Marketing bán hàng - Chapter 6: Financial strategy

Chapter 6Financial StrategyRetailing StrategyRetail Market Strategy Chapter 5Financial Strategy Chapter 6Retail Locations Chapters 7,8Human Resource Management Chapter 9Information and Distribution Systems Chapter 10Customer Relationship Management Chapter 112Retailer ObjectivesFinancial – not necessarily profits, but return on investment (ROI) – primary focusSocietal – helping to improve the world around usPersonal – self-gratification, status, respect3Financial Tradeoff Made by Retailers to Increase ROIAsset Turnover Net Profit Margin4The Strategic Profit Model: An OverviewProfit Margin x Asset turnover = Return on assetsNet profit x Net sales (crossed out) = Net profitNet sales (crossed out) Total assets Total assets5Components of the Strategic Profit Model6The Strategic Profit Model: Profit ManagementNet Profit MarginSalesNet ProfitGross MarginTotal ExpensesSalesCost of Goods Sold15%15401006010025--7The Strategic Profit Model: Asset ManagementAsset TurnoverTotal AssetsSalesCurrent AssetsFixed AssetsInventoryAccounts Receivable2.510010544030+ ++Other Current Assets18The Strategic Profit Model: Return on AssetsNet Profit MarginSalesNet ProfitGross MarTotal Exp.SalesCost Goods Sold15%15401006010025--Asset TurnoverTotal AssetsSalesCurrent AssetsFixed AssetsInventoryA/R2.510010544030+ ++Other Cur Assets1Return onAssets37.5%Times Net Profit Net Profit Net SalesTotal Assets = Net Sales x Total Assets Net SalesTotal Assets() Net Profit Net Sales() Net ProfitTotal Assets() 9Financial Implications of Strategies Used By  a Bakery and Jewelry Store Net Profit X Asset = Return on Assets Margin TurnoverLa Madeline Bakery 1% X 10 times = 10%Kalame Jewelry 10% X 1 time = 10%10Income Statements for Federated Department Stores and Costco11Profit Management Path for Federated and Costco12 Net SalesGross MarginGross MarginGross SalesLess ReturnsLess customer allowancesCOGSComponents of Gross Margin13Gross Margin for Federated and CostcoGross Margin = Gross Margin %Net SalesFederated: $ 6,333 = 40.5% $15,630Costco: $ 6,014 = 12.5% $48,107Why does Federated have higher margins than Costco?Does the higher margins mean the Federated’s is more profitable?14Operating ExpensesOperating Expenses = Operating Expenses % Net salesFederated: $4,933 = 31.6% $15,630Costco: $4,629 = 9.6% $48,10715Types of Retail Operating ExpensesSelling expenses = Sales staff salaries + Commissions + BenefitsGeneral expenses = Rent + Utilities + Miscellaneous expensesAdministrative expenses = Salaries of all employees other than salespeople + Operations of buying offices + Other administrative expenses16Net ProfitNet Profit = Net Profit %Net salesFederated: $689 = 4.4% $15,630Costco: $882 = 1.8% $48,10717Asset Information from Federated’s and Costco’s Balance Sheet18Asset Management Path for Federated and Costco19Inventory TurnoverCost of Goods = Inventory TurnoverAverage inventoryFederated: $9,297 = 3.0 $3,120Costco: $42,093 = 11.6 $ 3,644 20Inventory Turnover21Asset Turnover Net Sales = Asset TurnoverTotal AssetsFederated: $15,630 = 1.1 $14,885Costco: $48,107 = 3.2 $15,09322Return on AssetsNet Profit Margin x Asset Turnover = Return on AssetsFederated: 4.41 x 1.05 = 4.63%Costco: 1.83 x 3.29 = 5.84%23Strategic Profit Model Ratios for Selected Retailers24Income Statement for Gifts to Go25Gross Margin PercentGross Margin = Gross Margin Percent Net SalesStores: $350,000 = 50% $700,000GiftstoGo.com $220,000 = 50% $440,00026Operating Expense PercentOperating Expenses = Operating Expenses % Net SalesStores: $250,000 = 35.7% $700,000GiftstoGo.com: $150,000 34.1% $440,00027Net Profit PercentageNet Profit = Net Profit PercentageNet SalesStores: $ 59,800 = 8.5% $700,000 GiftstoGo.com: $ 45,500 = 10.3% $440,000 28Balance Sheet Information for Gifts to Go and Proposed Internet Channel29Inventory TurnoverCost of Goods = Inventory TurnoverAverage InventoryStores: $350,000 = 2.0 $175,000GiftstoGo.com: $220,000 = 3.1 $ 70,00030Asset TurnoverNet Sales = Asset TurnoverTotal AssetsStores: $700,000 = 1.84 $380,000GiftstoGo.com: $440,000 = 2.09 $211,00031Return on AssetsNet Profit Margin x Asset Turnover = Return on AssetsStores: 8.54 x 1.84 = 15.7%Giststgo.com 10.3 x 2.09 = 21.3%32Profit ManagementAsset ManagementThe Strategic Profit ModelNet SalesCost of goods soldVariable expensesFixed expensesGross marginTotal expensesNet profitNet SalesNet profit marginAsset turnoverReturn on assets --+InventoryAccounts receivableOther current assetsTotal current assetsFixed assetsNet salesTotal assets+++x33Productivity MeasuresInput Measures – assess the amount of resources or money used by the retailer to achieve outputs such as salesOutput measures – asses the results of a retailer’s investment decisionsProductivity measure – determines how effectively retailers use their resource – what return they get on their investments34Setting and Measuring Performance ObjectivesRetailers will be better able to gauge performance if it has specific objectives in mind to compare performance.Should include: numerical index of performance desired time frame for performance necessary resources to achieve objectives35Setting Objectives in Large Retail OrganizationsTop Down PlanningCorporate Developmental StrategyCategory, Departments and sales associates implement strategy36Setting Objectives in Large Retail OrganizationsBottom Up PlanningBuyers and Store managers estimate what they can achieveCorporateOperation managers must be involved in objective setting process37Financial Performance of RetailersOutputs - PerformanceSalesProfitsCash flowGrowth in sales, profits – Same store sales growthInputs Used by RetailersInventory ($)Real Estate (sq. ft.)Employees (#)Overhead (Corporate Staff and Expenses)AdvertisingEnergy CostsMIS expenses38Productivity - Outputs/Input Corporate LevelROA = Profits/Assets (ROE = Profit/Equity)Overhead/SalesBuyers (Inventory, Pricing, Advertising)Gross Margin % = Gross Margin/SalesInv Turnover = COGS/ Avg. Inventory (cost)GMROI – Gross Margin/Average InventoryAdvertising/salesStores (Real Estate, Employees)Sales/Square Feet inv. Shrinkage/salesSales/Employee39Performance Objectives and Measures Used by Retailers40Examples of Performance Measures Used by RetailersLevel of Output Input ProductivityOrganization (Output/Input)Corporate Net sales Square feet of Return on assets(measures of store space entire corporation) Net profits Number of Asset turnover employees Growth in sales, Inventory Sales per employee profits Advertising Sales per square expenditures foot41Examples of Performance Measures Used by RetailersLevel of Output Input ProductivityOrganization (Output/Input)Merchandise Net sales Inventory level Gross Margin management Return on(measures for a Investment (GMROI)merchandisecategory) Gross margin Markdowns Inventory turnover Growth in sales Advertising Advertising as a expenses percentage of sales * Cost of Markdown as a merchandise percentage of sales* * These productivity measures are commonly expressed as an input/output.42Examples of Performance Measures Used by RetailersLevel of Output Input ProductivityOrganization (Output/Input)Store operations Net sales Square feet of Net sales per(measures for a selling areas square footstore or department Gross margin Expenses for Net sales perwithin a store) utilities sales associate or per selling hour Growth in sales Number of sales Utility expenses as associates a percentage of sales ** These productivity measures are commonly expressed as an input/output.43Illustrative Productivity Measures Used by Retailing OrganizationsLevel of Output Input ProductivityOrganization (Output/Input)Corporate Net profit Owners’ equity Net profit /(chief executive owners’ equity =officer) return on owners’ equityMerchandising Gross margin Inventory * Gross margin /(merchandise inventory* = manager and GMROIbuyer)Store operations Net sales Square foot Net sales /(director of stores, square footstore manager) *Inventory = Average inventory at cost44Benchmarks Performance of retailer over time – retailer can compare its recent performance to its performance in the preceding months, quarters or years. Performance of a retailer compared to its competitors45Sources of InformationBalance Sheet (Snap Shot at One Time)Asset ManagementIncome Statement (Summary Over Time)Margin ManagementAnnual Reports/ SEC Filings’s and Costco’s Financial Performance Over Three Years47Financial Performance of Federated and Other National Department Store Chains48