Unit 2

Task 1a: Aims and Objectives

1. You need to select three very different retailers, which all sell different products/services. In order to pass this task, you MUST select different types of retailer. For example, Marks & Spencer and Debenhams have very similar product ranges and appeal to very similar market segments, so would not allow you to make sufficient comparisons. As a starting point, you could select Aldi, Thomas Cook Travel Agents and HSBC bank (remember retailers sell services as well as goods).
   
   
   Remember to make sure your three chosen retail businesses are contrasting - i.e. very different. For example, are FCUK and Hugo Boss too similar? Source: Biz/ed images.
2. Having selected your retailers, you need to carry out research into their strategic aims. You can find this sort of information by accessing company Web sites. When accessing these sites you need to be aware of the distinction between the 'sales' site and the corporate site. The latter will tend to give you information about the company itself and is aimed at potential investors. Many businesses have this type of information under the heading 'investor relations'. You might also try using Biz/ed's Business Profiles section to help you. This contains information on a range of different business organisations. You then need to produce a handbook for new staff explaining:
   • What is a strategic aim?
   • What is an objective?
   • The strategic aims and objectives of each retailer. You should consider:
     • Provision of service - how do they aim to provide customer satisfaction? Is it to do with quality assurance? Provision at or above cost? The provision of goods/services?
     • Breaking-even.
     • Profit maximisation - how does each retail business try to achieve this? Do they aim to cut costs, use retained profits, maximise prices etc?
     • Growth - do they aim to increase their market share? Enter new markets? Diversify? Increase the size of the business by expansion or through a merger or takeover?
     • Business ethics - there are a number of examples where businesses have been accused of exploiting their workforce at home and/or abroad. For example, Primark, Tesco and Asda received some adverse publicity with regard to those working in the textile industry in supplier nations in 2006; Dell Computers faced similar allegations in Brazil. Think about the ethics in relation to suppliers - do they use Fair Trade suppliers, for example? You might consider health and safety and the security of employees and customers. Business ethics might also relate to the reliability of products and services, the maintenance of premises and any legal obligations.

Task 1b: Strategy

You must write a report demonstrating why different retailers have different aims and objectives. You must investigate the history of the retailers, their markets and goods/services sold as well as the changes in fashion and tastes that drive these changes. You must also illustrate how the retailers have changed in response to changes in the target market and the consumer base. For example, Marks & Spencer introduced their Per Una range as a direct response to changing fashions and their expanded organic food range is a response to consumer demand.

You can get some help about Business Strategy by going to Biz/ed's Business strategy PowerPoint presentation. Remember that this information is generic - i.e. it applies to many different types of business. However, you must apply this knowledge to the retail industry.

Task 2: Use of Budgets

A firm often uses budgets to help control financial planning. For one of the firms identified in Task 1, provide a means of explaining the use of budgets at a staff training event. You can create a PowerPoint presentation supported with a handout but any appropriate form of presentation can be used.

You need to:

• Define what budgets are
• Explain the different types of budgets retailers use (e.g. overall business, departmental, sales, marketing)
• Plan a budget
• Explain and show what is meant by variance
• Demonstrate how a retail business might implement corrective action
• Show what is meant by expenditure control

All these need to be explained within the context of the organisation

All businesses need to have some way of planning and monitoring their income and expenditure - that is part of the role of budgeting. Copyright: Jasper Greek Golangco, from stock.xchng.

Task 2b

Produce a guide to managers explaining the importance of budget planning. This must include:

• Why it is necessary
• What it achieves
• The problems of not having a plan

Explain that plans are not rigid and they need to be adjusted with changing circumstances, particularly those beyond the firm's control.

Task 3: Performance Indicators

For all the retailers you chose in Task 1, you need to examine performance indicators used by these retailers to check that they meet their aims and objectives and to measure the results of their business activities.

Write a short report of between 300 - 500 words explaining what performance indicators are, and how they are used by each of the 3 retailers.

These include:

• Turnover
• Profitability
• Direct costs
• Indirect costs
• Share price
• Dividend
• Market share
• Customer numbers
• Growth
• Performance compared with competitors
• Profit centres
• Performance against set targets
• Performance against budgets

You can get some further information about performance monitoring by going to Biz/ed's lesson on Business Performance.

Monitoring performance is vital if targets are to be met and longer term strategic aims are to be achieved. Copyright: Sanja Gjenero, from stock.xchng.

Task 4: Strategy - success or failure?

Select two of the retailers you discussed in Task 1: you are to study them in more depth now. You need to compare their aims and objectives, along with the long-term strategies the two organisations use to achieve these. You need to discuss how successful each retailer has been and the role the strategy has played in their success or failure. You will need to use performance indicators and explain how these show how successful each retailer is.

In your conclusion, you need to explain how budgets and performance can be used to measure business performance.

Task 5: Sales Forecasting

For each of the three retailers you need to explain the factors they have to consider when forecasting sales and how these affect each business. For each company you need to explain how 3 of the factors are used to help forecast sales. These are:

1. Identifying trends using PESTLE (political, economic, social, technological, legal and environmental factors)
2. Seasonal fluctuations e.g. Easter eggs, sporting goods for the football season, clothing
3. Cyclical Fluctuations e.g. booms, recessions
4. Random Fluctuations including inflation, interest rates, consumer confidence and the effects of technology using historic data

Sales forecasting can take many different forms - you need to demonstrate that you are aware of the different methods of sales forecasting in retail organisations as well as the factors that could affect these forecasts.

(You can get some help with business analysis and sales forecasting by looking at this PowerPoint presentation)

You can also get some information on historical data by going to Biz/ed's Key Economic Data

Task 6: External Constraints

Selecting one of the retailers you have studied you need to explain the external factors that will affect their performance. You need to examine the impacts of:

• The Political Environment - you should consider Government and EU Laws and regulations, taxation and import quotas for example.
• Economic factors - the state of the economy, wage levels, unemployment, interest rates, inflation, changes in costs and changes in the global economy, for example, oil prices.
• Social - consumer tastes, demographics, distribution of wealth and fashion.
• Technological - new products and new methods of sellinge, for example, e-commerce.
• Legal - consumer law, employment law and environment law.
• Environmental - packaging and resources, for example, recycling.

The development of e-commerce has changed the way many retailers now operate - for some the challenge presented by competition from e-retailers has been very significant - look at HMV, for example! Copyright: Steve Woods, from stock.xchng.

Task 7: Links between External Constraints and Business Performance

For one of the retailers you have studied, you need to demonstrate how the external environment has affected sales. You must show both direct and indirect effects, for example, a rise in interest rates will reduce consumer spending power but will also increase the costs of the business. You also need to explain the difficulties firms have in predicting the effect of external constraints announced well in advance, for example, new legislation and the changes in fashion and tastes that drive such new legislation. You must also illustrate how the retailers have changed in response to changes in the target market and the consumer base. For example, Marks & Spencer introduced their Per Una range as a direct response to changing fashions and their expanded organic food range is due to consumer demand.

You can get some help on the effect of external influences on business by looking at these PowerPoint presentations:

Economic influences.

Technology and social attitudes.

Legal and political.

Ethics.

Remember that this information is generic - i.e. it applies to many different types of business. However, you must apply this knowledge to the retail industry.

Task 8: The Impact of External Constraints on Two Retailers

You need to write a short report of around 1,000 words evaluating the impact of external constraints on two contrasting retailers. You need to illustrate that these not only affect present performance but also future long-term planning. Long-term plans may be frequently changed in the short-term due to circumstances beyond the control of the retailer.

Even the best laid plans can be affected by circumstances beyond the control of the retailer. What happens when things do not go to plan? How do retailers adjust to cope with unexpected change? Source: Biz/ed images.