Abstract
In Chapter 1 and Chapter 2 of this text we described the functions of retailing and the way in which the retail sector of the economy developed particularly since the middle of the nineteenth century. This description included some reference to the emergence and relative success of different forms of retailing such as department stores and multiple-shop organisations. Having analysed retailing competition in Chapter 3 the function of this present chapter is to look at how retail organisations respond to competitive and other pressures in terms of their business strategies. This chapter therefore continues with an outline of the topic of business strategy. This is followed by more specific analysis of strategic decision making in the retail sector, including longer term decision areas such as vertical integration and the role of acquisitions. The chapter concludes with a consideration of the issues involved in strategy implementation in retailing.
‘An important consideration in understanding the retail structure or corporate performance in any sector or country is … the competitive strategy and decision-making adopted by companies and individuals.’
D. Lord et al., ‘Retailing on Three Continents: The Discount Food Store Operations of Albert Gubay’, International Journal of Retailing, 1988, Vol. 3 No. 3, p. 3.
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References
This section draws heavily upon the author’s text Corporate Strategy (London: Macmillan, 1986) Ch. 1.
H. I. Ansoff, Corporate Strategy (Harmondsworth: Penguin, 1968) p. 9.
A. Chandler, Strategy and Structure: Chapters in the History of the Industrial Enterprise (Cambridge, Mass.: MIT Press, 1962) p. 13.
K. R. Andrews, ‘Corporate Strategy as a Vital Function of the Board’, Harvard Business Review, November–December 1981, p. 180.
Ansoff, Corporate Strategy, pp. 17–22.
This sequence is based upon a more extended one in D. F. Harvey, Business Policy and Strategic Management (Columbus, Ohio: Charles E. Merrill Publishing, 1982) Ch. 1.
See P. H. Grinyer and D. Norburn, ‘Strategic Planning in 21 U.K. Companies’, Long Range Planning, August 1974, pp. 80–8.
See M. Leontiades, Strategies for Diversification and Change (Boston: Little, Brown & Co., 1980) p. 63–4.
See M. Corina, Pile it High, Sell it Cheap (London: Weidenfeld & Nicolson, 1971);
and K. K. Tse, Marks & Spencer (Oxford: Pergamon Press, 1985)
See Financial Times, 6 June 1986.
See the chapter on (Sir) Terence Conran in W. Kay, Tycoons (London: Piatkus, 1985) pp. 38–9.
See ‘Paying the price of dear money’, Financial Times, 27 May 1989; and ‘A ghastly shopping season in store’, Sunday Times, 15 October 1989.
For a retailer’s broad view on this see I. MacLaurin, ‘Food Retailing in the Eighties — Technological Opportunities and Social Constraints’, Long Range Planning, February 1982, pp. 40–6. Mr (now Sir) MacLaurin is managing director of Tesco Stores (Holdings) Ltd.
Labour costs account for about half of retail operating expenses, and as a percentage of sales these are generally between 10 per cent and 20 per cent lower in supermarkets than in smaller grocery shops. See J. A. N. Bamfield, ‘The Changing Face of British Retailing’, National Westminster Bank Quarterly Review, May 1980, p. 35.
See, for example, in G. Rees, St. Michael: A History of Marks & Spencer (London: Weidenfeld & Nicolson, 1969) p. 112.
This figure was given as the capital spending budget of Tesco for 1986, involving the opening of eleven new superstores. See Financial Times, 6 May 1986. More recent data suggest that Sainsbury may spend about £500 million in new stores in 1991. See Sunday Times, 3 February 1991.
It was the retail sector in the 1950s that pioneered the sale-and-leaseback arrangement whereby, following a takeover, shop properties were sold to financial institutions which leased them on a long-term basis to their previous owners. Early exponents of this technique were Charles Clore of J. Sears & Co. and the first Lord Fraser of Allander. See W. Davis, Merger Mania (London: Constable, 1970) Ch. 2.
Henry Smith referred in this contex to ‘the case of Woolworth’s…where the salesman is a nonentity behind the counter, neither informing nor influencing the consumer, but merely engaged in collecting money and preventing petty larceny’. While the terminology is perhaps a little extreme it does suggest a contrast in staffing policy between different retailing organisations. See H. Smith, Retail Distribution (London: CUP, 2nd edn, 1948) p. 26.
See Financial Times, 6 May 1986.
Ibid., 6 June 1986.
Ibid., 26 April 1986.
See D. Knee and D. Walters, Strategy in Retailing (Oxford: Philip Allan, 1985) Ch. 2.
Quoted in G. Havenhand, Nation of Shopkeepers (London: Eyre & Spottiswoode, 1970) p. 103.
‘Littlewoods looks to the mums’, Sunday Times, 20 April 1986.
This table is based upon factors listed in Knee and Walters, Strategy in Retailing, p. 25.
In common with a number of store groups, however, Marks & Spencer now offers credit facilities through its chargecard, and in 1986 these accounted for 8 per cent of UK turnover. See Financial Times, 9 August 1986.
For a short account of the importance of this see ‘Mothercare: How Conran gave birth to a new image’, Marketing Week, 22 July 1983, pp. 40–1.
Rees, St. Michael, p. 66.
Ibid., p. 58.
Tse, Marks & Spencer, p. 25.
See Rees, St. Michael, p. 58. Subsequent expansion of its food departments from the late 1950s has reduced the proportion of turnover accounted for by clothing to around one half, with food sales making up slightly less than 40 per cent of the total. See Marks & Spencer Annual Reports.
See M. Wray, The Women’s Outerwear Industry (London: Duckworth, 1957) pp. 152–3.
See Corina, Pile it High, Sell it Cheap, pp. 95, 118 and 192.
See A. C. Tynan and J. Drayton, ‘The Methuselah Market Part II: Decision Making and the Older Consumer’, Journal of Marketing Management, Winter 1985, pp. 213–21.
See M. P. McNair and E. G. May, ‘The Next Revolution of the Retailing Wheel’, Harvard Business Review, September–October 1978, pp. 81–91.
See M. E. Porter, Competitive Strategy (New York: Free Press, 1980) Ch. 14.
Although it is less susceptible to precise analysis than some of the other variables involved in the vertical integration decision, the issue of the transferabilty of management skills between retailing and manufacturing is an important one. Instancing the withdrawal of department stores from manufacturing one author commented that ‘such extensions to the manufacturing sector usually spread the energies and the mental resources of the (retail) management over too wide a field.’ H. Pasdermadjian, The Department Store (London: Newman Books, 1954) p. 112.
C. Wilson, First with the News: The History of W. H. Smith 1792–1972 (London: Jonathan Cape, 1985) pp. 267–8, 302, 399 and 403.
Sears’ principal footwear retail outlets are Freeman Hardy & Willis, Dolcis, Lilley & Skinner, Saxone, Manfield and Trueform. See ‘The Sears Group of Companies’, Euromoney, July 1985 (Supplement).
See Kay, Tycoons.
For further details see Burton Group Ltd case in J. M. Stopford et al., British Business Policy (London: Macmillan, 1975) pp. 152–71.
The firm’s founder Sir Jesse Boot ‘insisted that he could make most chemist’s goods more cheaply than he could buy them,… constantly substituting products of their own make for those bought from other manufacturers’. See S. Chapman, Jesse Boot of Boots the Chemist (London: Hodder & Stoughton, 1974) p. 91.
See J S 100: The Story of Sainsbury’s (London: J. Sainsbury, 1969) p. 86. One direction in which retailers may choose to integrate vertically is physical distribution from warehouses or regional distribution centres to individual stores. It is generally held that the internalisation of physical distribution which multiple retailers have achieved through vertical integration of this function has conferred upon them a number of operational and other benefits, including greater bargaining power in negotiating with their suppliers. However, although multiple grocery retailers have continued to exert direct control over physical distribution, around 70 per cent of this is now carried out by third party operators such as Exel Logistics, Christian Salvesen and Tibbett & Britten who are employed by the large-scale retailers. See A. C. McKinnon, Physical Distribution Systems (London: Routledge, 1989) pp. 65–72; and Financial Times, 15 May 1990.
See K. J. Blois, ‘Vertical Quasi-Integration’, Journal of Industrial Economics, July 1972, pp. 253–72.
See D. Isaac, ‘Harris Queensway’s Flying Carpet’, Management Today, January 1984, p. 56.
Tse, Marks & Spencer, p. 21.
See The Economist, 4 September 1982, p. 26; and Tse, Marks & Spencer, p. 80.
Wilson, First with the News, pp. 400 and 422.
Knee and Walters, Strategy in Retailing, pp. 137–8.
See Corina, Pile it High, Sell it Cheap, pp. 138, 153 and 165.
See 100 Years of Shopping at Boots (Nottingham: Boots plc, 1977).
Corina, Pile it High, Sell it Cheap, pp. 149–50.
Wilson, First with the News, pp. 428–33.
Ibid., p. 432.
See S. Salmans, ‘Mixed Fortunes at Marks & Spencer’, Management Today, November 1980, pp. 67–73.
See ‘U.K. retailing: new steps in takeover tango’, Financial Times, 5 July 1986; and S. Shamoon, ‘High Noon on the High Street’, Business, April 1986, pp. 87–96.
See ‘Designs on Debenhams’, Sunday Times, 26 May 1985. Interestingly, the same figure of compressing ten years of internal growth into a single takeover was also quoted in the context of the Argyll Group’s 1987 acquisition of 132 UK Safeway stores. See Financial Times, 24 January 1987.
See H. Barty-King, Eyes Right: The Story of Dollond & Aitchison 1750–1985 (London: Quiller Press, 1986) p. 213.
See Financial Times, 5 June 1986.
See K. Davies and L. Sparks, ‘ASDA-MFI: the Superstore and the Flat Pack’, International Journal of Retailing, Vol. 1, No. 1, 1986, pp. 55–78.
See Financial Times, 5 July 1986.
Rees, St. Michael, p. 125.
Quoted in G. Havenhand, Nation of Shopkeepers, p. 5. See also C. Kennedy, ‘Keeping up with the consumer’, The Illustrated London News, January 1985, pp. 27–30.
See T. Nash, ‘MFI’s new life after Asda’, Director, November 1988, pp. 112–16;
and A. van de Vliet, ‘Can Asda deliver the goods?’, Management Today, April 1988, pp. 58–63
See, for example, Howe, Corporate Strategy, pp. 95–103.
See Chandler, Strategy and Structure; and P. Steer and J. Cable, ‘Internal Organization and Profit: An Empirical Analysis of Large UK Companies’, Journal of Industrial Economics, September 1978, pp. 13–30.
See Porter, Competitive Strategy, Ch. 2.
See S. Segal-Horn, ‘The Retail Environment in the U.K.’, in G. Johnson (ed.), Business Strategy and Retailing (Chichester: Wiley, 1987) p. 25.
See Financial Times, 13 August 1987.
See D. F. Channon, The Service Industries (London: Macmillan, 1978) pp. 19, 184–5.
See Knee and Walters, Strategy in Retailing, p. 131.
In respect of large superstore groups performance may be broken down by store and product area.
These strategic costs would not necessarily include activities such as head office accounting expenses. On the other hand central personnel costs which relate to a particular desired quality of recruitment and selection appropriate to strategy should be allocated to business units or divisions.
In addition to the fixed asset base of the department not being identified, problems also arise as working capital tied up in stock or in the form of debtors (resulting from extended credit) may not be taken into account, when the latter two variables, stock and debtors, may well enter into the strategy of the department.
See International Journal of Retailing, 1986, Vol. 1, No. 1, p. 85.
K. Davies et al., ‘Structural Changes in Grocery Retailing: The Implications for Competition’, International Journal of Physical Distribution and Materials Management, 1985, No. 2, pp. 38, 39.
See G. Davies and J. Brooks, Positioning Strategy in Retailing (London: Paul Chapman, 1989).
See W. Kay, Battle for the High Street (London: Piatkus, 1987) pp. 99–103, 114, 120.
See C. Moir, The Acquisitive Streak (London: Hutchinson, 1986) p. 51.
A current example at the time of writing of the problems of implementing incremental strategic change is the boardroom upheaval at Harris Queensway as the group attempted to broaden its range of furniture, increasing the element of design in merchandising and moving into higher price/quality fields at Queensways itself. The failure rapidly to achieve this change in strategy resulted in the departure of the group’s joint chief executive, some City disenchantment with Queensway, and even the suggestion that Sir Philip Harris would have to resign, or that the group would be taken over. See Financial Times, 9 June 1987, and Sunday Times, 23 August 1987. In fact by August 1988 Harris Queensway had been acquired by Mr James Gulliver’s Lowndes group, although by early 1990 there were signs that this had not resulted in a total recovery of Queensway’s fortunes (see Financial Times, 16 December 1989, 21 January 1990 and 15 August 1990) and in August 1990 Lowndes Queensway went into receivership.
M. Pitt and G. Johnson, ‘Managing Strategic Change: A Chief Executive’s Perspective’, in Johnson (ed.), Business Strategy and Retailing, p. 195.
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© 1992 W. Stewart Howe
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Howe, W.S. (1992). Retail Corporate Strategy. In: Retailing Management. Palgrave, London. https://doi.org/10.1007/978-1-349-21716-8_4
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