Questions/Answers of Kmart

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Running Head: KMART
KMART
Name of the Student
Name of the subject
Author’s Note

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1KMART
Table of Contents
Answer to question (2)...............................................................................................................2
Answer to question (3)...............................................................................................................6
Answer to question (4)...............................................................................................................9
Answer to question (5).............................................................................................................11
References................................................................................................................................13
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Answer to question (2)
Kmart, a nationwide online retail brand that operates in electronics, clothing,
furniture, home décor and toys with its headquarters situated in Hoffman Estates, Illinois. The
company operates in a highly competitive market and its some of the rival brands are
Amazon, Walmart, Kroger’s, Target and many more. In discount retail industries entry
barrier risks are very high and companies do not keep a good margin in order to compete with
brands like Walmart and Amazon. Kmart is third largest company in US and is benefited
from the economies of scale (Brea-Solís & Grifell-Tatjé, 2019). Kmart is known for cheap or
discounted products available online or in 1,500 Kmart stores available worldwide. However,
the company experiences fierce competition from Walmart. Walmart is a strong, well-settled
brand deals in diversified products known for its distribution capabilities and efficient
inventory management. The company claims to have the largest satellite communication
network in the United States and is also one of leading buyers in the world.
SWOT analysis is one of the most effective tool or model used at the time of competitive
analysis of any organisation’s strengths. It is a proven framework that is used to analyse the
internal and external environment of a brand. Kmart’s SWOT focuses on analysing the
strengths, weaknesses, opportunities and Threats of the company.
1. Strengths
- The location of the stores is the main strength of the company, the stores are
mainly located in the urban areas which is mostly concentrated with targeted
customers.
- The company gives its customer the option of paying in instalments with excellent
customer service
2. Weaknesses
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- Weak financial position of the company; High leveraged, Bankruptcy
- Poor supply management of the company makes it difficult to compete against
strong brands like Walmart.
3. Opportunities
- The company has seen an increase in its market presence due to availability of
targeted customers in rural regions.
- Emerging markets and expanding services to schools and healthcare sectors
4. Threats
- Economic slowdown is risking the company its regular customers as consumers
are shifting to brands with cheaper offerings
- Changes in government policies and taxes are slowing down the growth of the
company.
- Declining profits pressurises the weak financials of the company.
Two major competitors of Kmart are Walmart and Whole Foods. Kmart faces fierce
competition from Whole Foods when it comes to better quality products and from Walmart in
case of cheaper products.
Kmart Wal-Mart The Warehouse
Key success
factors/
Strength Measures
Importance
Weight
Strength
Rating
Weighted
Score
Strength
Rating
Weighted
Score
Strength
Rating
Weighted
Score
Quality/Product
performance
1 8 8 7 7 8 8
Reputation/ 0.9 6 5.4 7 6.3 6 5.4

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4KMART
Brand Image
Manufacturing
Capability
0.9 9 8.1 8 7.2 9 8.1
Technological
Skills
0.7 8 5.6 9 6.3 8 5.6
Distribution
Capability
1.0 8 8 8 8 6 6
New product
Innovations
0.7 7 4.9 8 5.6 6 4.2
Financial
resources
0.8 6 4.8 7 5.6 8 6.4
Relative cost
Position
0.9 7 6.3 8 7.2 7 6.3
Customer service
capabilities
0.9 8 7.2 7 6.3 8 7.2
Total 8.0 - - - - - -
Overall weighted competitive rating 58.3 - 59.5 57.2
Competitive Strength Assessment
Kmart VS Wal-Mart
Kmart, founded in the year 1962 dealt in durable goods, furniture and other daily
consumable goods whereas Wal-Mart, started a couple of years later dealt in similar products
gave the company tough competition. Wal-Mart understood the consumer wants and
projected strategies that take care of these needs (Banerjee, 2015). The company knew that
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the country is heading towards global economic slowdown and high prices products will
become a major issue for the average income earners. Hence, Wal-Mart focused on selling
similar quality products as Kmart in lower prices, which created a shift in Kmart customers
towards Wal-Mart and as a result Kmart lost a major share of revenue from these customers.
Gradually, the demand for Kmart products started to decline.
Graph showing growth of Walmart and Kmart over the years
Kmart started quite well and offered discounts and sales very often to its customers.
However, records reveal that the brand image and financial resources or financial position of
the company is not good. The company has taken a lot of debts which it was unable to repay
as a result the stock prices of the company is falling and people are losing their trusts for the
company (Casadesus-Masanell, Van den Steen & Elterman, 2018). The company filed its
first bankruptcy in the year 2002 and later got merged with Sears, which again filed
bankruptcy two months later, thereby bringing Lampert into the picture saving both the
companies.
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Kmart should focus on technological innovations and use cost relative methods in
order to create techniques that would lower the cost of production for the company and
hence, help the company in keeping its prices low. This would give an intense competition to
Wal-Mart, as low price is their unique selling point and this move of Kmart will cut the
shoulder to shoulder competition that both the company face.
Kmart VS Warehouse
The Warehouse is the largest operating retail group in New Zealand, which deals in
products similar to Kmart. Kmart faces fierce competition from the Warehouse, although it is
slightly stronger when it comes to their strength analysis. Kmart has larger brand awareness
than compare to the Warehouse (May, 2019). The main festive season where a shoulder to
shoulder competition is seen between both the companies is in Christmas. Both the brands
sell similar products, prices almost at par with each other. In a research it was observed that
the management in Kmart stores led to chaos. However, Kmart has incorporated some digital
innovations such as auto checkouts in their stores. This makes the entire billing process easier
whereas Warehouse never gets crowded as very less number of customers visits their stores.
The quality of product in case of Kmart is better compare to the Warehouse (May, 2019).
When it comes to price of the products Warehouse takes the lead by providing cheaper

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7KMART
products. This should be the major concern of Kmart as it makes the company lose some of
its loyal customers.
Answer to question (3)
Kmart, Australia’s leading retail and departmental store is a struggling store. The
company faces intense competition from other online retail stores offering wider variety of
products at competitive prices with Kmart. Kmart has average compounded growth rate of
over 120 per cent over the last 12 years. The company got bankrupted for the first time in the
year 2008 and in next 10-12 years it reaped an EBIT of over $470 million (Stowell &
Stowell, 2017). Various strategies used by the company in order to gain a competitive
advantage in the retail market are as follows:
1. Pricing: The company realised the most important factor that is making the company
lose its customer is the price of the products offered by its competitive brands. Kmart
was known as ‘discount store’, which wasn’t sufficient so the company turned being
everyday low prices (EDLP) store. Kmart offers products as cheap as $7 and as high
as more than $10. Shift of Kmart to a permanent low-pricing model helped the
company in gaining back the lost image and profits. Russo took over Kmart in 2008
after its bankruptcy and understood the need of revising the pricing model for Kmart.
Russo understood the importance of all time low cost products rather than occasional
discounts that proved ineffective in attracting customer. The new pricing strategy
helps the company in attracting sales of more than 150 million more items in their
stores.
2. Marketing and Advertising: The Company changed its advertising focus from every
individual to a special emphasis on women and girls. Kmart also incorporated a
catchy pop music in their television commercials instead of a corporate jingle that
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helped it gaining attentions of the viewers and creating awareness. It focused on
certain handful of key products that helped the company in creating a new trademark.
3. Social media: Kmart is using various applications such as its own websites,
Instagram accounts and Facebook pages that is helping the company getting
enthusiastic responses from its customers. Women in particular are buying Kmart’s
how décor products and updating pictures on social media showing off their unique
home styles and DIY makeovers. Social media engagement became incredibly
effective for the brand in increasing its customer base.
4. Technological innovations: Kmart clearly forecasted the need of changing with time.
The company incorporated various innovations and updated the latest technologies.
This not only maximized the productivity but also improved the management of stores
and customers. Kmart used auto check out machines in their stores in order to reduce
the waiting time of customers in the long billing queues.
5. Direct-sourcing model: the biggest change that the company made is eliminating
middle men from and buying the products directly from the manufacturers. This
reduced the cost for Kmart drastically as the profit margins that each middle man kept
got eliminated too. Due to this Kmart was able to sell the products at cheaper cost just
as its competitors and came back in the competition after the bankruptcy becoming
one of busiest store in Australia.
6. Supply Chain Logistics: The focus of Kmart shifted to large volume of limited
products, it included a process of easier pick and pack method. This included small
cartons for delivery and lowered the delivering cost for the customers. Kmart’s
existing supply chain system and infrastructure was ill equipped to cope with direct
buying from the manufacturers. It was highly inefficient and had transparency issues.
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Direct sourcing system solved this problem and resulted in low cost, increase in
volume and eliminating the need for more number of staffs.
7. Mergers and Acquisitions: Kmart Australia was created as a joint venture between G.J
Coles & Coy Limited (Coles) and S.S. Kresge Company in the United States. Kresge
owned 51% stake in the company in 1969. In 1978 Kresge exchanged its 51% stake in
Kmart Australia for 20% share of Coles. In 1994, Coles bought back all the shares
back from Kresge. In 2007, Westfarmers announced it would buy the Coles Group for
$22 billion AUD and fully take over. It was the biggest acquisition in Australian
history. Westfarmers and Sears (USA) had a licensing agreement allowing them to
use the Kmart brand name in Australia and New Zealand, in 2017 Westfarmers
bought the brand name for $100 million and ending the licensing agreement. Kmart
has their own electronics brand by the name of Anko which was positioned for the
international market like the USA, however it is now common to also see Anko
branded products at Kmart stores in Australia and New Zealand. Westfarmers has also
revealed that a partial merger of Kmart and Target stores could result in Target stores
being converted in Kmart outlets due to the decline in EBIT earnings for Target stores
in recent years.
These were some of the factors that gave Kmart a competitive advantage even after
getting bankrupted and acquired twice. The company had products that could have been

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10KMART
easily substituted with other brands so it made sure that the quality of their product to be
premium and one of the best. The products available at Kmart were of unique designs, which
were rare and valuable to the public. Women in particular were very fond of Kmart’s home
décor products and often flaunt it on social media tagging “Kmart hacks” which showed that
Kmart was successful in satisfying their customers. Customer services of Kmart were one of
its kinds. They made sure that there is no delay in delivering and provided after sale services
to its customers. The company made sure that its customers are highly satisfied with their
good quality furniture, artificial plants and other home decors.
Answer to question (4)
(i) Kmart, a company that got bankrupted twice and still manages to be one of the
largest supermarkets in Australia. The organisation should also focus on being
eternally fit with market conditions. This means that when there is an economic
slowdown than the company should understand that the public want cheaper price
products and should be flexible enough to offer products at cheaper rates without
having loss (Dubas, Hershey & Dubas, 2015). There are various factors that help
in checking the fit test of the company which in common terms is known as
PESTEL analysis. Analysing the political, environmental, social, technological,
economical and legal stability of the company will help in knowing weather
Kmart is externally fit or not.
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1. Political Factors: Australia has a stable climate and there is not much change
in political policies that affect companies like Kmart. Australia ranked 13th out
of 180 countries in the world, which means the company has one of the highly
clean governments. Hence, Kmart or any other brands in Australia do not
experience political instability.
2. Economic: the global economic growth is around 2.6% and Australia’s growth
is 5.1 % in 2019 from 5.6% in 2018, which is more than double the global
economic growth. However, US experienced economic slowdown and Kmart
lost a major chunk of its customers to Wal-Mart that offered cheaper products.
3. Social: Kmart is doing extremely fabulous when it comes to social
engagement. The company has its own websites, instagram accounts and face
book pages which helps the company in better engagement with its customers.
4. Technological: The Company is advancing itself with the latest technologies
in the market to stay ahead of the competition. It has now got auto check-outs
in its physical stores.
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5. Environmental: Any organisation has some rights towards the environment,
some of which include no pollution, not hurting the animals and many more.
Kmart makes sure that it is environmentally ethical and healthy.
6. Legal: legal factors include all such activities that are unethical should not be
conducted such as cyber-crimes or high debt from banks and financial
institutions without timely repayments. Kmart in 2008 got bankrupted due to
this reason but recovered soon after merging with Russo.
(ii) Performance test of a company includes analysing it past financial records, market
standing and profitability of the company. There are many financial measures that
help in analysing the financial position of the company. Three most important
measures are financial ratios, cash management and the revenue growth of the
company.
1. Financial ratios: There are numerous ratios that help in identifying and
analysing the liquidity of the organisation, its inventory turnover and the debt
position of the company. The company suffered from high debt and got
bankrupted in the year 2008 due to its poor financial performance.
2. Cash management: Kmart after being bankrupted twice in the year 2008
managed to come back in the competition with $400 million profit in the year
2014. This happened only because of the effective cash management
techniques that the company incorporated. Kmart created excellent pricing
strategy that helped them cutting down the cost of the product and managed to
offer products at competitive prices.
3. Revenue growth: The main thing that measures the performance of the
company is its ability to grow its annual revenue year after year. Kmart had
revenue of 228 million dollars in the year 2014 which grew to 400 million

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dollar in next two years. The company is showing remarkable improvement
after the bankruptcy in 2008. A good revenue growth results in growing and
improvising its performance year after year.
Answer to question (5)
Diversification is the most effective method of reducing risk and cost of the company.
Kmart has a diversified portfolio both in the case of products and in the case of suppliers. The
Company deals in more than 200 products related to furniture, home décor and other daily
use retail products. It makes sure that it has a diversified supply chain management, which
means dealing with a large number of suppliers for different products. Diversification would
allow Kmart to explore new opportunities that are available in the market. It would help the
company to venture into new and different areas of growth which would have better
prospects (Gyan, Brahmana & Bakri, 2017). No business can run with same products and
same strategy forever, hence, diversification will help Kmart in discovering new domains,
better prospects and a new direction, which will give the company a competitive edge.
Diversification will also allow the company to move ahead by incorporating technological
advancements in the business. To change with advancement in technology will help the
company in reducing cost and grow rapidly. Horizontal diversification is one of the most
effective ways of diversification, in this the organisation takes over those organisations that
provide or offers similar or substitute products. This helps in reducing competition in the
market and expanding the size of the business. Kmart was acquired by Russo in the year
2008.
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Diversification helps in creating cost saving opportunities for any business. In case of
Kmart, buying products from diversified suppliers will help the company with better
bargaining strategies. It will help in exploring more suppliers and choose a one that provides
higher rate of return. Similarly, incorporating latest technologies will help Kmart in
maximising its product, which would in turn reduce the per product cost (Gyan, Brahmana &
Bakri, 2017). Lower cost will either help the company in having a better profit margin or
Kmart can keep reduce the price of the product by keeping the margin same as before. This
would help the company in attracting a large chunk of consumer hence, resulting in business
expansion. Hence, diversification is a very effective tool in reducing the cost and risk for
Kmart. Although Kmart has a diversified portfolio in case of products it should consider
expanding and exploring for discovering better business opportunities.
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References
Banerjee, D. (2015). Walmart Stores Inc.-A Strategic Analysis. International Journal in
Management & Social Science, 3(12), 202-225.
Brea-Solís, H. A., & Grifell-Tatjé, E. (2019). A business model analysis of Kmart’s
downfall. International Journal of Retail & Distribution Management.
Casadesus-Masanell, R., & Elterman, K. (2018). The Rise and Rise (?) of Walmart (B):
Kmart Declares Bankruptcy.
Casadesus-Masanell, R., Van den Steen, E., & Elterman, K. (2018). The Rise and Rise (?) of
Walmart (A): Battling Kmart.
Chen, Y., Jiang, Y., Wang, C., & Hsu, W. C. (2014). How do resources and diversification
strategy explain the performance consequences of internationalization?. Management
Decision.
Dubas, K. M., Hershey, L., & Dubas, S. M. (2015). An evaluation of the walk-in and online
counterparts of the leading US stores. Academy of Marketing Studies Journal, 19(1),
166.
Gyan, A. K., Brahmana, R., & Bakri, A. K. (2017). Diversification strategy, efficiency, and
firm performance: Insight from emerging market. Research in International Business
and Finance, 42, 1103-1114.
May, P. (2019). Get smarter: Why smarter warehouses demand smarter risk strategies. MHD
Supply Chain Solutions, 49(2), 20.
SOLUTIONS—MARCH, M. S. C. KMART’S SUPPLY CHAIN TRANSFORMATION.

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Stowell, D. P., & Stowell, P. (2017). Kmart, Sears, and ESL: How a Hedge Fund Became
One of the World's Largest Retailers. Kellogg School of Management Cases.
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