Strategic management tools used in the strategic development of wholesale and retail trade enterprise

Enterprise development strategy is the basis for all management systems, as it serves as a guide for making key management decisions relating to the development of future markets, products, organizational structure of business, profitability and the risk profile. Several independent approaches to develop strategy of trading enterprise are used and discussed here. These are SWOT and PEST analyses which are based on analyses of external and internal environments. Also matrix from Ansoff was used to analyse and appropriately meet customer needs.

Formulation of the Problem. Nowadays, to successfully survive in the long term period, the company should be able to predict what difficulties may occur on its way in the future and what new opportunities may come along. Therefore, strategic management studies both internal and external environments to thoroughly identify and find out what threats and opportunities might be fraught in the external environment and what exactly are the strengths and weaknesses of the enterprise.

Formulation of the objectives of the Article (problem). The aim of this study is to better understand and determine the strategic development process and analyzing tools that could be used by trading companies. Here, we suggested using analyses such as SWOT Analyses, PEST Analyses, and Ansoff matrix. To cope with the threats and to effectively use the opportunities it is not enough to have only knowledge about them. You can know about the threat, but not be able to resist it and thus fail. You can also know about the opening of new opportunities, but do not have the capacity to use them and, therefore, not be able to use them. The strengths and weaknesses of the internal environment of commercial enterprise as well as the threats and opportunities, define the conditions for the successful existence of commercial enterprise.

The main material of research with the full justification of scientific results: In modern practice, trading companies' management uses several independent approaches to develop its strategy of commercial enterprise .

One approach is to develop strategies to promote the market, based on the analysis of the external and internal environment: SWOT-analysis, PEST-analysis. Another approach is the method of constructing a matrix from Ansoff to develop a strategy to properly meetcustomer needs. Also commonly used method of estimating competitiveness is developed on the basis of its strategy to ensure and improve the company competitive position. All of these approaches are correct, but are not sufficient to uniquely identify the methodology of strategy development of wholesale and retail businesses.

Activities of wholesale and retail trade enterprise include the following main processes:

  • - Purchase of goods;
  • - Sale of goods.

Therefore, the strategy of development of wholesale and retail enterprises should also include two independent strategies:

  • - Strategy for purchase;
  • - Strategy to promote products on the market.

The operational efficiency of the intermediate sellers is strongly dependent on the sources of wholesale shipments. Good work of suppliers affects the structure of the product range, and in some cases supply conditions determine the direction of the wholesale business. In the modern literature of strategic marketing this issue has not yet studied enough.

The main objectives of the purchase system, as a subsystem of market resources are:

  1. providing an optimal range of products for customers at various levels;
  2. minimization of costs through the purchase of supplies in large quantities, as well as credit providers;
  3. ensuring continuity (risk reduction) of the supply of goods;

g) Provision of information to support manufacturers.

Minimization of costs of received goods for sale forms the basis for the formation of internal competitive advantages, which, in turn, can go to the basis of the development strategy of the company. Considering the strategy as an approach to achieving the goals of the company, you can enter a term in the scientific revolution of the purchasing strategy.

Diversity of supply objectives determine the selection of the set of purchasing strategies, a typology which is offered in Table 2.

The meaning of the marketing strategy is defined as an integral part of marketing, its main concept, covering the theory and practice of preparing, planning and conducting marketing activities which leads to a significant improvement, both in the external and the internal environment of the enterprise [1, p.53].

Strategic marketing is a direct product of (and illustration) of the total marketing "choice" of commercial enterprise and is primarily analytical, focused on long-term process which consists in the constant analysis of needs and the formation of assortment policy for the recognition of the consumer and the sustainable competitive advantage of commercial enterprise.

Marketing strategy, according to A. Weissman, a "fundamental, medium or long-term solutions that provide guidance and guide individual activities to achieve its marketing goals" [2, p.215].

To successfully survive in the long term period, the company should be able to predict what difficulties may occur on its way in the future and what new opportunities may come along. Therefore, strategic management studies the environment, focusing on finding out what threats and opportunities might be fraught in the external environment.

In summary, it can be stated that the analysis of the environment, as it is held in strategic management, aims to identify the threats and opportunities that may arise in the external environment to the enterprise as well as strengths and weaknesses, which it has to deal with. To solve this problem, certain methods of analyzing environment were developed and are used in strategic management.

One of the most effective tools used in strategic marketing, is the Ansoff matrix (matrix of growth of goods-market), an analytical tool for strategic planning, allowing you to select one of the possible strategies for the development of typical commercial enterprise in the market.

The idea of the matrix is that, there must be a relationship between the current and future commercial enterprise products and markets in which it operates. Any industry suggests a wide selection of products from which you can configure your product range and

markets in which it can work, so the company has a large variety of growth areas. The company needs to determine its current position in the industry and to choose the direction of their growth, which would provide a competitive advantage in the future for it.

Thus, the strategy of commercial enterprise shall be determined by three main factors:

  1. Existing state as a set of products and markets in which it operates and is currently trading;
  2. Growth vector that defines the direction of the development of commercial enterprise on the basis of its current situation;
  3. Competitive advantage - key features of existing and future products and markets that can provide the company a strong competitive position.

Selection and implementation of the development strategy of a trading enterprise should be carried out under the policy of the company, based on a combination of knowledge and ideas about the state and prospects of trade. Regional market of sanitary ware seems to be an aggregate category, encompassing a complex set of objects of sharing sanitary goods that are of real interest to the various market participants, who act as subjects of the market environment.

Since the problems that play role in the selection of strategy can occur depending on various situations, in general they have general character and features. Therefore in various productions, while retaining the general features, the development of suitable methods and approaches for their analysis and solutions with general characters can be eliminated. This elimination has no need to develop a sequence of steps behavior of commercial enterprise for each specific market situation.

By analyzing the problems encountered in the process of developing strategy, it is possible to identify their similarities and based on their study; develop a methodical system to deal with them.

The development strategy of the trading company is determined through mutual change (development) of enterprise products and markets to meet their needs. The tool of choice of this strategy is the Ansoff matrix.

Ansoff matrix is a square formed by two axes:

The horizontal axis of the matrix - the products of commercial enterprise, which are divided into existing and new;

The vertical axis of the matrix - the markets of commercial enterprise, which are also divided into existing and new.

At the intersection of the two axes there is a form of four quadrants (Figure 3):

Let us consider all four quadrants of the matrix Ansoff.

1. Strategy of market penetration (existing product - the existing market). Increase market penetration - is a simple and most obvious strategy for most businesses. They are already present in the market and their main goal is to increase sales.

The main tool in the market penetration is the act of increasing the competitiveness of products, so that the main focus of this strategy should be aimed at improving the efficiency of business processes, thereby making it possible to increase the consumption of products by existing customers and attract new customers.

Possible sources of growth can be:

  • - Increase market share;
  • - Increasing the frequency of use of the product (including the expense of loyalty programs);
  • - Increase in the amount of use of the product;
  • - The discovery of new applications and usage for existing consumers.

2. Strategy for market expansion (existing product - a new market). This strategy is the second possible solution, in which traders are trying to adapt their existing products to new markets. For this, it is necessary to determine the potential new customers to existing products. Commercial enterprises, whose competence in the field of marketing are effective enough to be a key driving force for development, can successfully go this route due to:

  • - Geographic market expansion;
  • - The use of new distribution channels;
  • - Search for new market segments, which are not yet users of this product group.

The strategy of product development (new product - the existing market). A third possible way for growth is a proposal of products with characteristics that have been updated in such a way to improve their market relevance on the existing market. This way is the most preferable for those companies whose core competencies lie in the areas of technology and technological development. Opportunities for growth are based on:

  • - The addition of new product features or of the product with high quality, including repositioning of the product;
  • - Expansion of the product line (including new options of use for existing products);
  • - Development of a new generation of products;
  • - Development of new products.

Diversification strategy (new product - a new market). End of the possible strategies is the most risky for commercial enterprise, as it implies access to an entirely new market. Such choice is justified in cases where:

  • - The company does not see the opportunities to achieve their goals, while remaining within the first three strategies;
  • - New activity promises to be much more profitable than the existing development;
  • - When there is insufficient information to be sure of the stability of the existing business;
  • - Develop a new approach that does not require major investment.

Based on the above listed explanations, each of these basic strategies requires certain economic resources and certain administrative actions.

Also in strategic management in the process of defining a strategy for further development of commercial enterprise uses SWOT-analysis in the market.

Used for environmental analysis SWOT method is quite widely accepted approach that allows you to conduct a joint study of the external and internal environment. Application of the SWOT method is possible to establish the link between the strength and the weakness inherent in the enterprise, and external threats and opportunities [3, p. 90].

The analysis begins with the identification of sources of strength and competitive advantage of commercial enterprise. Strength - this is what the company is doing well, or characteristic that enhances its competitiveness. Among the strengths of commercial enterprise, as a rule, include:

  • - Large physical assets;
  • - Highly qualified personnel;
  • - Good organization and logistics;
  • - Alliance or cooperative enterprises;
  • - Unique intangible assets;
  • - Key competencies and know-how;
  • - Significant competitive advantages;
  • - Other attributes that provide the company a dominant position in the market [4, p. 59].

Often the strengths of commercial enterprise are discovered as a result of an internal strategic analysis and evaluation of the strategic potential.

In parallel with the identification of the strengths of the commercial enterprise, the weaknesses and competitive disadvantages are also identified. Weakness - it is the lacks or limitations which worsen its position relative to competitors. Sources of weakness in the business tend to be associated with:

  • - Lack of innovation or expertise and competence;
  • - Shortage of material, organizational, or intangible assets;
  • - The loss of capacity in key areas.

Another aspect of the SWOT-analysis is the external environment in terms of its impact on the company. Therefore, when the market is analyzed, the opportunities of commercial enterprise are identified. Opportunities - are the favorable conditions for the commercial enterprise and which environmental factors increase its competitive position or weaken the position of the main competitors. Market opportunities often provide the company with the best prospect for longterm increase in profits, sustainable competitive advantage, sources of financial and organizational advantages. Favorable opportunities for commercial enterprise not only occur in the economy, but may be related to the political, legal, social and other developments in the region, the country and globally.

Along with the opportunities in the external environment, there are also factors that negatively affect the strategic position of commercial enterprise. These factors are called external threats. They also identified during the SWOT-analysis. These usually include:

  • - The emergence of cheaper or better technologies;
  • - Bring in products with improved properties by competitors;
  • -Increasing competitive pressure from either side; -Increased government regulation and control activities;
  • -Increasing efficiency ratios in the industry;
  • - Potentially hostile merger;
  • - Unfavorable demographic shifts in the region;
  • - Unfavorable foreign exchange rates dynamics;
  • - Political upheaval in the country, and others [5, p. 80].

Once compiled a list of specific strengths and weaknesses of commercial enterprise, as well as threats and opportunities, comes the stage of establishing links between them. And for the purpose of establishing these links the SWOT matrix is created.

It is have to be remembered that when formulating the strategy, the opportunities and threats can be transformed into its opposites. Thus, the unused capability can become a threat if it uses a competitor. Or vice versa, the prevention of threats can create a commercial enterprise with an extra strong side in case competitors have not eliminated its threat too.

For a successful application of the SWOT-analysis of commercial enterprise environment, it is important not to be only able to reveal the threats and opportunities, but also to try to assess them in terms of how important it is for the company.

The choice of strategy - is the central point of strategic management. All discussed important preceding stages of strategic management, only provide the foundation for developing the strategy.

Defining the strategy for the commercial enterprise significantly depends on the specific situation in which the enterprise is located. However, there are some common approaches to strategy formulation and some general framework in which to fit the strategy.

The strategic choice is made up of stages of development, debugging and analysis (assessment) strategy. In practice these steps are difficult to separate, as they represent different levels of a single analytical process. However, the content, methodological and information support of these kinds of management activities have their significant features that cannot be ignored and should be viewed separately.

In the first stage (development of strategic alternatives) there are strategies to achieve their goals. It is important to develop the largest possible number of possible alternative strategies, engaging with the work of not only top executives but also middle managers. This allows extending the strategic choice and not missing a potentially better option.

In the second strategy (debugging strategy) stage, the entire diversity is finalized taking into account the developments in the external environment and changes in the internal environment of a trading enterprise. The result is a common strategy, which is then filled with concrete content, and in some functional areas of the enterprise their own private strategies are developed.

In the third stage (analysis/evaluation of the strategy) analyzes of alternatives within the chosen strategy of commercial enterprise and evaluated in terms of meeting the main objectives of the mission and with the existing limited capacity to implement them. As a result, strategies are selected in order to implement the most appropriate one.

Strategic alternatives - is a set of various private strategies, that have achievable strategic goals of commercial enterprise considering all their diversity and restrictions on the use of available resources. Each strategic alternative provides enterprise with different possibilities and is characterized by different inputs and outputs, which ultimately determines the strategic choice of commercial enterprise.

The choice of strategy is influenced by numerous and diverse factors, among the most important of them are as follows (Table 3):

Here, particular attention should be paid on the last three factors. Strong functional areas of commercial enterprise contribute to hastily use of opening new opportunities. Weaknesses require constant management attention in choosing a strategy, its implementation, in order to avoid potential threats and to compete with other commercial enterprises.

Often leaders consciously or intuitively have the experience from merger strategies that were chosen by the company in the past. Experience allows, on the one hand, avoiding repeating past mistakes, but on the other - limits choice.

The time factor in management decisions is important. It can contribute to the success or failure of the enterprise. And that could lead the company to large losses or even bankruptcy [6, p. 19].

Implementation of the strategy is a critical process, as it is the only case which gives desired goals for successful implementation of the strategy. In most of the time, there are cases where traders are not able to implement the chosen strategy. This can happen either because of the incorrect analysis that was carried out and made the wrong conclusions, either because there were unexpected changes in the environment. Often, however, the strategy is not executed because the management cannot properly engage in commercial enterprise available capacity to implement the strategy. This applies in particular to the use of labor potential.

Implementation of the strategy is aimed at achieving the following three objectives presented graphically in Figure 6.

Setting priority administrative tasks is necessary to their relative importance to conform to the strategy that will be implemented by the company. This relates primarily to tasks such as the allocation of resources, the establishment of organizational relations, creation of support systems, etc.

Table 3 - Factors influencing the choice of strategy for the development of commercial enterprises

Factors

The degree of influence

1

2

Type of business and especially the industry in which the company operates.

First of all here is taken into account the level of competition from companies implementing the same or substitute products and delivering it to the same markets.

State of the external environment.

Is it stable or subject to frequent changes? How predictable are these changes?

Goals and values

Nature of the targets set by the company, as well as the values that guide decision-making process for the senior managers or owners of the company.

Risk levels.

Risk is a real factor in viability of the Company. Too high a level of risk can lead to the collapse of the company. Therefore, it is always important for heads of the company to ask the question: what level of risk is acceptable for the enterprise?

The internal structure of the company, its strengths and weaknesses.

The internal structure of the enterprise should be considered with regard to branches and offices in other regions, offices, subsidiaries and affiliates, presented in the form of functional areas.

Experience of implementation of previous strategies.

It is primarily associated with the human factor, the psychology of people and can be both positive and negative.

Time factor.

Even the most perfect strategy, a new technology or a new product will not succeed if they are presented on the market at the late or wrong time.

Note - compiled using the source [6, c.19]

There is also should be noted, that setting relative ties between the chosen strategy and internal organizational processes, are needed to guide the activities of commercial enterprise to implement the chosen strategy. Compliance must be achieved in these characteristics of commercial enterprise; its structure, the system of motivation and incentives, norms and rules of behavior, shared values and beliefs, qualification of employees and managers, etc.

Figure 6 - Management decisions in the implementation of the development strategy of a trading enterprise.

Moreover, the ongoing strategy must be chosen in harmonization with leadership style and right approach to the management of a commercial enterprise.

After the implementation of an appropriate strategy is properly controlled, the process is repeated again and again to ensure the continuity of strategic planning.

Formation of strategy of commercial enterprise, in itself, involves the implementation of the strategic planning process that has various aspects. And these aspects will have binary affect, so that it will influence on one hand, and determine the effectiveness of the chosen strategy on the other hand. The difference between the functions of the wholesale and retail trade enterprises, as well as a variety of forms and types of businesses, shows an individual, detailed and complex process of strategy development for each specific company in wholesale and retail trade.

An important feature of the wholesale and retail businesses is a combination of two functions - to engage in wholesale and retail trade. To perform these functions, the company is often obliged to make contradictory decisions. Marketing tools used in the wholesale trade, do not differ from the tools and techniques used in the retail trade. However, in the wholesale marketing has its own specific. Wholesale warehouses sell goods in large quantities is not for the end user, and for subsequent sale. Distribution centers serve large areas, have several features that differ from those of retailers. In particular, they act as an intermediary between manufacturers and retailers, converted product range in the commercial, packaged goods and store them. Marketing department distribution centers use the information about the market, somewhat different from the information obtained in retail trade.

Findings from this study and the prospects for further research in this direction. Thus, the study of the theoretical aspects of the strategic development of commercial enterprise helped us to formulate the following conclusions:

1) Wholesale and retail enterprise - is a special type of enterprises working in the sphere of commodity circulation. Its special feature is the combination of the two functions of wholesale and retail trade. And due to significant differences in the characteristics of the consumers and approaches to meet their needs, the decision making process may require contrary solutions.

2) Strategic Management in the wholesale and retail outlets designed to decide; what quality levels this particular company should gain given a strategic perspective, what are the position principles to hold in the relevant market, how to change the niche market businesses on qualitative level in all areas of, etc.

3) The activities of wholesale and retail trade enterprise include the following main processes: the purchase of goods and sale of goods, so the strategy of development of wholesale and retail enterprises should also include two independent strategies: purchasing strategy and the strategy of promotion of products on the market.

And finally, the wholesale and retail enterprises differ in the types and nature of consumers. For wholesalers customers are resellers who buy in bulk for resale and with high professionalism when choosing a product. In retail enterprises purchases are made with a view to final consumption, in smaller volumes, but a lot of buyers. Hereafter, the wholesale and retail enterprise - are a special type of enterprises in the sphere of circulation. Its special feature is the combination of the two functions (wholesale and retail), the implementation of which requires the solution, and often this solution has opposite tasks due to significant differences in the characteristics of the consumers, the ways and means to meet their needs.

All of these approaches are correct, but are not sufficient to uniquely identify the methodology of strategy development of wholesale and retail businesses. Therefore, the further study and development of marketing tools specially for this type of business is very crucial, as we have represented its different features.

 

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Year: 2014
City: Karaganda
Category: Economy