EXECUTIVE SUMMARY
Kmart was the largest retail discount with competitors such as Wal-Mart continually increasing their profit, Kmart's market share has dwindled to 13% and continues to decline. Wal-Mart's early use of IT within the industry was a major factor to Wal-Mart rise about Kmart and the fall of this once mammoth retail chain. Wal-mart was the first within the industry to operate on a large-scale format, operate a computerized inventory system, use bar codes and wireless scanners, allow electronic data interchange with suppliers, and expand around central distribution centers.
With its recent Chapter 11 bankruptcy filing and the once loyal customer going to their competitors, it does not seem as though they can find any key strengths to attract customers or potential shareholders. Kmart needs to focus on their strongest competitive advantagetheir private brand labels such as (Martha Stewart Everyday, Jaclyn Smith, Disney, and Sesame Street) and a value-for-the-money proposition on all the products that the store carries.
The competition of Wal-Mart's low prices is a weakness for Kmart, because they are unable to match these prices. Another weakness is their stores are considered old and outdated, their distribution systems is not very efficient. Kmart does have some opportunities that could improve their sitituation, with the purchase of the IBM systems this will give them an improvement in customer relations and processing, update the old store with a new look, increase advertising of their strongest brands, work on developing a new supply chain management that can handle data efficiently, this will eliminate unnessacerry inventory in house. If Kmart puts these opportunities in place they might be able to stay in the game.
With Kmart coming out of Bankruptcy and acquiring Sears for 11 billion was a bold move which should position them as the number three discount realter. The key to this merger is they should be able to maximize their cash flow and they should be able to capitalize on cross selling of the exclusive priviate brand that each store currently sells.
Company History
Sebastian S. Kresge founded the S.S. Kresge Corporation, the predecessor of Kmart, in 1899 in Detroit, Michigan. Kresge's first retail establishment. The store grew into a chain known as S. S. Kresge. By 1912, the chain operated 85 stores. By the 1920s, Kresge operated larger stores that offered a wider variety of merchandise and pricesprecursors of the modern discount store. The first Kmart opened in 1962.
The top two reasons for such success in ranking first in retail store market, is because Wal-Mart is convenient globally and so are there prices in the competitive market . Wal-Mart has three segments which are superstores, discount stores, and Sam's Club stores, all of these are scattered in the United States, Canada, Mexico, Europe, Brazil, and Asia. One downfall was from Sam's club because too many were opening all over internationally it decreased the number of customers per location. Overall despite the company's decline on Sam's club sales, the Corporations did well over all with the figures brought in and conditions.
Kmart is a huge vintage company that had peeked at one time and now is
Wal -Marts' major competitors are the Kroger co. #2 in annual sales, Albertsons' Inc. #3, Safeway,Inc. #4, and Costco Wholesale Group #5. Now even though Wal- Mart is leading the way in total sales the #2 and #3 businesses lead in way with total # of stores. The Kroger Co. has 3,302 with Albertsons at 2,476 stores nationwide. Wal-Marts total sales for that year alone was beating its 2nd place competition alone by more than 80 billion dolla...
Wal-Mart’s competitive environment is quite unique. Although Wal-Mart’s primary competition comes from general merchandise retailers, warehouse clubs and supermarket retailers also present competitive pressure. The discount retail industry is substantial in size and is constantly experiencing growth and change. The top competitors compete both nationally and internationally. There is extensive competition on pricing, location, store size, layout and environment, merchandise mix, technology and innovation, and overall image. The market is definitely characterized by economies of scale. Top retailers vertically integrate many functions, such as purchasing, manufacturing, advertising, and shipping. Large scale functions such as these give the top competitors a significant cost advantage over small-scale competition.
As revealed by the SWOT analysis earlier Kmart has potential to pull itself out of its current position of facing closure. In order to exploit opportunities and counter threats Kmart needs to build on these competencies to strengthen its position and counter internal weaknesses against the single largest industry threat - increased competition in a mature market.
This paper discusses the strategic problems that led to Kmart's poor performance. The first Kmart store was opened in Garden City, Michigan, in 1962 (the same year that Wal-Mart and Target began operations) by the S.S. Kresge Co., a five-and-dime chain that was founded at the turn of the 20th century in Detroit by Sebastian Spering Kresge. By the end of 1963 Kmart had 63 stores converted from Kresge's. By 1977, Kmart generated nearly all of Kresge's sales, and the company changed its name to Kmart Corp.
Kmart's main weakness was that it had an aspiration to be all things to all people – its dabblings in drug stores, home improvement stores, bookstores, cafeterias and specialty stores in the 1980s and early 1990s seemed to spread the company very thin. This focus on diversification is just one example of how the retailer has often not made the wisest choices when faced with a tight spot. By the 1980s, just before the rise of Wal-Mart, Kmart had become complacent. It believed it would be the king of discount retailing, now and forever.
Our Strategic Issue for SHC is, "How can Sears Holdings Corporation strengthen Kmart's position and regain its competitive advantage? Our recommendations are as follows: 1. Differentiation Strategy: Appeal to low and middle income families with children, Quality clothing and decorating store. 2. Stable & Effective Management: Retention, Value Chain Analysis: Supply Chain, Inventory Control (Product Selection), Technology (Reserve), Overall Consistency, Continue Value Adding Strategic Alliances, Similar to alliance with Joe Boxer. 3. Continue to Evaluate Store Portfolio, Focus on owning more/ Premium space. 4. Meet Customer Expectations, Customer Service, and Continuous Research & Development.
The first Walmart was located in Rogers, Arkansas, it was founded in 1962, by Sam Walton, he called it simply “Walton’s”. At first it started as a small town mom & pop store, and then it grew, the original store is actually now the location for The Walmart Museum.
Walton proved to be a visionary leader and was known for his ability to quickly learn from his competitors' successes and failures. In fact, the creator of Kmart once claimed that Walton "not only copied our concepts, he strengthened them. Sam just took the ball and ran with it". In the 70’s and 80’s K-mart wasn’t going into towns that had a population lower than 50,000 people, so Walton decided that he would put his stores in small towns that all the major retailers were ignoring. As Walton stated, “When people want to simplify the Wal-Mart story that’s usually how they sum up the secret of our success, “Oh, they went into small towns when nobody else would.”” Walton realized early on that he couldn’t build stores in just large cities like his competitors. So realizing this, he built his stores around his distribution centers and warehouses, in which each store was no more than a days drive away.
Walmart is a retail giant that just about everyone in America has purchased something from them. It is a one stop shop for anything that a person could ever need. Walmart stores can be found anywhere in fact most people are less than an hour drive away from a Walmart store. Walmart’s success has put many companies out of business. The chains success is primarily from low prices and using an information technology system to meet customer demands giving them a competitive advantage. Walmart’s first major use of information technology came in 1975 when the company leased an IBM computer system to track inventory in warehouses and distribution centers. Computers have come a very long way since this time and are used almost everywhere. But in 1975 this was cutting edge technology and gave Walmart the competitive advantage over other retailers. Another thing that Walmart used to be revolutionary in their supply chain was the use of scanning barcodes in 1983. Before barcodes objects had to be read by a skilled cashier. With barcodes all that was needed was a quick scan and the computer would do all the work. This greatly sped up checkout time and made tracking inventory and data collection much faster and easier for both customers and the employees. Since this time it has become an industry standard for products.
Overall, the main point of the merger was to help both organizations financially. Since Sears and Kmart were both facing financial deficits and significant declines, this merger was thought to bring about prosperity. However, there was no concrete strategy implemented that would ensure long-term
Should Kmart and Sears keep their own identities and have unique competitive strategies, or should they be combined in some way with a new overall corporate competitive strategy? Please defend your answer.
The benefits or competitive advantage Wal-Mart derived over the years from its supply chain management practices is also covered. The reason Wal-Mart is ahead of their competition is because they invest in technology in the 1980s. This investment paid off in the long run. Wal-Mart invested heavily in IT and communication systems to effectively track sales and merchandise inventories in stores across the country. They have set up own satellite communication in 1983. Employees at the stores have the ‘Magic Wand’ at hand. These barcode scanners allow you to check the prices of items at that particular store by scanned the barcode on the product. This is especially helpful when there is clearance that isn 't always marked and sometimes clearance items are cheaper than they
Walmart is the world’s largest retailer. Its revenue was considered as GDP it would be 23 countries ahead of Sweden. Walmart has 4 different segments Walmart stores, Sam’s club, international, and other private labels. Walmart has great strengths like efficient supply chain cross docking and inventory management, service innovation, strong penetration and is the world’s largest private satellite communication system. With every company they also have weakness like poor public image, unable to adapt internationally and strict labor laws. Walmart have come across some great opportunities over the years. They have opportunities like globalization in the middle class globally, e-business and inorganic growth leading to consolidation. They have also encounter some threats