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
According to the Kohl’s Corporation Hoover Report (2014), in the late 1920s, a man named Max Kohl opened a grocery store in Milwaukee, Wisconsin (Hoover Report, 2014, pg. 9). By 1938, Max and his three sons had developed his store into a successful chain and incorporated the business. Max Kohl had experienced enough success by 1962 that he opened a department store right next to his Kohl’s grocery store. In 1972, Max Kohl and his family’s “65 food stores and five department stores were generating about $90 million in yearly sales” (pg. 9) In the same year, the British American Tobacco’s Brown & Williamson Industries (BATUS) purchased 80% of the Kohls’ two operations. Six years later, BATUS proceeded to purchase what remained of Kohl’s. In the early 1980s, BATUS decided that “Kohl’s discount image did not fit in with BATUS’s other retail operations” and decided to ultimately separate the two operations in order to put them up for sale (pg. 9). The president and chief executive officer at the time, William Kellogg, “and two other executives, with the backing of mall developers Herbert and Melvin Simon, led an LBO (leveraged buy-out) to acquire the chain’s 40 stores and a distribution center” (pg. 9). By the time Kohl’s managed to go public in the year 1992, they “had 81 stores in six states, and sales topped $1 billion” (pg. 9). At this time Kohl’s began its expansion and within the next five years managed to top sales at two billion dollars. Kohl’s then “acquired a former Bradlees store to enter New Jersey and opened stores in Washington, DC; Philadelphia; New York; and Delaware” (pg. 9). The following year Kohl’s managed to expand into Tennessee by adding new stores. The company named Larry Montgomery CEO in 1999 and short...
This nationally recognized mass merchandiser that stood as Kohl’s other leading adversary in the market has everyday low prices that were able to compete with Kohl’s promotional events. Wal-Mart also outdid their competition when it came to number of store locations around the country. The weaknesses of this reputable company come to light when shoppers are looking to buy clothes and are not presented with nearly the selection that the department store can offer. Also, their service is not considered to be as helpful as the department stores that can input more expertise when trying on
Without good customer service and keeping your promises, your company would have loyal customers. According to 5 Focusing Steps, “If you’re not yet sold on the idea, consider that a 2 percent increase in customer retention has the same effect as decreasing costs by 10 percent. Not only that, but it costs over six times more to get a new customer than it does to keep one.” Customer satisfaction should be a golden rule of all companies.
in low service for clients and affected employee morale seriously, and the managers had to
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).
This goal of this analysis is to shadow some light on K-Mart and Target and with the help of extensive research. In this analysis we can find out what each company can do, where they lack and what has to be done in order to keep the company profitable and alive. Thus, we will try to look at the Target wholly and then it will identify a successful business strategy and thus show that the strategy has moved the Target into one of such leaders in the industry. When we will take a look at K-Mart and then we will move on the identification of a failed business strategy and then show that the strategy has been holding this company at the back. After that we will try to perform a cross- case analysis by contrasting and comparing the case studies on the points of difference and the parity. This will help us in looking at a side by side difference of a SWOT analysis and also the five force analysis.
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.
Read the short Kmart case study on pages 161-162 carefully and answer the following questions:
Kmart is a huge vintage company that had peeked at one time and now is
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. Also, on the strategic side, there are issues of where stores were located. On the whole, Kmart stores did not seem to be sited as well as the stores of the competition. Then there was the issue of technology. While Wal-Mart was becoming the relentless efficiency engine that we know today by investing in technology and streamlining the supply chain, Kmart held back. As Wal-Mart developed an infrastructure that enabled it to lower prices, Kmart slipped into a price disadvantage. This paper discusses these strategic problems that led to Kmart's poor performance.
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.
Nordstrom’s retail positioning strategy provides it with the competitive edge it needs to differentiate it from competitors who also serve similar markets.
The most significant component of Wal-Mart’s success was the way it treated its employees or as they are known as in Wal-Mart “associates”, the beliefs or rules of the Wal-Mart culture makes associates want to provide excellent service to its customers. During visits Walton encouraged associates to pledge to greet customers and ask if they assist them or walking into a Wal-Mart store customers are met by a greeter, an associate who welcomed them and handed out shopping carts (Farhoomand, 2006).
Some core competencies that must be exploited are: Brand Kmart is an existing well-known and trusted national brand in USA Kmart has private label and designer clothing that is well endorsed Infrastructure Kmart has a large number of well-located, low-cost, leased stores in urban far away from competitors through out the country ( Appendix B ). Staffing Confidence by the market in Kmart is created by the achievements of its staff and management. With the turn-around strategy in place, new blood has been put into the top management structures. In any renewal there will be retrenchment as unprofitable stores are closed. This can be used as an opportunity to retain and move high performing staff to where they are needed and to get rid of non-performing staff. Anderson the chairperson of Kmart is well supported by Wall Street and the board of Directors. These new staff members enter the company with needed skills to address problems in certain areas that previously were poorly managed such as inventory control and merchandising. Store locations, layout and Performance Stores conveniently located away from competitors like Wal-mart and Target therefore less to compete for customers face-to-face. There are 250 non-performing stores who have already been identified as being more cost effective to close than continue with running costs. Expertise exists in-house for the planning of store layout and appearance to meet different customer segments. This concentration of effort will enable focus on key areas Technology Kmart has already invested in good retailing systems. The system can be use to control inventory, supplier payments, track customer buying and monitor income versus profit margins across all stores. Research and Development The planning department is well established and in cross-functional to provide various perspective. The planning department to ensure that strategies at all levels are executed can further use the access to past data and knowledge of changes in buying patterns. Financial Backing JP Morgan Chase has agreed to support Kmart to avert the current threat of closure due to bankruptcy.