The sample was nearly evenly divided between small retailers which perceived increased levels of environmental hostility as a result of Wal-Marts arrival and those local retailers that felt the discount chains entry had no impact. Previous analysis of the data indicated that there were significant differences between these two groups so the sample was split for the purposes of this study.
Retailers Impacted by Wal-Mart
The factor analysis yielded six patterns of strategic behavior with eigenvalues greater than one (see Table 1). Factor one -- "presentation and preparation" -- represents a pattern of strategic behavior in which a significant priority is given to the presentation of high quality merchandise by well-trained employees. The factors loading on the second factor -- "specialty products and service" -- depict a strong emphasis on offering unique products and better pre-purchase service. Factor three -- "heavy discounting"-- represents a straightforward strategic behavior. Retailers emphasizing this factor use frequent sales to maintain a low price image. Small retailers emphasizing the fourth factor -- "high priced convenience"-- carry private label brands, offer superior buying convenience, and are visible in the community through their civic involvement and advertising activities. As one would expect, these retailers also carry higher priced merchandise. Retailers emphasizing the fifth factor -- "Innovative pricing" -- strive to maintain low prices by monitoring their competitors prices, carrying lower priced merchandise, and by using co-op advertising. The final factor -- "product variety" -- depicts a strong emphasis on carrying a wide variety of products. It also appears these retailers use computers to help monitor their sales and inventory.
Factor Analysis of Competitive Methods Used by Small Retailers in Hostile Environments
|Competitive Methods||Factor 1||Factor 2||Factor 3||Factor 4||Factor 5||Factor 6|
|Store layout and merchandise presentation||.80||.74|
|Maintaining high inventories||.79||.74|
|High quality merchandise||.74||.77|
|Monitoring competitors promotional activities||.89||.85|
|Stocking unique products||.84||.84|
|Depth of product line||.42||.50|
|Sales promotion programs||.64||.59|
|Pricing below competitors||.60||.65|
|Stocking highly recognized products||.48||.68|
|Stocking private label brands||.77||.64|
|Carrying higher priced products||.52||.43|
|Concerted effort to be innovative||.68||.49|
|Monitoring competitors pricing||.68||.59|
|Carrying lower priced products||.58||.60|
|Use of co-op advertising||.55||.60|
|Carrying a variety of products||.77||.66|
|Use of computers to monitor sales and inventory||.64||.66|
The items comprising each of the six factors were then used in a cluster analysis. A four cluster solution (with a pseudo F statistic of 43.2 and a CCC of 4.2) was produced. Table 2 provides a narrative of the competitive profiles of each cluster. Cluster 1 -- "Innovative Pricers" -- firms rely on innovative pricing along with high priced convenience. They also feature effective merchandise presentation and preparation. Cluster 2 -- "Variety Discounters" -- firms depend heavily upon product variety with a tendency to compete on pricing. Cluster 3 -- "Target Marketers" -- firms seek to service specific niches or markets, relying on finding the right niche rather than offering low prices or variety. Finally, cluster 4 -- "Aggressive Pricers" -- firms compete within specific markets on the basis of price. Interestingly, these merchants are also willing to offer superior buying convenience.
Cluster Profiles of Merchants in Hostile Environments (N = 122)
Cluster 1: Innovative Pricers (n = 51 )
The competitive orientation of this group seeks to emphasize both innovative pricing policies and superior buying convenience.
|Cluster 2: Variety
Discounters(n = 28)|
The competitive orientation of this group is straightforward. Merchants place a major emphasis on product variety. Conversely, they do not emphasize high priced convenience or niche marketing.
|Cluster 3: Target
Marketers (n = 31)|
The competitive orientation of this group seeks to service specific market segments or niches. These firms are not concerned with low prices or variety.
|Cluster 4: Aggressive
Pricers (n = 12)|
The competitive orientation of this group seeks to emphasize aggressively pricing programs to specific market niches. These merchants also strive to offer buying convenience.
The four identified strategic patterns were then compared on the three performance measures (net income after taxes, total sales growth over the past three years, and overall store success or performance). As the ANOVA results indicate (see Table 3), significant differences exist on all three performance measures. The Tukey-Kramer paired comparisons also produced identifiable patterns.
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