Kmart
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What core competencies do you think the company has and what is needed to exploit opportunity and counter threats.
As revealed by the SWOT analysis earlier Kmart has potential to pull itself out of its current position of facing closure. In order to exploit opportunities and counter threats Kmart needs to build on these competencies to strengthen its position and counter internal weaknesses against the single largest industry threat – increased competition in a mature market.
Some core competencies that must be exploited are: Brand Kmart is an existing well-known and trusted national brand in USA Kmart has private label and designer clothing that is well endorsed Infrastructure Kmart has a large number of well-located, low-cost, leased stores in urban far away from competitors through out the country ( Appendix B ). Staffing Confidence by the market in Kmart is created by the achievements of its staff and management. With the turn-around strategy in place, new blood has been put into the top management structures. In any renewal there will be retrenchment as unprofitable stores are closed. This can be used as an opportunity to retain and move high performing staff to where they are needed and to get rid of non-performing staff. Anderson the chairperson of Kmart is well supported by Wall Street and the board of Directors. These new staff members enter the company with needed skills to address problems in certain areas that previously were poorly managed such as inventory control and merchandising. Store locations, layout and Performance Stores conveniently located away from competitors like Wal-mart and Target therefore less to compete for customers face-to-face. There are 250 non-performing stores who have already been identified as being more cost effective to close than continue with running costs. Expertise exists in-house for the planning of store layout and appearance to meet different customer segments. This concentration of effort will enable focus on key areas Technology Kmart has already invested in good retailing systems. The system can be use to control inventory, supplier payments, track customer buying and monitor income versus profit margins across all stores. Research and Development The planning department is well established and in cross-functional to provide various perspective. The planning department to ensure that strategies at all levels are executed can further use the access to past data and knowledge of changes in buying patterns. Financial Backing JP Morgan Chase has agreed to support Kmart to avert the current threat of closure due to bankruptcy. It needs to be determined whether the loan terms are compatible with the companys profitability objectives.
The single largest threat to face Kmart is from the fact that discount retailing is a mature industry, with many competitors, a few of which are large and cater for differentiated market segments with better profit margins. It is also true that ” the affect of these conditions was that many of the discount retailers went bankrupt and others such as Woolworths withdrew or divested interests in the discount industry completely. Increased competition in price and specialization retailing meant that Kmart was growing at a slower rate than competitors, making lower margins and not moving stock quickly enough.
Increased competition in the mature market took several forms such as price wars between Kmart and Wal-mart, increased customer service and specialty stores such as Toys “R” Us concentrating on toys in the discount sector. Cost leadership is not an alternative for Kmart as proven by the disastrous outcomes of price fights with Wal-mart. Kmart cannot compete as Wal-mart can handle a sustained price cutting war. Kmart should therefore consider the differentiation strategy option. Choose a strategic position from the generic strategies shown below and avoid Stuck in the middle syndrome.
“Being all things to everyone is a recipe for strategic mediocrity and below average performance” Porter (1998). He refers to this as being “Stuck in the middle”. Cost Leadership Differentiation
3. Cost focus
4. Focused Differentiation
Broad target Competitive Scope
Narrow target
Figure 1.3 Generic Strategies (Source: Porter,