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Kmart pp2
- 1. Kmart Strategic Management CaseStudy February 24, 2015 Bailey Hopper, Justin Howard, Taylor Houle, Christopher Goggin, Jared Hofer, Ge Changlin, & Iesha Hall
- 2. The Start ofKMart • Founded in 1899 • Filed Chapter 11 in 2002 • Acquired by Sears in March 24, 2005 • Sears Holdings Company is located in Hoffmann Estates, IL.
- 3. Sears Holding Corporation (SHC) •Kmart and Sears merger in March 24, 2005 • There are operations in three business segments: Kmart, Sears Domestic, and Sears Canada.
- 4. SHC & Kmart’s Strategy? “Focuson a member-centric retailer leveraging Shop Your Way and Integrated Retail”
- 5. Mission "We are committedto improving the lives of our customers by providing quality services, products and solutions that earn their trust and build lifetime relationships." Vision Create lifelong relationships built on trust.
- 6. 5 Key Pillarsfor Kmart’s Strategy (Core Competencies) 1. Creating lasting relationships with customers by empowering them to manage their lives. 2. Attaining best in class productivity and efficiency. 3. Building our brands. 4. Reinventing the company continuously through technology and innovation. 5. Reinforcing “The SHC Way” by living our values every day.
- 7. The plan tosucceed in transformation? • “Leveraging Shop Your Way and Integrated Retail as the foundation of our member-centric business model • Realignment of our of businesses to become a more focused company • Enhancing our financial flexibility to support and fund our transformation • Allowing shareholders to participate in value creation actions”
- 8. Is the strategyworking? Analyzing SHC/Kmart’s Financial Data
- 9. Current Price 52Week High Market Cap. Existing # of Shares Sears Holding $32.94 $48.25 $3.51 Billion 106.5 Million Stock Information 2013 2012 2011 2010 2009 Revenues $36,188 $39,854 $41,567 $42,664 $43,360 Net Income (loss) ($1,365) (930) (3,113) 122 218 Total Assets $18,261 $19,340 $21,381 $24,360 $24,901 # of Stores 2,429 2,548 4,010 3,949 3,862 SHC (monetary data in millions)
- 11. 5 year Total SearsHolding Revenues $164.6 Billion Net Income (loss) ($5.07 Billion) Total Inventory Total Sq. Ft. Inventory/Sq. Ft. Sears Holding $7.56 B 281,960,000 $26.81/sq. ft. Inventories
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- 14. Demographic Gender Female 59% Male 41% MaritalStatus Married 46% Unmarried W/ Partner 9% Single 23% Divorced 16% Widowed 6% Age Range 18-24 7% 25-34 13% 35-44 15% 45-54 24% 55-64 21% 65+ 20% Income < $25,000 33% $25 –$ 75,000 56% >$75,000 11%
- 15. Economic Nature and directionof the economy in which a firm competes or may compete • Economic Conditions in North America & Canada • Declining Gas Prices • Consumer Price Index • The Recovery in the Real Estate Industry • The decline/growth in Unemployement
- 16. Sociocultural • Hassle freeparking • Rewards program: Kmart offers loyalty cards that give customers points. Users gets $1 in store credit for every $100 spent • Kmart targets ethnic customers • 15.2% are Hispanic 15.4% are African American 4.8% are Asian Pacifier • Approximately 35% of Kmart’s workforce represent multicultural minorities • 53% of the workforce is made up of females and 47% males • Kmart works with minority owned vendors • Kmart promotes battery recycling
- 17. Global • Canada • Firststore built in 1929 • In 1983, Company restructuring and closed 5 Montreal store • In 1998, Financial difficulties, sell 112 stores to sellers (HBC) • Australia • There is 15 stores in New Zealand (Richmond Nelson) • Eastern Europe • Purchased 13 communist department stores • There are large troubles in US caught up with its European operation later in the decade. • The K-Mart sold its 13 stores to force operation in North American • Mexico • There are 4 stores in suburbs of city; half of store area is devoted of groceries • In 1997, sold to Mhyper Market.
- 18. Technological • Retail relieson computer systems to process transactions, summarize results, and manage the overall business. • Technology is reshaping business • Internet is offering customers more shopping options. • More competition • Web-based markets Amazon.com • Television Shopping Network • Barcoding and computerized billing systems • Point-of-sale systems increase sales • Cash, check, credit- and debit-card payments.
- 19. Political /Legal • Handling ofhazardous waste • “Failure to warn” • Sales Tax • Federal Food Stamp Act • Asbestos regulation • Accurate weights and measurements • Price-fixing (colluding with other big-box retailers) • Alcoholic Beverage Control Act • Sales of expired products • Federal labeling and packaging requirements • Disabled access (ADA / Unruh Act) • Exclusive business dealing (special deals for specific vendors) • False advertising • Tobacco regulation
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- 21. Threat of Substitute Products Threat of New Entrants Threatof New Entrants Rivalry Among Competing Firms in Industry Bargaining Power of Buyers Bargaining Power of Suppliers Six Forces Model of Competition
- 22. Threat of NewEntrants Low • Barriers of entry are relatively high in discount retail industry. – There is a lot of investment and capital needed to open large discount stores • Difficult to create reliable suppliers • Economies of scale • Difficult to establish brand loyalty with new entrant
- 23. Bargaining Power ofSuppliers Low • Large retail stores have a diverse range of suppliers • There are multiple suppliers that offer substitutes for products • Switching costs are low for retailers • Buying in bulk
- 24. Bargaining Power ofBuyers High • Consumers are extremely price sensitive • Low switching costs • Little brand loyalty when it comes to bargain shopping • Large number of retailers
- 25. Threat of SubstituteProducts High • Customers are price and quality sensitive of products. • Switching costs are low. • However, in bargain retail, the cleanliness of stores, number of products, and variety matter.
- 26. Rivalry/Competition High • Many retailstore with similar products, quality, and prices • Walmart #1 US retailer and Target #4 • Wal-Mart and Target have defined strategies – Wal-Mart Low cost – Target Differentiation
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- 28. Competitor Analysis Walmart Improve customerexperience Beat competitors prices Expand product assortment Future Objectives •How do our goals compare to our competitors’ goals? •Where will emphasis be placed in the future? •What is the attitude toward risk? Kmart n Increase market share in the retail industry n Increase customer retention among target audience n Increase overall sales
- 29. Competitor Analysis Walmart • Improvingits inventory efficiency and it's planning to open more checkout lines • Wal-Mart rolled out a new app last year called Savings Catcher, which helps shoppers compare prices on merchandise • Make sure customers are not overwhelmed by different choices Kmart • Engage customers through brand repositioning to gain a competitive advantage with the target audience • Enhance in-store and online customer experiences by improving customer service, communication, and engagement efforts • Identify and accommodate customers’ needs and demands by implementing a new pricing strategy Current Strategy • What are companies doing? •What would the companies like to do?
- 30. Competitor Analysis Walmart • Developbetter employee and employer relationship • Improve supplier empowerment • Sell better quality products KMart Industry • Provide value to customers • Define knowledge, systems, tool and processes capabilities that create differentiated value • Select a set of product and services that best leverage unique capabilities • Choose a coherent way to competing • Develop a “must have” item for particular consumer segment • Revive company brand be bringing outsiders to refresh store’s brand • Revamp ordering and supply management Assumptions •What does the competition believe about the current industry and about what the companies themselves need to be concerned with?
- 31. Competitor Analysis Walmart KMart Capabilities •Whatare the competing firms capabilities and strengths • Sells family apparel, household items, health and beauty products, household needs, electronics, toys, fabrics and crafts, lawn and garden, and jewelry. • Operates in U.S. and 9 other countries. • Offer lowest prices in bargain retail market. • Offer special layaway programs • Located in urban areas. • Exclusive brands, and brand loyalty.
- 32. Competitor Analysis n KMart’skey competitive advantages are: Future Objectives Current Strategy Assumptions Capabilities Response •Where do we have a competitive advantage? •What does Kmart •want to continue doing to gain market share over the competition? • Valuable real estate • Shop Your Way Rewards • Exclusive brands • Martha Stewart, Nicki Minaj, Joe Boxer, Route 66, etc.
- 33. Value Chain Analysis Operations Outbound Logistics Support Activities PrimaryActivities Firm Infrastructure Human Resource Management Technological Development Procurement Inbound Logistics Marketing &Sales Service
- 34. Value Chain Analysis PrimaryActivities Support Activities Inbound Logistics • Sears Holdings Corp. has a network of 45 distribution centers • 100 local delivery operations to make sure all stores remain stocked and that online orders are fulfilled.
- 35. Value Chain Analysis PrimaryActivities Operations Support Activities Inbound Logistics • Implementation of new operating software to support their new “Shop Your Way” technology
- 36. Value Chain Analysis Omin-Channel FBS (Fufilled by Sears) Partnering with UPS to ensure fast delivery and availability on products Primary Activities Operations Outbound Logistics Support Activities Inbound Logistics
- 37. Value Chain Analysis •Social Media Sites & E commerce site • Retail Stores that offer both Kmart and Sears products • Promotional Events • Layaway Program Primary Activities Operations Outbound Logistics Support Activities Inbound Logistics Marketing &Sales
- 38. Value Chain Analysis •In store purchasing or Kmart.com • Shop Your Way Program • Customer Service Contact • Sears Auto Centers Primary Activities Operations Outbound Logistics Support Activities Inbound Logistics Marketing &Sales Service
- 39. Value Chain Analysis •Managed By Sears Holding • Supplier Diversity – minorites and women owned enterprises • RIM (Retail Inventory Method) • MyGofer Primary Activities Operations Outbound Logistics Support Activities Inbound Logistics Marketing &Sales Service Procurement
- 40. Value Chain Analysis •Mobile App/Digital Retailing • Omin-Channel-COOL (Customer Order Orchestration Layer) • Investing in Hadoop Primary Activities Operations Outbound Logistics Support Activities Inbound Logistics Marketing &Sales Service Procurement Technological Development
- 41. Value Chain Analysis •Work Your Way Program • Sears Training Centers • Rewards and Recognition for Diverse Hiring Primary Activities Operations Outbound Logistics Support Activities Inbound Logistics Marketing &Sales Service Procurement Technological Development Human Resource Management
- 42. Value Chain Analysis PrimaryActivities Operations Outbound Logistics Support Activities Inbound Logistics Marketing &Sales Service Procurement Technological Development Human Resource Management Firm Infrastructure • Publicly traded company • Member centric and integrated retail • Continuing to reinvent the company • Provide quality services and products
- 43. Value System Analysis SupplierValue Chain Firm Value Chain Channel Value Chain Buyer Value Chain Kmart makes sure only quality products are received from suppliers. The partnerships it has to be the sole provider of certain brands creates a dependent and strong relationship with suppliers and encourages continuous quality products and quality displays to sell them.
- 44. Value System Analysis Kmartis a member-centric integrated retailer that offers a wide range of products and speciality items from clothing, to hardware tools. And they are the home of the “Shop Your Way” rewards program Supplier Value Chain Firm Value Chain Channel Value Chain Buyer Value Chain
- 45. Value System Analysis Kmarthas partnered with numerous brands to offer a wide variety of products from Craftsman tools to Joe Boxer clothing. These quality brands have built high reputations for themselves and have high marketability. With these reputable brands only the highest quality products are sold to consumers. Supplier Value Chain Firm Value Chain Channel Value Chain Buyer Value Chain
- 46. Value System Analysis Allof Kmart’s products are offered on their website which also allows them to sell products that they do not offer in stores. Customers have the option of using the year round layaway program. Consumers also have the ability to sign up for Kmart’s rewards programs. Sears is moving more into the commercial real-estate market, using the land gained from closing unprofitable stores. Supplier Value Chain Firm Value Chain Channel Value Chain Buyer Value Chain
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- 48. Strengths • Customer rewardssystem – Shop Your Way • Layaway program • Employee benefits • Wide variety of products • Valuable real-estate • Located in concentrated urban areas.
- 49. Weaknesses • Stores arepoor quality – Bad lighting, dirty • Poor employee relations • Poor product quality • Overleverage financial position • Closing of store have affected brand
- 50. Opportunities • Falling energycosts • Expanding foreign markets • Acquisition of outside brands/products/celebrity endorsements • Improving economy/Lower employment • Rising minority population • Acquisitions of newer brands and labels can improve sales • Private label growth
- 51. Threats • Competition • Reductionin government subsidies • Reduced negotiation power with suppliers due to reduced size • Economic Downturn • Data breach/payment information theft
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- 53. Strategic Alternatives • Productdevelopment • Customer Relationships • Invest in technology
- 54. Strategic Alternatives Product Development AlternativeRank Pros Cons Develop more differentiated product lines 2 Moving into a more differentiation market Better qulaity products Expensive for research and endorsements Sell/Lease property 1 More income and reduced expenses Losing the tradition sense of operation Maintain current operation with product lines 3 No increased expense and develop the current market Won't be able to attract new customer and continue to lose market share to competitors
- 55. Strategic Alternatives Customer Relations AlternativeRank Pros Cons Maintain current relations with buyers 3 Maintain relationships with customer Inability attract new customers Increase staff and training programs 2 Happier customers and staff due to better knowledge Expensive and time consuming to train and educate Increasing the quality and cleanliness of the store/remodeling 1 Able to attract new customers and gain a better reputation Expensive
- 56. Strategic Alternatives Invest inTechnology Alternative Rank Pros Cons Invest heavily into the Omni channel networks 1 It is the way of the future and it will keep Kmart more competitive Expensive and time consuming Increase the security to protect against hacks 2 Gain customer trust Expensive Maintain current technology 3 Stick to what you know mentality Falling behind competitors
- 57. Alternative Selection Increasing thequality and cleanliness of the store/remodeling 1 Able to attract new customers and gain a better reputation Expensive Invest heavily into the Omni channel networks 1 It is the way of the future and it will keep Kmart more competitive Expensive and time consuming Sell/Lease property 1 More income and reduced expenses Losing the tradition sense of operation
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