Review questions and answers

Chapter 4

1. What are the various models of retail competition?

• Can a retailer ever operate in a pure monopoly situation? If you believe that this Can a retailer ever operate in a pure monopoly situation? If you believe that this is possible, provide an example and explain what dangers this retailer faces. If you believe this is not possible, explain why not.

            The reality about retailing is that pure monopoly is unrealistic. On the contrary, near monopoly is quite common in retail business. Licensing of a reputable beer firm that deals with the production of highly brand beer is an excellent example of the high possibility of the occurrence of a monopoly within a city hence causing a near monopoly. This kind of retail is quite vulnerable to be converted into an unproductive and less inventive business (Dunne et al., 2014). This monopoly is due to the inadequacy of challenges from the market. Once the monopoly retail takes no notice of its stakeholders, it is often at risk of losing their customers. As a result, their competitors have a better stance to serve all of their consumers efficiently. In most cases, there are always varying alternate solutions and replacements for retail outlets. For instance, a monopoly lessens due to the emergence of e-commerce and internet. 

• Why is it so important for a retailer to develop a protected niche?

            Niche protection involves the safeguarding of value creation process by a retailer. The principle of niche protection is that the retailers with outstanding value proposition are mostly responsible for maintaining that position. They often use every means such as patenting, continuous innovation and reliable partnership formations. Niche protection in retailing, therefore, helps the retailer to avoid competition, overcome long-term consumer value and gain higher profits on the costs gained (Dunne et al., 2014).

• Many retailers undoubtedly compete on price. Why is the price the retailer charges for merchandise or services not the same as the total cost the customer pays?

            The price of the product or service varies from that of the total cost of customer ownership. In most of the times, price, sales tax and cost of transportation form the significant aspects of the overall cost of the service or product (Dunne et al., 2014). At times, apart from the expenses mentioned above, the consumer has to incur both system and training costs before they could utilize the service or even the product. Several retailers are centering their attention towards the cost of ownership instead of the price of the product. In line with carrying out the strategy, most of the retailers are promising their consumers free delivery as well as tax-free pricing to all of their consumers.

• What are the ways a retailer can avoid or minimize competing on price?

            Some of the significant ways through which a retailer can endure price competition and niche protection is through their capacity to adopt methods of positioning their stores (Dunne et al., 2014). These methods include,

• Efficient managing of products mixes, for example, successful management of goods, custom-made services and space creation mostly for pragmatic shopping.
• Introduction of specialty classified brand merchandise in the inventory
• Introduction of customer loyalty rewarding strategies

 

3. What four theories are used to explain the evolution of retail competition?

• Describe the wheel of retailing theory. What are the theory’s major strengths and weakness? Does this theory do a good job of explaining what has happened to American retailers today?

            Wheel of retailing theory helps in the explanation of organizational changes that occurs when the retail product owners choose to change their market positioning or integrating other set-ups of the firm. This theory offers a reasonable account of the changes in the method of the reputable retailers. It also directs the retailers to upscale their contributions (Dunne et al., 2014). However, not all retailers start with low pricing. The theory continues to stress only to the prices and margins and fails to sufficiently include other variables, for instance, segmentation and location. In regards to this theory, a firm case of conversion of a retail brand from low to highly luxurious products is inaccessible from the American market.

• Describe the retail accordion theory of competition. What are this theory’s major strengths and weakness?

            The retail accordion theory focuses on the changes in the variety and profundity of goods range or sale of products by retailers. According to the method, the series of broad and specific product retailing will take place across all retail outlets. Retail cycle often starts by selling a superior range of goods followed by a precise variety of goods and this cycle repeats itself. The theory is of the essence as it is a tool that develops and modifies retail strategy (Dunne et al., 2014). Conversely, there are numerous restrictions related to the approach. At first, the transition cost from broad to explicit and vice-versa is quite expensive. Consequently, not all retailers pay for the change. At times, the market conditions such as the high pressure from customers or competitors will put off retailers to convert the range of goods.

• Would strategies for retailers differ in the four stages of the retail life cycle? What strategies should be emphasized at each of the four stages?

            Elements of the retail firms changes for every stage of the product lifecycle. The introductory phase sharply varies in the way they provide value to their consumers. As the retail business achieves a rapid sales increase, they enter into another period referred to as growth stage. Companies use different strategies to consolidate their market position. It is at this stage that the company develops suitable systems and course of actions and are often are concerned about raising their returns. As the retail firm continues t grow, it reaches the level of stabilization (Dunne et al., 2014). At this stage, the retail companies often renew their strategy. Finally, with the decline stage, companies often lose their competitive advantage. However, different retailing companies use different approaches such as optimally managing all of their resources. They focus on re-strategizing on their strategy and implementation of these plans at a quick rate.

• If a retail format enters the decline stage of the retail life cycle, does that mean that this format will be gone within the next decade? Or can it linger in the decline stage for years? Can a format ever reposition itself and return to either the growth or maturity stage? Can you think of any current format that could reinvigorate itself?

            Retail companies are unable to control expenses, manage success and sustain its competitive advantage while in the decline stage of the cycle. However, for the retail company to rescue the organization, the administration has to adopt suitable strategies and implementation strategies. Rethinking the strategy and quickly taking actions are the essential plans that will enhance the company to restore back to growth and mature stage (Dunne et al., 2014). For example, an old bakery can rejuvenate their existence by valuing their consumers and venture into implementing their value addition plan to the contemporary retail market.

Chapter 5

1. What is the retailer’s role as a member of the larger supply chain?

• Why must a retailer view itself as a member of a larger marketing system? Can’t JCPenney, Costco, or Best Buy be successful on its own?

Supply chain management involves delivery of goods and services from the producer to the consumers. They are engaged in performing different functions which are inter-linked thus making the supply chain to act as one whole system. It is for this main reason that the retailers must consider themselves as members of the vast marketing scheme (Dunne et al., 2014). Leading retail brands such as JCP, CTC and BB are competent in their supply chain as they sell their goods in smaller quantities to their consumers. Therefore, these leading retail firms can independently operate on their account if they adapt to better strategies in the supply chain.

 

• Must a retailer be involved in performing all the marketing functions? If it can rely on other members of the channel, what functions can they perform and which members can perform them?

            Retailers are often involved in performing all market function which also includes advertising. There are different functions within the supply chains, and therefore other members can be involved in carrying out some of these functions through category management (Dunne et al., 2014). This type of management is where different members undertake the simultaneous control of the price, warehouse while others take part in the promotional work.

• Facilitating marketing institutions, since they don’t take title to the goods, add no value to a supply chain. Agree or disagree with this statement and explain your reasoning.

            Facilitating marketing institutions that offer varying services to maintain supply chain progression is unable to take the label of the product. This argument, however, does not mean that they do not have value added to their supply chain process.

3. How do dependency, power, and conflict influence supply-chain relations?

• You are a manufacturer of a popular consumer product that is sold through independent retailers and some department store chains. Today, a large big-box chain approaches you and wants to carry your line. What should you do? How will this affect your relationship with your current retailers?

            It is quite essential to sustain a cordial relation with all stakeholders of the supply chain. A functional relationship between the retailer and manufacturer leads to a better handing over of the process of supplying goods to new entrants (Dunne et al., 2014). With the current economies of scale, there are higher chances of upsetting the original supply chain box. Once the retailers agree with them working along with other supply chain box, then the manufacturer could consider the option basing on all factors such as cost and efficiency before accepting the new supply box deal.

• Agree or disagree with the following statement and support your answer. “Retailers should always oppose attempts by the manufacturer to sell its products directly to the consumer from the manufacturer’s website.”

            Retailers should not agree to the manufacturers’ idea of having direct distribution to the end user through their website. This uninterrupted supply is because having a binary distribution that involves direct and indirect distribution results to competition among all stakeholders of the supply chain.

• Should it be legal for a manufacturer to prevent a discount retailer from purchasing the manufacturer’s name-brand products from a diverter and selling these in the discounter’s store?

            Buying from a diverter should be illegal for both the retailer and also for the consumers. However, instead of making the buying process illegal, it should focus on making diverter’s activities.

• Why are retailers so dependent on other supply-chain members? Couldn’t they simply perform all eight marketing functions themselves?

            It is true that retailers ought to view the supply chain as a whole system that is integrated. However, the process is quite long and thus leading to retailers’ high dependence on other members who are expected to help in the supply chain process. Their reliance is, therefore, an affirmative action that yields a better outcome.

Chapter 6

1. How does legislation constrain a retailer’s pricing policies?

• A busy corner intersection in Houston has gasoline stations on all four corners. These dealers always seem to have identical prices for their gasoline or, at least, they are within one cent of each other. Is this evidence of horizontal price fixing? Why or why not?

            According to Dunne et al., (2014), horizontal price fixing involves the maintenance of a prearranged level of prices at similar levels across the supply chain. However, if prices vary at a difference of cents, then this may not be regarded as horizontal fixing. In most cases, gasoline prices are highly dependent on the import price, and the global market fluctuations are hence resulting in an almost same range price. It is therefore hard to conclude and say that uniform pricing represents a horizontal price fixing.

            Reference

Dunne, P. M., Lusch, R. F., & Carver, J. R. (2014). Retailing. Cengage Learning.