Finance and Location Strategies

In this presentation, we will help you to understand the suitable finance strategies and favorable location strategies for retail segment. We will cover strategic profit model, profit path, turnover path, activity based costing and return on assets for retailers. We will also talk about setting goal performance and performance measures that retailers should adopt.
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1. Chapter 1

Finance and Location Strategies for
Retailing

2. Learning Objectives

= Working on the ‘Strategic Profit Model’
= Activity based costing (ABC)

= Setting objectives for performance by
retailers

= Factors influencing retailer's choice of
location

= Retail location strategies
= Points to remember

3. Strategic Profit Model

= The aim of every retailer is to be
successful financially, which is usually
measured in terms of high return on
assets
= Return on assets = Net Profit x Net Sales
Net Sales Total Assets
= Net Profit
Total assets

4. Utility of the Strategic Profit
Model

= Profit margin in management and asset
management

= Return on assets

= Evaluate financial implications of new
strategic decisions before they are
implemented

5. Profit Path

= Net Sales = Gross amount of sales —
customer returns —customer allowances

= Total expenses = Total expenses/ Net
Sales ration

= Net profit = Gross Margin- Expenses
= Net profit margin = Net profit/Net
Sales

6. Turnover Path

Current assets
Accounts receivables
Inventory turnover
Cash

Fixed assets

Asset turnover
Current liabilities

7. Turnover Path

= Long term liabilities
= Owner's equity
= Other current assets

8. Fig 1.1. The Strategic Profit

9. Activity Based Costing

Activity based costing is a financial
management tool which is being used by
retailers worldwide.

Within a const centre all major activities are
identified and the cost of performing each are
worked out

The resulting costs are then identified into
costs objects such as stores, product lines

10. Advantages - Activity Based
Costing

= It uses the general ledge data and then
assigns all expenses-sales, marketing,
administrative, financing and operating
costs.

aln other methods elaborate

identification of various costs usually is
not looked into

11. Activity Based Costing- 5
Steps

Summarize the resources
Define key activities
Define the resource drivers
Specify the cost objects
Identify the activity drivers

12. Setting Objectives for
Performance by Retailers

= The performance desired, including a
numerical goal which is to be achieved

= The time period within which the goal is
to be achieved

= The resources required to achieve the
objectives

13. Three types of retailers;
performance measures

= Input measures

= i.e. amount of money or resources used by
the retailer to generate sales and profit

= Output measures
= i.e. sales revenue
= Productivity Measure
= Ratio of input to output

14. Factors Influencing Retailer’s
Choice Of Location

= Consumers’ choice
= To gain competitive advantage

= Understanding of the structural and
social changes

= Long term financial implications
= Government formalities

15. New Markets — Up country

= Better connectivity via a network of
national highways

= Attraction and migration of job seekers
into such up country towns from
villages

16. Types of Location Site and
Retail

= Solitary site
= The unplanned shopping area site

= The Planed shopping area site
= Merchandise kiosks

17. Retail Location Strategies

= Department Stores

= Specialty Apparel stores
= Category specialists

= Grocery stores

= Food stores

18. Summary

= The strategic profit model combines two
decision making areas- profit margin
management and asset management

= ABC provides a means of improving the
retailer's financial analysis

= While setting performance e objectives
retailers have to consider performance
goal expressed in numerical terms

WELINGKAR

19. Summary

= The retail while taking decisions
regarding the location of a store has to
keep in mind consumer preference

= Usually retailer make a choice of
location site from _ solitary site,
unplanned shopping area site and
planned shopping area site

20. "weschool

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Master's level Distance Learning Program - PGDBA

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