Chapter 2

Location Selection and Human Resource Management

Learning Objectives

Factors affecting the location of retail outletRetail location research and techniquesImportance of human resource managementRetail organization designs and structures

Learning Objectives

Developing employee’s skills & commitment andMotivating employees

Factors in The Location of Retail Outlet

Search for good Location siteAssessment of the viability of the siteAssessment of other Micro Factors

Details of Actual /Potential Customers

Numbers by demographicsEarnings through income/employment by occupation, industry, trends, purchasing powerPattern of spendingDemography in terms of population growth , density and trendsLife style trends

Accessibility factors

Visibility of sitePedestrian flowsBlspontaneouslyarriers in the from of railway tracks, rivers etcType of location zoneInfrastructure such as road conditions and network linkParking facilities

Competitors’ issues

Amount and level of competitionNumber of competitors and types of competitionSaturation indexProximity to competitors, traders, market and brand leaders

Cost factors

Building costsRental costsRates payableDelivery costsInsurance costsRates of labor

Retail Location Research and Techniques

David Huff’s Model and Centre of Gravity SimulationComputerized Simulation ModelsTrade Area AnalysisMultiple regression method

David Huff’s Model and Centre of Gravity Simulation

This method is suitable for taking decision related to locating a single warehouse or retail siteAbove method is based on Newton’s Law of Gravity

Center of Gravity Model

Huff’s Model- FormulaPij = Sj÷Tij

b

n ∑ j=1 Sj ÷Tijb

Where,Pij = Probability of a customer at a given point of origin

‘I’ will travel to a particular shopping centre jSj = Size of the shopping centre jTij =Travel time taken from customer’s starting point to

the shopping centreB= An exponent to Tij reflecting the effect of travel

time on different kinds of shopping trips

Evaluation of Huff’s Model

Model can be used by retailers to define their trade areas and forecast salesIts is best suited when the number of stores with obtainable data are smallIt takes into consideration the ‘ issues of competition and customers’ distance time to the shopping store

Suitable in situations involving a single warehouseThis model is not designed to cope up with the difficulties involved in determining how many warehouses should be used and where they should be lactated in distribution system

Limitations of Huff’s Model

Computerized Simulation Models

To overcome the problem of identifying the locations of multiple warehouses, a computer simulation approach will be required.Only a computer simulation approach can be used to process the large amounts of data for each of the many possible configurations of numbers and locations of warehouses

Trade Area Analysis

Analyzing the addresses of credit card holdersShopping centre intercept surveyTrade are data can be used by retailers in order to communicate or create mailing lists, evaluate a store’s market positioning, measuring competitive customer bases, identifying the market potential etc.

The Analog Approach -Steps

A. Define the current trade are by using the customer spotting technique

B. Matching the characteristics of the current store with potential new store location to determine the best retail site

Not always each to find analogous situationsThe weaker the analogy, the more tough will be the location decisionThe approach cab be used by a retailer having fewer number of outlets

The Analog Approach –Limitations

Multiple Regression Method

1. Select appropriate measures of store performance such as per capital sales or market share

2. Select a set of potential and prediction variables

3. Solve the regression equation and use it to project performance for future sites

y = a =b1x1 + b2x2+…….+bmxm+bm+1Xm+1+….bnxn

Where, y= store salesX’s = independent variables concerned

with the characteristic of each store and characteristics of the trade area (population and competition)

Multiple Regression Method

Meaning of Human Resource

“the total knowledge, skills, creative abilities, talents and aptitudes of an organization’s workforce, as well as the value, attitudes and beliefs of the individual involved.”

“the planning, organizing, directing and controlling functions for the purpose of employing , developing and compensating human resources leading to the creation and development of human relations within the organization with the intention to contribute proportionately to the individual, organizational and social goods.”

Meaning of Human Resource Management

Competitive advantage through effective HRM

Cost advantagesIncreased motivation and effortGood customer serviceHigh job satisfaction less employee turnover

Employee Productivity

E.P. = Retailer’s Sales or ProfitTotal no. of employees

Employee Turnovercan be expressed at the rate of change in

the employers of retailing firm during a definite period

Merchandise Management

Buying merchandiseControl merchandisePricing merchandise

Store Management

Recruit, select and train store personnelMaintain stores, locate and display merchandiseRepair and alter merchandiseTake physical inventoryPrevent inventory shrinkages

Operations Management

Carry out promotion activitiesManaging human resourcesDistribution of merchandiseFinancial control technique

Strategic Management

Develop retail strategyIdentify the target market and workout retail formatIdentify location siteDesign suitable organization structure

Retail Organization Structure

Determine the tasks to be performed by the retailing firm

1. Strategic management2. merchandise management3. Store management4. Operations management

Considerations of Organization Design

Focus on specializationMatching authority and responsibilityWork out the reporting relationshipsMatch organization structure to retail strategy

The extent or degree to which the decision making is to be centralized Approaches used to co-ordinate merchandise and store management activities when they are divided into different organizations within the firm

Specific Organization Design Issues

Benefits of Centralized decision making

Reduction in costCompany achieves lower prices from suppliersBest people to make decision for the entire teamUse of standard policies and guidelines across stores

Limitation of Centralized Decision Making

Difficult for retailer to adopt local market conditionsSlow response to local competition and labor markets

Co-ordination of Stores and Merchandise Management

1. Increase buyers contact with customers2. Increase customer contact and

communication3. Involve employee to be responsible and

assign the job of coordinating buying and selling activities

4. Improve coordination between by buying and selling activities

Motivation

“Motivation cab be defined as an unsatisfied need which creates a state of tension or disequilibrium, causing the individual to move in a goal directed pattern towards restoring a state of equilibrium by satisfying the need.”

Organization Culture

A set of values, traditions and customs in the form of unwritten guidelines which are passed on by older employees to newer onesvalues such as quality, customer orientation, commitment, discipline, integrity, learning, transparency, respect, customer orientation etc.

Firms’ Policy and Supervision

Written policies clearly indicating what employees have to do and also have supervisors enforce these policies

E.G. Most of the retailer have a written policy clearly specifying that good once sold cannot be return or exchanged and circumstance when such goods could be taken back by the retailer

Developing Employee Skill and Commitment

Develops employee skill through selection and trainingEmpowering employeesDeveloping partnering relationships with employees

Emerging Trends in Retail HRM

Diverse workforceCultural awareness Interpersonal skillsSupport groupTechnology to replace time consuming monotonous job

Building the HR Scoreboard

1. Clearly articulate the business strategy2. Build on the strategy map3. Link HR strategy map to the overall

corporate strategy

Employee Behavior and Organization Benefits

Summary

The factors which affect the location decision making process are search for good location site, access the viability of site and micro factors such as pedestrian flows etc.The various retail location research techniques include David Huff’s Centre of Gravity Simulation, Computerized simulation model, Multiple regression method etc.

Summary

The strategic objective of HRM is to match the capabilities and behaviors of employees with the goals of the retailing firmUsage of HR scorecard can help HR professionals and the retailing firm to translate corporate strategy and execute it by creating HR initiatives and systems

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