Retail Trends & Strategies


  • Better market positioning: This involves more careful identification of market segments and providing service superior to that of competition.
  • Market intensification: This involves clustering more stores in the same metropolitan area and contiguous markets.
  • Secondary markets: Expansion will be increasingly focused on secondary markets  of under 100,000 population because there may be less competition from larger retailers, and costs, such as wages, may be lower.
  • Differences in store size: Retailers will have a more flexible portfolio of different sized stores depending on the size of the community and existing retail competition. More use of second-hand space will occur because this can result in savings of 30 percent or more in rent.
  • Productivity increases: The application of central checkout, self-selection, and low gross margins to areas of trade where these techniques have not been used before will occur. Look now at toy supermarkets, home-decorating centers, and self-service shoe stores.
  • Fewer product options: Product lines will increasingly be consolidated, and new product development will be cut back.
  • Service growth: Services retailing will continue to grow as a percentage of total retail sales. Services already represent about 50 percent of the gross national product.
  • More mergers: Increasingly, smaller and weaker firms will be absorbed as more retail outlets struggle to survive.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

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The Three Types of Strategies


There are three main types of strategies:

  1. The corporate level strategy identifies the portfolio of businesses that in total will comprise the corporation and the ways in which these businesses will relate;
  2. The competitive strategy identifies how to build and strengthen the business’s long-term competitive position in the marketplace; and
  3. The functional strategies identify the basic courses of action that each department will pursue to contribute to the attainment of its goals.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

The Role of Diversification


Corporate diversification is everywhere. Virtually all of the Fortune 1,000 (the largest 1,000 corporations in the US) are diversified, many of them to a great extent. Some corporations consist of dozen—even hundreds—of different businesses. Besides such corporate giants, many smaller firms, some with only a handful of employees, also diversify.

What is the strategic role of diversification? Popular answers to this question have changed dramatically over the last several decades. During the 1960s, diversification fueled tremendous corporate growth as corporations bought up dozens of businesses, regardless of the good or service sold. Managers based this diversification on unrelated businesses on the assumption that good managers could manage any business, allowing the formation of huge conglomerates of completely unrelated businesses. In the 1970s, managers began to emphasize diversification based on balancing cash flow between businesses. Corporate managers attempted to diversify so that the resulting portfolio would offer a balance between businesses that produced excess cash flows and those that needed additional cash flows beyond what they could produce themselves. The 1980s brought a broad-based effort to restructure corporations, as managers stripped out unrelated businesses and focused on a narrower range of operations. Restructuring usually also involved downsizing, and the largest corporations shrank in relation to the rest of the economy. In the 1990s, corporations have once again taken an interest in using diversification to grow. But unlike the unrelated diversification that took place in the 1960s, the trend in the 1990s is to diversify into related businesses, or at least into businesses in which the strengths of a popular managerial team fit the needs of the new business being added to the corporation.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Release of Free Cash Flow


The project entry typically has a finite life. Its dividend policy is usually specified contractually at the time any outside equity financing is arranged. Cash flow not needed to cover operating expenses, pay debt service, or make capital improvements—so-called free cash flow—must normally be distributed to the project’s equity investors. Thus, the equity investors, rather than professional managers, get to decide how the project’s free cash flow will be reinvested.

 When project is financed on a company’s general credit, the project’s assets become part of the company’s asset portfolio. Free cash flow from the project augments the company’s internal cash resources. This free cash flow is retained or distributed to the company’s shareholders at the discretion of the company’s board of directors.

 Project financing eliminates the element of discretion. Investors may prefer to have the project company distribute the free cash flow, allowing them to invest it as they choose. Reducing the risk that the free cash flow might be retained and invested without the project’s equity investors’ approval should reduce the cost of equity capital to the project.

 The sponsor is not necessarily placed at a disadvantage under this arrangement. If the sponsor is considering additional projects that it believes are profitable, it can negotiate funding for these projects with outside equity investors. If they agree to fund any of these additional investments within the project entity, the dividend requirement can be waived by mutual agreement and the funds invested accordingly.

 My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Line of Sight

Antiquated Strategic Planning


At one time, the view from the top of most corporations was strongly influenced by their leaders planning doctrine. Executives were taught that the best way to plan for a complex company into discrete components, called strategic business units. For a time this practice provided a helpful way to unbundle the corporation and to select strategies most appropriate to each unit’s individual situation.

Companies were best thought of as a portfolio of individual businesses: some brand-new and unproven, some growing rapidly and consuming great amounts of cash, some growing rapidly and generating the cash needed by the up-and-comers, and some out and out losers.

Strategic planners eventually carried the idea one step further. They developed formulas that appeared to identify the contribution each business unit was making to the company’s overall stock price. Called value-based planning (as in shareholder value), its application, along with techniques such as junk-bond-driven leveraged buyouts, helped de-conglomerate many corporate dinosaurs in the financial go-go years.

These planning techniques are logical and quantifiable, descriptive as well as perspective. They provide a seemingly attractive way for the head of an enterprise to put arms around what might have become an increasingly diverse array of businesses. But thinking of a corporation as if it were similar to a portfolio of stocks or other investments can also be very limiting and one dimensional.

This kind of thinking tends to overemphasize the uniqueness of each business and often assumes that all the competition in which the corporation is engaged occurs when its business units do battle with their counterparts in other companies. It suggests that the role of top corporate management is either secondary or passive with regard to competition. It also implies that top management’s role is primarily that of a banker to the individual strategic business unit, concerned chiefly with financial resource allocation, and that it adds value mainly through “balancing the portfolio” by buying or selling the strategic business units that make up the company.

This approach encourages a “trader’s mentality” on the part of top management. Traders like to buy and sell, conglomerate and de-conglomerate. But they do not know how very much about how to grow the company from within.

Decentralization, sometimes extreme decentralization, is also encouraged, because each business is expected to stand on its own, containing most of the resources it needs for its operations. This simplifies the job of top management. It has only to focus on each strategic business unit’s bottom line and consider the details of its operations on an exception-only basis.

But this simplification comes to a great cost. Stressing stand-alone uniqueness and managing through the blinders of short-term earnings results in living, growing business entities treated almost as if they were fragments of the company’s stock certificate. The disease of the stock markets—perspective that seldom extends beyond next quarter’s financials—is passed along to the company.

There is another danger when strategic business unit framework dominates corporate decision-making. This is the tendency to grow redundant resources in the company as each strategic business unit, over time, builds up all the functions and staffing it feels it needs to operate as autonomously as possible. At times headquarters management tries to check the emergence of this costly duplication by mandating resource sharing across strategic business units, by using central service groups, or both. But these well-meaning attempts at cost containment send mixed signals to the strategic business units and they also can impose heavy coordination costs in terms of time and loss of flexibility.

Many intelligently managed companies led down the paths and took a seemingly attractive shortcut in their thinking. They confused a framework for planning with a basis for organizing power and resources. They used a perspective that directs to management’s attention to the financial scorekeeping aspects of the business at the cost of neglecting the underlying mechanisms that create value for their customers.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please contact www.asifjmir.com, Line of Sight

Corporate Restructuring


Corporate restructuring encompasses a broad range of activities and include acquisition and divestiture of lines of business and assets, acquiring controlling shares in other companies, alteration in capital structure through a variety of financial engineering initiatives, and also effecting internal streamlining and business process reengineering to improve efficiency and effectiveness of the firm. Corporate restructuring can thus lead to changes along one or more of the three directions, vis-à-vis, i) assets and portfolio, ii) capital structure, and iii) organization and management. Assets and portfolio structure can get significantly altered when a firm undertakes a series of acquisitions and divestitures to bring more focus to its lines of business or widen its activities to enter new fields. Capital structure can change due to corporate restructuring caused by infusion of large debt, change in equity due to either expansion of capital base or buyback of equity or composition of owners (e.g., participation of MNCs, and FIs in the equity of the firm). Organizational restructuring is also a part of the overall corporate restructuring and is designed to improve the overall efficiency and effectiveness of the organization through changes in structure, systems and processes, people and culture.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please contact www.asifjmir.com, Line of Sight