merchants

association required
Voluntary regulations by local merchants

248
Site Selection
Site Selection
Trade area -- contiguous geographic

Trade area -- contiguous geographic
area that accounts for the majority of
area that accounts for the majority of
a stores sales and customers
a stores sales and customers
Primary trade zone -- Usually 3-5

Primary trade zone -- Usually 3-5
mile radius; generates 60-65% of
mile radius; generates 60-65% of
customers
customers
Secondary trade zone -- Usually 3-7

Secondary trade zone -- Usually 3-7
mile radius; generates 20% of
mile radius; generates 20% of
customers
customers
Tertiary trade zone -- Usually 15 - 50

Tertiary trade zone -- Usually 15 - 50
mile radius
mile radius
249
Steps in selecting a site:
Steps in selecting a site:
Evaluate alternative geographic areas in

Evaluate alternative geographic areas in
terms of the characteristics of residents
terms of the characteristics of residents
and existing retailers (trading-area
and existing retailers (trading-area
analysis)
analysis)
Determine whether to locate as stand-

Determine whether to locate as stand-
alone, unplanned business district or
alone, unplanned business district or
planned shopping center
planned shopping center
Make a decision about location type

Make a decision about location type
Analyze alternate sites

Analyze alternate sites
Session-7
Session-7
251
Introduction to Store
Introduction to Store
Layout Management
Layout Management
Store Image
Store Image
is the overall
is the overall
perception the customer has of the
perception the customer has of the
stores environment.
stores environment.
Space Productivity
Space Productivity
represents how
represents how
effectively the retailer utilizes its
effectively the retailer utilizes its
space and is usually measured by
space and is usually measured by
sales per square foot of selling space
sales per square foot of selling space
or gross margin dollars per square
or gross margin dollars per square
foot of selling space.
foot of selling space.
252
Store Image
Store Image
L.L. Bean offers relaxed, classic

L.L. Bean offers relaxed, classic
apparel styles to its customers. To
apparel styles to its customers. To
help convey this image, L.L. Beans
help convey this image, L.L. Beans
catalog and advertising reinforces
catalog and advertising reinforces
their image. For catalog customers,
their image. For catalog customers,
the catalog is the store environment.
the catalog is the store environment.
By incorporating a caf as an
By incorporating a caf as an
integral part of Barnes & Noble
integral part of Barnes & Noble
bookstores, a very relaxing and
bookstores, a very relaxing and
casual ambiance is created.
casual ambiance is created.
253
Objectives of the Store
Environment
Environment
Tasks to create desired store image

Tasks to create desired store image
and increase space productivity:
and increase space productivity:
Get customers into the store

Get customers into the store
(market image).
(market image).
Convert them into customers buying

Convert them into customers buying
merchandise once inside the store
merchandise once inside the store
(space productivity).
(space productivity).
Do this in the most efficient manner

Do this in the most efficient manner
possible.
possible.
254
Environment
Environment
Shrinkage
Shrinkage
Represents merchandise that cannot
Represents merchandise that cannot
be accounted for due to theft, loss,
be accounted for due to theft, loss,
or damage.
or damage.
255
Store Planning
Store Planning
Floor Plan
Floor Plan
is a schematic that shows
is a schematic that shows
where merchandise and customer
where merchandise and customer
service departments are located,
service departments are located,
how customers circulate through the
how customers circulate through the
store, and how much space is
store, and how much space is
dedicated to each department.
dedicated to each department.
Stack-Outs
Stack-Outs
are pallets of
are pallets of
merchandise set out on the floor in
merchandise set out on the floor in
front of the main shelves.
front of the main shelves.
256
Allocating Space
Allocating Space
Types of space needed:

Types of space needed:
Back room
Back room
Office and other functional spaces

Office and other functional spaces
Aisles, services areas, and other

Aisles, services areas, and other
nonselling areas of the main sales
nonselling areas of the main sales
floor
floor
Wall merchandise space

Wall merchandise space
Floor merchandise space

Floor merchandise space
257
Space Allocation
Space Allocation
Planning
Planning
Improving Space Productivity in

Improving Space Productivity in
Existing Stores
Existing Stores
Space Productivity Index

Space Productivity Index
is a ratio
is a ratio
that compares the percentage of the
that compares the percentage of the
stores total gross margin that a
stores total gross margin that a
particular merchandise category
particular merchandise category
generates to its percentage of total
generates to its percentage of total
store selling space used.
store selling space used.
Space Allocations for a New Store

Space Allocations for a New Store
258
Circulation
Circulation
Free-Flow Layout Free-Flow Layout is a type of store layout in which is a type of store layout in which
fixtures and merchandise are grouped into free- fixtures and merchandise are grouped into free-
flowing patterns on the sales floor flowing patterns on the sales floor
.
.
Allowance for browsing Allowance for browsing

and wandering freely and wandering freely
Increased impulse Increased impulse

purchases purchases
Visual appeal Visual appeal
Flexibility Flexibility
Disadvantages
Loitering encouraged
Possible confusion
Waste of floor space
Cost
Difficulty of cleaning
259
Circulation: Free Flow
Circulation: Free Flow
Pg no.209, chap:9, Retail Management, Berman & Evans
260
Circulation: Grid Layout
Circulation: Grid Layout
261
Circulation
Circulation
Loop Layout
Loop Layout
is a type of store layout
in which a major customer aisle
in which a major customer aisle
begins at the entrance, loops
begins at the entrance, loops
through the store, usually in the
through the store, usually in the
shape of a circle, square, ar
shape of a circle, square, ar
rectangle, and then returns the
rectangle, and then returns the
customer the front of the store.
customer the front of the store.
Advantages
Advantages
Exposes customers to the greatest amount Exposes customers to the greatest amount
of merchandise of merchandise
262
Circulation: Loop Layout
Circulation: Loop Layout
263
Circulation
Circulation
Spine Layout
Spine Layout
in which a single main aisle runs
in which a single main aisle runs
from the front to the back of the
from the front to the back of the
store, transporting customers in both
store, transporting customers in both
directions, and where on either side
directions, and where on either side
of this spine, merchandise
of this spine, merchandise
departments using either a free-flow
departments using either a free-flow
or grid pattern branch off toward the
or grid pattern branch off toward the
back aisle walls.
back aisle walls.
264
Circulation: Spine Layout
Circulation: Spine Layout
265
Planning Fixtures and
Planning Fixtures and
Merchandise Presentation
Merchandise Presentation
On-Shelf Merchandising
On-Shelf Merchandising

Is the display of merchandise on
Is the display of merchandise on
counters, racks, shelves, and fixtures
counters, racks, shelves, and fixtures
throughout the store.
throughout the store.
Fixture Types
Fixture Types
Merchandise Presentation Planning

Merchandise Presentation Planning
Selecting Fixtures and Merchandise

Selecting Fixtures and Merchandise
Presentation Methods
Presentation Methods
Visual Merchandising
266
Fixture Types
Fixture Types
Softlines Fixtures
Softlines Fixtures
Bulk or Capacity Fixture

Bulk or Capacity Fixture
is a display
is a display
fixture that is intended to hold the
fixture that is intended to hold the
bulk of merchandise without looking
bulk of merchandise without looking
as heavy as a long straight rack of
as heavy as a long straight rack of
merchandise.
merchandise.
Feature Fixture
Feature Fixture
is a display that
is a display that
draws special attention to selected
draws special attention to selected
features (e.g., color, shape, or style)
features (e.g., color, shape, or style)
of merchandise.
of merchandise.
267
Merchandise
Merchandise
Presentation Planning
Methods of Merchandise
Methods of Merchandise
Presentation:
Presentation:
Shelving
Shelving
Hanging
Hanging
Pegging
Pegging
Folding
Folding
Stacking
Stacking
Dumping
Dumping
268
Merchandise
Merchandise
Psychological Factors to Consider

Psychological Factors to Consider
When Merchandising Stores:
When Merchandising Stores:
Value/fashion image
Value/fashion image
Angles and sightlines

Angles and sightlines
Vertical color blocking

Vertical color blocking
269
Store Design
Store Design
Ambience
Ambience
Is the overall feeling or mood
Is the overall feeling or mood
projected by a store through its
projected by a store through its
aesthetic appeal to human senses.
aesthetic appeal to human senses.
Storefront Design
Storefront Design
Interior Design
Interior Design
Lighting Design
Lighting Design
Sounds and Smells: Total Sensory

Sounds and Smells: Total Sensory
Marketing
Marketing
270
Visual Communications
Visual Communications
Name, Logo, and Retail Identity

Name, Logo, and Retail Identity
Institutional Signage
Institutional Signage
Directional, Departmental, and

Directional, Departmental, and
Category Signage
Category Signage
Point-of-Sale (POS) Signage

Point-of-Sale (POS) Signage
Lifestyle Graphics
Lifestyle Graphics
271
Directional, Departmental,
Directional, Departmental,
and Category Signage
and Category Signage
Directional and Departmental Signage

Directional and Departmental Signage
are
are
large signs that are usually placed fairly
large signs that are usually placed fairly
high, so they can be seen throughout the
high, so they can be seen throughout the
store.
store.
Category Signage
Category Signage
are smaller than
are smaller than
directional and departmental signage and
directional and departmental signage and
are intended to be seen from a shorter
are intended to be seen from a shorter
distance; they are located on or close to
distance; they are located on or close to
the fixture itself where the merchandise is
the fixture itself where the merchandise is
displayed.
displayed.
272
Point-of-Sale (POS)
Point-of-Sale (POS)
Signage
Signage
Point-of-Sale Signage
Point-of-Sale Signage
Is relatively small signage that is
Is relatively small signage that is
placed very close to the
placed very close to the
merchandise and is intended to give
merchandise and is intended to give
details about specific items.
details about specific items.
POS signage for clearance and sale

POS signage for clearance and sale
items tend to be in red to draw a
items tend to be in red to draw a
consumers attention.
consumers attention.
Session-8
Session-8
274
A shopper should be able to

A shopper should be able to
determine a stores
determine a stores
Name
Name
Line of trade
Line of trade
Claim to fame
Claim to fame
Price position
Price position
Personality
Personality
275
Atmosphere
Atmosphere
The psychological feeling a

The psychological feeling a
customer gets when visiting a
customer gets when visiting a
retailer
retailer
Store retailer: atmosphere refers to

Store retailer: atmosphere refers to
stores physical characteristics that
stores physical characteristics that
project an image and draw customers
project an image and draw customers
Nonstore retailer: atmosphere refers to

Nonstore retailer: atmosphere refers to
the physical characteristics of catalogs,
the physical characteristics of catalogs,
vending machines, Web sites, etc.
vending machines, Web sites, etc.
276
Proactive, integrated
Proactive, integrated
atmospherics approach to create
atmospherics approach to create
a certain look, properly display
a certain look, properly display
products, stimulate shopping
products, stimulate shopping
behavior, and enhance physical
behavior, and enhance physical
behavior
behavior
277
Exterior Planning
Exterior Planning
Storefront
Storefront
Marquee
Marquee
Store entrances
Store entrances
Display windows
Display windows
Exterior building height

Exterior building height
Surrounding stores and

Surrounding stores and
area
area
Parking facilities
Parking facilities
278
Alternatives in Planning a
Alternatives in Planning a
Basic Storefront
Basic Storefront
Modular structure
Modular structure
Prefabricated structure
Prefabricated structure
Prototype store
Prototype store
Recessed storefront
Recessed storefront
Unique building design

Unique building design
279
Store Entrances
Store Entrances
How many entrances are

How many entrances are
needed?
needed?
What type of entrance is best?

What type of entrance is best?
How should the walkway be

How should the walkway be
designed?
designed?
280
General Interior
General Interior
Flooring
Flooring
Colors
Colors
Lighting
Lighting
Scents
Scents
Sounds
Sounds
Store fixtures
Store fixtures
Wall textures
Wall textures
Temperature
Temperature
Aisle space
Aisle space
Dressing
Dressing
facilities
facilities
In-store
In-store
transportation
transportation
(elevator,
(elevator,
escalator, stairs)
escalator, stairs)
Dead areas
Dead areas
Personnel
Personnel
Merchandise
Merchandise
Price levels
Price levels
Displays
Displays
Technology
Technology
Store cleanliness
Store cleanliness
281
Allocation of Floor Space
Allocation of Floor Space
Selling space
Selling space
Merchandise space
Merchandise space
Personnel space
Personnel space
Customer space
Customer space
282
Straight Traffic Pattern
Straight Traffic Pattern
Advantages
Advantages
An efficient An efficient
atmosphere is atmosphere is
created created
More floor space is More floor space is

devoted to product devoted to product
displays displays
People can shop People can shop

quickly quickly
Inventory control Inventory control

and security are and security are
simplified simplified
Self-service is easy, Self-service is easy,

thereby reducing thereby reducing
labor costs labor costs
Disadvantages
Disadvantages
Impersonal Impersonal
atmosphere atmosphere
More limited More limited

browsing by browsing by
customers customers
Rushed shopping Rushed shopping

behavior behavior
283
Curving Traffic Pattern
Curving Traffic Pattern
Advantages
Advantages
A friendly
A friendly
atmosphere
atmosphere
Shoppers do not
Shoppers do not
feel rushed
feel rushed
People are
People are
encouraged to
encouraged to
walk through in
walk through in
any direction
any direction
Impulse or
Impulse or
unplanned
unplanned
purchases are
purchases are
enhanced
enhanced
Disadvantages
Disadvantages
Possible
Possible
customer
customer
confusion
confusion
Wasted floor
Wasted floor
space
space
Difficulties in
Difficulties in
inventory control
inventory control
Higher labor
Higher labor
intensity
intensity
Potential
Potential
loitering
loitering
Displays may
Displays may
cost more
cost more
284
Interior (Point-of-Purchase)
Interior (Point-of-Purchase)
Displays
Displays
Assortment display
Assortment display
Theme-setting display
Theme-setting display
Ensemble display
Ensemble display
Rack display
Rack display
Case display
Case display
Cut case
Cut case
Dump bin
Dump bin
285
Online Store
Online Store
Considerations
Considerations
Unlimited space to Unlimited space to

present assortments, present assortments,
displays, and displays, and
information information
Can be customized to Can be customized to

the individual customer the individual customer
Can be modified Can be modified

frequently frequently
Can promote cross- Can promote cross-

merchandising and merchandising and
impulse purchasing impulse purchasing
Enables a consumer to Enables a consumer to

quickly enter and exit quickly enter and exit
an online store an online store
Disadvantages Disadvantages
Can be slow for Can be slow for

dialup shoppers dialup shoppers
Can be too complex Can be too complex
Cannot display Cannot display

three-dimensional three-dimensional
aspects of products aspects of products
well well
Requires constant Requires constant

updating updating
More likely to be More likely to be

exited without exited without
purchase purchase
Session-9
Session-9
287
Introduction
Introduction
Plan your store layout, atmosphere,

Plan your store layout, atmosphere,
and create irresistible visual
and create irresistible visual
merchandising displays. View floor
merchandising displays. View floor
plans and other retail store designs.
plans and other retail store designs.
Learn how to select and care for
Learn how to select and care for
store fixtures, as well as using
store fixtures, as well as using
special lighting techniques to accent
special lighting techniques to accent
your products.
your products.
288
10 ways to turn off
10 ways to turn off
customers
customers
Dirty Bathrooms Dirty Bathrooms

This customer pet peeve clearly deserves the number one spot on this list. This customer pet peeve clearly deserves the number one spot on this list.
Retail store restrooms should always be sparkling clean, whether they are Retail store restrooms should always be sparkling clean, whether they are
open for public use or not. Make sure to stock the bathrooms with plenty of open for public use or not. Make sure to stock the bathrooms with plenty of
paper products, soap, trash receptacles and clean it daily. paper products, soap, trash receptacles and clean it daily.
Messy Dressing Rooms Messy Dressing Rooms

Keeping the dressing room area free of discarded hangers, tags and empty Keeping the dressing room area free of discarded hangers, tags and empty
packaging goes beyond creating a neat store appearance, it is also a good packaging goes beyond creating a neat store appearance, it is also a good
step towards loss prevention. Take a quick look for out of place items after step towards loss prevention. Take a quick look for out of place items after
each customer uses the dressing room. each customer uses the dressing room.
Loud Music Loud Music
Playing music in a retail store can help create a certain atmosphere for our Playing music in a retail store can help create a certain atmosphere for our
shoppers. Music that is too loud, inappropriate or of poor quality can run a shoppers. Music that is too loud, inappropriate or of poor quality can run a
positive shopping experience. positive shopping experience.
Handwritten Signs Handwritten Signs

In this era of technology, there is no excuse for displaying handwritten In this era of technology, there is no excuse for displaying handwritten
signage. It is too simple to print a sign from our computers or use pre-printed signage. It is too simple to print a sign from our computers or use pre-printed
signs. Printed signs simply look more professional and signs with hard-to- signs. Printed signs simply look more professional and signs with hard-to-
read handwriting can be a customer turn-off. read handwriting can be a customer turn-off.
289
10 ways
10 ways
continued
continued
Stained Floor or Ceiling Tiles Stained Floor or Ceiling Tiles

It is true, accidents happen. However, our customers don't have to It is true, accidents happen. However, our customers don't have to
see them. Dirty carpet, stained flooring and ugly ceiling tiles can see them. Dirty carpet, stained flooring and ugly ceiling tiles can
turn off many shoppers. Sweeping, vacuuming and mopping should turn off many shoppers. Sweeping, vacuuming and mopping should
be done on a regular basis. Consider hiring a professional cleaning be done on a regular basis. Consider hiring a professional cleaning
crew to polish tile floors. Replace stained portions of carpet and crew to polish tile floors. Replace stained portions of carpet and
ceiling tiles where possible. ceiling tiles where possible.
Burned-out or Poor Lighting Burned-out or Poor Lighting

Replace any burned out light bulbs as soon as possible. Make sure Replace any burned out light bulbs as soon as possible. Make sure
all customer areas of the store have ample lighting and take into all customer areas of the store have ample lighting and take into
consideration shoppers with aging or less than perfect eyesight. consideration shoppers with aging or less than perfect eyesight.
Your store should be well illuminated for all customers. Your store should be well illuminated for all customers.
Offensive Odors Offensive Odors

Customers understand if they visit a lawn and garden center they Customers understand if they visit a lawn and garden center they
will have to deal with the smell of fertilizer. The same goes for will have to deal with the smell of fertilizer. The same goes for
shoppers of a feed supply store. Certain odors are understandable shoppers of a feed supply store. Certain odors are understandable
and may even appeal to the customer's sense of smell. However, and may even appeal to the customer's sense of smell. However,
shoppers don't want to smell an employee's lunch drifting across shoppers don't want to smell an employee's lunch drifting across
the store. Use neutralizers to combat any offensive odors. the store. Use neutralizers to combat any offensive odors.
290
10 ways
10 ways
continued
continued
Crowded Aisles Crowded Aisles

Consumers like a selection but not if it means sacrificing comfort Consumers like a selection but not if it means sacrificing comfort
while shopping. Be sure your store is designed to allow adequate while shopping. Be sure your store is designed to allow adequate
space between aisles and keep walkways free of merchandise. space between aisles and keep walkways free of merchandise.
Cramped spaces can ruin a shopping experience and turn off a Cramped spaces can ruin a shopping experience and turn off a
customer. customer.
Disorganized Checkout Counters Disorganized Checkout Counters

A stack of hangers, returned merchandise and sloppy work areas A stack of hangers, returned merchandise and sloppy work areas
behind the checkout is a huge customer turn-off. This particular behind the checkout is a huge customer turn-off. This particular
area where a customer's financial transaction is taking place should area where a customer's financial transaction is taking place should
not show any signs of disorganization. Like messy dressing rooms, a not show any signs of disorganization. Like messy dressing rooms, a
disorganized checkout counter can lead to theft. Keep those disorganized checkout counter can lead to theft. Keep those
register areas neat and tidy. register areas neat and tidy.
Lack of Shopping Carts/Baskets Lack of Shopping Carts/Baskets

Your type of retail shop may not require a shopping cart or your Your type of retail shop may not require a shopping cart or your
store may be too small, but there's not a single type of retailer that store may be too small, but there's not a single type of retailer that
wouldn't need at least some sort of shopping basket. If you hope for wouldn't need at least some sort of shopping basket. If you hope for
your customer to purchase more than one item in your store, be your customer to purchase more than one item in your store, be
sure to have an adequate supply of shopping carts or baskets on sure to have an adequate supply of shopping carts or baskets on
hand. hand.
291
Exterior of store
Exterior of store
Population and Your Customer Population and Your Customer
If you are choosing a city or state to locate your retail store, If you are choosing a city or state to locate your retail store,
research the area thoroughly before making a final decision. Read research the area thoroughly before making a final decision. Read
local papers and speak to other small businesses in the area. Obtain local papers and speak to other small businesses in the area. Obtain
location demographics from the local library, chamber of commerce location demographics from the local library, chamber of commerce
or the Census Bureau or the Census Bureau
Accessibility, Visibility and Traffic Accessibility, Visibility and Traffic
Don't confuse a lot of traffic for a lot of customers. Retailers want to Don't confuse a lot of traffic for a lot of customers. Retailers want to
be located where there are many shoppers but only if that shopper be located where there are many shoppers but only if that shopper
meets the definition of their target market. meets the definition of their target market.
Signage, Zoning and Planning Signage, Zoning and Planning
Before signing a lease, be sure you understand all the rules, policies Before signing a lease, be sure you understand all the rules, policies
and procedures related to your retail store location. Contact the and procedures related to your retail store location. Contact the
local city hall and zoning commission for information on regulations local city hall and zoning commission for information on regulations
regarding signage regarding signage
292
Exterior of store
Exterior of store
Competition and Neighbors Competition and Neighbors
Other area businesses in your prospective location can Other area businesses in your prospective location can
actually help or hurt your retail shop. Determine if the types actually help or hurt your retail shop. Determine if the types
of businesses nearby are compatible you're your store of businesses nearby are compatible you're your store
Location costs Location costs
The location you can afford now and what you can afford in The location you can afford now and what you can afford in
the future should vary. It is difficult to create sales projects the future should vary. It is difficult to create sales projects
on a new business on a new business
Personal Factors Personal Factors
If you plan to work in your store, think about your personality, If you plan to work in your store, think about your personality,
the distance from the shop to home and other personal the distance from the shop to home and other personal
considerations. considerations.
293
General Interior
General Interior
Flooring
Flooring
Colors
Colors
Lighting
Lighting
Scents
Scents
Sounds
Sounds
Store fixtures
Store fixtures
Wall textures
Wall textures
Temperature
Temperature
Aisle space
Aisle space
Dressing
Dressing
facilities
facilities
In-store
In-store
transportation
transportation
(elevator,
(elevator,
escalator, stairs)
escalator, stairs)
Dead areas
Dead areas
Personnel
Personnel
Merchandise
Merchandise
Price levels
Price levels
Displays
Displays
Technology
Technology
Store cleanliness
Store cleanliness
Session-10
Session-10
Display :Visual Merchandising
Display :Visual Merchandising
and Atmospherics
and Atmospherics
295
Retail Store Design & Visual Merchandising
Retail Store Design & Visual Merchandising

Store design and layout tells a customer what the Store design and layout tells a customer what the
store is all about and it is very strong tool in the store is all about and it is very strong tool in the
hands of the retailer for communicating and hands of the retailer for communicating and
creating the image of the store in the mind of the creating the image of the store in the mind of the
customers. customers.
The design and layout of the store are a means of The design and layout of the store are a means of
communicating the image of the retail store. communicating the image of the retail store.
The environment which is creates in the retail store, The environment which is creates in the retail store,
is a combination of the exterior look of the store, is a combination of the exterior look of the store,
the store interiors, the atmosphere in the store and the store interiors, the atmosphere in the store and
the events, promotions and the themes. the events, promotions and the themes.
296
The overall look of a store and the series of mental The overall look of a store and the series of mental
pictures and feelings it evokes within the beholder. pictures and feelings it evokes within the beholder.
For the retailer, developing a powerful image For the retailer, developing a powerful image
provides the opportunity to embody a single provides the opportunity to embody a single
message, stand out from the competition and be message, stand out from the competition and be
remembered. remembered.
297
Elements of store design
Elements of store design
Store
design
Building
architecture
Frontage &
Entrance
Ext.
Display
space
Target
Customers
Health &
Safety
Location
Store
theme
Merchand
ise Mix
Parking
Access
298
Exterior Store Design & Interior Design
Exterior Store Design & Interior Design
Exterior
Exterior
Location Location
Parking Parking
Ease of access Ease of access
The building architecture The building architecture
Health and safety standards Health and safety standards
Store windows, lighting Store windows, lighting
Interior
Interior
Fixtures Fixtures
Flooring & Ceilings Flooring & Ceilings
Lighting Lighting
Graphics & Signages Graphics & Signages
Atmospherics Atmospherics
299
Visual merchandising
Visual merchandising
Can be termed as the orderly,

Can be termed as the orderly,
systematic, logical and intelligent
systematic, logical and intelligent
way of putting stock on the floor
way of putting stock on the floor
VM is the art of presentation, which puts the VM is the art of presentation, which puts the
merchandise in focus. It educates the customers, merchandise in focus. It educates the customers,
creates desire and finally augments the selling creates desire and finally augments the selling
process. process.
300
www.pantaloons.com
www.pantaloons.com
301
www.shoppersstop.in

302
METHODS OF DISPLAYS
METHODS OF DISPLAYS
Color Dominance Color Dominance
Co-ordinated Presentation Co-ordinated Presentation
Presentation by price Presentation by price

FAQs
FAQs
304
Questions
Questions
Q1: Name the retail institutions classified by ownership? Q1: Name the retail institutions classified by ownership?
Ans: Independent, Chain, franchise, lease department, vertical marketing Ans: Independent, Chain, franchise, lease department, vertical marketing
systems, consumer cooperatives. systems, consumer cooperatives.
Q2: Name the retail institutions classified by store-based retail strategy mix? Q2: Name the retail institutions classified by store-based retail strategy mix?
Ans: Food oriented retailers: Convenience store, conventional supermarkets, Ans: Food oriented retailers: Convenience store, conventional supermarkets,
food based supermarkets, combination store, box (limited line) store, food based supermarkets, combination store, box (limited line) store,
warehouse store. warehouse store.
General merchandise retailers: Specialty store, variety store, traditional General merchandise retailers: Specialty store, variety store, traditional
department store, full line discount store, off-price chain, factory outlets, department store, full line discount store, off-price chain, factory outlets,
membership clubs, flea markets. membership clubs, flea markets.
Q3: What is the non-store based retail strategy mix? Q3: What is the non-store based retail strategy mix?
Ans: Direct marketing, direct selling. Vending machine, World Wide Web, other Ans: Direct marketing, direct selling. Vending machine, World Wide Web, other
emerging retail formats. emerging retail formats.
Q4: What are the pros & cons of store based retailing? Q4: What are the pros & cons of store based retailing?
Ans: Advantages: Goods can be touched & tried out, a leisure activity or Ans: Advantages: Goods can be touched & tried out, a leisure activity or
diversion, store environment is interesting & stimulating, a social activity, a diversion, store environment is interesting & stimulating, a social activity, a
day out. day out.
Disadvantages: Can be crowded & time spent queuing, lack of privacy, parking Disadvantages: Can be crowded & time spent queuing, lack of privacy, parking
charges, physically demanding. charges, physically demanding.
305
Questions
Questions
Q5: What are the pros & cons of non-store based retailing? Q5: What are the pros & cons of non-store based retailing?
Ans: Advantages: Can be performed at any time of the day, high comfort factor, Ans: Advantages: Can be performed at any time of the day, high comfort factor,
can provide party plan, increased privacy, less physically demanding. can provide party plan, increased privacy, less physically demanding.
Disadvantages: Usually relies on presentation rather than actual product, no Disadvantages: Usually relies on presentation rather than actual product, no
opportunity to getaway from home, repackaging & posting, postage & opportunity to getaway from home, repackaging & posting, postage &
packaging charges, some formats does not allow interaction with sales packaging charges, some formats does not allow interaction with sales
personnel for additional information. personnel for additional information.
Q6: What is technology based retailing. Give examples. Q6: What is technology based retailing. Give examples.
Ans: Impact of technology advancement on retailing. Few types are: vending, Ans: Impact of technology advancement on retailing. Few types are: vending,
telesales, internet retailing, video kiosks, airport retailing. telesales, internet retailing, video kiosks, airport retailing.
Q7: What are the elements of retail promotion? Q7: What are the elements of retail promotion?
Ans: Advertising, public relation, personal selling, sales promotion. Ans: Advertising, public relation, personal selling, sales promotion.
Q8: Explain the strategic aspect of retail promotion? Q8: Explain the strategic aspect of retail promotion?
Ans: Goals re stated in specific & measurable terms, an overall promotion Ans: Goals re stated in specific & measurable terms, an overall promotion
budget is set, the promotional mix is outlined, the promotional mix is budget is set, the promotional mix is outlined, the promotional mix is
enacted, the retailer systematically reviews & adjusts the promotional enacted, the retailer systematically reviews & adjusts the promotional
306
Questions
Questions
Q11: What is a retail institution? Give its classification? Q11: What is a retail institution? Give its classification?
Ans: Retail institution: basic format of business. Ans: Retail institution: basic format of business.
Ownership: Independent, Chain, franchise, lease department, vertical marketing systems, consumer Ownership: Independent, Chain, franchise, lease department, vertical marketing systems, consumer
cooperatives. cooperatives.
Store-based retail strategy mix: Food oriented retailers: Convenience store, conventional supermarkets, Store-based retail strategy mix: Food oriented retailers: Convenience store, conventional supermarkets,
food based supermarkets, combination store, box (limited line) store, warehouse store. food based supermarkets, combination store, box (limited line) store, warehouse store.
General merchandise retailers: Specialty store, variety store, traditional department store, full line General merchandise retailers: Specialty store, variety store, traditional department store, full line
discount store, off-price chain, factory outlets, membership clubs, flea markets. discount store, off-price chain, factory outlets, membership clubs, flea markets.
Non store based: Direct marketing; direct selling, vending machine, World Wide Web, other emerging Non store based: Direct marketing; direct selling, vending machine, World Wide Web, other emerging
retail formats. retail formats.
Q12: What are the main factors considered while targeting a customer segment in a retail format? Q12: What are the main factors considered while targeting a customer segment in a retail format?
Ans: Demographics, life-styles, needs and desires, shopping attitudes & behavior, retailer actions, Ans: Demographics, life-styles, needs and desires, shopping attitudes & behavior, retailer actions,
environmental factors. environmental factors.
Q13: What is perceived risk, its types & its impact on the consumer? Q13: What is perceived risk, its types & its impact on the consumer?
Ans: Perceived risk = level of risk customer believes exists regarding the purchase of a specific product. Ans: Perceived risk = level of risk customer believes exists regarding the purchase of a specific product.
Types: Functional, physical, financial, social, psychological, time. Types: Functional, physical, financial, social, psychological, time.
Impact: Purchase new product, stick with old brands, talk to friends and seek more information, non- Impact: Purchase new product, stick with old brands, talk to friends and seek more information, non-
purchase. purchase.
Q14: Explain the Consumer Decision Process? Q14: Explain the Consumer Decision Process?
Ans: A. The decision process: (Stimulus, problem awareness, information search, evaluation of Ans: A. The decision process: (Stimulus, problem awareness, information search, evaluation of
alternatives, purchase, post-purchase behavior) alternatives, purchase, post-purchase behavior)
B. Factors affecting the process: (Demographics, Life-styles). B. Factors affecting the process: (Demographics, Life-styles).
307
Case Study
Case Study
Client Overview Client Overview

The Client is one of the leading global retailer having a wide range of merchandise, The Client is one of the leading global retailer having a wide range of merchandise,
exclusive shop-in-shop counters of international brands and world-class customer exclusive shop-in-shop counters of international brands and world-class customer
service. The client has brought international standards of shopping to the Indian service. The client has brought international standards of shopping to the Indian
consumer providing them with a world class shopping experience. It is today consumer providing them with a world class shopping experience. It is today
recognised as Indias premier shopping destination. With a customer entry of about recognised as Indias premier shopping destination. With a customer entry of about
50,000 customers a day, a national presence with over 6,00,000 square feet of retail 50,000 customers a day, a national presence with over 6,00,000 square feet of retail
space and stocking over 250 brands of garments and accessories, it has clearly space and stocking over 250 brands of garments and accessories, it has clearly
become a one stop shop for all customers. become a one stop shop for all customers.

Their motto: We are responsible for the goods we sell. Their motto: We are responsible for the goods we sell.

Business Need Business Need

The clients customer loyalty program is called The First Citizen. The program offers The clients customer loyalty program is called The First Citizen. The program offers
its members an opportunity to collect points and avail of innumerable special its members an opportunity to collect points and avail of innumerable special
benefits. Currently, the client has a database of over 2.5 lakh members who benefits. Currently, the client has a database of over 2.5 lakh members who
contribute to nearly 50% of the total sales. Also the stores offer a complete range of contribute to nearly 50% of the total sales. Also the stores offer a complete range of
apparel and lifestyle accessories for the entire family. apparel and lifestyle accessories for the entire family.

308
Case Study
Case Study
Clients reporting system needs to be more flexible so that business users can extract complete Clients reporting system needs to be more flexible so that business users can extract complete
information easily and quickly. Different source systems typically use inconsistent data, which information easily and quickly. Different source systems typically use inconsistent data, which
needed reconciliation thereby to facilitate data consolidation. needed reconciliation thereby to facilitate data consolidation.
The Challenge The Challenge
To provide a Business Intelligence solution that would access the operational data effectively to To provide a Business Intelligence solution that would access the operational data effectively to
maintain the Loyalty program. To understand the importance of distribution and logistics in maintain the Loyalty program. To understand the importance of distribution and logistics in
ensuring that merchandise is available on the shop floors. To help vendor management, purchase ensuring that merchandise is available on the shop floors. To help vendor management, purchase
order management, stock receiving systems, purchase verification and inventory build up. To help order management, stock receiving systems, purchase verification and inventory build up. To help
faster replication of the data for new stores. To produce information about merchandise for quick faster replication of the data for new stores. To produce information about merchandise for quick
decision making. decision making.
Decision Making: Decision Making:
Make faster more informed investment decisions to support new products throughout their life cycle. Make faster more informed investment decisions to support new products throughout their life cycle.
Reference the product launches of proven high (and low) performers and compare their adoption Reference the product launches of proven high (and low) performers and compare their adoption
cycle to your current new product introductions. Further reduce risk by segmenting the consumer cycle to your current new product introductions. Further reduce risk by segmenting the consumer
base to perform and monitor trials to predict the impact for your entire consumer base. Integrate base to perform and monitor trials to predict the impact for your entire consumer base. Integrate
market data and learn from your competitors. market data and learn from your competitors.

Trend Indicators: Trend Indicators:
Performance indicators alert users when one was not performing to expectations. Analyze Performance indicators alert users when one was not performing to expectations. Analyze
performance against growth to find out which of the products are stars, which of accounts are dogs, performance against growth to find out which of the products are stars, which of accounts are dogs,
who the star sales people are, which of the outlets represent opportunity gaps etc. who the star sales people are, which of the outlets represent opportunity gaps etc.

Promotions: Promotions:
Benchmark promotions against previous best and worst performers. Understand what the Halo and Benchmark promotions against previous best and worst performers. Understand what the Halo and
Cannibalization effects are likely to be. Quantify the overall impact of promotions on total sales Cannibalization effects are likely to be. Quantify the overall impact of promotions on total sales
and margin. Reduce risk by tracking a test of the promotion before implementation and making and margin. Reduce risk by tracking a test of the promotion before implementation and making
accurate predictions for the roll out. accurate predictions for the roll out.

309
Objective Question
Objective Question
The typical method of retail operation used by supermarkets The typical method of retail operation used by supermarkets
and catalog showrooms is called: and catalog showrooms is called:
a. a. self-service retailing. self-service retailing.
b. b. limited-service retailing. limited-service retailing.
c. c. full-service retailing. full-service retailing.
d. d. service-merchandiser. service-merchandiser.
A(n) __________________ are computerized collections of A(n) __________________ are computerized collections of
information obtained from data sources within the company. information obtained from data sources within the company.
a. a. retrieval systems retrieval systems
b. b. marketing research reports marketing research reports
c. c. flow diagrams and PERT charts flow diagrams and PERT charts
d. d. internal databases internal databases
The total number of items that the company carries within The total number of items that the company carries within
its product lines refers to the ___________ of the product mix. its product lines refers to the ___________ of the product mix.
a. a. width width
b. b. depth depth
c. c. length length
d. d. consistency consistency
The use of price points for reference to different levels of The use of price points for reference to different levels of
quality for a company's related products is typical of which quality for a company's related products is typical of which
product-mix pricing strategy? product-mix pricing strategy?
a. a. Optional-product pricing Optional-product pricing
b. b. Captive-product pricing Captive-product pricing
c. c. By-product pricing By-product pricing
d. d. Product line pricing Product line pricing
If a company's objective were to reach masses of buyers If a company's objective were to reach masses of buyers
that were geographically dispersed at a low cost per that were geographically dispersed at a low cost per
exposure, the company would likely choose which of the exposure, the company would likely choose which of the
following promotion forms? following promotion forms?
a. a. Advertising Advertising
b. b. Personal selling Personal selling
c. c. Public relations Public relations
d. d. Sales promotion Sales promotion
Using a successful brand name to introduce additional items Using a successful brand name to introduce additional items
in a given product category under the same brand name in a given product category under the same brand name
(such as new flavors, forms, colors, added ingredients, or (such as new flavors, forms, colors, added ingredients, or
package sizes) is called a(n): package sizes) is called a(n):
a. a. line extension. line extension.
b. b. brand extension. brand extension.
c. c. multibranding. multibranding.
d. d. new brands. new brands.
Successful service companies focus their attention on both Successful service companies focus their attention on both
their customers and their employees. They understand their customers and their employees. They understand
___________________, which links service firm profits with ___________________, which links service firm profits with
employee and customer satisfaction. employee and customer satisfaction.
a. a. internal marketing internal marketing
b. b. service-profit chains service-profit chains
c. c. interactive marketing interactive marketing
d. d. service differentiation service differentiation
__________________ is quoted as saying that "everyone lives __________________ is quoted as saying that "everyone lives
by selling something." by selling something."
a. a. Bill Gates Bill Gates
b. b. Robert Louis Stevenson Robert Louis Stevenson
c. c. Arthur Miller Arthur Miller
d. d. Henry Ford Henry Ford
310
Objective Questions
Objective Questions
. . Anything that can be offered to a market for attention, Anything that can be offered to a market for attention,
acquisition, use, or consumption that might satisfy a acquisition, use, or consumption that might satisfy a
want or need is called a(n): want or need is called a(n):
a. a. idea. idea.
b. b. demand. demand.
c. c. product. product.
d. d. service. service.
The type of sales presentation approach that requires The type of sales presentation approach that requires
good listening and problem-solving skills is the: good listening and problem-solving skills is the:
a. a. canned approach. canned approach.
b. b. formula approach. formula approach.
c. c. need-satisfaction approach. need-satisfaction approach.
d. d. critical-thinking approach. critical-thinking approach.
Yahoo, Infoseek, and Excite are all called: Yahoo, Infoseek, and Excite are all called:
a. a. browsers. browsers.
b. b. Webcasters. Webcasters.
c. c. search engines. search engines.
d. d. software. software.
Successful ________________ depends on how well a Successful ________________ depends on how well a
company blends its people, organizational structure, company blends its people, organizational structure,
decision and reward systems, and company culture into decision and reward systems, and company culture into
a cohesive program that supports its strategies. a cohesive program that supports its strategies.
a. a. marketing strategy marketing strategy
b. b. marketing control marketing control
c. c. marketing analysis marketing analysis
d. d. marketing implementation marketing implementation
Wal-Mart owned Sam's club is an example of a retail Wal-Mart owned Sam's club is an example of a retail
form called a(n): form called a(n):
a. a. factory outlet. factory outlet.
b. b. super specialty store. super specialty store.
c. c. seconds store. seconds store.
d. d. warehouse club. warehouse club.
______________ is the general term for a buying and ______________ is the general term for a buying and
selling process that is supported by electronic means. selling process that is supported by electronic means.
a. a. Internet commerce Internet commerce
b. b. Web commerce Web commerce
c. c. Computer commerce Computer commerce
d. d. Electronic commerce Electronic commerce
When a company enters a new product category for When a company enters a new product category for
which its current brand names are not appropriate, it which its current brand names are not appropriate, it
will likely follow which of the following brand strategies? will likely follow which of the following brand strategies?
a. a. Product extensions Product extensions
b. b. Line extensions Line extensions
c. c. Brand extensions Brand extensions
d. d. New brands New brands
________________ consists of dividing a market into ________________ consists of dividing a market into
distinct groups of buyers on the basis of needs, distinct groups of buyers on the basis of needs,
characteristics, or behavior who might require separate characteristics, or behavior who might require separate
products or marketing mixes. products or marketing mixes.
a. a. Product differentiation Product differentiation
311
Objective questions
Objective questions
. . _________________ are ads that appear while _________________ are ads that appear while
subscribers are surfing online services or subscribers are surfing online services or
Web sites, including banners, pop-up Web sites, including banners, pop-up
windows, "tickers," and "roadblocks." windows, "tickers," and "roadblocks."
a. a. Online infomercials Online infomercials
b. b. Online ads Online ads
c. c. Online broadcasts Online broadcasts
d. d. Online bullets Online bullets
In terms of special product life cycles, a In terms of special product life cycles, a
_____________ is a basic and distinctive mode _____________ is a basic and distinctive mode
of expression. of expression.
a. a. genre genre
b. b. style style
c. c. fashion fashion
d. d. fad fad
_________________ is a principle of enlightened _________________ is a principle of enlightened
marketing that requires that a company seek marketing that requires that a company seek
real product and marketing improvements. real product and marketing improvements.
a. a. Innovative marketing Innovative marketing
b. b. Consumer-oriented marketing Consumer-oriented marketing
c. c. Value marketing Value marketing
d. d. Sense-of-mission marketing Sense-of-mission marketing
Many U.S. firms have sought relief from Many U.S. firms have sought relief from
foreign competition by demanding foreign competition by demanding
protectionism policies by the U.S. protectionism policies by the U.S.
government. A better way for companies to government. A better way for companies to
compete is to expand into foreign markets compete is to expand into foreign markets
and: and:
a. a. lower prices. lower prices.
b. b. increase promotion both at home and increase promotion both at home and
abroad. abroad.
c. c. continuously improve their products continuously improve their products
at home. at home.
d. d. join into cartels at home. join into cartels at home.
__________________ is the process of __________________ is the process of
evaluating each market segment's evaluating each market segment's
attractiveness and selecting one or more attractiveness and selecting one or more
segments to enter. segments to enter.
a. a. Mass marketing Mass marketing
Answer Answer
21.a, 22c, 23.a, 24.d, 25c, 26.d, 27.a, 28.a, 21.a, 22c, 23.a, 24.d, 25c, 26.d, 27.a, 28.a,
29.b, 30.b, 31.c, 32.c, 33.c, 34.d, 35.d, 36.d, 29.b, 30.b, 31.c, 32.c, 33.c, 34.d, 35.d, 36.d,
37.d, 38.b, 39.b, 40.b 41.a, 42.c 37.d, 38.b, 39.b, 40.b 41.a, 42.c
312
Unit:I
Unit:I
II
II
(8
(8
Sessions)
Sessions)

Managing Retail Managing Retail

Business Business
Retail Organization and Retail Organization and

HRM HRM
Retail Organization and Retail Organization and

Operations Operations
Management Management
Financial Dimensions Financial Dimensions
Managing Retail Managing Retail

Services Service Services Service
characteristics characteristics
Branding Branding
Perceptions of Service Perceptions of Service

Quality Quality
313
Sno
Unit Lecture
no
(1) III 1,2
Retail organization & HRM
314-340
(2) 3
Retail Organization and Operations
Management
341-353
(3) 4
Financial Dimensions
354-367
(4) 5
Service characteristics
368-389
(5) 6
Managing retail services
390-395
(6) 7
Branding
396-415
(7) 8
Service quality
414-438
(8)
439-447
LECTURE PLAN
Unit-III Sub: Retail Management (MBA-MK4)
Session
Session
315
Gaining Competitive Advantage
Gaining Competitive Advantage
through Human Resource
through Human Resource
Management
Management
Why does human resource management
Why does human resource management
give a sustainable competitive advantage?
give a sustainable competitive advantage?
Labor costs account for a significant

Labor costs account for a significant
percentage of a retailers total expenses
percentage of a retailers total expenses
The customer experiences are determined

The customer experiences are determined
by the activities of employees (selecting
by the activities of employees (selecting
merchandise, providing information and
merchandise, providing information and
assistance, etc.)
assistance, etc.)
These potential advantages are difficult for

These potential advantages are difficult for
competitors to duplicate
competitors to duplicate
316
Objectives of
Objectives of
Human Resource
Human Resource
Management
Management
Short Term Short Term
Increasing Employee Productivity Increasing Employee Productivity
Productivity = Sales/ Number of Employees Productivity = Sales/ Number of Employees
Long-Term Long-Term
Employee attitude Employee attitude customer satisfaction and customer satisfaction and
loyalty loyalty long-term performance long-term performance
Increasing Employee Satisfaction Increasing Employee Satisfaction Reducing Reducing

Turnover Turnover
Employee turnover Employee turnover

= = # of employees leaving their job during the # of employees leaving their job during the
year year
# of positions # of positions
317
Human Resource
Human Resource
Management
Management
Challenges in Retailing
Challenges in Retailing
Work Environment
Work Environment
Open Long Hours

Open Long Hours
Peak Sales Periods

Peak Sales Periods
Emphasis on Cost
Emphasis on Cost
Control
Control
Employees
Unskilled
Part-Time
Diverse
Backgrounds
High Turnover
High Turnover
318
Special HR
Special HR
Considerations Facing
Considerations Facing
Retailers
Retailers
Need for Part-Time Employees

Need for Part-Time Employees
Demand on Expense Control

Demand on Expense Control
Changing Employee Demographics

Changing Employee Demographics
International HR Issues
International HR Issues
319
Strategic Issues
Strategic Issues
Facing Retail HR
Facing Retail HR
Professionals
Professionals
The design of the organization structure

The design of the organization structure
for assigning responsibility, and authority
for assigning responsibility, and authority
for tasks to people and business units
for tasks to people and business units
The approaches utilized coordinate the

The approaches utilized coordinate the
activities of the firms department and
activities of the firms department and
employees, while motivating employees to
employees, while motivating employees to
work toward achieving company goals
work toward achieving company goals
The programs used to build employee

The programs used to build employee
commitment, and retain valuable human
commitment, and retain valuable human
resources
resources
320
Designing the Organizational Structure

Organizational structure
Organizational structure
Identifies the activities to be
Identifies the activities to be
performed by specific employees,
performed by specific employees,
and determines the lines of authority
and determines the lines of authority
and responsibility in the firm
and responsibility in the firm
321
Strategic Management Tasks
Performed in a Retail Firm
Develop a retail
Develop a retail
strategy
strategy
Identify the target

Identify the target
market
market
Determine the retail

Determine the retail
format
format
Design organizational
Design organizational
structure
structure
Select locations
Select locations
322
Merchandise Management Tasks
Buy merchandise Buy merchandise
Locate vendors Locate vendors
Evaluate vendors Evaluate vendors
Negotiate with vendors Negotiate with vendors
Place orders Place orders
Control merchandise inventory Control merchandise inventory
Develop merchandise Develop merchandise
Budget plans Budget plans
Allocate merchandise to stores Allocate merchandise to stores
Review open-to-buy and stock Review open-to-buy and stock

position position
Price merchandise Price merchandise
Set initial prices Set initial prices
Adjust prices Adjust prices

323
Store Management Tasks
Recruit, hire, and train store Recruit, hire, and train store
personnel personnel
Plan work schedules Plan work schedules
Evaluate performance of store Evaluate performance of store

personnel personnel
Maintain store facilities Maintain store facilities
Locate and display merchandise Locate and display merchandise
Sell merchandise to customers Sell merchandise to customers
Repair and alter merchandise Repair and alter merchandise
Provide services Provide services
Handle customer complaints Handle customer complaints
Take physical inventory Take physical inventory
Prevent inventory shrinkage Prevent inventory shrinkage

324
Administrative Management Tasks

Promote the firm, its

Promote the firm, its
merchandise and its
merchandise and its
services
services
Manage human resources

Manage human resources
Distribute merchandise
Distribute merchandise
Establish financial control

Establish financial control
325
Assignment of
Assignment of
Responsibility for Tasks
Responsibility for Tasks
Strategic Top Management, Board of

Strategic Top Management, Board of
Directors
Directors
Merchandise Management
Merchandise Division
Merchandise Division
Store Management Stores Division

Store Management Stores Division
Administrative Corporate Specialists

Administrative Corporate Specialists
326
What does a Buyer do?
What does a Buyer do?

A buyer is responsible for:
A buyer is responsible for:
procuring merchandise procuring merchandise
setting prices and markdowns setting prices and markdowns
managing inventories managing inventories
building and maintaining building and maintaining

relationships relationships
attending trade and fashion shows attending trade and fashion shows
negotiating with vendors on price, negotiating with vendors on price,

quantities, assortments, delivery quantities, assortments, delivery
dates and payment terms dates and payment terms
specifying private label merchandise specifying private label merchandise

327
What does a category
What does a category
manager do?
manager do?
A category manager
A category manager
Is responsible for a set of products that

Is responsible for a set of products that
are viewed as substitutes by customers
are viewed as substitutes by customers
(Ex: all pastas fresh, frozen, packed, or
(Ex: all pastas fresh, frozen, packed, or
canned)
canned)
Is evaluated on the profitability of

Is evaluated on the profitability of
category
category
Is motivated to eliminate me to
Is motivated to eliminate me to
products and keep essential niche
products and keep essential niche
products
products
Is used primarily by supermarkets, big

Is used primarily by supermarkets, big
box retailers
box retailers
328
Allocator vs. Planner
Allocator vs. Planner

Allocator
Allocator
responsible for allocating the
responsible for allocating the
merchandise and tailoring the
merchandise and tailoring the
assortments in several categories for
assortments in several categories for
specific stores in a geographic area.
specific stores in a geographic area.

Planner
Planner
responsible for the financial
responsible for the financial
planning and analysis of the
planning and analysis of the
merchandise category. They develop
merchandise category. They develop
the budget plan and monitor
the budget plan and monitor
performance
performance
329
Activities Performed at
Activities Performed at
the Macys Inc.
the Macys Inc.
Corporate Office
Corporate Office
Support services and counsel to operating Support services and counsel to operating
divisions divisions
Conceptualizing, designing, sourcing, and Conceptualizing, designing, sourcing, and

marketing private label and exclusive merchandise marketing private label and exclusive merchandise
sold at Macys and at Bloomingdales sold at Macys and at Bloomingdales
Overall strategy, product development, Overall strategy, product development,

merchandising and marketing of home-related merchandising and marketing of home-related
merchandise merchandise
Logistics, distribution, and operations functions Logistics, distribution, and operations functions
Services all proprietary and VISA credit card Services all proprietary and VISA credit card
accounts accounts
Performance of most other non-store services for Performance of most other non-store services for
customers and employees customers and employees
Development of distinctive sales promotions Development of distinctive sales promotions
Provision of an integrated electronic commerce, Provision of an integrated electronic commerce,

and data warehouse systems and data warehouse systems
330
Retail Organization
Retail Organization
Design Issues
Design Issues
The degree to which decision making

The degree to which decision making
is centralized or decentralized
is centralized or decentralized
The approaches used to coordinate

The approaches used to coordinate
merchandise and store management
merchandise and store management
331
Centralization vs. Decentralization
Advantages of Centralization
It is difficult for a retailer It is difficult for a retailer

to adapt to local market to adapt to local market
conditions conditions
It may have problems It may have problems

responding to local responding to local
competition and labor competition and labor
markets markets
Personnel policies make it Personnel policies make it

hard for local managers hard for local managers
to pay competitive wages to pay competitive wages
Reduce costs
(overhead falls with
fewer managers)
Coordinated buying
achieve lower prices
from suppliers
Opportunity to have
the best people make
decisions for the entire
corporation
Increases efficiency
Disadvantages of Centralization
332
Winning the Talent War
Winning the Talent War
Retailers are engaged in a war with

Retailers are engaged in a war with
their competitors for talent for
their competitors for talent for
effective employees and managers
effective employees and managers
who can effectively deal with the
who can effectively deal with the
incased complexities of retail jobs
incased complexities of retail jobs
(the use of new technologies,
(the use of new technologies,
increased profit & loss
increased profit & loss
responsibilities, increased global
responsibilities, increased global
competition, a diverse workforce).
competition, a diverse workforce).
Develop programs to attract,

Develop programs to attract,
develop, motivate, and keep talent
develop, motivate, and keep talent
333
Attracting Talent
Attracting Talent
Employment Marketing
Employment Marketing

Marketing programs that attract
Marketing programs that attract
best and brightest potential
best and brightest potential
employees
employees
Starbucks
Starbucks Love What You Do Love What You Do
Southwest
Southwest Free to Actually Enjoy What Free to Actually Enjoy What
You Are Doing You Are Doing
Employment marketing (branding)
334
Attracting Talent Employment
Attracting Talent Employment
Marketing
Marketing
JCPenney
JCPenney
To build its employment brand,
To build its employment brand,
JCPenney uses the tagline
JCPenney uses the tagline
A Perfect
A Perfect
Fit
Fit
on all correspondence and
on all correspondence and
advertising directed toward potential
advertising directed toward potential
employees
employees
335
Developing Talent
Developing Talent
Selection and Training
Selection and Training
Selective Hiring:
Selective Hiring:
Recruit Recruit the right people the right people
Simply seeking the best and the brightest may not Simply seeking the best and the brightest may not
always be the most effective approach always be the most effective approach
Training:
Training:
Increasing investments in management training Increasing investments in management training

programs and developing leaders programs and developing leaders
Increasing attention to college graduates - Increasing attention to college graduates -

Generation Y Generation Y
336
Motivating Talent
Motivating Talent
Aligning Goals
Aligning Goals
Policies and Supervision

Policies and Supervision
Indicate what employees should do

Indicate what employees should do
Behavior Enforced by Managers

Behavior Enforced by Managers
Incentives
Incentives
Commission, Bonus, Stock Options

Commission, Bonus, Stock Options
Organization Culture
Organization Culture
The set of values, traditions, and

The set of values, traditions, and
customs of a firm that guides
customs of a firm that guides
employee behavior
employee behavior
Behavior enforced by social

Behavior enforced by social
pressure
pressure
337
Use of Incentives
Use of Incentives
Advantages
Advantages
Aligns Employee
Aligns Employee
and Company
and Company
Goals
Goals
Strong Motivating
Strong Motivating
Force
Force
Disadvantages
Employees Only
Focus on Sales
Less Commitment
to Retailer
338
Developing and
Developing and
Maintaining a Culture
Maintaining a Culture
Stories
Stories
Nordstrom Hero Service Nordstrom Hero Service

Stores Stores
Ritz-Carlton wow story Ritz-Carlton wow story

reading reading
Whole Foods working in Whole Foods working in

teams and using its teams and using its
employees in the hiring employees in the hiring
process process
Wal-Mart Saturday Morning Wal-Mart Saturday Morning

Meeting Meeting
Symbols
Symbols
CEO Leadership
CEO Leadership
339
Keeping Talent
Keeping Talent
Building Employee
Building Employee
Commitment
Commitment
Empowering Employees
Empowering Employees
Empowerment is the process of managers sharing Empowerment is the process of managers sharing
power and decision-making authority with power and decision-making authority with
employees employees
Gives employees confidence Gives employees confidence
Provides greater opportunity to provide service to Provides greater opportunity to provide service to
customers customers
Employees are more committed to firms success Employees are more committed to firms success
Creating Partnering Relationships with

Creating Partnering Relationships with
Employees
Employees
Reducing Status Differences Reducing Status Differences
Promotion From Within Promotion From Within
Balancing Careers and Families Balancing Careers and Families
Flextime, job sharing Flextime, job sharing

340
Issues in Retail Human
Issues in Retail Human
Resource Management
Resource Management
Managing Diversity Managing Diversity
Diversity Training Diversity Training
Support Groups and Mentoring Support Groups and Mentoring
Career Development and Career Development and

Promotions Promotions
Growth in Legal Restrictions on Growth in Legal Restrictions on

HR Practices HR Practices
Equal employment opportunity Equal employment opportunity
Compensation Compensation
Labor relations Labor relations
Employee safety and health Employee safety and health
Sexual harassment Sexual harassment
Employee privacy Employee privacy
Use of Technology to Increase Use of Technology to Increase

Employee Productivity Employee Productivity
Session
Session
Retail organization &
Retail organization &
operation management
operation management
342
Overview
Overview

Operations management
Operations management
is
is
the efficient and
the efficient and
effective implementation of
effective implementation of
the policies and tasks that
the policies and tasks that
satisfy a retailers
satisfy a retailers
customers, employees, and
customers, employees, and
management (and
management (and
stockholders, if it is publicly
stockholders, if it is publicly
owned)
owned)
343
Operational Decisions
What operating guidelines are

What operating guidelines are
used?
used?
What is the optimal format and

What is the optimal format and
size of a store? What is the
size of a store? What is the
relationship among shelf space,
relationship among shelf space,
shelf location, and sales for each
shelf location, and sales for each
item in the store?
item in the store?
How can personnel be matched to

How can personnel be matched to
customer traffic flows? Would
customer traffic flows? Would
increased staffing improve or
increased staffing improve or
reduce productivity? What impact
reduce productivity? What impact
does self-service have on sales?
does self-service have on sales?
344
(cont.)
(cont.)
What effect does the use of

What effect does the use of
various building materials have on
various building materials have on
store maintenance? How can
store maintenance? How can
energy costs be better controlled?
energy costs be better controlled?
How often should facilities be
How often should facilities be
renovated?
renovated?
How can inventory best be

How can inventory best be
managed?
managed?
How can the personal safety of

How can the personal safety of
shoppers and employees be
shoppers and employees be
ensured?
ensured?
345
(cont.)
(cont.)
What levels of insurance are

What levels of insurance are
required?
required?
How can credit transactions be

How can credit transactions be
managed most effectively?
managed most effectively?
How can computer systems

How can computer systems
improve operating efficiency?
improve operating efficiency?
Should any aspects of operations

Should any aspects of operations
be outsourced?
be outsourced?
What kind of crisis management

What kind of crisis management
plans should be in place?
plans should be in place?
346
Operating A Retail Business
Operating A Retail Business
Operations Blueprint
Store Format, Size, and Space

Store Format, Size, and Space
Allocation
Allocation
Personnel Utilization
Personnel Utilization
Store Maintenance, Energy Mgt.,

Store Maintenance, Energy Mgt.,
Renovations
Renovations
Inventory Management
Store Security
Store Security
Insurance
Insurance
Credit Management
Credit Management
Computerization
Computerization
Outsourcing
Outsourcing
Crisis Management
Crisis Management
347
An operations blueprint operations blueprint systematically lists all
the operating functions to be performed, their
characteristics, and their timing.
The retailer specifies, in detail, every operating
function from the stores opening to closing
and those responsible for them.
348
Maximizing Personnel
Maximizing Personnel
Productivity
Productivity
Hiring Process
Hiring Process
Workload Forecasts
Workload Forecasts
Job Standardization and Cross-

Job Standardization and Cross-
Training
Training
Employee Performance Standards

Employee Performance Standards
Compensation
Compensation
Self-Service
Self-Service
Length of Employment
Length of Employment
349
Decisions
Decisions
How can handling of merchandise from How can handling of merchandise from
different suppliers be coordinated? different suppliers be coordinated?
How much inventory should be on the sales How much inventory should be on the sales
floor versus in a warehouse or storeroom? floor versus in a warehouse or storeroom?
How often should inventory be moved from How often should inventory be moved from
nonselling to selling areas of a store? nonselling to selling areas of a store?
What inventory functions can be done during What inventory functions can be done during
nonstore hours? nonstore hours?
What are the trade-offs between faster What are the trade-offs between faster
supplier delivery and higher shipping costs? supplier delivery and higher shipping costs?
What supplier support is expected in storing What supplier support is expected in storing
merchandise or setting up displays? merchandise or setting up displays?
What level of in-store merchandise breakage What level of in-store merchandise breakage
is acceptable? is acceptable?
Which items require customer delivery? When? Which items require customer delivery? When?
By whom? By whom?
350
Store Security
Store Security
Uniformed security guards

Uniformed security guards
Undercover personnel
Undercover personnel
Brighter lighting
Brighter lighting
TV cameras and other devices

TV cameras and other devices
Curfews
Curfews
Limited access to backroom facilities

Limited access to backroom facilities
Frequent bank deposits

Frequent bank deposits
351
Insurance Issues
Insurance Issues
Rising premiums
Rising premiums
Reduced scope of coverage by

Reduced scope of coverage by
insurers
insurers
Fewer insurers servicing

Fewer insurers servicing
retailers
retailers
Greater need for insurance

Greater need for insurance
against environmental risks
against environmental risks
352
Credit Management
Credit Management
Decisions
Decisions
What form of payment is acceptable?

What form of payment is acceptable?
Who administers the credit plan?

Who administers the credit plan?
What are customer eligibility

What are customer eligibility
requirements for a check or credit
requirements for a check or credit
purchase?
purchase?
What credit terms will be used?

What credit terms will be used?
How are late payments or

How are late payments or
nonpayments to be handled?
nonpayments to be handled?
353
Crisis Management
Crisis Management
There should be contingency plans for There should be contingency plans for
as many different crisis situations as as many different crisis situations as
possible possible
Essential information should be Essential information should be

communicated to all affected parties communicated to all affected parties
as soon as the crisis occurs as soon as the crisis occurs
Cooperation not conflict among the Cooperation not conflict among the
involved parties is essential involved parties is essential
Responses should be as swift as Responses should be as swift as

feasible feasible
The chain of command should be clear The chain of command should be clear
and decision makers given adequate and decision makers given adequate
authority authority
Session
Session
Retail organization & financial
Retail organization & financial
Dimension
Dimension
355
Profit Planning
Profit Planning
Profit-and-loss (income)
Profit-and-loss (income)
statement
statement
Summary of a retailers
Summary of a retailers
revenues and expenses over
revenues and expenses over
a given period of time
a given period of time
Review of overall and specific

Review of overall and specific
revenues and costs for
revenues and costs for
similar periods and
similar periods and
profitability
profitability
356
Major Components of a
Major Components of a
Profit-and-Loss Statement
Profit-and-Loss Statement
Net Sales
Net Sales
Cost of Goods
Cost of Goods
Sold
Sold
Gross Profit
Gross Profit
(Margin)
(Margin)
Operating
Operating
Expenses
Expenses
Taxes
Taxes
Net Profit
Net Profit
After Taxes
After Taxes
Net Sales $330,000
CGS $180,000
Gross Profit $150,000
Operating
Expenses
$ 95,250
Other Costs $ 20,000
Total Costs $115,250
Net Profit before
Taxes
$ 34,750
Taxes $ 15,500
Net Profit after
Taxes
$ 19,250
357
Asset Management
Asset Management
The Balance Sheet

The Balance Sheet
Assets Assets
Liabilities Liabilities
Net Worth Net Worth
Net Profit Margin Net Profit Margin
Asset Turnover Asset Turnover
Return on Assets Return on Assets
Financial Leverage Financial Leverage

358
Other Key Business Ratios
Other Key Business Ratios
Quick Ratio
Quick Ratio
Current Ratio
Current Ratio
Collection Period
Collection Period
Accounts Payable to Net

Accounts Payable to Net
Sales
Sales
Overall Gross Profit

Overall Gross Profit
359
Financial Trends in
Financial Trends in
Retailing
Retailing
Slow growth in U.S.

Slow growth in U.S.
economy
economy
Funding sources
Funding sources
Mergers, consolidations,
Mergers, consolidations,
spinoffs
spinoffs
Bankruptcies and
Bankruptcies and
liquidations
liquidations
Questionable accounting
Questionable accounting
and financial reporting
and financial reporting
practices
practices
360
Funding Sources
Funding Sources
Mortgage refinance (due to low

Mortgage refinance (due to low
interest rates)
interest rates)
REIT (retail-estate investment

REIT (retail-estate investment
trust) to fund construction
trust) to fund construction
Company dedicated to owning and

Company dedicated to owning and
operating income-producing real
operating income-producing real
estate
estate
Initial public offering (IPO)

Initial public offering (IPO)
361
Budgeting
Budgeting
Budgeting outlines a
Budgeting outlines a
retailers planned
retailers planned
expenditures for a given
expenditures for a given
time based on expected
time based on expected
performance
performance
Costs are linked to satisfying

Costs are linked to satisfying
target market, employee,
target market, employee,
and management goals
and management goals
362
Benefits of Budgeting
Benefits of Budgeting
Expenditures are related to expected Expenditures are related to expected

performance performance
Costs can be adjusted as goals are Costs can be adjusted as goals are
revised revised
Resources are allocated to the right Resources are allocated to the right
areas areas
Spending is coordinated Spending is coordinated
Planning is structured and integrated Planning is structured and integrated
Cost standards are set Cost standards are set
Expenditures are monitored during a Expenditures are monitored during a

budget cycle budget cycle
Planned budgets versus actual budgets Planned budgets versus actual budgets
can be compared can be compared
Costs/performance can be compared with Costs/performance can be compared with

industry averages industry averages
363
Preliminary Budgeting
Preliminary Budgeting
Decisions
Decisions
1) 1)
Specify budgeting
Specify budgeting
authority
authority
2) 2)
Define time frame
Define time frame
3) 3)
Determine budgeting
Determine budgeting
frequency
frequency
4) 4)
Establish cost categories
Establish cost categories
5) 5)
Set level of detail
Set level of detail
6) 6)
Prescribe budget
Prescribe budget
flexibility
flexibility
364
Cost Categories
Cost Categories
Capital expenditures
Capital expenditures
Fixed costs
Fixed costs
Direct costs
Direct costs
Natural account
Natural account
expenses
expenses
365
Ongoing Budgeting Process
Ongoing Budgeting Process
Set goals
Set goals
Specify performance standards

Specify performance standards
Plan expenditures in terms of

Plan expenditures in terms of
performance goals
performance goals
Make actual expenditures

Make actual expenditures
Monitor results
Monitor results
Adjust budget
Adjust budget
366
Resource Allocation
Resource Allocation
Capital
Capital
Expenditures
Expenditures
Long-term Long-term
investments in investments in
fixed assets fixed assets
Operating
Operating
Expenditures
Expenditures
Short-term Short-term
selling and selling and
administrative administrative
costs in running costs in running
a business a business
367
Enhancing Productivity
Enhancing Productivity
A firm can improve employee

A firm can improve employee
performance, sales per foot of
performance, sales per foot of
space, and other factors by
space, and other factors by
upgrading training programs,
upgrading training programs,
increasing advertising, etc.
increasing advertising, etc.
It can reduce costs by

It can reduce costs by
automating, having suppliers
automating, having suppliers
do certain tasks, etc.
do certain tasks, etc.
Session
Session
369
The Service Process
The Service Process
Matrix
Matrix

Degree Degree of Interaction and Customization Degree Degree of Interaction and Customization
of labor Intensity of labor Intensity Low High Low High
Service factory Service factory: : Service shop Service shop: :
* Airlines * Hospitals * Airlines * Hospitals
Low * Trucking * Auto repair Low * Trucking * Auto repair
* Hotels * Other repair services * Hotels * Other repair services
* Resorts and recreation * Resorts and recreation

Mass service Mass service: : Professional service Professional service: :
* Retailing * Doctors * Retailing * Doctors
High * Wholesaling * Lawyers High * Wholesaling * Lawyers
* Schools * Accountants * Schools * Accountants
* Retail aspects of * Architects * Retail aspects of * Architects
commercial banking commercial banking

370
The Service Package
The Service Package
Supporting Facility:
Supporting Facility:
The physical
The physical
resources that must be in place
resources that must be in place
before a service can be sold.
before a service can be sold.
Examples
Examples
are golf course, ski lift,
are golf course, ski lift,
hospital, airplane.
hospital, airplane.
Facilitating Goods:
Facilitating Goods:
The material
The material
purchased or consumed by the buyer
purchased or consumed by the buyer
or items provided by the consumer.
or items provided by the consumer.
Examples
Examples
are food items, auto parts,
are food items, auto parts,
legal documents, golf clubs.
legal documents, golf clubs.
371
The Service Package
The Service Package
(cont.)
(cont.)
Explicit Services:
Explicit Services:
Benefits readily
Benefits readily
observable by the senses. The
observable by the senses. The
essential or intrinsic features.
essential or intrinsic features.
Examples
Examples
are quality of meal,
are quality of meal,
attitude of the waiter, on-time
attitude of the waiter, on-time
departure.
departure.
Implicit Services
Implicit Services
: Psychological
: Psychological
benefits or extrinsic features which
benefits or extrinsic features which
the consumer may sense only
the consumer may sense only
vaguely.
vaguely.
Examples
Examples
are privacy of
are privacy of
loan office, security of a well lighted
loan office, security of a well lighted
parking lot.
parking lot.
372
From pure to quasi-
From pure to quasi-
manufacturing services
manufacturing services
Pure service:
Pure service:
high contact
high contact
Mixed service:
Mixed service:
medium contact
medium contact
(front-office)
(front-office)
Quasi-manufacturing:
Quasi-manufacturing:
low contact
low contact
(boundary functions and technical
(boundary functions and technical
core)
core)
Degree of contact influences time of

Degree of contact influences time of
demand and the exact nature of the
demand and the exact nature of the
service
service
373
Degree of contact and
management decisions
High
High
Location
Location
:
:
near
near
customer
customer
Layout:
Layout:
customer
customer
physical,
physical,
psychological needs
psychological needs
and expectations
and expectations
Product Design:
Product Design:

environment as well
environment as well
as physical product
as physical product
Low
Low
Near supply,
Near supply,
transport, labor
transport, labor
Enhance
Enhance
production
production
Product defined by
Product defined by
fewer attributes
fewer attributes
374
(cont)
(cont)
High
High
Process design:
Process design:

stages have direct,
stages have direct,
immediate effect
immediate effect
Scheduling:
Scheduling:

customer is in the
customer is in the
schedule,
schedule,
immediate service
immediate service
Production
Production
planning:
planning:
orders
orders
cannot be stored
cannot be stored
Low
Low
Customer not
Customer not
involved in
involved in
majority of steps
majority of steps
Customer
Customer
concerned with
concerned with
completion dates
completion dates
Backlogging and
Backlogging and
smoothing are
smoothing are
possible
possible
375
(cont)
(cont)
High
High
Worker skills:
Worker skills:
PR
PR
Quality:
Quality:
variable
variable
standards and
standards and
expectations
expectations
Time standards:
Time standards:

depends on
depends on
customer needs,
customer needs,
loose
loose
Low
Low
Technical skills
Technical skills
Standards
Standards
measurable and
measurable and
fixed
fixed
Time can be
Time can be
known
known
376
(cont)
(cont)
High
High
Wages:
Wages:
variable
variable
o/p, time based
o/p, time based
wage systems
wage systems
Capacity
Capacity
Planning:
Planning:
meet
meet
peak demand
peak demand
Forecasting:
Forecasting:
short-
short-
term, time oriented
term, time oriented
Low
Low
Fixed o/p, output

Fixed o/p, output
based wage
based wage
systems
systems
Storable output,
Storable output,
average demand
average demand
Long term, o/p

Long term, o/p
oriented
oriented
377
(cont)
(cont)
HC systems have more uncertainty in

HC systems have more uncertainty in
day to day operations
day to day operations
It is only by chance that capacity will

It is only by chance that capacity will
match demand
match demand
Workforce is a signficant PR
Workforce is a signficant PR
component
component
HC systems are at the mercy of time

HC systems are at the mercy of time
378
(cont)
(cont)
Implications for management
Implications for management
Rationalization is difficult: many

Rationalization is difficult: many
factors affect the ultimate quality of
factors affect the ultimate quality of
the service experience
the service experience
Distinction should be made between

Distinction should be made between
high and low contact elements
high and low contact elements
Development of 2 types of worker

Development of 2 types of worker
skills
skills
379
Unique Characteristics of
Services
Services
Customer presence: uncertainty on

Customer presence: uncertainty on
service time, workforce needed,
service time, workforce needed,
quality of service and operating
quality of service and operating
costs.
costs.
Attention to facility design and layout

Attention to facility design and layout
Routing the customer through the

Routing the customer through the
service system
service system
Employee job design

Employee job design
Customer job design

Customer job design
380
Services
Services
Intangibility:
Intangibility:
Customer doesnt know what level of

Customer doesnt know what level of
service s/he will be getting (only
service s/he will be getting (only
minimum levels may be guaranteed
minimum levels may be guaranteed
through registration, licencing,
through registration, licencing,
regulations)
regulations)
Management must identify particular

Management must identify particular
needs and use
needs and use
creative advertising
creative advertising
to
to
emphasise abstract benefits
emphasise abstract benefits
I
I
mportance of reputation
mportance of reputation
381
Services
Services
No patent protection: short life

No patent protection: short life
cycles for innovations; quick
cycles for innovations; quick
response to competitive pressure
response to competitive pressure
Capture market share as quickly as

Capture market share as quickly as
possible
possible
Clear definition of service package,

Clear definition of service package,
geographic area covered, standard
geographic area covered, standard
facility design, trademarks to define
facility design, trademarks to define
uniqueness
uniqueness
Barriers to entry
Barriers to entry
382
Services
Services
Simultaneity:
Simultaneity:
non-inventoriable
non-inventoriable
output
output
Inability to absorb fluctuations in

Inability to absorb fluctuations in
demand
demand
Manufacturing inventory decouples Manufacturing inventory decouples

operations operations
Services decoupling is through customer Services decoupling is through customer

waiting waiting
Inventory control queue control Inventory control queue control
Capacity, facility utilisation, idle time

Capacity, facility utilisation, idle time
balanced against customer waiting
balanced against customer waiting
time
time
Capacity surrogate to inventory Capacity surrogate to inventory
Cost of idle capacity inventory holding Cost of idle capacity inventory holding
cost cost
Lack of capacity stock out Lack of capacity stock out

383
Services
Services
Simultaneity
Simultaneity
(cont)
(cont)
I
I
nteraction creates customer
nteraction creates customer
perceptions of quality
perceptions of quality
; eliminates
; eliminates
opportunites for QC
opportunites for QC
Limit discretion of employees Limit discretion of employees
Standardised procedures Standardised procedures
Limited geographic area

Limited geographic area
O
O
pportunities for
pportunities for
promotional
promotional
strategies,
strategies,
personal selling
personal selling
384
Services
Services
Time-dependant demand: customer

Time-dependant demand: customer
demand and arrival patterns difficult
demand and arrival patterns difficult
to forecast (
to forecast (
cyclical, seasonal
cyclical, seasonal
)
)
Perishability
Perishability
of demand
of demand
: cannot
: cannot
inventory, opportunity loss of idle
inventory, opportunity loss of idle
capacity, need to match supply with
capacity, need to match supply with
demand
demand
Strategies to cope with variability:

Strategies to cope with variability:
Automation (affects pricing, service Automation (affects pricing, service

time,market positioning, maintenance, layout, time,market positioning, maintenance, layout,
workforce), Overlapping shifts, Price workforce), Overlapping shifts, Price
incentives, Reservations and appointments, incentives, Reservations and appointments,
Customer self-service Customer self-service
385
Services
Services
Heterogeneity:
Heterogeneity:
variability in output
variability in output
Due to
Due to
customer
customer
presence and
presence and
intangibility
intangibility
Difficult to establish and meet standards

Difficult to establish and meet standards
each time
each time
Training employees (Hamburger

Training employees (Hamburger
University)
University)
Field inspection
Field inspection
386
Services
Services
Difficulty in measuring output

Difficulty in measuring output
(number of customers) and evaluating
(number of customers) and evaluating
performance (maximizing profit)
performance (maximizing profit)
Labor intensiveness
Labor intensiveness
Customer/worker interface
Customer/worker interface
marketing/production interface
marketing/production interface
Direct worker affects perceived value of

Direct worker affects perceived value of
service
service
Production as well as marketing skills Production as well as marketing skills
Worker scheduling, training, incentives Worker scheduling, training, incentives

387
Services
Services
Site and size dictated by customer

Site and size dictated by customer
Limited economies of scale

Limited economies of scale
Control of decentralised operations

Control of decentralised operations
(multi-site management)
(multi-site management)
Standardise service package Standardise service package
Extra layers of management Extra layers of management
Automate back room operations Automate back room operations
Resilence to economic cycles:

Resilence to economic cycles:
recession proof?
recession proof?
388
Services
Services
International transportability
International transportability
Legal restrictions
Legal restrictions
Advertisability
Advertisability
Adequate channels of distribution

Adequate channels of distribution
Cultural, social norms

Cultural, social norms
Political stability
Political stability
Distance
Distance
Language
Language
389
Service Process
Service Process
Orientation
Orientation
Customer as Coproducer
Customer as Coproducer
Front and Back Office Perspectives

Front and Back Office Perspectives
Service Profit Chain Focus on

Service Profit Chain Focus on
Internal and External Customers
Quality (perceptions vs
Quality (perceptions vs
expectations)
expectations)
Focus on Both Efficiency and

Focus on Both Efficiency and
Effectiveness
Effectiveness
Use IT as
Use IT as
an
an
Enabler for Both
Enabler for Both
Session
Session
391
Retailing
Retailing
Nonstore retailing
Categories of nonstore retailing
Direct selling
Direct marketing
Telemarketing
Television direct-response
marketing
Electronic shopping
Automatic vending
Buying service
392
Retailing
Marketing Decisions
Target Market
Product Assortment and

Procurement
Breadth
Depth
393
Retailing
Services and Store Atmosphere
Prepurchase services include accepting

telephone and mail orders, etc.
Postpurchase services include shipping

and delivery, etc.
Ancillary services include general

information, check cashing, parking, etc.
Price Decision
High-markup, lower volume
Low-markup, high volume

394
Retailing
Promotion Decision
Place Decision
General business districts
Regional shopping centers
Community centers
Strip malls (a.k.a. shopping strips)
A location within a larger store

395
Retailing
Trends in Retailing
1. New retail forms and combinations
2. Growth of intertype competition
3. Growth of giant retailers
4. Growing investment in technology
5. Global presence of major retailers
6. Selling an experience, not just goods
7. Competition between store-based
and non-store-based retailing
Session
Session
Branding
Branding
397
Traditional view - Traditional view -
A A brand brand is a name, term, sign, symbol, or design which is intended is a name, term, sign, symbol, or design which is intended
to to identify identify the goods or services of one seller or group of sellers and the goods or services of one seller or group of sellers and
to to differentiate differentiate them from those of competitors. them from those of competitors.
More recent views More recent views
Brand is what is Brand is what is experienced and valued experienced and valued by customers in everyday by customers in everyday
social life. social life.
Brand is the culture of the product shared taken for-granted Brand is the culture of the product shared taken for-granted
brand stories, images, and associations brand stories, images, and associations
Brand is the mental and emotional file we have for a product or Brand is the mental and emotional file we have for a product or
service or entity. service or entity.
398
Brands are important as ever

Brands are important as ever
Consumer need for simplification

Consumer need for simplification
Consumer need for risk reduction

Consumer need for risk reduction
Brand management is as difficult as ever

Brand management is as difficult as ever
Savvy consumers
Savvy consumers
Increased competition
Increased competition
Decreased effectiveness of traditional marketing tools

Decreased effectiveness of traditional marketing tools
and emergence of new marketing tools
and emergence of new marketing tools
Complex brand and product portfolios

Complex brand and product portfolios
399
Branding by Retailers Example: Walmarts 5 Branding by Retailers Example: Walmarts 5
Next Victims Forbes 11/12/2004 Next Victims Forbes 11/12/2004
Consumer Electronics Consumer Electronics

Best Buy #1, Walmart #2 but Best Buy #1, Walmart #2 but
recently rolled out private brand ILO., expanded brand recently rolled out private brand ILO., expanded brand
relationships with Sony, RCA, Panasonic relationships with Sony, RCA, Panasonic
Banking Banking

trying to get into banking but thwarted by trying to get into banking but thwarted by
regulators, instead it offers check cashing, bill payment, & regulators, instead it offers check cashing, bill payment, &
money orders & boasts 28 Wal-Mart Money Centres operated money orders & boasts 28 Wal-Mart Money Centres operated
by Sun Trust Banks plus it has I-store bank branches with by Sun Trust Banks plus it has I-store bank branches with
other banks other banks
Pharmacy Pharmacy currently 4 currently 4

th th
in pharmacy business, rolling out a in pharmacy business, rolling out a
handful of 24hr pharmacies handful of 24hr pharmacies
Gasoline Gasoline 1555 stations on Wal-Mart properties, 300 of 1555 stations on Wal-Mart properties, 300 of
which are operated by Sams Club, rest by Murphy which are operated by Sams Club, rest by Murphy
Fashion Fashion

bought #1 selling British apparel brand George bought #1 selling British apparel brand George
from Asda, licenses Mary-Kate & Ashley lines from the Olsen from Asda, licenses Mary-Kate & Ashley lines from the Olsen
twins twins
400
In this difficult environment, marketers

In this difficult environment, marketers
must have a keen understanding of:
must have a keen understanding of:
customers
customers
brands
brands
the relationship between the two

the relationship between the two
401
The brand equity concept stresses the

The brand equity concept stresses the
importance of the brand in marketing
importance of the brand in marketing
strategies.
strategies.
Brand equity is defined in terms of the

Brand equity is defined in terms of the
marketing effects uniquely attributable
marketing effects uniquely attributable
to the brand.
to the brand.
Brand equity relates to the fact that different

Brand equity relates to the fact that different
outcomes result in the marketing of a product or
outcomes result in the marketing of a product or
service because of its brand name, as compared
service because of its brand name, as compared
to if the same product or service did not have that
to if the same product or service did not have that
name.
name.

402
Customer-based brand equi ty

Customer-based brand equi ty
Differential effect
Differential effect
Customer brand knowledge

Customer brand knowledge
Customer response to brand marketing

Customer response to brand marketing
403
Customer is
Customer is
aware
aware
of and
of and
familiar
familiar
with the
with the
brand
brand
Customer holds some

Customer holds some
strong, favorable, and
strong, favorable, and
unique brand associations
unique brand associations
in memory
in memory
404
Brand knowledge structures depend on . . .

Brand knowledge structures depend on . . .
The initial choices for the brand elements

The initial choices for the brand elements
The supporting marketing program and the

The supporting marketing program and the
manner by which the brand is integrated into it
manner by which the brand is integrated into it
Other associations indirectly transferred to the

Other associations indirectly transferred to the
brand by linking it to some other entities
brand by linking it to some other entities
405
Enjoy greater brand loyalty, usage, and

Enjoy greater brand loyalty, usage, and
affinity
affinity
Command larger price premiums

Command larger price premiums
Receive greater trade cooperation & support

Receive greater trade cooperation & support
Increase marketing communication

Increase marketing communication
effectiveness
effectiveness
Yield licensing opportunities

Yield licensing opportunities
Support brand extensions.

Support brand extensions.
406
Customer-based brand equity

Customer-based brand equity
represents the added value endowed
represents the added value endowed
to a product as a result of past
to a product as a result of past
investments in the marketing of a
investments in the marketing of a
brand.
brand.
Customer-based brand equity provides

Customer-based brand equity provides
direction and focus to future marketing
direction and focus to future marketing
activities
activities
407
For branding strategies to be successful,

For branding strategies to be successful,
consumers must be convinced that there
consumers must be convinced that there
are meaningful differences among brands
are meaningful differences among brands
in the product or service category.
in the product or service category.
Consumer must not think that all brands in

Consumer must not think that all brands in
the category are the same.
the category are the same.
PERCEPTION = VALUE
PERCEPTION = VALUE
408
Strategic brand management

Strategic brand management
involves the design
involves the design
and implementation of marketing programs and
and implementation of marketing programs and
activities to build, measure, and manage brand
activities to build, measure, and manage brand
equity.
equity.
The
The
strategic brand management process
strategic brand management process
is
is
defined as involving four main steps:
defined as involving four main steps:
1) Identifying and establishing brand positioning and values 1) Identifying and establishing brand positioning and values
2) Planning and implementing brand marketing programs 2) Planning and implementing brand marketing programs
3) Measuring and interpreting brand performance 3) Measuring and interpreting brand performance
4) Growing and sustaining brand equity 4) Growing and sustaining brand equity
409
Major Branding Decisions
Decision #1: Choosing a brand

Decision #1: Choosing a brand
name
name
Should suggest product benefits/qualities Should suggest product benefits/qualities
Sunkist, Spic and Span, DieHard, Easy-Off Sunkist, Spic and Span, DieHard, Easy-Off
Easy to pronounce, recognize, remember Easy to pronounce, recognize, remember
Tide, Aim, Puffs, but I Cant Believe Its Tide, Aim, Puffs, but I Cant Believe Its
Not Butter works too! Not Butter works too!
Distinctive Distinctive
Taurus, Kodak, Exxon Taurus, Kodak, Exxon
Translates easily into foreign languages Translates easily into foreign languages
Capable of registration and legal protection Capable of registration and legal protection
410
Decision #2: Brand Sponsor

Decision #2: Brand Sponsor
Manufacturers brand or private brand?

Manufacturers brand or private brand?
Retailers like private brands

Retailers like private brands
Builds loyalty to the retailer Builds loyalty to the retailer
Frequently better profit margins Frequently better profit margins
But they can be expensive to develop But they can be expensive to develop
Family brand or individual brand?

Family brand or individual brand?
Do existing associations work for the new Do existing associations work for the new
product? product?
411
Line
Extension
Brand
Extension
Multibrands
New
Brands
Product Category
Existing New
Brand
Name
Existing
New
Source: Kotler and Armstrong (1999). Principles of Marketing, 8th edition. Upper Saddle River, NJ: Prentice Hall
Decision #3:
Brand Strategy
412
International Branding
International Branding
Strategies
Strategies
One brand name everywhere
(greater identification of the
product worldwide, but are all
consumer needs the same?)
One brand name everywhere
(greater identification of the
product worldwide, but are all
consumer needs the same?)
Adaptions and
modifications
(modifying elements to
fit each market will
this help you achieve
economies of scale?)
Adaptions and
modifications
(modifying elements to
fit each market will
this help you achieve
economies of scale?)
Different brand names
in different markets
(new marketing mixes
for each market
will this make you
more effective?)
Different brand names
in different markets
(new marketing mixes
for each market
will this make you
more effective?)
413
Brand Equity
Brand Equity
A brand has value, called

A brand has value, called
brand
brand
equity
equity
. Brand equity is based on
. Brand equity is based on
brand loyalty, name awareness,
brand loyalty, name awareness,
perceived quality, strong
perceived quality, strong
associations, patents, etc.
associations, patents, etc.
What are the top brands worldwide

What are the top brands worldwide
for brand equity?
for brand equity?
Brand equity makes brand and line

Brand equity makes brand and line
extensions easier.
extensions easier.
414
Managing Brand Equity
Managing Brand Equity
Brand equity is an asset, and needs to be

Brand equity is an asset, and needs to be
managed.
managed.
maintain/improve top-of-mind awareness maintain/improve top-of-mind awareness
improve perceptions of quality improve perceptions of quality
create positive brand associations create positive brand associations
To manage brand equity, you should:

To manage brand equity, you should:
continuous R & D investment continuous R & D investment
skillful advertising skillful advertising
avoid short-term actions which undermine the avoid short-term actions which undermine the
brand in the long-term brand in the long-term
415
Five levels of brand
Five levels of brand
familiarity
familiarity
Brand rejection Brand rejection: wont buy unless a relevant factor : wont buy unless a relevant factor
changes changes
Brand non-recognition: Brand non-recognition: consumers dont pay consumers dont pay
attention to brands (commoditization) attention to brands (commoditization)
Brand recognition: Brand recognition: consumers are aware of the consumers are aware of the
brand and recognize it with/without prompting brand and recognize it with/without prompting
Brand preference: Brand preference: consumers usually choose a consumers usually choose a
specific brand specific brand
Brand insistence: Brand insistence:consumers are willing to prolong consumers are willing to prolong
search to find the desired brand search to find the desired brand
Session
Session
Service Quality
Service Quality
417
Introduction
Introduction
Each customer contact is called a

Each customer contact is called a
moment of truth.
moment of truth.
You have the ability to either satisfy

You have the ability to either satisfy
or dissatisfy them when you contact
or dissatisfy them when you contact
them.
them.
A
A
service recovery
service recovery
is satisfying a
is satisfying a
previously dissatisfied customer and
previously dissatisfied customer and
making them a loyal customer.
making them a loyal customer.
418
Dimensions of Service
Quality
Quality
Reliability
Reliability
: Perform promised service
: Perform promised service
dependably and accurately.
dependably and accurately.
Example
Example
: receive mail at same time
: receive mail at same time
each day.
each day.
Responsiveness
Responsiveness
: Willingness to help
: Willingness to help
customers promptly.
customers promptly.
Example
Example
: avoid
: avoid
keeping customers waiting for no
keeping customers waiting for no
apparent reason.
apparent reason.
419
Quality
Quality
Assurance
Assurance
: Ability to convey trust
: Ability to convey trust
and confidence.
and confidence.
Example
Example
: being
: being
polite and showing respect for
polite and showing respect for
customer.
customer.
Empathy
Empathy
: Ability to be
: Ability to be
approachable.
approachable.
Example
Example
: being a
: being a
good listener.
good listener.
Tangibles
Tangibles
: Physical facilities and
: Physical facilities and
facilitating goods.
facilitating goods.
Example
Example
:
:
cleanliness.
cleanliness.
420
Perceived Service
Perceived Service
Quality
Quality

Word of
mouth
Personal
needs
Past
experience
Expected
service
Perceived
service
Service Quality
Dimensions
Reliability
Responsiveness
Assurance
Empathy
Tangibles
Service Quality Assessment
1. Expectations exceeded
ES<PS (Quality surprise)
2. Expectations met
ES~PS (Satisfactory quality)
3. Expectations not met
ES>PS (Unacceptable quality)
Pg:124, Ch:4, Service Quality, ICFAI
421
Service Quality Gap
Service Quality Gap
Model
Model
Customer
Perceptions
Customer
Expectations
Service
Delivery
Service
Standards
Management
Perceptions
of Customer
Expectations
Managing the
Evidence
Conformance
Service Design
Understanding
the Customer
GAP 5
Customer /
Marketing Research
GAP 1
Conformance
GAP 3
Communication
GAP 4
Design GAP 2
Service Quality Gap Model
Gap model, pg no:126, Ch:4, Service Marketing ,ICFAI
Gap model, Pg:234,CH:9 Service Marketing, ICFAI
422
Quality Service by
Quality Service by
Design
Design
Quality in the Service Package

Quality in the Service Package
Budget Hotel example
Budget Hotel example
Taguchi Methods (Robustness)

Taguchi Methods (Robustness)
Notifying maids of rooms for
Notifying maids of rooms for
cleaning
cleaning
Poka-yoke (fail-safing)
Poka-yoke (fail-safing)
Height bar at amusement park
Height bar at amusement park
Quality Function Deployment

Quality Function Deployment
House of Quality
House of Quality
423
Classification of Service
Classification of Service
Failures
Failures
Server Errors
Server Errors
Task Task: :
Doing work incorrectly Doing work incorrectly
Treatment Treatment: :
Failure to listen to Failure to listen to
customer customer
Tangible Tangible: :
Failure to wear clean Failure to wear clean
uniform uniform
Customer Errors
Customer Errors
Preparation Preparation: :
Failure to bring Failure to bring
necessary materials necessary materials
Encounter Encounter: :
Failure to follow system Failure to follow system
flow flow
Resolution Resolution: :
Failure to signal service Failure to signal service
failure failure
424
Achieving Service
Achieving Service
Quality
Quality
Cost of Quality
Cost of Quality
Service Process Control

Service Process Control
Statistical Process Control

Unconditional Service Guarantee

Unconditional Service Guarantee
425
Unconditional Service
Guarantee: Customer View
Guarantee: Customer View
Unconditional
Unconditional
Easy to understand and

Easy to understand and
communicate
communicate
Meaningful
Meaningful
Easy to invoke
Easy to invoke
Easy to collect
Easy to collect
426
Guarantee: Management
Guarantee: Management
View
View
Focuses on customers (British

Focuses on customers (British
Airways)
Airways)
Sets clear standards (FedEx)

Sets clear standards (FedEx)
Guarantees feedback (Manpower)

Guarantees feedback (Manpower)
Promotes an understanding of the

Promotes an understanding of the
service delivery system (Bug Killer)
service delivery system (Bug Killer)
Builds customer loyalty by making

Builds customer loyalty by making
expectations explicit
expectations explicit
427
All customers want to be satisfied.

All customers want to be satisfied.
Customer loyalty is only due to the

Customer loyalty is only due to the
lack of a better alternative
lack of a better alternative
Giving customers some extra value

Giving customers some extra value
will
will
delight
delight
them by exceeding their
them by exceeding their
expectations
expectations
and insure their return
and insure their return
428
Customer Feedback and
Customer Feedback and
Word-of-Mouth
Word-of-Mouth
The average business only hears from 4% of their The average business only hears from 4% of their
customers who are dissatisfied with their products or customers who are dissatisfied with their products or
services. Of the 96% who do not bother to complain, 25% services. Of the 96% who do not bother to complain, 25%
of them have serious problems. of them have serious problems.
The 4% complainers are more likely to stay with the The 4% complainers are more likely to stay with the
supplier than are the 96% non-complainers. supplier than are the 96% non-complainers.
About 60% of the complainers would stay as customers if About 60% of the complainers would stay as customers if
their problem was resolved and 95% would stay if the their problem was resolved and 95% would stay if the
problem was resolved quickly. problem was resolved quickly.
A dissatisfied customer will tell between 10 and 20 other A dissatisfied customer will tell between 10 and 20 other
people about their problem. people about their problem.
A customer who has had a problem resolved by a A customer who has had a problem resolved by a
company will tell about 5 people about their situation. company will tell about 5 people about their situation.
429
Walk-Through-Audit
Walk-Through-Audit
Service delivery system should

Service delivery system should
conform to customer expectations.
conform to customer expectations.
Customer impression of service

Customer impression of service
influenced by use of all senses.
influenced by use of all senses.
Service managers lose sensitivity

Service managers lose sensitivity
due to familiarity.
due to familiarity.
Need detailed service audit from a

Need detailed service audit from a
customers perspective.
customers perspective.
430
Approaches to Service
Approaches to Service
Recovery
Recovery
Case-by-case
Case-by-case
addresses each
addresses each
customers complaint individually but
customers complaint individually but
could lead to perception of unfairness.
could lead to perception of unfairness.
Systematic response
Systematic response
uses a protocol to
uses a protocol to
handle complaints but needs prior
handle complaints but needs prior
identification of critical failure points
identification of critical failure points
and continuous updating.
and continuous updating.
Early intervention
Early intervention
attempts to fix
attempts to fix
problem before the customer is
problem before the customer is
affected.
affected.
Substitute service
Substitute service
allows rival firm to
allows rival firm to
provide service but could lead to loss of
provide service but could lead to loss of
customer.
customer.
431
Example to illustrate the
Example to illustrate the
process
process
We are the maker of this cereal,

We are the maker of this cereal,
which is advertised 16 ounces
which is advertised 16 ounces
per box.
per box.
Consumer Reports
Consumer Reports
has
has
just published an article that
just published an article that
shows that we frequently have
shows that we frequently have
less than 15 ounces of cereal in a
less than 15 ounces of cereal in a
box.
box.
What should we do?

What should we do?
432
Step 1 - Define
Step 1 - Define
What is the critical-to-quality

What is the critical-to-quality
characteristic?
characteristic?
The CTQ (critical-to-quality)

The CTQ (critical-to-quality)
characteristic in this case is the
characteristic in this case is the
weight of the cereal in the box.
weight of the cereal in the box.
433
2 - Measure
2 - Measure
How would we measure to

How would we measure to
evaluate the extent of the
evaluate the extent of the
problem?
problem?
What are acceptable limits on

What are acceptable limits on
this measure?
this measure?
434
2 Measure (continued)
2 Measure (continued)
Lets assume that the

Lets assume that the
government says that we must
government says that we must
be within
be within
5 percent of the
5 percent of the
weight advertised on the box.
weight advertised on the box.
Upper Tolerance Limit = 16 + .

Upper Tolerance Limit = 16 + .
05(16) = 16.8 ounces
05(16) = 16.8 ounces
Lower Tolerance Limit = 16 .

Lower Tolerance Limit = 16 .
05(16) = 15.2 ounces
05(16) = 15.2 ounces
435
2. Measure (continued)
2. Measure (continued)
We go out and buy 1,000 boxes

We go out and buy 1,000 boxes
of cereal and find that they
of cereal and find that they
weight an average of 15.875
weight an average of 15.875
ounces with a standard
ounces with a standard
deviation of .529 ounces.
deviation of .529 ounces.
What percentage of boxes are

What percentage of boxes are
outside the tolerance limits?
outside the tolerance limits?
436
Step 3 - Analyze - How can
Step 3 - Analyze - How can
we improve the capability
we improve the capability
of our cereal box filling
of our cereal box filling
process?
process?
Decrease Variation
Decrease Variation
Center Process
Center Process
Increase
Increase
Specifications
Specifications
437
Step 4 Improve How good is
Step 4 Improve How good is
good enough?
good enough?
Motorolas Six Sigma
Motorolas Six Sigma
438
Step 5 Control
Step 5 Control

(SPC)
(SPC)
Use data from the actual

Use data from the actual
process
process
Estimate distributions
Estimate distributions
Look at capability - is good

Look at capability - is good
quality possible
quality possible
Statistically monitor the

Statistically monitor the
process over time
process over time
FAQs
FAQs
440
Questions
Questions
Q1. What are the different factors that must be considered in planning and assessing the retail organization? Q1. What are the different factors that must be considered in planning and assessing the retail organization?
Ans: Three main factors 1-Target market needs Ans: Three main factors 1-Target market needs
2-Employee needs 2-Employee needs
3-Management needs 3-Management needs
Q2. Explain the process of organizing a Retail firm? Q2. Explain the process of organizing a Retail firm?
Ans Ans
Outline the specific tasks to be performed in retail distribution channel Outline the specific tasks to be performed in retail distribution channel
Dividing the tasks among channel members and customers Dividing the tasks among channel members and customers
Grouping the retailers tasks into jobs Grouping the retailers tasks into jobs
Classifying jobs Classifying jobs
Integrating positions through and organization chart Integrating positions through and organization chart
Q3- What are the duties and responsibilities of a store manager? Q3- What are the duties and responsibilities of a store manager?
Ans Ans
Sales forecasting and Budgeting Sales forecasting and Budgeting
Personnel recruitment, selection, training, motivation, and evaluation Personnel recruitment, selection, training, motivation, and evaluation
Merchandise display, inventory management Merchandise display, inventory management
Handling store receipt, preparing bank transactions, opening and closing store Handling store receipt, preparing bank transactions, opening and closing store
Reviewing customer complaints Reviewing customer complaints
Semiannual review of overall operations and reports for top management Semiannual review of overall operations and reports for top management
Q4 In how many ways jobs can be classified in Retail Organization Q4 In how many ways jobs can be classified in Retail Organization
Ans Ans
Functional Functional
Product Diversification Product Diversification
Geographic Geographic
441
Questions
Questions
Q5 What are the main principles for organizing a retail firm? Q5 What are the main principles for organizing a retail firm?
Ans Show interest in employees Ans Show interest in employees
Monitor employee turnover, lateness, and absenteeism Monitor employee turnover, lateness, and absenteeism
Trace line of authority from top to bottom Trace line of authority from top to bottom
Limit span of control, Empower employees Limit span of control, Empower employees
Delegate authority while maintaining responsibility, Acknowledge need for coordination and communication Delegate authority while maintaining responsibility, Acknowledge need for coordination and communication
Recognize the power of informal relationships Recognize the power of informal relationships
Q6-What are the main functions of HRM in retail organization? Q6-What are the main functions of HRM in retail organization?
Ans Recruiting Ans Recruiting
Selecting Selecting
Training Training
Compensating Compensating
Supervising Supervising
Q7-What is the true cost of Employee turnover? Q7-What is the true cost of Employee turnover?
Ans Recruiting and hiring new employees Ans Recruiting and hiring new employees
Training costs including management time Training costs including management time
Full pay and benefits during training, before full productivity is reached Full pay and benefits during training, before full productivity is reached
Costs of mistakes made by new, inexperienced employees Costs of mistakes made by new, inexperienced employees
Loss of customers loyal to departing employees Loss of customers loyal to departing employees
Lost or damaged relationships with suppliers Lost or damaged relationships with suppliers
Employee morale and customer perceptions of that morale Employee morale and customer perceptions of that morale
Q8-What are the financial aspects of operations in Retail Industry? Q8-What are the financial aspects of operations in Retail Industry?
Ans-Profit planning Ans-Profit planning
Asset management Asset management
Budgeting Budgeting
Resource Allocation Resource Allocation
442
Questions
Questions
Q9 What is Profit Planning? Q9 What is Profit Planning?
Ans Profit-and-loss (income) statement Ans Profit-and-loss (income) statement
Summary of a retailers revenues and expenses over a given period of time Summary of a retailers revenues and expenses over a given period of time
Review of overall and specific revenues and costs for similar periods and Review of overall and specific revenues and costs for similar periods and
profitability profitability
Q10 What is Asset Management? Q10 What is Asset Management?
Ans The Balance Sheet Ans The Balance Sheet
Assets, Liabilities Assets, Liabilities
Net Worth, Net Profit Margin Net Worth, Net Profit Margin
Asset Turnover, Return on Assets Asset Turnover, Return on Assets
Financial Leverage Financial Leverage
Q11-What is Budgeting? Q11-What is Budgeting?
Ans AnsBudgeting outlines a retailers planned expenditures for a given time based on Budgeting outlines a retailers planned expenditures for a given time based on
expected performance expected performance
Costs are linked to satisfying target market, employee, and management goals Costs are linked to satisfying target market, employee, and management goals
Q13 What is Operation Management in Retail Management? Q13 What is Operation Management in Retail Management?
Operations management Operations management is the efficient and effective implementation of the policies is the efficient and effective implementation of the policies
and tasks that satisfy a retailers customers, employees, and management (and and tasks that satisfy a retailers customers, employees, and management (and
stockholders, if it is publicly owned) stockholders, if it is publicly owned)
443
Case Study
Case Study
How to fuel an innovationin concept: The NRL thrust How to fuel an innovationin concept: The NRL thrust
A Case study. A Case study.
In the realm of petro-retailing, launching a small refining In the realm of petro-retailing, launching a small refining
company from a remote up-country location to the company from a remote up-country location to the
mainstream of marketing amongst existing giants like IOC, mainstream of marketing amongst existing giants like IOC,
BPCL, HPCL, IBP, Reliance, Essar, Shell, ONGC, etc. means BPCL, HPCL, IBP, Reliance, Essar, Shell, ONGC, etc. means
an everyday fear of facing extinction in a market dominated an everyday fear of facing extinction in a market dominated
by established players. This is how Numaligarh Refineries by established players. This is how Numaligarh Refineries
Limited (NRL) is attempting to cross the divide... The in- Limited (NRL) is attempting to cross the divide... The in-
road challenge was mainly to capture the mindshare and road challenge was mainly to capture the mindshare and
create high recall branding of NRL in the minds of the create high recall branding of NRL in the minds of the
customers. The composite marketing strategy of NRL was to customers. The composite marketing strategy of NRL was to
project it as dynamic and sensitive to changing user project it as dynamic and sensitive to changing user
expectations. Conceived, designed and developed by expectations. Conceived, designed and developed by
Bharat Petroleum Corporation Ltd., the result creates a Bharat Petroleum Corporation Ltd., the result creates a
dramatically different petro retail outlet from existing dramatically different petro retail outlet from existing
formats, through innovative amenities, indigenous formats, through innovative amenities, indigenous
ingenuity and world-class service. ingenuity and world-class service.
444
Case Study
Case Study
Having entered the retail sector in 2006, the company will Having entered the retail sector in 2006, the company will
end up with 35 outlets in Assam this year. Plans are afoot to end up with 35 outlets in Assam this year. Plans are afoot to
have 125 outlets in the state in the next two years. Also, have 125 outlets in the state in the next two years. Also,
102 locations have been identified in West Bengal, Sikkim, 102 locations have been identified in West Bengal, Sikkim,
Bihar , Chhattisgarh, Jharkhand and Orissa for setting up Bihar , Chhattisgarh, Jharkhand and Orissa for setting up
retail outlets. The action plan includes the set up 510 retail retail outlets. The action plan includes the set up 510 retail
outlets spread over eastern and parts of northern and outlets spread over eastern and parts of northern and
southern region of India . southern region of India .
At first glance, an NRL outlet's aero-foil shaped horned At first glance, an NRL outlet's aero-foil shaped horned
canopy with an aesthetically curved inner structure, canopy with an aesthetically curved inner structure,
tapered columns, monolith and other signages creates an tapered columns, monolith and other signages creates an
inviting atmosphere. And, depicts stark digressions from inviting atmosphere. And, depicts stark digressions from
contemporary conventional retail outlets visible in the contemporary conventional retail outlets visible in the
country, thereby branding the retail station as an Energy country, thereby branding the retail station as an Energy
Station connoting a future looking organisation with future Station connoting a future looking organisation with future
fuels/ energy in mind. fuels/ energy in mind.
445
Objective Questions
Objective Questions
1.Which of the following information forms available to the 1.Which of the following information forms available to the
marketing manager can usually be accessed more quickly marketing manager can usually be accessed more quickly
and cheaply than other information sources? and cheaply than other information sources?
a. a. Marketing intelligence Marketing intelligence
b. b. Marketing research Marketing research
c. c. Customer profiles Customer profiles
d. d. Internal databases Internal databases
2. 2. All of the following are considered to be drawbacks of local All of the following are considered to be drawbacks of local
marketing marketing EXCEPT EXCEPT: :
a. a. it can drive up manufacturing and marketing costs it can drive up manufacturing and marketing costs
by reducing economies of scale. by reducing economies of scale.
b. b. it can create logistical problems when the it can create logistical problems when the
company tries to meet varied requirements. company tries to meet varied requirements.
c. c. it can attract unwanted competition. it can attract unwanted competition.
d. d. it can dilute the brand's overall image. it can dilute the brand's overall image.
3. 3. Cognitive dissonance occurs in which stage of the buyer Cognitive dissonance occurs in which stage of the buyer
decision process model? decision process model?
a. a. Need recognition Need recognition
b. b. Information search Information search
c. c. Evaluation of alternatives Evaluation of alternatives
d. d. Postpurchase behavior Postpurchase behavior
4. 4. That the company that overlooks new and better ways to do That the company that overlooks new and better ways to do
things will eventually lose customers to another company things will eventually lose customers to another company
that has found a better way of serving customer needs is a that has found a better way of serving customer needs is a
major tenet of: major tenet of:
a. a. innovative marketing. innovative marketing.
b. b. consumer-oriented marketing. consumer-oriented marketing.
c. c. value marketing. value marketing.
d. d. sense-of-mission marketing. sense-of-mission marketing.
5.The biggest or greatest amount of involvement in a foreign 5.The biggest or greatest amount of involvement in a foreign
market comes through which of the following? market comes through which of the following?
a. a. Exporting Exporting
b. b. Joint venturing Joint venturing
c. c. Licensing Licensing
d. d. Direct investment Direct investment
6. 6. A ______________ is a good offered either free or at low cost A ______________ is a good offered either free or at low cost
as an incentive to buy a product. as an incentive to buy a product.
a. a. patronage reward patronage reward
b. b. spiff spiff
c. c. price pack price pack
d. d. premium premium
7. 7. Setting call objectives is done during which of the following Setting call objectives is done during which of the following
stages of the selling process? stages of the selling process?
a. a. Prospecting Prospecting
b. b. Preapproach Preapproach
c. c. Approach Approach
d. d. Handling objections Handling objections
8. 8. Pricing to cover variable costs and some fixed costs, as in Pricing to cover variable costs and some fixed costs, as in
the case of some automobile distributorships that sell below the case of some automobile distributorships that sell below
total costs, is typical of which of the following pricing total costs, is typical of which of the following pricing
objectives? objectives?
a. a. Current profit maximization Current profit maximization
b. b. Product quality leadership Product quality leadership
c. c. Market share leadership Market share leadership
d. d. Survival Survival
446
Objective question
Objective question
9.In determining salesforce size, when a company groups accounts 9.In determining salesforce size, when a company groups accounts
into different size classes and then determines the number into different size classes and then determines the number
of salespeople needed to call on them the desired number of of salespeople needed to call on them the desired number of
times, it is called the: times, it is called the:
a. a. key-size approach. key-size approach.
b. b. work-load approach. work-load approach.
c. c. product-need approach. product-need approach.
d. d. call-service approach. call-service approach.
10. 10. ____________________ are products bought by individuals and ____________________ are products bought by individuals and
organizations for further processing or for use in conducting organizations for further processing or for use in conducting
a business. a business.
a. a. Consumer products Consumer products
b. b. Services Services
c. c. Industrial products Industrial products
d. d. Specialty products Specialty products
11. 11. All of the following would be ways to segment within the All of the following would be ways to segment within the
category of psychographic segmentation EXCEPT: category of psychographic segmentation EXCEPT:
a. a. social class. social class.
b. b. occupation. occupation.
c. c. lifestyle. lifestyle.
d. d. personality. personality.
12. 12. The __________________ is a person within a reference group The __________________ is a person within a reference group
who, because of special skills, knowledge, personality, or who, because of special skills, knowledge, personality, or
other characteristics, exerts influence on others. other characteristics, exerts influence on others.
a. a. facilitator facilitator
b. b. referent actor referent actor
c. c. opinion leader opinion leader
d. d. social role player social role player
13. 13. _______________ describes changes in an individual's behavior _______________ describes changes in an individual's behavior
arising from experience. arising from experience.
a. a. Modeling Modeling
b. b. Motivation Motivation
c. c. Perception Perception
d. d. Learning Learning
14. 14. Concerns that the manufacturers of harmful products such Concerns that the manufacturers of harmful products such
as tobacco have influence on lawmakers to the detriment of as tobacco have influence on lawmakers to the detriment of
the public interest is used as evidence of which criticism of the public interest is used as evidence of which criticism of
marketing? marketing?
a. a. Too much advertising. Too much advertising.
b. b. Too few social goods. Too few social goods.
c. c. Cultural pollution. Cultural pollution.
d. d. Too much political power. Too much political power.
15. 15. The Internet evolved from a network created by The Internet evolved from a network created by
_________________ during the 1960s. _________________ during the 1960s.
a. a. the Commerce Department the Commerce Department
b. b. the Massachusetts Institute of Technology (MIT) the Massachusetts Institute of Technology (MIT)
c. c. Northwestern University Northwestern University
d. d. the Defense Department the Defense Department
16. 16. In terms of execution styles, a family seated at the dinner In terms of execution styles, a family seated at the dinner
table enjoying the advertised product would be an example table enjoying the advertised product would be an example
of which of the following types of advertising? of which of the following types of advertising?
a. a. Slice of life Slice of life
b. b. Lifestyle Lifestyle
c. c. Mood or imagery Mood or imagery
d. d. Personality symbol Personality symbol
447
Objective questions
Objective questions
17. 17. A child in the United States is normally exposed to all of A child in the United States is normally exposed to all of
the following values EXCEPT: the following values EXCEPT:
a. a. achievement and success. achievement and success.
b. b. activity and involvement. activity and involvement.
c. c. material comfort. material comfort.
d. d. collectivism. collectivism.
18. 18. ________________ have contractual authority to sell a ________________ have contractual authority to sell a
manufacturer's entire output. manufacturer's entire output.
a. a. Selling agents Selling agents
b. b. Rack jobbers Rack jobbers
c. c. Manufacturer's agents Manufacturer's agents
d. d. Purchasing agents Purchasing agents
19. 19. Sellers that handle their own exports are engaged in: Sellers that handle their own exports are engaged in:
a. a. direct exporting. direct exporting.
b. b. indirect exporting. indirect exporting.
c. c. licensing. licensing.
d. d. contract manufacturing. contract manufacturing.
20. 20. More and more salespeople are being evaluated and More and more salespeople are being evaluated and
compensated based on different measures than in the compensated based on different measures than in the
past. All of the following are illustrations of those past. All of the following are illustrations of those
measures EXCEPT: measures EXCEPT:
a. a. long-term customer satisfaction. long-term customer satisfaction.
b. b. competitive predatory pricing performance. competitive predatory pricing performance.
c. c. full customer service. full customer service.
d. d. retention rates. retention rates.
21. 21. ________________ includes practices such as overstating ________________ includes practices such as overstating
the product's features or performance, luring the the product's features or performance, luring the
customer to the store for a bargain that is out of stock, customer to the store for a bargain that is out of stock,
or running rigged contests. or running rigged contests.
a. a. Deceptive promotion Deceptive promotion
b. b. Deceptive packaging Deceptive packaging
c. c. Deceptive pricing Deceptive pricing
d. d. Deceptive cost structure Deceptive cost structure
22. 22. The orange juice manufacturers know that orange juice The orange juice manufacturers know that orange juice
is most often consumed in the mornings. However, they is most often consumed in the mornings. However, they
would like to change this and make the drink would like to change this and make the drink
acceptable during other time periods during the day. acceptable during other time periods during the day.
Which form of segmentation would they need to work Which form of segmentation would they need to work
with and establish strategy reflective of their desires? with and establish strategy reflective of their desires?
a. a. gender segmentation gender segmentation
b. b. benefit segmentation benefit segmentation
c. c. occasion segmentation occasion segmentation
d. d. age and life-cycle segmentation age and life-cycle segmentation
Answer: Answer:1.d 2.c, 3.d,4.a 5.d 6. d 7.b8d 9b 10.c 11.b 12 c 13d 1.d 2.c, 3.d,4.a 5.d 6. d 7.b8d 9b 10.c 11.b 12 c 13d
14.d 15.d 16.a 17.d 18a 19.a 20.b 21a 22.c 14.d 15.d 16.a 17.d 18a 19.a 20.b 21a 22.c
448
Unit:I
Unit:I
V
V
(14
(14
sessions)
sessions)
Delivering the Product: Retail Delivering the Product: Retail

Information Systems Information Systems
Merchandise Management Merchandise Management
Retail Pricing Retail Pricing
Development & implementing Development & implementing

Plans Plans
People in Retailing People in Retailing
International Retailing: International Retailing:

Internationalization and Internationalization and
Globalization Globalization
Shopping at World Stores Shopping at World Stores
Going International Going International
The Internalization Process The Internalization Process
Culture Culture
Business and International Business and International

Management Management
449
Sno
Unit Lecture
no
(1) IV 1
Delivering the Product: Retail
Information Systems
451-459
(2) 2
460-469
(3) 3,4
Retail Pricing
470-502
(4) 5
Development & implementing Plans
503-519
(5) 6
People in Retailing
520-529
(6) 7
International Retailing
530-541
(7) 8,9
Globalization
542-554
(8) 10
Shopping at World Stores
555-573
(9) 11
Going International
574-579
LECTURE PLAN
Unit-IV Sub: Retail Management (MBA-MK4)
450
Sno
Unit Lecture
no
(10)
IV 12
The Internalization Process
580-590
(11)
13
Culture
591-609
(12)
14
Business and International Management
610-634
635-643
LECTURE PLAN
Unit-IV Sub: Retail Management (MBA-MK4)
Session-1
Session-1
Information Systems
Information Systems
452
DEFINITION OF RETAIL INFORMATION
DEFINITION OF RETAIL INFORMATION
SYSTEM
SYSTEM
A
A
RETAIL INFORMATION SYSTEM
RETAIL INFORMATION SYSTEM
(RIS
(RIS
)
)
anticipates the information
anticipates the information
needs of retail managers; collects,
needs of retail managers; collects,
organizes, stores relevant data on a
organizes, stores relevant data on a
continuous basis; and directs the
continuous basis; and directs the
flow of information to the proper
flow of information to the proper
decision makers.
decision makers.
453
BUILDING AND USING A RETAIL INFORMATION BUILDING AND USING A RETAIL INFORMATION
SYSTEM SYSTEM
Now present a general RIS. The retailer begins Now present a general RIS. The retailer begins
with its business philosophy and objectives, which with its business philosophy and objectives, which
are influenced by environmental factors (such as are influenced by environmental factors (such as
competitors and the economy). The philosophy competitors and the economy). The philosophy
and goals provides broad guidelines that direct and goals provides broad guidelines that direct
strategic planning. Some aspects of plans are strategic planning. Some aspects of plans are
routine and need little reevaluation. Others are routine and need little reevaluation. Others are
non routine and need evaluation each time they non routine and need evaluation each time they
arise. arise.
Once a strategy is outlined, the data needed to Once a strategy is outlined, the data needed to
enact it are collected, analyzed, and interpreted. If enact it are collected, analyzed, and interpreted. If
data already exist, they are retrieved from files. data already exist, they are retrieved from files.
When new data are acquired, files are updated. All When new data are acquired, files are updated. All
of this occurs in the information control center. of this occurs in the information control center.
Based on data in the control center, decisions are Based on data in the control center, decisions are
enacted. enacted.
454
RIS
RIS
Performance results are fed back to the Performance results are fed back to the
information control center and compared with pre- information control center and compared with pre-
set criteria. Data are retrieved from files or further set criteria. Data are retrieved from files or further
data are collected. Routine adjustments are made data are collected. Routine adjustments are made
promptly. promptly.
Regulars reports and exception reports (to explain Regulars reports and exception reports (to explain
deviations from expected performance) are given deviations from expected performance) are given
to the right managers. Sometimes managers may to the right managers. Sometimes managers may
react in a way that affects the overall philosophy react in a way that affects the overall philosophy
or goals (such as revising an old-fashioned image or goals (such as revising an old-fashioned image
or sacrificing short-run profits to introduce a or sacrificing short-run profits to introduce a
computer system). computer system).
455
RIS
RIS
A good RIS has several strengths. Information A good RIS has several strengths. Information
gathering is organized and company focused. Data gathering is organized and company focused. Data
are regularly gathered and stored so that are regularly gathered and stored so that
opportunities are foreseen and crises averted. opportunities are foreseen and crises averted.
Strategic element can be coordinated. New Strategic element can be coordinated. New
strategies can be devised more quickly. strategies can be devised more quickly.
Quantitative results are accessible, and cost- Quantitative results are accessible, and cost-
benefits analysis can be done. Information is benefits analysis can be done. Information is
routed to the right personnel. However, developing routed to the right personnel. However, developing
an RIS may require high initial time and labor an RIS may require high initial time and labor
costs, and complex decision may be needed to set costs, and complex decision may be needed to set
such a system. such a system.
456
ENVIRONMENT RETAILERS PHILOSPHY &
OBJECTIVES
STRATEGIC
PLANS
Data collection, Information Data Storage & Retrieval Updating of
Analysis, and files
Interpretation Control center
Retail Operations
Implementation
Feedback
Retail Information System, pg:342, Ch:11, Berman & Evans
457
Decisions in building RIS
Decisions in building RIS
How active a role should the RIS have? How active a role should the RIS have? Will it Will it
proactively search for use any relevant information or will it proactively search for use any relevant information or will it
reactively respond to requests from managers when reactively respond to requests from managers when
problems arise? The best systems are more proactive since problems arise? The best systems are more proactive since
they anticipate events. they anticipate events.
Should an RIS be managed internally or be Should an RIS be managed internally or be

outsourced? outsourced? Although many retailer perform RIS functions, Although many retailer perform RIS functions,
some use outside specialists. Either style can work as Long some use outside specialists. Either style can work as Long
as the RIS is guided by the retailer's information needs. as the RIS is guided by the retailer's information needs.
Several firms have their own RIS and use outside firms for Several firms have their own RIS and use outside firms for
specific tasks (such as conducting surveys or managing specific tasks (such as conducting surveys or managing
networks). networks).
How much should an RIS cost? How much should an RIS cost? Retailers typically spend Retailers typically spend
0.5 to 1.5% of their sales on an RIS. This lags behind most 0.5 to 1.5% of their sales on an RIS. This lags behind most
of the suppliers from which retailers buy goods and of the suppliers from which retailers buy goods and
services. services.
458
Decisions
Decisions
continued
continued
How technology-driven should an RIS be? How technology-driven should an RIS be? Although retailers Although retailers
can gather data from trade associations, surveys, and so forth, can gather data from trade associations, surveys, and so forth,
more firms now rely on technology to drive the information process. more firms now rely on technology to drive the information process.
With the advent of personal computers, inexpensive networks, and With the advent of personal computers, inexpensive networks, and
low-priced software, technology is easy to use. Even a low-priced software, technology is easy to use. Even a
neighborhood deli can generate sales data by product and offer neighborhood deli can generate sales data by product and offer
specials on slow-sellers. specials on slow-sellers.
How much data are enough? How much data are enough? The purpose of an RIS is to provide The purpose of an RIS is to provide
enough information, on a regular basis, for a retailer to make the enough information, on a regular basis, for a retailer to make the
proper strategy choice not to overwhelm retail managers. This proper strategy choice not to overwhelm retail managers. This
means a balancing act between too little information and means a balancing act between too little information and
information overload. To avoid overload, data should be carefully information overload. To avoid overload, data should be carefully
edited to eliminate redundancies. edited to eliminate redundancies.
How should data be disseminated throughout the firm? How should data be disseminated throughout the firm? This This
requires decisions as to who receives various reports, the frequency requires decisions as to who receives various reports, the frequency
of data distribution, and access to data bases. When a firm has of data distribution, and access to data bases. When a firm has
multiple divisions or operates in several regions, information access multiple divisions or operates in several regions, information access
and distribution must be coordinated. and distribution must be coordinated.
459
Benefits of RIS
Benefits of RIS
Information collecting is organized quite broad Information collecting is organized quite broad
(company wide) in scope. (company wide) in scope.
Data regularly gathered & stored. It helps in Data regularly gathered & stored. It helps in
foreseeing the opportunities & avoiding the crises foreseeing the opportunities & avoiding the crises
Elements of strategy can coordinated Elements of strategy can coordinated
New strategies can be devised more quickly New strategies can be devised more quickly
Quantitative results are obtainable & cost benefits Quantitative results are obtainable & cost benefits
analysis can be done. analysis can be done.
Session
Session
Merchandising Management
Merchandising Management
461
Product and merchandising management is key Product and merchandising management is key
activity in the management of retail business. activity in the management of retail business.
The primary function of the retailing Is to sell The primary function of the retailing Is to sell
Merchandise. Merchandise.
One of the most strategic aspects of the retail One of the most strategic aspects of the retail
business is to decide the merchandise mix and business is to decide the merchandise mix and
quantity to be purchased . quantity to be purchased .
Merchandising can be termed as the planning, Merchandising can be termed as the planning,
buying and the selling of merchandising . buying and the selling of merchandising .
Merchandising,
Merchandising,
Basis of retail merchandising
Basis of retail merchandising
,
,

462
Define Merchandising as The analysis, planning, Define Merchandising as The analysis, planning,
acquisition, handling and control of merchandise acquisition, handling and control of merchandise
investments of a retail operation. investments of a retail operation.
Merchandising is the core of retailing. Merchandising is the core of retailing.
The function of merchandising is an integral part The function of merchandising is an integral part
of retailing and also one of the most challenging of retailing and also one of the most challenging
functions. functions.
AMA define The planning involved in marketing AMA define The planning involved in marketing
the right merchandise at the right place at the the right merchandise at the right place at the
right time in the right quantities at the right price. right time in the right quantities at the right price.
463
Achieving these Achieving these five Right five Right is the key to is the key to
successful merchandising and many a times, this successful merchandising and many a times, this
remains an elusive goal for most retailers. remains an elusive goal for most retailers.
Merchandising management can be termed as Merchandising management can be termed as

Planning, analysis, acquisition, handling Planning, analysis, acquisition, handling
and control of the merchandise and control of the merchandise
464
Analysis Analysis: because retailers must be able to : because retailers must be able to
correctly identify their customers before they can correctly identify their customers before they can
ascertain consumer desires and their ascertain consumer desires and their
needs/requirements for making a good buying needs/requirements for making a good buying
decision. decision.
Planning Planning is important because merchandise to be is important because merchandise to be

sold in the future must be bought now. sold in the future must be bought now.
Acquisitions Acquisitions because the merchandise needs to be because the merchandise needs to be
procured from others, either distributors or procured from others, either distributors or
manufactures. manufactures.
Handling Handling involves seeing that the merchandise is involves seeing that the merchandise is
where it is needed and in the proper condition to where it is needed and in the proper condition to
be sold. be sold.
Control Control is required since the function of is required since the function of
merchandise involves spending money for merchandise involves spending money for
acquiring products it is necessary to control the acquiring products it is necessary to control the
amount of money spent on buying amount of money spent on buying
465
Factors Affecting the Merchandising Function
Factors Affecting the Merchandising Function
Merchandising does not function in isolation. Merchandising does not function in isolation.
It is affected by various factors like the It is affected by various factors like the
organization structure, the size of the retail organization structure, the size of the retail
organization and the merchandise to be carried. organization and the merchandise to be carried.
Rarely are any two stores organized in the same Rarely are any two stores organized in the same
way. way.
The function of the merchandising is vary from one The function of the merchandising is vary from one
organization to another. organization to another.
Size Size: The needs of the individual retailers vary : The needs of the individual retailers vary
from those of large chain store operation. from those of large chain store operation.
466
The merchandiser to be carried by a retailer The merchandiser to be carried by a retailer

largely determines the responsibilities of the largely determines the responsibilities of the
merchandiser. merchandiser.
Merchandise to be carried: Merchandise to be carried: The buying for basic The buying for basic
merchandise is fairly different from buying fashion merchandise is fairly different from buying fashion
merchandise. merchandise.
A merchandisers who I handling fashion products A merchandisers who I handling fashion products
will need to spend more time in the market, and will need to spend more time in the market, and
looking for the products which is more suitable for looking for the products which is more suitable for
the customers. the customers.
Organization structure that Organization structure that the retail organization the retail organization
adopts also affects the merchandising function. adopts also affects the merchandising function.
Some organization may differentiate the role of Some organization may differentiate the role of
the buyer and the role of a merchandisers the buyer and the role of a merchandisers
separately. separately.
467
The Merchandises Role & Responsibilities
The Merchandises Role & Responsibilities
Planning: Planning: Thought the merchandising may not be Thought the merchandising may not be
directly involved in the actual purchase of directly involved in the actual purchase of
merchandise. merchandise.
They formulate the policies for the areas in which They formulate the policies for the areas in which
they are responsible. they are responsible.
Forecasting sale for the forth coming budget Forecasting sale for the forth coming budget
period and can estimate the consumer demand period and can estimate the consumer demand
and the impact of changes in the retail and the impact of changes in the retail
environment. environment.
Directing: Guiding and training buyers as and Directing: Guiding and training buyers as and
when the need arises, is also a function of the when the need arises, is also a function of the
merchandiser. merchandiser.
The buyers have to be guided to take additional The buyers have to be guided to take additional
markdowns for products which may not be doing markdowns for products which may not be doing
too well in the stores. too well in the stores.
468
Co-ordinating: Merchandise managers supervise Co-ordinating: Merchandise managers supervise

the work of more than one buyer. the work of more than one buyer.
They need to coordinate the buying effort in terms They need to coordinate the buying effort in terms
of how well it fits in with the store image and with of how well it fits in with the store image and with
the other products being bought by other buyers. the other products being bought by other buyers.
Controlling: assessing the buyers performance , is Controlling: assessing the buyers performance , is
a also part of the merchandise managers Job. a also part of the merchandise managers Job.
This includes evaluated on the basis of net sale, This includes evaluated on the basis of net sale,
maintain mark up percentage, gross margin % and maintain mark up percentage, gross margin % and
stock turn stock turn
469
Role of the Buyer
Role of the Buyer
Buyers plays an important role in the retail Buyers plays an important role in the retail
industry. they select and order merchandise to industry. they select and order merchandise to
be sold. be sold.
Buyers may be responsible for buying for a Buyers may be responsible for buying for a
department, an entire store, or a chain of stores department, an entire store, or a chain of stores
1. 1. Developing the merchandising strategies for the Developing the merchandising strategies for the
product line product line
2. 2. Planning and selecting merchandise assortments Planning and selecting merchandise assortments
3. 3. Vendor Selection Vendor Selection
4. 4. Pricing of the merchandise Pricing of the merchandise
5. 5. Inventory Management Inventory Management
Session
Session
Pricing
Pricing
471
What is a Price?
What is a Price?
Narrow definition.
Narrow definition.
Price is the amount of money charged

Price is the amount of money charged
for a product or service.
for a product or service.
Broad definition.
Broad definition.
Price is the sum of all the values that

Price is the sum of all the values that
consumers exchange for the benefits
consumers exchange for the benefits
of having or using the product or
of having or using the product or
service.
service.
Dynamic pricing.
Dynamic pricing.
Charging different prices depending

Charging different prices depending
on individual customers and
on individual customers and
situations.
situations.
472
Pricing Best Practices
Pricing Best Practices
Develop a one percent pricing

Develop a one percent pricing
mentality.
mentality.
Consistently deliver more value.

Consistently deliver more value.
Price strategically, not

Price strategically, not
opportunistically.
opportunistically.
Know your competition.

Know your competition.
Make pricing a process.

Make pricing a process.
473
Pricing Decision
Pricing Decision
Factors
Factors
External Factors
External Factors
Nature of the
Nature of the
market.
market.
Demand.
Demand.
Competitor.
Competitor.
Economic state.
Economic state.
Reseller needs.
Reseller needs.
Government
Government
actions.
actions.
Social concerns.
Social concerns.
Internal Factors
Marketing
objectives.
Marketing mix.
Costs
Fixed
Variable
Organization style.
Target market.
Positioning
objectives.
474
Pricing in Different Markets
Pricing in Different Markets
Pure competition.
Pure competition.
Many buyers and sellers where each has little effect Many buyers and sellers where each has little effect
on the going market price. on the going market price.
Monopolistic competition.
Monopolistic competition.
Many buyers and sellers who trade over a range of Many buyers and sellers who trade over a range of
prices. prices.
Oligopolistic competition.
Oligopolistic competition.
Few sellers and sensitive to each others Few sellers and sensitive to each others
pricing/marketing strategies. pricing/marketing strategies.
Pure monopoly.
Pure monopoly.
Market consists of a single seller. Market consists of a single seller.

475
Demand and Elasticity
Demand and Elasticity
Demand.
Demand.
The relationship between price

The relationship between price
changes and the number of units
changes and the number of units
sold.
sold.
Elasticity.
Elasticity.
A way of measuring how sensitive

A way of measuring how sensitive
the market is to price changes.
the market is to price changes.
Inelastic minimal change in demand Inelastic minimal change in demand

as price increases. as price increases.
Elastic significant drop in demand as Elastic significant drop in demand as

price increases. price increases.
476
Price Setting
Price Setting
Considerations
Considerations
Product costs.
Product costs.
Price floor no profits below this

Price floor no profits below this
price.
price.
Competitors prices and other

Competitors prices and other
internal and external factors.
internal and external factors.
Consumer perceptions of value.

Price ceiling no demand above this

Price ceiling no demand above this
price.
price.
477
General Pricing
General Pricing
Approaches
Approaches

Cost-based approach.
Cost-based approach.
Cost-plus pricing.
Cost-plus pricing.
Break-even analysis.
Break-even analysis.
Target profit pricing.

Target profit pricing.
Value-based approach.
Value-based approach.

Competition-based approach.
Competition-based approach.
What competitors are charging

What competitors are charging
(going rate vs. sealed bid).
(going rate vs. sealed bid).
478
Pricing New Products
Pricing New Products
Skimming pricing.
Skimming pricing.
High price to reap maximum profit from

High price to reap maximum profit from
early adopter segments.
early adopter segments.
Can encourage competition.

Can encourage competition.
Products must be unique and hard to

Products must be unique and hard to
copy.
copy.
Penetration pricing.
Penetration pricing.
Low price to gain maximum market

Low price to gain maximum market
share.
share.
May discourage competition.

May discourage competition.
Used when the product is easily copied.

Used when the product is easily copied.
479
Product Mix Pricing
Product Mix Pricing
Strategies
Strategies
Product line
Product line
pricing levels to deliver
pricing levels to deliver
value to different segments.
value to different segments.
Optional products
Optional products
separate options
separate options
available for the main product.
available for the main product.
Captive products
Captive products
needed to make
needed to make
main product usable.
main product usable.
By-products
By-products
created from the
created from the
manufacture of the main product.
manufacture of the main product.
Product bundles
Product bundles
combinations.
combinations.
480
Product Line Pricing
Product Line Pricing
Involves setting price steps between

Involves setting price steps between
various products in a product line
various products in a product line
based on:
based on:
Cost differences between products.

Cost differences between products.
Customer evaluations of different

Customer evaluations of different
features.
features.
Competitors prices.
Competitors prices.
481
Optional/Captive Product
Optional/Captive Product
Pricing
Pricing
Optional-product.
Optional-product.
Pricing optional or accessory products

Pricing optional or accessory products
sold with the main product (e.g. ice
sold with the main product (e.g. ice
maker with the refrigerator).
maker with the refrigerator).
Product bundle pricing (packaging or

Product bundle pricing (packaging or
bundling)
bundling)
Combining several products and offering

Combining several products and offering
the bundle at a reduced price (e.g.
the bundle at a reduced price (e.g.
computer with software and Internet
computer with software and Internet
access).
access).
482
Price-Adjustment
Price-Adjustment
Strategies
Strategies
Discount and allowance pricing Discount and allowance pricing
give away profit give away profit
Segmented pricing Segmented pricing
movie theatre movie theatre
Psychological pricing Psychological pricing
quality judgment quality judgment
Promotional pricing Promotional pricing
create interestloss leader create interestloss leader
Geographical pricing Geographical pricing
FOB origin, uniform (averaged freight), zone (zone FOB origin, uniform (averaged freight), zone (zone
averaging), basing-point (freight from base), freight- averaging), basing-point (freight from base), freight-
absorption (seller takes hit) absorption (seller takes hit)
International pricing International pricing
Economics, competition, laws, infrastructure Economics, competition, laws, infrastructure

(wholesale/retail), costs, internet (wholesale/retail), costs, internet
483
Initiating Price Changes
Initiating Price Changes
Price Cuts
Excess
capacity.
Falling market
share.
Dominate
market through
lower costs.
Price Increases
Cost inflation.
Over-demand.
Cannot supply
all customers
needs.
484
Responding to
Responding to
Competitor Price
Competitor Price
Changes
Changes
What can you do when a competitor

lowers prices? How can you respond?
Please get together in your groups, think of a

local business you know and come up with three
ideas of what you could do if you were the
Product Manager for the business and your main
competitor dropped their prices on one of your
main products?
1. Name the business
2. Define the main product
3. Identify the three options available to you and
explain why you think they would work and why
they might not?
485
Responding to
Responding to
Competitor Price
Competitor Price
Changes
Changes
What can you do when a

competitor lowers prices? How can
you respond?
Reduce price to match the competitors price.
Maintain price but increase the perceived

value of the offer.
Improve quality and raise price.
Hold price and introduce a new brand at a

higher price.
Hold price and introduce a new brand at a

lower price (fighting brand).
486
Pricing Ethics -
Pricing Ethics -
Regulation
Regulation
Competitors
Competitors
Price-fixing (collusion) Price-fixing (collusion)
Predatory pricing (sell at loss-eliminate Predatory pricing (sell at loss-eliminate

competition) competition)
Manufacturer and retailer.

Manufacturer and retailer.
Retail price maintenance (same price to Retail price maintenance (same price to
same level of trade) same level of trade)
Discriminatory pricing (allowed if prove Discriminatory pricing (allowed if prove

costs different) costs different)
Manufacturer/retailer and consumer.

Manufacturer/retailer and consumer.
Deceptive pricing (bait and switch up Deceptive pricing (bait and switch up
stock out) stock out)
487
Pricing Decisions
Pricing Decisions
Pricing strategies
Pricing strategies
Pricing exercise
Pricing exercise
Ten ways to increase

prices without increasing
price - Winkler
price - Winkler
488
Pricing strategies
Pricing strategies
Premium pricing
Premium pricing
Uses a high price, but gives a good Uses a high price, but gives a good
product/service exchange e.g. Concorde, product/service exchange e.g. Concorde,
The Ritz Hotel The Ritz Hotel
Penetration pricing
Penetration pricing
offers low price to gain market share - offers low price to gain market share -
then increases price then increases price
e.g. France Telecom - to attract new e.g. France Telecom - to attract new
corporate clients (or Telewest cable) corporate clients (or Telewest cable)
Economy pricing
Economy pricing
placed at no frills, low price placed at no frills, low price
e.g. Soups, spaghetti, beans - economy e.g. Soups, spaghetti, beans - economy
brands brands
489
Price skimming
Price skimming
where prices are high - usually during introduction where prices are high - usually during introduction
e.g new albums or films on release e.g new albums or films on release
ultimately prices will reduce to the parity ultimately prices will reduce to the parity
Psychological pricing
Psychological pricing
to get a customer to respond on an emotional, to get a customer to respond on an emotional,

rather than rational basis rather than rational basis
.e.g 99p not 1.01 price point perspective .e.g 99p not 1.01 price point perspective
Product line pricing

Product line pricing
rationale of a product range rationale of a product range
e.g. MARS 32p, Four-pack 99p, Bite-size 1.29 e.g. MARS 32p, Four-pack 99p, Bite-size 1.29
Pricing variations
Pricing variations
off-peak pricing, early booking discounts,etc off-peak pricing, early booking discounts,etc
e.g Grundig offers a cash back incentive for e.g Grundig offers a cash back incentive for
expensive goods expensive goods
490
Optional product-pricing
Optional product-pricing
e.g. optional extras - BMW famously e.g. optional extras - BMW famously
under-equipped under-equipped
Captive product pricing

Captive product pricing
products that complement others products that complement others
e.g Gillette razors (low price) and blades e.g Gillette razors (low price) and blades
(high price) (high price)
Product-bundle pricing
Product-bundle pricing
sellers combine several products at the sellers combine several products at the
same price same price
e.g software, books, CDs. e.g software, books, CDs.
Promotional pricing
Promotional pricing
BOGOF e.g. toothpaste, soups, etc

BOGOF e.g. toothpaste, soups, etc
491
Geographical pricing
Geographical pricing
different prices for customers in different different prices for customers in different
parts of the world parts of the world
e.g.Include shipping costs, or place onPLC e.g.Include shipping costs, or place onPLC
Value pricing
Value pricing
usually during difficult economic usually during difficult economic

conditions conditions
e.g. Value menus at McDonalds e.g. Value menus at McDonalds

492
price - Winkler
price - Winkler
Revise the discount structure

Revise the discount structure
Change the minimum order size

Change the minimum order size
Charge for delivery and special

Charge for delivery and special
services
services
Invoice for repairs on serviced

Invoice for repairs on serviced
equipment
equipment
Charge for engineering, installation

Charge for engineering, installation
Charge for overtime on rushed

Charge for overtime on rushed
orders
orders
Collect interest on overdue accounts

Collect interest on overdue accounts
493
Produce less of the lower margin

Produce less of the lower margin
models in the line
models in the line
Write penalty clauses into

Write penalty clauses into
contracts
contracts
Change the physical

Change the physical
characteristics of the product
characteristics of the product
494
Pricing Objectives
Pricing Objectives
Price is the value placed on what is

Price is the value placed on what is
exchanged. Before determining the price
exchanged. Before determining the price
itself, the organization must establish a
itself, the organization must establish a
pricing objective compatible with the goals
pricing objective compatible with the goals
for the organization and its marketing
for the organization and its marketing
program.
program.
Pricing objectives include profitability,

Pricing objectives include profitability,
volume, meeting competition, and other
volume, meeting competition, and other
objectives.
objectives.
495
Pricing Objectives
Pricing Objectives
Profit maximization Profit maximization: management sets increasing : management sets increasing
levels of profitability as its objective. levels of profitability as its objective.
Target return Target return: desired profitability is stated in terms of : desired profitability is stated in terms of
return on sales or investment. return on sales or investment.
Sales maximization Sales maximization: management sets an acceptable : management sets an acceptable
level of profitability and then tries to maximize sales. level of profitability and then tries to maximize sales.
Market share Market share: : it is a percentage of a market controlled it is a percentage of a market controlled
by a certain company or product. by a certain company or product.
Meeting competition Meeting competition: : Some prices are set to Some prices are set to beat beat
competition competition by beating the pricing leader's prices. by beating the pricing leader's prices.
496
Other Pricing Objectives
Other Pricing Objectives
social and ethical objectives: social and ethical objectives:

Nonprofit Nonprofit
organizations and government agencies these objectives to organizations and government agencies these objectives to
cover their costs where possible and to raise money for cover their costs where possible and to raise money for
their activities. their activities.

Status Quo objectives: Status Quo objectives:

maintain market share by maintain market share by
meeting competitor prices, achieving price stability, or meeting competitor prices, achieving price stability, or
maintaining public image. maintaining public image.
Prestige pricing objectives: Prestige pricing objectives:

establish a relatively establish a relatively
high price to develop and maintain an image of quality and high price to develop and maintain an image of quality and
exclusiveness. exclusiveness.

497
Example for Prestige pricing
Example for Prestige pricing
objectives
objectives
Starbucks Starbucks
Special coffee culture which is focusing on five senses: Special coffee culture which is focusing on five senses:
Taste: Taste: provides high quality coffee bean, develop new kinds of coffee and new provides high quality coffee bean, develop new kinds of coffee and new
ways of brewing. ways of brewing.
Smell: Smell: prevents any possible foods with strong smell, so that the whole store will prevents any possible foods with strong smell, so that the whole store will
be permeated with the smell of their coffee. be permeated with the smell of their coffee.
Vision: Vision: the the decorations and pictures in the shop are all about coffee, they also decorations and pictures in the shop are all about coffee, they also
created an atmosphere of elegance. created an atmosphere of elegance.
Hearing: Hearing: plays their own developed music that matches their coffee products. plays their own developed music that matches their coffee products.
Touch: Touch: provides the experience of touching the coffee beans before and after provides the experience of touching the coffee beans before and after
brewing, as well as the appliances for making coffee. brewing, as well as the appliances for making coffee.
498
Product-mix Strategies
Product-mix Strategies

Product line pricing Product line pricing is setting the price steps between various products in is setting the price steps between various products in
a product line based on cost differences between the products, customer a product line based on cost differences between the products, customer
evaluations of different features, and competitors prices. evaluations of different features, and competitors prices.
Optional-product pricing Optional-product pricing is the pricing of optional or accessory products is the pricing of optional or accessory products
along with a main product. along with a main product.
Captive-product pricing Captive-product pricing is setting a price for products that must be used is setting a price for products that must be used
along with a main product, such as blades for a razor and film for a camera. along with a main product, such as blades for a razor and film for a camera.
By-product pricing By-product pricing is setting a price for by-products in order to make the is setting a price for by-products in order to make the
main products price more competitive. main products price more competitive.
Product bundle pricing Product bundle pricing is combining several products and offering the is combining several products and offering the
bundle at a reduced price. bundle at a reduced price.
499
Psychological Pricing
Psychological Pricing

Prestige pricing Prestige pricing Price-quality relationships Price-quality relationships

refer to the idea that consumers tend to equate refer to the idea that consumers tend to equate
product quality with the prices charged. product quality with the prices charged.
Example: Perfumes. Example: Perfumes.
Reference pricing Reference pricing where there are prices that where there are prices that
the buyer carries in their minds and refer to the buyer carries in their minds and refer to
when looking at a given product. when looking at a given product.
Odd pricing Odd pricing is the practice of choosing such is the practice of choosing such
prices as $19.95, $.99, or $99.99. prices as $19.95, $.99, or $99.99.
500
Discounts and Allowances

Discount and allowance pricing Discount and allowance pricing has the effect of has the effect of
reducing prices to reward customer responses such as reducing prices to reward customer responses such as
paying early or promoting the product. paying early or promoting the product.
Discount pricing Discount pricing is an idea of is an idea of flexible pricing policy flexible pricing policy. .
functional functional or or trade discounts trade discounts are given to an intermediary for are given to an intermediary for
performing certain functions. performing certain functions.
Cash discounts Cash discounts are price reductions to buyers who pay their are price reductions to buyers who pay their
bills promptly. bills promptly.
Quantity discounts Quantity discounts are given due to economies of purchasing are given due to economies of purchasing
large quantities. large quantities.
Seasonal discounts Seasonal discounts are price reductions to buyers who buy are price reductions to buyers who buy
merchandise or services out of season. merchandise or services out of season.
501
Trade in allowances Trade in allowances are price reductions are price reductions
granted for turning in a used item when granted for turning in a used item when
purchasing a new one. purchasing a new one.
Promotional allowances Promotional allowances are money paid by are money paid by
manufacturers to retailers in return for an manufacturers to retailers in return for an
agreement to feature the manufacturers products agreement to feature the manufacturers products
in some way. in some way.

502
Geographic Pricing Policies
Geographic Pricing Policies
FOB-origin pricing FOB-origin pricing is a geographical pricing strategy in which goods are is a geographical pricing strategy in which goods are
placed free on board a carrier; the customer pays the actual freight from the placed free on board a carrier; the customer pays the actual freight from the
factory to the destination. factory to the destination.
Uniform-delivered pricing Uniform-delivered pricing is a geographical pricing strategy in which the is a geographical pricing strategy in which the
company charges the same price plus freight to all customers, regardless of company charges the same price plus freight to all customers, regardless of
their location. their location.
Zone pricing Zone pricing means that different areas pay different prices on freight but means that different areas pay different prices on freight but
all customers within the same area pay the same freight charges. all customers within the same area pay the same freight charges.

Basing-point pricing Basing-point pricing means that all customers are charged freight from a means that all customers are charged freight from a
specified billing location. specified billing location.
freight-absorption pricing freight-absorption pricing in this case, the seller pays all shipping costs in this case, the seller pays all shipping costs
to get the desired business. to get the desired business.
Session
Session
Developing & implementing
Developing & implementing
plan
plan
504
Marketing Is A Complex
Marketing Is A Complex
Activity
Activity
u
Marketing is more than selling a
Marketing is more than selling a
commodity
commodity
u
Marketing should begin before you plant,
Marketing should begin before you plant,
not after you harvest (year around)
not after you harvest (year around)
u
Production & marketing are integrated
Production & marketing are integrated
u
No single best marketing strategy exists:
No single best marketing strategy exists:
s
varies over time, location, commodity,
varies over time, location, commodity,
financial situation, etc.
financial situation, etc.
505
A Marketing Plan Is Necessary,
A Marketing Plan Is Necessary,
But Not Sufficient
But Not Sufficient
u
What else?
What else?
u
A farm plan:
A farm plan:
s
goals: short term and long term
goals: short term and long term
s
objectives: quantifiable with a time
objectives: quantifiable with a time
frame
frame
u
Financial statements:
Financial statements:
s
know your financial situation:
know your financial situation:
risk bearing capacity, cash flow needs
risk bearing capacity, cash flow needs
s
where you are today and where you
where you are today and where you
are going
are going
506
Customize Marketing Plan
Customize Marketing Plan
u
A marketing plan works only if it fits
A marketing plan works only if it fits
your
your

operation, your goals,
operation, your goals,
your
your
objectives and
objectives and
your
your
financial situation
financial situation
507
Purpose Of Marketing Plan
Purpose Of Marketing Plan
:
:
u
Reduces pressures which can result in
Reduces pressures which can result in
selling at a bad time
selling at a bad time
u
help establish price targets:
help establish price targets:
s
compatible with market conditions
compatible with market conditions
s
compatible with financial situation
compatible with financial situation
u
Identify times when market is offering an
Identify times when market is offering an
acceptable price
acceptable price
u
Tool to help manage price risk
Tool to help manage price risk
508
Marketing Plan Prerequisites
Marketing Plan Prerequisites
u
Know your cost of production
Know your cost of production
u
Understand the market:
Understand the market:
s
historical
historical
s
current
current
u
Form price expectations
Form price expectations
u
Develop market price objectives
Develop market price objectives
u
Understand marketing alternatives
Understand marketing alternatives
u
A willingness to follow plan
A willingness to follow plan
509
Marketing Plan Defined
Marketing Plan Defined
u
A course of action which allows a
A course of action which allows a
producer to sell a commodity at a time
producer to sell a commodity at a time
that offers an
that offers an
acceptable
acceptable
profit potential
profit potential
u
A process to assist in choosing between
A process to assist in choosing between
various methods of marketing a product
various methods of marketing a product
510
A Marketing Plan Should
A Marketing Plan Should
Answer Four Questions
Answer Four Questions
s
When to sell? When to sell?
s
Where to sell? Where to sell?
s
What to sell? What to sell?
s
How to sell? How to sell?
s
Time of year Time of year
s
Location Location
s
Product form Product form
s
Compare alternatives Compare alternatives
511
Essential Elements In
Essential Elements In
Developing A Marketing Plan
Developing A Marketing Plan
u
Outlook
Outlook
s
whats going to happen?
whats going to happen?
u
Marketing alternatives
Marketing alternatives
s
which alternatives are viable?
which alternatives are viable?
u
A marketing strategy
A marketing strategy
s
what am I going to do?
what am I going to do?
u
Disciplined marketing management
Disciplined marketing management
s
following the plan!
following the plan!
512
Market Outlook Using
Fundamentals
Fundamentals
u
Market fundamentals:
Market fundamentals:
s
supply & demand
supply & demand
u
Balance sheet approach:
Balance sheet approach:
beginning stocks beginning stocks
+ + production production
- - utilization utilization
= = ending stocks ending stocks
u
Look at changes as well as absolute levels
Look at changes as well as absolute levels
513
Technical Analysis (Charting
Technical Analysis (Charting
)
)
u
Charts give picture of past price
Charts give picture of past price
behavior
behavior
u
Charting forces you to follow the
Charting forces you to follow the
market regularly
market regularly
u
Charting helps you identify
Charting helps you identify
s
market direction
market direction
s
market trends
market trends
s
market cycles
market cycles
514
Marketing Alternatives
u
Open (spot) cash market
Open (spot) cash market
u
Pre-season contracts
Pre-season contracts
u
Forward cash sales
Forward cash sales
u
Consignment
Consignment
u
Basis contracts
Basis contracts
u
Futures contracts
Futures contracts
u
Government programs
Government programs
515
u
Factors to consider:
Factors to consider:
s
method of delivery
method of delivery
s
place of delivery
place of delivery
s
time of delivery
time of delivery
s
cost of using
cost of using
s
pricing mechanism
pricing mechanism
s
payment schedule
payment schedule
s
contingencies
contingencies
516
u
Advantages/Disadvantages:
Advantages/Disadvantages:
s
risk
risk
s
cash flow
cash flow
s
market access
market access
s
price level
price level
s
marketing cost (including time)
marketing cost (including time)
s
flexibility
flexibility
s
negotiating power
negotiating power
517
Developing A Marketing
Strategy
Strategy
u
Set objectives
Set objectives
u
Define how to meet objectives
Define how to meet objectives
u
Establish decision rules
Establish decision rules
s
fixed vs. flexible sales
fixed vs. flexible sales
s
time-limited vs. open-ended
time-limited vs. open-ended
s
fail-safe vs. default
fail-safe vs. default
518
Strategy (cont.)
Strategy (cont.)
u
Test the strategy
Test the strategy
s
evaluate what ifs
evaluate what ifs
s
forecast the end result
forecast the end result
s
refine
refine
u
Establish criteria for changing strategy
Establish criteria for changing strategy
s
establish a contingency plan
establish a contingency plan
s
avoid second guessing trap
avoid second guessing trap
u
Clearly define decision making
Clearly define decision making
responsibilities
responsibilities
519
Marketing Management
Marketing Management
u
Implement, Follow and Evaluate plan!
Implement, Follow and Evaluate plan!
u
Remember:
Remember:
s
discipline is important
discipline is important
s
good planning improves the chance
good planning improves the chance
of success
of success
s
good decisions sometimes have bad
good decisions sometimes have bad
outcomes
outcomes
s
evaluate decisions relative to
evaluate decisions relative to
objectives
objectives
s
no one goes broke making a small
no one goes broke making a small
profit
profit
s
your
your
marketing plan must fit
marketing plan must fit
your
your

operation
operation
Session
Session
People in retail
People in retail
521
Types of Retailers
Types of Retailers
Types of Retailers
Types of Retailers
Specialty Shop:
Specialty Shop:
A conventional, limited line store A conventional, limited line store
Built on having the right product assortment Built on having the right product assortment
and knowing customers well and knowing customers well
Department Store
Department Store
Larger store w/ separate distinctive Larger store w/ separate distinctive

departments departments
Generally higher margins and greater service Generally higher margins and greater service
Issue: Do consumers value service and quality Issue: Do consumers value service and quality
of assortment more than the increase in costs? of assortment more than the increase in costs?
522
Types of Retailers
Types of Retailers
(continued)
(continued)
Types of Retailers
Types of Retailers
(continued)
(continued)
Mass Merchandisers
Mass Merchandisers
(discounters)
(discounters)
Dependent upon achieving volume

Dependent upon achieving volume
through lower margins
through lower margins
Catalog Showrooms
Catalog Showrooms
Emphasis on well known brands.

Emphasis on well known brands.
Achieving price reductions through

Achieving price reductions through
reductions in retailing costs.
reductions in retailing costs.
523
Types of Retailers
Types of Retailers
(continued)
(continued)
Types of Retailers
Types of Retailers
(continued)
(continued)
Single Line Retailers

Single Line Retailers
Carries a single line (e.g., clothing) but

Carries a single line (e.g., clothing) but
usually with depth (an accessory store)
usually with depth (an accessory store)
Variation: the Category Killer

Variation: the Category Killer
Warehouse Clubs
Warehouse Clubs
Fastest growing form of retailing

Fastest growing form of retailing
Emphasis is on volume, low margins,

Emphasis is on volume, low margins,
reduced operating costs, and creating
reduced operating costs, and creating
customer commitment.
customer commitment.
524
Types of Retailers
Types of Retailers
(continued)
(continued)
Types of Retailers
Types of Retailers
(continued)
(continued)
Convenience Stores
Convenience Stores
Specializes and frequently purchased

Specializes and frequently purchased
items, convenience items, emergency
items, convenience items, emergency
items.
items.
Frequently uses low margin products to

Frequently uses low margin products to
build traffic for high margin items.
build traffic for high margin items.
525
Why Do People Buy
Why Do People Buy
What
What

They Buy?
They Buy?
Why Do People Buy
Why Do People Buy
What
What

They Buy?
They Buy?
Consumers buy when doing so fulfills

Consumers buy when doing so fulfills
a need, either rational or irrational.
a need, either rational or irrational.
Problem recognition: an imbalance

Problem recognition: an imbalance
between a
between a
desired state
desired state
(how they
(how they
would like to be) and an
would like to be) and an
actual state
actual state

(how they are)
(how they are)
526
Why Do People Buy
Why Do People Buy
What
What

They Buy? (continued)
Why Do People Buy
Why Do People Buy
What
What

Social identity
Social identity
: How others perceive us.
: How others perceive us.
When we move towards our ideal state,

When we move towards our ideal state,
what we are trying to do is to
what we are trying to do is to
change our
change our
social identity
social identity
.
.
Changes occur in social identity when we

Changes occur in social identity when we
claim an image,
claim an image,
and
and
the claim is accepted
the claim is accepted
by others in the social group.
by others in the social group.
Moral: Sell to the

Moral: Sell to the
ideal
ideal
image (not the
image (not the
actual,
actual,
) as long as the image claimed by
) as long as the image claimed by
the consumer is likely to be successful.
the consumer is likely to be successful.
527
Why Do People Buy
Why Do People Buy
Where
Where
They Buy?
They Buy?
Why Do People Buy
Why Do People Buy
Where
Where
They Buy?
They Buy?
Shop Trigger Event

Shop Trigger Event
Once an individual recognizes that a

Once an individual recognizes that a
problem exists, it may still be necessary
problem exists, it may still be necessary
to prompt the individual to take some
to prompt the individual to take some
action. To do this, you can:
action. To do this, you can:
Heighten the need Heighten the need
Lower the barriers to purchase Lower the barriers to purchase

528
Why Do People Buy
Why Do People Buy
Where
Where
They Buy?
They Buy?
(continued)
(continued)
Why Do People Buy
Why Do People Buy
Where
Where
They Buy?
They Buy?
(continued)
(continued)
Destination vs. Intercept Merchandise

Destination vs. Intercept Merchandise
Destination Merchandise: Destination Merchandise: a purchase which a purchase which

motivates a particular shopping trip (e.g., motivates a particular shopping trip (e.g.,
buying a suit for an event) buying a suit for an event)
Sought-Intercept Merchandise: Sought-Intercept Merchandise: a purchase a purchase

the consumer sees a need for, but not critical the consumer sees a need for, but not critical
enough to trigger a special trip (e.g., socks) enough to trigger a special trip (e.g., socks)
Impulse-Intercept Merchandise: Impulse-Intercept Merchandise: a purchase a purchase

that was not planned and a need was only that was not planned and a need was only
recognized during the shopping trip (e.g., a tie) recognized during the shopping trip (e.g., a tie)
529
Why Do People Buy
Why Do People Buy
Where
Where
They Buy?
They Buy?
(continued)
(continued)
Why Do People Buy
Why Do People Buy
Where
Where
They Buy?
They Buy?
(continued)
(continued)
So, how do you use this information?

So, how do you use this information?
Where do you promote Where do you promote destination destination merchandise merchandise
(e.g., a suit)? (e.g., a suit)?
through ads - through ads - before before the consumer leaves home the consumer leaves home
Where do you promote Where do you promote sought-intercept sought-intercept

merchandise (e.g., socks)? merchandise (e.g., socks)?
mostly POP ads mostly POP ads
Where do you promote Where do you promote impulse-intercept impulse-intercept

merchandise (e.g., ties)? merchandise (e.g., ties)?
in-store locations, high traffic areas in-store locations, high traffic areas
Session
Session
International Retail
International Retail
531
Introduction
Introduction
Internationalisation of retailing is not a new Internationalisation of retailing is not a new

phenomenon phenomenon
Woolworths in the UK in 1909 Woolworths in the UK in 1909
Maison Liberty, Paris, 1890, divested 1932 Maison Liberty, Paris, 1890, divested 1932
Practice outpaced academic study until Hollander Practice outpaced academic study until Hollander
(1970) (1970) Multinational Retailing Multinational Retailing
Food retailers contribution to distribution systems Food retailers contribution to distribution systems
development nationally and subsequently development nationally and subsequently
internationally (Goldman, 1974) internationally (Goldman, 1974)
Specialist retailers exploiting market appeal of a Specialist retailers exploiting market appeal of a
distinctive brand distinctive brand
2008 - the worlds largest company (top of the 2008 - the worlds largest company (top of the
Fortune 500) Wal-Mart, is an international retailer Fortune 500) Wal-Mart, is an international retailer
532
Early stages
Early stages
Internationalisation to and from the US provided initial Internationalisation to and from the US provided initial
locus of interest (Hollander, 1970, Ball, 1980) locus of interest (Hollander, 1970, Ball, 1980)
Sears Roebuck: Cuba 1942 & Mexico 1947 Sears Roebuck: Cuba 1942 & Mexico 1947
Woolworths UK 1909 Woolworths UK 1909
1980s 1980s
Initial conceptualisation global, multinational etc Initial conceptualisation global, multinational etc
Impact of supermarket technology on developing economies Impact of supermarket technology on developing economies
Individual experiences of some retailers Laura Ashley, Ikea Individual experiences of some retailers Laura Ashley, Ikea
1990s 1990s
Direction and extent of international activity cross border Direction and extent of international activity cross border
Individual international retail companies Ikea, H&M Individual international retail companies Ikea, H&M
Motivations for internationalisation Motivations for internationalisation

533
Recent themes
Recent themes
Evolution of retail sectors under study

Evolution of retail sectors under study
Evolution of
Evolution of
why
why
and
and
where
where
to
to
how
how

retailers internationalise
retailers internationalise
The changing international retail

The changing international retail
marketplace
marketplace
Methodological diversity
Methodological diversity
534
Evolution
Evolution
continued
continued
Largest Retailers Largest Retailers
Food in conjunction with non-food Food in conjunction with non-food
Power in the distribution system big-box operations Power in the distribution system big-box operations
US (11), Germany (5), France (2), Japan (1), UK (1) US (11), Germany (5), France (2), Japan (1), UK (1)
Q Companies Q Companies
Differentiation, brand appeal, innovation Differentiation, brand appeal, innovation
Smaller, specialist retailers with international brand Smaller, specialist retailers with international brand
appeal across a range of sectors and delivery systems appeal across a range of sectors and delivery systems
US (12), Japan (3), Sweden, Spain, UK, Australia, South US (12), Japan (3), Sweden, Spain, UK, Australia, South
Africa Africa
535
Evolution
Evolution
continued
continued
These distinctions mirror how academic research These distinctions mirror how academic research
of retail sectors has evolved of retail sectors has evolved
Move from study of those firms that dominate the Move from study of those firms that dominate the
distribution system to the study of international distribution system to the study of international
retail brands retail brands
536
Evolution
Evolution
continued
continued
Increasing focus on the methods retailers use to Increasing focus on the methods retailers use to
enter international markets enter international markets
(Doherty, 2000) (Doherty, 2000)
Franchising Franchising
(Quinn, 1998, 1999; Doherty and Quinn, 1999; Quinn and (Quinn, 1998, 1999; Doherty and Quinn, 1999; Quinn and
Doherty, 2000; Doherty and Alexander, 2004, 2006; Doherty, 2000; Doherty and Alexander, 2004, 2006;
Doherty, 2007a, 2007b, 2009) Doherty, 2007a, 2007b, 2009)
Merger and acquisition Merger and acquisition
(Wrigley, 1997, 1998, 2002, 2002) (Wrigley, 1997, 1998, 2002, 2002)
Joint ventures Joint ventures
(Palmer and Owens, 2006) (Palmer and Owens, 2006)

537
Change in international
Change in international
retail
retail
1980s and early 1990s Europe, US, Japan 1980s and early 1990s Europe, US, Japan
sources of both academic and practical interest sources of both academic and practical interest
Since 1990s, academic interest has evolved Since 1990s, academic interest has evolved
Eastern Europe (Drtina, 1996) Eastern Europe (Drtina, 1996)
Russia (Rogers, Ghauri and George, 2005) Russia (Rogers, Ghauri and George, 2005)
Middle East (Jones, 2003) Middle East (Jones, 2003)
South America (Alexander and de Lira e Silva, 2002; South America (Alexander and de Lira e Silva, 2002;
Bianchi and Arnold, 2004) Bianchi and Arnold, 2004)
China (Sternquist and Chen, 2006) China (Sternquist and Chen, 2006)
538
Change
Change
continued
continued
India India
2006, regulation allowed international retailers 51% 2006, regulation allowed international retailers 51%
ownership of a single brand operation ownership of a single brand operation
2005-08, franchising increased by 60% year on year with 2005-08, franchising increased by 60% year on year with
expectations to increased to 100% by 2013 expectations to increased to 100% by 2013
it is not practically possible to know all the local languages it is not practically possible to know all the local languages
whereas for forays into Tier II and Tier III towns it is very whereas for forays into Tier II and Tier III towns it is very
important to know the local language. The best way to enter important to know the local language. The best way to enter
these markets is through the franchise route these markets is through the franchise route
Planet Retail - Marks and Spencer, Guess and Next Planet Retail - Marks and Spencer, Guess and Next
International retailers have to create an Indian solution for an International retailers have to create an Indian solution for an
Indian opportunity franchising with a local partner can create Indian opportunity franchising with a local partner can create
that solution that solution
539
Change
Change
continued
continued
Russia
Russia

Significant challenges despite 14-16% retail Significant challenges despite 14-16% retail
growth rate growth rate
Road network, HR, property, import regulations Road network, HR, property, import regulations
Carrefour, Ikea, Auchan in the market Carrefour, Ikea, Auchan in the market
Department store retailing Department store retailing
BhS, C&A and Debenhams BhS, C&A and Debenhams
Fashion retailers Zara, Mango, Benetton Fashion retailers Zara, Mango, Benetton
Mothercare, Next, The Body Shop and Peacocks Mothercare, Next, The Body Shop and Peacocks
Luxury Luxury
540
Change
Change
continued
continued
China
China
China is one country but with 32 markets, each with its China is one country but with 32 markets, each with its
own tastes and shopping habits. Understanding the own tastes and shopping habits. Understanding the
diverse, fragmented and constantly evolving needs of diverse, fragmented and constantly evolving needs of
the consumer will be the biggest challenge (IGD, 2005) the consumer will be the biggest challenge (IGD, 2005)
E Early 1990s arly 1990s
Carrefour, Wal-Mart, Metro, Tesco, Auchan Carrefour, Wal-Mart, Metro, Tesco, Auchan
hypermarket hypermarket
Now moving to second and third tier cities for Now moving to second and third tier cities for
expansion expansion
Luxury brands and specialists Luxury brands and specialists
Dior, Louis Vuitton, Pink, Pilgrim, Zara, Benetton Dior, Louis Vuitton, Pink, Pilgrim, Zara, Benetton
541
Change
Change
continued
continued
Future Markets
Future Markets
Africa Africa
Egypt - Claires and Mothercare(Alshaya), Carrefour Egypt - Claires and Mothercare(Alshaya), Carrefour
Morocco Tiffany, Yves Rocher, Casino, Auchan and Morocco Tiffany, Yves Rocher, Casino, Auchan and
Metro Metro
Tunisia Carrefour, Casino, Yves Rocher Tunisia Carrefour, Casino, Yves Rocher
Middle East Middle East
Saudi Arabia and United Arab Emirates Saudi Arabia and United Arab Emirates
South America South America
Chile, Brazil and Mexico Chile, Brazil and Mexico

Session
Session
Globalization
Globalization
543
Introduction
Introduction
Globalization Globalization in its literal sense is the process of in its literal sense is the process of
transformation of local or regional phenomena into transformation of local or regional phenomena into
global ones. It can be described as a process by global ones. It can be described as a process by
which the people of the world are unified into a which the people of the world are unified into a
single society and function together. single society and function together.
This process is a combination of economic, This process is a combination of economic,

technological, socio-cultural and political forces. technological, socio-cultural and political forces.
Globalization is often used to refer to economic Globalization is often used to refer to economic
globalization, that is, integration of national globalization, that is, integration of national
economies into the international economy through economies into the international economy through
trade trade, , foreign direct investment foreign direct investment, capital flows, , capital flows,
migration migration, and the spread of technology. , and the spread of technology.
544
Introduction
Introduction
Globalization is a widely-used term that can be defined in a Globalization is a widely-used term that can be defined in a
number of different ways. When used in an economic number of different ways. When used in an economic
context, it refers to the reduction and removal of barriers context, it refers to the reduction and removal of barriers
between national borders in order to facilitate the flow of between national borders in order to facilitate the flow of
goods, capital, services and labour...although considerable goods, capital, services and labour...although considerable
barriers remain to the flow of labour...Globalization is not a barriers remain to the flow of labour...Globalization is not a
new phenomenon. new phenomenon.
It began in the late nineteenth century, but its spread It began in the late nineteenth century, but its spread
slowed during the period from the start of the First World slowed during the period from the start of the First World
War until the third quarter of the twentieth century. This War until the third quarter of the twentieth century. This
slowdown can be attributed to the inward looking policies slowdown can be attributed to the inward looking policies
pursued by a number of countries in order to protect their pursued by a number of countries in order to protect their
respective industries.. however, the pace of globalization respective industries.. however, the pace of globalization
picked up rapidly during the fourth quarter of the twentieth picked up rapidly during the fourth quarter of the twentieth
century..." century..."
545
History
History
The term " The term "globalization globalization" has been used by economists " has been used by economists
since the 1980s although it was used in social sciences in since the 1980s although it was used in social sciences in
the 1960s; however, its concepts did not become popular the 1960s; however, its concepts did not become popular
until the latter half of the 1980s and 1990s. The earliest until the latter half of the 1980s and 1990s. The earliest
written theoretical concepts of globalization were penned written theoretical concepts of globalization were penned
by an American entrepreneur-turned-minister by an American entrepreneur-turned-minister Charles Charles Taze Taze
Russell Russell who coined the term 'corporate giants' in 1897. who coined the term 'corporate giants' in 1897.
The Islamic Golden Age is also an example, when Muslim The Islamic Golden Age is also an example, when Muslim
traders and explorers established an early global economy traders and explorers established an early global economy
across the Old World resulting in a globalization of crops, across the Old World resulting in a globalization of crops,
trade, knowledge and technology; and later during the trade, knowledge and technology; and later during the
Mongol Empire, when there was greater integration along Mongol Empire, when there was greater integration along
the Silk Road. Globalization in a wider context began shortly the Silk Road. Globalization in a wider context began shortly
before the turn of the 16th century, with two Kingdoms of before the turn of the 16th century, with two Kingdoms of
the Iberian Peninsula - the Kingdom of Portugal and the the Iberian Peninsula - the Kingdom of Portugal and the
Kingdom of Castile. Kingdom of Castile.
546
History
History
Portugal's global explorations in the 16th century, especially, linked Portugal's global explorations in the 16th century, especially, linked
continents, economies and cultures to a massive extent. Portugal's continents, economies and cultures to a massive extent. Portugal's
exploration and trade with most of the coast of Africa, Eastern exploration and trade with most of the coast of Africa, Eastern
South America, and Southern and Eastern Asia, was the first major South America, and Southern and Eastern Asia, was the first major
trade based form of globalization. A wave of global trade, trade based form of globalization. A wave of global trade,
colonization, and enculturation reached all corners of the world. colonization, and enculturation reached all corners of the world.
In the 17th century, globalization became a business phenomenon In the 17th century, globalization became a business phenomenon
when the British East India Company (founded in 1600), which is when the British East India Company (founded in 1600), which is
often described as the first multinational corporation, was often described as the first multinational corporation, was
established, as well as the Dutch East India Company (founded in established, as well as the Dutch East India Company (founded in
1602) and the Portuguese East India Company (founded in 1628). 1602) and the Portuguese East India Company (founded in 1628).
Because of the large investment and financing needs and the high Because of the large investment and financing needs and the high
risks involved with international trade, the British East India risks involved with international trade, the British East India
Company became the first company in the world to share risk and Company became the first company in the world to share risk and
enable joint ownership of companies through the issuance of shares enable joint ownership of companies through the issuance of shares
of stock: an important driver for globalization. of stock: an important driver for globalization.
547
History
History
Globalization was achieved by the Globalization was achieved by the British Empire British Empire
(the largest empire in history) due to its sheer size (the largest empire in history) due to its sheer size
and power. British ideals and culture were imposed and power. British ideals and culture were imposed
on other nations during this period. on other nations during this period.
The 19th century is sometimes called "The First The 19th century is sometimes called "The First
Era of Globalization." It was a period characterized Era of Globalization." It was a period characterized
by rapid growth in international trade and by rapid growth in international trade and
investment between the European imperial investment between the European imperial
powers, their colonies, and, later, the United powers, their colonies, and, later, the United
States. States.
The "First Era of Globalization" later collapsed The "First Era of Globalization" later collapsed
during the gold standard crisis and Great during the gold standard crisis and Great
Depression in the late 1920s and early 1930s. Depression in the late 1920s and early 1930s.
548
Measuring Globalization
Measuring Globalization
Goods and services, e.g. exports plus imports as Goods and services, e.g. exports plus imports as
a proportion of national income or per capita of a proportion of national income or per capita of
population population
Labor/people, e.g. net migration rates; inward or Labor/people, e.g. net migration rates; inward or
outward migration flows, weighted by population outward migration flows, weighted by population
Capital, e.g. inward or outward direct investment Capital, e.g. inward or outward direct investment
as a proportion of national income or per head of as a proportion of national income or per head of
population population
Technology, e.g. international research & Technology, e.g. international research &
development flows; proportion of populations (and development flows; proportion of populations (and
rates of change thereof) using particular rates of change thereof) using particular
inventions (especially 'factor-neutral' technological inventions (especially 'factor-neutral' technological
advances such as the telephone, motorcar, advances such as the telephone, motorcar,
broadband) broadband)
549
Measuring
Measuring
continued.
continued.
As globalization is not only an economic phenomenon, a As globalization is not only an economic phenomenon, a
multivariate approach to measuring globalization is the multivariate approach to measuring globalization is the
recent index calculated by the Swiss think tank KOF. recent index calculated by the Swiss think tank KOF.
The index measures the three main dimensions of The index measures the three main dimensions of
globalization: economic, social, and political. In addition to globalization: economic, social, and political. In addition to
three indices measuring these dimensions, an overall index three indices measuring these dimensions, an overall index
of globalization and sub-indices referring to actual of globalization and sub-indices referring to actual
economic flows, economic restrictions, data on personal economic flows, economic restrictions, data on personal
contact, data on information flows, and data on cultural contact, data on information flows, and data on cultural
proximity is calculated. proximity is calculated.
Data is available on a yearly basis for 122 countries, as Data is available on a yearly basis for 122 countries, as
detailed in Dreher, Gaston and Martens (2008).According to detailed in Dreher, Gaston and Martens (2008).According to
the index, the world's most globalized country is Belgium, the index, the world's most globalized country is Belgium,
followed by Austria, Sweden, the United Kingdom and the followed by Austria, Sweden, the United Kingdom and the
Netherlands. The least globalized countries according to the Netherlands. The least globalized countries according to the
KOF-index are Haiti, Myanmar the Central African Republic KOF-index are Haiti, Myanmar the Central African Republic
and Burundi. and Burundi.
550
Effects of Globalization
Effects of Globalization
Industrial Industrial - emergence of worldwide production - emergence of worldwide production

markets and broader access to a range of foreign markets and broader access to a range of foreign
products for consumers and companies. products for consumers and companies.
Particularly movement of material and goods Particularly movement of material and goods
between and within national boundaries. between and within national boundaries.
Financial Financial - emergence of worldwide financial - emergence of worldwide financial

markets and better access to external financing for markets and better access to external financing for
borrowers. As these worldwide structures grew borrowers. As these worldwide structures grew
more quickly than any transnational regulatory more quickly than any transnational regulatory
regime, the instability of the global financial regime, the instability of the global financial
infrastructure dramatically increased, as infrastructure dramatically increased, as
evidenced by the financial crises of late 2008. evidenced by the financial crises of late 2008.
551
Effects
Effects
continued
continued
Economic
Economic
- realization of a global common
- realization of a global common
market, based on the freedom of
market, based on the freedom of
exchange of goods and capital. The
exchange of goods and capital. The
interconnectedness of these markets,
interconnectedness of these markets,
however meant that an economic collapse
however meant that an economic collapse
in any one given country could not be
in any one given country could not be
contained.
contained.
Political - some use "globalization" to

Political - some use "globalization" to
mean the creation of a world government
mean the creation of a world government
which regulates the relationships among
which regulates the relationships among
governments and guarantees the rights
governments and guarantees the rights
arising from social and economic
arising from social and economic
globalization.
globalization.
552
Effects
Effects
continued
continued
Informational - increase in information flows Informational - increase in information flows

between geographically remote locations. between geographically remote locations.
Arguably this is a technological change with the Arguably this is a technological change with the
advent of fibre optic communications, satellites, advent of fibre optic communications, satellites,
and increased availability of telephone and and increased availability of telephone and
Internet. Internet.
Competition Competition - Survival in the new global business - Survival in the new global business
market calls for improved productivity and market calls for improved productivity and
increased competition. Due to the market increased competition. Due to the market
becoming worldwide, companies in various becoming worldwide, companies in various
industries have to upgrade their products and use industries have to upgrade their products and use
technology skillfully in order to face increased technology skillfully in order to face increased
competition. competition.
553
Effects
Effects
continued
continued
Ecological - the advent of global environmental challenges Ecological - the advent of global environmental challenges
that might be solved with international cooperation, such as that might be solved with international cooperation, such as
climate change, cross-boundary water and air pollution, climate change, cross-boundary water and air pollution,
over-fishing of the ocean, and the spread of invasive over-fishing of the ocean, and the spread of invasive
species. Since many factories are built in developing species. Since many factories are built in developing
countries with less environmental regulation, globalism and countries with less environmental regulation, globalism and
free trade may increase pollution. On the other hand, free trade may increase pollution. On the other hand,
economic development historically required a "dirty" economic development historically required a "dirty"
industrial stage, and it is argued that developing countries industrial stage, and it is argued that developing countries
should not, via regulation, be prohibited from increasing should not, via regulation, be prohibited from increasing
their standard of living. their standard of living.
Cultural - growth of cross-cultural contacts; advent of new Cultural - growth of cross-cultural contacts; advent of new
categories of consciousness and identities which embodies categories of consciousness and identities which embodies
cultural diffusion, the desire to increase one's standard of cultural diffusion, the desire to increase one's standard of
living and enjoy foreign products and ideas, adopt new living and enjoy foreign products and ideas, adopt new
technology and practices, and participate in a "world technology and practices, and participate in a "world
culture". Some bemoan the resulting consumerism and loss culture". Some bemoan the resulting consumerism and loss
of languages. of languages.
554
Effects
Effects
continued
continued
Social
Social
- development of the system of
- development of the system of
non-governmental organizations
non-governmental organizations
as main
as main
agents of global public policy, including
agents of global public policy, including
humanitarian aid and developmental
humanitarian aid and developmental
efforts.
efforts.
Technical-
Technical-
Development of a global
Development of a global
telecommunications infrastructure and
telecommunications infrastructure and
greater transborder data flow, using such
greater transborder data flow, using such
technologies as the Internet,
technologies as the Internet,
communication satellites, submarine fiber
communication satellites, submarine fiber
optic cable, and wireless telephones.
optic cable, and wireless telephones.
Session
Session
Shopping at world stores
Shopping at world stores
556
Emerging Trends
Emerging Trends

Evolving activities
Evolving activities
Changing customer lifestyles

Changing customer lifestyles
Increasing competition
Increasing competition
Increasing usage of dual

Increasing usage of dual
distribution channels
distribution channels
Changing media roles,

Changing media roles,
technological advances, and global
technological advances, and global
penetration
penetration
557
Selection Factors by
Selection Factors by
Customers
Customers
Company reputation and image

Company reputation and image
Ability to shop whenever consumer

Ability to shop whenever consumer
wants
wants
Types of goods and services

Types of goods and services
Availability of toll-free phone

Availability of toll-free phone
number or Web site for ordering
number or Web site for ordering
Credit card acceptance

Credit card acceptance
Speed of promised delivery time

Speed of promised delivery time
Competitive prices
Competitive prices
Satisfaction with past purchases

Satisfaction with past purchases
and good return policy
and good return policy
558
Media Selection
Media Selection
Printed
Printed
catalogs
catalogs
Direct-mail ads
Direct-mail ads
and brochures
and brochures
Inserts with
Inserts with
monthly credit
monthly credit
card and other
card and other
bills
bills
(statement
(statement
stuffers)
stuffers)
Freestanding
Freestanding
displays
displays
Ads or
Ads or
programs in
programs in
mass media
mass media
Banner ads or
Banner ads or
hot links on the
hot links on the
Web
Web
Video kiosks
Video kiosks
559
Outcome Measures
Outcome Measures
Overall Response Rate

Overall Response Rate
Average Purchase Amount

Average Purchase Amount
Sales Volume by Product Category

Sales Volume by Product Category
Value of List Brokers

Value of List Brokers
560
Reasons NOT to Shop
Reasons NOT to Shop
Online
Online
Trust
Trust
Fear
Fear
Lack of security
Lack of security
Lack of personal
Lack of personal
communication
communication
561
Recommendations for
Recommendations for
Web Retailers
Web Retailers
Develop or exploit a well-known,

Develop or exploit a well-known,
trustworthy retailer name
trustworthy retailer name
Tailor the product assortment for

Tailor the product assortment for
Web shoppers
Web shoppers
Enable the shopper to click as

Enable the shopper to click as
little as possible
little as possible
Provide a solid search engine

Provide a solid search engine
Use customer information

Use customer information
562
Features of Airport
Features of Airport
Retailing
Retailing
Large group of prospective

shoppers
shoppers
Captive audience
Captive audience
Strong sales per square foot of

retail space
retail space
Strong sales of gift and travel

items
items
Difficulty in replenishment
Longer operating hours

Duty-free shopping possible

563
Whats the Problem?
Whats the Problem?
Product proliferation and duplication

Product proliferation and duplication
Product complexity and change

Product complexity and change
Confusing promotions
Confusing promotions
Ineffective signage and excessive

Ineffective signage and excessive
clutter
clutter
Products hard to find or out of stock

Products hard to find or out of stock
Poor service
Poor service
Long lines
Long lines
564
What Are the Effects?
What Are the Effects?
High levels of consumer stress

High levels of consumer stress
Procrastination
Procrastination
Reduced shopping frequency and

Reduced shopping frequency and
duration
duration
Low purchase conversion rates

Low purchase conversion rates
565
How do We Fix the
How do We Fix the
Problem?
Problem?
Develop a better understanding of

Develop a better understanding of
consumer demand and the shopping
consumer demand and the shopping
process
process
Create more compelling and

Create more compelling and
engaging shopping environments
engaging shopping environments
Make it easier for consumers to find

Make it easier for consumers to find
what theyre looking for
what theyre looking for
566
What is Retail
What is Retail
Shoppability?
Shoppability?
Definition:
Definition:
The ability of the retail environment to

The ability of the retail environment to
translate consumer demand into
translate consumer demand into
purchase
purchase
Components:
Components:
Consumer Engagement
Consumer Engagement
: Making
: Making
consumers needs salient in specific
consumers needs salient in specific
retail settings
retail settings
Purchase conversion
Purchase conversion
: Turning
: Turning
shoppers into buyers
shoppers into buyers
567
Enhancing Retail
Enhancing Retail
Shoppability
Shoppability
1. 1.
Show the Product
Show the Product
2. 2.
Provide Effective Navigational Aids
Provide Effective Navigational Aids
3. 3.
Simplify Product Organization and
Simplify Product Organization and
Presentation
Presentation
4. 4.
Minimize Clutter
Minimize Clutter
5. 5.
Maximize Product Affordance
Maximize Product Affordance
568
Enhancing Retail
Enhancing Retail
Shoppability
Shoppability
6. 6.
Showcase Whats New
Showcase Whats New
7. 7.
Make the Experience Convenient
Make the Experience Convenient
8. 8.
Make the Experience Enjoyable
Make the Experience Enjoyable
9. 9.
Speak with Authority
Speak with Authority
10. 10.
Maintain Flexibility
Maintain Flexibility
569
Measuring Retail
Measuring Retail
Shoppability
Shoppability
These 10 principles are a great

These 10 principles are a great
starting point, but
starting point, but
every retailer is
every retailer is
different
different
Brand positioning and equity

Brand positioning and equity
Product characteristics
Product characteristics
Customer needs and expectations

Customer needs and expectations
We need to measure and manage

We need to measure and manage
shoppability for our unique
shoppability for our unique
customers, products and contexts
customers, products and contexts
570
Measuring Retail
Measuring Retail
Shoppability (cont.)
Talk to Customers
Talk to Customers
Consumer surveys
Consumer surveys
Exit interviews
Exit interviews
Shopper suggestions
Shopper suggestions
571
Measuring Retail
Measuring Retail
Talk to Customers
Talk to Customers
Observe Customer Behavior

Customer traffic
Customer traffic
Traffic flow (speed and direction)
Traffic flow (speed and direction)
Aisle penetration
Aisle penetration
Category dwell time and product
Category dwell time and product
interaction
interaction
Purchase conversion
Purchase conversion
Queue lengths and crowding
Queue lengths and crowding
Shopper demographics
Shopper demographics
572
Measuring Retail
Measuring Retail
Talk to Customers
Talk to Customers

Test New Concepts

Test New Concepts
573
Features of Airport
Features of Airport
Retailing
Retailing

shoppers
shoppers
Captive audience
Captive audience

retail space
retail space

items
items


Session
Session
Going International
Going International
575
Reasons for going
Reasons for going
international
international
Reactive
Reactive
(from reaction - to receive
(from reaction - to receive
information, then act)
information, then act)
the company is responding to

the company is responding to
demand it discovers in another
demand it discovers in another
location
location
it sees it competitors going to a

it sees it competitors going to a
particular place
particular place
regulations - environmental/work
regulations - environmental/work
safety may be easier overseas
safety may be easier overseas
costs of production at home force it

costs of production at home force it
to cheaper areas
to cheaper areas
chance occurrence
chance occurrence
additional reasons on page 240 - 241
576
Reactive, continued
Reactive, continued
If a companies customers go
If a companies customers go
international, then it may be required
international, then it may be required
to follow.
to follow.
eg. if an auto parts supplier to Magna sees
eg. if an auto parts supplier to Magna sees
Magna beginning to make some important
Magna beginning to make some important
component in Mexico, then it may also
component in Mexico, then it may also
have to go to Mexico so it can mfg. there
have to go to Mexico so it can mfg. there
and continue to supply Magna - it would
and continue to supply Magna - it would
be too expensive to ship the parts from
be too expensive to ship the parts from
Canada
Canada
577
Reasons for going
Reasons for going
international
international
Proactive
Proactive
(to actively look for an
(to actively look for an
opportunity)
opportunity)
strategically seeking out

strategically seeking out
advantages
advantages
launch and offense into a new

launch and offense into a new
market before competitor does
market before competitor does
power and prestige

power and prestige
incentives
incentives
lower costs of labour, production,

lower costs of labour, production,
energy
energy
578
Proactive, continued
Proactive, continued
As costs of labour have increased in North

As costs of labour have increased in North
America, many assemblers and
America, many assemblers and
component parts mfg. have had to move
component parts mfg. have had to move
offshore
offshore
Also, another reason to go international is

Also, another reason to go international is
to gain prestige which can be applied to
to gain prestige which can be applied to
customers at home - if a company has
customers at home - if a company has
overseas offices, it appears to be more
overseas offices, it appears to be more
impressive at home ie. law firms, CA firms
impressive at home ie. law firms, CA firms
579
Ways to enter the new
Ways to enter the new
market
market
(choice of entry mode)
(choice of entry mode)
simple export of the product

simple export of the product
develop a joint venture to sell

develop a joint venture to sell
through an existing sales company in
through an existing sales company in
similar business
similar business
sell license to foreign company and

sell license to foreign company and
collect royalties
collect royalties
contract a foreign company to do the

contract a foreign company to do the
business for a % of the sales
business for a % of the sales
overseas office and subsidiary

overseas office and subsidiary
company set up
company set up
Session
Session
Internationalization process
Internationalization process
581
Cross-cultural encounters
Cross-cultural encounters
Why problematic? Why problematic?
artifacts, including artifacts, including behavior behavior
mental maps mental maps (person schemas, person-in-situation (person schemas, person-in-situation
schemas, self-schemas, scripts, cognitive maps) schemas, self-schemas, scripts, cognitive maps)
values values
in one society: people share values, mental maps ==> easy to function in one society: people share values, mental maps ==> easy to function
new and cross-cultural encounter settings: mental maps dont work ==> new and cross-cultural encounter settings: mental maps dont work ==>
misinterpretation, wrong behavior, uncertainty, attribution of bad-will misinterpretation, wrong behavior, uncertainty, attribution of bad-will
582
Hofstedes study of cultural
Hofstedes study of cultural
differences
differences
IBM employees in the end of the 1960s IBM employees in the end of the 1960s
studied values related to organizational behavior studied values related to organizational behavior
==> four cultural dimensions related to common basic ==> four cultural dimensions related to common basic
problems: problems:
1. 1. power distance power distance: the extent to which power differences are : the extent to which power differences are
accepted accepted
2. 2. uncertainty avoidance uncertainty avoidance: the extent to which uncertain, : the extent to which uncertain,
ambiguous situations are seen as threatening --> formal rules, ambiguous situations are seen as threatening --> formal rules,
norms, experts norms, experts
3. 3. individualism individualism: the extent to which people feed responsible : the extent to which people feed responsible
only for themselves (and very close ones) only for themselves (and very close ones)
4. 4. masculinity masculinity: the extent to which assertiveness, work, and : the extent to which assertiveness, work, and
career is important in life career is important in life
583
Internationalization Process
Internationalization Process
Model
Model
Psychic distance
Psychic distance
Unfamiliarity because of differences

Unfamiliarity because of differences
in language, culture, business
in language, culture, business
practice and political systems
practice and political systems
Definition of psychic distance

Definition of psychic distance
Factors that disturb the flow of

Factors that disturb the flow of
information between a firm and its
information between a firm and its
market
market
584
Process
Process
continued....
continued....

Lack of knowledge about
Lack of knowledge about
foreign markets and
foreign markets and
operations are the main
operations are the main
obstacle to the development
obstacle to the development
of international operations
of international operations
and that the necessary
and that the necessary
knowledge can be acquired
knowledge can be acquired
mainly through operations
mainly through operations
abroad
abroad

(Johanson & Vahlne, 1977)
(Johanson & Vahlne, 1977)
585
Theoretical vs. operational
Theoretical vs. operational
level
level
1) 1) A theoretical level A theoretical level
An explanation for the incremental An explanation for the incremental

behavior often observed behavior often observed
2) 2) An operational level An operational level
In which sequence are foreign markets In which sequence are foreign markets
typically entered typically entered
The order in which operational forms are The order in which operational forms are
applied in a specific country applied in a specific country
586
The mechanism of
The mechanism of
internationalization
internationalization
When investing abroad the lack of knowledge creates When investing abroad the lack of knowledge creates
substantial uncertainty and high perceived risk substantial uncertainty and high perceived risk
The managers are risk-averse and will not start The managers are risk-averse and will not start
projects that exceed a certain level of risk projects that exceed a certain level of risk
Market risk = uncertainty x market investments Market risk = uncertainty x market investments
The uncertainty can be reduced by increased The uncertainty can be reduced by increased
knowledge of the market knowledge of the market
The critical market knowledge is mainly gained by The critical market knowledge is mainly gained by
experiential activities in the particular market experiential activities in the particular market
(experiential knowledge related to the specific (experiential knowledge related to the specific
context) context)
587
Implications
Implications
Successful foreign expansion is a costly and time- Successful foreign expansion is a costly and time-
consuming process (no short-cuts), as consuming process (no short-cuts), as
experiential knowledge is: experiential knowledge is:
difficult to acquire difficult to acquire
difficult to integrate if acquired difficult to integrate if acquired
Internationalization is a process of cultural Internationalization is a process of cultural

learning, as it reduces psychic distance learning, as it reduces psychic distance
Internationalization is often a reactive process Internationalization is often a reactive process

rather than an proactive process rather than an proactive process
588
What is the order of
What is the order of
entry?
entry?
Firms will start their internationalization in

Firms will start their internationalization in
markets with lowest psychic distance, as
markets with lowest psychic distance, as
they can understand these markets -> low
they can understand these markets -> low
uncertainty
uncertainty
With increasing experiential knowledge

With increasing experiential knowledge
the firm will expand into markets with
the firm will expand into markets with
greater psychic distance
greater psychic distance
589
The stages model
The stages model
(Establishment chain)
(Establishment chain)
Sporadic
export
Sales
subsidiary
Production
subsidiary
Foreign
intermediary
The usual pattern of gradually increasing
resource commitment on the foreign markets
Assembly
production
590
The Internationalization
The Internationalization
Process Model
Process Model
Criticism
Criticism
firms do have a choice (the model is quite

firms do have a choice (the model is quite
deterministic)
deterministic)
doesnt consider network, market & industry

doesnt consider network, market & industry
differences
differences
no room for external drivers like global

no room for external drivers like global
competition
competition
High profit-potential might compensate for

High profit-potential might compensate for
high risks
high risks
also: increased international knowledge &

also: increased international knowledge &
experience
experience
Session
Session
Culture
Culture
592
Culture
Culture
Helps us organize our world

Helps us organize our world
Shared values, understandings,

Shared values, understandings,
assumptions and goals (values,
assumptions and goals (values,
beliefs, norms)
beliefs, norms)
Learned from earlier generation

Learned from earlier generation
Imposed by present members of

Imposed by present members of
society
society
593
Principles for Studying
Principles for Studying
Other Cultures
Other Cultures
Individuals may not conform

Differences may not be culturally

based
based
Understand your own culture first

Understand your own culture first
Continuums
Continuums
Few fall at the extremes, most are

Few fall at the extremes, most are
somewhere in the middle
somewhere in the middle
594
Stereotyping/
Stereotyping/
Sociotyping
Sociotyping
Mental files
Mental files
Natural
Natural
Useful
Useful
Can be misused
Can be misused
595
Ethnocentrism
Ethnocentrism
Belief that one's cultural

Belief that one's cultural
values, beliefs and norms are
values, beliefs and norms are
better than those of another
better than those of another
culture are
culture are
596
Principles Summary
Principles Summary
4 Principles for studying cultures

4 Principles for studying cultures


based
based
Understand self first

Understand self first
Continuums
Continuums
Stereotyping
Stereotyping
Natural, potentially useful or harmful

Natural, potentially useful or harmful
mental files
mental files
Ethnocentrism
Ethnocentrism
Belief that ones own culture is best

Belief that ones own culture is best
597
Team Work
Team Work
Find several examples that

Find several examples that
demonstrate how culture affects
demonstrate how culture affects
management functions such as
management functions such as
planning, organizing, directing and
planning, organizing, directing and
controlling
controlling
Find examples of how culture

Find examples of how culture
affects management style
affects management style
Find several examples of how

Find several examples of how
business practices differ across
business practices differ across
cultures
cultures
Prepare to present findings to class

Prepare to present findings to class
598
Cultural Characteristics
Cultural Characteristics
Understand the ways culture

Understand the ways culture
can differ
can differ
Understand ourselves
Understand ourselves
Understand others
Understand others
Value different points of view

Value different points of view
Develop shared values, beliefs

Develop shared values, beliefs
and norms
and norms
599
What do you think?
What do you think?
Are subordinates the same kind of

Are subordinates the same kind of
people as management?
people as management?
Should the boss know all the answers?

Should the boss know all the answers?
Is it ok for the boss to have privileges

Is it ok for the boss to have privileges
such as drinking coffee on the job that
such as drinking coffee on the job that
the front line workers do not have?
the front line workers do not have?
Is it ok to call the boss by his/her first

Is it ok to call the boss by his/her first
name?
name?
Which type of boss do you think is best -

Which type of boss do you think is best -
one that is autocratic, persuasive or
one that is autocratic, persuasive or
paternalistic, or democratic
paternalistic, or democratic? ?

600
Power Distance
Power Distance
High Power
High Power
Distance
Distance
Order of
Order of
inequality
inequality
Special privileges
Special privileges
Subordinates are
Subordinates are
different from
different from
superiors
superiors
Boss should know

Boss should know
all
all
Low Power Distance
Low Power Distance
Minimize
Minimize
inequalities
inequalities
Equal rights
Equal rights
Subordinates and
Subordinates and
superiors are
superiors are
equals
equals
Ok for boss to ask

Ok for boss to ask
subordinates for
subordinates for
answers
answers
601
High Power Distance
High Power Distance
Employee Expectations
Employee Expectations
Wrong to disagree with the

Wrong to disagree with the
boss
boss
Paternalistic (father-like)
Paternalistic (father-like)
management style
management style
Boss should know all the

Boss should know all the
answers
answers
Boss should have more

Boss should have more
privileges
privileges
602
Uncertainty Avoidance
Uncertainty Avoidance
High
High
Avoid risks
Avoid risks
Dissonance is
Dissonance is
dangerous
dangerous
Time is money
Time is money
Need written
Need written
rules and
rules and
regulations
regulations
Believe in
Believe in
experts
experts
Low Low
Willing to take Willing to take

risks risks
Accept Accept
disagreements disagreements
Time is free Time is free
Prefer common Prefer common

sense to rules sense to rules
Logic and common Logic and common

sense better than sense better than
expert opinions expert opinions
603
Individualism
Individualism
Collectivism
Collectivism
Responsible for
Responsible for
self and
self and
immediate family
immediate family
Identity based on
Identity based on
the individual
the individual
Autonomy,
Autonomy,
variety, pleasure
variety, pleasure
and individual
and individual
financial security
financial security
Individual
Individual
decisions
decisions
Extended
Extended
families,
families,
loyalty,
loyalty,
protection
protection
Identity in the
Identity in the
social system
social system
Expertise,
Expertise,
order, duty,
order, duty,
security
security
provided by the
provided by the
in-group
in-group
Group
Group
decisions
decisions
604
Affect of High Uncertainty
Affect of High Uncertainty
Avoidance on Employees
Avoidance on Employees
Career stability
Career stability
Rules, regulations, direction

Rules, regulations, direction
Consistency
Consistency
Avoid conflict/disagreement
Avoid conflict/disagreement
Resist change
Resist change
Fear of failure
Fear of failure
May appear less ambitious May appear less ambitious
Stable employees
Stable employees
605
Locus of Control
Locus of Control
Internal
Internal
Belief in ones
Belief in ones
ability to control
ability to control
fate
fate
Respect for conflict

Respect for conflict
and resistance
and resistance
Focus on self
Focus on self
rather than others
rather than others
Discomfort with
Discomfort with
lack of control
lack of control
External
External
Belief that
Belief that
something outside
something outside
oneself is in control
oneself is in control
Harmony and
Harmony and
responsiveness
responsiveness
Focus on other
Focus on other
Comfortable with
Comfortable with
changes
changes
606
Neutral/Affective
Neutral/Affective
Neutral
Neutral
Hide feelings
Hide feelings
Tension
Tension
accidentally
accidentally
revealed
revealed
Admire poise
Admire poise
Avoid hugs, broad

Avoid hugs, broad
smiles and broad
smiles and broad
gestures
gestures
Monotone
Monotone
Affective
Affective
Openly reveal
Openly reveal
emotions
emotions
Expressive
Expressive
Animated
Animated
expressions
expressions
Touching, and
Touching, and
broad gestures
broad gestures
admired
admired
Expression and
Expression and
emotion
emotion
607
Diffuse (High context)
Diffuse (High context)
/Specific (low context)
/Specific (low context)
Diffuse (high context) Diffuse (high context)
Indirect Indirect
Evasive, tactful, Evasive, tactful,

ambiguous ambiguous
Context more Context more

important than words important than words
Highly situational Highly situational

morality morality
Prefer neutral Prefer neutral

expressiveness expressiveness
Report conclusions at Report conclusions at

end end
Specific (low Specific (low
context) context)
Direct, to the Direct, to the

point point
Precise, blu8nt Precise, blu8nt
Words more Words more

important than important than
context context
Consistent moral Consistent moral

stands regardless stands regardless
of circumstances of circumstances
Prefer animated Prefer animated

expression expression
Report Report
conclusions and conclusions and
important points important points
first first
608
Cultural Dimensions Summary
Cultural Dimensions Summary
Power Distance how should the

Power Distance how should the
boss act
boss act
Uncertainty Avoidance rules or

Uncertainty Avoidance rules or
common sense
common sense
Masculine/Feminine material
Masculine/Feminine material
rewards or quality of life
rewards or quality of life
Individualism/Collectivism I
Individualism/Collectivism I
versus we
versus we
Universalistic/Particularistic
Universalistic/Particularistic
treat all equally versus do favors
treat all equally versus do favors
for friends
for friends
609
Cultural Dimensions
Cultural Dimensions
Summary
Summary
Achievement/Ascription respect for

Achievement/Ascription respect for
what you do or respect for who you
what you do or respect for who you
are
are
Locus of Control I am in control of

Locus of Control I am in control of
my destiny versus outside forces are
my destiny versus outside forces are
in control
in control
Neutral/Affective hide versus

Neutral/Affective hide versus
display emotions
display emotions
Diffuse/Specific (high/low context)

Diffuse/Specific (high/low context)
indirect versus direct communication
indirect versus direct communication
Session
Session
Business & International
Business & International
management
management
611
Introduction
Introduction
Business definition as
Business definition as
strategy
strategy
content
content
:
:
It describes which customers the firm will

It describes which customers the firm will
serve, what products/services will be
serve, what products/services will be
offered, and what technologies the firm
offered, and what technologies the firm
will employ.
will employ.
Business definition is also a

Business definition is also a
strategy
strategy
process
process
:
:
The process by which the firm selects its

The process by which the firm selects its
position in its industry environment.
position in its industry environment.
612
Introduction (cont.)
Introduction (cont.)
Major challenge associated with

Major challenge associated with
business definition:
business definition:
Requires an on-going process of

Requires an on-going process of
redefinition.
redefinition.
Over time, industry changes occur -- shifts in Over time, industry changes occur -- shifts in
customer demographics and preferences. customer demographics and preferences.
Diversified businesses need to define

Diversified businesses need to define
each of their different businesses.
each of their different businesses.
613
Business Definition as a
Creative Process
Creative Process
Five characteristics of the business

Five characteristics of the business
definition process:
definition process:
1. It is fundamentally a
1. It is fundamentally a
creative
creative
process.
process.
Few business schools offer courses in Few business schools offer courses in
creativity. creativity.
Business world seeks to quantify everything. Business world seeks to quantify everything.
Creative process is not well-understood. Creative process is not well-understood.
Rollo May: Rollo May: Need for creativity is in direct Need for creativity is in direct
proportion to degree of change the proportion to degree of change the
profession is undergoing profession is undergoing. .
614
Creative Process
Creative Process
(cont.)
(cont.)
2. Effective business definitions
2. Effective business definitions
rarely emerge without an
rarely emerge without an
extensive
extensive
knowledge
knowledge
of the competitive
of the competitive
landscape.
landscape.
Rarely the result of luck or whims -- instead, Rarely the result of luck or whims -- instead,
are outcome of expertise and hard work. are outcome of expertise and hard work.
Examples: Head skis, Goodyears vulcanized Examples: Head skis, Goodyears vulcanized
rubber, and PC products from Wozniak and rubber, and PC products from Wozniak and
Jobs. Jobs.
615
Creative Process
Creative Process
(cont.)
(cont.)
3. Effective business definition will
3. Effective business definition will
not only answer the Who, What,
not only answer the Who, What,
and How questions, but it will also
and How questions, but it will also
be much
be much
more creative and unique
more creative and unique

than any corporate mission
than any corporate mission
statement.
statement.
Truly distinctive definitions unlikely to Truly distinctive definitions unlikely to

emerge from committees. emerge from committees.
Usually the inspiration of a key entrepreneurial Usually the inspiration of a key entrepreneurial
thinker. thinker.
616
Creative Process
Creative Process
(cont.)
(cont.)
4. The business definition process
4. The business definition process
implies that firms will
implies that firms will
engage in
engage in
some activities and not engage in
some activities and not engage in
others
others
.
.
Business definitions can sometimes result Business definitions can sometimes result
from not deciding or maintaining the status from not deciding or maintaining the status
quo. quo.
However, most business definitions are However, most business definitions are
redefined over time in order to maintain redefined over time in order to maintain
alignment with the larger competitive alignment with the larger competitive
environment. environment.
Example of Ziebart evolving from rustproofing to Example of Ziebart evolving from rustproofing to
supplying window tinting, sunroof installations, supplying window tinting, sunroof installations,
auto detailing, and security systems. auto detailing, and security systems.
617
Creative Process
Creative Process
(cont.)
(cont.)
5. Final characteristic of business
5. Final characteristic of business
definition process is its
definition process is its
fleeting
fleeting
nature
nature
.
.
Many business definitions quickly become Many business definitions quickly become
dated or irrelevant due to changes in dated or irrelevant due to changes in
competitive environment or actions by competitive environment or actions by
managers. managers.
Examples: transistor technology vs. vacuum Examples: transistor technology vs. vacuum
tubes and Coors national marketing strategy vs. tubes and Coors national marketing strategy vs.
their previous Rocky Mountain area focus. their previous Rocky Mountain area focus.
618
Business Definition and
Competitive Advantage
Business definition
Business definition
positions
positions
a
a
firm or business in its competitive
firm or business in its competitive
space or industry environment.
space or industry environment.
Almost all industries have various

Almost all industries have various
strategic groups -- groups of firms
strategic groups -- groups of firms
pursuing similar strategies.
pursuing similar strategies.
In brewing industry, Anheuser-Busch, Miller, In brewing industry, Anheuser-Busch, Miller,

and Coors all pursue national strategies. and Coors all pursue national strategies.
Microbreweries serve only small, local markets. Microbreweries serve only small, local markets.
Examples of effective definition and

Examples of effective definition and
positioning: Smucker jams and jellies,
positioning: Smucker jams and jellies,
and Gerber baby food.
and Gerber baby food.
Both aggressively defend against imitators. Both aggressively defend against imitators.
619

(cont.)
(cont.)
Business definition helps to focus

Business definition helps to focus
management attention on the firms
management attention on the firms
key objectives, the firms most
key objectives, the firms most
significant strategic issues, and the
significant strategic issues, and the
firms most important rivals.
firms most important rivals.
Where are we now? Where are we

Where are we now? Where are we
taking the business?
taking the business?
How are we going to position our

How are we going to position our
business vis--vis the competition and
business vis--vis the competition and
the marketplace?
the marketplace?
620

(cont.)
(cont.)
Business definition influences other

Business definition influences other
strategic decisions.
strategic decisions.
Usually precedes other strategic

Usually precedes other strategic
decisions.
decisions.
Example of Williams Companies and their Example of Williams Companies and their
decision to enter fiber optic cable business. decision to enter fiber optic cable business.
621

(cont.)
(cont.)
Business definition provides meaning

Business definition provides meaning
and can be very motivational.
and can be very motivational.
Firms that have strong business

Firms that have strong business
definitions (vision statement or
definitions (vision statement or
organizational identity) provide
organizational identity) provide
employees with sense of meaning,
employees with sense of meaning,
purpose, and excitement.
purpose, and excitement.
Can be more tangible and motivational than Can be more tangible and motivational than
financial objectives. financial objectives.
Motorolas quality improvements, HPs technical Motorolas quality improvements, HPs technical
contributions, and Nordstroms exemplary contributions, and Nordstroms exemplary
customer service. customer service.
622
General Motors in 1921

General Motors in 1921
Had 7 different car lines that lacked

Had 7 different car lines that lacked
clear identities and vigorously competed
clear identities and vigorously competed
against each other.
against each other.
CEO Sloan decided that each GM car line CEO Sloan decided that each GM car line
should serve different, but overlapping price should serve different, but overlapping price
points points (see illustration on following slide). (see illustration on following slide).
Illustrations of Effective
Illustrations of Effective
Business Definitions
623
Characteristics of Effective
Characteristics of Effective
Distinctiveness
Distinctiveness
Can be competitive advantage if firms

Can be competitive advantage if firms
business definitions are not only unique,
business definitions are not only unique,
but also difficult for competitors to
but also difficult for competitors to
imitate.
imitate.
Timely and appropriate given the

Timely and appropriate given the
industry environment.
industry environment.
Must continually redefine your business.

Must continually redefine your business.
Clear and readily understandable.

Clear and readily understandable.
Smuckers labels let customers know that

Smuckers labels let customers know that
they are purchasing a high-quality
they are purchasing a high-quality
product.
product.
624
1. 1. Globalization of Economic Activities Globalization of Economic Activities
2. 2. Institutional Environment of International Institutional Environment of International
Business Business
3. 3. Business Risks from a New Institutional Business Risks from a New Institutional
Economics Perspective Economics Perspective
4 4. . Multinational Corporations Multinational Corporations
5. Entering Foreign Markets: Choosing the 5. Entering Foreign Markets: Choosing the
Organizational Form Organizational Form
6. External Growth Strategies 6. External Growth Strategies
7. 7. International HR Management International HR Management
8. 8. Cross-Cultural Business Negotiations Cross-Cultural Business Negotiations
9. 9. Project: The Ruritanian Electronics Project: The Ruritanian Electronics
Negotiation Negotiation
625
The Theory of Absolute Advantage
Adam Smith [1776]
The Theory of Comparative Advantage
David Ricardo [1819]
The Theory of Factor Proportions
Eli Heckscher and Bertil Ohlin
The Competitive Advantage of Nations
Michael Porter
1. Globalization of Economic Activities
(Czinkota/Ronkainen/Moffett (2000), International Business. Update 2000, Fort Worth et al., p. 156.)
626
What motivates companies to expand
their operations internationally?
Proactive Motives
[firm-initiated strategic
change]
Reactive Motives
[firms response and adoption
to changes imposed by outside
environment]
Profit advantage

Competitive pressures
Unique products

Overproduction
Technological advantage

Declining domestic sales
Exclusive information (Ongoing!)
Excess capacity
Managerial commitment

Saturated domestic
markets
Tax benefit

Proximity to customers
and ports
627
What drives Globalization?
A Technological Triggers
B Institutional Triggers
628
Hill, C. W. L. (2000): International Business, 3thd ed., Boston et al.
A. Technological Triggers
Transport

goods
raw material
humans
Information and

Communication
Technology
information
know-how
monitoring control
629
Hill, C. W. L. (2000): International Business, 3thd ed., Boston et al.
ad B. Institutional Triggers
Legal changes

e. g. declining trade and investment
barriers
- less protectionism (tariffs, subsidies,
regulations or quotas), because of
WTO, ETC
- less capital restrictions
Political changes
revolutions,
new governments,
wars
...
Consumer tastes
changing preferences and tastes;

growing acceptance of standardized
- consumer electronic goods,
- automobiles,
- computers,
- calculators
growing individualization
630
2. Institutional Environment of International Business
Three layers of analysis
[Cf. Williamson (1996), The institutions and governance of economic development and reform, in: Williamson, O. E. (1996),
The mechanisms of governance, New York, p. 326.]
Institutional
Framework
Contractual
Governance
Individual
Behavioral
Attributes
Shift
Parameters
Strategic
Endogenous
Preferences
Framework effects
The same management tools
might induce different effects in
different environments.
Behavioral expectations can
vary much more when crossing
framework borders.
631
[cf. Klein, P. G. (2000), The New Institutional Economics, p. 3, http://encyclo.findlaw.com/0530book.pdf, pp. 458 ff.;
cf. Wolff, B. (1999): Anreizkompatible Reorganisation von Unternehmen, Stuttgart, p. 197 ff.]
refers to the
background constraints,
or rules of the game
Institutional
Environment
formal, explicit
rules
informal, often
implicit rules
e.g.
constitutions,
laws
e.g.
social
conventions,
norms
The institutional environment forms the framework in which human action
takes place. It defines property rights and how they can be transferred.
Explicit Institutional Environment
632
2. Institutional Environment of International Business
Institutional
Environment
formal, explicit
rules
informal, often
implicit rules
solves problems of
coordination and
motivation by altering the
payoff structure in each
game
solves problems of
coordination and
motivation by repeating
the game (social rewards
and sanctions)
Formal rules and informal rules are not necessarily substitutes, but complements.
They influence each other.
dominant
principle
2.2 Implicit Institutional Environment
633
Multinational corporation
What exactly is a Multinational Corporation?
- enterprises that own or control production or service facilities outside the
country in which they are based (United Nations in Czinkota et al.: 395)
quantitative criteria

- must have operations in at least two
countries (sometimes subsidiaries in
even 6 or more countries are required)
- proportion of overall revenue generated
abroad: 25-30 percent is most often cited
- involvement in foreign markets should be
substantial enough to make a difference
in decision making or
- the owners of the corporation must be of
several nationalities
qualitative criteria

- management must consider the firm as
multinational and must act accordingly
(view their domestic operations as part of
worldwide operations)
- ...
634
Alternative Modes of Foreign Entry
Alternative Modes of Foreign Market Entry
Internal strategies: Using your own assets
1. Exporting
2. Licensing
3. Franchising
4. Joint Ventures
5. Sales Office
6. Production Plant
7. Full Scale Subsidiaries
8. Turnkey contracts
External strategies: Combining your and your partners assets
Corporate Networks
Strategic Alliances ( International Management II)
Reference: Hill (2000)
FAQS,
FAQS,
636
Questions
Questions
Q1 What is Merchandising? Q1 What is Merchandising?
Activities involved in acquiring particular goods and/or services and making them available at the Activities involved in acquiring particular goods and/or services and making them available at the
places, times, and prices and in the quantity that enable a retailer to reach its goals. places, times, and prices and in the quantity that enable a retailer to reach its goals.
Q2 What IS Micro merchandising? Q2 What IS Micro merchandising?
Retailer adjusts shelf-space allocations to respond to customer and other differences among local Retailer adjusts shelf-space allocations to respond to customer and other differences among local
markets markets
Q3What is Cross merchandising? Q3What is Cross merchandising?
Retailers carry complementary goods and services to encourage shoppers to buy more Retailers carry complementary goods and services to encourage shoppers to buy more
Q4 What are the different factors considered while devising a merchandising plan? Q4 What are the different factors considered while devising a merchandising plan?
Forecast Forecast
Allocation Allocation
Timing Timing
Brands Brands
Assortment Assortment
Innovativeness Innovativeness
Q5 What are the different types of merchandising? Q5 What are the different types of merchandising?
Staple merchandise Staple merchandise
Assortment merchandise Assortment merchandise
Fashion merchandise Fashion merchandise
Seasonal merchandise Seasonal merchandise
Fad merchandise Fad merchandise
637
Questions
Questions
Q6 What is Retail Information System ? Q6 What is Retail Information System ?
Anticipates the information needs of retail managers Anticipates the information needs of retail managers
Collects, organizes, and stores relevant data on a continuous basis Collects, organizes, and stores relevant data on a continuous basis
Directs the flow of information to the proper decision makers Directs the flow of information to the proper decision makers
Q7 What does supplier need to know from Retailer and customer? Q7 What does supplier need to know from Retailer and customer?
From the Retailer, Estimates of category sales From the Retailer, Estimates of category sales
Inventory turnover rates, Feedback on competitors Inventory turnover rates, Feedback on competitors
Level of customer returns, From the Customer Level of customer returns, From the Customer
Attitudes toward styles and models Attitudes toward styles and models
Extent of brand loyalty, Willingness to pay a premium for superior quality Extent of brand loyalty, Willingness to pay a premium for superior quality
Q8 what does Retailer need to know from Supplier and Customer Q8 what does Retailer need to know from Supplier and Customer
From the Supplier, Advance notice of new models and model changes From the Supplier, Advance notice of new models and model changes
Training materials, Sales forecasts Training materials, Sales forecasts
Justifications for price changes, From the Customer Justifications for price changes, From the Customer
Why people shop there Why people shop there
What they like and dislike What they like and dislike
Where else people shop Where else people shop
Q9 What does Customer need to know from Supplier and Retailer? Q9 What does Customer need to know from Supplier and Retailer?
From the Supplier From the Supplier
Assembly and operating instructions Assembly and operating instructions
Extent of warranty coverage Extent of warranty coverage
638
Questions
Questions
Q16 What are the different categories of pricing? Q16 What are the different categories of pricing?
Cost Oriented Pricing Cost Oriented Pricing
Demand Oriented pricing Demand Oriented pricing
Competition oriented pricing Competition oriented pricing
Q17 What are the basic pricing strategies adopted by a retailer? Q17 What are the basic pricing strategies adopted by a retailer?
Customary Pricing Customary Pricing
Everyday Low Pricing Everyday Low Pricing
Variable Pricing Variable Pricing
Yield Management Pricing Yield Management Pricing
One-Price Policy One-Price Policy
Flexible Pricing Flexible Pricing
Contingency Pricing Contingency Pricing
Q18 How can people be managed in Retail Q18 How can people be managed in Retail
Mutual trust Mutual trust
Open communications Open communications
Common goals Common goals
Credible commitments Credible commitments
639
Case Study
Case Study
TRENT - Powered by SAP NetWeaver, mySAP ERP TRENT - Powered by SAP NetWeaver, mySAP ERP
Headquartered at Mumbai, Trent Ltd. was already a successful Headquartered at Mumbai, Trent Ltd. was already a successful
department store enterprise when it decided on a bold department store enterprise when it decided on a bold
move to branch out into hypermarket retailing. move to branch out into hypermarket retailing.
Based on the new model, the hypermarket retailing would Based on the new model, the hypermarket retailing would
require the support of a new kind of IT infrastructure. For require the support of a new kind of IT infrastructure. For
this they searched and evaluated several players in the this they searched and evaluated several players in the
market and finally Trent tapped SAP solutions. market and finally Trent tapped SAP solutions.
We evaluated several vendors, and only SAP met all We evaluated several vendors, and only SAP met all
our criteria. Said Mr. K.V.S. Seshasai, Head of IT our criteria. Said Mr. K.V.S. Seshasai, Head of IT
and Corporate Quality, Trent Ltd. Trent is the part of and Corporate Quality, Trent Ltd. Trent is the part of
the Tata Group, one of India's largest and most the Tata Group, one of India's largest and most
respected business conglomerates. Trent already respected business conglomerates. Trent already
had 12 Westside department stores focused on had 12 Westside department stores focused on
fashion retailing that were operating across India. fashion retailing that were operating across India.
However, in October 2004, the company launched its However, in October 2004, the company launched its
first hypermarket discount format store, Star India first hypermarket discount format store, Star India
Bazaar Bazaar
640
Case Study
Case Study
Star India bazaar, being a Greenfield project, Trent had the enviable advantage Star India bazaar, being a Greenfield project, Trent had the enviable advantage
of starting from scratch, with no outdated legacy systems or applications of starting from scratch, with no outdated legacy systems or applications
that had to be upgraded or integrated into the new infrastructure. They that had to be upgraded or integrated into the new infrastructure. They
envisioned creating a state-of-the-art, integrated IT infrastructure that envisioned creating a state-of-the-art, integrated IT infrastructure that
incorporated the latest in best practices. incorporated the latest in best practices.
Why SAP Solutions: Why SAP Solutions:
The flexible state-of-the-art solution incorporates retail best practices. The flexible state-of-the-art solution incorporates retail best practices.
SAP's partner relationship with Tata Consultancy Services (TCS) guaranteed SAP's partner relationship with Tata Consultancy Services (TCS) guaranteed
high levels of support. high levels of support.
The SAP solutions could be localized to meet special country requirements. The SAP solutions could be localized to meet special country requirements.
Trent finally decided to go ahead with a host solutions from SAP including, Trent finally decided to go ahead with a host solutions from SAP including,
mySAP ERP; SAP for Retail solution portfolio; SAP NetWeaver platform, mySAP ERP; SAP for Retail solution portfolio; SAP NetWeaver platform,
including the SAP NetWeaver Business Intelligence and SAP NetWeaver including the SAP NetWeaver Business Intelligence and SAP NetWeaver
Application Server components and the SAP NetWeaver Portal component Application Server components and the SAP NetWeaver Portal component
with knowledge management functionalities. A small, separate, point-of-sale with knowledge management functionalities. A small, separate, point-of-sale
(POS) system between the store and Trent's headquarters office was also to (POS) system between the store and Trent's headquarters office was also to
be implemented be implemented
Key Business Process: Key Business Process:
Trent is already realizing benefits from the infrastructure. There are some Trent is already realizing benefits from the infrastructure. There are some
specific advantages that we are already enjoying. For example, we are specific advantages that we are already enjoying. For example, we are
making good use of SAP NetWeaver BI analytic and data warehouse making good use of SAP NetWeaver BI analytic and data warehouse
functionalities, which provide an invaluable window into the business, said functionalities, which provide an invaluable window into the business, said
Mr. Seshasai Mr. Seshasai
641
Multiple questions
Multiple questions
__________ is concerned with the acquisition, financing, and management __________ is concerned with the acquisition, financing, and management
of assets with some overall goal in mind. of assets with some overall goal in mind.
Financial management Financial management
Profit maximization Profit maximization
Agency theory Agency theory
Social responsibility Social responsibility

Jensen and Meckling showed that __________ can assure themselves that Jensen and Meckling showed that __________ can assure themselves that
the __________ will make optimal decisions only if appropriate the __________ will make optimal decisions only if appropriate
incentives are given and only if the __________ are monitored. incentives are given and only if the __________ are monitored.
principals; agents; agents principals; agents; agents
agents; principals; principals agents; principals; principals
principals; agents; principals principals; agents; principals
agents; principals; agents agents; principals; agents

__________ is concerned with the maximization of a firm's earnings after __________ is concerned with the maximization of a firm's earnings after
taxes. taxes.
Shareholder wealth maximization Shareholder wealth maximization
Stakeholder maximization Stakeholder maximization
EPS maximization EPS maximization

What is the most appropriate goal of the firm? What is the most appropriate goal of the firm?
Shareholder wealth maximization. Shareholder wealth maximization.
Profit maximization. Profit maximization.
Stakeholder maximization. Stakeholder maximization.
EPS maximization. EPS maximization.

Which of the following statements is correct regarding profit maximization Which of the following statements is correct regarding profit maximization
as the primary goal of the firm? as the primary goal of the firm?
Profit maximization considers the firm's risk level. Profit maximization considers the firm's risk level.
Profit maximization will not lead to increasing short-term profits at the Profit maximization will not lead to increasing short-term profits at the
expense of lowering expected future profits. expense of lowering expected future profits.
Profit maximization does consider the impact on individual shareholder's Profit maximization does consider the impact on individual shareholder's
EPS. EPS.
Profit maximization is concerned more with maximizing net income than Profit maximization is concerned more with maximizing net income than
the stock price. the stock price.

__________ is concerned with the branch of economics relating the __________ is concerned with the branch of economics relating the
behavior of principals and their agents. behavior of principals and their agents.

A concept that implies that the firm should consider issues such as A concept that implies that the firm should consider issues such as
protecting the consumer, paying fair wages, maintaining fair hiring protecting the consumer, paying fair wages, maintaining fair hiring
practices, supporting education, and considering environmental practices, supporting education, and considering environmental
issues. issues.

Which of the following is not normally a responsibility of the treasurer of Which of the following is not normally a responsibility of the treasurer of
the modern corporation but rather the controller? the modern corporation but rather the controller?
Budgets and forecasts Budgets and forecasts
Asset management Asset management
Investment management Investment management
Financing management Financing management

642
Multiple questions
Multiple questions
The __________ decision involves determining the appropriate make-up of The __________ decision involves determining the appropriate make-up of
the right-hand side of the balance sheet. the right-hand side of the balance sheet.
asset management asset management
financing financing
investment investment
capital budgeting capital budgeting

To whom does the Treasurer most likely report? To whom does the Treasurer most likely report?
Chief Financial Officer. Chief Financial Officer.
Vice President of Operations. Vice President of Operations.
Chief Executive Officer. Chief Executive Officer.
Board of Directors. Board of Directors.

The authors of your textbook suggest that you need to understand The authors of your textbook suggest that you need to understand
financial management even if you have no intention of becoming a financial management even if you have no intention of becoming a
financial manager. One reason is that the successful manager of financial manager. One reason is that the successful manager of
the not-too-distant future will need to be much more of a __________ the not-too-distant future will need to be much more of a __________
who has the knowledge and ability to move not just vertically who has the knowledge and ability to move not just vertically
within an organization but horizontally as well. Developing within an organization but horizontally as well. Developing
__________ will be the rule, not the exception. __________ will be the rule, not the exception.
specialist; specialties specialist; specialties
generalist; general business skills generalist; general business skills
technician; quantitative skills technician; quantitative skills
team player; cross-functional capabilities team player; cross-functional capabilities

The __________ decision involves a determination of the total amount of The __________ decision involves a determination of the total amount of
assets needed, the composition of the assets, and whether any assets needed, the composition of the assets, and whether any
assets need to be reduced, eliminated, or replaced. assets need to be reduced, eliminated, or replaced.
financing financing
How are earnings per share calculated? How are earnings per share calculated?
Use the income statement to determine earnings after taxes (net Use the income statement to determine earnings after taxes (net
income) and divide by the previous period's earnings after taxes. income) and divide by the previous period's earnings after taxes.
Then subtract 1 from the previously calculated value. Then subtract 1 from the previously calculated value.
income) and divide by the number of common shares outstanding. income) and divide by the number of common shares outstanding.
income) and divide by the number of common and preferred shares income) and divide by the number of common and preferred shares
outstanding. outstanding.
income) and divide by the forecasted period's earnings after taxes. income) and divide by the forecasted period's earnings after taxes.
Then subtract 1 from the previously calculated value. Then subtract 1 from the previously calculated value.

According to the text's authors, what is the most important of the three According to the text's authors, what is the most important of the three
financial management decisions? financial management decisions?
Asset management decision. Asset management decision.
Financing decision. Financing decision.
Investment decision. Investment decision.
Accounting decision. Accounting decision.

The __________ decision involves efficiently managing the assets on the The __________ decision involves efficiently managing the assets on the
balance sheet on a day-to-day basis, especially current assets. balance sheet on a day-to-day basis, especially current assets.
financing financing

Which of the following is not a perquisite (perk)? Which of the following is not a perquisite (perk)?
Company-provided automobile. Company-provided automobile.
Expensive office. Expensive office.
Salary. Salary.
Country club membership. Country club membership.

643
Multiple questions
Multiple questions
Which of the following is not a perquisite (perk)? Which of the following is not a perquisite (perk)?
Company-provided automobile. Company-provided automobile.
Expensive office. Expensive office.
Salary. Salary.
Country club membership. Country club membership.

Which of the following is not normally a responsibility of the controller of Which of the following is not normally a responsibility of the controller of
the modern corporation? the modern corporation?
Budgets and forecasts. Budgets and forecasts.
Asset management. Asset management.
Financial reporting to the IRS. Financial reporting to the IRS.
Cost accounting. Cost accounting.

All constituencies with a stake in the fortunes of the company are known All constituencies with a stake in the fortunes of the company are known
as __________. as __________.
shareholders shareholders
stakeholders stakeholders
creditors creditors
customers customers

Which of the following statements is not correct regarding earnings per Which of the following statements is not correct regarding earnings per
share (EPS) maximization as the primary goal of the firm? share (EPS) maximization as the primary goal of the firm?
EPS maximization ignores the firm's risk level. EPS maximization ignores the firm's risk level.
EPS maximization does not specify the timing or duration of expected EPS maximization does not specify the timing or duration of expected
EPS. EPS.
EPS maximization naturally requires all earnings to be retained. EPS maximization naturally requires all earnings to be retained.
EPS maximization is concerned with maximizing net income. EPS maximization is concerned with maximizing net income.

__________ is concerned with the maximization of a firm's stock price. __________ is concerned with the maximization of a firm's stock price.
Shareholder wealth maximization Shareholder wealth maximization
Stakeholder welfare maximization Stakeholder welfare maximization
EPS maximization EPS maximization

Answers
Answers
1a, 2a, 3b, 4c, 5d, 6c, 7a 8d , 1a, 2a, 3b, 4c, 5d, 6c, 7a 8d ,
9a,10d, 9a,10d,
11a, 12d, 13a, 14c, 15a, 16b, 11a, 12d, 13a, 14c, 15a, 16b,
17b, 18a, 19c, 20d. 17b, 18a, 19c, 20d.

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Retail

Overview of Retailing Environment Overview of Retailing Environment

Retailing, Definition and Concept Retailing, Definition and Concept

Functions of Retailing Functions of Retailing

Driving Forces for Retailing Driving Forces for Retailing

Building and Sustaining Relationships Building and Sustaining Relationships

Strategic Planning Strategic Planning

Structural Change Structural Change

Type of Retail Outlets Type of Retail Outlets

Market Structure Market Structure

Focusing on the Consumer Focusing on the Consumer

Mapping Out Society Mapping Out Society

Key points are:

Provides to the end users Provides to the end users

For own personal use For own personal use

Several 24-hour retail stores would emerge to cater to consumers.

Strong time Strong time

Team work Team work

Leadership qualities Leadership qualities

Analysis and Analysis and

Numeric skills Numeric skills

Attention to detail Attention to detail

Retailing is the sale of goods and

The retailer does not supply raw material,

The retailer performs the function of

preferable shopping hours.

Retailers are able to balance the

Establishing relationships in a crisis Establishing relationships in a crisis

Pay attention to people. Pay attention to people.

Communicate openly Communicate openly

Appreciate each other Appreciate each other

Extend yourself Extend yourself

Challenge each other to do better Challenge each other to do better

Build relationships one at a time

Be friendly and make a

Ask people questions

Tell people about yourself

Invite people to get involved

Learn about the person's culture

Listen and withhold judgment

Retail marketing plan consists of:

Systematic way of identifying a

Formulation of plans for achieving

Logical sequence of retailing

Hostile and complex retail marketing

External and internal retail organisation

Maximising revenue Maximising revenue

Maximising profit Maximising profit

Maximising return on investment Maximising return on investment

Minimising costs Minimising costs

Each element has conflicting needs

All these variables interact

All these variables result in optimum

Retail management sets goals and

Various units prepare own goals and

Annual plan short term and

Long range three to five years

Strategic plans five to ten years

Current retail marketing position

Strategy for the year

Objectives for the year

Action , budgets and controls.

Coordinating retail activities within