KMART: STRIVING FOR A COMEBACK
COMPANY:
Kmart Corporation is facing a serious problem with regards to the problem of bankruptcy protection that had allowed it to continue its operation even though it had been delinquent on obligations of more than $4.7 billion owed to creditors, vendors and leaseholders. The bankruptcy< which was filed in January 2002 was the largest bankruptcy in U.S. retailing history and was the culmination of decades of poor strategy execution that resulted in an overall deterioration of Kmart's competitive position in the discount retail industry and a roller-coaster earning history.
Strengths and Weaknesses:
A. Employees
The concern of the company with regards to the attitude and performance of Kmart store managers and associates were adversely impacting shopper visits and loyalty. Hall brought all Kmart store managers meeting. The executive team made it clear that they intended to end Kmart's historically insular, turf-wary organizational culture and adopt a more team oriented atmosphere at both corporate headquarters and in the stores. The company announced its new management development program to help the company develop future store-level and corporate level managers from within its ranks.
The company is criticized for lack of concern in promoting sound management to ensure productivity and efficiency in the process.
B. Customer
It is sad to note that Kmart is unresponsive to customer service. A 1994 Forbes article cited customer complaints of indifferent Kmart employees who, when asked for a specific item in the store, would wave their hand in a general direction. One disgruntled shopper complained "At the superstores in Farmington Hills or Southfield, the help is su...
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...t system and poor supplies chain management The company is threatened by the financial losses and in its inability to remain liquid, solvent and profitable Opportunity for the company is big if it is able to deal with its finances and as well as its product lines.
2 The customers are the lifeblood of the business there is a need to improve its customer service Customer service are poor If customer service is not properly handled, then further losses would mean closure of the company There is a need to assess consumer preferences and choices in order to ensure customer satisfaction
3 Pricing should be low in cost but quality service Poor pricing strategies It is threatened by the problem of its competitor's strategy which gains competitive advantage Opportunity depends on its ability to remain liquid and solid in solving the problem.
siurce:company annual reports
The Corporation has sustained losses and negative cash flows from operations since its inception. The Corporation is exposed to liquidity risk as it continues to have net cash outflows to support its operations.
With minimal aid from interviews with managers and no exposure to the marketing entity of the company, I was able to accomplish much of my findings related to the macro environment of Kohl’s through diligent online research. One of the major changes occurring in the retail industry is online shopping. Substitutes such as Amazon, eBay, and other online retailers are replacing the technically savvy shoppers from ever having to enter a store. Kohl’s competes with these outlets by remaining on the cutting edge of integrated technology to enhance the customer experience shopping their brand. They are currently testing multi-function tablets in jewelry and beauty departments that can be used to demonstrate
Kmart, contrarily, entered behind Wal-Mart as the second largest retailer in the United States after Sears’ reign. They, however, suffered a similar affliction to what felled Sears when Kmart ruled discount retail so heavily that they seemed almost unstoppable. However, with lack of solid knowledge on the business’ purpose and Wal-Mart as a strong competitor, there began a steep decline, along with Sears, that led to filing for Chapter 11 bankruptcy (New York Times 2002).
Over one hundred years ago, an entrepreneur named Sebastian Spering Kresge opens his first retail store in 1899. The store was named Five-and-Dime and was located in downtown Detroit. The store was named Five-and-Dime because everything in the store was priced at either five cents or ten cents. This low price gained him a lot of customers and a lot of publicity. With this new found publicity, in 1912, he opened 85 more stores with annual sales of $10 million. As time went on, the prices have changed to $1 or less, but the business philosophy has remained the same. Around this time, the retail environment was getting very competitive, and the company needed to make some changes to keep up. In 1959, Kresge hired Harry B. Cunningham to become the president of the company. Under Cunningham leadership, the first Kmart store was opened in 1962 in Garden City, Michigan. In 1966, sales in 162 Kmart stores and Kresge stores topped the $1 billion mark and in 1968, the S. S. Kresge aired its first T.V. commercial. In 1976, Kresge made history by opening 271 Kmart stores in 1 year and becoming the first ever retailer to launch 17 million square feet of sales space in a single year. By 1977, nearly 95% of the S. S. Kresge sales were generated by Kmart so the company officially decided to change its name to Kmart Corporations. In 1991, Kmart opened the first supercenter in Medina, Ohio offering a full-service grocery area. In 1996, a complete redesign of Kmart was launched, changing its name to Big Kmart [or BigK] and in 1999, Kmart launch a new internet presence, named bluelight.com [now known as kmart.com]. In 2002, Kmart filed for Chapter 11 bankruptcy protection. (Corpor...
Sears has created a “Financial Crisis” when hedge fund manager Edward Lampert took over control of the company. The mentality of investors of a CFO is an important viewpoint during crisis because it can help streamline process and reduce cost. Retail experience should be dominant the retail in order to feel the pulse of the consumer desires and to determine proper margin levels while eliminating inefficiencies in the organization. According to Marina Strauss of the Globe and Mail, “a sweeping change will be required to improve the retailer’s outlook”. She quoted the (CEO of Sears-Canada) Mr. McDonald saying in a memo that “Our store are too difficult to shop in. We have inconsistent execution…We do not offer the right product in the right market” (STRAUSS M., 2011).
Kmart has many competitive and environmental forces impacting the industry today. As all organizations do some or these forces are opportunities for them while others are threats to the organization. A few of the forces are their rivals or competitors, the substitutes that can be used, and the new entrants into the market.
Kmart's biggest problem is obviously the widespread of Wal-Mart all over the United States. They have to find a way to compete with Wal-Mart's regional distribution centers. These centers ensure the Wal-Mart customers that they are going to get the best product for the best price. Since Kmart does not have these centers they still need to pay all of the fees that deal with shipping and handling. Kmart needs to do something quick. In a recent survey 49% of people said that they would drive right past a Kmart to go to a Wal-Mart. The average Wal-Mart customer visits the store 32 times in a year, meanwhile the average Kmart customer only visits 15 times in a year. They have to be in financial trouble since they are getting pressure from vendors to pay their bills on time.
Kmart is a huge vintage company that had peeked at one time and now is
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.
On January 22, 2002, Kmart filed for Chapter 11 bankruptcy protection becoming the largest retailer ever to do so in U.S. history. Most industry analysts attributed the immediate cause of the company's bankruptcy filing to a dull holiday season and stiff competition from WalMart and Target as the chain's more fundamental problem. But competition wasn't the root cause of Kmart's consistently poor performance. The real reason for Kmart's poor performance is that Kmart never had a marketing strategy. Kmart completely misunderstood its market and was positioning itself in the wrong direction.
First, Nordstrom is unique through its excelling customer service. As a full-service retailer, Nordstrom assists customers in every phase of the shopping process. Because they carry more specialty goods, customers will need and want more assistance leading to increased value of customer service. One of their policies is that they will accept any merchandise that people bring back without asking any questions. As a result, people feel more confident about purchasing products from there, since they can buy something with the comfort and knowledge that Nordstrom has an excellent return
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.
There was no right procedure in training staff and it recruited young inexperienced staff. It also had a disorganized billing system and financial accounts.
Overtime, a combination of poor customer service, messy stores, and lengthy checkout processes have led to the failure of the Kmart and Sears merger. One-time loyal customers, who routinely shopped at these stores, no longer felt appreciated or that the organization desired their business. Since they no longer felt important, customer chose to give their business to more deserving competitors such as Target.
The key issues for K-Mart strategies are finding the right cost level for an opportunity to be aggressive, and differentiating the product for consumer in terms of different consumer and different intangible product attributes. K-Mart and Sears should be combined with a new overall corporate competitive strategy using a cost focus. This may turn out to be the only sensible strategy, and the one which best describes the strategy adopted. Strategies of cost leadership and product differentiation are often described as if they were mutually exclusive you can either pursue one or the other, but not both.