STRATEGIC MANAGEMENT: KMART
Professor Jeanine Bennett,
30th, January 2013
Kmart became a pioneer in discount retail merchandising, when it opened its doors to Americans in 1962, in Detroit. The low and middle-income American consumers loved to shop at Kmart because it offered a wide range of products at reasonable prices. In the 1970s, Kmart expanded and opened more stores in America, becoming the second largest retailer in the United States, after Sears. Further diversification included buying of other companies. In 2002, it came as a shock when Kmart filed for bankruptcy. However, the company dealt with this, and today, Kmart is the third largest retailers in the United States, after Wal-Mart and Target (O’Rourke, 2007).
In the last few decades, globalization has become a crucial factor in business, as it affects business in different ways. In the case of Kmart, globalization has led to increased competition in the market. For instance, Target and Wal-Mart are new entrants in the market, having come after Kmart. These later replaced Kmart as the leading retailer. In addition, consumers today have a wide range of options to choose from. With increased technology that comes with globalization, consumers in America can now shop from other international companies, out of America. Being operational only in Guam, the United States, and Puerto Rica, Kmart has not stabilized and diversified enough to adapt to the competition that is globalization presents. In addition, the company has not adopted technology to the required global standards, therefore, cannot fully exploit new business opportunities globally (Turner, 2003).
Technology is an important factor in companies today, considering the benefits it presents. In Kmart, the factor of technology made it lag behind and lose it to Wal-Mart. This is because Kmart took a long period to adopt technology to the standards of its competitors. Wal-Mart, which is Kmart’s main competitor, used technology since the early 1970,s as the key to its success. During these years, the company used computers in its stores, electronic cash registers, and used scanners to read UPC bar codes. Later, Wal-Mart started using virtual documents in placing orders and receiving shipping notices. Since Kmart did not take the initiative of integrating technology in its business, this made Wal-Mart have all the competitive advantage, as advanced technology brought effectiveness in the business. However, during the end of 1980s Kmart started to adopt advanced technology in its business process gradually. Nonetheless, the sluggish adoption of technology due to lack of finances was one of the reasons behind the bankruptcy of Kmart in 2002 (O’Rourke, 2007).
Kmart has been unable to earn above average returns as compared to their competitor Wal-Mart. This is because, of different problems in the company’s structure, the nature of markets, and its competitors. Therefore, based on these factors, the industrial organization model can be used to determine how Kmart can resolve these to start earning decently. In addition, the resource-based model can be used to determine how Kmart can have a competitive advantage in the market using its valuable tangible and intangible resources (O’Rourke, 2007).
In one survey in the United States, 52 per cent of the respondents preferred to shop at Wal-Mart, 29 per cent preferred Target, while only 13 per cent picked Kmart. Analysts believe that the problems at Kmart are complex, and need to be solved for better returns, as of the three competitors, Kmart is the least preferred. The first remedy is for Kmart to differentiate itself from its competitors, instead of competing with them. In doing this, the company will achieve a competitive advantage or a distinct capability. Secondly, Kmart should consider closing down some of its outlets that are unprofitable. By choosing the locations they will continue operating, Kmart will have set itself from its competition. This will help the company differentiate itself from its competitors by establishing a reliable position in the market. Additionally, this will help them target the niche markets that its competitors have forgotten about. Apart from this benefit, the company will save the money used on operating the unprofitable stores, and invest in the more promising stores (O’Rourke, 2007).
Kmart should stop its frequent restructuring of the top management employees. This lack of continuity in management has contributed to the low returns at Kmart. The different management develop different strategies and priorities, leading to lack of consistence and focus in the company objectives. Today, Kmart lacks a market image, as it lies between Wal-Mart’s reputation for quality and the hip fashion image of Target. Once Kmart adopts a consistent management, they will be able to focus, work on company short and long-term objectives, and make attractive returns (Turner, 2003).
Kmart should also use its resources to ensure a competitive advantage in the market. Since the company is known for its poor customer service, it should consider investing in employee training so that they attain the needed customer service skills. Employees are an important resource, which a company should invest in and capitalize on for better returns. Employees carry the image of the company, and influence relationships between a company and its customers. Kmart should also use its financial resources to invest in more technology, which will boost effectiveness in the company, boost sales, and bring in more profits (Turner, 2003).
A mission statement of a company serves to reflect its culture, customer experience, and brand. The mission statement of Kmart reads: Kmart will become the discount store of choice for middle-income families with children by satisfying their routine and seasonal shopping needs as well as or better than the competition. This means that the company aims at achieving consumer loyalty through its provision of quality products at fair prices, while maintaining good customer service. This mission statement has immensely contributed to the success of Kmart in different ways, both negative and positive. Kmart ensures to adhere to what is provided in this mission statement, with the main aim of achieving customer satisfaction, by providing them with their shopping needs (O’Rourke, 2007).
First, Kmart exhibits a great deal of diversification in its products. It has no limits to the type of products it makes available to its customers. These products include electronics, beauty products, baby products, kitchen equipment, entertainment, apparel, among many other home products. Therefore, this helps shoppers find all they need under one roof, enhancing convenience. The wide range of products, coupled with the low prices offered by Kmart has seen the company win over many low and middle-income customers. Therefore, this one aspect has helped Kmart win itself many customers. However, throughout Kmart’s history, it has been unable to offer the kind of customer service it aims to achieve. Different consumer reports and industry analyst reports have pointed out the apathy of the sales staff in Kmart stores. In addition, the Kmart stores were in the past considered as not meeting the basic hygiene standards. Kmart had to work on this to ensure high hygiene standards in its stores. This factor has influenced Kmart in a negative way over the years, as customers pull away from poor services (Turner, 2003).
Kmart’s stakeholders include its employees, government, customers, suppliers, investors, among others. All these influence Kmart’s strategy, collaboration, and policies. Both the internal and external stakeholders, as well as the connected stakeholders affect the success of the company. The employees at Kmart have been instrumental in ensuring that business is in process at the company. However, these have somehow negatively contributed to the success of Kmart. Most of them lack good customer service skills, and this has driven away a considerable number of customers. Kmart’s suppliers have collaborated with the company to offer a continued supply of products, which are designed to fulfil customer needs. By supplying a variety of goods, the company attracts a good number of customers due to its increased efficiency. In the recent past, Kmart’s stakeholders influenced the company’s decision to buy Sears. This was a decision that Kmart only could not make, as it would influence all the stakeholders. This was a wise decision that has contributed to the success of Kmart today. In addition, Kmart’s customers, who have been loyal to this company, have ensured consistent sales and returns for the company, hence, boosting its profits and success in the market (Turner, 2003).
In conclusion, it is evident that Kmart is not one successful company as it used to be during its initial years. This is because of the different structural and operational problems it has experienced, in addition to a variety of negative forces in the market. However, this is not the end for Kmart, as it still has many opportunities to get back on track. One main factor that will be instrumental in reviving this company is the development of a sound management system. This will be responsible for bringing focus in the company, as well as developing fixed goals for the company to achieve. The company today is still under the influence of its bankruptcy situation. However, with the appropriate management strategies, the company will come out of this with an increased market share.
O’Rourke, J. (2007). The Business Communication Casebook: A Notre Dame Collection. New
York: Cengage Learning.
Turner, M. (2003). Kmart’s Ten Deadly Sins: How Incompetence Tainted an American Icon.
New York: John Wiley & Sons.
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