Adopting a Strategic Approach within Retail Organisations

Term Paper 2009 11 Pages

Business economics - Marketing, Corporate Communication, CRM, Market Research, Social Media


Table of Contents

List of Abbreviations

List of Figures and Tables

1 Introduction and Definition of Strategy

2 Advantages to Retail Organisations of Adopting a Strategic Approach

3 Framework for Strategic Decision-Making within an Organisation

4 Conclusion

Reference List

List of Abbreviations

illustration not visible in this excerpt

List of Figures and Tables

Figure 1 The Strategic Management Process

Figure 2 Porter’s Five Forces

Figure 3 Ansoff Matrix

1 Introduction and Definition of Strategy

“Strategy is defined as the determination of the basic long-term goals and objectives of an enterprise” (Chandler, 1990, p. 13).

As the quote by Chandler suggests, strategy is concerned with the alignment of a corporation to the market in order to achieve its long-term targets. Therefore, the adoption of a strategic approach is essential for large organisations (especially retail organisations) as it is fundamental for the development of a company and consequently its success in the long run. With increasing differentiation in product portfolios, notably in the retail industry (e.g. with retailers like Marks & Spencer or Bhs both adding food to an existing non-food offer, or the grocery supermarket chains offering clothing and other merchandise categories) companies are more frequently separating their product range into several corporate divisions, which are also known as independent, market-oriented strategic business units (SBUs). In this strategy (business strategy), the strategy formulation (i.e. how the company can achieve a competitive advantage in each area of business) is carried out by the head of each business segment. The strategic alignment of each business unit is then determined by the top-level corporate strategy, where decisions are made by the upper management. Next to these two areas of strategy formation (i.e. corporate and business unit level), strategy can equally be developed from a functional viewpoint (also known as functional strategy) when making decisions as to which marketing concepts should be used or which capital equipment the company should employ to be flexible and cost-efficient for example. Within this multi-level structure of strategic decision-making there must be a sufficient amount of co-ordination on all three levels (Megicks, 2007, pp. 484-485).

The overall strategic goal of the organisation, as Porter (1980) describes it, is to achieve “a position of sustainable competitive advantage” and therefore differentiate the value a company generates and offers in comparison to its competitors. These activities to achieve a sustainable competitive advantage should fulfil the following criteria: they should (1) be associated to an attribute with value and relate to the targeted customer segment, (2) be sustainable (not easily imitable), as well as (3) be perceived by the customer (Mintzberg, 1996, p. 88).

2 Advantages to Retail Organisations of Adopting a Strategic Approach

The fact that increasing competition in the retail sector, essentially leading to higher costs (especially labour costs), is forcing every retail organisation to reconsider the effectiveness of their strategic development (Harris & Ogbonna, 2001, pp. 157-173). The retail industry, as a relatively mature and oligopolistic sector, can be characterised by overcapacity, price-driven marketing, and a high concentration of firms (Morschett, Swoboda, & Schramm-Klein, 2005, p. 275). These attributes have led to a rather homogenous development of the industry, making it all the more important to establish a consistent strategy in order to be able to differentiate from competitors through effective positioning (Walters & Knee, 1989, p. 74).

The benefits for a firm’s development of adopting a strategic approach are numerous. There are certain characteristics that are usually attributed to the strategic management of a company, which similarly apply to retailing organisations. Firstly, strategies coin the fundamental orientation of a company. Therefore, strategies need to be formulated on the basis of a long-term validity in order to anticipate uncertainties and establish a path for the development of the company. Secondly, strategies can help the organisation to build up a competitive advantage over its competitors and therefore generate long-term success of a company. Beyond that, strategies allow a firm exploit options for future actions by defining the internal and external alignment of resources. Strategies also have inter-divisional significance, which means that strategy formulation cannot be left to few divisions, but needs to be primarily carried out at the top of the hierarchy of management. In summary, the effectiveness of the overall corporate strategy largely determines the long-term success of an organisation and should thus not be underestimated.

Retail organisations may follow complex strategies which require a general framework. The model for strategic decision making as well as some specific retail strategies will be examined in the next chapter.



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University of St Andrews
Strategy Corporate Strategy Retailing UK Retailing Marks & Spencer Bhs Tesco Business Strategy Porter SWOT Analysis Generic Strategy PESTEL Porter's Five Forces Ansoff Matrix Competitive Advantage Value Chain Capabilities Environment




Title: Adopting a Strategic Approach within Retail Organisations