Analyzing the Factors Behind Sears Holdings Corp's Bankruptcy

This report provides a comprehensive analysis of the factors that contributed to the failure of Sears Holdings Corp., a once-dominant retail chain in the USA. The paper begins with an overview of Sears' history, its evolution, and its eventual bankruptcy filing in 2018. It then delves into the key causes of the company's downfall, including fierce competition from rivals like Amazon, ineffective management styles, the impact of the financial recession, and problematic product diversification strategies. The analysis highlights how Sears struggled to adapt to the changing dynamics of the retail industry, particularly the rise of e-commerce and shifting consumer preferences. The report examines how the company's inability to compete effectively, coupled with poor decision-making, led to a significant decline in market share and profitability. The study offers valuable insights into the importance of adaptability, effective management, and strategic planning in the face of evolving market conditions, making it a relevant case study for business students and professionals alike. This assignment is available on Desklib, a platform offering various AI-powered study tools and resources.

Running head: THE FALL OF SEARS
The Fall of Sears
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1THE FALL OF SEARS
Introduction
As opined by Hillary (2017), the dynamics of the modern business world had changed
in a significant manner and the present-day business world is drastically different from that of
the earlier times. Ji-fan Ren et al. (2017) are of the viewpoint that this change perceptible
within the mould of the modern business world can be attributed to the felt need on the part
of the business firms to amend their business model as well as the products or services
offered by them on the basis of the changing needs of the customers and also the
requirements of the business markets. It is pertinent to note that one of the major factors
which has brought this change within the framework of the business world is the process of
globalisation. In this regard, it needs to be said that the process of globalisation had opened
windows of opportunities for the business firms and the net result of this is that the number of
options or choices which are available to the customers had also increased in a substantial
manner (Sodeyfi, 2016). This in turn had significantly enhanced the level of competition
within the business world which in turn is adversely affecting the prospects of the firms.
More importantly, another factor which adversely affects the prospects of the contemporary
firms is the inability of the business firms to adjust to the changes which had taken place
within the contemporary business world because of the changing needs of the customers. This
paper will analyse the factors which have contributed towards the failure of the firm Sears
Holdings Corp.
Overview of Sears
Sears Holdings Corp., founded in 2005, was a retail chain in the nation of USA and
was the parent company of the present day famous firms Kmart and Sears
(Searsholdings.com, 2019). The firm was founded on the score of the purchase of the firm
Sears by the firm Kmart in the year 2005 and in the year 2015 the concerned firm was the 15th

2THE FALL OF SEARS
largest retail firm of the world in terms of the profitability (Cnbc.com, 2019). However, in the
year 2018 the firm under discussion here filed for bankruptcy because of the debts which it
owed as well as its inability to perform on par with the standard performance of the different
top retail firms of the world (Cbsnews.com, 2019). As per Searsholdings.com (2019), the
firm “a leading integrated retailer focused on seamlessly connecting the digital and physical
shopping experiences to serve our members - wherever, whenever and however they want to
shop”. In this regard, it needs to be said that the firm under discussion here intended to
revolutionaries the shopping experience of the customers by combining the positive aspects
of the traditional method of retail shopping with the usage of different kinds of innovative
digital technologies (Fortune.com, 2019). This was the major reason why the concerned firm
offered rewards to the customers who purchased products or services from its various
subsidiaries like Kmart, Roebuck and others (Howard, 2015). More importantly, it was seen
that the firm under discussion here took the help of its different subsidiaries not for the
purpose of the effective management of its different business operations throughout the
nation of USA but also for the expansion of the same. One of the most important aspects of
the firm under discussion here was the fact that it was one of the very first firms of the world
to embrace the e-commerce model of business and thereby exploit the benefits or rewards
offered by the same (Hortaçsu & Syverson, 2015). In this context, it needs to be said that at
one point of time the concerned firm was one of the most profitable retail firms of USA and
used to offer a wide range of products or services to the customers starting from groceries to
insurance services and others. However, soon the sales as well as the prospects of the
concerned firm declined and the net result of this was that it had to file for bankruptcy in
2018 because of these issues (Tokosh, 2019).

3THE FALL OF SEARS
Causes for the failure of Sears
The rise and the fall of the retail chain under discussion here is a story that all the
contemporary retail firms need to take into account not only for the manner in which they
need to amend their business in response to the requirements of the business world but also
the manner in which they can sustain themselves within the business world. For example, the
firm under discussion here at one point of time was the 15th largest retail firm of the world
and was one of the first firms to take the help of the e-retail business model (Cnbc.com,
2019). However, the firm was unable to manage the diverse aspects of its business and
maintain the growth level that it at one of time had managed to gain. The net result of this
was that the firm had to firm was unable to pay off the debts that it had and thereby filed for
bankruptcy in 2018. Some of the most important factors which contributed towards the
downfall of the retail giant are listed below-
Fierce competition
McDowell, Harris and Geho (2016) have stated that the problem of fierce competition
is one of the most important factors which adversely affects the business prospects of the
different firms and thus it becomes all the more important for the firms to take the help of
different kinds of business strategies for the mitigation of the same. However, in the
particular context of the firm Sears, it was seen that the firm did nothing to mitigate the
adverse effects of the fierce business competition which it faced. For example, in its annual
report for the year 2016, the firm mentioned Walmart, Target, Amazon, Home Depot and
others as its major competitors (Tokosh, 2019). However, it was seen that whereas within the
span of just one year, whereas the profitability of Amazon increased by more than 33% and
that of the other business firms increased by more than 2% (Fortune.com, 2019). In this
context, it needs said that within the same period of time, the firm Sears lost 96% of its
market share as well as value within the retail industry of USA (Hortaçsu & Syverson, 2015).

4THE FALL OF SEARS
Furthermore, one of the major reasons for the failure of the concerned firms was the
extensive growth attained by the firm Amazon which not offered similar kinds of products or
services to the customers but also followed the same business model as well as strategies that
the firm Sears followed (Cnbc.com, 2019). However, the major factor which contributed
towards the extensive growth of Amazon was its ability to amend its business activities in
response to the changing business world whereas the failure of Sears can be attributed to the
inability of the firm to do so. This in turn significantly stunted the ability of the firm to
compete in an equal manner with the other retail firms of USA which in turn lead to its
failure.
Ineffective management style
According to Teece (2018), the organisational as well as the business prospects of the
firms greatly depends on the effectiveness or the efficiency of the management or the
leadership style which is being followed within the framework of the concerned firm. In this
regard, it needs to be said that one of the major factors which contributed towards the
unprecedented growth attained by the firm Sears in the later part of the 20th century or for that
matter in the early part of the 21st century was the effective management approach followed
by the concerned firm (Tokosh, 2019). More importantly, it was seen that during this time
period the firm under discussion here had some of the best leaders in the form of Richard
Sears, Alvah C. Roebuck, Edward Lampert and others who not only offered effective
leadership to the firm but at the same time managed the diverse aspects of the business of
Sears in an effective manner (Howard, 2015). This in turn promulgated the rise as well as the
expansion of the firm in a significant manner and in the year 2005 it was seen that the
concerned firm had more than 3500 outlets in the different parts of USA (Hortaçsu &
Syverson, 2015). However, the subsequent managers as well as the leaders of the firm under
discussion here were not as effective or efficient as the earlier times and this contributed

5THE FALL OF SEARS
towards the downfall of the concerned firm in a significant manner. For example, in the year
2015 it was seen that the firm had shut down the majority of its retail outlets and only 500 of
them were operational and even they faced various kinds of issues because of the lack of
sales and customer demand (Fortune.com, 2019). Thus, it can be said that the ineffective
management style adopted by the firm Sears directly contributed towards the downfall of the
concerned retail giant.
Financial recession
Evans et al. (2017) are of the viewpoint that the financial recession that the nation of
USA in the early part of the 21st century adversely affected the business prospects of the
different firms of the concerned nation. For example, it was seen that the retail industry of the
concerned nation was more adversely affected by the process of financial recession than the
other industries of the nation. Needless to say, this adversely affected the business prospects
and the financial returns earned by the firm Sears by significantly limiting the buying
capability or the ability of the customers in the face of the financial recession. However,
whereas it was seen that the other firms like Home Depot, Macy’s, Target and others were
taking the help of different kinds of discounted sales, aggressive sales strategies and others
for the enhancement of their profitability, the firm Sears practically did nothing to enhance
the amount of profit earned by it (Cnbc.com, 2019). This in turn not only affected the
profitability of the firm under discussion here but at the same time started the downfall of the
firm.
Product diversification
As opined by Lee and Klassen (2016), the effective usage of the strategy of product
differentiation not only enables the firms to earn a higher amount of profit but at the same
time helps them in a significant manner to attain competitive advantage within the business
markets of their operations as well. However, in the particular context of Sears it was seen

6THE FALL OF SEARS
that the usage of this very strategy lead to the downfall of the concerned firm. For example,
during the foundation years of the firm it was seen that the firm focused on selling watches,
retail products and others to the customers through the usage of different kinds of innovative
technologies and this in turn enabled the firm to become profitable (Tokosh, 2019). However,
soon it was seen that the firm started to offer insurances, financial services and other similar
ones to the customers which in other times would have significantly enhanced the
profitability as well as the customer base of the firm (Cnbc.com, 2019). The problem was the
fact that during the time when the firm offered these financial services to the customers, the
nation was going through the financial recession and this inability of the firm to take into
account the requirements of the business market lead to the failure of the firm. More
importantly, it was also seen that the firm diversified its product portfolio to such an extent
that it was becoming very difficult for the firm to manage its business activities and this
dissatisfied the customers which in turn made them to turn to other retail stores (Fortune.com,
2019). This in turn forced the firm to shut down the majority of its retail outlets which
reduced the scope of business of the concerned even more and thereby directly contributed
towards the downfall of the concerned firm.
Inability to exploit the e-retail business framework in an effective manner
Sears was one of the first firms to use the e-retail business model and this enabled the
firm to gain a substantial amount of profit and also to expand its business all over USA in the
later part of the 20th century and the early part of the 21st century (Hortaçsu & Syverson,
2015). Furthermore, the effectiveness of this business model followed by the firm becomes
apparent from the fact that at one point of time in 2005, the firm had more than 3500 retail
outlets in USA. However, the inability of the firm under discussion here to modify the e-retail
business model followed by it on the basis of the developments in the field of technology and
also on the basis of the demands of the customers directly lead to its failure (Tokosh, 2019).

7THE FALL OF SEARS
On the other hand, the success gained by the firm Amazon through the usage of the same
model and that too in the same time period can be attributed to the fact that the concerned
firm was being able to integrate the developments in the technological field and also the
expectations of the customers within the business model used by it.
Conclusion
To conclude, the business environment in which the firms are operational wields a
significant amount of influence on their business operations. More importantly, one of the
major criteria that the contemporary firms need to fulfil so as to gain success is the fact that
they need to constantly change or amend their business activities, business models, the
products or services offered by them and other aspects of their business on the basis of the
demands of the business environment and also the customers. These aspects of the modern
business world become apparent from the above analysis of the factors which contributed
towards the downfall of the once successful firm Sears.

8THE FALL OF SEARS
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