Retailing Follow-Up

Comments Concerning Retailing Strategy

All strategies have inherent risks. A do-nothing strategy has perhaps the greatest degree of risk – the competition will move forward. A me-too strategy guarantees parity with the competition at best - but not if they execute better. And strategies, by their very nature, do not admit of experimentation and validation before-the-fact. They contain assessments, judgements, and decisions based on probabilities, not certainty. So, yes, they are guesswork.

In "The Halo Effect" Phil Rosenzweig identifies four areas of risk.
First – the Customers. Will they behave as anticipated?
Second – Business Competitors. What strategies are they about to pursue?
Third – the Company itself. How will the company respond internally to the strategy? Can it be executed profitably?
Fourth – Technological change. Never assume that the environment will not change. (Rosenzweig, 2009)

The first three above constitute the traditional C3 model of Company, Customer, Competition. Of these, only the first is moderately controllable; the others can only be guessed at probabilistically.

Michael Porter at Harvard makes a simpler classification: there are only two aspects – strategy and execution. This duality underscores the huge impact of the internal operation of a company. Many companies may not be able to implement the investment strategy outlined in the previous post. Numerous obstacles may hinder profitable implementation - staffing inadequacies (lack of training personnel, for example), systems inefficiencies, and misallocation of resources among them. Managers may be afraid to invest the time, money, and effort required. There may be "Cargo Cult" analysis that will obfuscate thinking. (The term "brand aspirational" comes to mind. Aren't all customers "brand-aspirational"?) And there is always the law of unanticipated consequences.

Is the strategy retailing strategy outlined in the previous paper risky? Of course!

But this is true of any strategy. All strategies are risky. Managers are paid (and hopefully trained) to assess the probabilities, judge the risks, and evaluate these obstacles. And to make the decisions – to take the risks.