Comprehensive Strategic Analysis of Kmart Limited: A Business Report

This report presents a strategic analysis of Kmart Limited, an Australian-based retail store owned by Wesfarmers. The report delves into both external and internal factors impacting the company's performance. The external analysis includes PEST analysis, industry life cycle assessment, and Porter's Five Forces model to understand the market dynamics and competitive landscape. The internal analysis utilizes the VRIO framework to evaluate Kmart's resources and capabilities, along with an examination of its competitive advantages, profitability, and value creation strategies. Furthermore, the report discusses Kmart's functional level strategies, focusing on how the company enhances quality, innovation, efficiency, and customer responsiveness. The analysis aims to provide a comprehensive understanding of Kmart's strategic position and offer recommendations for future growth and development. The report covers a range of topics including political, economic, social, and technological factors impacting Kmart, its product life cycle stages, competitive forces, internal resources, competitive advantages, profitability, value creation, and functional level strategies. The report uses models like PEST, Five Forces, and VRIO to analyze the business. Finally, recommendations and conclusions are presented based on the findings.

Strategic management

Executive summary
This report included an analysis of Kmart Limited. In the domestic market, the strategic analysis
of the business helps in analysing the position of the organization. The internal and external
analysis helps in analysing the market position of the organization in the domestic market. The
external analysis included the PEST analysis, the industry life cycle process is analysed for the
growth and development of the business. Porter Five forces model is a strategic tool for
analysing the competition of the business. In the internal analysis of the organization, the VRIO
resource model is discussed in the report. Functional level strategies are discussed for increasing
the quality, innovation and customer responses.

Contents
Introduction......................................................................................................................................3
External analysis..............................................................................................................................3
PEST analysis..............................................................................................................................3
Industry life cycle process............................................................................................................4
Five force model..........................................................................................................................5
Internal analysis...............................................................................................................................6
VRIO analysis..............................................................................................................................6
Competitive advantage.................................................................................................................7
Profitability of the company........................................................................................................8
Value creation of the company....................................................................................................8
Functional level strategy..............................................................................................................8
Recommendation...........................................................................................................................10
Conclusion.....................................................................................................................................10
Reference.......................................................................................................................................11

Introduction
In Australia, Kmart Limited is an Australian based retailing store which is owned by
Wesfarmers. In Australia and New Zealand, it operates more than 228 stores which are a
subsidiary of Wesfarmers and its head office is in Mulgrave, Melbourne. It was founded in 1969
and the numbers of employees are more than 31,000 (Kmart, 2019). It provides retail goods to
consumers. Wesfarmers Group's acquisition of Kmart's retail business has also helped increase
Wesfarmers Group's revenue. Today, stores are known for their excellent supply chain systems,
an important function of every business organization. This report includes the strategic analysis
of the business in the domestic market which is used for the growth and development of the
organization. The internal and external analysis of the organization will be done which includes
the PEST analysis, five force model and life cycle process as external analysis and internal
analysis include the VRIO model, competitive advantages as well as profitability will be
discussed. The functional level strategy of the organization will be discussed which helps in
increasing the quality, innovation, efficiency, and customer responsiveness.
External analysis
PEST analysis
In Australia, the organization is required to consider considering the internal as well as external
analysis for analysing the strategy. PEST analysis is an effective tool that helps in analysing the
environment of the organization. It includes the political, economic, social and technological
factors which impact on the Kmart limited.
Political factor
Political factor plays a crucial role in determining the factors which impacts on the Kmart limited
in Australia. In Australia, Kmart includes restrictive training hours. They include the planning,
zoning and retail tenancy leases. An important aspect of politics and law is the balance between
risk and return when sourcing goods from developing countries. It can be seen from the media
release of Kmart Australia (Knott, 2015).
Economic factor

The industry's currently operating economy-is it a monopoly, an oligopoly or something similar
to a perfectly competitive economy. The country’s with high rate of unemployment requires to
supply the jobs for exceeding the demand which will provide the people to work at lower wages.
The financial market operations has also affected Kmart Limited's ability for raising funds at
reasonable prices and considering the supply and demand.
Social factor
Kmart has effectively marketed support to local communities through initiatives such as the
"Kmart Wish Tree" appeal. Kmart Australia also places great emphasis on environmental
sustainability, once again building stronger links between local communities. Such localization
can encourage community acceptance and support, all of which can increase sales and consumer
loyalty (Knott, 2015).
Technological factor
In Australia, Kmart is required to adopt new technologies are required to be adopted. Kmart has
implemented the IT supply chain infrastructure which helps in enabling smooth and identical
technology across the extensive distribution network.
Industry life cycle process
The industry life cycle process of Kmart includes product development, start-up, growth,
maturity, and decline. The stages of the industry include the course of its lifestyle in the market.
At the market introduction stage, the costs of the products are high and sales volume in starting is
slow. In the beginning, the competition is low and demand is required to be created. At this
stage, the customers are prompted for trying the products and they do not make any money at
this stage (Lin, et al., 2012).
At the growth stage, costs are reduced because of economies of scale. Kmart limited started
increasing sales significantly and profitability begins rising. The public awareness increases at
this stage by the organization. The competition increases with the few new competitors in
establishing a market. At this stage, the competition increases which leads to a decrease in the
price of products.

At the maturity stage, costs are low as a result of production volumes increases and experience
the curve effects. At this stage, the competition is more which enters the market. The profits of
industry go down and brand starts differentiation and feature diversification helps in maintaining
and increasing the market share (Lin, et al., 2012).
At the decline stage, costs have become counter-optimal. In Australia, the sales volume
decreases and profitability start diminishing and profits are more challenging for production
efficiency for increasing sales.
Five force model
Rivalry competition
In the Australian market, Kmart has major competitors in the market which include Walmart,
Tesco, Target, and Costco. Competition is intense and many other companies in Australia
provide similar products and services to customers (Manteghi and Zohrabi, 2011).
The threat of new entrants
Wesfarmers provides new innovative products and services as it helps in attracting the
customers. They build capabilities and spend money on research and development. Kmart
significantly reduces the window of extraordinary profits for the new firms for discouraging the
new players of the retailing industry.
Substitutes
In the case of substitutes on the market of Australia, people prefer to go to a huge store that
provides the customer with all the products in one place than go shopping in the brand name
store. As compare to others, Kmart has a relatively low threat of substitutes in the market. For
online shopping, Kmart has an online store where customers can buy the products 27*7 (Peng
and Nunes, 2017).
Bargaining power of suppliers
Bargaining power of suppliers of Kmart limited is done by building an efficient supply chain
with various suppliers. Kmart experiment the product designing by using the material and they
also develop dedicated suppliers.

Bargaining power of Buyers
In order to fulfill and satisfy the buyers, Kmart tackles the buyers by building a large customer
base and it helps in two ways as it reduces the bargaining power of buyers as well as it helps in
providing the opportunities to the firm for streamlining the sales and process of production.
Kmart provides the innovating products to customers (Peng and Nunes, 2017).
Internal analysis
VRIO analysis
The VRIO analysis helps in analyzing the internal resources.
Valuable
Kmart limited includes the valuable resources and they are highly valuable as it helps in
providing the external opportunity of investing. The local food products are valuable resources
because the products are highly differentiated. It helps in making the perceived value and valued
more than the competition by customers (Pesic, 2013).
Rare
The employees are with high skills and training and when the effective services are provided to
employees for their satisfaction, than they does not leave the company for other companies.
Kmart products are considered as rare because it is analysed that financial resources are strong.
The better compensation and work environment helps in ensuring to provide the opportunities.
Inimitable
The resources of Kmart limited are costly as it is analysed in VRIO analysis. The distribution
network of Kmart is costly as it is required to imitate by competition. The local products are not
costly of Kmart limited (Pesic, 2013).
Organization
Kmart limited as organized in capturing value. The use of resources are done strategically as they
invest at the right place and seizes the opportunities for growth and development. These

resources helps in proving that Kmart limited gains competitive advantages in market (Roberts,
et al., 2015).
Kmart Limited's distribution network was determined by VRIO analysis of Kmart Limited.
Kmart Limited uses this network to ensure that its products can be used to contact its customers
at all points of sale. As such, these resources have proven to be a source of Kmart Limited's
continued competitive advantage.
Competitive advantage
Diversity of products
Kmart operates the nationwide level and reaching customers with products with different needs.
The advantage to the organization is the management of inventory and distribution channel
which requires effective strategies and management. Inventory management and trend predicting
are effective in Kmart in the domestic market (Walsh and Dodds, 2017).
Quality in retail discount
In the domestic market, they provide discounts on products and services. With the help of
technology, the organization is improving the inventory system as well as they are able to
analyze the preferences of clients. In the case of switching costs, the quality products are
provided at low prices which makes them difficult for competitors (Gupta, 2013).
Pricing
Pricing is the competitive advantage to the organization as they are making the efforts for
penetrating the new market and also adopts the new products and process which includes the
wide range of products (Ho, 2014).
Distribution network
For distributing the products in the domestic market, the private information is required for
analyzing the retail process. In the case of switching costs, the delivery costs and services of
other companies are comparatively higher.
Customer service

For the organization, it is necessary to understand the needs of customers and investing
resources. While improving the customer services, it requires to build the mutual dependence of
clients (Ho, 2014).
The profitability of the company
Kmart Group is in the future. The focus will continue to provide considerable returns over the
long term tenure and use of team structure to improve operational performance reduce operating
costs. Kmart will continue to deliver by focusing on sustainable development create a great place
to shop simple operation and better delivery effect lower-priced products (Graff, 2016). Under
maintenance price leadership in the market, continuously improve product range, relentless
pursuit of the lowest cost and expansion of numbers and data ability will still be this business.
Coming year continuous growth online, further attention category growth opportunities and
continuously improve operations efficiency, and continuity investment in the store network.
Kmart operates clothing, household, and daily necessities local and local retail internationally.
This department is highly competitive including department stores professional retailers and
growing online business channels. Another feature of it is expanding international influence
retailers; the level of direct sales continues to increase procurement and online growth (Cardeal
and Antonio, 2012).
Value creation of the company
For the value creation of the company, Kmart is focused on a strategy that includes creating a
great place for shopping which is simple for running and deliver the better products at low
prices. They maintain the price leadership in the market of Australia and continue to enhance the
product range and expand the digital and data capabilities at the key priority for the organization
(Bailey, 2017).
Functional level strategy
The functional level strategy is used by the organization for increasing the quality, innovation,
efficiency as well as customer responsiveness. The various functional level strategies are adopted
by the management of Kmart for providing the products and services to customers for their
satisfaction. The functional level strategy includes marketing, financial, human resources,
production, and R&D strategy. Kmart launched the new brand positioning and campaign which
is the low prices for life as it aims to put the customers at the center of its strategy (Bailey, 2017).

The R & D strategy makes focus in innovating and developing new products and improve old
ones by implementing effective strategies and leading the market. Product development,
concentric diversification, and market penetration are various strategies of business that requires
to introduce the new products and major changes to old products.
The company's product strategy is focused on the entire manufacturing system, operational
planning, and control, logistics and supply chain management. The main goals of the production
strategy are to improve quality, increase the quantity and reduce overall production costs.
The vision of Kmart is providing the household products at lower price. Kmart continues for
driving the sustainable growth by focusing to make Kmart the ideal shopping place for easy
operation and offering the products on low prices of the business focuses for leveraging the
stores network and evolves digital capabilities for ensuring Kmart provides customers Seamless
shopping experience between channels (Bailey, 2017). The business focuses on improving
product usability while Reduce inventory and work to maintain its price leadership in the market.
Kmart will continue to determine opportunities for end-to-end product development to increase
productivity into the operational model of the shelf. Kmart's high-quality teams and strong
culture support business success.
The advantage of "low price for life" not only strengthens our price leadership but also lies in a
simple emotional truth that people experience on Kmart every day-this is the happy hour every
day. The new positioning has made Kmart customers the center of our strategy. The "low price
for life" demonstrates our continuous commitment to provide customers with simple and happy
products at low prices. For marketing and advertising, the campaigns are developed for drawing
the attention to focus on low pricing strategy on the key products. In-store merchandising, the
key strategies are focused on back to basics products which makes the changes to stores and
make it easier.
Moving to low-cost strategies requires a comprehensive overhaul of supply chain processes. To
focus its efforts on transferring fewer products, Kmart announced a lean approach which
includes processes such as picking and packaging, which reduces the carton size and reduced
shipping costs.

Recommendation
For the strategic analysis, it is recommended to recognize the importance of creating unique
ways to delight the customers. It will be beneficial for the organization to analyze the effective
ways for personalizing the online shopping. It is required to identify the non-value added cost for
the element for its supply of products and services.
The main competitor that will be watching closely will be Wal-Mart in the United States. The
company will be very aware of the performance of Kmart and its competitors in the Australian
market, and they will consider downgrading soon. Kmart is a way of promoting the social and
green issues which required to actively engage the local communities in which they operate.
Kmart needs to restructure its financing methods operations. It will be beneficial to provide the
stores and incentives based bonuses and pay schemes. Kmart is required to invest heavily in
software which helps in managing the supply chain in an effective manner. Kmart needs to
rediscover which product he needs to sell and which product is best discarded from the shelf
(Bailey, 2017).
Conclusion
In order to conclude, Kmart is a subsidiary of Wesfarmers limited. The internal and external
analysis helps in analyzing the position of the organization in the Australian market. In the
external analysis, PEST analysis, industry life cycle is analysed and five force model is discussed
as these model helps in analysing the external position. In the case of internal analysis, the VRIO
resource model is discussed which helps in analysing the value, rareness, imitability, and
organization. It is considered as an analytical technique for strategic choices and implementation.
The profitability of the company is analysed along with value creation. The competitive
advantages of the organization are discussed which helps in the growth and development of the
business. The functional level strategies help in increasing the quality, innovation, efficiency and
customer responsiveness in the market.

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