CRA Retail Strategic Analysis 3 — Questions and Answers
Question 1: A retailer's 'assortment breadth' refers to:
- The number of units stocked per SKU
- The total number of distinct product categories offered (Correct answer)
- The depth of size and color options within a category
- The ratio of national brands to private labels
Correct answer: The total number of distinct product categories offered
Assortment breadth measures the variety of different product categories a retailer carries, while depth refers to options within a category.
Question 2: Which strategic framework evaluates industry attractiveness by analyzing suppliers, buyers, substitutes, new entrants, and rivalry?
- PESTEL analysis
- Porter's Five Forces (Correct answer)
- BCG Matrix
- Ansoff Matrix
Correct answer: Porter's Five Forces
Porter's Five Forces assesses competitive intensity and profitability potential through five structural forces shaping an industry.
Question 3: A retailer pursuing an 'everyday low price' (EDLP) strategy would most likely report:
- High sales variance and frequent promotional spikes
- Stable sales with lower average promotional costs (Correct answer)
- Higher gross margins than high-low competitors
- Increased seasonal inventory buildup
Correct answer: Stable sales with lower average promotional costs
EDLP produces consistent sales flow and reduces advertising and markdown costs compared to high-low promotional strategies.
Question 4: In the Ansoff Growth Matrix, selling existing products to new customer segments is called:
- Market penetration
- Market development (Correct answer)
- Product development
- Diversification
Correct answer: Market development
Market development involves expanding into new markets or customer segments with the retailer's current product offerings.
Question 5: Which of the following is a leading indicator of future retail sales performance?
- Last quarter's gross margin
- Year-to-date inventory shrink
- Consumer confidence index (Correct answer)
- Prior year's return rate
Correct answer: Consumer confidence index
The consumer confidence index reflects shoppers' spending intentions and is a forward-looking predictor of retail sales trends.
Question 6: A retailer's 'merchandise margin return on investment' (MMROI) combines which two performance dimensions?
- Gross margin and sales volume
- Gross margin percentage and inventory turnover (Correct answer)
- Net profit and asset base
- Operating margin and traffic growth
Correct answer: Gross margin percentage and inventory turnover
MMROI (also called GMROI) multiplies gross margin percentage by inventory turnover to show margin earned per dollar of inventory invested.
Question 7: When a retailer reduces SKU count to improve supply chain efficiency, this strategy is known as:
- Category expansion
- SKU rationalization (Correct answer)
- Vendor consolidation
- Assortment broadening
Correct answer: SKU rationalization
SKU rationalization eliminates underperforming or redundant items to reduce complexity, lower costs, and improve inventory efficiency.
CRA Retail Strategic Analysis 3
A retailer's 'assortment breadth' refers to: