How would you use the internet to purchase your next car? Using your smartphone, table computer, or desk computer, select two or three different auto websites. List their web addresses, such as www.autobytel.com, and make a report describing what they have on their websites. Which one do you like best? Why? Can you purchase online from each website? What is the buying process? Can competitors gain anything from looking at these websites? Finally, what is missing from these websites that you feel should be on them?
This first is intended to acquaint you with how sensitive your retail business will be to changes in sales volume. Let’s assume that you plan that your retail business will generate $650,000 per year in annual sales and that it will operate at a gross-margin percentage of 40 percent. If your fixed operating expenses are $180,000 annually and variable operating costs are 12 percent of sales, then how much profit will you make? (Hint: sales x gross-margin percentage = gross margin; gross margin – fixed operating expenses – sales x variable operating expenses as % of sales = net profit.) Use a spreadsheet program on your computer to compute your firm’s net profits; next, analyze what happens (1) if sales drop 10 percent and (2) if sales rise 10 percent. Why are bottom line results (net profits) so sensitive to changes in sales volume?
(a) Currently, there is a great deal of debate about the future impact of the Internet on retailing. Which of the following items – a vacation package for spring break, a wedding gift for a friend, a pair of jeans for yourself, or an end table for your apartmentwould you be least likely to purchase online? Why?
(b) Price competition in retailing is pervasive. Explain how lower prices can lead to higher operating efficiency.
(c) How can a retailer compete by focusing on shopper or customer experience?
Dolph Drake, the owner of Bulldog Books, has three bookstores near the campus of a
large state university. In the past, he has run his stores very informally. He likes to
claim that he is successful because he doesn’t think too much and that he makes most
of his decisions by the “seat of his pants.” Over the past five years profits at each store
have increased between 5 percent and 7 percent each year, despite the fact that the average price of textbooks has doubled. Also, Drake has never given much thought to
changing his original plans for his bookstores.
While Drake was the first to open off-campus stores and therefore got the prime
locations, competitors are beginning to appear near all three of his stores. In fact, just
recently an out-of-town competitor gathered the majority of the end-of-semester textbook
buy-backs, one of the most profitable activities for a campus bookstore. This out
of towner merely set up a drive-through buyback operation at a nearby parking lot so
that students could pull up under an awning, hand over their books, and drive off with
money within minutes. Even though the competitor left town the next day, Drake
expects other book buyers will seek to “hit and run” at the end of the fall semester.
As a result of this recent loss of business, Drake feels that it is time to develop a
more structured approach for his business and asks you as part of your summer
internship to research the strategic planning process. You are to prepare a memo on the
basic steps and tasks that are involved in developing a strategic plan. Be sure to include
in your memo a mission statement and a list of objectives that Bulldog Books should
seek to achive.