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Financial objectives are an integral part of a retailers market strategy. Retailers develop their strategy and build a sustainable competitive advantage to generate a continuing stream of profits. Can be used to monitor the retailers performance, assess the reasons its performance is above or below expectations, and provide insight into appropriate actions that can be taken if performance falls short of those expectations.
Retail
strategy specifies about devising objectives and scope of activities an organization plans to undertaken
Financial objectives Societal objectives Personal objectives
Financial objectives
Profit is not the appropriate measure Return on investment is the appropriate measure Ex: if an organization set a financial objective of making profit of at least $100000 a year, then they need to consider how much she needs to invest to make the $100000, the profit they desires from the investment.
commonly used measure is return on assets (ROA), i.e. the profit return on all the assets possessed by the firm.
Societal objectives
Related
to much broader issues about providing benefits to society Retailer might be concerned about providing employment opportunities for people in a particular area Societal objectives might include offering unique merchandise such as environmentally sensitive products
Personal objectives
Like
self-gratification, status and respect Ex: The owner of a book store may find it rewarding to interact with others who like reading and authors that visit the store for book-signing promotions.
by Dupont to analyze the factors affecting the financial performance of a firm. Method for summarizing the factors that affect a firms financial performance as measured by ROA. Two components:
Net profit margin Asset turnover
Net
profit margin is how much profit a firm makes divided by its net sales. Asset turnover is the retailers net sales divided by its assets.
assesses the productivity of a firms investment in its assets and indicates how many sales rupees are generated by each rupee of assets.
The
and Total Assets of strategic profit model illustrate that ROA is determined by two sets of activities, profit margin management and asset management
ABC
XYZ
used to examine the profit margin management path comes from the retailers income statement, which summarizes a firms financial performance over a period of time
Net
profit = Gross margin Expenses-Taxes Net profit% = Net profit Net Sales
used to analyse a retailers asset management path primarily comes from the firms balance sheet. Summarizes a retailers financial position.
to be considered
Assets
turnover
Return
Issues to be considered
Retailers
and investors need to consider both net profit margin and asset turnover when evaluating their performance Retailer need to consider the implications of strategic decisions on both components of the strategic profit model