LASA —Presentation of Strategy Audit Findings

In this assignment, integrate all the pieces of work you have drafted and formally turn it into the capstone strategy audit.

In previous assignments, you performed multiple, specified analyses of your company (or any company of your choosing). Those individual analyses provide the needed research to successfully complete the following LASA.

Part I: Strategy Audit Report

Using the tools and framework learned in class and throughout the program, prepare a 15-page strategy audit of your company with a companion presentation
. The strategy audit is a comprehensive analysis of the company’s business strategy and operating performance, and culminates in a series of recommendations for improving your company’s performance based on the findings and conclusions of your analysis.

A strategy audit involves assessing the actual direction of a business and comparing that course to the direction required to succeed in a changing environment. A company’s actual direction is the sum of what it does and does not do, how well the organization is internally aligned to support the strategy, and how viable the strategy is when compared to the external market, competitors, and financial realities. These two categories, the internal assessment and the external or environmental assessment, make up the major elements of a strategy audit.

In your strategy audit:

• Provide a high-level analysis of the company’s business strategy and operating performance. Be sure to complete the following:Analysis of the company value proposition, market position, and competitive advantageExternal environmental scan/five forces analysisInternal environmental scan/organizational assessmentSWOT AnalysisBalanced scorecard/strategy scorecard
• Recommend specific tactics for improving your company’s strategic alignment and operating performance.
• Recommendations

can include but are not limited to tactics in marketing, branding, alliances, mergers/acquisitions, integration, product development, diversification or divestiture and globalization (if you recommend your company go global, you must include a supply chain analysis and an analysis of your firm’s global capabilities).Explain how the recommendations will help the company achieve its strategy and vision.

You are to write this report as though you are a consultant to your company, and are addressing the executive officers of this company. You will collect and analyze a large amount of data in producing your report, but your final product will be condensed and focus on presenting your analysis findings and conclusions.

Your report should consist of the following sections in the given order.

1. Executive summary (1 page): A concise and insightful summary of the significant findings of your analysis and the recommendations you have for your executive team.
2. Strategic issues and recommendations(5 pages): Identify 5–7 most important strategic issues facing your business unit. Strategic issues arise from a mismatch between internal capabilities and external trends such that important opportunities are not being pursued or significant external threats are not being addressed under the current strategy.

   The strategic issues list should integrate your SWOT analysis, your Five Forces analysis, and the organizational assessment and external environmental scan completed earlier during the course. These detailed analyses are the foundation for your final set of findings and recommendations presented to the executive team.

   In developing your recommendations for addressing each strategic issue, consider misalignments that might be apparent in different operating areas:

   Product portfolio: Are there changes to the target market segment, value proposition, or positioning of the product or service line needed?Structure: Are the organizational roles and responsibilities, decision-making authority, skill requirements, and work assignments properly configured and aligned to support the strategy?Organizational culture or behavior: Does the organizational culture inspire behaviors that support the strategy? Are the mission, vision, and values clearly articulated and aligned with the strategy? What new behaviors are needed?Value chain activities: Does the organization value chain fully align with the strategy? Are their activities that should be added, eliminated, or modified significantly?Performance measures: Do the organization’s performance measures focus on the key drivers of strategic success? Is there a strategy scorecard that ties the main elements of the strategy to specific operating capabilities, including goals and key performance indicators (KPIs) that give an indication of incremental or predictive progress toward reaching strategic goals?

   Your recommendations should fall into these general categories, but should be specific in terms of scope and expected impact.

   These sections have been completed earlier in the course, and should appear as appendices:

3. SWOT analysis (2 pages—completed in Module 4): SWOT matrix illustrating strengths, weaknesses, opportunities, and threats.
4. Balanced strategy scorecard (4 pages—completed in Module 4): Develop a Balanced Scorecard for your business unit that reflects the key drivers for your business strategy.
5. Organizational assessment (3 pages—completed in Module 3)
6. External environmental scan and five-forces analysis (3 pages—completed in Module 2)
7. Market position analysis (3 pages—completed in Module 1)

Part II: Companion Presentation

Finalize the companion PowerPoint presentation that summarizes the audit and recommendations in a compelling manner that persuades senior management to explore and possibly implement your recommendations. The elements of the presentation should include the following:

• Title
• Agenda
• Summary of audit

Recommendations

• Key measurements
• Risks and benefits
• Call to action
• Next steps

Submit a 20–25-page report in Word format. Apply APA standards to citation of sources.

 

Develop a 10-slide companion presentation in PowerPoint format. Apply APA standards to citation of sources.

 

Use information from your previous assignments to support your conclusions and recommendations and conduct additional research when needed. Make sure you properly reference and cite so that the location of information is clear.

RunningHead: Market Position Analysis 0

Market Position Analysis 1

Introduction

Adventure travel international is the full service travel agency, which is dealing in the travel and tourism, which provides recreational travelling services with professional consultation and services. Adventure travel international will position in a better way as they are highly specialized in the field of travel and tourism and the company can generate the majority of income from this segment. Moreover, these services will offer to provide benefits to the tourism stakeholder and the society on a large scale.

Segmentation Targeting & Positioning (STP)

Adventure travel international use three basic strategies which are targeting, positioning and segmentation, these are the three marketing strategies which are used by the company. These strategies are used for the promotion of the organization and promotion of their products, In order to maximize the sales the company use following strategies (Hamal, 1996).

Segmentation Strategy

Segmentation plays a hugely significant role in the success of failure of the organization. The principal and local all market segments are highlighted in this part it leads to maximize the sales of the company. In addition to that, by increasing customer satisfaction company can also increase their sales in highly effective manner.

Targeting Strategies

The targeting strategies which are used by Adventure travel international are unique which analyze the viability of the business. In the targeting strategies, all those people are involved who are interested in the fair trade products such as kids, teenagers and mature people. In addition to that, the company always evaluates consumer needs and demands in order to target their consumer in highly respectable and professional manner. Product differentiation is tremendously significant to running any type of business. This is due to financial philosophies that have been established time and time over in approximately every market. If the communal observes no alteration among two opposing products, then the only conceivable means of rivalry is over pricing. In a condition such as this, goods are watched by consumers as very informal alternates for one more. If one product is much exclusive than the other products, the consumer will simply buying the inexpensive product (Blunk, Clark & Mcgibany, 2006).

Positioning strategy

Marketing positioning strategies of are different for different products which are used by Adventure travel international. These strategies play extremely powerful and critical role in the development and better position of products and services of the company. The Adventure travel international always position their products in the city center place where all the people are having the facility of that place. In order to meet the rising demand of consumers, the Adventure travel international should position them in extremely persuasive way.

Product

Adventure travel international offers wide variety of tourism products and services to their customers, they offer a broad range of customize limited services at extremely competitive price. Moreover, consumers can easily understand the products because it is developed based on consumer perception. Adventure travel international products are highly value oriented as compared to fashion oriented. In order to gain more customers and increase the customer loyalty, the company offers lots of value added service such as discounts on tickets, free visits, and refreshment during tour. Adventure travel international also offers customized web page services and telephonic services to their consumers so that they can fulfill consumer needs and demands at most. On the other hand, company is starting new business so they are not able to provide few specialized services to their customers such tour guides in different languages and services for disable customers. The company has plan to provide these services but after sometime so that they fully target the market.

Pricing

Recent studies show that non price features has gained so much importance, but the price is still the decisive factor which directly affects the market share and profitability. In addition to that, several products which are available at Adventure travel international are also available on their website. The company follows the cost plus pricing strategy which is adding standard mark up towards the cost of production (Hamal, 1996).

Place

Adventure travel international use following strategies, which are used in the placement of products:

· Distribution channels

· Office channels

· Promotion

· Sales promotion

· Advertising

Long term sustainability strategy

The market sustainability strategy for rapid expansion which is followed by Adventure travel international is the joint development and strategic Alliance. The company has made its entry in the new markets such as India and China, these new markets serve as the key features in the growth of incomes of the company and strategic expansion. In addition to that, the interest of Adventure travel international in the Adventure market is extremely weighty decision because by serving Adventure Market Company can earn greater profits and revenues for the long time period. Moreover, there is so much growth in the consumer spending and a higher tendency towards the retail commerce (Han, Durbarry & Sinclair, 2006).

Source of Competitive Advantage

The main source of competitive advantage is that, consumers can easily understand the products because it is developed based on consumer perception. Price is the combination of all the values, which are provided to consumer in order to accomplish the advantages of having or usage to product and services. The price has a direct effect on the buying behavior of consumers. The targeting strategies which are used by Adventure travel international are unique which analyze the viability of the business. In the targeting strategies, all those people are involved who are interested in the fair trade products such as kids, teenagers and mature people (Choi, 2003).

In addition to that, company has the excellent staff which provides high quality services in simple professional way. This will attract more customers and also increases the customer loyalty for the company. In addition to that Adventure travel international offers wide variety of tourism products and services to their customers, they offer a broad range of customize limited services at extremely competitive price.

Value proposition

While Australia has a number of established travel agents, not many offer quality for lesser payments. This is what we focus on. One unique thing is that this company will be primarily targeted at local people and as such necessary and custom designed adjustments have been included to ensure this function is well achieved. The main value proposition for the company is providing higher quality products and services to their customers at highly competitive prices. The main purpose of given higher quality products and services to fulfill customer needs and demands and satisfy customers because customer satisfaction is extremely beneficial for the company’s future development and growth (Cho, 2001).

References

Blunk, S. S., D. E. Clark, & J. M. Mcgibany (2006): “Evaluating The Long Run Impacts Of The 9/11 Terrorist Attacks On Us Domestic Airline Travel,” Applied Economics, 38, 363-

370.

Bogari, N. B., G. Crowther, & N. Marr (2004): “Motivation For Domestic Tourism: A Case

Study Of The Kingdom Of Saudi Arabia,” Tourism Analysis, 8, 137-141.

Cai, L. A., & B. J. Knutson (1998): “Analyzing Domestic Tourism Demand In China: A

Behavioral Model,” Journal Of Hospitality & Tourism Research, 5, 95-113.

Cho, V. (2001): “Tourism Forecasting And Its Relationship With Leading Economic Indicators,”

Journal Of Hospitality & Tourism Research, 25, 399-420.

Choi, J. G. (2003): “Developing An Economic Indicator System (A Forecasting Technique) For

The Hotel Industry,” Hospitality Management, 22, 147-159.

Coenen, M., & L. V. Eekeren (2003): “A Study Of The Demand For Domestic Tourism By

Swedish Households Using A Two-Staged Budgeting Model,” Scandinavian Journal Of

Hospitality And Tourism, 3, 114-133.

Hamal, K. (1996): “Modelling Domestic Holiday Tourism Demand In Australia: Problems And

Solutions,” Asia Pacific Journal Of Tourism Research, 1, 35-46.

Hamilton, J. M., & R. S. J. Tol (2007): “The Impact Of Climate Change On Tourism In

Germany, The Uk And Ireland: A Simulation Study,” Regional Environmental Change,

7, 161-172.

Han, Z., R. Durbarry, & M. T. Sinclair (2006): “Modelling Us Tourism Demand For European

Destinations,” Tourism Management, 27, 1-10.

Appendix

Competitor Matrix

Number

Customer Needs

Adventure Travel International

Competitor 1

Competitor 2

1

Health & Safety

2

2

1

2

Food

2

1

1

3

Language

1

2

1

4

Services for disable persons

0

1

0

5

Accommodation

2

1

1

6

Price

2

1

1

7

Quality / Standard

2

1

2

Running head: EXTERNAL ENVIRONMENTAL ANALYSIS 1

EXTERNAL ENVIRONMENTAL ANALYSIS-WAL-MART CORPORATION 8

Executive summary

The paper starts by introducing the topic and explaining how it affects businesses. It proceeds with a highlight about the company’s background. It highlights issues of economic, political, regulatory and legal, societal, technological, and environmental factors and trends. The paper further addresses the issues of current external environment and uses five forces analysis by Porter (2008) on the same. The five forces highlighted include supplier power, buyer power, threats of new entrants, competitive rivalry, and threats of substitution.

Introduction

External environmental environment analysis highlights information regarding a business’s political, industry, competition, and social settings. These factors influence the business although they are out of its control. For example, when a new political party takes power and amends regulations, which may in turn require the company to spend in new assets or modify its products. Another example is the change of customer’s base due to changing demographics, trends and needs such as an aging population. Managers of businesses need to be conscious of these situations in order to take full advantage of opportunities and reduce the impact of threats.

Information gathering can be done through scanning and general surveillance to identify early signs of changes; monitoring and close consideration to particular developments; and follow actions of rivals through competitive Intelligence. There are two areas of analysis namely, general and competitive environment. General environment comprise as economic, political, regulatory and legal, societal, technological, and environmental factors and trends (Becher, 2005). On the other hand, competitive environment include Porter Five-Forces concept to determine the attractiveness of an industry, business key success factors, competitive changes in times of industrial evolution, strategic groups and national competitive advantage.

Wal-Mart Corporation is a retail store chain that is headquartered in the US and with many domestic and international stores. Its mission is to help its targeted audience to save money so they can live better. Its goal is to be an international brand while the vision entails working together to lower costs. Wal-Mart corporation target customer includes persons with modest incomes and shoppers sensitive in prices although the target base is continually changing as the environment dictates. Its main competitors include Target, Amazon, Costco, Home depot, Kroger, Staples, and Office depot among others. The company’s focus is to offer the best value to customers for the lowest price.

External environmental scan/five forces analysis

Assessment of external factors applying five forces

Michael Porter (2008), five forces tool is a primary yet dominant tool to understand where power lies in a business situation. It assists to understand existing competitive strength and possible strength of the envisioned position (Porter, 1996). Knowledge and clarity of strength in a competitive situation will help Wal-Mart to take advantage of its strength and modify weak areas.

Supplier power

This assesses the ability of Wal-Mart suppliers to drive up price. Abilities of these suppliers to influence Wal-Mart will be influenced by the number of providers on key inputs, distinctiveness of their products, and the sunk cost. The few the supplier alternatives for Wal-Mart the more the balance of power incline in favor of suppliers. The number and size of suppliers for Wal-Mart is large both domestic and internationally and provide goods for mass market. Wal-Mart has the agility and flexibility, and it can easily move from one supplier or brand to another. Its turnover is big and enjoys huge economies of scale which can easily attract any potential supplier. Its many stores provide it with an advantage in regard to appeal for potential business partners. Wal-Mart has continued to enhance introduction of private label, and this pushes power in its favor.

Buyer power

It refers to the ease for purchasers to force prices down. Factors persuading this include number of buyers, value of individual buyers, and cost to switch to others. Wal-Mart transacts with many buyers and it has a distinct value proposition. Although the price is a key factor for most Wal-Mart customers, it is attracting customers who are not entirely price sensitive but are seeking convenience and quality. Buyers are located within proximity, and who runs into millions hence their individual acts may not drastically influence the power. It is therefore clear that the balance of power lies with Wal-Mart.

Competitive rivalry

This aspect revolves around the numbers and capabilities of rivals. Target, Amazon, Costco, Home depot, Kroger, Staples, and Office depot are some of the principal competitors for Wal-Mart Corporation. These competitors offer equally attractive products and even at competitive prices. This scenario implies that customers can easily change allegiance if they do not get expected value from Wal-Mart. The move to global markets is mainly influenced by domestic competition. Wal-Mart has been received well in international markets especially Canada, and this sounds well for the company. Wal-Mart has a strong customer loyalty base in spite of the low degree of product differentiation in the industry. This in essence reduces the intensity in competition. Wal-Mart has sustained its competitiveness through innovation in products and systems as a means of reducing prices and increasing efficiency.

Threats of substitution

Online platforms, neighborhood retail shops, mom and dad stores provide alternatives options for Wal-Mart customers. Most buyers are flexible and can move to other options easily without adjustment cost or significant inconvenience. Its products are not vastly differentiated and switching information is readily available. This setting gives the balance of power skewed in favor of consumers and the industry.

Threats of new entrants

Generally, new entrants change the industry environment. High returns in an industry attract new players and accordingly affect the profitability. Existing players and industry formation can obstruct new player’s entry through patents, rights, and resource requirements. The retail industry is a high obstacle and low exit sector making it good for existing players but a challenge for new players. Wal-Mart has a strong brand name and has considerable economies of scale. New entrants will face significant challenges of access to the distribution network, sunk costs, resource requirements, faithful existing customers, small profit margins, cost disadvantages, and government policies. The current environment favors Wal-Mart.

Political factors

Refer to how and to what level an administration intervenes in the economy. This may include tax guidelines, labor regulations, tariffs, environmental law, trade restrictions, and political stability (Thompson et al, 2011). They may also entail goods and services which the administration needs or does not need. The government ensures competitive tax regimes for enterprises. There are several trade restrictions and tariffs to protect local industries. Wal-Mart imports many items from cheaper and competitive production destinations. There are strong workers unions and consumer organizations that consistently protect workers and consumers respectively. Recently trends show a move towards a sensitive population in regard to the environment. Many laws are legislated to protect the environment from landfills and other environmental hazards.

Economic factors

Comprise economic growth, exchange rates, interest rates, and the inflation rate. For example, interest rates influence a company’s cost of capital and hence growth and expansion of business. Foreign exchange rates influence the costs of exports goods and price of imported goods in an economy. Wal-Mart operations depend heavily on imports from competitive sources.

Social factors

Embrace the cultural aspects that include health awareness, population growth, age range, and emphasis on safety. Trends in social aspects shape the demand for a company’s products and services. For instance, an ageing American population may imply a smaller labor force hence increasing the cost of labor. In addition, Wal-Mart may adjust strategies in marketing to adapt to these social trends.
Technological factors

Entail environmental aspects, such as R&D functions, computerization, and technology inducements. They can influence, minimum efficient production level, systems competitiveness and persuade outsourcing decisions (Barney, 1991). Further, its changes can affect expenditures, quality, and innovation. Logistical functions at Wal-Mart heavily rely on technology.

Classification

Opportunities
· Huge potential market in Asia and other emerging economies.
· One stop shopping preference by shoppers
· Increase in liberalized economies and investment friendly destinations
· Adaption and embrace of strategic alliances such as acquisitions and integration
· Internalization of markets
· Enhancement of e-commerce

Threats
· Emerging new retail shopping concepts
· Exposed to competitions
· political challenges, cultural and practice divergences
· Intense price rivalries
· Large international competitors in global scale
· Slow economic growth
· Instabilities in some strategic markets such as in the middle East

References

Barney, J.B., (1991), Firm Resources and Sustained Competitive Advantage. Journal of

Management; 17, (1), pp.99–120

Becher, J. D. (2005). Operational alignment: Bridging the gap between strategy and

execution. Business Performance Management Magazine, 3(1), 11.

Michael E. Porter. (2008). “The Five Competitive Forces that Shape Strategy”, Harvard Business

Review, January 2008, p. 86-104

Porter, M. (1996). What is strategy? Harvard Business Review 74(6), 61–78.

Thompson, A., Peteraf, M., Gamble, J., & Strickland, A.J. (2011). Crafting and executing

strategy: The quest for competitive advantage: Concepts and cases. (18th ed.) New

York: McGraw-Hill.

Abstract

Kmart is one of the leading discount stores chain in the United States. Despite having gone through turbulent times over the years, the company has experienced resurgence after resurgence to remain among the top three largest chains. However, it ranks third behind Wal-Mart and Target, despite being a pioneer of the discount stores ‘movement’. This paper took a closer look at Kmart’s value proposition, market position and competitive advantage. it also scanned its current environment and that of the industry by applying the Porter’s five forces model.

Identified several strategic issues that Kmart must re-look so that it can either regain its leadership position in the industry or remain as a worthy player in the industry. For instance, it should tailor its target market from the urban areas where its stores are predominantly located. It should also abandon the cost leadership approach in its pricing strategy. Adapting technology in managing its inventory and merchandising would go a long way in cutting its costs. Revitalising its brand image should focus on creating a unique customer experience. Furthermore, besides transforming its methods the company should look at management changes to steer it from repeating similar mistakes that has led it to the current situation.

2

>

Table of Contents

Abstract

ii

Table of Contents

iii

1

Introduction

1

1.1

Value proposition

1

1.2

Market Position

2

1.

3

Competitive Advantage

2

2

External Environmental Scan/

Five Forces Analysis

3

2.1

Current environment

3

2.2

Five Forces Analysis

3

2.2.1

Buyer Power

3

2.2.2

Supplier Power

4

2.2.3

Rivalry

4

2.2.4

New Entrants

5

2.2.5

Substitutes

5

3

Strategic issues

5

3.1

Target Market

5

3.2

Pricing

6

3.3

Inventory

Management

6

3.4

Brand Image

7

3.5

Management

7

4

Summary/ Key Findings and Recommendations

8

References:

9

Running head: PRELIMINARY STRATEGY AUDIT i

PRELIMINARY STRATEGY AUDIT ii

Introduction
Kmart’s story began when Sebastian Kresge opened a store in Detroit back in 1899. His low prices appealed to many customers and he was able to open an additional 84 stores in the next thirteen years. Currently, the Kmart business empire has about 1500 stores and operates an online store, Bluelight.com. The brand stands for quality products and low prices. Despite many challenges presented by wars and financial crises, the business did not fizzle out. It continued its expansion and opened ‘discount stores’ that sold goods for a dollar or less (searholdings.com). The discount stores chain has beat all odds to become the world’s third largest chain behind Target and Wal-Mart.
Value proposition
Kmart is a subsidiary of the Sears Holding Corporation that offers its customers quality products at affordable prices. The discount stores chain offers an assortment of merchandise that includes consumer electronics, toys, garden equipment, outdoor living, food products, apparels and seasonal products. A few years back, it acquired Sears and thus offers some Sears brand merchandise such as Kenmore and Craftsman. Some Kmart stores operate Sears Auto Centres that offer professional motor repair, maintenance and a wide array of motor accessories. Kmart carries several exclusive brands such as Smart Sense, Route 66, Joe Boxer and Jadyn Smith. A majority of Kmart stores run in-store pharmacies. About 25 Kmart Super Centres operate 24-hours-a-day and carry groceries and merchandise similar to that offered in the discount stores. Kmart is part of the ‘Shop Your Way’ social experience where registered members earn points which they can redeem them while shopping. Kmart runs the layaway program that lets customers finance their online and in-store purchases in a cost-effective manner. Customers can also purchase merchandise online and then pick up at their desired store through a service offered by MyGofer. Kmart customers can also purchase products through kmart.com as well as by using a mobile application (searsmedia.com)
Market Position
Kmart currently ranks as the third largest chain in the discount stores industry, behind Wal-Mart and Target. Over the past few years, the chain has stumbled due to intense competition, its dwindling grocery business and an increased onslaught in the urban areas. This has seen its sales volume decline. Although, Kmart introduced the layaway program, other competitors have pushed this idea further and thus introduced more competition for low-income earners (Mattioli, 2013).
Kmart has had its fair share of challenges. For instance, the company had to file for bankruptcy in the early 2000s. Furthermore, the retail chain has had to close non-performing stores over the years. When Edward Lampert came in as CEO, the chain received a breath of fresh air that included the Sears-Kmart merger. However, several missteps have slowed down the anticipated full recovery (Schultz, 2012).
Competitive Advantage
Competitive advantage refers to the ability of an organization to generate more sales and profits, and sustain more customers that its competitors. Kmart offers a quasi-banking service at its stores for low-income customers who do not operate bank accounts. This allows individuals to use their social security checks shop at the stores. The stores also offer check-cashing services at over six-hundred stores in its network. It has also collaborated with different utility companies to enable their customers to pay for water, gas and cell phone bills at the stores. These services are expected to retain existing customers and lure new ones. Although, Kmart introduced the layaway program, intense competition has forced it to respond with a free layaway program (Mattioli, 2013).
According to Schultz (2012), Kmart has many stores located closer to urban residential areas than any other competitor. This provides it with an opportunity to become a niche player. After the Sears-Kmart merger, the discount stores could carry Sears branded items which increases its customer traffic.
External Environmental Scan/Five Forces Analysis
Current environment
The discount stores industry has grown into an extremely competitive one. This has led its pioneer Kmart to falter and even seek bankruptcy reorganization. The different players in this industry compete on price. However, the emergence of new entrants has led to the evolution of differentiating factors as the clamour for market share intensifies. For instance, Wal-Mart focused on rural America and the suburbs and became a force to reckon with in its use of technology to manage its inventory. Conversely, Target adopted a hybrid of low-pricing and high quality experience with its product offerings and its stores.
Five Forces Analysis
The Porter’s five forces analysis model assists an organization to learn where power is in the business. It forms the basis for analysis of the attractiveness of the structure of an industry. Therefore a business can assess its current strength of its competitive position and the strength of the desired position (notedesk.com).
Buyer Power
Ordinarily, when individual buyers, who are negligible regarding a firm’s total sales, give threats to switch, then such threats are not overwhelming to the organization (Mcafee, 2012). Over the years, Kmart has faced bad publicity due to investigations on their top executives and its wanting performance. The closure of non-performing stores has also reduced the traffic in the remaining stores. This is because a majority of Kmart customers believe that the stores chain is leaving the business.
Supplier Power
Kmart relies on its suppliers to deliver products. The company has a nationwide network of stores even in prime shopping areas; hence its suppliers are many. The supplier power in the retail industry is fair. Even though Kmart has undergone many challenges that include bankruptcy it still yields enough power over the suppliers. This is because not many suppliers or Kmart are willing to end the relationships. Kmart purchases in huge volumes and has huge shelf space, therefore the suppliers will not just abandon it. For instance, Kmart has the power to allocate a competing brand larger shelf spaces if a supplier increases their prices.
Rivalry
There is intense competition in the discount stores industry. This is due to the presence of many rivals offering the same products and services. Furthermore, there also exists fierce price competition (as implied by the term ‘discount stores’). There industry is dominated by three main rivals i.e. Kmart, Target and Wal-Mart, which makes it almost an oligopoly. The rivals have tried to differentiate themselves using different approaches. For instance, Wal-Mart portrays itself as a low-price leader and Target puts across its value proposition. Kmart has not really been successful in portraying a steady image. This is because its carries branded merchandise that fits into its value proposition strategy, as well as trying to compete on pricing although Wal-Mart remains on top (Hopkins, 2003).
Kmart has not been able to match Wal-Mart’s technological prowess. On the other hand, Target’s phenomenal growth, partly because of Kmart’s woes, is another troublesome issue for Kmart. Kmart lost many customers to other stores such as Target and Wal-Mart during the bankruptcy period and also when it decided to close some of its stores. These customers may view the switching costs back to Kmart as too high, and thus the retail chain will have to provide them with convincing differentiators to lure them back.
New Entrants
The discount stores industry presents high entry barriers to new entrants. In order to compete effectively with chains like Target and Wal-Mart would first have to be in a position to compete on cost. Apart from the large capital outlay a new entrant would require, they would also face difficulties in getting reliable distribution chains and suppliers. Therefore, the threat from new entrants is minimal. However, Kmart is the third largest stores chain in the United States. Wal-Mart boasts of superior inventory as well as distribution capacities, low-cost labour and real estate structure, and an advanced satellite-based communications network.
Substitutes
The substitutes to the discount stores may be grocery stores, club stores, brand-name stores, dollar stores and other small discount retailers. However, the big discount stores offer a wide range of merchandise; hence they actually have few true substitutes. On the other hand, many people would rather look for an item from a huge store that carries many items rather than in a brand-name store. Kmart also has the advantage of having an online store. Therefore, all these other alternatives present very low threat.
Strategic issues
Target Market
Kmart has struggled to define its target market guided by customer expectations. The Sears merger, inclusion of branded house ware, apparel lines amongst other things has helped Kmart to keep operating. However, to survive in the long run Kmart should expressly define itself, the target market and see through the implementation of its strategy. Once it has clearly differentiated itself, Kmart should change its focus to design branded merchandise rather than commodity-type products. It should also increase its marketing campaign to clarify its brand position. Schultz (2012) notes that Target and Wal-Mart used about three times in media marketing each, than what Kmart spent in 2010 and 2011. Both competitors focused their campaigns on low pricing.
Pricing
The discount stores industry is guided by price. Unfortunately, Kmart has limited options on how to effectively counter Wal-Mart’s and Target’s low-price models. A majority of Kmart’s customers are price-sensitive, and therefore it cannot segment the customers by offering them different prices on the basis of different characteristics. Therefore, Kmart is left with limited options for their price discrimination strategy. For instance, it could adopt coupons for price-sensitive clients and bulk discounts for customers willing to buy items in large quantities. However, none of these strategies would be special to Kmart, as it would lead to enhanced competition. In fact, Wal-Mart with its wide-ranging efficient management and vertical integration would have a better advantage. Thus, Kmart should abandon the cost leadership strategy in the short run until it has adequate infrastructure, as it would only eat into its resources.
Inventory Management
Kmart has not done well in inventory management and merchandising. Some of the merchandising problems that Kmart has faced include weak supply-chain management, recurrent stock outs, unnecessary inventory of slow-moving merchandise and shaky pricing strategies. Currently, Kmart needs to look into ways it can improve its financial position without necessarily opening new stores. Therefore it should invest in technology that guarantees merchandising optimization. This will enable Kmart to come up with solutions that make it easier to make decisions on pricing decisions and profitable buying on the basis of consumer demand. Some of the options that Kmart would consider are Retail Revenue Management, Demand-Based Management and Pricing & Revenue Optimization. Kmart will then be able to apply advanced data processing techniques on its inventory data and accurately forecast supply and demand patterns on individual items and the entire store.
Brand Image
The tough times that Kmart has gone through have dented the image of one of the most recognizable United States retail brand. This has been occasioned by the closure of some stores and the bankruptcy. The poor merchandising and unappealing stores have not helped the situation. That is why Kmart must purposely reinvent and re-design the customer experience. They must make it about buying the Kmart idea, the Kmart ethos, and the Kmart lifestyle rather than just buying products from Kmart. However, a transformation of the brand will require culture changes within Kmart management. They have to focus on the long term performance and not just close down poorly performing stores.
Management
A close look at Kmart’s top executives will reveal that the company is exceptionally insulated i.e. not many outsiders have come on board to steer the company out of the murky waters. This is perhaps the reason why there have repeated mistakes processes, and the boardroom has been experiencing internal wars and fiefdoms. Instead of focusing on the reorganization of processes and procedures, the company should consider management restructuring for Kmart to re-affirm its relevance in the industry.
Summary/ Key Findings and Recommendations
Kmart must expressly define itself and the target customers. Kmart’s presence in the urban areas gives it an advantage over its competitors who do not have many stores, and therefore it should develop its product lines to suit the urban residents. Kmart must re-position its brand through advertising to the target groups. It must revamp its inventory management and merchandising and probably acquire technology that will make these processes easier. It must hire top-notch senior managers, especially in marketing and merchandising, from outside the company to assist it to get over its perennial problems. These measures will require the management to make some tough decisions if consumers are going to have the ‘bluelight special’ experience in future.

References:

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