K-Mart which is commonly known as Kmart is one of the leading American chains of discount stores which has its headquarters in the United States of America. In 2005, it acquired Sears so that it could form an entirely new company and exploit the opportunities available in the market. Sears Holding Corporation was established in 1962 and grew to become the third biggest chain of discount stores across the world. The two main competitors of Kmart are Target and Wal-Mart. Kmart is offering its customers high quality products through a diversified portfolio of top notch brands such as Sofia Vergara, Smart Sense, Route 66, Joe Boxer and Jaclyn Smith (Sears Media, 13).
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As of February 2013, the Sears Holding Corporation has about 1,221 Kmart store in 49 states of United States across Guam, the U.S. Virgin Islands and Puerto Rico. There are about 1,196 discount stores which have an average size of 94,000 sq. feet and about 25 Super Centers with average size of 168,000 sq. feet. It has been stated by Graff that majority of Kmart stores are on one floor in the form of free standing units which are carrying the wide range of products from many categories of merchandise such as seasonal merchandise, outdoor living, garden equipment, consumer electronics, toys, food and consumable along with clothing (60).
Kmart is well-known for the Blue Light Specials which occurred as the surprise moments at the store (). The worker at the store would light up a light of mobile police highlighting the discount offers in particular department of the store. Kmart is also present in Australia and New Zealand but it has its major operations within US (Sears Media, 16).
SWOT analysis of K-Mart
In order to assess the strategic positioning of Kmart, SWOT analysis will reveal the resources and capabilities owned by the company and the opportunities and threats present for the discount store. A detailed review of all of these factors will shed light on the future aspects of the retail industry in US and will ensure that Kmart is able to exploit the opportunities available within the industry (Zhu, Vishal and Mark, 454). With the advent of time, the retail industry is getting competitive as the firms are competing against each other aggressively for attaining high levels of market share. The detailed analysis of Kmart’s SWOT is as follows:
As Kmart has been present in the industry for many years, it has strengthened its resources and capabilities effectively. The only way of competing in tough economic situations is to invest in the core competencies possessed by the store. The analysis of Kmart performance in the retail industry reveals the following strengths:
It has a highly committed and loyal workforce and management team which are always striving to maintain the store’s competitiveness within the industry. The employees of the organization are considered to be an integral part of the corporation so that they can feel valued and worthwhile. In order to retain the employees for long period, every personnel are provided the most compatible compensation package so that they are rewarded for their performance.
HR professionals of the company ensure that they keep track of the changing demands and laws related to the employees so that they develop policies in accordance within the legal boundaries. The rules and regulations are updated frequently so that the employees are provided the latest compensation packages for their jobs.
In order to provide excellent shopping experience to the customers, the sales and marketing personnel ensure that they are provided the most convenient one stop shopping facility. Although Kmart allocates limited amount of funds in its marketing campaigns but it designates sufficient money for the training and development of sales personnel. Kmart mainly relies on the experience provided to the customers on the first visit to the store so that they become repeated buyers and loyal to the store as well.
Since every company is investing in creation of value chain supply chains, Kmart has tried to capitalize on it by developing an efficient distribution network. It has implemented the latest IT system so that its operations become digital and cost effectiveness can be gained from these online operations.
Kmart is strongly recognized among its customers for offering the most diverse range of products which are of superior quality and give them value for the money. The latest brands are stored in the discount chains so that the customers can get the complete range of offerings within their budget range.
Since every corporation has some weak areas, it is vital for them to keep track of them so that they can be eliminated with the passage of time (Li and Lin, 593). Kmart has some weak areas as its reputation has been impacted by some events and it is important for the company to work on them so that they can be converted into its strong areas. Kmart has the following weaknesses:
Bankruptcy declaration which was filed by the store in 2002 as its sales were very low. Although it has been more than ten years since the company faced this issue but it has still impacted the brand image of the Kmart stores to a significant level.
Kmart has developed an effective Marketing department which carefully carries out the market research to gather information about the customer needs and wants. The only weakness in this department is that the marketing strategy is not properly designed and it has unexploited various avenues for reaching the target market effectively.
It has allocated low profit margins in the suburban stores which is affecting its revenue stream. It has to revise its financial strategy so that it can ensure that the financial plan is properly developed and sufficient budget is allocated for the efficient management of operations.
The supply chain is ineffective as it lacks the effectiveness required in the discount chain stores. Wal-Mart has created a competitive edge on the basis of its efficient and extraordinarily cost-effective distribution channel so that it can have a flexible and agile logistics framework.
There is lack of uniformity in the stores and the assortment of products is not appropriately done. Most of the customers believe that the Kmart stores do not provide extraordinarily appealing shopping experience in the stores as they find difficult in locating the products within the outlets.
In order to assess the opportunities available for the store, it is better to review the external factors present in the industry such as political stability, economic trends, customer demands and others so that they can be availed properly. The opportunities available for Kmart are as follows:
The store strategy has to be repositioned so that it can comply with the demands of the urban population. In order to strengthen the image, the company has to reconsider the product and service offerings so that they meet the standard level of the target market.
An integrated supply chain has to be created like the one in Wal-Mart so that the management of operations becomes efficient and effective. The IT system can be upgraded by availing the services of the leading corporations such as SAP, IBM or Cisco who will design the entire system in accordance to the requirements of Kmart.
An up gradation of store infrastructure is required so that everything becomes organized and disciplined. With the help of an effective IT system, it will be easier to design an appealing and convenient layout of the store so that the customers have an excellent shopping experience.
In order to increase the presence in international markets, it is important to design a strategy in accordance to the market requirements so that the customers are able to develop an association with the brand.
The product line can be enhanced by targeting the middle class people. This market is extremely huge and it presents various opportunities to Kmart along with the potential of reaping high amount of profit margins.
Some of the major threats which are posed for Kmart in the retail industry are as follows:
The competition from both high end and price competitive players is increasing which is emphasizing the need of developing a well-designed and effective marketing strategy.
The consumer spending power is lowering and they are looking for goods which are available at affordable prices but also provide them good quality options. Most of the customers are now shifting from premium quality products as the economic recession has impacted their disposable income to a great extent.
As the economies of scale can be enjoyed only by the retail giants such as Wal-Mart, it can impact the profit margins of Kmart if it shifts its location in cost-effective regions.
The government can impose more stringent rules and regulations in the retail industry which can affect its expansion strategy and ability to compete effectively within the market.
External Analysis of K-Mart
PESTEL analysis of the US retail industry will highlight the key factors impacting the operational activities of Kmart in its market. A brief overview of the external environment of Kmart is discussed below:
Political – Kmart’s operations are greatly impacted by the US government laws and regulations. In order to ease the competition among the key players, it has imposed various rules so that unfair competition can be avoided and the customers are provided goods at reasonable prices. The government has also passed the laws for reducing the usage of single carrier plastic bags so that the environment is protected from any kind of pollution.
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Economical – The economy of the country is still in recession phase and it is evident from its economic policies along with increasing unemployment rate and declining consumer spending power. However, the demand of grocery market products is inelastic due to the fact that people have to buy them for daily nourishment needs; there is certain budget limitations that impact the quantity of the goods purchased.
Social – The families are the main target market of US discount chain stores as they want to provide them a platform for purchasing everyday items within their limited budget. Majority of the people are changing their lifestyle patterns as they are becoming conscious about eating a healthy and well-balanced diet. Kmart can remain one step ahead of the social demands of the customers and launch the “Eat Smart” range of products.
Technological – All the businesses in US are making heavy investments in their technological system so that they gain competitive edge within the respective industry. The online shopping trend is gaining immense importance as most of the consumers are using Internet for shopping the goods online. Kmart has developed the website so that it can meet the demands of the customers effectively and provide them convenient shopping experience.
Environmental – As the environment’s protection has become an important aspect of every organization, the retail stores are reducing the carbon footprints on the environment by adaptation of the sustainable and eco-friendly processes. Kmart has even implemented steps for the reduction of carbon footprints and has replaced the carrier bags with the reusable bags so that the recycling concept can be emphasized.
Legal – Kmart has to ensure compliance with the legal laws so that it can ensure that it conducts its business activities within the legal framework. Some of the legislations which have to be strictly followed as Minimum Wages Act, Equal Employment Opportunity Act and Health and Safety at Work so that the employees are provided a conducive working environment.
In order to strengthen its position in the discount store category, Kmart can undertake following initiatives:
The foremost thing required is to develop an efficient supply chain management system so that it can develop its competency in this area. Wal-Mart has been giving tough competition to the store because of its proficient logistics system. The corporation can seek assistance from IBM who will ensure that the most flexible and innovative system is implemented for the robust performance of the store.
The layouts of the stores have to be changed so that the customers can have a marvelous shopping experience. Kmart has to enhance the product offerings by adding organic food options as the consumers are becoming conscious about living a healthy lifestyle. It can even start its own private labels after strengthening its brand image in about two years time.
In order to eliminate the bad reputation of the brand, it should develop collaborations with NGOs and actively participate in community related projects. It will show that the company is concerned about the benefits of the society and ensure that it does not break the trust of its loyal customers.
Finally, it has to revamp its marketing strategy by emphasizing that it is targeting both upper and middle class customers. In order to reach the customers properly, Kmart has to use online media tools such as SEO websites, social networking sites and offering various promotions on its own website.
Hence, Kmart has to strengthen its position in the discount chain store market by undertaking various initiatives. The most crucial aspects which have to be addressed by the company are development of highly integrated supply chain system, designing an effective marketing strategy, expanding the product offerings by adding organic food items and redesigning the store layout to provide the customers with a convenient shopping experience. Therefore, Kmart should ensure that it assesses its performance on regular basis so that it can enhance its performance in the tough and ever changing business environment.
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