importance of strategic planning to retailers

Strategic planning is the formal process firms (should) undergo to develop a plan for how best to compete, understanding the market and the factors that influence it, the needs of the consumer, the relative position of the competition, the firm’s own capabilities, and the financial implications, given required trade-offs.

The outcome of this process, which includes objective setting, situational analysis, customer analysis, tactical planning, and implementation & control, is the development of a strategic (or marketing) plan. The strategic plan is a shared document that serves as the “road map” for how the firm will pursue its strategic objectives, ensuring that the organization is aligned on priorities and action items across all functions.


  • Outline the steps of retail strategy planning
  • Describe the value of an organizational vision and mission
  • Explain how a retail strategy guides the decisions of an organization

Steps of Retail Strategy Planning

Strategic planning is a formal process. Thus, it is marked by specific activities in which firms engage to build a marketing plan, ensuring that the entire organization is aligned on strategic priorities. The actions included in strategic planning are:

  1. Objective Setting
  2. Situational Analysis
  3. Customer Analysis
  4. Tactical Planning
  5. Implementation and Control

Objective Setting

A firm might pursue any number of objectives for any number of reasons. For example, an objective around sales could be expressed by total revenue, total units, or YOY (year over year) growth.

Yet these objectives, though all focused on sales, are not all the same. There are clear difference between those measures and what they might mean for an organization. Further, the measure is only part of the consideration. The stated objective might be made with an eye ultimately on profitability or market share or operational efficiency. Objective setting is not just stating a goal, ambition or target. It isn’t only about WHAT the firm plans to accomplish, such as “grow category sales by 4%” or “increase profit to $150k” or “reduce returns to <5%.” It must also include the plan for HOW the firm can accomplish that goal, which implies WHY the objective is strategically important.

In this way, the objectives listed above might be revised to read:

  • “Grow category sales by 4% by increasing merchandising and promotional activity.”
  • “Increase profit to $150k by introducing new flavors and regional brands.”
  • “Reduce spoilage to <5% by increasing stock rotation in produce.”

As you can see, the specific measurable goal didn’t change. But, each objective now includes language around how it will be achieved. And, in doing so, they imply the organizational priorities, the “why.” By adding this detail, the firm helps the broader organization focus on the activities that support the strategy.

For example, while we could raise prices or reduce product costs or eliminate marketing expenses to increase profit by $150k, the inclusion of “by introducing new flavors and regional brands” informs the organization how the objective is to be met. And, in doing so, we understand that there is value in changing our assortment to provide more variety and popular local items for shoppers. Thus, there’s little room for confusion about what’s important. In this case, it is likely the shopper experience, reflected in variety and local products. Thus, the firm helps the broader organization focus on the activities that support the strategic opportunity and gives it meaning.

Situational Analysis

Situational analysis helps decision-makers in the firm understand what to do and how to do it. At its most basic level, it’s a multi-dimensional consideration of the context (the environment in which we’ll compete), organizational capabilities, customer, and competition. These factors describe the business environment, how our own abilities can deliver value relative to consumer needs, and the likely actions/reactions of our competitive set.

Customer Analysis

Customer analysis is a critical activity that ultimately helps focus marketing and sales resources more efficiently. It includes research into and analysis of consumer behavior, the results of which inform segmentation, targeting, and positioning. Thus, rather than marketing a product or actively trying to sell it across a wide swath of the total population, customer analysis helps break the population into smaller homogenous segments. From these, marketers select the sub-population of potential customers who are the most attractive and most accessible for targeting.

This is based upon both the long-term economic attractiveness of the segment and the firm’s organizational capabilities. In this way, the firm can optimize its marketing mix to position its offerings to meet these consumers’ needs. This both ensures that consumers’ needs are satisfied and creates a virtuous cycle wherein the firm can continue to innovate, developing products that suit its core consumers, despite changing needs and demands.

Tactical Planning

Tactical plans are the short-term actions the firm takes to affect the controllable elements of the strategy. For example, if a firm has the objective to “grow category sales by 4% by increasing merchandising and promotional activity,” a relevant tactic might be to plan robust promotional activity in key seasons. For example, this might mean that merchants engage their vendors in the soft drink and salty snacks categories to support promotions and allocate in-store space for merchandisers or store associates to build displays in advance of the New Year’s holiday or the Super Bowl. It could also mean that the corporate marketing team develops in-store circulars or television commercials to promote sale items around Thanksgiving, asking store managers to bring in shippers and high backstock levels to ensure sufficient inventory is kept on-hand. Each of these examples illustrate how a short-term tactical execution supports the broader objective of growing category sales by 4% by increasing merchandising and promotional activity.

Implementation and Control

Implementation and control refers to how the firm puts its strategic plan into place, including how it organizes cross-functionally and communicates priorities. Further, it also includes how the firm tracks progress toward its objectives, measuring performance so that adjustments can be made, if necessary. Certainly, a firm is responsible for managing its controllable variables. But, robust monitoring and control systems help firms react and adjust to uncontrollable variable like changes to the business environment or specific competitive activity.

Strategic planning is a formal process firms (should) undergo to develop a plan for how best to compete, given the business environment, the firm’s own capabilities relative to the needs of the customer and the anticipated actions/reactions of competitors. The outcome of this process is a marketing plan, the “road map” for how the firm will pursue its strategic objectives. It is a shared document to ensure that the entire organization is aligned on priorities and action items, regardless of function.

Visions and Missions

One of the biggest issues for any organization is keeping its members aligned, focused on the most important priorities—those that will deliver strategic objectives. This requires consistent communication, effective management and efficient resourcing. Further, some firms support this by publishing mission and vision statements to provide direction for the organization and to convey its values. While the values may be aspirational, the direction should communicate the strategic scope of the firm.

But going further, we should make a distinction between mission and vision statements. They are not the same. Mission statements describe what a firm does and/or wants to do now, while a vision statements is intentionally aspirational and describes what the firm hopes to do and be in the future. A mission statement describes the critical processes and performance that satisfies a specific customer. A vision statement is future oriented, meant to inspire. It often describes a future where the firm redefines the industry and benefits society overall.

For example, PepsiCo publishes this mission statement:

As one of the largest food and beverage companies in the world, our mission is to provide consumers around the world with delicious, affordable, convenient and complementary foods and beverages from wholesome breakfasts to healthy and fun daytime snacks and beverages to evening treats.

We are committed to investing in our people, our company and the communities where we operate to help position the company for long-term, sustainable growth.

By contrast, their vision statement is:

At PepsiCo, we aim to deliver top-tier financial performance over the long term by integrating sustainability into our business strategy, leaving a positive imprint on society and the environment. We call this Performance with Purpose.

It starts with what we make—a wide range of foods and beverages from the indulgent to the more nutritious; extends to how we make our products—conserving precious natural resources and fostering environmental responsibility in and beyond our operations; and considers those who make them—striving to support communities where we work and the careers of generations of talented PepsiCo employees.

Thus, the key distinctions between the two documents are time, orientation, and function. A mission statement is current and/or future-looking, whereas a vision statement is always future-looking. Mission statements deal with what we do and vision statements deal with what we aspire to be. Lastly, while mission statements function for internal communication and alignment, vision statements function as inspiration.

Despite their differences, both mission and value statements communicate the strategic scope of the firm.