Effective retail strategiesBY ARA Retail Institute
What makes a strategy effective?
It guides a business to achieve its desired outcomes. In addition, the path to the desired outcomes is navigated in a streamlined and efficient manner allowing for a feedback loop to monitor and refine implementation, ensuring alignment with objectives and adequate resourcing.
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Alignment with business
The importance of alignment with business throughout the strategic development process would seem an obvious requirement. Yet it is possible as businesses grow and diversify for differing agendas and directives to arise.
This occurs more often than not given the nature of retail as a network of departments and stores over a geographical region that may be city, state or country wide, even global.
To minimise the likelihood of taking actions that conflict or are out of alignment with business directives it is essential for retail leaders to be well versed with current and overarching business directives and have an effective approval process in place to gain endorsement and authorisation for plans. Ideally all business proposals that are part of the strategic planning process should go through a consultation phase that allows for the flagging of potential conflicts and ensures alignment with business mission and directions.
A big picture perspective
Strategy sets the direction and scope for the organisation for the long term.
Successful retailers such as Jeff Bezos of Amazon, and Steve Jobs of Apple have attributed their sector domination at least in part to a compelling vision of the future of their brand. Each of these leading edge retailers make (and made in the case of Steve Jobs) their decisions with their focus squarely on what they wish to achieve in the next five to ten years.
Jeff Bezos was very unpopular with the shareholders of Amazon.com for the first few years of operation as he was focused upon reinvesting in the business, buying out competitors and building relationships that would enable him to dominate the digital space and secure the ideal Amazon.com logistics platform required to become the biggest player in the online market. He knew, and those that have mirrored his business model now know the value in planning for the future you desire and taking steps today to achieve it rather than pursuing short-term gains.
Steve Jobs, possibly the most well-known retail visionary was equally feted and feared over his dogged focus on the future he saw for Apple.
The list of leaders that have navigated their businesses to retail success is long and not without stories of tyrants. Tyrants or not it is focus, clarity and an uncanny ability to read the market and consumer sentiment that allows for such heights of success.
A big picture perspective is a valuable starting point for any retail leader intending to carve a sustainable future for themselves and their business. This is where the dreaming comes into play.
A focus on detail
Unfortunately for the visionaries and dreamers, the big picture is just the starting point.
For any business directives to come to fruition a focus on the detail is required to ascertain how. This is where the business minds come in.
Operational effectiveness and strategy are both essential to superior performance and the realisation of business goals, but they work in very different ways.
Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value, both price and non-price value. The essence of strategy is in the activities, choosing to perform activities differently or to perform activities different from rivals.
Operational effectiveness means performing similar activities better than rivals perform them. It includes but is not limited to efficiency. It refers to any number of practices that allow a company to better utilise its input, such as reducing wastage through better stock management. Differences in operational effectiveness among companies are widespread. Some companies are able to get more out of their inputs than others because they eliminate wasted effort, employ more advanced technology, motivate employees better, or have greater insight into managing particular activities or sets of activities.
“A company can outperform its rivals only if it can establish a difference that it can preserve” -Michael Porter (1996)
This quote succinctly defines what drives retailers to adopt a strategic position. Michael Porter, in addition to providing the quote above states that strategic positions emerge from three distinct sources:
- Based on producing a subset of an industry’s products or services. It is based on the choice of product or service varieties rather than customer segments
- Makes sense when a company can best produce or deliver particular products or services using distinct sets of activities
- Based on servicing most or all of the needs of a particular group of customers. This approach is close to traditional thinking about targeting a particular segment of customers
- Makes sense when there are groups of customers with differing needs, and when a tailored set of activities can serve those needs best. Differences in needs will not translate into meaningful positions unless the best set of activities to satisfy them also differs
- Based on segmenting customers who are accessible in different ways. Access can be a function of customer geography or customer scale – or of anything that requires a different set of activities to reach customers in the best way
- Makes sense when targeting urban vs. rural, serving smaller rather than larger customers, or densely rather than sparsely situated customers
About ARA Retail Institute
ARA Retail Institute is Australia’s leading retail training provider for both accredited and non-accredited learning programs. For more information, please visit: www.retailinstitute.org.au
ABOUT THE AUTHOR
ARA Retail Institute
ARA Retail Institute is Australia’s leading retail training provider for both accredited and non-accredited learning programs. The ARA Retail Institute is a Government Registered Training Organisation (RTO) making it fully qualified to offer retail education programs to ARA members and broader retail industry.