Podoleanu Silvia & Buda Denisa

7/30/2019 Podoleanu Silvia & Buda Denisa

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EXECUTIVE SUMMARY

K-mart is one of the top retailers in the united states and the number three discount-retai

behind wal-mart and target.

Kmart operated a total of 1,416 kmart stores across 49 states, guam, puerto rico, and the

islands.

K-mart had problems competing with other major retailers and managing its supply cha



COMPANY OVERVIEW

• Established in 1912

• Delaware

• Started off with the name S.H. Kresge that was founded by sebastian spering kresge an

McCrory.

•Grew from a detroit five-and-dime store opened in 1899.

• K-mart has went from only 85 stores to 2,114 stores.



SWOT ANALYSISSTRENGTHS

• STRONG MANAGEMENT TEAM

• STRONG BRAND EQUITY

• STRONG FINANCIAL POSITION

• LOYAL CUSTOMER BASE

• LOYAL SHOPPERS

• CLOTHING LINES (JOE BOXERS, ROUTE 66)

• MARTHA STEWART PRODUCTS

• STORE LOCATIONS (URBAN AREAS, STORES LOCATED IN EASY ACCESSIBLE AREAS)

• EXCELLENT CUSTOMER SERVICE

• GREAT QUALITY IN FOOD, PERISHABLES

• VARIETY, SELECTION OF PRODUCTS

• OFFER LAY-AWAY PLAN FOR PEOPLE WHO NEED TO PAY IN INSTALLEMENTS



WEAKNESSES

• OVER LEVERAGED FINANCIAL POSITION

• BANRUPTCY

• LOW MARKET SHARE

• DISTRIBUTION NETWORK

• STRUCTURE

• OLD LOOK

• STUCK BETWEEN WALMART'S AND TARGET'S ECONOMIC DEMOGRAPHIC

• VERY LARGE GROCERY STORES - NOT MOST EFFICIENT SHOPPING EXPERIENCE

• HIGH PRICES ON PREPARED FOODS

• DILUTED - NOT A LOT OF STORES

• PRIVATE OWNERSHIP RESTRICTS CAPITAL RAISE FOR FASTER STORE EXPANSION

• DECREASED SALES

• STORE CLOSINGS



OPPORTUNITIES

• ACQUISITIONS

• EMERGING MARKETS AND EXPANSION ABROAD

• INNOVATION

• BLACK FRIDAY

• STORE GROWTH

• GROWTH IN HIGHER MARGIN CATEGORIES

• EXPAND SERVICES - CULINARY SCHOOLS, HEALTHCARE, OTHERS

• PRIVATE LABEL GROWTH TO ENHANCE BRAND & MARGINS



THREATS

• CHEAPER TECHNOLOGY

• EXTERNAL CHANGES (GOVERNMENT, POLITICS, TAXES, ETC)

• ECONOMIC SLOWDOWN

• COMPETITION FROM THREE FRONTS: HIGH-END (WHOLE FOODS) AND PRICE COMPETITIVE (WAL-

TARGET) INCREASING MARKET SHARE

• INABILITY TO ABSORB PRICE INCREASES DUE TO SMALLER SCALE VS. NATIONAL COMPETITORS

• ECONOMIC DOWNTURN AFFECTING CORE SHOPPERS' WALLETS

• PROFITS DECLINING



COMPETITIONCompetition is intense. Many rivals with similar products and services.



PRODUCTS

• CLOTHING

• LINEN

• JEWELRY

• HOUSEWARES

• TOOLS

• ELECTRONICS

• TOYS

• RESTAURANT



PRICING

• Unlike Wal-mart’s “everyday low prices,” Kmart used promotional pricing, and

heavily on weekly mailers.

• Kmart does not have the low price position in consumers’ minds.

• Competing on price can be a problem.

•Kmart has not been able to compete with Wal-Mart on the basis of price. It cannwith Target on the basis of appearance, style or shopping experience. Price is the

variable to copy, at least in the short run.



POWER OF BUYERS

• Buyer power is high. Many competitors available, stores as well as online.

• For Kmart, bargaining power is high, since the Kmart brand is going through difficu

last decade.

• Normally, when buyers individually are very small relative to total firm sales, buyers

threaten to switch, but such threats are not devastating to the firm. However, Kmart b

switched – en masse. Kmart has alienated many of its customers. Along with bad pu

regarding investigations of top executives and Martha Stewart, many Kmart custome

that Kmart was leaving the business entirely. As a result, store closings affected traffi

stores as well.



POWER OF SUPPLIERS

• The company rely on suppliers to deliver quality products.

• The company sells nationwide and offer store locations in prime shopping locatio

Suppliers are abundant.

• The power of the suppliers in the industry is fair.

• Kmart’s supplier power is higher because of payment problems in the relatively n



SUPPLY CHAIN• Kmart from the beginning did not dominate many of its markets and so was not able

effectively develop its own distribution system. In its stores, many shelves were bare, contained merchandise that wasn’t selling.

• In 2000, Jennifer Bott described some of the evolution of the supply chain problems a

explained how chronically empty shelves or shelves with the wrong stuff on them didn

from lack of inventory but from inadequate or untimely information and the lack of a

transfer stock from one store to another. She described Kmart Corporation Chairman

Conaway’s belief that a justin- time delivery system to stores was just what Kmart ne

especially for apparel.• In 2001 Kmart turned to an alliance with distributor Fleming to help with the attemp

supply chain muddle. At the time, it was believed that the alliance (with Fleming) wou

combined savings of about $400 million by the third year.



CUSTOMER SERVICEImitation

• Private information- understanding the needs of its customers, investing resources and effort in ongo

improvement of its customer service (ranked one of the top companies in this field).

• High switching costs- customers don’t not want to switch to a different company.

• Upgrading and constantly improving

Substitution

• Customer service does not have an efficient substitute (maybe sophisticated software) amazon is not r

this threat.



COSTUMER SERVICE

• Holdup

• Constantly improving customer service, to build mutual dependence of clients, develop trust and coo

long term relations and contracting with suppliers, allows it to efficiently address customer service iss

a specific supplier or product.

• Slack

• Amazon uses online surveys to improve and monitor its customer service. Limited slack. Amazon also

outstanding return policy.



STOCK

• The country's second-largest retailer has teamed with the online investing firm stockpower to s

common stock through the web site of its recently started e-commerce company, bluelight.Comprovides further evidence that online investing is moving from cutting edge to commonplace. A

is offering a futuristic and forward thinking approach to establish itself as a leader. Kmart fore

growing percentage of its 180 million customers will turn into shareholders, which should incre

spending and loyalty.

• Kmart feels this move will improve the stock performance, which has languished as the compan

sales stagnated and margins shrunk because of aggressive competition. A.G. Edwards rates km

hold, and has not done any underwriting of stock or debt for the company. Still, for those indivon placing their focus away from high-flying technology stocks and toward the slower-growth w

retailing, kmart's online ordering system can be set up to allow for automatic monthly stock pu

will email all investor relations materials



DISTRIBUTION CHANNELS

•Kmart operates in an arena that requires a nationwide and diversified net of supplierresource of a distribution network is absolutely essential to thrive for both companies

• The distribution network, selling so many different products to millions of different c

throughout the country, is a vast network, and one of the key resources in the discoun

industry. There are other nationwide brands like Gap, Barns&Noble, Stop’n’Shop, e

sell a smaller line of products, and not necessarily discounted. Therefore we consider

rare.



TRANSPORTATION SERVICES

• Kmart corporation is an active carrier company with the following USDOT num

148642. The company received a carrier safety rating of satisfactory and has a reaccident rate of 00. Additionally, kmart corporation covered 00 miles at the time

company's last MCS-150 filing, which is the average for all trucking and transpo

services. The carrier service kmart corporation transports hazmat materials and

following cargo: general freight.

Fleet details

The company has 2 total driver(s) and operates 2 power unit(s), which is 1 more t

average for all trucking and transportation services. Additionally, Kmart corpora

the following vehicle(s) for their services: truck.



INFORMATION FLOWS

• In all the information sharing that takes place in scm(supply chain management)

there is a need to ensure that the information flow is accurate and reliable.

• It is worth noting that both the inter-functional and inter-organizational coordina

dimensions of SCM have made significant strides forward as a result of developm

field of information technology, particularly the growth of inter-organizational in

systems.



CONCLUSIONS

• Because Kmart measured potential profitability by gross margin percentages rat

sales-per-square, the retailer has and continues to stock higher-margined goods in

faster-moving products, leading to a decrease in inventory turn-over. Furthermo

inefficient ordering and supply-chain management means everything's cost more

arrives later than at kmart's competitors. Combine these factors, and you get a dretailer on the brink of disappearing from the american landscape.



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Podoleanu Silvia & Buda Denisa

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