Page 35 - DMGT551_RETAIL_BUSINESS_ENVIRONMENT

Retail Business Environment

Notes 2. Productivity of the organisation
3. New manufacturing processes
4. New products and services of supply chain partners
5. New technology that could impact the company

6. Cost and accessibility of resources such as electrical power, water supply, fuel etc.

The Global Environment

A question fundamental to the discussion of retail globalization asks why retailers follow such
a strategy. Invariably operating in a new market is a high cost and high risk method of growth.
Indeed, it has been suggested, “Global retailing demands huge investment and gives no guarantee
of return” (quoted in Lamey, 1997).

While there are certainly successful global retailers, there are many examples of failure. Failure
is, undoubtedly, the result of a series of complex and interrelated factors.

Growth Strategies

It is assumed that retailers want to grow their company, and then they have three options:
1. From operating their core offer in the home market they may choose to follow a strategy
of sectoral expansion, whereby they move into new formats, retail sectors or even outside
the retail industry.
2. The second growth strategy open to retailers is to remain with the core offer and to
transfer this is that they are experienced in the operation; however, they may need to learn
about and adapt to new market conditions.
3. The third method of growth is to use a combined strategy, whereby a company may move
away from its core offer and also gloablise. Although this may balance the risks somewhat
it may mean the board lose focus. If this strategy is taken to its extreme, the company then
becomes a global portfolio or holding company.

Self Assessment

Fill in the blanks:

1. Simultaneous assessment of the ……………………environment and company profile
enables a firm to identify a range of possibly attractive interactive opportunities.
2. The ……………………the rate of growth and the weaker the competition, the more
attractive the industry.
3. The ……………………………..environment refers to the stage of economic development
of the country like developed or developing, state of agriculture, industry and service
sectors, level of national income, its composition or source-mix.

4. The intensity of competitive rivalry within an industry will affect …………………………of
the industry as a whole.
5. The strength of the threat from new entrants depends on two factors firstly the strength of
the barriers of entry and the likely response of existing ………………………to the new
entrants.

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