[MUSIC] Does retailing have frontiers? Today we will start to discover the new trends in retailing. The environment is changing so much and so fast that we can talk about retailing without frontiers. What is going to happen? What if we're retaining hearing? Being globalization, one of the main characteristics of the new trend. We will start by understanding the different types of growth and strategy we can choose and apply. If you want to be creative. Today is your opportunity. There are four types of growth opportunity that retailers may pursue, market penetration, market expansion, greet and formal development, and diversification. We are going to present them in a graph. Where the vertical axis indicates the synergies between the retailer's present market and the growth opportunity, whether the opportunity involves markets that retailer is presently pursuing or our new market. In the horizontal axis indicates the synergies between the retailers present retail mix and the retail mix of the growth opportunity. What are the opportunities exploit? The retailer's skills in operating its present format or requires a new set of skills to operate. Let us start to explain the different strategies. A market penetration growth opportunity involves realizing growth by directing a force to work, existing customers and using retailers present retailing format. It is the way most retailer are start. This opportunity involves attracting customers from the current target market that do not buy at this moment or get the existing ones to visit us more often or make them buy more in each visit. It can mean also opening more stores in the target market, and keeping the existing ones open for longer hours. Another issue can also displaying merchandise to increase impulse buying and finally, also, training sales people to core selling. That means, selling complimentary merchandise. This is the typical strategy for example, that Starbucks applies. If we talk about market expansion, the second strategy involves using the existing retail format in new market settings. It would be, for example, opening these stores in other regions or other countries. Recently, Amazon has opened in Spain. As I mentioned before in another lesson, Prada is currently in more than 90 countries. The first strategy is greeted formal development, it's an opportunity in which a retailer develops. A new retail format with a different retail mix for the same target market. Multichannel retailing is an example. So we will talk for example about TESCO. It operates several different food store formats that target basically the same target market. For example, Tesco Express is small stores, 3,000 square foot, located close to where the customer lives and work. Then comes Tesco Metro. It can go up to 15,000 square foot. They are very conveniently located in the city center and they do offer as well ready to eat meals. Tesco Super Store up 50,000 square foot also offers non-food products. And finally Tesco Extra, it has more than 60,000 square foot and is a one-stop destination and offers food and non-food product. And the fourth strategy is diversification. Retailer operates a new retail format directed to where a market segment that's not currently served by the retailer. Diversification can be related. That means that the retailer's current target market or retail format, shares something in common with a new opportunity. An example would be buying from the same vendor, opening in similar locations, or using the same ID systems. Most of the fashion groups like Inditex and Cortefiel operate this way. And here, we can also mention the vertical integration. That describes a diversification by retailers into wholesaling or manufacturing. The luxury industry, to control the process of production they are very active in here. At the end of 2015, Chanel for example, bought its supplier of footwear and Hermes, their leather vendor. Diversification can be also unrelated, that means that lacks any commonality between the present business and the new business. Typically, retailers have the greatest competitive advantage when they engage In opportunities that are similar to the present retail strategy. That means, that retailer will be more successful engaging in market penetration opportunity that don't involve entering new market or operating new format. The retail form of development opportunity needs to build on the retailer's reputation and success with its present customer. Multi-channel is the example and when the retailers pursue a market expansion opportunity, they are building on their strength in operating a retail format and apply the competitive advantage, in a new market. Again, international expansion is the main example here. Now that we know what growth strategies we can use. In the next lesson, we will learn how to evaluate this opportunities. [MUSIC]
