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21
Opportunities (Take advantage of)
– Brand loyalty
– New market segments
– New products for local tastes
Threats (Manage)
– Growing competition, cheaper coffee –
Costa Coffee, McDonalds, etc.
– Culture of tea drinkers
Based on the above SWOT Analysis in regard to Starbucks’ expansion into China, a positive
recommendation would be provided to the CEO of Starbucks to move forward with continued
growth in this emerging market. When reviewing the strengths of the company, it is apparent that
Starbucks has many internal characteristics that will ensure successful additional locations in China.
The quality product, well recognized brand, past experience with international expansion and
relationships with established business partners in China can help the company to be triumphant in
China. In addition, Starbucks has well trained employees that it can leverage in China to ensure that
new employees understand the Starbucks culture. In addition, Starbucks has demonstrated
successful international growth in over 40 countries.
Case Synopsis, Uses, Discussion Questions, and Answers
22
2. Give examples of how Starbucks was successful upon entering the China market. Please use the
following videos to frame your response.
– Starbucks grows coffee in China, Reuters Video, Available at:
– Recognized different cultures in China – joined forces with three regional partners
– Partnerships and joint-ventures allowed insights into tastes and preferences of Chinese
population
– Smart market entry strategy – selected high-visibility and high-traffic locations
– Developed products to appeal to local tastes – green tea, moon cakes, and iced rice
dumplings
environment for employees
3. Compare Starbucks’ United States and Chinese strategies. What are the similarities and
differences? What generalities can you glean from this analysis to help the company expand into
other global marketplaces? Please use the case and the following article to frame your response.
– “Starbucks’ quest for healthy growth: An Interview with Howard Schultz.” McKinsey
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23
stayed intact. Starbucks also relied on local business partnerships and joint ventures to enter the
country and gain an understanding of the local tastes and preferences in China. Starbucks was able
to reach the local Chinese tea drinking culture by proactively advertising products tailored to this
region. Lastly, Starbucks prepared growth plans for its target markets to ensure disciplined growth
and avoid past problems encountered with hasty growth.
Case Synopsis, Uses, Discussion Questions, and Answers
24
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
CASE 10: Walmart: Pioneer in Supply Chain Management
1. How does an individual firm like Wal-Mart manage a supply chain, particularly considering that
supply chains include multiple firms with potentially conflicting objectives? Describe some of
the conflicts that could arise in such a circumstance.
Instructor Notes
When supply chain members disagree about their goals, roles, or rewards, supply chain conflict
2. What are some of the ways that Wal-Mart’s supply chain management system has provided it the
benefits of higher levels of product availability and lower merchandise acquisition and
transportation costs? Provide specific examples of each benefit.
Instructor Notes
To offer specific examples, students could discuss how Wal-Mart has used technological advances
such as RFID tags, telecommunication networks, cross-docking, and inventory management systems
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25
Case 11 – Tiffany and TJX: Comparing Financial Performance
1. Calculate the following for both Tiffany and TJX using data from the abbreviated
income statements and balance sheets in Exhibit 1.
Financial indicator
Formula Reference
Tiffany
TJX
Gross Margin %
GM $ / Net Sales $
59.0%
27.3%
Inventory Turnover
Asset Turnover
Net Sales $/Total Assets $
2. Compare and contrast the calculated financial figures for Tiffany and TJX. Analyze and
discuss why the percentages and ratios differ for the two retailers.
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26
Gross margin is the profit that retailers make on the merchandise they sell. Tiffany has a 59%
Gross Margin and TJX had a 27.3% Gross Margin. Therefore Tiffany had a higher percentage
profit on the merchandise that they sold. Retailers like TJX and other discount retailers, like
SG&A expense % The largest SG&A expenses for retailers typically is salary and wages.
SG&A also includes rent, utilities, advertising and supplies. In looking at Tiffany, one can see
how its SG&A expense (39.6%) would be much higher than TJX stores (16.8%). Tiffany stores
are typically in very high rent locations and Tiffany’s advertising would be more specialized
image advertising than the more mass marketed advertisements of TJX. Tiffany’s would employ
highly trained sales personnel whereas TJX may have entry level retail associates with minimum
training.
Operating Profit Margin (or Earnings Before Interest & Taxes, EBIT) is Gross Margin less
SG&A percent. Tiffany’s Operating Profit Margin (19.4%) is higher than TJX’s (10.5%) because
of Tiffany’s significantly higher gross margin.
Inventory Turnover:
TJX’s inventory turnover (5.71) is nearly eight times Tiffany’s (.72). This means that TJX sells
and replaces its inventory nearly 6 times a year, whereas Tiffany’s sells and replaces its inventory
less than once in a year. TJX’s faster inventory turnover is expected due to the nature of its
fashion merchandise. Fashion apparel, by its very nature, has a short lifespan. TJX brings in
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27
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Asset turnover: The asset turnover ratio calculates the total revenue for every dollar of assets a
company owns. Asset turnover is meant to measure a company’s efficiency in using its assets.
Generally, the higher the number, the better. TJX’s asset turnover (3.0) is a more than three
times that of Tiffany’s (.88). TJX’s asset turnover is higher than Tiffany’s because its inventory
3. Assess which chain has better overall financial performance using ROA.
Return on assets
Overall, TJX outperformed Tiffany’s since Tiffany’s ROA was 10.6%, whereas TJX’s was
Why is ROA a good measure of each of the retailers’ financial performance?
Return on assets is an indicator of how profitable a company is relative to its total assets. ROA
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29
CASE 12: Choosing a Store Location for a Boutique
Synopsis: Stephanie Wilson is considering a number of different locations for a new ready to wear
boutique she is going to open. This is a hypothetical case.
Use:
Chapter 7 Discussion of need to match the location decision with the positioning strategy of the
store. Illustration of the advantages and disadvantages of different locations.
Discussion Questions
1. Give the pluses and minuses of each location.
PLUS
MINUS
Downtown
Arcade
downtown business customers.
Redevelopment might attract a
lot of customer interest and
traffic. Might attract tourist and
Risky business no information
about types of customers or
amount of traffic.
Tenderloin
Village
Location of stores close to her
home.
Traffic limited to residents of
the village.
Low rent, no overage clause,
short lease.
Limited retailing doesn’t have a
big draw for outside
neighborhood.
Traffic and nature of customers
area.
30
2. What type of store would be most appropriate for each location?
Downtown Arcade—Store would have to cater to working women who work downtown and/or
3. If you were Stephanie, which location would you choose? Why?
The answer to this depends on Stephanie’s interests. The mall has the highest risks due to the
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31
CASE 13 – Hutch: Locating a New Store
Synopsis: This case deals with a large chain of popularly priced women’s apparel stores that are
generally located in small towns in the Southeast, Midwest, and eastern fringe of the
Southwest. The company strategy is to sell to women between the ages of 18 and 40 who
are in the lower-middle to middle income range. The principal issue is which of two
available locations the manager should choose as the location for the next store. The
manager is given information on the demographics, lifestyles, and income of the
populations for the trade areas of the proposed locations. He is also provided with
environmental information and descriptions of each center’s characteristics.
Discussion Questions
1. How do the people living in the trade areas compare with Hutch’s target customer?
Hutch customers are price-conscious women between the ages of 18 and 40 who live in small
towns, like to wear the latest fashions, and are in the low- to middle-income range.
Dalton is a bigger market by every measurable standard, although Hinesville is growing at a
higher rate. Further, over 11 percent of the population in Hinesville probably lives in barracks
on the base.
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2. How do the proposed locations, including the cities, tenant mix, and the locations
within the malls, fit with Hutch’s location requirements?
We should assume that these locations are within a 400-mile radius of one of their distribution
centers.
The stores should be located in communities with a population range from 10,000 to 50,000 and
a trade area of 50,000 to 150,000. Although both towns meet this criteria, Dalton is significantly
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3. Which location would you select? Why?
All things considered, Dalton is a stronger market from a demand perspective. Dalton has more
women within the target age categories. Dalton is also more affluent. It appears that the people
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CASE 14- Avon Embraces Diversity
Synopsis: Avon, the largest cosmetics firm in the United States, sells primarily through the direct
selling method using about 3.5 million sales representatives in about 143 countries
around the world. The case describes Avon’s turnaround strategy since the 1970s when
it started actively promoting diversity, by including more women and minorities in the
top and middle management levels.
Use:
Chapter 3 Describes the multichannel strategies of a large cosmetics firm, using a combination of
direct selling and retail sales approaches.
Chapter 5 Illustrates the retail market strategy including target markets and products lines for a
large cosmetics firm.
Chapter 9 Examines a firm’s commitment to and management of diversity in human resource
management decisions.
Discussion Questions
1. Why is Avon so committed to diversity?
Avon’s target market is women consumers for all its cosmetics lines. It is to be expected that
women decision-makers would be able to understand the needs to women and explore new
market opportunities. This is evident from the historical problems at Avon, when an all-male
2. Why don’t more retailers follow Avon’s lead?
Other retailers do not pursue the same target markets or use the same direct selling approaches
as Avon does. But, in general, it is pragmatic for more retailers to increase the diversity of their
Case Synopsis, Uses, Discussion Questions, and Answers
3. How has increasing diversity been beneficial to Avon as it develops new strategies?
Avon has been able to uncover new market opportunities, especially the cosmetics needs of
working and professional women. Women have also been instrumental in ensuring that the
4. Evaluate the new opportunities that Avon is pursuing.
Avon is engaging in entry into many international markets and more of its new managers now
come from international markets. This helps convert the firm into more of a global retailer with
a global orientation and commitment to diversity.
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CASE 15- Sephora Loyalty Programs: A comparison between France and the U.S.
Discussion Questions :
1. Identify the benefits for a company to implement a loyalty program
– Develop repeat purchase behavior
2. What are the design characteristics of an effective loyalty program?
– Identify each customer and provide rewards for their purchases
– Use a tiered program. Not all customers have the same value for a company, therefore
3. What are the benefits of having a tiered loyalty program such as Sephora’s loyalty
program?
Not all clients have the same value. In general, 20% of the customers account for 80% of the
4. Describe Sephora’s loyalty program design characteristics in both countries. What
are the main differences? Which loyalty program is most effective at developing
customer loyalty? Why?
US loyalty programs
French loyalty programs
Common to all programs : $1 spent = 1 point
Common to all programs : 1€ spent = 1 point
make-up style
Rewards Beauty Insider Program :
100 points = sample-sized product
Rewards White card :
150 points or 4 purchases = 10% discount for next
The main differences are:
– Discount: in the French program, there is a mix of discount and rewards; whereas the
American program only offers rewards. Discounts are used to tease consumers at the
beginning of the relationship. This entry level relationship, which is based on a lower price
point, does not garner loyalty because it is easily copied by completion. As the customer
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reaches higher levels, Sephora grants higher rewards and services, which creates a stronger
relationship.
The French program is more effective at developing customer loyalty. It combines discount
and rewards. The more a customer is valued (in terms of purchase amount or purchase
frequency) the more he/she will get rewards rather than discounts. Discounts are used to
transform customer into good customers because it is a way to make them patronize the
retailer more frequently.
5. Are both Sephora’s French and American premium programs worth what they spend
to reward customers?
French premium program
The costs include: (1) the costs of rewards ; (2) the cost of shipping ; (3) the costs of
newsletters ; (4) the costs of salesperson’s training and time ; (5) the costs of telephone line ;
(6) the costs of additional gifts and private sales
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6. Why do both programs have a limited time validity and a specific requirement
regarding the amount spend per year?
Time validity is a used to give the feeling to customers that they have to deserve their special
7. Could the premium loyalty program implemented in France be adapted to the U.S.
market? Explain.
Since there is no information in the text, further information needs to be sought. Data about
the beauty market in both France and the U.S. are available on Datamonitor, on the websites
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40
CASE 16- Attracting Generation Y to a Retail Career
Synopsis: Diva is a specialty fast fashion jewellery and accessories retailers, with its roots in
Australia but its store network spanning America, Russia, and Europe. The retailer is
confronted with the problem of attracting and retailing its Generation Y workforce.
Use:
Chapter 16 Managing the Store
Discussion Questions
1. How can Diva demystify what happens behind the scenes and make potential
Generation Y employees aware of the opportunities available to them beyond the
shopfloor?
Generation Y seldom see retail as a career of choice, particularly given many believe a retail
success of those that have worked from the store to senior positions.
Diva has implemented a learning organizational culture in an attempt to attract the retail
staff. Discuss the possible pros and cons of this strategy for Generation Y.
On the positive side, Diva has developed a workplace environment that encourages goal-setting
Give examples of how other organizations (perhaps even non-retailers) attract a Generation
Y workforce. What could Diva learn from other organizations?
The fast paced technology industry provides a good example of a sector confronted with a
predominantly Generation Y workforce. Google, for instance, engage staff in a variety of ways