Coursework1. The retail life cycle has FOUR distinct stages. Explain carefully.The final framework we will examine is the retail life cycle. Some experts argue that retailing institutions pass through an identifiable cycle. This cycle has four distinct stages; it starts with (1) introduction, proceeds to (2) growth, then (3) maturity, and ends with (4) decline. We discuss each stage briefly.IntroductionThis stage begins with an aggressive, bold entrepreneur who is willing and able to develop a different approach to the retailing of certain products. Most often the approach is oriented to a simpler method of distribution and passing the savings on to the customer. Other times it could be centered on a distinctive product assortment, shopping ease, locational convenience, advertising, or promotion. For example, Jiffy Lube and other quick oil change service retailers offered faster "while you wait" service at more convenient locations with lower prices than conventional service stations and auto dealers and changed the way consumers serviced their cars. During this stage profits are low, despite the increasing sales level, due to amortizing developmental costs.GrowthDuring the growth stage, sales, and usually profits, explode. New retailers enter the market and begin to copy the idea. For example, the rapid growth of Starbucks cafes encouraged other "gourmet" coffeehouses to enter the market and capture the growing interest in deeper assortments of coffee beverages and casual "lifestyle" eateries. Toward the end of the growth period, cost pressures that arise from the need for a larger staff, more complex internal systems, increased management controls, and other requirements of operating large, multiunit organizations overtake some of the favorable results. Consequently, late in this stage, both market share and profitability tend to approach their maximum level.MaturityIn maturity, market share stabilizes and severe profit declines are experienced for several reasons. First, managers have become accustomed to managing a high-growth firm that was simple and small, but now they must manage a large, complex firm in a nongrowing market. Second, the industry has typically overexpanded. Third, competitive assaults will be made on these firms by new retailing formats (a bold entrepreneur starting a new retail life cycle) or more efficient retailers consolidating the industry.DeclineAlthough decline is inevitable for some formats (few people get their milk delivereto the door anymore), retail managers will try to postpone it by changing the retail mix. These attempts can postpone the decline stage, but a return to earlier, attractive levels of operating performance is not likely. Sooner or later a major loss of market share will occur, profits fall, and the once promising idea is no longer needed in the marketplace. However, the retailer that can identify a small, but lucrative, customer group that insists on the traditional form (e.g., home delivery of groceries) may be able to extract a premium for its services, and extend its lifetime.The retail life cycle is accelerating today. New and more competitive concepts now move quickly from introduction to maturity since the leading operators have aggressive growth goals and their investors demand a quick return on equity. In addition, larger retailers with capital and expertise in concept roll-out can acquire many entrepreneurs in the early stages of the retail life cycle. Exhibit 3.4 lists the various stages of the retail life cycle for many of our current retail institutions.

Exhibit 3.4Retail Institutions in Their Various Stages of the Retail Life Cycle2. Explain carefully Analytical Method and Creative Method.Analytical MethodThe analytical retail manager is a finder and investigator of facts. These facts are summarized and synthesized so a manager can make decisions systematically. In doing so, the manager uses models and theories of retail phenomena that enable him or her to structure all dimensions of retailing. An analytical perspective can result in a standardized set of procedures, success formulas, and guidelines.Consider, for example, a manager operating a Starbucks shop where everything is preprogrammed, including the menu, decor, location, hours of operation, cleanliness standards, customer service policies, and advertising. This store manager needs only to gather and analyze facts to determine if the preestablished guidelines are being met and to take appropriate corrective action if necessary.Creative MethodConversely, the creative retail manager is an idea person. This retail manager tends to be a conceptualizer and has a very imaginative and fertile mind capable of creating a highly successful retail chain. A good example of this is Leslie Wexner, founder and chairman of The Limited. When everyone else (including his father) in the mid-1960s thought he was crazy for selling only a "limited" line of women's apparel focusing on 18- to 35-year-old professional career women, Wexner had a gut feeling he was right. Such a retailer uses insight, intuition, and implicit knowledge, rather than just facts. The result is usually a novel way to approach or solve a retail problem that reflects a deeper understanding of the market. Is it possible to operate a retail establishment, in most part, with just creativity? Yes. However, in the long run, creativity alone will not be adequate. Witness the problem of a slowdown in sales at the Body Shop, a retailer with a very creative pro-environment focus, as other firms, including The Limited, were able to copy its creative focus. Analytical decision making must also be used so that a manager can profitably respond to unforeseen events in the environment.Page 2 of 4